MNI US OPEN: Equity Rebound Faltering As USD Gains

MNI: GERMANY JAN IFO CURRENT CONDITIONS 96.1; DEC 96.9

GERMANY JAN IFO BUSINESS CLIMATE +95.7

MNI: SPAIN DEC PPI +3.8% M/M, +35.9% Y/Y, NOV +33.1% Y/Y

MNI: UK DEC CGNCR GBP17.56 BN

Public sector borrowing declined to GBP16.848 billion in December, falling short of the GBP18.5 forecast by City analysts, and down from GBP24.402 billion in year earlier, the Office for National Statistics said Tuesday. An unexpected surge in corporate tax payments kept borrowing in check, with corporates returning GBP5.5 billion to the Treasury, the highest for any month on record, despite the super-deduction in corporation tax announced in the April budget.

FIXED INCOME: Off the highs

As risk recovers somewhat and equities continue to move off their lows, core fixed income is also retreating from yesterday's highs. No real trigger for the moves other than market moves having been rather excessive.

• This morning's German IFO data was better than expected but not enough to warrant the moves seen in core FI.
• As we noted earlier, the Eurodollar strip in particular is very correlated with equity moves at present and is down 7 ticks from yesterday's close in the Reds.
• Markets continue to look ahead to tomorrow's FOMC meeting.
• TY1 futures are down -0-13+ today at 128-03 with 10y UST yields up 1.8bp at 1.790% and 2y yields up 1.1bp at 1.019%.
• Bund futures are down -0.40 today at 170.47 with 10y Bund yields up 3.0bp at -0.79% and Schatz yields up 1.4bp at -0.647%.
• Gilt futures are down -0.43 today at 123.15 with 10y yields up 4.7bp at 1.172% and 2y yields up 2.6bp at 0.890%.

FOREX: Equity Bounce Fades, Helps Tip USD Index to New High

• Equity markets remain the leading indicator for risk appetite following yesterday's late-in-the-day recovery rally. Prices have moderated slightly, with stock index futures in minor negative territory. As a result, the greenback and other haven FX including JPY are seen higher, helping the USD Index touch the best levels since Jan 10.
• Despite slight outperformance among haven currencies, CHF sits at the bottom of the G10 pile, helping EUR/CHF bounce off multi-year printed yesterday at 1.0300. The reversal of CHF strength today will raise questions about the SNB's involvement in FX levels at this point, with the bank still committed to intervening across currency markets to avoid disorderly price formations in CHF.
• Mimicking the price action across EUR/CHF, AUD and CAD are also bouncing, but both currencies remain well off the best levels of the week against the USD. This keeps a lid on AUD/USD at 0.7188 and USD/CAD at 1.2555.
• US conference board consumer confidence data takes focus Tuesday, with the Richmond Fed index also on the docket. There are no central bank speakers of note.

EQUITIES: Futures Holding On To Most Of Late Monday's Recovery

• Asian stocks closed lower: Japan's NIKKEI closed down 457.03 pts or -1.66% at 27131.34 and the TOPIX ended 33.25 pts lower or -1.72% at 1896.62. China's SHANGHAI closed down 91.044 pts or -2.58% at 3433.061 and the HANG SENG ended 412.85 pts lower or -1.67% at 24243.61
• European equities are bouncing a bit, with the German Dax up 152.97 pts or +1.02% at 15163.22, FTSE 100 up 64.49 pts or +0.88% at 7362.95, CAC 40 up 80.78 pts or +1.19% at 6871.02 and Euro Stoxx 50 up 45.26 pts or +1.12% at 4098.83.
• U.S. futures have held on to most of late Monday's recovery, with the Dow Jones mini down 99 pts or -0.29% at 34154, S&P 500 mini down 31.75 pts or -0.72% at 4372, NASDAQ mini down 163.5 pts or -1.13% at 14339.

COMMODITIES: Metals Fade As Dollar Gains

• WTI Crude up $0.92 or +1.1% at $84.2
• Natural Gas down $0.11 or -2.73% at $3.921
• Gold spot down $5.63 or -0.31% at $1837.42
• Copper up $0.7 or +0.16% at $441.85
• Silver down $0.24 or -1% at $23.7529
• Platinum down $9.79 or -0.95% at $1023.47