• APAC stocks mostly gained as investors continued to pile on the reopening bets despite China 'unswervingly' maintaining its COVID approach, while the region also shrugged off disappointing Chinese trade data
• DXY began with early gains and rose back above 111.00 amid the initial risk aversion; G10s were lower and Antipodeans underperformed
• China’s health commission spokesman said China will not waver in preventing a COVID rebound and in the dynamic clearing of cases as soon as they emerge, while it did not make adjustments to anti-COVID protocols
• Apple (AAPL) trimmed its new iPhone output forecast by 3mln units as demand cools, according to Bloomberg
• UK Chancellor is set to outline GBP 60bln in tax and spending cuts with early drafts of the autumn statement, according to The Guardian.
• Looking ahead, highlights include German Industrial Production, EZ Sentix, Speeches from ECB’s Lagarde, Panetta, BoE’s Pill, Fed’s Barkin, Mester & Collins, UK QT
• US clocks moved back 1 hour to Standard Time with the difference between London & New York back to 5 hours
• Click here for the Week Ahead preview

US TRADE

• US stocks and commodities were firmer on Friday in which US indices trailed global peers as growing expectations around China reopening fuelled 'reopening' trades in the backdrop of a mixed NFP report, while the dollar saw pronounced selling in which it suffered its largest drop in 7 years amid strength in its counterparts.
• SPX +1.36% at 3,771, NDX +1.56% at 10,857, DJIA +1.26% at 32,403, RUT +1.13% at 1,800.
• Click here for a detailed summary.

NOTABLE HEADLINES

• IAM union representing around 4,900 workers rail workers said members narrowly ratified the tentative contract agreement reached in mid-December with US freight railroads, according to Reuters.
• Apple (AAPL) trimmed its new iPhone output forecast by 3mln units as demand cools, according to Bloomberg. Apple said COVID-19 restrictions temporarily impacted its primary iPhone 14 Pro and Pro Max assembly facility in Zhengzhou, China, with the facility operating at a significantly reduced capacity, while it added that customers will experience longer wait times to receive their new products, according to Reuters.
• Meta (META) is preparing to notify employees of mass layoffs this week, according to WSJ.

APAC TRADE

EQUITIES

• APAC stocks mostly gained as investors continued to pile on the reopening bets despite China 'unswervingly' maintaining its COVID approach, while the region also shrugged off disappointing Chinese trade data.
• ASX 200 was higher as strength in the commodity-related and consumer sectors atoned for the weakness in tech and financials with the latter not helped by Westpac’s earnings which showed a decline in cash profit and revenue.
• Nikkei 225 strengthened from the open and climbed above the 27,500 level with the index unfazed by the weak earnings releases from the likes of Sharp and SoftBank Corp.
• Hang Seng and Shanghai Comp recovered from opening losses in which the Hong Kong benchmark briefly surged by more than 3% amid strength in property names and a continued tech rally, while the mainland index was less decisive amid disappointing Chinese trade data and after China stuck to its strict COVID policy, as well as reported its largest number of daily infections in 6 months.
• US equity futures initially declined after China stuck with its strict COVID policy, although most of the opening losses faded as markets in Asia shrugged off the COVID and data-related headwinds.
• European equity futures were slightly softer overnight with the Euro Stoxx 50 future -0.1% after cash markets closed up 2.7% on Friday.

FX

• DXY began with early gains and rose back above 111.00 amid the initial risk aversion after China said it would unswervingly keep to its COVID approach, although the support in the dollar was only brief as Asia mostly brushed off the COVID fears and following last week’s historic drop whereby the greenback suffered its largest daily decline in 7 years.
• EUR/USD was slightly lower but held on to most of Friday’s gains with support seen around the 0.9900 level.
• GBP/USD marginally softened with Chancellor Hunt set to outline GBP 60bln in tax and spending cuts and with UK PM Sunak facing criticism of his judgement after a key ally was accused of bullying.
• USD/JPY rebounded above 147.00 as the greenback attempted to nurse some of Friday’s losses.
• Antipodeans were pressured amid COVID woes and were also not helped after Chinese trade data disappointed.
• PBoC set USD/CNY mid-point at 7.2292 vs exp. 7.2289 (prev. 7.2555)

FIXED INCOME

• 10yr UST futures traded rangebound following Friday’s indecisiveness in the aftermath of the mixed jobs data where the headline NFP topped forecasts but coincided with a larger-than-expected increase to the unemployment rate, while the commentary from Fed officials continued to hint at further rate hikes ahead albeit at a slower pace.
• Bund futures were uneventful with prices marginally edging towards 137.00 amid a lack of pertinent drivers.
• 10yr JGB futures kept afloat but with upside limited after the results of the inflation-indexed 10yr auction were relatively in line with the previous and with Japan to boost issuances in the short-end to fund economic stimulus.

COMMODITIES

• Crude gapped lower after China reaffirmed its strict COVID policy, while nat gas extended on last week's gains amid cold weather forecasts and with Russia said to be readying new attacks on Ukrainian infrastructure including energy.
• Kuwait appointed Ahmed Jaber al-Aydan as the new CEO of Kuwait Oil Company and Wadha al-Khateeb as CEO of Kuwait National Petroleum Company, while new leaders were also appointed for Kuwait Integrated Petroleum Industries Company and other state companies in the energy sector, according to Reuters.
• Spot gold marginally softened overnight albeit with the pullback limited by a lacklustre dollar.
• Copper traded lower as risk assets wobbled at the reopening of futures trading owing to China's unswerving COVID approach but losses were stemmed as Asian stock markets shrugged off the concerns and continued to position for a future loosening of COVID controls.

CRYPTO

• Bitcoin was indecisive with prices relatively unchanged after failing to hold above the USD 21,000 level.

NOTABLE ASIA-PAC HEADLINES

• China health commission spokesman said China will not waver in preventing a COVID rebound and in the dynamic clearing of cases as soon as they emerge, while it did not make adjustments to anti-COVID protocols and a China disease control official said they are to guide localities to continue strengthening COVID vaccination of the elderly. Furthermore, a Peking University infectious disease expert said the current prevention strategy is still able to control COVID despite the high transmissibility of variants and asymptomatic carriers, although an Education Ministry official noted that it is necessary to prevent excessive epidemic prevention and not add extra layers of measures, according to Reuters.
• China’s Zhengzhou city is taking steps to improve the precision of epidemic control measures after being criticised for a one size fits all approach and the city government apologised for the problems in the latest COVID fight, while it vowed to implement social management and control measures in a precise manner to avoid simply locking down communities.
• China's new daily COVID-19 cases were rose to the highest in six months with the country reporting 5,436 new cases on Sunday, according to Bloomberg.
• China Commerce Ministry said it firmly opposes Canada’s actions to disrupt and block normal business cooperation between companies of both countries in the name of national security after Canada recently ordered 3 Chinese companies to divest their holdings in Canada’s critical minerals. Furthermore, Mofcom urged Canada to take China’s concerns seriously and stop politicising economic and trade issues, while it added that China will take necessary steps to resolutely safeguard the legitimate rights and interests of Chinese firms, according to Reuters.
• German Chancellor Scholz said getting China to openly oppose the use of nuclear weapons over Ukraine was reason enough to travel to Beijing and said that Germany will continue its economic relationship with China but will reduce their dependency, while he said that they need to diversify and do that right away. Furthermore, Scholz said they have to avoid Chinese loans to developing countries triggering a new global financial crisis and talked to the Chinese government regarding that, according to Reuters.
• PBoC Deputy Governor Fan Yifei, who is a key driver of the digital yuan transition, was detained for investigation and is suspected of serious violations of discipline and law, according to SCMP.
• Japan’s government releases a statement on the US inflation Reduction Act in which it stated that the requirement of EV tax credits is not consistent with the US and Japanese governments’ shared policy to work with allies and like-minded partners to build resilient supply chains. Japan added that if the IRA would be implemented as it is to provide discriminatory incentives, it is possible that Japanese automakers will hesitate to make further investments towards the electrification of vehicles, according to Reuters.

DATA RECAP

• Chinese Trade Balance (CNY)(Oct) 586.8B vs Exp. 702.9B (Prev. 573.6B)
• Chinese Exports YY (CNY)(Oct) 7.0% vs Exp. 12.7% (Prev. 10.7%)
• Chinese Imports YY (CNY)(Oct) 6.8% vs Exp. 10.0% (Prev. 5.2%)
• Chinese Trade Balance USD* (Oct) 85.15B vs. Exp. 95.95B (Prev. 84.74B)
• Chinese Exports YY (USD)(Oct) -0.3% vs. Exp. 4.3% (Prev. 5.7%)
• Chinese Imports YY (USD)(Oct) -0.7% vs. Exp. 0.1% (Prev. 0.3%)

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said Russian forces are suffering serious losses in the east and Russia is readying new attacks on Ukrainian infrastructure, particularly energy, according to Reuters. There were also separate reports that Zelensky said Iran lied about sending a limited number of drones to Russia and he noted that Kyiv forces were shooting down at least 10 of them daily.
• Ukrainian authorities in Kyiv have begun planning for a complete blackout which would require the evacuation of 3mln residents and are establishing 1,000 heating centres although it was noted that the situation was currently manageable, according to NYT.
• Ukrainian forces damaged the Russian-held Nova Kakhova dam in a HIMARS strike, according to an emergency services representative cited by TASS.
• US National Security Adviser Sullivan held confidential discussions with Russian counterparts in recent months in an effort to reduce the risk of a broader conflict over Ukraine and to warn about the use of nuclear or other weapons of mass destruction, according to WSJ.

OTHER

• Sweden’s new centre-right government said it will distance itself from several Kurdish groups as it seeks to win Turkish support for the bid to join NATO, according to FT.
• Russian jets conducted a strike in Syria’s Idlib which killed at least 9 civilians, according to SCMP citing witnesses and rescuers.
• Iran successfully tested the first sub-orbital stage of the three-stage Ghaem 100 space launcher, according to IRNA. US State Department spokesperson said that such actions were unhelpful and destabilising, while the official added that the US is concerned by Iran’s continued development of space-launch vehicles which pose a significant proliferation concern, according to Reuters.
• North Korea fired 4 ballistic missiles into the western sea on Saturday morning which flew about 80 miles and at an altitude of about 12 miles, according to South Korea’s military cited by Yonhap. North Korea said last week's US-South Korea air drills were an open provocation and a dangerous war drill, while it said its recent military operations were a clear answer to enemies' provocative military moves and it will continue to respond to anti-North war drills with resolute and overwhelming practical military measures, according to KCNA.
• Taiwan Defence Ministry said 17 Chinese air force planes crossed the Taiwan Strait median line on Sunday, according to Reuters.

EU/UK

NOTABLE EU/UK HEADLINES

• UK PM Sunak and Chancellor Hunt are to announce a stealth tax raid on pensions later this month, according to The Telegraph. It was also reported the Chancellor is set to outline GBP 60bln in tax and spending cuts with early drafts of the autumn statement containing plans for up to GBP 35bln of spending cuts and GBP up to GBP 25bln on tax increases, according to The Guardian.
• UK PM Sunak warned that people cannot expect the state to “fix every problem” and vowed to regain the trust of voters by being honest about the scale of the economic difficulties ahead, according to The Times.
• UK PM Sunak is reportedly under pressure regarding bullying claims concerning one of his closest political allies with the opposition Labour party calling for an independent investigation of allegations of bullying by Sir Gavin Williamson who was appointed as Minister of State without Portfolio last month, according to FT.
• UK stamp duty in Q3 rose to a record high of GBP 3.6bln although property market analysts warned the trend will reverse as house prices decline, according to FT.
• UK steel industry warned that it needs state aid to survive a green transition with two large producers calling for the government to match the support offered to suppliers across Europe, according to FT.
• Traders have pointed to a squeeze in the “repo” market and short-dated gilts, according to The Times and The Telegraph.
• ECB and UniCredit (UCG IM) are reported to clash regarding capital plans and Russia presence with tensions building amid the Italian lender's aggressive strategy to overhaul lending operations, according to FT.
• Germany is to allocate EUR 83.3bln or 42% of a major protection scheme that was launched in October to finance a cap on gas and power prices next year, according to Reuters.
• ECB's Villeroy said shouldn't stop rate hikes as long as underlying inflation has not clearly peaked, adds we are not far from the neutral rate, beyond which the hiking pace could be more flexible and slower, according to Irish Times.