US stocks were pressured and yields climbed after hot ISM Services and recent Fed rhetoric - Newsquawk Asia-Pac Market Open

• US stocks declined but finished off their lows with early pressure from the broader hawkish reaction to the hot ISM Services PMI data which lifted yields to YTD highs and underpinned the dollar, while the recent Fed comments were also hawkish leaning.
• USD strengthened amid upside in UST yields after strong ISM Services PMI and recent hawkish Fed rhetoric including from Powell who repeated that a March cut is seen as too early, while Bowman said she is prepared to hike further if needed and cautioned against early rate cuts. Furthermore, Fed's Goolsbee emphasised on the need to see more data and Kashkari touted a potentially higher neutral rate as giving the Fed leeway to be patient on when it begins cutting.
• Looking ahead, highlights include Japanese Household Spending & Average Cash Earnings, Australian Retail Sales, Philippines CPI, RBA Rate Decision, SoMP & Press Conference, Holiday in New Zealand and Taiwan.

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LOOKING AHEAD

• Highlights include Japanese Household Spending & Average Cash Earnings, Australian Retail Sales, Philippines CPI, RBA Rate Decision, SoMP & Press Conference, Holiday in New Zealand and Taiwan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks declined but finished off their lows with early pressure from the broader hawkish reaction to the hot ISM Services PMI data which lifted yields to YTD highs and underpinned the dollar, while the recent Fed comments were also hawkish-leaning.
• SPX -0.32% at 4,943, NDX -0.17% at 17,613, DJI -0.71% at 38,380, RUT -1.30% at 1,937.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (voter) said wage growth is settling back into more normal patterns, while he didn’t comment on the rate outlook in prepared remarks.
• Fed's Goolsbee (non-voter) repeated that he does not want to rule out a March cut and reiterated the economy has been quite strong. Goolsbee also said it does not seem to be indicative of a wider issue in the banking system when asked about problems of New York Community Bancorp (NYCB).
• Fed's Kashkari (non-voter) said possibly higher neutral rate means the Fed can take more time to assess upcoming data before beginning rate cuts with “less risk” to the recovery, while he assesses that a higher neutral rate means policy may not be as tight as thought and said core inflation is making “rapid progress” towards the Fed’s target.
• Fed SLOOS (Q4) noted that tighter standards and weaker demand were reported. Regarding loans to businesses, survey respondents, on balance, reported tighter standards and weaker demand for commercial and industrial (C&I) loans to firms of all sizes, while banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories. For loans to households, banks, on balance, reported that lending standards tightened across all categories of residential real estate (RRE) loans other than government residential mortgages and government-sponsored enterprise (GSE)-eligible residential mortgages, for which standards remained basically unchanged.
• NYT's Smialek and WSJ's Timiraos played down CBS reporter commentary that Fed Chair Powell alluded to the first rate cut occurring mid-year.

DATA RECAP

• US S&P Global Services PMI Final (Jan) 52.5 (Prev. 52.9)
• US S&P Global Composite Final PMI (Jan) 52.0 (Prev. 52.3)
• US ISM Non-Manufacturing PMI (Jan) 53.4 vs. Exp. 52.0 (Prev. 50.6, Rev. 50.5)
• US ISM Non-Manufacturing New Orders Index (Jan) 55.0 (Prev. 52.8)
• US ISM Non-Manufacturing Index (Jan) 50.5 (Prev. 43.3, Rev. 43.8)
• US ISM Non-Manufacturing Price Paid Index (Jan) 64.0 (Prev. 57.4)

FX

• USD strengthened amid upside in UST yields after strong ISM Services PMI and recent hawkish Fed rhetoric including from Powell who repeated that a March cut is seen as too early, while Bowman said she is prepared to hike further if needed and cautioned against early rate cuts. Furthermore, Fed's Goolsbee emphasised on the need to see more data and Kashkari touted a potentially higher neutral rate as giving the Fed leeway to be patient on when it begins cutting.
• EUR was pressured amid the dollar strength and after slipping beneath its 100dma of 1.0782.
• GBP underperformed in which GBP/USD fell below the 1.2600 handle and 200dma of 1.2564.
• JPY continued to soften which saw USD/JPY print a fresh YTD high as US yields climbed.

FIXED INCOME

• Treasuries sell-off continued amid a busy supply calendar and a hot ISM Services print.

COMMODITIES

• Oil prices were firmer after recovering from earlier lows despite the stronger dollar.
• Saudi Aramco kept Arab Light OSP for Asia unchanged at Oman/Dubai plus USD 1.50/bbl for March, while it kept March Arab Light crude oil OSP to NW Europe unchanged at a premium of USD 0.90/bbl to ICE Brent and cut March OSP to US to a premium of USD 4.85/bbl vs ASCI (prev. plus USD 5.15/bbl).

GEOPOLITICAL

• Major and regional countries are preparing an action plan that begins with a truce in Gaza and ends with a major regional agreement before June, according to a post by Al Arabiya on X.
• Pentagon said there likely were casualties in US strikes in Iraq and Syria, but added that the assessment is still ongoing.
• China’s Coast Guard reportedly "legally drove away" a Philippine Coast Guard vessel which "intruded" waters near Scarborough Shoal on February 5th.

ASIA-PAC

NOTABLE HEADLINES

• China’s securities regulator said it will guide securities firms to maintain flexibility of the closeout line by extending the time for adding collateral and "dynamically" adjusting the closeout line in order to reduce the risk of forced liquidation and market pressure. Furthermore, it will continue to strengthen the supervision of the margin trading business and take effective measures for a smooth operation of the financing business.
• Chinese brokerages including CICC restricted cross-border swaps to control short-selling of stocks, according to Reuters sources.

EU/UK

NOTABLE HEADLINES

• BoE's Pill said UK economic activity has been quite weak and supply-side constraints limit UK GDP growth, while he added it is "early days" to declare inflation has been suppressed. Pill also stated that rates would be restrictive even after cuts and rates will fall as the BoE forecasts progress on inflation. Furthermore, he is not yet confident in inflation to reduce rates but noted that the emphasis now is on when there is enough evidence to cut rates, not if.
• German Finance Minister Lindner said German growth remains weak and cannot give a forecast yet, while he agrees with the Economy Minister that Germany is not competitive. Lindner also stated that Germany is becoming poorer because of no growth and said that they need to give incentives to individuals to work longer.
• European Commissioner said potential EU trade measures to support solar manufacturers have to be weighed against solar deployment targets.

DATA RECAP

• UK S&P Global Services PMI (Jan) 54.3 vs. Exp. 53.8 (Prev. 53.8)
• UK S&P Global Composite PMI (Jan) 52.9 (Prev. 52.5)
• German HCOB Services PMI (Jan) 47.7 vs. Exp. 47.6 (Prev. 47.6)
• German HCOB Composite Final PMI (Jan) 47.0 vs. Exp. 47.1 (Prev. 47.1)
• French S&P Global Services PMI (Jan) 45.4 vs. Exp. 45 (Prev. 45)
• French HCOB Composite PMI (Jan) 44.6 vs. Exp. 44.2 (Prev. 44.2)
• EU HCOB Services PMI (Jan F) 48.4 vs. Exp. 48.4 (Prev. 48.4)
• EU S&P Global Composite PMI (Jan F) 47.9 vs. Exp. 47.9 (Prev. 47.9)
• EU Producer Prices MM (Dec) -0.8% vs. Exp. -0.8% (Prev. -0.3%)
• EU Producer Prices YY (Dec) -10.6% vs. Exp. -10.5% (Prev. -8.8%)
• EU Sentix Index (Feb) -12.9 vs. Exp. -15.0 (Prev. -15.8)