US Key Highlights

*Hassett vows optimism on trade; VIX at lowest since November
* SNAP SHOT: Equities up, dollar up, treasuries down, crude down.
* REAR VIEW: Hassett on China trade, EU not budging on withdrawal agreement, Russian oil output dropped by 70k BPD in Jan.
* AHEAD: RBA Interest Rate Decision and Australian Retail Sales, EZ and UK Services PMIs, Canadian Trade Balance and US, ISM Non-Manufacturing PMI, API Weekly Crude Stocks, Fed’s Mester, and ECB’s Chief Economist Praet to speak, German I/L Bund, and US 3yr Note Auctions
 
* WHITE HOUSE ECONOMIC ADVISOR KEVIN HASSETT: In a CNBC interview Monday morning, Hassett said he was still waiting to see how much progress can be made in China talks and that Trump still hopes for a trade deal before the deadline. Later comments saw him say progress was being made and there was less uncertainty. On the economic outlook, he noted that US job gains show growth momentum heading into 2019, he expects real wage growth to accelerate this year with nominal wage growth above 4%; adding that he sees the jobless rate normalising after the govt shutdown.

* BREXIT: Brexit news on Monday saw reports early on from an EU official, saying that on the EU’s side, “nobody is considering” legally binding assurances on the Irish backstop and that the EU is right to prepare for a no-deal Brexit. Ireland’s Foreign Minister threw water over backstop “alternative arrangements”, saying none of the new ideas stood up to scrutiny. EU Chief Brexit Negotiator Barnier said the EU is ready to work on alternative solutions to the backstop during transition, backstop is only operational solution to Irish border issue today and the withdrawal agreement cannot be reopened. On UK turf, conservative lawmakers were said to have had “detailed and constructive” talks in regard to the backstop.

* WTI (H9) FUTURES SETTLE USD 0.70 LOWER AT USD 54.56/BBL, BRENT (J9) FUTURES SETTLE USD 0.24 LOWER AT USD 62.51/BBL. Oil prices reversed course on Monday and dipped into negative territory after hitting a two-month high amid OPEC supply cuts and US sanctions on Venezuela. Today’s movement lacks a specific catalyst though analysts have cited unfavourable prospects for the global economy and insufficient progress in trade talks as two potential factors placing downward pressure on the energy complex.  In news flow, Head of Russian Finance Ministry stated that Russian oil production has not peaked yet while Russian oil output dropped by 70k BPD in January to 11.38mln BPD from December; Russian Energy Minister Novak noted that the country is fully complying with the conditions of the OPEC+ deal and is committed to reaching output cut target by May. Elsewhere, Venezuelan exports fell to a ten-month low in January at 1.11mln BPD. Looking ahead, this week’s energy inventories see crude building 1.6mln barrels, distillates drawing 1.9mln barrels and gasoline building 1.7mln barrels.

* SPX +0.68% at 2725, NASDAQ +1.23% at 6960, DJI +0.70% at 25239. SECTORS: Energy +0.17%, Materials -0.23%, Industrials +1.30%, Cons Discretionary +0.64%, Cons staples +0.61%, Healthcare -0.34%, Financials +0.37%, Tech +1.60%, Telecoms +0.95%, Utilities +0.21%.

* STOCKS SPECIFICS: Earnings before the bell on Monday saw Alexion Pharmaceuticals (ALXN) and Sysco (SYY) beat top and bottom line estimates causing them to surge on the open. Starboard Value made an undisclosed investment in Bristol-Myers (BMY) which caused it to open in the green, whilst Bristol’s merger target Celgene (CELG) opened lower over concern of the deal deteriorating; Starboard also made a USD 200mln investment in Papa John’s (PZZA) and appointed two new board members causing the stock to surge. General Electric (GE) opened higher after being awarded a USD 500mln contract modification for turbine engines. Spotify (SPOT) traded in the green on the back of acquiring the podcast studio Gimlet Media. Broker moves saw Intuit (INTU) benefit from an upgrade at Morgan Stanley, Xilinx (XLNX) suffer from a downgrade at Goldman and Yelp (YELP) surging after a Buy initiation at Goldman.
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* US T-NOTE FUTURES (H9) SETTLED 7 TICKS LOWER AT 121-23. Treasuries started off the week on the back foot amid think trade and ahead of supply this week. The complex ticked temporarily higher after Factory Orders missed expectations. Most of the action was concentrated in the belly of the curve where yields were higher by c.3bps at settlement. In afternoon trade the complex attempted to stir direction but struggled to retain gains and ended the session close to lows of the day. Spreads were close to the unchanged mark, and only slightly steeper.