Unlike Monday's global PMI deterioration (which sent markets around the globe soaring), there was little in terms of macroeconomic data overnight (German IFO earlier missed on expectations and business climate but beat on current assessment) so the "market made the news." These came most from the USDJPY which has continued to fall, sliding to 111.85 overnight, and dragging the Nikkei to a -0.4% drop.

Japan’s currency strengthened against all of its 16 major peers and gold rose for the first time in three days after the People’s Bank of China reduced the reference rate by more than some analysts forecast. 

Many are now wondering what if anything the BOJ - a critical member of the "global central bank put" team - can do any more at this point to push the next leg higher in the USDJPY.

"It’s beginning to feel like the BOJ is completely stuck,” said Tetsuo Seshimo, a portfolio manager at Saison Asset Management Co. in Tokyo. "The yen had been trading at historically low levels that implied an endless amount of easing, but now doubts are emerging. It’s difficult to imagine any scenarios where the BOJ can take action."

Elsewhere in Asia, China's Shanghai Composite (-0.8%) retreated from a monthly high, as financials were pressured on outflow fears after the PBoC weakened the reference rate by the most since early January. Furthermore, now that the PBOC has limited tracking data on offshore or CNH intervention, it will be virtually impossible to quantify just how much intervention the PBOC has engaged in even after the fact, something which will certainly confuse traders and raise suspicions that China's capital outflow problem is greater than even the worst case scenario.

Emerging-market stocks retreated from a six-week high. BHP Billiton Ltd. (BHP) led commodity producers lower after making a larger-than-expected cut to its dividend. Crude fell and industrial metals declined, with zinc slipping back after entering a bull market on Monday.

European stocks were weighted down by the previously reported first cut in BHP Billiton’s dividend in 15 years and a surprise loss posted by Standard Chartered Plc (SCBFF) confirming that the global slowdown and tumbling prices for metals and oil are weighing on earnings. Britain’s referendum on its membership in the European Union is also raising currency-market risks across the continent, with the cost of options protecting against losses on the euro jumping.

Crude has generally drifted lower today although expect more headline-driven squeezes on headlines out of Houston where Saudi oil minister Ali al-Naimi will deliver the welcome and ministerial address to open day 2 of the IHS CERAWeek conference. In other oil data we also have API weekly inventory data today, with builds expected both nationally and at Cushing delivery hub in EIA data tomorrow.

But the biggest question on all traders' minds will be whether the bear market short squeeze that sent the S&P higher by 130 points in 6 days, is finally over - with most global market rolling over and with US equity futures unable to find theirsolid early morning footing, it may finally be time to cash out of the bear market rally which so many predicted, and which GSBank yesterday may have top-ticked with perfection.

Where markets stand now:

• S&P 500 futures down 0.1% to 1933
• Stoxx 600 down 0.3% to 330.9
• FTSE 100 down 0.5% to 6008
• DAX down 0.7% to 9506
• German 10Yr yield up less than 1bp to 0.18%
• Italian 10Yr yield up 2bps to 1.54%
• Spanish 10Yr yieldunchanged at 1.65%
• S&P GSCI Index down 1% to 297.7
• MSCI Asia Pacific down less than 0.1% to 121
• Nikkei 225 down 0.4% to 16052
• Hang Seng down 0.3% to 19415
• Shanghai Composite down 0.8% to 2903
• S&P/ASX 200 down 0.4% to 4980
• US 10-yr yield up 2bps to 1.78%
• Dollar Index down 0.01% to 97.37
• WTI Crude futures down 0.6% to $33.22
• Brent Futures down 1.8% to $34.05
• Gold spot up 0.9% to $1,219
• Silver spot up 0.3% to $15.23

Global Top news

• United Technologies Says Obstacles Scuttled Honeywell Talks: Walked away from preliminary talks about a merger due in part to concerns that a deal wouldn’t win approval from antitrust authorities; Honeywell said to have offered $108 a share last wk
• Valeant Says It Will Restate Earnings After Board Review: Philidor accounting review showed $58m in rev. recognized in 2014 should have been booked in subsequent periods; sees change reducing 2014 GAAP EPS by ~10c, increasing 2015 GAAP EPS by ~9c
• German Business Sentiment Falls as Turmoil and China Sow Concern: The IFO institute’s business climate index dropped to 105.7 in Feb. from 107.3 in Jan., median est. decline to 106.8
• Boeing CEO Muilenburg Named Chairman as McNerney Exits Board: CEO Dennis Muilenburg was named chairman, succeeding former CEO Jim McNerney, who is stepping down as a director
• Bill Gates Sides With Government in Apple Clash, FT Says: Gates has sided with the U.S. govt. in a dispute over Apple’s refusal to break into a terrorist’s iPhone, breaking ranks with the industry in a face-off with law enforcement, FT reported
• Fitbit Forecasts Miss Estimates on Global Rollout of New Devices: Sees 1Q adj. EPS breakeven to 2c vs est. 23c; sees 1Q rev. $420.0m-$440.0m, est. $484.6m
• Brookfield, Qube Consider Joining Forces in Bid for Asciano: Groups led by Brookfield Asset and Qube Holdings are considering joining forces to buy Asciano, 2 groups discussing joint offer of A$9.28 per share in cash
• J&J Must Pay $72 Million Over Talc Tied to Woman’s Cancer: Company faces about 1,200 more suits over talc products
• Goldman Sachs, HSBC Back Cameron Push to Keep Britain in the EU: 36 FTSE companies sign letter that backs remaining in bloc
• OPEC Doesn’t Know How It Can ‘Live Together’ With Shale Oil: Production freeze will be re-evaluated after 3-4 months
• Drug Spending Slowed in 2015 After Discounts, CVS Health Says: Drug costs for its plans grew 5% in 2015 vs 11.8% in 2014
• Syrian Cease-Fire to Begin Feb. 27, U.S. and Russia Announce

Looking at regional markets, we start in Asia where equities failed to take the impetus from Wall Street gains, with sentiment in the region dampened on a reversal in energy and caution regarding China. ASX 200 (-0.4%) and Nikkei 225 (-0.4%) pared early gains as appetite for risk deteriorated amid a pull-back in energy, with the latter also pressured by JPY appreciation. Chinese markets underperformed with the Shanghai Comp (-0.8%) retreating from a monthly high, as financials were pressured on outflow fears after the PBoC weakened the reference rate by the most since early January, where continued similar action by the PBoC triggered widespread uncertainty and a global stock slump. 10yr JGBs initially tracked the gains in UST's, with the dampened risk-off sentiment supporting safe-havens, while today's 40yr auction saw increased demand as participants search for positive yields. However, heading into the European open gains were pared amid a sell-off in USTs. PBoC set the CNY mid-point at 6.5273 vs. last close. 6.5230 (Prey. mid-point 6.5165); this represents the biggest weakening of the reference rate by the PBoC in 6 weeks. (RTRS)

Asian top news

• Honda Shakes Up Ranks as Recalls Persist After CEO Switch: Chairman and eight other top Honda executives are retiring
• Top Macro Hedge Fund Sees Monetary Easing as Boon for Stocks: PruLev Global says more central bank easings may boost developed market indexes
• Noble Group Warns of Loss After Additional $1.2 Billion Charges: About half of $1.2 billion charge taken on long- term contracts
• Earliest Chinese Data Signal Slowdown Hasn’t Bottomed Out Yet: Private gauges of manufacturing and services fell to new lows, a reading of business confidence slipped, and interest in small and medium sized businesses deteriorated, the readings show.
• China Reform Said to Near Joining $43 Billion Syngenta Purchase: State-run fund in discussions to join ChemChina’s record deal
• Singapore Lawyers Warn of 1998-Like Pain as Debt Defaults Spread: ‘A while before any significant recovery’ Rajah & Tann Singapore says
• Kuroda Hints at Shift in Thinking on Monetary Policy’s Power: Unprecedented stimulus program failed to achieve Bank of Japan’s inflation target
• China’s New Securities Chief Said to Urge Strict Supervision: Liu Shiyu said to request checks on market manipulation after replacing Xiao Gang as CSRC chairman

European equities kicked off the session in a similar manner to Asian equities, opening with losses and being weighed on by the energy and material sectors although with much of the losses being pared throughout the morning (Euro Stoxx: -0.2%). The day has so far seen some retracement from much of yesterday's moves, with risk off sentiment dictating play today. In terms of stock specific news, two of the most notable earnings of the day were particularly downbeat, with BHP Billiton (-3.0%) and Standard Chartered (-4.0%) both among the worst performers in Europe. 

Elsewhere, fixed income has seen a choppy session so far, with Bunds largely shrugging off the miss on expectation in German IFO German IFO Business Climate (105.7 vs. Exp. 106.8). Of note, as European participants arrived at their desks this morning, softness was seen in US 10yr T-notes due to two large sellers, one of 30k contracts and one of 5k contracts.

European top news

• BHP Cuts Dividend for First Time in 15 Years on Profit Drop: Cuts interim div. to 16c/shr from 62c y/y, payout had been forecast to drop to 31c; 1H underlying profit fell to $412m at its continuing operations from $4.9b yr earlier
• Standard Chartered Plunges on Surprise Annual Loss, Revenue Miss: 2015 pretax loss $1.5b, down from profit of $4.2b y/y; FY adj. pretax $834m, missed ests. of $1.37b; loan impairments almost double to $4b, highest ever
• Swiss Re Quarterly Profit Beats Estimates; Names New CEO: Christian Mumenthaler will take over as CEO as of July 1; 4Q net income $938m; est. $916m
• InterContinental to Pay Out $1.5b After Hotel Sales: Special div. will be paid in 2Q, takes funds returns since 2003 to $12b
• U.K. Bank Rules Won’t Revert to Pre-Crisis Days on ‘Brexit:’ Prudential Regulation Authority’s Andrew Bailey says there won’t be a “bonfire of regulations”
• Danone Forecasts Profitability to Improve on Yogurt Turnaround: 2015 LFL sales to rise 3% to 5% with “solid” margin advancement
• JPMorgan’s ‘London Whale’ Surfaces to Say ’12 Loss Not His Fault: Bruno Iksil comments on losses in former unit in letter

In FX, the USD/JPY has stolen the limelight with another move through 112.00 although in more orderly trade this time around, with some reluctance seen to push too aggressively towards the recent 110.99 lows. A busy morning for EUR/USD though, with some early calls that parity is still a view firmly held. Alongside a soft business climate index in the German IFO survey, we saw a push on 1.1000, with some large buy orders filled through the figure, though more seen through to 1.0950. Tight trade seen elsewhere, with AUD digging despite some fresh, but modest weakness in stocks. EUR/CHF now pushing lower also, dipping below 1.0950 to reflect the heavy risk and EUR tones. Oil prices steady, but coming off better levels — as with the related currencies.

In commodities, WTI and Brent futures fell throughout the European session with the commodities seeing continued volatility as participants wait to see what, if any, deal can be agreed regarding a freeze in global production. Additionally, participants will be keeping a keen eye out for the latest API crude inventory report.

The Bloomberg Commodities Index fell as much as 0.6 percent, weighed down by weaker oil and base metals prices. Oil traded near $33 a barrel after the International Energy Agency said a global surplus will persist into next year and limit any chance of a short-term price rebound. While supply and demand will be aligned next year, large accumulated stockpiles will slow the pace of recovery in prices, the IEA said in its medium-term report. April futures in New York slid 2.3 percent to $32.63.

Zinc retreated 1.2 percent to $1,759 a metric ton on the London Metal Exchange, falling from its highest close in four months. Copper, lead and nickel fell at least 0.5 percent. Gold led precious metals higher, gaining 0.9 percent to $1,219.03 an ounce as investor holdings in exchange-traded funds jump to the highest in almost a year.

On the US calendar attention will be focused on the February consumer confidence print where the consensus is for a near 1pt decline to 97.2. We’ll also get more housing market data with January existing home sales and the December S&P/Case-Shiller house price index, while the February Richmond Fed manufacturing activity index print is also expected. There’s nothing in the way of Fedspeak today however it’ll be worth keeping an eye on the BoE where Governor Carney is due to speak to lawmakers this morning (10am GMT) on the outlook for the UK economy and monetary policy. The ECB’s Nouy is also due to speak this afternoon at a DB conference I'll be attending.

Bulletin Headline Summary from Bloomberg and RanSquawk

• European equities take the impetus from the weak lead in Asian bourses amid weakness in energy and material names, while BHP Billiton and Standard Chartered are among the worst performers on the back of poor earnings.
• EUR takes a hit following soft German IFO readings alongside bearish calls from the likes of BNP Paribas and Deutsche Bank citing ECB action next month.
• Looking ahead, highlights include US S&P/Case Shiller index, Existing Home Sales as well as comments from Fed's Kashkari, Fischer and BoE's Haldane
• Treasuries lower with global equity markets and oil; week’s U.S. auctions begin today with $26b 2Y notes, WI yield 0.775%, compares with 0.86% awarded in Jan., lowest 2Y auction stop since November.
• The yen gained and gold climbed after China cut the yuan’s fixing by the most in six weeks, spurring demand for havens. European stocks and emerging markets fell while oil declined with copper
• Britain’s referendum on its membership in the European Union isn’t just a threat to the pound. It’s raising currency- market risks across the continent
• Mark Carney said the Bank of England isn’t making a judgment on the consequences of Britain’s referendum on its European Union membership
• Chief executive officers from HSBC Holdings Plc to Goldman Sachs International were among the business leaders to endorse Prime Minister David Cameron’s campaign to keep Britain in the European Union
• German business confidence fell for a third month in a sign that companies in Europe’s largest economy are growing more concerned as slowing global growth roils financial markets
• BlackRock Inc., the world’s biggest money manager, is warning bond investors they’re not prepared for the Federal Reserve to raise interest rates
• Microsoft co-founder Bill Gates has sided with the U.S. government in a dispute over Apple’s refusal to break into a terrorist’s iPhone, breaking ranks with the industry in a face-off with law enforcement, the Financial Times reported
• The U.S. and Russia announced that a partial cease-fire in Syria will start Feb. 27, reviving hopes for a solution to a five-year war that’s killed 260,000 people and created a refugee crisis straining Europe’s borders
• $18.75b IG corporates priced yesterday (YTD volume $244.25b) and no HY priced (YTD volume $11.125b)
• Sovereign 10Y bond yields mostly steady; European, Asian markets drop; U.S. equity- index futures lower. Crude oil and copper fall, gold rises

US Event Calendar

• 8:30am: Fed’s Fischer speaks in Houston
• 9:00am: S&P/Case-Shiller US HPI m/m, Dec. (prior 0.87%)
  • S&P/CaseShiller 20-City Index NSA, Dec., est. 183.07 (prior 182.86)
  • S&P/CS 20 City m/m SA, Dec., est. 0.85% (prior 0.94%)
  • S&P/CS Composite-20 y/y, Dec., est. 5.8% (prior 5.83%)
  • S&P/Case-Shiller US HPI NSA, Dec. (prior 175.71)
  • S&P/Case-Shiller US HPI y/y, Dec. (prior 5.35%)
• 10:00am: Consumer Confidence Index, Feb., est. 97.2 (prior 98.1)
• 10:00am: Richmond Fed Mfg Index, Feb., est. 2 (prior 2)
• 10:00am: Existing Home Sales, Jan., est. 5.32m (prior 5.46m); Existing Home Sales m/m, Jan., est. -2.5% (prior 14.7%)
• 1:00pm: U.S. to sell $26b 2Y notes

DB's Jim Reid completes the overnight wrap

While Sterling had a day to forget yesterday, it was EM and commodity sensitive currencies which ranked among the day’s best performers after Oil and industrial metals climbed sharply higher. Indeed it was the Russian Ruble (+2.27%), Brazilian Real (+1.98%), Colombian Peso (+1.40%), South African Rand (+1.37%), Chilean Peso (+1.28%) and Australian Dollar (+1.11%) which benefited, as Oil surged higher with the new WTI April contract finishing up +5.17% on the day at $33.39/bbl (we should highlight that this contract had closed at $31.75/bbl on Friday, while the old March contract which expired yesterday rallied 6.2% to $31.48/bbl). The focus appeared to be on some supportive commentary out of the IEA, with the agency forecasting for US shale-oil production to fall by 600k barrels a day in 2016 and 200k barrels a day in 2017 and also suggesting that oil prices should come under upward pressure from next year. It’s worth reminding that we’ve seen a number of temporary bounces like this so far this year and in reality Oil has been in a late $20s to mid $30s range since early January. That said, overall sentiment feels improved and that’s helping risk assets.

That was evidenced yesterday where we saw equity markets globally kick the week off on the front foot. In Europe a rally for commodity sensitive names helped the Stoxx 600 close up +1.67% while the peripherals were more impressive with the IBEX and FTSE MIB +2.35% and +3.52% respectively. That helped the S&P 500 get off to a strong start with the index holding onto gains impressively as the session wore on, eventually finishing +1.45%. Along with that move for Oil, Aluminium (+1.61%), Copper (+1.58%) and Zinc (+2.09%) were all up sharply too while Iron Ore rallied over 6% to close above $50/tn for the first time since October. The VIX finished over 5% lower and closed below 20 for the first time in three weeks, while credit markets had a strong day too with CDX IG and Main both finishing 5bps tighter. A sign of the better sentiment was also reflected in another strong day for primary issuance with nearly $19bn said to have priced in US IG alone which according to Bloomberg is the biggest start to a week since May last year.

Glancing at our screens this morning, after bourses in Asia had initially moved higher reflecting those gains on Wall Street last night, the rally has faded as markets head into the midday break. Not helping is a retreat for Oil with WTI down 1.5% while the news that the PBoC has weakened the CNY fix by the most (0.17%) since January 7th seems also to be weighing on sentiment. Bourses in China are leading the weakness with the Shanghai Comp and CSI 300 -1.26% and -1.27% respectively. Elsewhere the Nikkei (-0.31%), Hang Seng (-0.54%), Kospi (-0.28%) and ASX (-0.47%) are also down after initially opening up stronger. US equity market index futures are also pointing to a softer start, while Gold (+0.95%) and the Yen (+0.53%) are the ones benefiting from the weaker tone.

Moving on. Along with the better day for risk yesterday, European rates markets were a tad stronger too reflecting what was a fairly softish set of European PMI’s. The flash February Euro area composite was down 0.9pts and more than expected this month to 52.7 (vs. 53.3 expected), the second consecutive monthly decline and lowest in 13 months. This was primarily driven by the manufacturing print which fell 1.3pts to 51.0 (vs. 52.0 expected), although services was also slightly lower (-0.6pts to 53.0; 53.4 expected). Regionally it was the weakness in Germany which stood out with the manufacturing print down 2.1pts to 50.2 (vs. 51.9 expected), marking a 15-month low. The French composite also dipped below 50 following a drag from the services reading. Our European Economists highlighted in a note yesterday that the flash PMI’s suggest a sharp monthly fall (1.4pts) on average in the composite PMI of Italy, Spain and Ireland. They also note that the composite PMI for the Euro area is now consistent with +0.3% qoq growth and in line with their slightly lower outlook for H1 2016, but also raises the risk of a more material slowdown. Clearly the data also adds more fuel to the fire for the ECB to deliver next month.

Meanwhile, over in the US yesterday there was similar softness in the flash manufacturing PMI there, which declined 1.4pts to 51.0 (vs. 52.4 expected) and the lowest since October 2012. That said there was better news to come out of the Chicago Fed manufacturing activity index which was up over half a point to 0.28 (vs. -0.05 expected) in January.

Looking at the day ahead now, the focus shortly after we go to print this morning will be on Germany where the final revision to Q4 GDP is due (no change expected at +0.3% qoq). Shortly after this we’ll get a number of confidence indicator readings out of France before we return to Germany again with the IFO survey data for February. Interest in the US this afternoon is likely to be centered on the February consumer confidence print where the consensus is for a near 1pt decline to 97.2. We’ll also get more housing market data with January existing home sales and the December S&P/Case-Shiller house price index, while the February Richmond Fed manufacturing activity index print is also expected. There’s nothing in the way of Fedspeak today however it’ll be worth keeping an eye on the BoE where Governor Carney is due to speak to lawmakers this morning (10am GMT) on the outlook for the UK economy and monetary policy. The ECB’s Nouy is also due to speak this afternoon at a DB conference I'll be attending.