European stocks rise the first day in four, with Asian stocks, S&P futures and the Dollar all gaining following strong Apple (AAPL) earnings ahead of today's Fed decision and the U.K. parliament's first vote on the Article 50 bill.

World stocks made their first gain in five days on Wednesday as the dollar steadied from turbulence after the Trump administration accused Germany, Japan and China of devaluing their currencies to gain a trade advantage. The U.S. currency suffered its worst January in three decades after President Donald Trump complained that every "other country lives on devaluation". Bargain hunters nudged the dollar up 0.15% in Asian and European trading, reassuring themselves that the Federal Reserve should signal later that it still plans to raise U.S. interest rates a number of times this year

Speaking of, today's main event - in addition to any off the cuff Trump statements and/or tweets - is the Fed decision, however it should be relatively uneventful as officials aren’t expected to increase rates when the Federal Open Market Committee convenes, but investors will trawl the statement accompanying the decision for any change in forward guidance which earlier indicated there could be three hikes this year. The Fed watchers will also look for clues on how the Fed interprets Trump’s impact on the US economy. The overall tone should still be one that is relatively positive but it’s hard to see much new information that would really shift market expectations. A reminder that Yellen’s Humphrey-Hawkins testimony is only two weeks away so that may end up being the more relevant event for markets.

“The markets are caught in this dilemma about whether to pay more attention to fundamentals or to politics,” said Andrew Milligan, head of global strategy at Standard Life Investments Ltd. in Edinburgh. “We’re getting a fairly steady stream of profits exceeding expectations. The dollar is the canary in the coal mine -- it’s the asset to watch because it’s so closely correlated to risk-on, risk-off sentiment across all other assets.”

Following a weak two-day close to the month in US markets, an upbeat mood in Europe’s aided by generally strong final Mfg PMI readings as well as strong corporate earnings underpinned a rebound in global stocks, while the dollar stabilized as investors prepare to scour today's Fed statement for clues on the path of interest rates this year. The mood was also better in Asia this morning, with the Nikkei, Kospi and ASX all higher while in FX the Dollar index has also rebounded.

“European shares are trading higher this morning receiving a boost from firmer markets across Asia, better than expected Apple earnings and Siemens revising upwards its profit forecast,” Markus Huber, a trader at City of London Markets said in a note. “Focus will be on the FOMC meeting with the interest rate decision due out later tonight.”

The positive sentiment was bolstered by positive data out of China which released the latest, January PMI report. All in all the data was relatively stable with the manufacturing reading falling a modest 0.1pts to 51.3 (vs. 51.2 expected) in January, offset by a 0.1pt rise in the non-manufacturing reading to 54.6.

"We believe that the manufacturing sector will continue to underperform the services sector," analysts at BMI Research, Fitch Group’s research arm, wrote in a note. "Weaker domestic demand and an uncertain external environment due to rising U.S. protectionism will weigh on the former, while services will benefit from continued investment by the government and the private sector."

"Behind the headline is still an outperformance of large enterprises, suggesting that China’s manufacturing industry continues to consolidate," said Raymond Yeung, chief greater China economist at Australia & New Zealand Banking Group Ltd. in Hong Kong. "Looking ahead, the government will continue to juggle growth and capacity reduction. This headline PMI will still stay above the threshold of 50, but it’s hardly impressive."

Exports from tech bellwether South Korea also grew at the fastest pace in almost five years, another sign the global economy had been on the mend before all the talk of U.S. protectionism darkened the air.

Over to Europe, where stocks climbed alongside S&P 500 futures rising by 0.3%, offsetting yesterday's loss, after companies including Apple, Siemens AG and Volvo AB posted results that exceeded expectations, along with optimistic forecasts for the year ahead. After its worst month since March, the greenback edged higher as frets over President Donald Trump’s policies were overshadowed by the Federal Reserve’s first meeting of the year.

The pound rose before a parliamentary vote on formally triggering an exit from the European Union. The U.K. parliament on Wednesday holds its first vote on the Article 50 bill. Bank of England Governor Mark Carney faces a delicate balancing act when policy makers meet to decide interest rates on Thursday.

Looking at markets, the Stoxx Europe 600 Index jumped 1% as of 10:41 a.m. in London, rebounding after a three-day decline. Futures on the S&P 500 rose 0.3%. The benchmark for American equities advanced 1.8 percent in January for a third monthly gain, and is higher by more than 6% since Nov. 8. The FTSE 100 Index gained the most in a month, advancing 0.8%. Oil touched $53 a barrel.

The yield on the 10-year U.S. Treasury note added two basis points to 2.47 percent. It fell four basis points on Tuesday. European government bonds extended a decline, with the yield on bunds due in a decade rising three basis points to 0.46 percent. French 10-year yields rose six basis points to 1.09 percent.

* * *

Overnight Bulletin Summary from RanSquawk

• European equities are trading modestly in the green this morning with price action largely dictated by the latest batch of earnings across Europe
• Despite the upcoming FOMC, it has been GBP in the spotlight, as the prospects for inflation and growth have spurred calls for a possible BoE rate hike later in the year
• Looking ahead, highlights include FOMC rate decision, Global Mfg. PMI data, US ISM Mfg. PMI and DoE crude oil inventory report

Market Snapshot

• S&P 500 futures up 0.3% to 2,281
• Stoxx 600 up 1% to 364
• FTSE 100 up 0.9% to 7166
• DAX up 1% to 11648
• MSCI Asia Pacific up 0.1% to 142
• Nikkei 225 up 0.6% to 19148
• Hang Seng down 0.2% to 23318
• S&P/ASX 200 up 0.6% to 5653
• German 10Yr yield up 3bps to 0.46%
• Italian 10Yr yield up 3bps to 2.29%
• Spanish 10Yr yield up 4bps to 1.64%
• S&P GSCI Index up 0.1% to 396.4
• Brent Futures up 0.3% to $55.73/bbl
• Gold spot down 0.01% to $1,210.63
• U.S. Dollar Index up 0.2% to 99.70

Top Overnight News

• Fed to Hold Rates Steady to Reassess Outlook: Decision-Day Guide
• Trump Court Pick Gorsuch Faces Senate Riven by Bitter Fights
• Japan Hits Back at Trump Charge That It Is Devaluing the Yen
• Iran’s Missile Launch ‘Unacceptable,’ Senior U.S. Official Says
• GE’s Immelt Talks Up Global Ties as Trump Pivots Away From Trade
• Apple Attracts New IPhone Fans as Existing Owners Await Upgrade
• Apple Weighs Legal Action on Trump’s Immigration Order, WSJ Says
• Disney (DIS) Agrees to Pay $100 Million to End No-Poaching Lawsuit
• Ford (F) Seen Reaping Edge Over Toyota in U.S. Border Tax Overhaul
• Tesla (TSLA) Falls Short of Top Safety Pick Awarded to 42 Other Cars
• Dakota Access Oil Pipeline Seen Gaining U.S. Approval Soon
• Amazon (AMZN) Plans $1.5 Billion Air Hub Near Cincinnati for Fleet
• Medtronic Said to Prepare Sale of Medical-Supplies Business
• First Hawaiian Prices Secondary Stock Offering at $32/Shr

Asia stocks traded mostly higher as the region digests the latest expectation-beating Chinese PMI data and after having shrugged off the negative lead from US where equity markets were dampened by Trump policy concerns and on month-end, pre-FOMC position squaring. ASX 200 (+0.6%) was led by miners after gains in the metals complex in which gold rose over 1% and copper rallied around 3% to its highest level since May 2015, while KOSPI (+0.6%) was underpinned after South Korean trade data showed exports increased by the most since February 2012. Nikkei 225 (+0.5%) was initially subdued by a firmer JPY, but then recovered alongside a rebound in USD/JPY and the Hang Seng (-0.2%) lagged as it reacted to the recent weakness in global stocks on return from the Lunar New Year holiday. 10yr JGBs saw uneventful trade with prices subdued amid an improvement in risk sentiment and after the BoJ also refrained from purchases of 5yr-10yr in today's buying operation, which resulted in a mixed curve and some mild underperformance in the belly.

Top Asia News

• Hong Kong Shares Fall as Market Reopens to U.S. Policy Concerns
• Missing Billionaire Stokes Fears of China Meddling in Hong Kong
• China’s Factory PMI Shows Stabilization Carried into New Year
• IndiGo Declines on Surprise Drop in Profit, Costlier Jet Fuel
• Japan’s Takeda Beats Sales Estimates on Gastroenterology Drugs

European equities are trading modestly in the green this morning with price action largely dictated by the latest batch of earnings across Europe. Industrials have been lifted by German heavyweight Siemens after company profits beat analyst forecasts while they also raised their outlook. Elsewhere, Julius Baer tops the SMI after net profit beat expectations. Additionally, sentiment has also been supported by firm Chinese PMI figures overnight, alongside firmer than expected Eurozone PMI data. Fixed income markets have centred around the continued widening of the 10yr French/German spread which is now at its widest since Jan'14 as uncertainty increases over Fillon's Presidential bid (Previously favourite to win). While some of the downside in French debt has been attributed to the unwind of yesterday's month-end extensions.

Top Europe News

• Euro-Area Manufacturing Picks Up as Demand Drives Prices Higher
• Siemens Taps New Boss With Head in the Cloud as Profits Surge
• BBVA Profit Beats Estimates, Bank Moves to All-Cash Dividend
• Trans-Atlantic Mood Sours as Merkel Refutes Trump on Euro
• Fund That Beat 90% of Its Peers Is Now Betting on Greek Banks
• VW, U.S. Drivers Reach $1.2 Billion Settlement as Costs Rise
• BMW CEO Pleads for Free Trade After Trump Border Tariff Threat
• Volvo Stock Surges as Truck Orders Jump 10% on European Growth

In currencies, the pound was the biggest gainer among Group of 10 nation currencies, advancing 0.3 percent to $1.2616; U.K. manufacturing PMI for January was in line with estimates, hovering near a 2 1/2-year high. The Bloomberg Dollar Spot Index rose 0.1 percent, after completing a 2.6 percent loss for January and sliding to its lowest level since Nov. 11. The euro retreated 0.1 percent to $1.0789.Despite the upcoming FOMC, it has been GBP in the spotlight, as the prospects for inflation and growth have spurred calls for a possible BoE rate hike later in the year. This was loosely underlined by the manufacturing PMI report this morning, which highlighted firmer PPI and output production at 32 month highs. Many accept this is significantly due to the weaker GBP of late, but this was further addressed as Cable managed to push through 1.2600 after some initial hesitation this morning. Little momentum to suggest we will test the recent 1.2680 highs in the very near term — ahead of tomorrow's BoE - but with EUR/GBP demand having passed through, we have also seen some softness in the cross rate as we dip into the mid 0.8500's. Elsewhere the USD looks to be on the front foot against the JPY again, having rejected the 111.00-112.50 support zone, but failure to break back above 114.00 puts the latest move back in the balance. EUR/USD also still looks intent on retesting 1.0800+ in the wake of the better than expected 2016 Q4 GDP and CPI numbers released yesterday, with the risk of any dovish moderation in tonight's Fed statement also supportive in the near term.

In commocidites, copper prices are back above 2.70 after Chile's largest mine voted against the BHP Billiton's wage offer and voted to go on strike. Modest moves seen recently as much of this was priced in — many anticipating this. Base metals elsewhere continue to chop around, with Iron Ore demand out of China clearly supportive. West Texas Intermediate crude gained 0.2 percent to $52.90 a barrel amid cuts from OPEC producers including Iraq.Russian oil output has been reported down 100k a day in January, and this may have provided some modest support, but also 'fits in' to a more supportive tone rather than providing fresh impetus for the upside — $51-54 WTI looks set to continue in the near term here. Finally for Gold, USD1200+ looks set to hold into the FOMC, but USD1220.00 looks firm resistance which will need a significant turn in the USD and/or risk sentiment (in the aftermath?).U.S. natural gas rose 3 percent to $3.211 per million British thermal units. Prices were rebounding from the lowest settlement price in three weeks amid forecasts for warmer-than-normal weather across the country.

Looking at the day ahead, we’ve got a busy diary to get through in the US: we’ll kick off with the January ADP employment change reading which should offer some early clues as to what to expect in Friday’s payrolls. Thereafter we’ll get the final manufacturing PMI revision followed closely by the ISM manufacturing print which the market expects to nudge up 0.5pts to 55.0. Construction spending data for December and vehicle sales in January rounds out the data before attention then turns to this evening’s conclusion of the FOMC meeting. As a reminder there is no Yellen press conference due today. On the earnings side of things we’ll also receive reports from 27 S&P 500 companies including Facebook.

US Event Calendar

• 7am: MBA Mortgage Applications, Jan. 27 (prior 4.0%)
• 8:15am: ADP Employment Change, Jan., est. 168k (prior 153k)
• 9:45am: Markit US Manufacturing PMI, Jan. F, est. 55.1 (prior 55.1)
• 10am: ISM Manufacturing, Jan., est. 55.0 (prior 54.7)
• 10am: Construction Spending MoM, Dec., est. 0.2% (prior 0.9%)
• 10:30am: DOE Energy Inventories
• 2pm: FOMC Rate Decision, Upper Bound, est. 0.75% (prior 0.75%)
• FOMC Rate Decision, Lower Bound, est. 0.5% (prior 0.5%)

US Government docket

• 8:30am: Sen. Orrin Hatch gives speech at U.S. Chamber of Commerce on Senate Finance Cmte’s 2017 agenda
• 10am: Senate Commerce, Science and Transportation Cmte hearing on reducing regulations
• 10am: House Armed Services Cmte hears from retired Gen. David Petraeus and former acting CIA Director John McLaughlin on national security threats
• 10:10am: Senate Budget Cmte vote on nomination of Rep. Mick Mulvaney for White House budget director
• 10:30am: Senate Budget Cmte hears from CBO Director Keith Hall on FY17 economic outlook
• 10:30am: Senate Judiciary Cmte to vote on nomination of Sen. Jeff Sessions to be U.S. atty general
• 10:45am: Senate Environment and Public Works Cmte to vote on nomination of Okla. Atty General Scott Pruitt for EPA administrator
• 12pm: House votes to disapprove Interior Dept stream-protection rule and SEC payment disclosure rule

DB's Jim Reid concludes the overnight wrap

It's difficult to know what's normal in financial markets these days as the world tries to get used to the ebbs and flows of a Trump Presidency. Although January saw a lot of talk of a reversal of "Trump trades" the reality is that the only leg that has been weak has been the dollar which was down -2.59% in the month. Risk assets have generally performed well across the month. Talking of currencies there was plenty of Trump administration talk on the subject yesterday. The main focus was on the comments from President Trump’s top trade adviser, Peter Navarro, who said to the FT that Germany is using a “grossly undervalued” euro in order to gain an advantage over both the US and EU trade partners. It didn’t stop there though with Trump also saying at a meeting with US drug makers that Japan and China “play the money market” and “play the devaluation market while we sit here like a bunch of dummies”. The comments from Navarro about the euro has prompted a response from the head of the European Council, Donald Tusk, who said that the “worrying declarations” have only increased the uncertainty levels facing Europe and “puts the EU in a difficult situation”.

All in all that contributed to another rough day for the Greenback yesterday with the US Dollar index falling -0.91% and to the lowest closing level since November 11th. On the other side of that we saw the Japanese Yen rally +0.86%, Euro +0.96% and the onshore Chinese Renminbi +0.36%. These moves come ahead of today’s Fed meeting although we’re not expecting much new to come out of it. The overall tone should still be one that is relatively positive but it’s hard to see much new information that would really shift market expectations. A reminder that Yellen’s Humphrey-Hawkins testimony is only two weeks away so that may end up being the more relevant event for markets.

Back to Trump briefly. With all the furore and fallout from the weekend immigration executive order it has been interesting to see the first poll released in the aftermath. A Reuters/Ipsos poll released yesterday and conducted over January 30th/31st from 1201 respondents found that 49% of US respondents “strongly” or “somewhat” agreed with the order. 41% “strongly” or “somewhat” disagreed while 10% said that they were unsure. It was interesting to see the party split too with 53% of Democrat supporters saying that they “strongly disagreed” and 51% of Republican supporters saying that they “strongly agree”. This follows a Quinnipiac poll conducted at the start of the month which showed that voters supported “suspending immigration from terror prone regions, even if it means turning away refugees” by a majority of 48% to 42%.

Staying with politics, early this morning we also had the announcement of the Supreme Court nominee with federal appellate judge Neil Gorsuch picked by Trump. The event ended up being a bit of a spectacle with the announcement also broadcast on live TV – although that may also come as little surprise to readers. Gorsuch is said to be known for his conservative approach and originalist philosophy and if confirmed, will bring the split between liberals and conservatives on the court to 5-4 in favour of the conservatives. According to the WSJ, Gorsuch is known as a well established conservative figure but also having been outspoken about the need for courts to have a limited role in American life and also being critical about disproportionate powers amongst federal agencies.

Back to markets. Away from the jolts in FX it was another day of relative Trump driven unease for risk assets with earnings misses from the likes of UPS and Under Armour (UA) also helping to drag stocks lower, although in fairness a late bounce into the close at least helped momentum finish on a high. The S&P 500 ended -0.09% after being down as much as -0.60% although the loss still meant that the index closed down for the fourth session in a row which is the longest such streak since early November and prior to the election result. The Dow also finished -0.54% although US equity index futures are pointing higher this morning after Apple reported after the close. The tech giant beat both Q1 sales and earnings street estimates sending shares up as much as 3% in aftermarket trading.

Elsewhere yesterday equity markets also had a rough time of it in Europe with the Stoxx 600 closing -0.67% which takes the three-day loss to -2.00% now. Credit indices also edged wider with CDX IG and iTraxx Main +0.5bps and +1.5bps wider respectively while sovereign bond yields dipped lower. 10y Treasury yields fell 3.5bps to 2.454% while Bunds (-1.3bps) also tracked lower. With the exception of Greece – where yields rose another 23bps on those concerns over the lack of progress over talks with creditors that we highlighted yesterday – the periphery also had a bounce back day with yields 3bps to 6bps lower. The big movers in the commodity complex meanwhile were precious metals with Gold (+1.26%) and Silver (+2.53%) both up sharply.

The mood is a bit better in Asia this morning. The Nikkei (+0.28%), Kospi (+0.49%) and ASX (+0.51%) are all higher while in FX the Dollar index has also rebounded +0.18%. The Hang Seng (-0.71%) has retreated although that reflects some catch up with the market reopening for the first time this week. There’s also been some data out of China to digest with the latest official PMI’s having been released. All in all the data was relatively stable with the manufacturing reading falling a modest 0.1pts to 51.3 (vs. 51.2 expected) in January, offset by a 0.1pt rise in the non-manufacturing reading to 54.6.

Away from Trump the other political focus at the moment is in France where it feels like with each passing day the presidential race is blowing more and more open. The focus currently is on the scandal facing Francois Fillon with the candidate now facing fresh claims over the employment of family members as well as his wife, and the use of public funds in the employment. Fillon has said that he will withdraw from the race should the preliminary inquiry turn into a formal inquiry. In addition, the Washington Post ran an article yesterday suggesting that the National Front could be open to implementing a similar immigration order to that put in place by Trump, should Le Pen be elected. Certainly these political developments are worth monitoring.

Yesterday’s economic data in the US again played second fiddle to Trump related headlines. The Q4 employment cost index was reported as rising +0.5% qoq during the quarter which was a tad below the consensus for +0.6%. That saw the annual rate edge down to +2.2% yoy and so remain below the post financial crisis high mark of +2.6%. Meanwhile, the Chicago PMI for January slipped 3.6pts to 50.3 (vs. 55.0 expected) which is actually lowest level since May last year. The conference board’s consumer confidence index also edged down to 111.8 from 113.3 although there was a reasonable divergence in the two components. The expectations component tumbled 6.6pts to 99.8 while the present situations gauge rose 6.2pts to 129.7. The jobs plentiful diffusion index also suggested that the labour market remained solid during the month.

Over in Europe the main focus was on the inflation data. Euro area headline CPI surprised to the upside in January after printing at +1.8% yoy (vs. +1.5% expected) which follows a +1.1% reading in December. The big driver was energy and food and it was more notable that the more relevant core reading stayed unchanged at +0.9% yoy. Keep in mind that core inflation 12 months ago was +1.0% yoy. In addition, Q4 GDP for the Euro area came in-line at +0.5% qoq and so keeping the YoY constant at +1.8%. Our economists argue that core inflation is still too low and the ECB needs to observe a self-sustained improvement in core inflation above +1.0%. As such, our team expect the ECB to make its next taper decision in September, although strong data in the mean time could bring this forward to June.

In terms of the other data yesterday, the Euro area unemployment rate was reported as dipping one-tenth to 9.6% helped by a similar fall for the rate in Germany to 5.9%. Meanwhile in the UK mortgage approvals in December edged up to 67.9k from 67.5k although still missed relative to consensus (of 69.2k). Finally net consumer credit was weaker than expected in the UK in December (£1.0bn vs. £1.7bn) which saw Sterling temporarily dip before then coming roaring back with the weakness in the US Dollar to finish back above $1.250.

Looking at the day ahead, this morning in Europe the focus will be on the final revisions to the January manufacturing PMI’s as well as a first look at the data for the periphery and the UK. Following that we’ve got a busy diary to get through in the US this afternoon. We’ll kick off with the January ADP employment change reading which should offer some early clues as to what to expect in Friday’s payrolls. Thereafter we’ll get the final manufacturing PMI revision followed closely by the ISM manufacturing print which the market expects to nudge up 0.5pts to 55.0. Construction spending data for December and vehicle sales in January rounds out the data before attention then turns to this evening’s conclusion of the FOMC meeting. As a reminder there is no Yellen press conference due today. On the earnings side of things we’ll also receive reports from 27 S&P 500 companies including Facebook (FB).