- APAC stocks traded mostly higher albeit with mixed price action seen following the subdued handover from Wall St where stocks declined amid geopolitical uncertainty, disappointing data and weak Walmart guidance, while participants in the region digested earnings releases and central bank commentary.
- Fed's Kugler (voter) said she believes the Fed should hold the policy rate in place for some time and noted there is currently a lot of uncertainty about the potential effect of President Trump's tariffs.
- Japanese CPI printed mostly above expectations; BoJ Governor Ueda said if markets make abnormal moves, the BoJ stands ready to respond nimbly, such as through market operations, to smooth market moves.
- US President Trump's administration gave Ukraine an "improved" draft for a minerals agreement between the countries after Ukrainian President Zelensky infuriated US President Trump by rejecting his initial offer, while sources on both sides now say a deal is now looking more likely, according to Axios.
- European equity futures indicate a flat cash market open with Euro Stoxx 50 futures U/C after the cash market closed flat on Thursday.
- Looking ahead, highlights include EZ, UK & US Flash PMIs, UK & Canada Retail Sales, Speakers including ECB’s Lane, BoC’s Macklem & Fed's Kugler & Jefferson, Earnings from Air Liquide, Standard Chartered & Poste Italiane.
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US TRADE
EQUITIES
- US stocks were pressured and all major indices closed in the red with underperformance in the Dow following dismal guidance from Walmart, while risk sentiment was also not helped by weaker-than-expected data and the geopolitical uncertainty amid tensions between US and Ukraine with White House National Security Advisor Waltz telling Ukraine to "tone it down", although sources later noted that the US has given Ukraine a new "improved" draft of the minerals deal.
- SPX -0.43% at 6,118, NDX -0.48% at 22,068, DJIA -1.01% at 44,177, RUT -0.91% at 2,262.
- Click here for a detailed summary.
TARIFFS/TRADE
- White House National Economic Council Head Hassett sees revenue from China tariffs of USD 500bln to USD 1tln over 10 years and said replacing income tax revenue with tariffs is possible.
- US President Trump’s aluminium tariffs set to take effect on March 12th will cover 123 products including chipmaking equipment parts and aircraft components in a potential blow to Japanese companies that rely on exports to America, while Japan’s Trade Ministry is working to identify items and how Japanese companies will be impacted, according to Nikkei.
NOTABLE HEADLINES
- Fed's Kugler (voter) said she believes the Fed should hold the policy rate in place for some time and noted there is currently a lot of uncertainty about the potential effect of President Trump's tariffs, as well as noted they are looking at potential scenarios on tariff impacts and tariffs could put up price pressures, but the extent is less known. Kugler said it is unknown how much tariffs will be passed through to consumers as higher prices and to assess tariff effects "we have to wait", while she added they will need to stop balance sheet shrinkage at some point, while still above ample reserves.
- Fed's Musalem (2025 voter) said assurance that inflation is returning to the 2% target is needed before further policy changes and a patient approach is appropriate, while he also stated there are lots of risks in the economy right now on many fronts and noted that so far there are no plans to change the Fed balance sheet drawdown. Furthermore, Musalem said a one-time increase in tariffs is a one-time increase in the price level and any new tariffs will need a lot of study to understand the impact.
- Fed's Barr (Vice Chair for Supervision) urged incoming regulators to implement international capital standards and said the Fed should not reform stress tests in a way that results in lower bank capital requirements. Furthermore, he said it is important to have strong bank regulation and supervision against potential shocks.
APAC TRADE
EQUITIES
- APAC stocks traded mostly higher albeit with mixed price action seen following the subdued handover from Wall St where stocks declined amid geopolitical uncertainty, disappointing data and weak Walmart guidance, while participants in the region digested earnings releases and central bank commentary.
- ASX 200 marginally declined amid a deluge of earnings releases and after Australia's flash manufacturing PMI improved but remained in contraction territory, while RBA Governor Bullock reiterated a cautious approach to further rate cuts.
- Nikkei 225 swung between gains and losses with initial pressure owing to recent currency strength and after mostly firmer-than-expected CPI data, although the index then rebounded and the yen weakened amid comments from BoJ Governor Ueda who said if markets make abnormal moves, they stand ready to respond nimbly, such as through market operations.
- Hang Seng and Shanghai Comp are positive with notable outperformance in the Hong Kong benchmark which was led by a tech surge as Alibaba shares climbed by a double-digit percentage post-earnings, while the PBoC and Chinese Premier Li recently pledged efforts to smooth financing and stimulate consumption, respectively.
- US equity futures remained subdued following the prior day's lacklustre performance on Wall St.
- European equity futures indicate a flat cash market open with Euro Stoxx 50 futures U/C after the cash market closed flat on Thursday.
FX
- DXY attempted to nurse some of the prior day's losses after falling to a fresh YTD low firmly beneath the 107.00 level with mild overnight support seen as the JPY gave back some of its recent gains following Ueda's comments. Nonetheless, the recovery in the greenback was limited following the recent weak data releases in the US and a softer yield environment.
- EUR/USD traded little changed and held on to most of its recent spoils after having briefly reclaimed the 1.0500 handle.
- GBP/USD took a breather after gradually climbing during the prior session to gain a firm footing above the 1.2600 level.
- USD/JPY recovered the majority of yesterday's losses and returned to above the psychologically significant 150.00 level with the rebound assisted by comments from BoJ Governor Ueda who said they are ready to respond nimbly through open market operations if there are abnormal market moves.
- Antipodeans were uneventful amid a lack of pertinent tier-1 data and with RBA and RBNZ officials reiterating the views from their respective central bank meetings earlier this week.
- PBoC set USD/CNY mid-point at 7.1696 vs exp. 7.2433 (prev. 7.1712).
FIXED INCOME
- 10yr UST futures eked mild gains following yesterday's positive but choppy performance as participants reflected on the recent rhetoric from the Trump administration, US data and the negative risk sentiment on Wall St.
- Bund futures continued the slow recovery from this week's trough and remained in sub-132.00 territory amid a lack of pertinent drivers and ahead of the German election on Sunday.
- 10yr JGB futures were boosted alongside comments from BoJ Governor Ueda who spoke regarding the BoJ's past massive monetary easing including YCC which he said was a necessary process towards achieving the price target and stated that they stand ready to respond nimbly such as through market operations if markets make abnormal moves.
COMMODITIES
- Crude futures were rangebound amid quiet energy-specific catalysts and ongoing geopolitical uncertainty.
- Spot gold initially climbed as Shanghai commodities trade got underway but then wiped out its gains as the dollar firmed.
- Copper futures retreated with demand subdued by the mixed risk appetite and a stronger dollar.
- US EIA Weekly Crude Stocks 4.633M vs. Exp. 3.0M (Prev. 4.07M).
- US EIA reported no crude oil addition to the SPR in the latest week for the first time since December 2024.
- EU's Energy Commissioner said the EU is looking for more gas, including from the likes of the US, to replace Russian supplies, via Reuters; the draft shows that the EU is aiming for long-term LNG contracts to stabilise prices. The EU is also looking for renewable energy to cut its overall reliance on fuel.
CRYPTO
- Bitcoin traded indecisively and kept within a relatively tight range above the USD 98,000 level.
NOTABLE ASIA-PAC HEADLINES
- BoJ Governor Ueda said BoJ's massive monetary easing including YCC was a necessary process towards achieving the price target and they acknowledged the BoJ's massive stimulus caused various side effects, Ueda said they expect long-term interest rates to fluctuate to some extent depending on the market's view on the economic outlook and if markets make abnormal moves, they stand ready to respond nimbly, such as through market operations, to smooth market moves. Ueda said he won't comment on where long-term interest rates could eventually converge and cannot say specifically when exactly the BoJ could conduct emergency market operations to soothe yield moves. Furthermore, he said there could be more side effects from monetary easing and that more interest rate hikes could come into sight if the price outlook continues to improve, and there might be some unpredictable impact on the economy, while he reiterated the accommodative environment continues and BoJ will adjust monetary policy if underlying prices rise.
- RBA Governor Bullock said the board is committed to being guided by incoming data and evolving risk assessments, while she added there is no pre-commitment to any specific course of action on interest rates and the board remains cautious about further policy easing.
DATA RECAP
- Japanese National CPI YY (Jan) 4.0% vs. Exp. 3.9% (Prev. 3.6%)
- Japanese National CPI Ex. Fresh Food YY (Jan) 3.2% vs. Exp. 3.1% (Prev. 3.0%)
- Japanese National CPI Ex. Fresh Food & Energy YY (Jan) 2.5% vs. Exp. 2.5% (Prev. 2.4%)
GEOPOLITICS
MIDDLE EAST
- Israeli police received reports of two explosions in Bat Yam and one in Holon on Thursday night, while four explosive devices were found in buses in Bat Yam and Holon. Israeli PM's office said there was an attempt to carry out a series of attacks on buses and Israeli PM Netanyahu has instructed the military to carry out an intense operation in the West Bank against "terror" hubs.
- Israel military said two bodies released by Hamas on Thursday were identified as Israeli hostages Kfir and Ariel Bibas, while it demanded for Hamas to return Shiri Bilbas along with all hostages. It was separately reported that the IDF said the exchange with Hamas on Saturday will continue as planned, according to Asharq News.
RUSSIA-UKRAINE
- Ukrainian President Zelensky said he had a productive meeting with US Envoy Kellogg and discussed security guarantees, while he said Ukraine is ready for a strong and useful agreement with the US on investments and security.
- US President Trump's administration gave Ukraine an "improved" draft for a minerals agreement between the countries after Ukrainian President Zelensky infuriated US President Trump by rejecting his initial offer, while sources on both sides now say a deal is now looking more likely, according to Axios.
- White House National Security Advisor Waltz said Europe needs to step up for their own defence as a NATO partner and called for allies to pay up by the June NATO summit. Waltz also said some of the insults coming out of Kyiv were unacceptable and Ukrainian President Zelensky needs to come back to the table on critical minerals, while he added that President Trump is obviously very frustrated with Zelensky right now.
- US Secretary of State Rubio said the meeting between US President Trump and Russian President Putin will largely depend on whether progress can be made on ending the war in Ukraine.
- US opposes language on 'Russian aggression' in G7 statement on Ukraine, according to FT
- French President Macron said if there is no dissuasion, Russia will not keep its word, while they are not planning to send troops to Ukraine but could send troops as part of peacekeeping and security guarantees for Ukraine. Macron said the priority is to work on creating European champions for the defence industry and he will tell US President Trump that weakness with Russian President Putin will not make him credible with China and Iran's nuclear threat.
- Polish PM Tusk called for financing aid for Ukraine from frozen Russian assets and urged stronger defences along EU borders with Russia.
- China's Foreign Minister Wang Yi said China supports all efforts conducive to peace in Ukraine including the recent consensus reached by the US and Russia, while he added that China is willing to continue playing a constructive role in political resolution of the crisis.
OTHER
- China’s military warned and drove away three Philippine aircraft that ‘illegally intruded’ into the airspace near the Spratly Islands and reefs on Thursday.
EU/UK
NOTABLE HEADLINES
- UK reportedly lines up a new ambassador to help rebuild China ties, according to Reuters.
DATA RECAP
- UK GfK Consumer Confidence (Feb) -20.0 vs. Exp. -22.0 (Prev. -22.0)
