US stocks gained amid lower yields after mixed data releases - Newsquawk Asia-Pac Market Open

• US stocks were generally bid with the upside supported by a much stronger-than-expected Q4 GDP print which was also accompanied by some encouraging signs on PCE for Q4 ahead of the December PCE on Friday, while all major indices finished in the green albeit with underperformance in the NDX after weak Tesla (TSLA) earnings.
• USD strengthened despite the slew of mixed data releases including a much stronger-than-forecasted Q4 GDP print which was accompanied by softer PCE components within the release and Initial Jobless claims rose to outside of the forecast range and Durable Goods printed cooler than expected, while participants eagerly await the Fed's preferred PCE inflation gauge on Friday.
• Looking ahead, highlights include Japanese Tokyo CPI, Corporate Services Price Index & Leading Index, Singapore Industrial Production, BoJ December Meeting Minutes, Holiday Closures in Australia and India.

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LOOKING AHEAD

• Highlights include Japanese Tokyo CPI, Corporate Services Price Index & Leading Index, Singapore Industrial Production, BoJ December Meeting Minutes, Holiday Closures in Australia and India.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks were generally bid with the upside supported by a much stronger-than-expected Q4 GDP print which was also accompanied by some encouraging signs on PCE for Q4 ahead of the December PCE on Friday, while all major indices finished in the green albeit with underperformance in the NDX after weak Tesla (TSLA) earnings.
• SPX +0.53% at 4,894, NDX +0.10% at 17,516, DJIA +0.64% at 38,049, RUT +0.71% at 1,975.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden announced almost USD 5bln for major transportation projects nationwide, according to the White House.
• US Treasury Secretary Yellen said tax fairness with wealthy people and corporations paying more, will be an 'important part' of President Biden's second-term agenda and Biden wants to leave Trump-era tax cuts in place for those earning less than USD 400k a year. Yellen added that Biden does not want to continue business tax deductions and credits due to expire in 2025.

DATA RECAP

• US GDP Advance (Q4) 3.3% vs. Exp. 2.0% (Prev. 4.9%)
• US Core PCE Prices Advance (Q4) 2.0% vs. Exp. 2.0% (Prev. 2.0%)
• US Durable Goods (Dec) 0.0% vs. Exp. 1.1% (Prev. 5.4%, Rev. 5.5%)
• US KC Fed Manufacturing (Jan) -17.0 (Prev. -4.0, Rev. -5)
• US KC Fed Composite Index (Jan) -9.0 (Prev. -1.0)
• US New Home Sales Units (Dec) 0.664M vs. Exp. 0.645M (Prev. 0.59M, Rev. 0.615M)
• US Initial Jobless Claims 214k vs. Exp. 200k (Prev. 187k, Rev. 189k)
• US Continued Jobless Claims 1.833M vs. Exp. 1.828M (Prev. 1.806M)

FX

• USD strengthened despite the slew of mixed data releases including a much stronger-than-forecasted Q4 GDP print which was accompanied by softer PCE components within the release and Initial Jobless claims rose to outside of the forecast range and Durable Goods printed cooler than expected, while participants eagerly await the Fed's preferred PCE inflation gauge on Friday.
• EUR weakened in the aftermath of the ECB announcement and press conference as the central bank kept rates unchanged, as expected, while Lagarde was deemed more dovish than anticipated as she did not explicitly push back on market pricing and provided welcomed wage-related remarks.
• GBP remained subdued and briefly dipped beneath the 1.2700 level amid a firmer greenback.
• JPY was ultimately softer with price action choppy and with attention turning to Tokyo inflation data.
• CBRT hiked by 250bps as expected to 45.00%, while the Committee assessed that the current level of the policy rate will be maintained until there is a significant decline in the underlying trend of monthly inflation.
• Norges Bank maintained its Key Policy Rate at 4.50% as expected and said the policy rate will likely be kept at that level for some time ahead. Norges Bank also noted that inflation is markedly above target and underlying inflation has declined further but is still high.
• South African Reserve Bank kept the Prime Rate unchanged at 11.75%, while it stated that risks to the medium-term domestic growth outlook are assessed to be balanced and a return to target in headline inflation has been slow.

FIXED INCOME

• Treasuries bull steepened after the data showed soft PCE within a strong GDP report and a rise in jobless claims, while a dovish leaning Lagarde and decent 7yr auction also facilitated the upside in treasuries..

COMMODITIES

• Oil prices were firmer amid the positive risk appetite, ongoing Middle East tensions, continued Chinese stimulus tailwinds and with US economic data showing faster-than-expected growth in Q4.

GEOPOLITICAL

• Israeli war council discussed a possible exchange deal with Hamas, according to Sky News Arabia.
• Hamas said if the ICJ issues a ruling for a ceasefire, Hamas will abide by it if Israel reciprocates, while Hamas said it will release all Israeli hostages in Gaza if Israel releases all Palestinian prisoners.
• US President Biden is reportedly sending CIA Chief Burns to meet with Israeli, Egyptian, and Qatari officials to help broker a Gaza hostage deal, according to Washington Post.
• American weapons arrived in Israel including dozens of F-35 and F-15 fighters and Apache helicopters, according to Al Jazeera citing Israeli Channel 12.
• Yemeni sources said Houthis tried to convince al-Qaeda elements to participate in targeting Western ships in the Red Sea, according to Sky News Arabia.
• US National Security Adviser Sullivan is to meet with Chinese Foreign Minister Wang Yi for talks on Houthi attacks in the Red Sea, according to WSJ.
• US and Iraq are to shift to bilateral military relations and US officials will stay in Iraq to defeat Islamic State, according to Bloomberg.
• Russian President Putin is reportedly to signal to the US that he's open to talks on Ukraine and sources added that Moscow is floating ideas on Ukraine security and territory, according to Bloomberg.
• Chinese Defence Ministry said US warships and planes have "caused trouble and provocations at China's doorstep" and carried out large-scale high-frequency activities in waters and airspace around China, while it added that Chinese armed forces handled the situation in accordance with the law.

ASIA-PAC

NOTABLE HEADLINES

• Japanese government report kept the overall view on the economy unchanged which is recovering at a moderate pace, while it lowered the view on exports for the first time in a year amid weak Europe-bound shipments and cautioned over the impact of the January 1st earthquake.
• US is reportedly ready to work with Japan to develop AI-piloted autonomous aircraft for the Air Force, according to Nikkei citing a top official.
• EU delegates are to visit India on February 19th for Free Trade Agreement talks with the upcoming round of negotiations expected to centre on services and investments, which will build on earlier talks that covered goods and public procurement.

EU/UK

NOTABLE HEADLINES

• Canada and Britain are pausing talks on a free trade agreement at Britain's initiative, according to a spokeswoman for the Canadian Trade Minister.
• ECB held its key rates as expected with the Marginal Lending Rate at 4.75%, Refinancing Rate at 4.50% and Deposit Rate at 4.00%. ECB said the declining trend in underlying inflation has continued and past interest rate increases keep being transmitted forcefully into financing conditions, while it noted that key ECB interest rates are at levels that if maintained for a sufficiently long duration, will make a substantial contribution to the goal.
• ECB President Lagarde said the Euro area economy is likely to have stagnated in Q4 2023 and forward-looking surveys point to a pickup later. Lagarde said the consensus on the Governing Council is that it is premature to talk about rate cuts, while she said the ECB will be data-dependent and is not fixated on the calendar. Furthermore, Lagarde said on wages, which have been a key source of focus when it comes to the timing of the first rate cut, that data is 'directionally good' and the Bank is not seeing second-round effects. Lagarde also suggested not being overly focussed on the wording changes in the policy statement and said the framework review will most likely be complete by the end of Spring.
• ECB policymakers are reportedly open to start discussing future rate cuts in March if the data points to inflation hitting 2% this year, according to Reuters citing sources who added that a March pivot would pave the way for a rate cut most likely in June.

DATA RECAP

• German Ifo Expectations New (Jan) 83.5 vs. Exp. 84.8 (Prev. 84.3)
• German Ifo Current Conditions New (Jan) 87.0 vs. Exp. 88.6 (Prev. 88.5)
• German Ifo Business Climate New (Jan) 85.2 vs. Exp. 86.7 (Prev. 86.4)