• APAC stocks traded firmer as risk appetite improved following a decline on Wall Street; ES +0.6%
• DXY softened amid the improved risk appetite and as yields took a breather from recent gains, G10s were firmer across the board
• AUD/USD pared some of its gains after the RBA stuck to a 25bps hike and refrained from any major hawkish surprises
• China’s Zhengzhou region said that the city will lift the temporary control for COVID-19 low-risk regions and gradually resume normal life, according to Global Times
• UK PM Sunak and Chancellor Hunt said it is inevitable that Britons will pay more tax, and reportedly ruled out increasing income tax, National Insurance, and VAT, according to The Telegraph and Bloomberg
• Looking ahead, highlights include UK & US Manufacturing PMI (Final), US ISM Manufacturing PMI, JOLTS, New Zealand Unemployment, Earnings from BP, Marathon, Phillips 66, Pfizer, Eli Lilly, Uber & AMD

• Click here for the Week Ahead preview

US TRADE

• US stocks declined at month-end as disappointing China data and problems in the Russia/Ukraine grain deal provided headwinds entering the Monday session, while hot EZ inflation data and weak Chicago PMI and Dallas Fed survey data added to the global demand woes and the Dollar strength.
• SPX -0.75% at 3,871, NDX -1.22% at 11,405, DJIA -0.39% at 32,732, RUT -0.00% at 1,846.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Treasury said Q4 borrowing estimate assumes an end-December cash balance of USD 700bln and it expects to issue USD 578bln in net marketable debt in January-March 2023, assuming an end-March cash balance of USD 500bln. Furthermore, it expects to issue USD 550bln in net marketable debt in the October-December 2022 period (prev. August estimate of USD 400bln) with the increase in the Q4 borrowing estimate due to changes in fiscal activity, greater-than-projected discount on marketable securities and lower non-marketable funding.
• US President Biden said the oil industry has not met its commitment to support the American people and that oil companies are not helping consumers with record profits, while he cited Shell (SHEL LN) and Exxon (XOM) profits as remarkably high and said oil companies should pay a higher tax on excess profits if they do not lower prices at the pump, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mostly higher as the region shrugged off the losses on Wall St and with Chinese Caixin PMI data not as bad as feared, although some cautiousness remained ahead of the looming risk events.
• ASX 200 finished positive with all sectors in the green after the RBA rate decision whereby it stuck to a 25bps rate increase instead of reverting to a more aggressive pace.
• Nikkei 225 eked modest gains amid a slew of earnings releases which were the catalyst for the biggest movers.
• Hang Seng and Shanghai Comp were both positive with notable outperformance in Hong Kong amid a tech-led surge and bargain buying after its brief retreat beneath the 15,000 level, while Caixin Manufacturing PMI data printed better than forecast despite remaining at a contraction.
• US equity futures notched mild gains in tandem with the improved risk appetite in Asia.
• European equity futures were modestly higher overnight with the Euro Stoxx 50 future +0.8% after cash markets closed up by 0.1% yesterday.

FX

• DXY softened amid the improved risk appetite and as yields took a breather from recent gains, although the pullback was contained and the DXY remained above the 111.00 level for most of the session ahead of this week’s key risk events.
• EUR/USD reclaimed the 0.9900 handle as it partially nursed some of the losses seen yesterday where it succumbed to the firmer greenback despite hot EU inflation data and hawkish ECB rhetoric.
• GBP/USD rebounded to back above 1.1500 with UK newsflow relatively light, although the government flagged tax hikes in which PM Sunak and Chancellor Hunt noted it was unavoidable that all Britons will pay more tax.
• USD/JPY retreated overnight which follows the recent revelation that Japan conducted a record of nearly USD 43bln in currency intervention during October.
• Antipodeans outperformed early on amid the improved risk tone and gains in commodities, although AUD/USD later pared some of its gains after the RBA stuck to a 25bps hike and refrained from any major hawkish surprises.
• PBoC set USD/CNY mid-point at 7.2081 vs exp. 7.2070 (prev. 7.1768)
• Turkish Central Bank warned banks again about FX transactions during "off hours" and informed banks that some lenders are holding Lira deposits with very high interest rates to circumvent bond holding requirements.

FIXED INCOME

• 10yr UST futures clawed back yesterday’s losses after reversing the bout of pressure seen from the US Treasury’s higher Q4 borrowing estimates and with the recovery helped by rebalancing following month-end.
• Bund futures remained beneath the 139.00 level after recent hot inflation data and hawkish ECB rhetoric.
• 10yr JGB futures were kept afloat after the results of the 10yr JGB auction were relatively in line with the previous and after BoJ Governor Kuroda unsurprising stuck to the dovish script.

COMMODITIES

• Crude marginally rebounded overnight as risk appetite improved and the greenback slightly eased.
• US Treasury website said Russian oil loaded on vessels before December 5th will not be subject to a price cap if unloaded at the destination before January 19th and a senior US Treasury Department official said Russia should feel free to try to line up ships to export oil outside the price cap with the G7 coalition not trying to prevent that, while the official added that discussions on the price cap level are continuing among the G7, according to Reuters.
• Russian President Putin said they can set up a gas hub in Turkey quite quickly, while he is sure gas contracts will be signed and said there will be many in Europe that want to do so, according to Reuters.
• Spot gold remained rangebound amid tentativeness as the FOMC draws closer.
• Copper gained amid the mostly constructive risk tone and a softer dollar.

CRYPTO

• Crypto markets were mixed with Bitcoin indecisive around the USD 20,500 level, while Ethereum rose 1.0% and Dogecoin rallied by nearly 10%.

NOTABLE ASIA-PAC HEADLINES

• Zhengzhou in C.China's Henan said on Tue that the city will lift the temporary control for COVID-19 low-risk regions and gradually resume normal life "after over 10-day fight against the virus", according to Global Times.
• RBA hiked the Cash Rate Target by 25bps to 2.85%, as expected. RBA said the board remains resolute in determination to return inflation to the target and expects to increase interest rates further over the period ahead, as well as reiterated that the size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. RBA also noted that the central forecast for GDP growth has been revised down a little with growth of around 3% expected this year and 1.5% in 2023 and 2024, while inflation is now forecast to peak at around 8% later this year and the central forecast is for CPI inflation to be around 4.75% over 2023 and a little above 3% over 2024.

DATA RECAP

• Chinese Caixin Manufacturing PMI Final (Oct) 49.2 vs. Exp. 49.0 (Prev. 48.1)

GEOPOLITICS

RUSSIA-UKRAINE

• Russian President Putin said Monday's attacks on Ukrainian infrastructure were partly a response to the attack on the Russian fleet in Sevastopol and that the attacks were not all that they could have done, according to Reuters.
• Russian Defence Ministry said it stresses that Russia is suspending, not withdrawing from the Black Sea initiative.

OTHER

• US State Department said there has been no change in US policy towards North Korea, while the US remains open to diplomacy and would like to see North Korea engage in serious and substantial dialogue, according to Reuters.

EU/UK

NOTABLE EU/UK HEADLINES

• UK PM Sunak and Chancellor Hunt said it is inevitable that Britons will pay more tax, according to Bloomberg. UK PM Sunak and Chancellor Hunt have reportedly ruled out increasing income tax, National Insurance, and VAT, according to The Telegraph, which added that a slew of other taxes may have to be increased.
• ECB President Lagarde said they have not reached the destination on rates yet and reiterated that the ECB is committed to doing whatever it takes to get inflation back to the 2% target, while she added that inflation is too high throughout the eurozone and the possibility of a recession has increased.