Momentum from Wall St. record highs offset by China weakness, key earnings due - Newsquawk Europe Market Open

• APAC stocks traded mixed as weakness in China offset the momentum from Wall St's record highs.
• US Treasury expects to borrow USD 760bln in net marketable debt for the January-March period which is down USD 55bln from the October 2023 estimate.
• European equity futures indicate a higher open with Euro Stoxx 50 future +0.4% after the cash market closed up 0.1% on Monday.
• DXY is contained and continued to pivot around 103.50, EUR/USD remains on a 1.08 handle, other majors are steady.
• Looking ahead, highlights include regional EZ CPIs, EZ-wide GDP, Swiss KOF Indicator, UK Mortgage Lending, EZ Consumer Inflation Expectations, US JOLTs, Consumer Confidence, Japanese Retail Sales, BoJ SOO, Comments from ECB’s Lane, Nagel & SNB’s Jordan, Supply from UK, Italy & Germany. Earnings from Diageo, Entain, BBVA, UPS, Pfizer, Marathon Petroleum, Microsoft, Alphabet, Starbucks & AMD.

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US TRADE

EQUITIES

• US stocks and bonds were firmer in a quiet US session with geopolitics in the limelight and amid a softer yield environment, while the gains in stocks and treasuries accelerated in late trade after the Treasury financing estimates for the quarter ahead were reduced.
• SPX +0.76% at 4,927, NDX +1.01% at 17,596, DJIA +0.59% at 38,333, RUT +1.67% at 2,011.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Treasury expects to borrow USD 760bln in net marketable debt for the January-March period which is down USD 55bln from the October 2023 estimate and it expects to borrow USD 202bln in the April-June period, assuming an end-June cash balance of USD 750bln. Furthermore, in the October-December 2023 period it borrowed USD 776bln and ended the quarter with a cash balance of USD 769bln.
• Bipartisan US Congress negotiators have agreed on funding allocations for all 12 government spending bills, according to Republican lawmakers cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as weakness in China offset the momentum from Wall St's record highs.
• ASX 200 finished positive albeit with upside capped after disappointing retail sales data and as financials lagged.
• Nikkei 225 was initially lifted after a surprise decline in Japan's unemployment but gradually pared most of its gains.
• Hang Seng and Shanghai Comp were pressured as the focus turned to earnings releases with underperformance in Hong Kong amid losses in property and tech, while the Hong Kong government also began the process of passing new national security laws.
• US equity futures plateaued overnight ahead of this week's key events and upcoming big tech earnings.
• European equity futures indicate a higher open with Euro Stoxx 50 future +0.4% after the cash market closed up 0.1% on Monday.

FX

• DXY kept within tight parameters (103.36-103.52) as participants awaited this week's slew of key risk events.
• EUR/USD lacked direction following a rebound from a brief dip below 1.0800 and recent ECB rhetoric.
• GBP/USD conformed to the holding pattern seen across the FX space as participants also await the BoE meeting.
• USD/JPY marginally extended on yesterday's lows amid softer US yields and a decline in Japan's unemployment.
• Antipodeans were mixed with the recent risk-fuelled momentum stalled by weak Australian retail sales and losses in China.
• PBoC set USD/CNY mid-point at 7.1055 vs exp. 7.1763 (prev. 7.1097).
• SNB's Chair Jordan said his expectation is inflation will again rise a little but noted the situation regarding inflation has improved and looks relatively good. Jordan also said that inflation should be below 2% in 2024 and that it probably accelerated in January.

FIXED INCOME

• 10yr UST futures remained afloat ahead of the refunding announcement and FOMC on Wednesday.
• Bund futures extended on the prior day's highs above the 135.00 level following recent dovish ECB comments.
• 10yr JGB futures eked marginal gains but with upside capped amid a fall in unemployment and mixed 2yr auction results.

COMMODITIES

• Crude futures traded rangebound after failing to sustain yesterday's initial advances although oil futures were kept afloat as the US mulls its response to the deadly attack on its troops at a base in Jordan and amid the threat of a return of Venezuela sanctions.
• Saudi Aramco received a directive to maintain maximum sustainable capacity at 12mln BPD and not to continue increasing it to 13mln BPD, according to Reuters.
• US Department of Energy’s Office of Petroleum Reserves announced that contracts have been awarded for the acquisition of 3.1mln barrels of US-produced crude oil for the SPR and the DOE will issue a new solicitation later this week to purchase oil for SPR replenishment for a June delivery date.
• US will restore sanctions on Venezuela’s energy sector if the country upholds its ban on an opposition candidate from running for president and is also considering additional measures to punish Venezuela, according to US officials. It was later reported that the US Treasury Department ordered a wind-down of transactions involving Venezuela state-owned miner Minerven by February 13th.
• Spot gold lacked direction as participants continued to brace for the upcoming FOMC meeting and NFP data.
• Copper futures pulled back from yesterday's peak with upward momentum stalled amid the weakness in China.
• Brazilian miner Vale reported Q4 iron ore production of 89.4mln tons (prev. 80.85mln tons Y/Y) and nickel production of 44.9k tons (prev. 47.4k tons Y/Y).

CRYPTO

• Bitcoin marginally extended on gains and briefly climbed north of the USD 46,500 level.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong government started the process to pass new national security laws this year with consultations on Article 23 to last until February 28th and some chapters of the new law will include actions that would endanger national security. Furthermore, one chapter is related to treason and actions with seditious intentions and another chapter relates to state secrets and espionage behaviour, while the law will also relate to using computers or electronic systems to conduct actions to endanger national security, according to Reuters.
• Two US lawmakers asked the Biden administration to impose export restrictions on four Chinese companies involved in the planned Ford (F) Michigan battery plant, according to a letter seen by Reuters.
• RBNZ Chief Economist Conway said recent economic data suggests that monetary policy is working with the economy slowing and inflation easing, but they still have a way to go to get inflation back to the target midpoint of 2%.

DATA RECAP

• Japanese Unemployment Rate (Dec) 2.4% vs. Exp. 2.5% (Prev. 2.5%)
• Japanese Jobs/Applicants Ratio (Dec) 1.27 vs. Exp. 1.28 (Prev. 1.28)
• Australian Retail Sales MM (Dec F) -2.7% vs. Exp. -1.0% (Prev. 2.0%, Rev. 1.6%)

GEOPOLITICS

MIDDLE EAST

• Israel’s War Council was reportedly discussing a proposal for a 45-day truce in exchange for the release of 35 detainees, according to Al Arabiya citing Israeli media.
• Qatar's PM said progress on hostage talks is improving vs. a few weeks ago and they made good progress on Sunday to lay the foundation for a way forward on hostages. Furthermore, the PM stated the current phase of talks could lead to a permanent ceasefire in the future but a possible US retaliation over the attack on US soldiers would have an impact on hostage talks and regional security.
• Hamas said Israel must halt its aggression and withdraw from Gaza before any prisoner exchange deal takes place.
• US President Biden asked advisers for options to respond that would deter any further attacks against US forces, while the Pentagon's response options include striking Iranian personnel in Iraq and Syria or Iranian naval assets in Gulf waters. Furthermore, a response is likely to come in waves against a range of targets and will likely be initiated in a couple of days after President Biden gives the green light, according to sources cited by Politico.
• US Secretary of State Blinken said response against Iran could be multi-levered, come in stages and be sustained over time, while he added that work on Gaza hostage talks has been important and hopeful with the proposal on the table is strong and compelling.
• Pentagon said the number of troops injured in the attack on the Jordan base is now more than 40 and the drone attack has 'footprints' of Kataib Hezbollah. Pentagon said they know Iran funds these groups that are attacking US troops but it added they do not seek a war and do not think Iran is seeking a war.
• UKMTO said a merchant vessel was approached on its starboard bow by three small craft 44 nautical miles west of Yemen's Al-Murkha, while the vessel carried out self-protection measures and the crew were reported as safe and the vessel is proceeding to the next port of call, according to an advisory note.

OTHER

• North Korea fired cruise missiles towards the sea off its west coast, according to South Korea's military.
• Chinese Vice Foreign Minister Sun met with Ukraine's Ambassador to China and said that China and Ukraine should promote stability and long-term development of bilateral ties, while they exchanged views on issues of common concern including the Ukraine crisis, according to Reuters.

UK/EU

NOTABLE HEADLINES

• Northern Ireland DUP leader Donaldson said the party executive endorsed proposals from negotiations with the UK government and the package of measures provides a basis to return to a devolved government, while the measures including new legislation will be published by the UK government in due course. Donaldson said he believes the package safeguards Northern Ireland's place in the UK and it will remove checks for goods moving with the UK and remaining in Northern Ireland, according to Reuters.

DATA RECAP

• UK BRC Retail Shop Price Index YY (Jan) 2.9% (Prev. 4.3%)