US stocks climbed after a lack of hawkish surprises from the PCE data - Newsquawk Asia-Pac Market Open

• US stocks gained and were led by the Nasdaq 100 amid semiconductor strength and as yields softened after the lack of hawkish surprises from Core PCE data which printed in line with expectations, while other releases also conformed to the dovish data theme.
• USD saw two-way price action with initial pressure after yields declined in the aftermath of in-line PCE data and rising jobless claims, as well as a miss in Chicago PMI and a miss in Pending Home sales. However, the DXY then clawed back its losses and then some to reclaim the 104.00 status.
• Looking ahead, highlights include Japanese Unemployment Rate & Household Confidence, South Korean Exports, Regional PMIs, Chinese Official PMIs & Caixin Manufacturing PMI, Comments from Fed's Williams & RBNZ Governor Orr, Supply from Australia, South Korean Markets are Closed for Holiday.

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LOOKING AHEAD

• Highlights include Japanese Unemployment Rate & Household Confidence, South Korean Exports, Regional PMIs, Chinese Official PMIs & Caixin Manufacturing PMI, Comments from Fed's Williams & RBNZ Governor Orr, Supply from Australia, South Korean Markets are Closed for Holiday.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks gained and were led by the Nasdaq 100 amid semiconductor strength and as yields softened after the lack of hawkish surprises from Core PCE data which printed in line with expectations, while other releases also conformed to the dovish data theme.
• SPX +0.52% at 5,096, NDX +0.95% at 18,043, DJIA +0.12% at 38,996, RUT +0.71% at 2,054.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (voter) said inflation came down much faster than he expected and the last few inflation readings have shown it is going to be a bumpy path back to 2%. Bostic also said they have to stay vigilant and attentive and that over the long arc, inflation is still coming down, while he reiterated it is probably appropriate to reduce the policy rate in the summertime.
• Fed's Daly (voter) said the Fed have policy in a good place and can cut if needed, while she wants to avoid holding rates all the way to 2% inflation and said there is no imminent risk of the economy faltering. Furthermore, Daly warned inflation could get stuck if the Fed cuts too quickly and noted that risks of persistent inflation and economic downturn are even.
• Fed's Mester (voter) said PCE data came in as expected and doesn't change her view that inflation is moving down, while she noted there is little more work for the Fed to do on inflation and that monetary policy is restrictive and demand should cool. Furthermore, Mester said she doesn't want to focus on time regarding the first rate cut and will focus on the economy, as well as noted that baseline forecasts for three cuts in 2024 still 'feels about right', according to a Yahoo Finance interview.
• Fed's Goolsbee (non-voter) said even with January PCE data showing a month of rebound, should be careful to extrapolate, while he added they had very substantial progress over a long-term basis on inflation.
• US House voted to pass the bill to avert a partial government shutdown. In relevant news, Senate Majority Leader Schumer hopes for the final passage of the stop-gap funding bill this evening.
• US House Speaker Johnson said the bill text on the FY24 spending bill will be posted this weekend.

DATA RECAP

• US Core PCE Price Index MM (Jan) 0.4% vs. Exp. 0.4% (Prev. 0.2%)
• US Core PCE Price Index YY (Jan) 2.8% vs. Exp. 2.8% (Prev. 2.9%)
• US Personal Income MM (Jan) 1.0% vs. Exp. 0.4% (Prev. 0.3%)
• US Consumption, Adjusted MM (Jan) 0.2% vs. Exp. 0.2% (Prev. 0.7%)
• US Chicago PMI (Feb) 44.0 vs. Exp. 48.0 (Prev. 46.0)
• US Initial Jobless Claims 215k vs. Exp. 210k (Prev. 201k, Rev. 202k)
• US Continued Jobless Claims 1.905M vs. Exp. 1.874M (Prev. 1.862M, Rev. 1.860M)
• US Pending Sales Change MM (Jan) -4.9% vs. Exp. 1.0% (Prev. 8.3%, Rev. 5.7%)

FX

• USD saw two-way price action with initial pressure after yields declined in the aftermath of in-line PCE data and rising jobless claims, as well as a miss in Chicago PMI and a miss in Pending Home sales. However, the DXY then clawed back its losses and then some to reclaim the 104.00 status.
• EUR was ultimately weaker against the dollar and tested 1.0800 to the downside following the slew of data releases including mixed Eurozone inflation data.
• GBP gave way to the intraday rebound of the dollar amid light UK-specific catalysts.
• JPY held on to its gains following the hawkish tone from BoJ board member Takata.

FIXED INCOME

• Treasuries firmed after in-line PCE data and soft activity data were accentuated by month-end buying.

COMMODITIES

• Oil prices were choppy and retreated into the settlement to end slightly in the red as a firmer dollar and continued heightened geopolitical worries cancelled each other out for the larger part of the session.
• OPEC February oil output rose by 900k BPD from January to 26.42mln BPD as Libyan output recovers from the outage, while OPEC's nine members making voluntary cuts or subject to quotas reduced output by 20k BPD vs. January to 21.43mln BPD, according to a Reuters survey.
• US crude oil production fell 4k BPD in December to 1.315mln BPD (prev. 13.319mln BPD in Nov), according to the EIA.
• Russia’s government announced it will reintroduce flexible export duties for coal exports linked to the Rouble exchange rate from March 1st which will be valid until February 28th next year and will vary from 4-7% but won't apply if USD/RUB is beneath 80.

GEOPOLITICAL

MIDDLE EAST

• Israeli PM Netanyahu said Israel won't fold to the delusional demand of Hamas but will provide freedom of worship to Muslims during the month of Ramadan while maintaining security at the same time, according to Al Jazeera.
• Israel’s Defence Minister said they are planning operations in Rafah and the central camps, while they will not stop until Hamas is eliminated but noted that concessions can be made on the issue of detainees, according to Al Jazeera.
• US President Biden indicated that any potential ceasefire may occur later than Monday. It also reported that President Biden spoke with Qatar's Emir in which they agreed Hamas should release the hostages it is holding without delay and underscored that the release of hostages would result in an immediate and sustained ceasefire in Gaza over a period of at least six weeks, according to the White House.
• Lebanese PM Mikati said a ceasefire in Gaza would trigger talks on a Lebanon truce and he is confident Hezbollah will ceasefire if Israel does the same. Furthermore, he expects weeks of talks to achieve long-term stability in south Lebanon once a Gaza deal is reached and said US envoy Hochstein is to visit Lebanon soon.
• Yemen’s Houthis leader warned their forces will introduce military "surprises" in their Red Sea operations which their "enemies" won't expect, according to Walla's Elster.

OTHER

• Ukraine sees a risk of Russia breaking through its defences by the summer unless allies increase supplies of ammunition, according to Bloomberg sources.
• Russian President Putin questioned "Don't they understand there is danger of nuclear conflict?", while he said regarding talk of NATO troops in Ukraine that consequences for the intruders will be more tragic and they have a weapon which is able to hit targets on their territory.
• US State Department said they do not have any sign Russia is preparing to use a nuclear weapon. It was also reported that President Biden seeks a plan to tap Russian assets for Ukraine by the G7 summit, according to Bloomberg.

ASIA-PAC

NOTABLE HEADLINES

• China’s top 100 developers’ February sales declined 60% Y/Y, according to CRIC.
• US is to investigate whether Chinese "connected" cars are a security risk, according to FT.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Hunt is considering extending the windfall tax on oil and gas profits ahead of the budget next week, according to Bloomberg.
• UK appointed Clare Lombardelli as the next BoE Deputy Governor for monetary policy to replace Broadbent who leaves at the end of June.
• ECB's Holzmann said a serious discussion at the ECB on rate reductions is unlikely before June, according to Politico.
• ECB's Panetta said inflation is falling faster than expected.

DATA RECAP

• German Retail Sales MM Real (Jan) -0.4% vs. Exp. 0.5% (Prev. -1.6%)
• German Retail Sales YY Real (Jan) -1.4% vs. Exp. -1.5% (Prev. -1.7%)
• German Unemployment Change (Feb) 11.0k vs. Exp. 7.0k (Prev. -2.0k)
• German CPI Prelim MM (Feb) 0.4% vs. Exp. 0.5% (Prev. 0.2%)
• German CPI Prelim YY (Feb) 2.5% vs. Exp. 2.6% (Prev. 2.9%)
• French CPI Prelim YY NSA (Feb) 2.9% vs. Exp. 2.7% (Prev. 3.1%)
• Spanish CPI Prelim YY NSA (Feb) 2.8% vs. Exp. 2.7% (Prev. 3.4%)