After yesterday's torrid, chaotic moves in the market, where an initial drop in stocks was quickly pared and led to a surge into the close after a weaker dollar on the heels of even more disappointing US data and Bill Dudley's "serious consequences" speech sent oil soaring and put the "Fed Relent" scenario squarely back on the table, overnight we have seen more global equity strength on the back of a weaker dollar, even if said weakness hurt Kuroda's post-NIRP world and the Nikkei erased virtually all losses since last Friday's surprising negative rate announcement. Oil and metals also rose piggybacking on the continued dollar weakness as the word's most crowded trade was suddenly shaken out.

“We’ve seen commodities across the board in a swift move higher, with the common denominator the weaker dollar,” said Robin Bhar, a London-based analyst at Societe Generale SA. “Everything from gold to oil has benefited. Dwindling expectations of higher rates are affecting markets across the board. Clearly the Fed may struggle to raise rates more than once or twice this year.”

Oil was largely unchanged after rebounding from its biggest drop in almost seven years. Futures were fractionally in the green at $32.36 a barrel after earlier climbing as much as 2.1%. Continuing the on again/off again "OPEC emergency meeting" theme, Venezuelan oil minister Eulogio Del Pino says 6 OPEC members are open to holding an emergency meeting if one is called. To be sure, Saudi Arabia will just say no, while those who are trying to discover which OPEC oil exporters will go bankrupt first, look no further than these 6 countries.

In other oily news, Shell (RDS-A) reported its 4Q profit dropped 44% on tumbling crude prices. Elsewhere, Aramco cut its March Arab Light crude price to Asia by 20c, while leaving March Light crude pricing to U.S. unchanged.

“Seems to be the market is trying to settle into a $30-$35 range -- it seems when we get to around $30 we see some verbal intervention come in with the reaction to buy more driving prices toward $35 before we run out of steam,” says Saxo Bank head of commodity strategy Ole Hansen. "Traders are coming back in today and seeing price levels they probably didn’t expect at this time yesterday."

Looking forward, while the US docket has a lot of macro data and at least two central bank speakers on deck, the key tell will be how stocks respond to data: if bad news is once again good for stocks, one can bury the rate hike narrative and just sit back and await admission from Yellen that it has relented and that, as Goldman hinted last night, the number of rate cuts will be dropped from 4 to 3, 2, 1 or even 0 as the US economy stalls.

For now, here is where we stand:

• S&P 500 futures up 0.1% to 1910
• Stoxx 600 up 0.5% to 331
• FTSE 100 up 1.5% to 5922
• DAX up 0.7% to 9502
• German 10Yr yield up 4bps to 0.32%
• Italian 10Yr yield up 7bps to 1.51%
• Spanish 10Yr yield up 8bps to 1.63%
• MSCI Asia Pacific up 1% to 121
• Nikkei 225 down 0.9% to 17045
• Hang Seng up 1% to 19183
• Shanghai Composite up 1.5% to 2781
• S&P/ASX 200 up 2.1% to 4980
• US 10-yr yield up 2bps to 1.91%
• Dollar Index down 0.63% to 96.67
• WTI Crude futures up 0.9% to $32.57
• Brent Futures up 0.5% to $35.20
• Gold spot up 0.4% to $1,147
• Silver spot up 0.6% to $14.78

Looking at regional markets around the globe, we start in Asia where equities traded mostly in the green, bolstered by the turn around in energy stocks following WTI crude futures rising by over 8% in the US, while also drawing comfort from a late rally on Wall Street. As such, the ASX 200 (+2.1 %) had been underpinned by energy and material names, while the Shanghai Comp (+1.5%) was also led higher by the energy, in addition the PBoC strengthened the CNY by the most since December 4th. However, Nikkei 225 (-0.9%) bucked the trend as exporters felt the brunt from the recent strength in the JPY, subsequently erased the majority of its BoJ stimulus inspired gains. JGBs finished trade flat in what was quiet session for Japanese paper.

Asia Top News

• China Sets 6.5% to 7% Growth Target, First Range Since 1990s: NDRC chief says downward pressure on growth “relatively big”
• Sharp Soars on Report It’s Giving Preference to Foxconn Bid: Deal would hand Apple iPhone assembler surprise victory
  • Sharp Says Bailout Talks to Continue With Both Foxconn, INCJ
  • Sharp Reports Fifth Straight Loss as Bailout Talks Continue
• Toshiba Widens Loss Outlook Amid Accounting Scandal Fallout: Net loss is expected to be a record 710b yen ($6b) in FY ending March; compares with an earlier forecast for a 550b yen loss and 505.5b yen loss analyst est.
• Japan Tobacco Forecast Below Estimates Amid Stalling Sales: Sees FY oper profit forecast 566b yen vs est. 607.8b yen.
• China’s Catch-22 Signals Stronger Yuan Surprise to Goldman Sachs: Higher yuan fixings to drive rally in risk assets, Brooks says
• Citigroup Plans Sale of Yen Bonds After BOJ Minus Rate Policy: Would be first yen bond by major foreign issuer since BOJ move
• China’s Biggest Ponzi Scheme Shows Rot in Internet Financing: Regulator says 1,000 of China’s 3,600 P2P sites are “problematic”

Another choppy session for European equities, which have largely remained in positive territory since the open, but endured some volatility. The USD has been the main driver of price action over the past 24 hours which has continued it's trend lower following dovish comments from the Fed and disappointing US data. Consequently an uptick has been seen in oil; WTI Mar'16 and Brent April'16 have taken USD 32.00 and USD 35.00 handles respectively, leading to an uptick in the energy sector which outperforms in Europe and bolsters indices.

European Top News

• EU Slashes 2015 Inflation Forecast to 0.5% as Growth Seen Slower: Cut its prediction for euro-area economic expansion to 1.7% of GDP this yr, down from a 1.8% forecast in Nov.
• EU Cuts U.K. Economic Outlook, Says Output Gap Has Closed: Sees GDP rising 2.1% in 2016 and 2017, down from the 2.4% and and 2.2% forecasts in Nov.
• Daimler Strikes Cautious Tone, Citing More Risks in Economy: Sees only slight gains in rev. and earnings this year, with the rate of increase in unit sales “rather lower” than in 2015
• Draghi Says Weak Global Inflation No Reason for ECB Inaction: Draghi said the fact that inflation is weak globally won’t stop ECB from adding stimulus for the euro area if needed
• ChemChina Said to Seek Jumbo Commitments on Syngenta Bridge Loan: Banks asked to contribute $5b each to acquisition loan
• Vodafone Service Revenue Shows Europe Rebound, Asian Growth: 3Q organic service rev. growth of 1.4% matches ests., reaffirms its earnings forecast for the full yr
• Beijing Enterprises to Buy EEW as China Acquisitions Ramp Up: Agreed to buy energy-from-waste company EEW from EQT Partners for EU1.44b
• AstraZeneca Sees 2016 Profit Dip as Crestor Gets Competition: 2016 sales to fall by low to mid single-digit percentage; core oper. profit per share will fall by a low to mid single-digit percentage from $4.26 last yr; 4Q core EPS 94c vs est. 94c
• Munich Re Jumps Most in Four Years After Dividend Beats Forecast: Proposes dividend of EU8.25 a share for 2015 vs Bloomberg div. forecast of EU8; 4Q earnings unchanged at EU700m
• Goldman Sees Pound Tumbling by as Much as 20% on ‘Brexit:’ Bank predicts decline to $1.15-$1.20 if U.K. leaves EU
• Osborne Hails EU Pact for Protecting London as Finance Capital
• Statoil Deepens Cuts to Maintain Dividends Amid Crude Slump: Statoil cuts investments to $13b, 35% lower than 2014; introduces scrip dividend, maintains 22c for quarter
• Biggest Danish Mortgage Bank Seeks IPO as Capital Woes Mount: Nykredit is seeking an IPO as looks for ways to generate enough funds to meet increasingly heavy capital requirements

In FX, it has been all about the dollar: the Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, retreated 0.4 percent after sliding as much as 1.9 percent last session.

Yesterday's sharp turn in the USD set the tone for early European trade, with the constant questioning on whether the Fed should hike again finally taking its toll on the greenback. As stocks and Oil were in the red, USD/JPY took the brunt of the action, but with the inverse relationship with commodities lifting Oil, stocks soon followed. The yen gained 0.1 percent to 117.73 per dollar following a 1.7 percent surge, while the euro traded at $1.1118.

This has tempered losses here, attentions switching to the rest of the majors. EUR gains have extended towards 1.1200 now, while AUD and NZD tip 0.7200 and 0.6700 respectively, but CAD gains have really gathered momentum with Oil higher, with 1.3700 the latest big figure breach.

The won strengthened the most since October after falling every other day this week. The ringgit climbed 1.6 percent, buoyed by crude’s recovery given Malaysia is Asia’s only major net exporter of oil. A Bloomberg gauge of emerging-market currencies climbed 0.2 percent after rallying 1.2 percent on Wednesday.

The pound extended its biggest jump since October before the BOE’s interest-rate decision and economic forecasts. Cable gains may be seen to be a little audacious ahead of the BoE/QIR, but we have still managed to push new highs through the 1.4600's. EUR/GBP back above 0.7600 though. EM also on the mend, BRL and TRY outperforming RUB, MXN and ZAR for now.

In commodities, WTI and Brent are rather flat on the session as markets take a breather following the dramatic price action in yesterday's session. The OPEC saga takes a back seat for now and there is no more news on that front anyway. Instead the USD dictates price action in oil, with the risk event in that respect coming in tomorrow's NFP report.

Gold remained near yesterday's highs in European trade having posted the best day of gains in 2-weeks yesterday, to trade above USD 1140, a level which it has not taken since early November. This came after dovish comments from the Fed and disappointing US data including services and ISM non-manufacturing PMI's which saw the USD soften.

The Bloomberg Commodity Index, which measures returns on raw materials, extended the previous session’s advance as it rallied 0.6 percent.

Statoil ASA, Norway’s biggest oil company, deepened investment cuts and offered to pay dividends in stock as a collapse in crude prices eroded earnings. The company said it plans to reduce capital expenditure to $13 billion this year from a revised $14.7 billion in 2015, after reporting a 63 percent drop in fourth-quarter profit on Thursday. Statoil boosted a target for 2016 cost savings to $2.5 billion from $1.7 billion.

Spot gold climbed for a fifth day, the longest run of gains in five months, as expectations of continued low U.S. interest rates seeped through the market. The metal soared to the highest in three months at $1,147.47 an ounce. Investors increased holdings in exchange traded funds for a 13th time, the longest run in three years.

Aluminum for delivery in three months climbed to the highest this year on the LME, reaching $1,543.50 a metric ton, and lead advanced for the eighth day in a row, the longest run since June 2014.

On today's calendar, we get the first estimates of Q4 nonfarm productivity (expected to fall by 2% on the back of weak output growth) and unit labour costs (expected to gain 4.3%) data, along with the latest initial jobless claims data. December factory orders data follows this along with the final revisions to January durable and capital goods orders. It’s a busy day for earnings also with 33 S&P 500 companies due to report with ConocoPhillips a highlight in the energy sector.

Top Global News:

• Credit Suisse Plunges as Investment Bank Slump Deepens Losses: 4Q net loss CHF5.8b, hurt by a goodwill impairment of CHF3.8b; biggest qtrly loss since 2008 and below the CHF4.3b loss est. of 5 analysts in a Bloomberg survey
• Redstone Tough-Guy Era May Be Drawing to a Close in Hollywood: Sumner Redstone resigned as chairman of CBS; to be replaced by CEO Les Moonves; Redstone may relinquish the executive chairmanship of Viacom
• Delta Names Bastian CEO as Anderson Departs After Merger Success: CEO Richard Anderson, will step down later this year to make way for his longtime second-in-command, Ed Bastian
• China Eases Rules on Foreign Investor Quotas, Fund Withdrawals: Relaxed restrictions on the amount of money foreign investors can bring into China, curbs on when they can take funds out, QFII allocations no longer subject to $1b cap
• Cisco to Buy Jasper for $1.4 Billion, Adding IoT Management: Closely held company helps connect new devices to Internet
• Shell 4Q Profit Drops 44% as Crude Prices Tumble: 4Q CCS net ex-items $1.8bm matches est. $1.8b
• Yum Tops Profit Estimates After Taco Bell, KFC Sales Grow: 4Q adj. EPS 68c, est. 66c, rev. $3.95b, est. $4.03b; same- stores sales gained 4% at Taco Bell and 3% at KFC
• GoPro Forecasts Another Quarter of Disappointing Sales: Sees 1Q rev. $160m-$180m vs est. $287.3m, sees FY2016 rev. $1.35b-$1.5b vs est. $1.59b; Brian McGee to succeed Jack Lazar as CFO
• Allstate Quarterly Profit Declines 41% as Auto Claims Rise: 4Q oper. EPS $1.60 vs est. $1.35
• MetLife Profit Falls 45% on Private Equity, Hedge Fund Slump: 4Q oper. EPS $1.23, est. $1.36
• Weatherford Cutting 6,000 More Jobs as Oil Downturn Worsens: Plans to lay off an additional 6,000 workers, about 15% of its workforce; follows loss of 14,000 workers in earlier cutbacks
• Oil Seen ‘Lower for Longer’ by Morgan Stanley as Forecasts Cut: Now sees oil mostly falling through 2016, compared with a previous outlook for prices to rise each quarter
• Goldman Sachs With Pimco Warn Bond Gains Will Turn Into Losses: Goldman’s Hatzius sees 10-yr yield rising to 3% by yr-end
• Price Spike on $750 Pill Was Shkreli’s, Turing Tells House: Turing, Valeant set to testify at hearing on drug pricing
• Santorum Says He’s Suspending Campaign, Endorsing Rubio
• Jefferies Said to Cut Fixed-Income Staff Linked to Mortgages
• Super Bowl Tests Twitter’s Dominance in Ads Paired With Live TV

Bulletin Headline Summary from RanSquawk and Bloomberg:

• Another choppy session for European equities, which have largely remained in positive territory since the open, but endured some volatility.
• WTI and Brent are rather flat but holding yesterday's gains, as markets take a breather following the dramatic price action yesterday
• Today's highlights include BoE's 'Super Thursday', US weekly job numbers, factory orders and challenger job cuts and comments from Fed's Rosengren
• Treasuries lower overnight, led by long-end, as declining consensus for further Fed rate hikes this year pressures USD, helps rally oil, global equity markets.
• Federal Reserve officials Lael Brainard and William Dudley said policy makers need to take into account tighter financial conditions when they meet next month to decide whether to raise interest rates again
• Goldman Sachs and PIMCO say bonds are poised to fall and traders aren’t prepared for how far the Federal Reserve will raise interest rates
• The slowdown in emerging economies is posing a major threat to recovery in the euro area, the European Commission said as it trimmed its 2016 growth forecast and warned inflation would be much slower than expected, cut forecast to 0.5%
• Mario Draghi said the fact that inflation is weak globally won’t stop the European Central Bank from adding stimulus for the euro area if needed
• Credit Suisse posted the biggest quarterly loss in seven years as it wrote off goodwill and set aside provisions for litigation, while a drop in trading deepened losses in the securities unit. The shares slumped to the lowest since 1991
• Jefferies cut employees from its fixed-income unit this week, with a focus on staff handling products tied to mortgages, according to people with knowledge of the matter
• As Japan’s stocks sink, pension funds are loading up. Trust banks, which buy on behalf of retirement savings managers, added ¥271 billion ($2.3 billion) of equities last week, the most since March 2009 and a net ¥1.4 trillion in 10 straight weeks of buying
• Sovereign 10Y bond yields mostly higher, led by Greece (+9bp). Asian, European stocks higher; U.S. equity-index futures rise. Crude oil, gold, copper rally

US Event Calendar

• 7:30am: Challenger Job Cuts y/y, Jan. (prior -27.6%)
• 8:30am: Non-farm Productivity, 4Q P, est. -2% (prior 2.2%)
  • Unit Labor Costs, 4Q P, est. 4.3% (prior 1.8%)
  • Initial Jobless Claims, Jan. 30, est. 277k (prior 278k)
  • Continuing Claims, Jan. 23, est. 2.24m (prior 2.268m)
• 9:45am: Bloomberg Consumer Comfort, Jan. 31 (prior 44.6)
• 10:00am: Factory Orders, Dec., est. -2.8% (prior -0.2%)
  • Factory Orders Ex Trans, Dec. (prior -0.3%)
  • Durable Goods Orders, Dec. F, est. -4.5% (prior -5.1%)
  • Durables Ex Transportation, Dec. F (prior -1.2%)
  • Cap Goods Orders Non-defense Ex Air, Dec. F (prior -4.3%)
  • Cap Goods Ship Non-defense Ex Air, Dec. F (prior -0.2%)

Central Banks

• 7:00am: Bank of England Bank Rate, est. 0.5% (prior 0.5%)
• 8:30am: Fed’s Kaplan speaks in Dallas
• 5:00pm: Fed’s Mester speaks in New York
• 7:30pm: Reserve Bank of Australia issues monetary policy

DB's Jim Reid completes the overnight wrap

Indeed after a 2-day 11% slump which was the largest in almost seven years, WTI oil rose 8.03% yesterday to close at $32.66/bbl. The move was the second largest one-day gain in the last five months. Interestingly the huge surge came despite more scary supply data after US crude inventories were said to have risen past the 500million barrel mark for the first time since 1982 based on weekly data (although based on monthly data you’ll have to go back to 1930 to find the last time we saw higher inventory levels). We had briefly thought that headlines on the wires suggesting that Venezuela, Iran and Russia had agreed to an emergency meeting with 3 other OPEC and non-OPEC members was the cause for yesterday’s rally, however the story never really gained traction after the initial leak.

Instead, much of yesterday’s move was attributed to a huge fall in the Dollar which came about after fears of a soft non-manufacturing ISM print were realized (53.5 vs. 55.1 expected, -2.3pts from December) with concerns about the employment component in particular. Some dovish comments from the Fed’s Dudley also played a role. More on that and the data later but in terms of the price action, the Dollar index finished -1.60% weaker which was the biggest daily fall since December 3rd, while the Greenback finished down 1.70% against the Euro which was also the weakest day since the ECB failed to meet high hopes two months ago.

Risk assets swung wildly in response. Despite the gains for Oil, the S&P 500 was down as much as -1.7% in early trading as financials dragged risk assets lower. The rebound kicked into gear with around two-hours in the session left as slowly but surely the energy sector began to reflect the huge gains for Oil, eventually culminating with the S&P 500 recording a +0.50% gain. The Dow was up a more impressive +1.13% by the close although the Nasdaq (-0.28%) failed to fully recover from earlier steep falls. US credit indices mirrored the moves with CDX IG trading as much as 4bps wider intraday, before finishing 1bp tighter by the end of play.

Meanwhile in the rates space we saw 10y Treasury yields fall as low as 1.792% intraday (24 hour high-to-low range of over 10bps) and the lowest in 12 months post the data, before then tracking the Oil move and retracing much of that to finish up 4bps on the day at 1.886%. It had been a much different tone during the European session where risk assets took another hammering (Stoxx 600 -1.54%) on the back of that financials weakness while European bond yields continued their move lower. In fact, 10y Bunds (currently 0.273%) are now under 3month Treasuries for the first time since October 2007 which is another of the interesting stats one can reel off about these heavily repressed government bond markets.

This morning in Asia we’ve seen Oil extend gains in early trading (WTI +0.81%) which is generally helping equity bourses trade higher as we go to print. There’s been little additional newsflow but it hasn’t stopped the Hang Seng (+1.36%), Shanghai Comp (+1.25%), Kospi (+1.34%) and ASX (+2.13%) all following the late US rebound and posting decent gains. The Nikkei (-0.68%) is bucking the overall trend and extending the post BoJ fallout there (it’s currently just +0.16% above where it was in the minutes prior to the negative rate announcement). US equity index futures are currently up half a percent, while in credit markets the Asia iTraxx has rallied back 5bps tighter.

Meanwhile, there’s some news out of China to report as yesterday various news agencies were reporting that the head of the National Development and Reform Commission has said that China’s growth target is set to be 6.5% to 7% this year. DB’s Chief China Economist, Zhiwei Zhang, pointed out that this is the first time China has set an annual growth target in a range rather than a specific number. The growth target for 2015 was 7%. In his mind the wide target range reflects the lack of consensus on growth potential in the policy circle. He highlights that some may believe growth faces severe pressure and a lower target is conducive to more sustainable growth. While others may think cutting the target in the first year of the new five year plan period makes it difficult to achieve the overall target, which is above 6.5% on average.

Back to yesterday’s data. A big focus of that ISM non-manufacturing data (which was the weakest since February 2014) was the aforementioned weakness in the employment component which tumbled 3.9pts to 52.1 and a 12-month low. This of course comes after the soft employment component in the manufacturing ISM. Yesterday’s data does however support our US Economists view of the non-manufacturing converging (by moving lower) to the manufacturing data with the gap now shrinking to 5.3pts from 7.8pts in December. Fears of a soft payroll print on Friday were unsurprisingly raised post the data, however some pointed towards a slightly better than expected ADP employment change reading (205k vs. 195k expected) last month. Elsewhere we saw the final US services PMI revised 0.5pts lower at 53.2.

In terms of that Fedspeak then, it was the cautious comments from NY Fed President Dudley, in an interview with MNI, which initially gained attention when he warned that financial conditions have tightened considerably and that should this remain in place by the time of the March meeting, then the Fed will need to take this into account. Dudley also commented on the weakening outlook for the global economy and acknowledged that the Fed committee is assessing the implications for the labour market and inflation, as well as the balance of risks to the outlook. Later on we heard from Governor Brainard who specifically referred to weakness in emerging markets as posing a risk to US growth. Clearly current market pricing (sub-50% for one rate hike this year) is in contrast to the Fed dot plots, but recent Fed comments have certainly weighed in with a much more dovish tone (Esther George aside).

Before we take a look at today’s calendar, the European data yesterday was firmly focused on the final revisions to the January PMI’s where in the end we saw no change to the Euro area services PMI at 53.6, and so down 0.6pts from December. The composite was revised up a very modest 0.1pts to 53.6 so as to be down 0.7pts from the prior month, albeit near the top of the recent range. Regionally we saw the composite print for Germany reaffirmed at 54.5, however France was revised down 0.3pts to 50.2. We also got the data for Italy where we saw the print fall 2.2pts to 53.8, while Spain was up a modest 0.1pts to 55.3. The UK was also up a solid 0.8pts to 56.1.

Onto today’s calendar now. It’s a quiet start to the day this morning in the European session with no data to report of before attention turns over to the BoE MPC meeting around midday where of course the focus will be on the Bank’s policy outlook assessment (minutes and inflation report will be released). This afternoon in the US we’re kickstarting with the first estimates of Q4 nonfarm productivity (expected to fall by 2% on the back of weak output growth) and unit labour costs (expected to gain 4.3%) data, along with the latest initial jobless claims data. December factory orders data follows this along with the final revisions to January durable and capital goods orders. Fedspeak wise we’ve got Rosengren due to speak shortly after this is out (7.15am GMT) followed by Kaplan (1.30pm GMT) this afternoon and then Loretta (10.00pm GMT) this evening. Also due this morning are comments from ECB President Draghi (8.00am), shortly followed by fellow ECB council member Knott. The IMF’s Lagarde is also due to speak on emerging and developed markets this afternoon at 3pm GMT. It’s a busy day for earnings also with 33 S&P 500 companies due to report with ConocoPhillips (COP) a highlight in the energy sector.