• Asian stocks traded mostly higher as the region cheered the continued rebound on Wall St.
• FX was quiet, in which most majors held on to Monday’s gains against the greenback
• Looking ahead, highlights include UK CPI, APIs, Japanese GDP and Fed’s Mester

ASIA

Asian stocks traded mostly higher as the region cheered the continued rebound on Wall St. where all majors finished with firm gains and the S&P 500 posted its best 2-day performance in over 2 years. ASX 200 (+0.6%) and Nikkei 225 (-0.7%) both opened higher in which mining-related sectors led in Australia, while Japanese stocks were initially outperformed buoyed as participants played catch up on return from holiday, although a firmer currency later saw gains wiped out. Elsewhere, Shanghai Comp. (+1.1%) and Hang Seng (+1.3%) were jubilant heading closer to the Lunar New Year holidays and after the PBoC announced to lend CNY 393bln tspanough the 1yr Medium-term Lending Facility. Furthermore, there was a decline in money market rates in which the 1-week CNH HIBOR fell by the most so far in 2018, and the latest Chinese lending data also showed both New Yuan Loans and Aggregate Financing surged from prior. Finally, 10yr JGBs were flat amid similar range-bound trade overnight in T-notes and although the BoJ were present in the market under its bond-buying program, this was kept at a reserved amount.

Japanese PM Abe said he is undecided on the next BoJ Governor, while Abe also stated that it is up to the BoJ to decide specific monetary policy measures and that he expects the BoJ to continue taking bold measures to achieve price stability. (Newswires)

PBoC skipped open market operations but announced CNY 393bln 1yr Medium-term Lending Facility. (Newswires)

PBoC set CNY mid-point at 6.3247 (Prev. 6.3001)

UK/EU

BoE’s McCafferty said the UK economy is holding up relatively well and it is likely rates will have to rise earlier than we thought late last year and noted it is too early to say whether the BoE will hike in May. (Newswires)

Japan's Ambassador to the UK Tsuruoka warned PM May that Japanese firms may leave UK if Brexit deal hits their profits. (Newswires)

FX

FX was quiet, in which most majors held on to Monday’s gains against the greenback. ZAR was in focus overnight and saw weakness on political uncertainty after reports the ruling ANC decided to recall President Zuma, who remained defiant and refused to resign. Elsewhere, AUD found mild support from an improvement in NAB business surveys, and USD/JPY was briefly pressured amid disappointment after PM Abe was said to be undecided on the next BoJ Governor. Furthermore, the weakness in USD/JPY was later exacerbated as the greenback continued to soften which saw USD/JPY slip below 108.50.

Australian NAB Business Confidence (Jan) 12 vs. Exp. 10 (Prev. 11). (Newswires)

Australian NAB Business Conditions (Jan) 19 (Prev. 13)

South Africa's ANC party has decided to either recall or remove President Zuma as head of state, although President Zuma was earlier reported to have refused to resign and was also said to want a 3-month ‘notice period’ before resigning. (Newswires/Business Day)

COMMODITIES

Commodities saw mild support overnight from a weaker greenback. This helped WTI recover from yesterday’s post-settlement pressure, which was triggered by EIA forecasts for increased shale production. Elsewhere, gold also benefitted from the weaker greenback, while copper conformed to the gains across the complex and in tandem with the heightened risk appetite in its largest consumer China.

EIA report stated that US Total Shale Regions Oil Production in March is forecast to increase by 111k BPD to 6.757mln BPD (Prev. 109k BPD increase in February). (Newswires)

GEOPOLITICAL

North Korean Leader Kim said need to continue good atmosphere with South Korea and it’s important to liven up the warm climate of reconciliation & dialogue. (KCNA).

US VP Pence stated that strong new sanctions are coming soon on North Korea and that policy towards North Korea remains unchanged. (Newswires)

US

Yields were slightly higher across the curve on Monday, with most of the action concentrated in the belly of the curve. The Tplex took its cue from continued ‘recovery’ in risk sentiment after last week, with 10s moving back to test 2.9% unsuccessfully, settling around 2.85%. Analysts were also citing concerns about the level of US deficits, and are mindful of inflation data, due Wednesday, for signs whether inflationary pressures are widespread, or fleeting/contained in certain areas. The US Treasury will also auction a new 30-year TIPS for $7bln, ahead of next week’s new 2s, 5s and 7s. US T-Notes settle 9 ticks lower at 120-25+.