US stocks eked slight gains in choppy trade amid lower yields and banking sector concerns - Newsquawk Asia-Pac Market Open

• US stocks eked slight gains with price action choppy amid a softer yield environment and after banking concerns were stoked by a further plunge in NYCB shares, while data releases were light and there were comments from Treasury Secretary Yellen in the Senate who voiced concerns over commercial real estate.
• USD weakened alongside softer yields and as banking fears resurfaced after NYCB shares took another tumble, while there were several Fed comments including from Mester who did not want to offer a timing on a rate cut, sees no need to rush and still leans towards three rate cuts in 2024.
• Looking ahead, highlights include Australian AIG Manufacturing & Construction Indexes, Japanese Leading Index, Supply from Australia & Japan, Holiday Closure in Taiwan.

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LOOKING AHEAD

• Highlights include Australian AIG Manufacturing & Construction Indexes, Japanese Leading Index, Supply from Australia & Japan, Holiday Closure in Taiwan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks eked slight gains with price action choppy amid a softer yield environment and after banking concerns were stoked by a further plunge in NYCB shares, while data releases were light and there were comments from Treasury Secretary Yellen in the Senate who voiced concerns over commercial real estate.
• SPX +0.23% at 4,954, NDX -0.23% at 17,572, DJIA +0.37% at 38,521, RUT +0.85% at 1,953.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Mester (voter) said the Fed can lower rates later this year if the economy performs as expected and when the Fed cuts rates, it will likely be at a gradual pace. Mester also stated that monetary policy is in a good place to assess what’s next for rates and if inflation doesn’t fall, the Fed can maintain current policy. Furthermore, she does not want to offer timing on a rate cut and sees no need to rush, while she still leans towards three rate cuts in 2024.
• Fed's Kashkari (non-voter) said inflation has come down very quickly and the labour market is very strong, while he added it's a conundrum and that recession is not his base case. Furthermore, Kashkari said they are not all the way there yet on inflation but added that data is looking positive.
• US Treasury said the IRS now estimates USD 80bln in Inflation Reduction Act funding would increase revenue by as much as USD 561bln from 2024-2034 (prev. USD 390bln) and if full IRS funding is continued in accordance with Biden proposals, revenue gains could be as high as USD 851bln.
• US Treasury Secretary Yellen said there's very robust demand for US Treasuries in the market.

FX

• USD weakened alongside softer yields and as banking fears resurfaced after NYCB shares took another tumble, while there were several Fed comments including from Mester who did not want to offer a timing on a rate cut, sees no need to rush and still leans towards three rate cuts in 2024.
• EUR recovered its earlier losses as the dollar retreated and returned to relatively flat territory, while ECB Consumer Inflation Expectations for 12-months ahead fell and the 3-year ahead view ticked higher.
• GBP benefitted from the dollar weakness and eyes a reclaim of the 1.2600 handle despite comments from BoE's dovish dissenter Dhingra who stated that now is the time to cut rates.
• JPY ultimately strengthened with USD/JPY trading sub-148.00 after US yields softened.
• BoC Governor Macklem said monetary policy needs more time to ease remaining price pressures and monetary policy is working which has slowed demand, rebalanced the economy and brought down inflation. Macklem also stated they are not working to a timetable when it comes to rate cuts.

FIXED INCOME

• Treasuries rallied as more banking fears permeated in a data-light US session, while the 3yr auction was decent ahead of 10yr and 30yr offerings.

COMMODITIES

• Oil prices were firmer amid a softer dollar but with gains capped by promising geopolitical updates in the Middle East.
• US Energy Inventory Data (bbls): Crude +0.7mln (exp. +1.9mln), Gasoline +3.7mln (exp. +0.1mln), Distillate -3.7mln (exp. -1.0mln) Cushing +0.5mln.
• EIA STEO raised the 2024 forecast for world oil demand growth by 30k BPD to a 1.42mln BPD Y/Y increase and raised the 2025 forecast for world oil demand growth by 80k BPD to a 1.29mln BPD Y/Y.
• Qatar set March Marine Crude OSP at Oman/Dubai plus USD 0.20/bbl (prev. minus USD 0.75/bbl) and Land crude OSP at Oman/Dubai minus USD 0.10/bbl (prev. minus USD 0.75/bbl), according to a pricing document cited by Reuters.
• Russia's oil exports from its western ports in February are to rise by 0.7mln tonnes from the initial plan after the Tuapse refinery outage, according to Reuters sources. It was also reported that Russian oil exports fell 3.3% in 2023 to 234.3mln tons, according to Ifax.
• Chile’s Codelco CEO said their copper production reached 1.325mln tonnes in 2023 and could reach 1.353mln tonnes in 2024, according to Reuters. Chile's Codelco expects a month-long stoppage at the Chuquicamata mine in 2025 to change the conveyor belt and expects to reach processing capacity at the underground mine by 2030.

GEOPOLITICAL

• Qatar PM Al Thani said the Hamas response in negotiations is "positive" and makes Qatar "optimistic" although he couldn't give details on the framework of the deal at this time.
• Hamas said they have dealt with the proposal in a positive spirit to ensure a comprehensive ceasefire, end to the aggression, lift of the siege and exchange of prisoners, according to Al Jazeera. Furthermore, a Hamas senior official later told Reuters that it took them time to respond to the framework agreement because many of its issues were unclear and ambiguous, while the official said Israeli PM Netanyahu is trying to make everyone believe that he has or will achieve victory to preserve his coalition government.
• Israel said regarding a potential Gaza truce that Hamas's response is being studied thoroughly by all parties involved in negotiations.
• US President Biden said there is some movement on a deal for a hostage release and fighting pause.
• US Secretary of State Blinken said the US is reviewing Hamas’s response to the framework on a hostage deal and will discuss it with the Israeli government on Wednesday, while there is a lot of work to be done but US continues to believe an agreement is possible. Blinken also said the US is determined to use any pause to continue to build the diplomatic path forward to a just and lasting peace.
• There was an earlier report that negotiations between Israel, Hamas, and mediators for a truce have been slowed down in recent weeks due to Israel's refusal to accept Hamas and mediators' demand for a permanent ceasefire at the end of the multiphase arrangement, according to FT sources.
• US and four European allies hope to announce in the next few weeks a series of commitments made by Israel and Hezbollah to diffuse tensions and restore calm to the Israel-Lebanon border, according to two Israeli officials and a source cited by Axios.
• Yemen’s Houthi leader said they will further escalate if the attack on Gaza does not stop.
• White House's Kirby received positive feedback that Saudi Arabia and Israel are willing to continue to have normalised discussions.
• German Chancellor Scholz will reportedly tell US President Biden the EU has done its part for Kyiv, according to Bloomberg citing an official, while it was noted that German military aid for Ukraine totals EUR 30bln.

ASIA-PAC

NOTABLE HEADLINES

• China’s financial regulator urged local supervisory bureaus to set up special working groups and strengthen cooperation with local governments and housing departments for real estate financing coordination. The regulator also urged local supervisory bureaus to guide banks to meet reasonable financing needs and said a special working mechanism should be established with each commercial bank to optimise the property loan approval process.
• China's Vice Premier said in a meeting with the US Treasury Undersecretary for International Affairs that both sides need to stabilise and develop the US-China economic relationship, while they discussed economic policies and cooperation with the US. Furthermore, China expressed concern over the US imposition of tariffs on China, two-way investment restrictions, and sanctions.
• US House Select Committee on the Chinese Communist Party is planning to hold a field hearing on Chinese biotech competition next week in Boston, according to Axios.
• China’s Foreign Minister held talks with his South Korean counterpart and hopes South Korea will pursue a positive, objective, and friendly policy towards China. Furthermore, China said both sides should jointly maintain stability and smooth flow of industrial chains and supply chains.
• BoJ is on track for a policy shift by April, assisted by the wage outlook, while it is reportedly laying the groundwork to end NIRP by April and overhaul other policy framework areas but will likely go slow on subsequent action, according to Reuters citing sources.

EU/UK

NOTABLE HEADLINES

• BoE's Dhingra (dovish dissenter) urged the BoE not to take a risk with the UK economy, while she added that inflation has been tamed and now is the time to cut rates. Dhingra also stated the BoE is basically still looking at a pretty restrictive period of monetary policy even after moderation begins and she is not worried about credibility risk from cutting rates too early, according to FT.
• ECB's Vujcic said they should not rush the cutting cycle and there is still quite a lot of resilience in services inflation and wages, while he added that equilibrium is higher than in the past.
• ECB Consumer Inflation Expectations survey (Dec) showed the 12-month ahead forecast at 3.2% (prev. 3.5%) and the 3-year ahead forecast at 2.5% (prev. 2.4%), while economic growth expectations for the next 12 months remained unchanged at -1.3%
• Dutch NSC Party stepped away from talks on forming a majority government, according to local press.

DATA RECAP

• UK S&P Global Construction PMI (Jan) 48.8 vs. Exp. 47.3 (Prev. 46.8)
• German Industrial Orders MM (Dec) 8.9% vs. Exp. 0.0% (Prev. 0.3%)
• EU Retail Sales MM (Dec) -1.1% vs. Exp. -1.0% (Prev. -0.3%, Rev. 0.3%)
• EU Retail Sales YY (Dec) -0.8% vs. Exp. -0.9% (Prev. -1.1%, Rev. -0.4%)