Alarms are going off in assorted plunge protecting offices, now that the USDJPY has breached the 102.000 "fundamental" support level, below which the Yen can comfortably soar to sub 100.000 in perfectly even 100 pip increments. The first trading day of February has brought another weaker session across Asia though some equity indices such as the KOSPI (-1.1%) are in catch-up mode given they were shut towards the back-end of last week. Over the weekend, the Chinese government published its latest official manufacturing PMI which showed a 0.5pt drop to 50.5, a six-month low, and consistent with consensus estimates. DB’s Jun Ma believes there was some element of seasonality affecting this month’s result including the fact that Chinese New Year started at the end of January (vs February last year), anti-pollution measures in the lead up to CNY and efforts to control government consumption around the holiday period. The official service PMI was released overnight (53.4) which printed at the lowest level since at least 2011. The uninspiring Chinese data has not helped market sentiment this morning, with the Nikkei plunging -2% and ASX200 once again under pressure. S&P500 futures have fluctuated around the unchanged line this morning although if support below the USDJPY fail solidly, then watch out below. Markets in Mainland China and Hong Kong remain closed for Lunar New Year.

Aside from the ECB, which is meeting this week, other highlights in the week ahead include a big US data docket. Indeed the three most important data releases this week are today’s January manufacturing ISM, Wednesday’s ADP employment and of course, Friday’s January non-farm payrolls. Also on Friday, the US treasury will once again officially hit its debt ceiling limit.

Market Re-Cap

European equities are treading water in negative territory amid cautious sentiment ahead of this week’s plethora of key risk events. Consequently financials are seeing underperformance with health care stocks outperforming in a defensive move, which is acting as support for the SMI and FTSE 100. In stock specific news, Lloyd’s shares are seen down 3% following their pre-market update which revealed the Co. sees GBP 1.8bln provision for PPI in Q4. Elsewhere, Ryanair are seen up over 5% after the Co. reiterated FY profit forecast of EUR 500-520mln and says pricing "soft" but not declining.

Following a host of impressive Eurozone Manufacturing PMI releases, EUR has trended higher, a move that has been exacerbated by the residual touted month-end related flows in EUR/GBP. GBP has seen weakness following this and a disappointing PMI Manufacturing release, a figure that is very much against the grain of recent UK data. Elsewhere, USTs and Bunds have recovered earlier losses and move back to unchanged, alongside the move lower in equities.

US Event Calendar:

• 8:58am: Markit U.S. PMI Final, Jan., est. 53.9
• 10:00am: ISM Manufacturing, Jan., est. 56.1 (prior 57,  revised 56.5); ISM Prices Paid, Jan., est. 53.8 (prior 53.5)
• 10:00am: Construction Spending, m/m, Dec., est. 0.2% (prior 1%)
• Total Vehicle Sales, Jan., est. 15.6m (prior 15.3m); Domestic Vehicle Sales, Jan., est. 12m (prior 11.65m)
• Yellen's first POMO - Fed purchases $1-1.25b in 2036-2043 sector at 11 am

Overnight headline bulletin from Bloomberg and RanSquawk:

• European equities are seen lower ahead of this week's host of key global risk events.
• GBP/USD has trended lower following a disappointing UK Manufacturing PMI and residual touted monthend related flows in EUR/GBP.
• Looking ahead for the session, there is a lack of tier 1 data. However, 1500GMT/0900CST sees the release of US ISM Manufacturing (Jan) M/M Exp. 56.2 vs. Prev. 57.0.
• Treasury 10Y yields holding near lowest since early November as China’s official purchasing managers’ index falls to six-month low in Jan., Nikkei enters correction.
• U.K. manufacturing expanded at slower pace in January, with PMI falling to 56.7 from revised 57.2, as domestic demand and rising export orders underpinned growth for a 10th month
• Investors are betting Bank of England’s Carney will lead the charge out of record-low interest rates as central banks pivot from fighting stagnation to managing expansions
• The U.K. markets regulator notified a bank manager and a rate submitter that they face penalties over their involvement in manipulating Libor in the first civil cases against individuals in the global probe
• Obama said neither he nor members of his administration anticipated the magnitude of the flaws that hobbled the startup of the federal website for people to choose health-care plans under his new law
• Ukraine’s opposition got a boost in its struggle to wrest power from President Viktor Yanukovych as  a report said the European Union and U.S. are working on an aid package to rival assistance from Russia
• Hundreds of flights across the U.S. are being canceled as a winter storm threatens to drop snow, ice and sleet from Utah to Pennsylvania, including as much as 8 inches (20 centimeters) in New York City
• Sovereign yields mixed. EU peripheral spreads tighten. Asian and European stocks, U.S. stock-index futures fall. WTI crude and copper lower; gold higher

Asian Headlines

China Manufacturing PMI (Jan) M/M 50.5 vs. Exp. 50.5 (Prev. 51.0); 6-month low.

China Non-Manufacturing PMI (Jan) M/M 53.4 (Prev. 54.6)

The Nikkei 225 closed 10% below its Dec. 30 high to enter a correction phase (down 2.0% on the day), as risk appetite across the region remained dampened following the release of uninspiring Chinese data. (RANsquawk) Mainland China, Hong Kong and Taiwan remained closed following the Lunar New Year celebrations.

EU & UK Headlines

German Manufacturing PMI (Jan F) M/M 56.5 vs. Exp. 56.3 (Prev. 56.3) - Highest since May 2011

Eurozone Manufacturing PMI (Jan F) M/M 54.0 vs Exp. 53.9 (Prev. 53.9)

French PMI Manufacturing (Jan F) M/M 49.3 vs Exp. 48.8 (Prev. 48.8)

Spanish PMI Manufacturing (Jan) M/M 52.2 vs Exp. 51.1 (Prev. 50.8)
- Spanish Job Manufacturing PMI Employment Index (Jan) M/M 50.8 vs Prev. 48.4 - showing the first jobs growth since Oct 2010.

UK PMI Manufacturing (Jan) M/M 56.7 vs Exp. 57.3 (Prev. 57.3)

Germany has denied reports of possible Greece debt cut, according to the German government spokesman Semmelmann.  (RTRS) This follows earlier reports that German Finance Minister Schaeuble is planning EUR 10-20bln in Greek aid. (Spiegel)

BoE Governor Carney said sees no immediate rate change needed. Carney said the bank will take stock of drop in unemployment and forward guidance will evolve. (Scotland on Sunday)

US Headlines

Fed watcher Hilsenrath points out that Yellen’s most critical decisions is when to start lifting interest rates and that if she and her colleagues wait too long, they could fuel high inflation or financial bubbles; if they move too soon, they could dampen a recovery that is just gaining steam. (WSJ)

US auto sales are due out Monday; Ford (F) exp. down 2.3%, Fiat's Chrysler (F IM) exp. up 5.4% and General Motors (GM) exp. down 2.5%. (RANsquawk)

Equities

With participants looking ahead to key risk events this week in the form of ECB and BoE monetary policy decisions, as well as the monthly US jobs report, European stocks have trended lower. Consequently, financials have been put under pressure, whilst healthcare stocks have benefited from the defensive positioning by participants, which has provided the FTSE 100 and SMI with support. Lloyds shares have suffered this morning (-3%) as their pre-market update has revealed the Co. sees GBP 1.8bln in provisions for PPI in Q4. Julius Baer shares are seen lower by over 5% following the Co.'s 2013 net profit CHF 480mln vs Exp. CHF 495mln. Ryanair are the sessions outperformer and seen seen up over 5% after the Co. reiterated FY profit forecast of EUR 500-520mln.

FX

EUR has been guided by an amalgamation of positive Eurozone PMI readings and residual touted month-end related flows in EUR/GBP. A move which has put downward pressure on GBP and later exacerbated by a disappointing PMI Manufacturing release from the UK. In Asia-Pacific trade, the Nikkei 225 closed 10% below its Dec. 30 high to enter a correction phase, alongside a less than impressive PMI release from China, which has consequently led USD/JPY lower. SNB’s Danthine said the SNB would only consider scrapping the minimum exchange rate of 1.2000 in EUR/CHF if inflation were much higher and there was less upward pressure on the currency. (Blick)

Commodities

South African government mediators have put forward a proposal designed to end a strike that hit around 40% of global platinum supply. It has not been made immediately clear what the proposal entails. (RTRS)

Morgan Stanley has lowered their 2014 gold forecast to USD 1,160/oz. (BBG)

Iraq's crude exports have declined to an average of 2.228mbpd but should rise next month, according to the Iraqi Oil Minister. (RTRS).

Goldman Sachs has raised their 2014 NYMEX natural gas price forecast to USD 4.5mmbtu from USD 4.25mmbtu. (RTRS)

In conclusion, here is Jim Reid with the overnight and weekend recap:

Right on my way back from three weeks away, the last couple spent travelling through Asia and Australia in seemingly non-stop meetings. I first travelled to Australia in 1998 when most of the tourists I saw were British, European or Americans. It’s a measure of how the world has changed in such a relatively short space of time that in my down time exploring, most of the tourists were from Asia with many from China. I suppose this reflects the changing world order from the last time EM had a global crisis. So we think whatever happens in EM this year will have consequences for the global economy, global markets and global central banks. It'll be difficult to de-couple. Indeed, emerging markets are expected to account for 85% of all global GDP growth seen in 2013, up from an average of just 37% in the years leading up to the 1997-1998 emerging market crises according to IMF data.

From all the stories that broke while I was away the most fascinating surely revolves around the Chinese Trust product that in the end wasn't allowed to be at the mercy of market forces. For me it’s a microcosm of the fragility still present in global financial markets that a $9.0 trillion dollar economy - that will be the biggest in the world within the time frame of most of our careers - struggles to allow a $500 million investment product to default without there being market fears of it igniting panic in financial markets. This has now been a theme for the best part of 10-15 years in global financial markets particularly in the developed world but more recently the EM world since the GFC. We've created a global debt monster that's now so big and so crucial to the workings of the financial system and economy that defaults have been increasingly minimised by uber aggressive policy responses. It’s arguably too late to change course now without huge consequences. This cycle perhaps started with very easy policy after the 97/98 EM crises thus kick starting the exponential rise in leverage across the globe. Since then we saw big corporates saved in the early 00s, financials towards the end of the decade and most recently Sovereigns bailed out. It’s been many, many years since free markets decided the fate of debt markets and bail-outs have generally had to get bigger and bigger.

This sounds negative but the reality is that for us it means that central banks have little option but to keep high levels of support for markets for as far as the eye can see and defaults will stay artificially low. As such we remain bullish for 2014. However it’s largely because we think the authorities are trapped for now rather than because the global financial system is healing rapidly. So as well as EM being very important for 2014, we continue to think the Fed taper pace is also very important. If the US economy was the only one in the world then maybe they could slowly taper without major consequences. However the world is fixated with US monetary policy and huge flows have traded off the back of QE and ZIRP so it does matter. We have suspicions that the Fed may have to be appreciative of the global beast they've helped create as the year progresses. We stand by our call from the 2014 Outlook (The Taper-Bubble Tightrope) that credit will end up having a good year but that H1 will be volatile but that H2 will be more positive as central bankers around the world look to be keeping their foot on the gas for longer.

On this the ECB will be interesting this week in light of Friday's soft inflation print (0.7% year-on-year vs consensus of 0.9%), which returned headline inflation to the October 2013 lows. Core inflation was 0.8% year-on-year which was little changed on last month. DB’s Wall and Moec think that last week’s inflation data was a negative surprise for the ECB, making it highly likely that forward inflation projections will be revised down. Despite the better PMI, weaker than expected German inflation data in January, pressures in EM that could entail disinflationary forces for Europe and an ECB keen to be ahead of the curve on inflation all add to the justification for the ECB to ease the policy stance again in February (if not in February, certainly in March). Wall & Moec expect the ECB to cut all policy rates by 5 or 10 basis points this week, implying a small negative deposit rate. The direct impact of a negative deposit rate may be less today than might have been the case 6 months ago when excess reserves were much higher. But there could be an important signal benefit from even a small negative deposit rate – either way a negative deposit rate would be another significant milestone in the theme of financial repression.

The first trading day of February has brought another weaker session across Asia though some equity indices such as the KOSPI (-1.1%) are in catch-up mode given they were shut towards the back-end of last week. Over the weekend, the Chinese government published its latest official manufacturing PMI which showed a 0.5pt drop to 50.5, a six-month low, and consistent with consensus estimates. DB’s Jun Ma believes there was some element of seasonality affecting this month’s result including the fact that Chinese New Year started at the end of January (vs February last year), anti-pollution measures in the lead up to CNY and efforts to control government consumption around the holiday period. The official service PMI was released overnight (53.4) which printed at the lowest level since at least 2011. The uninspiring Chinese data has not helped market sentiment this morning, with the Nikkei (-1.6%) and ASX200 (-0.1%) once again under pressure. S&P500 futures are slightly higher this morning (+0.15%) while 10yr USTs are unchanged near three month lows of 2.66%. Markets in Mainland China and Hong Kong remain closed for Lunar New Year.

Aside from the ECB, the other highlights in the week ahead include a big US data docket. Indeed the three most important data releases this week are today’s January manufacturing ISM, Wednesday’s ADP employment and of course, Friday’s January non-farm payrolls. DB is forecasting a +200k gain on both headline and private nonfarm payrolls. In addition, our economists expect the unemployment rate to fall two-tenths to 6.5% due to the expiration of extended unemployment benefits. Outside of the macro data, it’s another big week for earnings with close to one-fifth of S&P500 constituents reporting. Janet Yellen will be officially sworn in as Fed chair today so we enter a new era. The US treasury officially hits its debt ceiling limit on Friday, but the treasury secretary will resort to extraordinary measures to push the funding deadline until sometime late in February while Congress debates when and how to increase the debt limit. The US Congressional Budget Office releases its annual economic outlook on Tuesday. In Europe all eyes will be on Thursday’s ECB and BoE meetings. The service sector PMI readings will be published on Wednesday, German factory orders on Thursday and German and UK IP reports will be released on Friday. Australia’s RBA meets on Tuesday. In EM, there will be some focus on the inflation readings from Indonesia, Thailand and the Philippines. The fallout from Thailand’s weekend elections should be clearer towards the latter part of this week.