'We may be now seeing a return of the ‘twin deficits' that we saw in the 1980s and the 2000s'. - Jeffrey Frankel, Harvard University

The US trade deficit dropped more than expected in December after two straight months of increases amid higher exports. The Commerce Department reported the country's trade gap narrowed 3.2% to $44.3 billion in the reported month, following November's upwardly revised deficit of 45.7 billion, while market analysts held expectations for a decrease to $45.0 billion. The December improvement was driven by stronger exports that posted a 2.7% monthly increase to $190.7 billion, the highest level since April 2015. Advanced technology goods were the main contributor to export growth. However, US exports remained under pressure from the strong Dollar, which rose 4.4% against other major currencies in 2016. The data showed shipments to the EU climbed 10.1%, with exports to Germany advancing 12.4%. The US President Donald Trump accused the EU's largest economy of using the weak Euro to exploit the US. Meanwhile, imports of goods and services jumped 1.5% to $235.0 billion in December, the highest since March 2015. The key drivers of import growth were attributable to higher oil prices and stronger domestic demand. Separately, the JOLTS monthly report released on Tuesday showed job opening in the US totaled 5.50 million in December, slightly down from November's revised 5.51 million and below a 5.56 million market forecast.

EUR/USD as edged lower in the Wednesday session, as the pair continues to head lower this week. Currently, EUR/USD is trading at 1.0650. In economic news, it's an unusually quiet schedule, with only three minor events. The US will release Crude Oil Inventories, with the markets expecting another strong surplus. The estimate stands at 2.7 million barrels. On Thursday, unemployment claims is expected to rise to 249 thousand.

Early on in 2017, Mario Draghi & Co. can sleep easier, as Eurozone growth and inflation numbers have been moving higher. Inflation, which has been at low levels for years, has climbed in recent months, buoyed by higher oil prices. This is positive news for the ECB, which has long tried to raise inflation with an ultra-loose monetary policy. Still, inflation levels remain well below the ECB's target of 2 percent. On Monday, ECB President Mario Draghi poured cold water on hopes of a change in monetary policy due to the improved economic climate. Draghi said that the Eurozone economy was not yet strong enough to withdraw the bank's stimulus program. Draghi's comments sent the euro lower, as EUR/USD is down 1.2 percent this week. There are also market jitters over the French presidential elections in April. Marie Le Penn, the far-right candidate in the ring, is not only a strong supporter of Donald Trump, but is hoping to pull off a Trump-style upset win. Le Pen has promised a referendum on taking France out of the European Union, which has put further pressure on the euro.

President Donald Trump continues to create controversies on a daily basis, and his brash and undiplomatic style has not endeared him to the markets. Moreover, the lack of an economic policy from the new administration is a major source of concern and the the post-election euphoria which sent the markets higher has dissipated. The Federal Reserve, which had trumpeted that it was planning a series of hikes in 2017, was more cautious in its recent rate statement and is expected to adopt a wait-and-see attitude in the coming months. If the economy continues to grow, there is a strong likelihood of another rate hike in the first half of 2017, which is bullish for the dollar. On the other hand, if Trump makes good on his promises to “make America first” and implement protectionist policies, the greenback could lose ground.

Pullback from fresh highs at 0.7694 found footstep at 0.7600 support zone, where rising 10SMA contained pullback for now.

Correction should ideally end here to keep intact larger bull-channel from 0.7163 (02 Jan low), for fresh extension higher.

However, slow stochastic that reversed from overbought territory shows more room at the downside.

Extended correction would face rising 20SMA (currently at 0.7570) that offers significant support and guards lower breakpoints at 0.7510/89 zone (former consolidation floor / 100/200 SMA’s / Fibo 38.2% of 0.7159/0.7694 ascend.

Weak near-term studies keep the downside at risk, with stronger bounce above 0.7660, needed to sideline n/t bears and re-focus initial barriers at 0.7694.

Res: 0.7640, 0.7660, 0.7694, 0.7730
Sup: 0.7604, 0.7570, 0.7510, 0.7489

Bounce from new lows at 111.61/57 and yesterday’s close above 112.00 handle, prevented the pair from the second daily close below 112.00 pivot and sidelined immediate downside threats for extended consolidation.

Recovery attempts show signals of fading, with overall structure being negative and keeping the downside at risk.

Sustained break below 112.00 would trigger fresh bearish acceleration that may extend towards strong supports at 110.30/109.91 (ascending 100SMA / daily cloud base).

Daily Tenkan-sen marks key near-term barrier at 113.47 and only firm break here would neutralize downside risk.

Res: 112.50, 112.75, 113.00, 113.47
Sup: 111.97, 111.57, 111.34, 110.83

Cable is trading around 1.2500 handle in early Wednesday following Tuesday's spike to 1.2345 support, where fall was contained by daily Kijun-sen. Subsequent sharp recovery confirmed short-lived break below thin daily cloud (spanned between 1.2388 and 1.2426), as yesterday's strong downside rejection that left long-tailed daily candle that now underpins for fresh upside action. Corrective easing from yesterday's high at 1.2544 should stay above daily cloud to keep fresh near-term bulls in play. Cracked daily Tenkan-sen (currently at 1.2525) is still acting as significant resistance and firm break above is to trigger fresh acceleration higher. Conversely, repeated violation of daily cloud would signal fresh weakness.

Res: 1.2500, 1.2525, 1.2544, 1.2567
Sup: 1.2473, 1.2426, 1.2388, 1.2345

The Euro remains in red on Wednesday and pressures pivotal support at 1.0641 (Fibo 38.2% of 1.0339/1.0827 upleg / 30SMA).

Yesterday's break and close below 20SMA generated bearish signal for further downside, with break below 1.0641 needed to confirm bearish extension of pullback from 1.0827 (02 Feb peak).

towards next strong supports at 1.0550 (daily cloud top) and 1.0525 (Fibo 61.8% retracement).

Broken 20SMA (1.0700) now acts as resistance together with daily Tenkan-sen (1.0723) which is expected to cap upticks.

No events in today's calendar during European session suggest that technicals and politics would be Euro's main driver.

Res: 1.0689, 1.0700, 1.0723, 1.0773
Sup: 1.0641, 1.0600, 1.0550, 1.0525

During the late US trading session today, the RBNZ rate announcement will be in the spotlight. The forecast is for the Bank to remain on hold after cutting rates at the latest meeting in November. We share that view considering the recent improvement in the nation's economic data. Since the latest meeting, the CPI accelerated sharply in Q4, while 2-year inflation expectations for Q1 surged almost to the mid-point of the RBNZ's 1% - 3% target range. In our opinion, these developments have greatly diminished the likelihood for any further action by the Bank in the foreseeable future. Even though the employment data for Q4 were somewhat disappointing, given the material improvement in the inflation outlook, we think that the Bank will be more than satisfied. Thus, the tone of the meeting statement may be more optimistic than previously, something that could bring the Kiwi under renewed buying interest on the rate decision. Currently NZD/USD is trading near the support barrier of 0.7280 (S1) and the crossroad of the short-term uptrend line taken from the low of the 3rd of January and the downside resistance line drawn from the peak of the 7th of September. In case we get an optimistic statement, the bulls may take advantage of that support territory and push the pair back up for another test near 0.7335 (R1). A break above that zone is possible to open the way for our next resistance of 0.7400 (R2).

Having said that, we would stay careful of a possible correction lower in NZD/USD during the press conference following the decision. At the conference following the latest meeting, Governor Wheeler provided strong hints for FX intervention in case the Kiwi continues to appreciate, something that caused the pair to collapse. Considering that NZD/USD is now trading at even higher levels than back then, it seems likely that we get some more jawboning from Wheeler, which could erase any gains the pair posts on the decision itself. NZD/USD could slide back towards the 0.7280 (S1) barrier, but given that the price structure on the 4-hour chart still suggests a short-term uptrend, we would treat such a setback as a corrective phase.

BoE's Forbes says a rate hike may be warranted soon; lifts sterling

The British pound surged yesterday, following some hawkish comments from Kristin Forbes, a member of the Bank of England's Monetary Policy Committee (MPC). Forbes indicated that tentative data suggest that inflation may be accelerating slightly more rapidly than expected, and that if inflation continues to pick up, then a BoE rate hike may soon be an appropriate response. She added that the recent upside surprises in the UK CPI rates may be a precursor to a larger overshoot of the inflation target. GBP/USD had been trading in a declining mode during the European morning Tuesday, but after Forbes's comments, it shot up to hit resistance at 1.2545 (R1). Although there is the likelihood for the rate to continue higher for a while, the possibility for a lower high on the 4-hour chart still exists and as such, the bears may take charge again soon. We believe that they may do so near the 1.2545 (R1) or 1.2600 (R2) resistance areas and could eventually push the rate down for another test near the 1.2410 (S2) key support.

Forbes's hawkish rhetoric reinforces the view we adopted following the latest BoE policy meeting. We believe that since "some" MPC members have moved a little closer to their limits for tolerating an overshoot in inflation, there may be growing division among the Committee with regards to policy, suggesting that we could see some hawkish dissents in the upcoming meetings. The likely candidates for such an action is Forbes herself, and Ian McCafferty, both of which dissented the original decision to restart the QE program in August. Martin Weale also dissented that decision, but he has left the MPC since.

In any case, although such hawkish signals may provide some short-term support to GBP, we believe that the broader outlook of the currency remains cautiously negative. GBP/USD has been trading in a medium-term sideways range between 1.2100 and 1.2850 since the 7th of October, but the prevailing larger trend remains to the downside. Our pessimistic view is based on the fact that the BoE has made it clear that on the whole, it remains willing to "look through" above-target inflation, and that investors should not expect rate hikes anytime soon. Sterling is unlikely to draw support from political developments either, as the current landscape still suggests we are headed for a "hard Brexit" as we approach the triggering of Article 50 in March. Therefore, any further rebounds in GBP may remain limited in the foreseeable future, in our view.

Today's highlights:

During the European day, the economic calendar is empty, with no noteworthy indicators due to be released.

In the UK, lawmakers will vote again on the Article 50 bill and any potential amendments. Even though amendments that give Parliament serious scrutiny over the negotiations could prove positive for sterling, that scenario is rather unlikely in our view, as two such attempts have already been rejected.

From Canada, we get housing starts for January and expectations are for the figure to have declined somewhat, though this indicator is usually not a major market mover.

Besides RBNZ Governor Wheeler who will hold a press conference following the rate decision, we do not have any other speakers scheduled for today.

EURUSD

The EURUSD had a bearish momentum yesterday slipped below the bullish channel but still unable to break break below 1.0650 key support and H4 EMA 200 as you can see on my H4 chart below. The bias is bearish in nearest term but we need a clear break below 1.0650 to confirm the bearish reversal scenario with nearest target seen at 1.0500 region. Immediate resistance is seen around 1.0730. A clear break above that area could lead price to neutral zone in nearest term but would keep the bullish phase remains valid testing 1.0800 area. Overall I remain neutral.

GBPUSD

The GBPUSD attempted to push lower yesterday bottomed at 1.2346 but whipsawed to the upside and closed higher at 1.2505. The bias is neutral in nearest term probably with a little bullish bias testing 1.2600 area. Immediate support is seen around 1.2450. A clear break below that area could trigger further bearish pressure testing 1.2400 – 1.2350 region. Overall I remain neutral.

USDJPY

The USDJPY failed to continue its bearish momentum yesterday topped at 112.57. The bias is neutral in nearest term but overall I still prefer a bearish scenario at this phase with nearest target seen at 111.30. Immediate resistance is seen around 113.00. A clear break and daily close above that area could trigger further bullish pullback testing 114.00 region but any upside pullback should be seen as a good opportunity to sell. Immediate support is seen around 112.00. A clear break below that area could trigger further bearish pressure testing 111.30.

USDCHF

The USDCHF had a bullish momentum yesterday slipped above 1.0000. The bias is bullish in nearest term but 1.0000 – 1.0040 (H4 EMA 200) area is a good place to sell with a tight stop loss. Immediate support is seen around 0.9950. A clear break below that area could lead price to neutral zone in nearest term testing 0.9900 region. Overall I remain neutral.

Sunrise Market Commentary

• Rates: Looking for EMU bond markets and risk sentiment for guidance
  Today's eco calendar is empty apart from heavy supply (Germany, Portugal, Finland, US). Investors' focus will remain on EMU bond markets. Yesterday tensions eased, but we don't take that for granted. The short term technical picture of the Bund improved and the US Note future is near key resistance (125-09/16).
• Currencies: Sterling rebounds on hawkish BoE comments and 'Brexit compromise'
  Yesterday, the dollar gained modestly against the euro and the yen as risk sentiment improved. Today, the eco calendar is very thin. Sterling profits from hawkish comments from BoE's Forbes and as the UK government agreed on the Parliamentary approval of the final Brexit deal

The Sunrise Headlines

• US equities ended around 0.2% higher with the S&P 500 underperforming (flat). Asian stock markets trade mixed with Japan outperforming on the back of yesterday's yen weakness.
• Japan attained its second-biggest current account surplus on record in 2016, just days before the US and Japanese leaders meet for talks with trade surpluses and currency valuations expected to be high on the agenda.
• Britain will not seek further talks with the EU if parliament rejects the exit deal it reaches, the government said, as ministers defeated attempts to give lawmakers more say on the terms of the final agreement.
• The RBNZ will undertake a cost-benefit analysis of imposing debt-to-income limits aimed at cooling down a red-hot housing market, NZ's FM said, though it is unlikely DTI measures will be used this year.
• Bundesbank President Weidmann said that Germans mustn't forget that they benefit from low interest rates that make jobs safer and boost government tax revenue. The ECB is not yet at a point where it can end its expansionary policy.
• The IMF warned that Greece once again risks a eurozone exit amid stalled bailout talks, sending the clearest signal yet the emergency lender isn't likely to soon rejoin Europe's failed efforts to fix the debt-weary nation.
• Crude oil prices dropped $1.5/b yesterday after a private report (API) showed that oil inventories spiked last week and as Norwegian energy group Statoil booked a $2.3B impairment due to reduced LT expectations for oil prices.
• Today's eco calendar is empty apart from auctions in Portugal, Germany, Finland and the US..

Currencies: Sterling Rebounds On Hawkish BoE Comments And 'Brexit Compromise'

Dollar looking for a bottom

On Tuesday, the European risk-off trade that dominated Monday's session faded. In a session devoid of important data, this was enough to put a short term floor undere the dollar. USD/JPY rebounded from a correction low in the 111.60 area and settled in 112 big figure during the European hours. However, the pair lost again ground in US dealings as equities couldn't maintain the opening gains. USD/JPY closed the session at 112.39. EUR/USD extended its decline. Contrary to Monday, USD strength rather than euro weakness prevailed. The dollar also lost momentum against the euro later on and finished the session at 1.0683.

Overnight, Asian equities trade mixed. The rise of the dollar is positive for Japan. Chinese equity markets probably also still react to the Chinese forex reserve statistics showed a decline of reserves below $3 trillion. China weakened the yuan reference rate to USD/CNY 6.8849 and the PBOC again tightened monetary conditions as it skipped its reverse rate operations. The CNH and the CNY are losing marginal ground. The dollar shows no clear trend. USD/JPY stands at 112.25. EUR/USD at 1.0675.

Today, US and EMU eco calendars are devoid of market moving data. We are also not aware of any important events. So technical considerations and global risk sentiment will guide currency trading. Sentiment on risk is a bit fragile in Asia this morning, but nog enough to draw conclusion for European and US trading. So we expect a calm start for trading in the major USD cross. The USD price action over the previous days showed a mixed picture. The topside in EUR/USD looks rather well protected as sentiment on the euro is fragile due to political risks in the region. At the same time, USD/JPY struggles to hold above the 112/111.16 support area. The jury is still out whether this area will hold. A retest/break is possible if risk sentiment would worsen again. Yen traders also look to the meeting between PM Abe and President Trump later this week, as the yen will likely debated. This might be slightly yen-supportive

Global context. The dollar is in a corrective downtrend against most majors since the start of January. The USD rally on the Trump reflation trade petered out. Interest rate differentials in favour of the dollar narrowed. Trump politics/communication became a sources of uncertainty, also for the dollar. A break above EUR/USD 1.0874 (next resistance) would question the short-term USD positive outlook. At some point, absolute interest rate support should provide a USD floor, especially as the Fed is expected to continue its policy normalisation. Price action earlier this week showed that that euro weakness might still be a factor too. As we see the 1.0874 resistance is solid, a sell EUR/USD on upticks might be considered. USD/JPY is trading well off the post- Trump highs (118.60/66) and dropped (temporary?) below the112 support. USD/JPY 111.16 (38% retracement of the 99.02/118.66 rally) is the next key support. A break below this area is clearly USD negative.

EUR/USD: Topside test rejected. Dollar tries to build a bottom after recent correction

EUR/GBP

Sterling gain on BoE comments and Brexit compromise

Yesterday, sterling initially traded with a negative bias on soft BRC retail sales, below consensus Halifax house prices and lingering uncertainty on the Brexit debate in Parliament. EUR/GBP returned to the 0.8640 area even as EUR/USD traded with a negative bias. In the afternoon, sentiment on sterling improved for the better. BoE's Forbes said that “If the real economy remains solid and the pickup in the nominal data continues, this could soon suggest an increase in bank rate.” Sterling rebounded further on Brexit headlines. Cable finished the session at 1.2501. EUR/GBP tumbled below 0.86 and finished the session at 0.8538.

Overnight, a survey of the Recruitment and Employment Confederation and IHS Markit indicated rising wage pressures. Sterling is holding near yesterday's highs against the dollar and the euro. No eco releases are scheduled. Yesterday, sterling rebounded as the UK Parliament was allowed to vote on the final Brexit agreement, but there will be no renegotiation if the proposed deal is rejected. At this stage, we don't see this 'agreement' as a reason for further sterling strength. Last week's balanced approach of the BoE capped the topside of sterling and helped a cautious bottoming out process for EUR/GBP. Yesterday's comments from Forbes supported sterling, but we don't think they change the broader picture on the BoE policy approach. The EUR/GBP 0.8450 support looks again a bit better protected. The sterling momentum is waning a bit, but euro weakness might still be an issue. A cautious buy-on-dips approach is preferred. The cable price action suggests that further cable gains are difficult too

EUR/GBP still struggles to rebound off the 0.8450 support area

Download entire Sunrise Market Commentary

WTI crude falls another 1% after large API build

Asia Mid-Session Market Update: PBOC skips reverse repos again while weakening Yuan fix; WTI crude falls another 1% after large API build

US Session Highlights

(US) DEC TRADE BALANCE: -$44.3B V -$45.0BE

(US) Fed's Kashkari (dove, voter): would prefer to err on side of being too loose than too tight; sees no immediate risks to financial stability; inflation expectations remain well anchored

(US) Atlanta Fed cuts Q1 GDP forecast to 2.7% from 3.4% on 2/1

GM shares slump despite solid Q4 financial results amid slide in margins and rising inventories

US markets on close: Dow +0.2%, S&P500 flat, Nasdaq +0.2%

Best Sector in S&P500: Consumer Staples

Worst Sector in S&P500: Energy

Biggest gainers: TDG +6.5%, CNC +5.3%, NOV +4.9%, EMR +4.5%, CHD +4.0%

Biggest losers: KORS -10.8%, FMC -6.0%, MSI -5.4%, VMC -4.9%, GM -4.7%

At the close: VIX 11.3 (-0.1pts); Treasuries: 2-yr 1.17% (+2bps), 10-yr 2.39% (-2bps), 30-yr 3.02% (-3bps)

US movers afterhours

COHR: Reports Q1 $2.57 ex-items (unclear if comp) v $1.79e, R$346.1M v $318M; +13.2% afterhours

MCHP: Reports Q3 $1.05 v $0.90e, R$881.2M v $850Me; Guides Q4 $1.01-1.11 v $0.93e, R$872-908M v $862Me; +9.9% afterhours

CTB: Cooper Tire to join MidCap 400; Hersha to replace WCI Communities in SmallCap 600, after the close Feb 10th; +3.3%; HT +5.9% afterhours;

TIME: Meredith, Bronfman-led investor group said to be advancing in pursuit of Time Inc - press; +2.9% afterhours

PNRA: Reports Q4 $2.05 v $2.00e, R$727M v $728Me; +2.6% afterhours

MDLZ: Reports Q4 $0.47 v $0.49e, R$6.77B v $6.87Be; +1.9% afterhours

DIS: Reports Q1 $1.55 v $1.48e, R$14.8B v $15.3Be; -0.6% afterhours

TTWO: Reports Q3 -$0.33 (gaap) v $0.37e (unclear if comp), R$476.5 v $715Me (2 est); -1.3% afterhours

AKAM: Reports Q4 $0.72 v $0.68e, R$616M v $606Me; -3.7% afterhours

BWLD: Reports Q4 $0.87 v $1.23e, R$494.2M v $515Me; -4.6% afterhours

GILD: Reports Q4 $2.70 v $2.43e, R$7.22B v $7.17Be; Increases dividend 10% to $0.52/shr from $0.47; -5.3% afterhours

Z: Reports Q4 $0.14 v $0.13e, R$227.6M v $169.4M y/y; Guides initial FY17 R$1.03-1.05B v $1.07Be; -7.2% afterhours

USNA: Reports Q4 $0.87 v $0.90e, R$253M v $251Me; Discloses internal investigation of China operations; -20.7% afterhours

Politics

(US) 9th Circuit Court of Appeals said to have indicated a ruling on Pres Trump's travel ban today is unlikely; Ruling to come some time this week - press

(US) As expected, VP Pence breaks 50-50 deadlock in US Senate, confirming Education Sec nominee Devos

Asia Key economic data:

(CN) CHINA JAN FOREIGN RESERVES: $2.998T V $3.004TE (7th consecutive decline and falls below $3T for first time since Feb 2011) (overnight)

(JP) JAPAN DEC BOP CURRENT ACCOUNT TOTAL: ¥1.1T V ¥1.2TE; ADJ CURRENT ACCOUNT TOTAL: ¥1.7T V ¥1.7TE; TRADE BALANCE BOP BASIS: ¥807B V ¥739BE

(TW) TAIWAN JAN CPI Y/Y: 2.3% V 2.0%E; WPI Y/Y: 2.7% V 1.5%E

(NZ) New Zealand Jan ANZ Truckometer Heavy (heavy traffic) M/M: -0.8% v -0.1% prior; 2nd straight decline

Asia Session Notable Observations, Speakers and Press

Lack of momentum in US indices continues to be felt in Asia, where indices were once again mixed and volatility contained. Australia is the worst performer with Energy sector under heavy pressure - WTI oil fell below $52/brl in US hours and then fell another 1% in electronic session after API crude inventories report was 5x the expected build and also the 2nd biggest on record.

Mainland China markets are taking the 6-year low just below $3T in FX reserves released overnight in stride, with the main index down marginally. BoCom researcher said reserves of about $2T are appropriate given China's floating exchange rate system. Similarly, overnight China FX regulator SAFE said FX reserves are ample, and fluctuations in forex reserves are normal.

Separately, PBoC weakened Yuan slightly more aggressively, with the lowest CNY setting in over 2 weeks. PBoC also skipped reverse repo operations for the 4th straight session, though reiterated that banking system liquidity is at high level. Likewise overnight, PBOC research said the OMO are influenced by market forces, and last week's 10bp increase in offer rates should not be interpreted as tightening.

BOJ's summary of opinion from the latest meeting touched on the familiar themes, affirming commitment to YCC policy despite the rising US rates with an eye on risks from Brexit and Trump policy uncertainties. As reflected in the statement, BOJ was more upbeat on developments in exports, consumption and capex.

China:

(CN) China Information Daily: PBOC has no conditions for interest rate hike; will focus on flexible monetary policy

(CN) Bank of Communications (BoCom) researcher Liu Jian: China FX reserves of about $2T are appropriate - Chinese press

Japan:

(JP) Japan Chief Cabinet Sec Suga: Japan does make large investments into the US

Australia/New Zealand:

(NZ) New Zealand Fin Min Joyce: Budget to be presented on May 25th

(NZ) Fonterra Global Dairy Trade Auction: Dairy Trade price index: +1.3% v +0.6% prior; 2nd straight increase

Asian Equity Indices/Futures (00:00ET)

Nikkei +0.2%, Hang Seng -0.1%, Shanghai Composite -0.3%, ASX200 +0.5%, Kospi -0.5%

Equity Futures: S&P500 flat; Nasdaq flat; Dax +0.1%; FTSE100 +0.1%

FX ranges/Commodities/Fixed Income (00:00ET)

EUR 1.0665-1.0690; JPY 112.05-112.55; AUD 0.7610-0.7640; NZD 0.7285-0.7315

Apr Gold -0.1% at $1,235/oz; Mar Crude Oil -1.0% at $51.60/brl; Mar Copper +1.1% at $2.67/lb

(US) Weekly API Oil Inventories: Crude: +14.2M v +5.8M prior; 5x bigger expected, 3rd straight build; largest build since Feb 2015 and 2nd largest build on record

SPDR Gold Trust ETF daily holdings rise 8.2 tonnes to 826.9 tonnes; 5th consecutive increase; Highest since Dec 20th

(CN) PBOC SETS YUAN MID POINT AT 6.8849 V 6.8604 PRIOR; weakest setting since Jan 17th

(CN) China MoF sells 1-yr bonds at 2.78% v 2.78%e, bid-to-cover 1.8x; 10-yr bonds at 3.4% v 3.46%e, bid-to-cover 4.08x

(CN) PBOC skips reverse repo operations (4th consecutive day)

(JP) Japan Finance Ministry MOF: Foreign investors sold ¥119.2B in Japan stocks; bought ¥1.68T in japan bonds in Dec.

(AU) Australia MoF sells A$800M in 3.25% 2029 bonds; avg yield 2.8922%; bid-to-cover 2.48x

Asia equities/Notables/movers by sector

Consumer discretionary: 1929.HK Chow Tai Fook Jewellery Group -1.0%, 178.HK SA SA International Holdings -0.9% (Chinese New Year SSS); 2269.JP Meiji Holdings Co. -0.6% (9-month result)

Financials: 1918.HK Sunac China Holdings +5.6% (Jan result); 6837.HK Haitong Securities -0.7% (Jan result); SCP.AU Shopping Centres Australasia Property Group -2.2% (JPMorgan cuts rating); GMA.AU Genworth Mortgage Australia -14.7% (FY16 result)

Industrials: 6504.JP Fuji Electric Holding -2.5%; CIM.AU CIMIC Group +8.0% (H1 result); 7003.JP Mitsui Engineering & Shipbuilding Co -8.3% (9-month result)

Technology: CAR.AU Carsales.com limited +8.1% (H1 result); 9613.JP NTT Data Corp -5.0% (9-month result); 5201.JP Asahi Glass Co +8.5% (FY16 result)

Materials: 3405.JP Kuraray Co -5.8% (FY16/17 result)

Energy: 5019.JP Idemitsu Kosan Co -3.7% (9-month result)

Healthcare: 2784.JP Alfresa Holdings Corp +1.1% (9-month result)

Utilities: TCL.AU Transurban -2.2% (Morgans Financial cuts rating); 6841.JP Yokogawa Electric Corp -8.0% (9-month result)