US stocks finished mixed and pulled back from fresh record highs as yields climbed - Newsquawk Asia-Pac Market Open

• US stocks finished mixed as momentum from the PBoC's RRR cut was derailed by a rise in yields following strong PMI data which knocked the S&P 500 and Nasdaq 100 off their fresh record levels seen earlier in the session. Furthermore, Microsoft shares marginally eased back from highs after briefly joining the USD 3tln market cap club, while a dismal 5yr auction also facilitated the mild upside in yields.
• USD was lower although off today's worst levels with heavy selling pressure seen amid an early broad risk-on mood which dragged the DXY beneath the 130.00 level, while the dollar later was helped off lows after strong Flash PMI data which showed Manufacturing returned to expansionary territory.
• PBoC announced it will cut RRR by 50bps from February 5th and will continue to use liquidity injection tools. PBoC Governor Pan said RRR levels are still relatively high and the RRR cut is to release CNY 1tln into the economy.
• Looking ahead, highlights include South Korean GDP, Thailand Customs-Based Trade Data, Supply from Japan.

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LOOKING AHEAD

• Highlights include South Korean GDP, Thailand Customs-Based Trade Data, Supply from Japan.
• Click here for the Newsquawk Week Ahead.

US TRADE

• US stocks finished mixed as momentum from the PBoC's RRR cut was derailed by a rise in yields following strong PMI data which knocked the S&P 500 and Nasdaq 100 off their fresh record levels seen earlier in the session. Furthermore, Microsoft shares marginally eased back from highs after briefly joining the USD 3tln market cap club, while a dismal 5yr auction also facilitated the mild upside in yields.
• SPX +0.08% at 4,868, NDX +0.55% at 17,499, DJIA -0.26% at 37,806, RUT -0.73% at 1,961.
• Click here for a detailed summary.

DATA RECAP

• US S&P Global Manufacturing PMI Flash (Jan) 50.3 vs. Exp. 47.9 (Prev. 47.9)
• US S&P Global Services PMI Flash (Jan) 52.9 vs. Exp. 51.0 (Prev. 51.4)
• US S&P Global Composite Flash PMI (Jan) 52.3 (Prev. 50.9)

FX

• USD was lower although off today's worst levels with heavy selling pressure seen amid an early broad risk-on mood which dragged the DXY beneath the 130.00 level, while the dollar later was helped off lows after strong Flash PMI data which showed Manufacturing returned to expansionary territory.
• EUR gained and briefly reclaimed the 1.0900 status before the dollar clawed back some of the losses.
• GBP edged further above 1.2700 but gave back a majority of the gains as the dollar found composure.
• JPY strengthened on continued post-BoJ repricing and USD/JPY briefly dipped below 147.00.
• BoC held rates at 5.00%, as expected, while it dropped the language that it is prepared to raise rates further if needed but noted the Council is still concerned about risks to the outlook for inflation, particularly the persistence in underlying inflation. BoC Governor Macklem said the focus was very much on keeping rates on hold which there was a clear consensus for, while he said it is premature to discuss a rate cut and they are certainly not there yet when it comes to ending QT. Furthermore, he stated the risk of a rate hike is not zero and if they did see renewed upward pressure on inflation, they may have to raise rates further but this is not the base case.

FIXED INCOME

• Treasuries were sold in the wake of the hot US PMI data and a dismal 5yr auction.

COMMODITIES

• Oil prices were firmer amid tailwinds from the latest Chinese support measures, heightened Middle East tensions and bullish inventory data which showed a large fall in production.
• US EIA Weekly Crude Stocks -9.2M vs. Exp. -2.1M (Prev. -2.5M)
• White House is reportedly delaying the decision on an enormous natural gas export terminal and the DoE will analyse the climate impacts of one of the 17 proposed LNG export terminals, before deciding whether to approve it, according to the New York Times.
• QatarEnergy confirmed that Qatari LNG production continues uninterrupted but Red Sea developments may impact the scheduling of some deliveries as they take alternative routes.
• Over 70 people died following a Mali gold mine collapse on Friday, according to sources cited by AFP.

GEOPOLITICAL

• Israeli government spokesperson said there will be no Gaza ceasefire, while they will not give up on destroying Hamas and returning all hostages.
• Israel’s Economy Minister said Iran is now a “legitimate target” for Israeli missile strikes, while he noted that Israel can afford to keep fighting and that as ‘big as the crisis is, it is also a really big opportunity’, according to The Telegraph.
• US military said Houthis fired three missiles towards M/V Maersk Detroit which is a US-flagged and owned container ship transiting the Gulf of Aden.
• Yemen's Houthis said naval forces carried out an operation against a number of US military ships with ballistic missiles in the Gulf of Aden and Bab Al Mandab, while they added that naval forces directly hit a US military ship.
• An armed drone targeted a base which houses US forces near Erbil Airport, Iraq, according to Reuters, citing sources.
• US and Iraq are reportedly close to initiating talks on the future of US military presence in Iraq, while the US Ambassador to Iraq handed the Iraqi Foreign Minister a letter related to the process of ending the US-led coalition and establishing bilateral relations. However, it was also noted that the process could take many months to years and a US troop withdrawal is not imminent, according to Reuters citing sources.
• Russian Foreign Minister Lavrov asked for an emergency UN security council session on the crash of a Russian plane. This follows reports that Russia accused Kyiv of shooting down a military transport plane which killed all 74 people on board including 65 Ukrainian prisoners of war, according to NBC.
• A person was injured and a fire broke out in a drone attack on Ukraine's Black Sea port of Odesa, according to the regional governor cited by Reuters.
• EU prepares additional Russian sanctions ahead of the anniversary of the Ukraine war, according to FT.
• US Navy said USS John Finn conducted a Taiwan Strait transit on January 24th.

ASIA-PAC

NOTABLE HEADLINES

• PBoC announced it will cut RRR by 50bps from February 5th and will continue to use liquidity injection tools. PBoC Governor Pan said RRR levels are still relatively high and the RRR cut is to release CNY 1tln into the economy, while they will cut re-lending and re-discount rates by 25bps for the rural sector and small firms from January 25th. Furthermore, PBoC’s Deputy Governor said they will maintain credit support for the economy and will ensure real interest rates are to be in line with economic growth, while they will lower comprehensive social financing costs and will roll out policy measures to support financial coordination between mainland China and Hong Kong.
• PBoC Governor Pan said will use various policy tools to keep liquidity reasonably ample and will improve credit structure, step up support for private and small firms, as well as keep the CNY exchange rate basically stable and step up counter-cyclical policy adjustments. Pan noted they will make use of existing funds more efficiently, help local governments resolve key financial risks and will guide financial institutions to curb lending to sectors with excess capacity. Pan also said China's economy faces some difficulties but there are also positive factors and there is still sufficient room for China's monetary policy.
• PBoC and NFRA said banks should strengthen property loans approval and issuance, while national commercial banks are encouraged to issue commercial property loans for eligible developers to repay outstanding loans and bonds.
• PBoC is to include CNY treasury bonds and policy financial bonds under the northbound bond connect scheme with Hong Kong as eligible collateral for the Renminbi liquidity facility.
• China tripled individual investment quotas under the wealth connect, according to state media.
• Australian PM Albanese said every taxpayer will get a tax cut from July 1st.

EU/UK

NOTABLE HEADLINES

• Germany's Bundesbank said a Chinese economic crisis could cut German GDP growth by 0.7% in year one and by almost 1% in year two, while it added that an abrupt decoupling from China is not realistic or desirable and even an orderly withdrawal could bring considerable losses.
• ECB asked some lenders to monitor social media to detect bank runs and regulators are to also look at lenders' individual deposit bases, according to Reuters sources.
• Europe is set to agree on supply chain emergency powers next week with an agreement likely on a requirement for companies to prioritise production of key products during a supply chain crisis, according to a key EU lawmaker.

DATA RECAP

• UK Flash Manufacturing PMI (Jan) 47.3 vs. Exp. 46.7 (Prev. 46.2)
• UK Flash Services PMI (Jan) 53.8 vs. Exp. 53.2 (Prev. 53.4)
• UK Flash Composite PMI (Jan) 52.5 vs. Exp. 52.2 (Prev. 52.1)
• German HCOB Manufacturing Flash PMI (Jan) 45.4 vs. Exp. 43.7 (Prev. 43.3)
• German HCOB Services Flash PMI (Jan) 47.6 vs. Exp. 49.5 (Prev. 49.3)
• German HCOB Composite Flash PMI (Jan) 47.1 vs. Exp. 47.8 (Prev. 47.4)
• French HCOB Manufacturing Flash PMI (Jan) 43.2 vs. Exp. 42.5 (Prev. 42.1)
• French HCOB Services Flash PMI (Jan) 45.0 vs. Exp. 46.0 (Prev. 45.7)
• French HCOB Composite Flash PMI (Jan) 44.2 vs. Exp. 45.2 (Prev. 44.8)
• EU HCOB Manufacturing Flash PMI (Jan) 46.6 vs. Exp. 44.8 (Prev. 44.4)
• EU HCOB Services Flash PMI (Jan) 48.4 vs. Exp. 49.0 (Prev. 48.8)
• EU HCOB Composite Flash PMI (Jan) 47.9 vs. Exp. 48.0 (Prev. 47.6)