• Asia-Pac stocks eventually traded mixed; Mainland China and Hong Kong underperformed
• US and Eurozone equity majors kicked off 2022 with gains; Apple briefly hit USD 3tln market cap
• DXY was supported as USD/JPY took out its 2021 high; AUD was underpinned by firmer coal prices
• China is requiring security checks before domestic tech firms list overseas from Feb 15th
• Sarah Bloom Raskin has emerged as the leading candidate for Vice Chair of supervision at the Federal Reserve, Axios reported
• Looking ahead, highlights include German Unemployment, UK Manufacturing PMI Final, US ISM Manufacturing PMI, US JOLTS, JMMC/OPEC+ meetings, supply from Germany

[RECAP] UK BANK HOLIDAY (3rd January 2022)

• Eurozone and US equity markets kicked off 2022 on the front foot in which the Stoxx 600 saw gains of 0.5% whilst Stateside majors saw more pronounced gains. The debt complex was under heavy pressure with the US underperforming the EZ and in turn yields spiked higher. DXY was propelled higher by the surge in bond yields with G10 peers lower across the board. JPY was the most resilient G10. WTI and Brent front-month futures both settled higher after a choppy day, with the latter outperforming the former. Spot gold was pressured by the USD throughout the session and briefly dipped USD 1,800/oz.

Click here for a detailed recap of the session and Bank Holiday headlines.

CORONAVIRUS UPDATE

China's Zhengzhou in the Henan province has declared a partial lockdown amid COVID cases. (Newswires) Hong Kong is to start a wider vaccine mandate on Feb 24th. (Newswires)

US set a global daily record of over 1mln new COVID cases. (Newswires)

A scientist behind Oxford/AstraZeneca vaccine said the worst of the pandemic is 'absolutely behind us'. (Sky News)

Japanese PM Kishida said Japan must consider flexibly the chance of further curbs on activity if the COVID resurgence leads to a shortage of hospital beds. (Newswires)

ASIA

Asia-Pac stocks eventually traded mixed on the first trading session of the year for most bourses, with the region catching some tailwinds from the positive Eurozone and US sessions on Monday. On Wall Street, the Nasdaq outpaced with gains of 1.2% as Apple became the first-ever public company to reach USD 3tln in market value, whilst Tesla shares were catapulted 13.5% after beating Q4 delivery expectations despite the chip shortage and in spite of last week's mass recall. US equity futures overnight resumed trade with a mild positive bias and thereafter drifted higher - with the US ISM Manufacturing PMI, FOMC Minutes, US labour market report and Fed speakers all on this week’s docket. The ASX 200 (+2.0%) saw gains across its Energy, Mining, Tech and Financial sectors. The Nikkei 225 (+1.8%) briefly dipped under 29k before rising to session highs – with Autos among the top gainers amid a similar performance Stateside, whilst the softer JPY underpinned the index. The KOSPI (-0.2%) was flat in early trade but thereafter swung between gains and losses. In China, the Shanghai Comp (-0.4%) gave up early gains on its first trading day of 2022 following a CNY 260bln daily liquidity drain by the PBoC, whilst reports also suggested that China is facing USD 708mln cash demand this month, +18% Y/Y according to calculations, amid maturing debt and seasonal demand for cash ahead of the Lunar New Year on 1st February. The Hang Seng (-0.1%) kicked off its second day of trade the year initially in the green after Monday’s losses. China Evergrande shares resumed trade with gains of 5% after it yesterday suspended its Hong Kong shares in a bid to raise cash and following the order to demolish 39 buildings. Meanwhile, Hong Kong-listed and US-blacklisted AI firm SenseTime shares rose another 20% to almost triple its IPO price. In fixed income, US 10yr Mar'22 futures saw some light buying in early trade, with some suggested regional Asia demand following the heavy cheapening on Monday, albeit this early mild upside faded.

• PBoC set USD/CNY mid-point at 6.3794 vs exp. 6. 3805 (prev. 6. 3757).
• PBoC injected CNY 10bln via 7-day reverse repo at maintained rates of 2.20% for a net daily drain of CNY 260bln.

China is facing USD 708mln cash demand this month, +18% Y/Y according to Bloomberg calculations, amid maturing debt and seasonal demand for cash ahead of the Lunar New Year on 1st Feb, according to a BNN piece. (Newswires)

China is requiring security checks before domestic tech firms list overseas from Feb 15th. Online platform operators who hold the personal information of more than 1mln users must conduct a cybersecurity review. (Newswires/Global Times)

PBoC said it will adjust the financial credit-scoring legal framework if needed, via state media. (Newswires)

• Chinese Caixin Manufacturing PMI (Dec) 50.9 vs Exp. 50.0 (Prev. 49.9) *"Panel members indicated that lower prices for some raw materials, such as steel, helped to dampen cost inflation. Prices charged meanwhile fell for the first time since April 2020, albeit marginally."*

CENTRAL BANKS

Sarah Bloom Raskin has emerged as the leading candidate for Vice Chair of supervision at the Federal Reserve. No final decision has been made and an announcement could come as early as this week, Axios sources stated. (Axios) Click here for background information

The White House is reportedly likely to nominate economist Philip Jefferson for a Fed board seat, according to sources cited by Bloomberg's Jacobs. (Newswires) Click here for background information

BoJ governor Kuroda said policy will be appropriately guided with a close eye on domestic and overseas developments; uncertainty is heightened amid inflation in Europe and US alongside Omicron. (Newswires)

EUROPE

UK government extended powers to intervene in foreign takeovers that have the potential to harm national security. (The Guardian)

FX

In FX, DXY initially pulled back slightly following the prior day’s surge to 96.328, aided by the yield spike attributed to the Fed hike and inflation bets. The index was subdued throughout the first half of the session before a softening JPY provided the Buck with impetus. USD/JPY gradually inched higher in early trade and chipped away at recent highs (26th Nov high at 115.37 and 25th Nov high at 115.45) before taking out the 2021 peak at 115.51. The pair was then propelled higher to a fresh five-year high at 115.82, with very little technical resistance seen until the 116.00 psychological mark; JPY-crosses rose to session highs in tandem. On that note, it's worth recalling commentary from BoJ Governor Kuroda (on Dec 23rd) who suggested the negative impact of weak JPY on Japanese household income may be increasing, but at the time suggested the benefits of weak JPY exceeds demerits. EUR/USD overnight managed to reclaim a 1.1300-handle after the pair fell from levels near its 21 DMA (today at 1.1368) Monday. GBP/USD was contained in a tight range under 1.3500 as EUR/GBP trades sub-0.8400. Antipodeans recouped some of yesterday’s heft losses - AUD/USD found support at its 21 DMA (0.7184), with the Aussie currency also buoyed by the surge in coal prices after Indonesia banned coal exports in January - with China being one of its largest customers. NZD/USD tackled resistance near 0.6800 but drifted further away from the level as AUD/NZD mounted 1.0600. In the EM FX space, TRY felt some reprieve amid further government pledges following yesterday’s eye-watering Turkish inflation metrics, with USD/TRY probing 13.000 overnight.

COMMODITIES

WTI and Brent front month futures held yesterday’s gains as the clock ticks down to the OPEC+ confab later today - with the JMMC at 12:00GMT and OPEC+ at 13:00GMT. Ministers are expected to continue with the plan to increase its production quota 400k BPD in what is shaping to be a smooth meeting. Furthermore, Libya – currently exempt from OPEC+ quotas - shuttered a further 200k BPD of production to fix a broken pipeline. Following the latest militia intervention at the El Sharara oilfield, Libya's total production has declined by around 700k BPD, according to reports. Participants are also keeping the US winter storms on the radar with some airlines cancelling hundreds of flights amid the weather. Natural Gas futures rose amid the production impacts alongside the demand for heat. Elsewhere, spot gold confirmed support at USD 1,800/oz after Monday’s Dollar-induced decline, whilst spot silver remained subdued under USD 23/oz. Chinese coal futures rose around 8% overnight after weekend reports stated that Indonesia (one of China’s largest suppliers) has banned coal exports in January amid domestic power worries.

Tuesday's JMMC will start at 12:00GMT/07:00EST followed by the OPEC+ meeting at 13:00GMT/08:00EST. (Twitter) OPEC+ is expected to continue with its plan to increase its production quota 400k BPD at the meeting on Tuesday, according to Delegates. "Some opec plus states still can’t meet their production quotas, and opening up that subject at any of these meetings will stir a lot of trouble. No one wants to revise down their quota.", according to EnergyIntel's Bakr. (EnergyIntel/Twitter)

Due to the weather impacts in some areas, Delta Air Lines (DAL) is expecting to cancel around 500 flights for Jan 3rd with around 200 flights per day expected to be cancelled on Jan 4th and 5th. (Newswires)

Over 20mln people are under winter storm alerts Monday, as a strong storm system works its way across the eastern US. (CNN) Federal offices in Washington DC closed on Monday amid winter storm warnings. (The Hill)

US President Biden is cracking down on large US meat producers. The Biden Admin highlighted vulnerabilities from excessive market concentration in meat. (FT)

GEOPOLITICS

The Iranian Chief Negotiator met with the European Joint Commission coordinator Mora and the E3 Chief Negotiators on Monday, according to Journalist Aslani. (Twitter)

Saudi coalition intercepts five drones launched by Yemen's Houthis from Sana'a. (Sputnik)

US, Russia, China, the UK and France have agreed that “a nuclear war cannot be won and must never be fought” in a rare joint pledge. (The Guardian)

US

The debt complex was under heavy pressure with the US underperforming the EZ and in turn yields spiked higher. Treasuries were on a steady path lower with some participants noting of large blocked Futures/Swap futures spread trades also adding weight at the time. The US 30yr yield topped 2.00% again while the 10yr yield rose above 1.63%. Back to Europe, IFR highlighted speculation of a new BTP syndicated deal as soon as Tuesday, potentially a 15yr or 30yr. T-Note (H2) futures settled 1 point and 1 tick lower at 129-14.

AT&T (T) and Verizon (VZ) agreed to a two-week 5G deployment delay at the Transport Secretary's after airlines warned of risks of interference. (Newswire)

CLOSES: S&P 500 +0.6% at 4,796, Nasdaq 100 +1.2% at 15,832, Dow Jones +0.7% at 35,585, Russell 2000 +1.1% at 2,269.