If there isone thing that is virtually certain about today's trading (aside from the post Rig Count surge in oil because if there is one thing algos are, it is predictable) is that despite S&P futures being a touch red right now, everything will be forgotten in a few minutes and yet another USDJPY momentum ignition ramp will proceed, which will push the S&P forward multiple to 18.0x on two things i) it's Friday, and an implicit rule of thumb of central planning is the market can't close in confidenece-sapping red territory ahead of spending heavy weekends and ii) the Nasdaq will finally recapture 5000 following a final push from Apple's bondholders whose recent use of stock buyback proceeds will be converted into recorder highs for the stock, and thus the Nasdaq's crossing into 5,000 territory because in the New Normal, the more expensive something is, the more people, or rather algos, want to buy it.

European equities trade relatively mixed heading into the North American crossover with European newsflow on the light side thus far. On a sector specific basis, material names lead the way lower in tandem with the paring of recent gains in precious metals complex, while notable movers in Europe come in the form of Airbus (+6.6%) and IAG (+4.3%) following their respective earnings. However, as has been the case over the past few days, a bulk of the price action for Europe has been provided by fixed income markets, with German paper initially seeing a leg lower alongside the Saxony CPI release which showed a substantial bounce-back from the previous for both the M/M and Y/Y (M/M 0.9% vs. Prev. -1.2%, Y/Y 0.3% vs. Prev. -0.3%). This move was then extended throughout the morning, paring some of the hefty gains seen over the past few days, with some analysts also noting an unwind of month-end extensions. From a UK perspective, the short-sterling strip is being weighed on by the latest comments from BoE’s Shafik who said if slack is absorbed quickly, lift-off could be at a faster rate than the market currently expects.

The Nikkei 225 (+0.1%) failed to hold on to earlier gains after crawling to a fresh 15yr high, as JPY clawed back some of its recent losses. Shanghai Comp (+0.4%) and Hang Seng (-0.3%) were supported by further speculation of continued support measures by the Chinese government. JGBs trade up 4 ticks with short-end paper notably outperforming, as results of today' BoJ’s JPY 1.2trl purchasing operation indicated strong demand in the 1-3yr sector.

In FX markets, overnight AUD was the session’s biggest mover, falling against all of its counterparts as RBA rate talk gathered pace ahead of next week’s policy meeting. Analysts at Deutsche Bank, JP Morgan and Westpac all brought forward their forecasts for a 25bps rate cut next week, with markets now pricing in a 54% chance of such action. Heading into the European open, a video of RBA watcher McCrann got passed around desks with the commentator suggesting he expects the RBA to stand pat on rates for the moment, however, AUD has been relatively unshaken by these comments. Elsewhere GBP weakness has been observed across the board amid no new fundamental news, seemingly led by EUR/GBP which typically moves higher on the last trading day of the month due to month end demand. Emerging market currencies including TRY, ZAR and MXN are seen markedly lower this morning despite the USD trading lower as the prospect of Fed rate lift-off continues to weigh on the outlook for EM economies; TRY trades at a record low.

In the commodity complex, WTI crude futures rebounded overnight after finishing yesterday’s session down 5.53%, which saw the WTI-Brent crude spread at its widest level since January 2014, with energy specific news relatively light. Contrary to the move in energy prices, precious metals markets have drifted lower throughout the session, paring back some of the recent gains which saw gold prices rise their most in 3 weeks. In a similar manner, copper saw a pull-back from yesterday’s 6-week highs where prices rose to within proximity of the USD 6,000 per ton level.

In Summary: European shares fall with the basic resources and chemicals sectors underperforming and utilities, industrial outperforming. The Stoxx 600 is currently near its session low. The Swiss and Spanish markets are the worst-performing larger bourses, the U.K. the best. The euro is stronger against the dollar. German 10yr bond yields rise; Portuguese yields decline. Commodities gain, with nickel, silver underperforming and WTI crude outperforming. U.S. Chicago purchasing  manager  Michigan confidence, revised Q4 GDP, personal consumption, core PCE, ISM Milwaukee, pending home sales, due later.

Market Wrap

• S&P 500 futures down 0.1% to 2108
• Stoxx 600 down 0.2% to 389.9
• US 10Yr yield up 1bps to 2.04%
• German 10Yr yield up 4bps to 0.34%
• MSCI Asia Pacific down 0.1% to 146.2
• Gold spot down 0.4% to $1205.1/oz
• Eurostoxx 50 -0.2%, FTSE 100 -0.1%, CAC 40 -0.1%, DAX -0.1%, IBEX -0.4%, FTSEMIB -0.1%, SMI -0.4%
• Asian stocks little changed with the Sensex outperforming and the Kospi underperforming.
• MSCI Asia Pacific down 0.1% to 146.2
• Nikkei 225 up 0.1%, Hang Seng down 0.3%, Kospi down 0.4%, Shanghai Composite up 0.4%, ASX up 0.3%, Sensex up 1.6%
• Euro up 0.24% to $1.1225
• Dollar Index down 0.21% to 95.09
• Italian 10Yr yield down 2bps to 1.33%
• Spanish 10Yr yield down 2bps to 1.26%
• French 10Yr yield up 2bps to 0.6%
• S&P GSCI Index up 1% to 416
• Brent Futures up 2.2% to $61.4/bbl, WTI Futures up 2.2% to $49.2/bbl
• LME 3m Copper down 0.9% to $5834.5/MT
• LME 3m Nickel down 1.5% to $14160/MT
• Wheat futures up 0.8% to 504.5 USd/bu

Bulletin Headline Summary from RanSquawk and Bloomberg

• German regional CPIs show a rebound from January, subsequently pressuring German paper, with Bunds also pulling back from this week’s substantial gains
• Elsewhere, European equities trade in a particularly tight range with newsflow relatively light
• Today sees the release of US GDP, Chicago PMI, Pending Home Sales and University of Michigan, as well as a host of Fed speakers
• Treasuries decline overnight with EGBs; yields still lower on week after rally sparked by Yellen testimony on Tuesday, month-end duration extensions. Next week may see sales to hedge expected $22b offering from Actavis.
• Consumer prices from Germany to Italy and Spain signaled an easing of deflation risks in the euro area; inflation in Italy was +0.1% in Feb. vs -0.3% median forecast while data from four German states before national data later today also showed improvement
• As more central banks move to impose negative interest rates, economists are beginning to question just how low they actually could go; Barclays analysts suggest it may be “considerably lower” than the -75bps in Switzerland and Denmark
• Hong Kong introduced more measures aimed at cooling the property market and protecting financial stability after home prices rose to a record last year
• China plans to collect capital gains taxes from foreign money managers that invested in mainland markets during the five years through November 2014, a move that may compel funds to claw back more than $1b from investors to pay the government
• Three months after Saudi Arabia made clear it was going to let oil prices keep tumbling, the strategy is showing signs of working as U.S. drillers idle rigs at a record pace, gutting investment plans and laying off thousands of workers
• German lawmakers approved an extension of Greece’s loan  program after Merkel’s coalition staved off dissent from bailout-weary members in its own ranks
• The U.S. government is considering whether to shut one or more Russian banks out of the world financial system if rebels backed by Russia continue to violate the cease-fire in Ukraine, two administration officials said
• Assailants in Bangladesh’s capital hacked to death well- known U.S. blogger Avijit Roy and critically wounded his wife in a machete attack that police said may have been carried out by an extremist group
• Sovereign 10Y yields higher. Asian stocks mostly higher, European stocks mixed; U.S. equity-index futures decline. Crude higher; gold and copper decline

US Economic Calendar

• 8:30am: GDP Annualized q/q, 4Q revised, est. 2% (prior 2.6%)
  • Personal Consumption, 4Q revised, est. 4.3% (prior 4.3%)
  • GDP Price Index, 4Q revised, est. 0% (prior 0%)
  • Core PCE q/q, 4Q revised, est. 1.1% (prior 1.1%)
• 9:00am: ISM Milwaukee, Feb., est. 54 (prior 51.6)
• 9:45am: Chicago Purchasing Manager, Feb., est. 58 (prior 59.4)
• 10:00am: Pending Home Sales m/m, Jan., est. 2% (prior -3.7%)
  • Pending Home Sales NSA y/y, Jan., est. 8.7% (prior 8.5%)
• 10:00am: U. of Mich. Sentiment, Feb. final, est. 94 (prior 93.6)
  • U. of Mich. Current Conditions, Feb. final (prior 103.1)
  • U. of Mich. Expectations, Feb. final
  • U. of Mich. 1 Yr Inflation, Feb. final (prior 2.8%)
  • U. of Mich. 5-10 Yr Inflation, Feb. final (prior 2.7%)
• 1:30pm: Fed’s Fischer speaks in New York

DB's Jim Reid summarizes the remainder of the overnight events

Yesterday we saw another big rally in peripheral yields with the highlight perhaps being that Portugal 10 year yields closed below the US 10 year for the first time since October 2007. In today's EMR we show the long-term history back over 200 years between these two and you can see that this is a rare event. Lots of unusual events are continuing to occur with the extreme central bank activity and will do for some time yet.

Indeed the strong day for peripherals seemed to reflect the market focusing on what is now the imminent arrival of the ECB’s QE programme. 10y yields in Italy (-11.8bps), Spain (-10.5bps) and Portugal (-13.5bps) all fell significantly. It was a similar story in core markets too however as 10y Bunds also closed 2.8bps lower at 0.295%. Yesterday also marked the day that 7y Bunds stepped into negative territory with the curve now trading below zero up until that maturity. It was a stronger day for risk assets generally in Europe as the Stoxx 600 finished +1.02% and Crossover rallied 9bps. Despite all the Greece headlines of late, it’s clear that expected ECB stimulus has driven market returns through 2015 so far. In fact, Crossover is now 50bps tighter following the announcement by the Central Bank, 10y yields in Spain, Portugal and Italy are 25bps, 90bps and 35bps lower respectively and the Stoxx 600 is +9%

In the US, yesterday’s data and comments out of various Fed speakers took Treasury yields higher and helped fuel a Dollar rally. Indeed, 10y yields closed 6.1bps higher – including a 10bps swing off the day’s lows - and back above 2% again at 2.03%. In fact 10y yields are not far off the pre-Yellen speech at 2.06% on Tuesday now. 2y yields also closed higher (+4.4bps) at 0.641%. The Dollar, as measured by the DXY closed +1.15% higher at the close. In fact Dollar strength has been a theme all year and the DXY is +12.8% firmer through 2015 already, which is the highest since 1997. In terms of the data, the headline CPI print was a touch weaker than expected in the month of January at -0.7% mom (vs. -0.6% expected). The annualized headline print coming in at -0.1% yoy. The core meanwhile firmed and no doubt helped support some of the widening in Treasuries, printing at +0.2% mom which was up a tenth on the December print and also versus expectations. Again the annualized reading also stayed unchanged at +1.6% yoy. Elsewhere, data was more encouraging than that seen of late. Durable goods orders (+2.8% vs. +1.6% expected) and capital goods orders (+0.6% vs. +0.4% expected) were supportive. The FHFA house price index (+0.8% mom vs. +0.5% expected) also surprised to the upside whilst jobless claims came in a touch softer than expected at 313k (vs. 282k previously) although we note that the period also covered a public holiday.

There was no shortage of Fedspeak yesterday with the comments favouring those on the more hawkish side. Starting with Bullard, the St Louis Fed Chief was quoted as saying on CNBC that ‘we should take out ‘patient’ in March to provide optionality for the committee going forward’. San Francisco Fed President Williams meanwhile was quoted as saying in the WSJ that ‘in June it would be time to contemplate raising rates’. Finally the Cleveland Fed’s Mester reiterated the 2% inflation goal for the end of the year and was also noted saying that taking out the ‘patience’ language means June becomes a viable option for a rate hike.

Wrapping up the US, it was a less spectacular day for equity markets with the S&P 500 closing 0.15% lower at the close although in reality it was more of an energy related decline than anything else as energy stocks closed 1.76% lower led by falls for both WTI (-5.53%) and Brent (-2.56%) to $48.17/bbl and $60.05/bbl respectively.

In terms of the macro data in Europe yesterday, employment data in Germany was as expected with the unemployment rate unchanged at 6.5%. Consumer confidence for Germany improved however, up 0.4pts in March to 9.7. Elsewhere, money supply data for the Euro-area was above consensus (+4.1% yoy vs. +3.7% expected) and various confidence indicators for the region largely printed in line. Meanwhile in the UK, Q4 GDP of 2.7% was as expected.

Taking a quick look at the trading in Asia this morning, focus is on Japan with the latest inflation data for January. In terms of the numbers, the headline stayed at +2.4% yoy, which included a seasonally adjusted -0.1% mom reading for January. The core (excluding food) ticked down to +2.2% from +2.5% previously and the core-core (excluding food and energy) was unchanged at +2.1% yoy. Our colleagues in Japan noted that they see a low likelihood of any additional easing this year given that the BoJ has been emphasizing both the positive feedback from the decline in oil prices to real economic activity and also the stable inflation expectations of households. Elsewhere the preliminary industrial production reading for the region declined to -2.6% yoy from +0.1% previously, but still came in ahead of expectations (-3.1% yoy). In terms of early morning trading, the Nikkei (-0.19%) is modestly weaker on the back of the prints whilst the Shanghai Comp (+0.58%) and Hang Seng (+0.56%) are both higher.

In terms of the day ahead, the calendar continues to be busy with French PPI and consumer spending due, along with German and Italian inflation data. Over in the US this afternoon, focus will be on the second reading of the US Q4 GDP reading. As well as that, we’ve also got the Chicago PMI, ISM Milwaukee, pending home sales and final reading of the University of Michigan sentiment print.