US stocks were pressured and bond were underpinned ahead of PCE data - Newsquawk Asia-Pac Market Open

• US stocks suffered mild losses but were off the European morning lows with underperformance in the Nasdaq and Russell 2000 as communication, health and tech names lagged with the latter weighed on by chip names after AMAT received subpoenas related to China from the SEC and US Attorney's Office. Participants also digested the latest US data which ultimately had little sustainable reaction with Q4 '23 GDP revised down but the deflator, sales, PCE and Core PCE were revised up but did little to alter the Fed's narrative with all eyes on the January PCE report due Thursday.
• USD was initially underpinned amid the downbeat risk tone although the DXY failed to hold above 104.00, while Q4 GDP saw a slight revision lower but the PCE metrics were revised higher and attention now turns to the January PCE data scheduled for Thursday.
• Looking ahead, highlights include Japanese Industrial Production, Retail Sales & Housing Starts, Australian Retail Sales & Private Capex, New Zealand ANZ Business Confidence, Supply from Japan.

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LOOKING AHEAD

• Highlights include Japanese Industrial Production, Retail Sales & Housing Starts, Australian Retail Sales & Private Capex, New Zealand ANZ Business Confidence, Supply from Japan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks suffered mild losses but were off the European morning lows with underperformance in the Nasdaq and Russell 2000 as communication, health and tech names lagged with the latter weighed on by chip names after AMAT received subpoenas related to China from the SEC and US Attorney's Office. Participants also digested the latest US data which ultimately had little sustainable reaction with Q4 '23 GDP revised down but the deflator, sales, PCE and Core PCE were revised up but did little to alter the Fed's narrative with all eyes on the January PCE report due Thursday.
• SPX -0.17% at 5,069, NDX -0.54% at 17,874, DJIA -0.06% at 38,949, RUT -0.77% at 2,040.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (voter) said there is still work to do on inflation and they haven't declared victory, while he is 'comfortable' being patient on policy and said it won't be a fast march to 2% inflation with volatility expected.
• Fed's Williams (voter) said there is still some ways to go before hitting the 2% inflation target and sees a likely uneven path back to 2% inflation, while he said will let the incoming economic data determine the monetary policy path. Williams said the debate over rate cuts is a sign of progress on lowering inflation and the Fed is likely to cut rates later this year. Furthermore, he said three interest rate cuts in 2024 is reasonable for Fed officials to debate and data will drive when the Fed will cut rates.
• Fed's Collins (non-voter) repeated it will likely become appropriate to begin easing policy later this year and recent economic data highlights that progress toward the Fed's goals could continue to be bumpy. Collins added that more time is needed to discern if the economy is sustainably on the path to price stability and a healthy labour market, while she needs to see more evidence the disinflationary process will continue before starting to carefully normalise policy. Furthermore, Collins said it is premature to say whether the Fed could cut rates in May and sees risks as more balanced between cutting too early and too late.
• Fed's Logan (non-voter) said slowing the balance sheet runoff means managing the pace and does not mean stopping, while they need to disconnect the idea of a slower runoff pace and ending QT, according to a Bloomberg interview.
• Negotiators are reportedly very close to announcing a deal in principle on the first tranche of funding bills, which should theoretically unlock a short-term Continuing Resolution that would change the funding deadlines to March 8th and March 22nd, according to Punchbowl's Sherman.

DATA RECAP

• US GDP 2nd Estimate (Q4) 3.2% vs. Exp. 3.3% (Prev. 3.3%)
• US Core PCE Prices Prelim. (Q4) 2.1% vs. Exp. 2.0% (Prev. 2.0%)

FX

• USD was initially underpinned amid the downbeat risk tone although the DXY failed to hold above 104.00, while Q4 GDP saw a slight revision lower but the PCE metrics were revised higher and attention now turns to the January PCE data scheduled for Thursday.
• EUR slightly weakened against the dollar, while there was little surprise from the latest slew of ECB commentary which continued to push back against cutting rates too early.
• GBP mildly softened alongside weakness in cyclical peers and the downbeat risk tone.
• JPY lacked firm direction and marginally weakened against the dollar despite lower US yields.

FIXED INCOME

• Treasuries bull steepened and shrugged off the early pressure from upward Q4 PCE revisions ahead of the key inflation data on Thursday.

COMMODITIES

• Oil prices were choppy but ultimately declined amid a resilient dollar and bearish crude inventory data.
• US EIA Weekly Crude Stocks w/e 4.2M vs. Exp. 2.6M (Prev. 3.5M)
• Iran’s Oil Minister said Russian companies are ready to participate in petrochemical projects in Iran.
• Trans Mountain Corp said it successfully removed pipe from the final expansion section and is working to a Q2 in-service date for pipeline expansion.

GEOPOLITICAL

MIDDLE EAST

• Israeli sources said the Israeli delegation returned from Doha after two days of negotiations on the detainee deal without progress, according to Sky News Arabia.
• Israel's cabinet will meet tomorrow evening to discuss a prisoner exchange deal, according to Al Jazeera.
• Hamas urged armed factions in the region to intensify support for Gaza, according to Sky News Arabia.
• Hamas said the Paris negotiations may lead to a way out of the war and there is a preliminary agreement with Israel to bring aid into Gaza, while it added there will be no exchange of detainees with Israel without a ceasefire and this is the main point of contention, according to Al Arabiya.

OTHER

• Russia-controlled area of Transnistria in Moldova reportedly asked Russia for 'protection', according to AFP. It was later reported that Russia said protecting the population of Transnistria in Moldova is a priority for them, according to Al Arabiya.
• US State Department said the US is watching Russia's actions in Transnistria and the broader situation there very closely, while it supports Moldova's sovereignty and territorial integrity within its internationally recognised borders.
• Russia is to launch an Iranian satellite February 29th, according to Interfax.
• Eight EU countries call for new sanctions on Russia over Navalny's death.

ASIA-PAC

NOTABLE HEADLINES

• Chinese Premier Li held a meeting with the US Commerce Chamber delegation in Beijing and noted that decoupling and building a 'small yard with high fence' does not conform to the fundamental interests of both sides. Li added economic cooperation is a win-win for both nations and welcomes US companies continuing to invest in China.
• PBoC’s Governor and the Shanghai party chief held a seminar on Tuesday, and it was stated that the PBoC supports Shanghai's high-level opening up financially.
• China's securities regulator said they will continue to strengthen supervision of over-the-counter derivative businesses including direct market access, while they are to guide the industry to control business size and leverage, as well as crackdown on illegal activity to maintain market order.
• China Financial Futures Exchange said it will severely crack down on irregular behaviour that circumvents trading regulations and it punished a Chinese hedge fund for excessive trading.
• US Republican Senator Hawley introduced legislation to hike tariffs on China-made vehicles.
• RBNZ Governor Orr said as aggregate demand has slowed, it has been harder to pass on cost increases.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said a lack of "consumer discipline" complicated the BoE's task of hitting its price target, while the BoE is struggling to bring inflation back to the target because price rises are increasingly driven by people who are immune to the pressures of higher interest rates.
• UK Chancellor Hunt is reportedly considering scrapping “non-dom” tax status in the Budget to fund pre-election tax cuts, according to FT.
• ECB's de Guindos said the recent inflation outlook has been very positive and prices will continue to decline, while they need to be sure that prices will move towards the 2% target and if new data confirms their recent assessment, the GC will modify its monetary policy.
• ECB's Kazaks said it is too soon to consider cutting rates and that in any case it is only a question of "months or quarter" before the first cut occurs, according to Econostream.
• ECB's Kazimir said he prefers a June rate cut then a smooth and steady easing cycle, while the ECB is to acknowledge improved inflation outlook but should avoid providing forward rate guidance in March.
• ECB's Nagel said it would be fatal if the ECB cut rates too early only for inflation to rebound and needs confirmation that wage growth is moderating to a level that will let inflation fall back to the target in 2025.
• ECB's Simkus said lowering rates in March would be "premature" but does not see anything wrong about what the preconditions could be for a cut, according to Econostream.
• French Finance Minister Le Maire said France is fully committed to speeding up the process of agreeing on a minimum level of taxation on individuals.

DATA RECAP

• EU Economic Sentiment (Feb) 95.4 vs. Exp. 96.7 (Prev. 96.2, Rev. 96.1)
• EU Consumer Confidence Final (Feb) -15.5 vs. Exp. -15.5 (Prev. -15.5)
• EU Services Sentiment (Feb) 6.0 vs. Exp. 9.0 (Prev. 8.8, Rev. 8.4)
• EU Industrial Sentiment (Feb) -9.5 vs. Exp. -9.2 (Prev. -9.4, Rev. -9.3)
• EU Selling Price Expectations (Feb) 3.8 (Prev. 4.6, Rev. 4.4)
• EU Business Climate (Feb) -0.42 (Prev. -0.40, Rev. -0.42)