• Cash bourses in Europe hold the downside bias seen across APAC stocks overnight which emanated from China reporting a record increase in COVID cases
• Stateside, futures are under similar pressure with the ES below 4000
• USD is under pressure as the risk tone favours JPY & others, alongside month-end models pointing to USD selling
• Initial haven bid in EGBs has faded ahead of Central Bank speak incl. President Lagarde
• Crude is pressured on the China-COVID demand front and as Chevron is to receive a license to import Venezuelan crude
• Looking ahead, highlights include speeches from ECB’s Lagarde, Fed’s Williams & Bullard.

EUROPEAN TRADE

EQUITIES

• Cash bourses in Europe hold the downside bias seen across APAC stocks overnight which emanated from China reporting a record increase in COVID cases, whilst social unrest in the country made the headlines over the weekend; Euro Stoxx 50 -0.7%.
• European sectors are in a sea of red and portraying no overarching bias, although some of the defensive sectors are slightly more cushioned than most peers.
• In early European hours, the ES (-0.9%) gave up the 4,000 level while slight underperformance is present in the tech-laden NQ (-1.0%), as participants look for month-end flows ahead of the US jobs report at the end of the week.
• Apple (AAPL) is poised to lose 6mln iPhone Pros from the unrest at its Chinese plant, according to Bloomberg.
• Shipments of smartphones within China declined 4.6% Y/Y to 19.84mln handsets in Sept, according to CAICT.
• Click here for more detail.

FX

• Dollar downed as risk aversion favours Yen and others, while month end rebalancing models signal broad selling requirement, DXY under 200 DMA and 105.500, USD/JPY eyeing 137.50
• Euro through near term resistance vs Buck around 1.0450 and 100 DMA against the Pound on RHS flow for Wednesday
• Aussie underperforms after weaker than forecast final retail sales and in sympathy with the Yuan on more Chinese CVOID contagion; AUD/USD heavy on 0.6700 handle, USD/CNH probes 7.2500 before pullback
• Loonie and Nokkie undermined by collapse in crude prices, as USD/CAD rebounds through 1.3400 and EUR/NOK beyond 10.3500
• PBoC set USD/CNY mid-point at 7.1617 vs exp. 7.1695 (prev. 7.1339)
• Click here for more detail.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.0240-50 (2.4BN), 1.0250 (2.0BN), 1.0300 (737M), 1.0350 (377M), 1.0390-00 (1.06BN), 1.0405-15 (777M), 1.0425 (1.0BN), 1.0450-55 (708M)
• Click here for more detail.

FIXED INCOME

• Haven bid in bonds fades as Bunds retreat over 100 ticks from 141.42 Eurex peak, Gilts towards 107.00 after matching last Friday's 107.66 high and T-note between 113-17/113-02+ parameters.
• BTPs underperform within wide 120.26-118.87 extremes on domemstic supply grounds.
• Click here for more detail.

COMMODITIES

• WTI and Brent Jan futures have been under pressure since the reopening of futures trading, with Brent beneath USD 82/bbl for the first time since January (80.61-83.93/bbl daily range) and WTI printing a YTD low (73.60-76.49/bbl range) after Chinese daily COVID infections rose by a fresh record
• Spot gold has been gaining in tandem with the losses in the US Dollar with the yellow metal gaining above USD 1,750/oz but still under November's high of around USD 1,786/oz.
• Base metals are mixed, with the initial China-induced downside overnight somewhat trimmed/cancelled out by a slide in the USD, with 3M LME copper trading on either side of USD 8,000/t.
• US Treasury Department is to issue a licence to allow Chevron to import Venezuelan crude oil to the US, while the licences will allow Chevron to take part in oil activities in Venezuela that were previously banned by the US and also permit them to send products to Venezuela needed to refine heavy crude into exportable grades. Furthermore, the licence is time-limited to 6 months and can be revoked if President Maduro does not negotiate in good faith or follow through on commitments, according to Reuters.
• Iraq’s SOMO said the OPEC+ cut decision in October didn’t decrease Iraq’s crude exports and the decision to cut helps maintain market stability. Iraq also stated that it produces 11% of total OPEC+ output and noted that the upcoming meeting will take into account current market conditions, while it sees oil prices to range USD 85-95/bbl next year, according to Reuters. It was also reported that Iraq’s OPEC representative said the country will increase oil capacity by 150k-250k BPD by 2023 and that Iraq will add 1mln-1.5mln BPD of oil export capacity by 2025.
• Kuwait’s KPIC shipped the first shipment of aviation jet fuel from the Al Zour refinery to UAE and Oman.
• BP’s (BP/ LN) Rotterdam refinery is resuming some operations after being idle for a week amid a pay dispute with workers, according to Reuters.
• Norway’s Gassco decreased the unplanned gas outage impact at fields delivering into Segal which was revised to a decline of 12.0 MCM/day from a decline of 14.9 MCM/day, according to Reuters.
• UAE's ADNOC is reportedly to cut 5% of December's crude oil supply to some term-lifters in Asia, citing the operational tolerance clause, via Reuters citing sources; but, will provide full contractual volumes for January.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak is facing a rebellion from the ruling Conservative party as they seek to force the government to drop the ban on new onshore windfarms, according to Bloomberg.
• UK housing market stalled in October with house price growth slowing to its lowest quarterly level since February 2020 amid a disastrous mini-budget and the cost of living crisis, according to Reuters citing data from Zoopla.
• All EU market participant will have to hold "active accounts" at EU clearing houses for "systemically important" financial products, via Reuters citing an EU draft document.
• ECB's Knot says underlying inflation trends are worrisome, risks to the inflation forecast are entirely tilted to the upside.
• ECB's Kazimir says there is a growing risk of a recession in the Eurozone, hikes will continue despite unfavourable economic developments.

NOTABLE EUROPEAN DATA

• EU Money-M3 Annual Growth (Oct) 5.1% vs. Exp. 6.2% (Prev. 6.3%)
• EU Loans to Non-Financials (Oct) 8.9% (Prev. 8.9%); to Households (Oct) 4.2% (Prev. 4.4%)

NOTABLE US HEADLINES

• Adobe said Black Friday online spending rose by 2.3% Y/Y to a record USD 9.12bln and that electronics was a major growth driver with online sales up 221% over the average day in October 2022, while it expects e-commerce spending of more than USD 9bln over the weekend and for Cyber Monday online sales to grow 5.1% Y/Y to USD 11.2bln, according to Reuters.
• Economists said key indicators suggest that global inflation has peaked with the pace of headline inflation set to slow in the approaching months, while Moody's Analytics noted that inflation is likely at its apex, according to FT.
• China's Finance Ministry says they are to extend tariff waivers on some US goods until May 31st.

CRYPTO

• A whale address moved 73,224 Ethereum (ETH), worth USD 85.67mln, to Binance during the Asian hours, according to an analysis by on-chain researcher Lookonchain cited by CoinDesk.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Defence Ministry said nine Russian prisoners of war were released as part of a prisoner exchange with Ukraine on Saturday, according to Reuters citing Russian news agencies.
• Energoatom President said there have been signs in recent weeks that Russians may be preparing to leave the Zaporizhzhia nuclear power plant, according to Pravda.
• UK military intelligence said Russia is likely removing nuclear warheads from ageing nuclear cruise missiles and firing unarmed munitions at Ukraine which highlights a depletion in its stock of missiles, according to Reuters.
• UK PM Sunak said Britain will stand with Ukraine for as long as needed and will maintain or increase military aid to Ukraine next year, while he also stated that Britain needs to stand up to competitors 'not with grand rhetoric but with robust pragmatism', according to Reuters.
• Senior Ukrainian government sources inform Mapl+ that Moscow is "ready to withdraw some heavy equipment such as tanks and artillery", according to Mail's Franey. In the context of the Zaporizhzhia plant

OTHER

• North Korean leader Kim ordered to promote officials and scientists responsible for nuclear forces and said that building the nuclear force is the most important cause, while their ultimate goal is to possess the world’s most powerful strategic force. Kim added that recent ICBM launches demonstrated their firm resolution and decisive ability to build the world’s strongest army, while its new ICBM clearly proved that North Korea is a full-fledged nuclear power and can withstand the supremacy of the US. Furthermore, Kim said scientists have made a ‘wonderful leap forward’ in technology for mounting nuclear warheads on ballistic missiles and should continue to expand and strengthen the nuclear deterrent at an extraordinary pace, according to KCNA.

APAC TRADE

EQUITIES

• APAC stocks traded mostly lower with risk appetite sapped by the ongoing COVID-related issues in China where a fresh record number of daily infections were reported and with public unrest brewing after hundreds of people protested throughout the weekend in several major cities including Beijing and Shanghai.
• ASX 200 was lower with energy leading the declines after oil prices slumped to YTD lows and with sentiment also mired by the surprise contraction in Australian Retail Sales.
• Nikkei 225 trickled closer towards the 28,000 level with some utility names hit after reports that Japan’s FTC will issue a record fine on three regional power companies for antitrust violations.
• Hang Seng and Shanghai Comp were pressured as the PBoC’s recent 25bps RRR cut was overshadowed by the COVID situation in China and with tech also hit after US FCC banned equipment authorisations for Chinese telecommunications and video surveillance equipment deemed to pose a threat to national security, although casino names outperformed after Macau renewed the licences of the six existing operators.

NOTABLE ASIA-PAC HEADLINES

• Hundreds of demonstrators conducted protests in cities including Beijing and Shanghai to express their discontent against China’s strict COVID measures, while the protests have so far lasted for 3 days, according to BBC and Reuters.
• China’s Shenzhen announced to limit restaurants and other indoor venues to 50% occupancy and said new arrivals to the city will be barred from entering venues such as theatres and gyms for the first 3 days as part of COVID measures, while it also asked the public to work from home, according to Reuters.
• Goldman Sachs said China could end its zero-COVID policy before April and earlier than widely expected with some chance of a “disorderly” exit, although it still sees a Q2 exit from zero-COVID as most likely with around a 60% chance.
• Beijing has vowed to curb rapid increase in COVID cases, according to an official; Guangzhou is to resume public transportation in locked down areas, according to an official.
• China is set to ease rules on developer bond state guarantees, according to Bloomberg.
• US FCC banned equipment authorisations for Chinese telecommunications and video surveillance equipment deemed to pose a threat to national security, while the list of companies deemed to pose a threat includes Huawei, ZTE (763 HK) and Hytera Communications (002583 CH), according to Reuters.
• US Space Force chief said the rapid progress of China's military capabilities poses a growing risks to US superiority in outer space, according to Sky News Arabia and Reuters.
• Taiwan’s ruling DPP conceded defeat in the key Taipei mayoral election and Taiwanese President Tsai resigned as chairwoman of the ruling party following poor local election results but rejected an offer from Premier Su Tseng-chang to resign. Furthermore, the Chinese government said that the local Taiwan elections showed the mainstream opinion on the island is for peace, stability and a good life, while it will keep working with Taiwan’s people to promote peaceful relations and firmly oppose Taiwan independence, according to Reuters.
• South Korean Transport Ministry is to meet with the striking truckers’ union on Monday, according to an official cited by Reuters.

DATA RECAP

• Australian Retail Sales MM Final (Oct) -0.2% vs. Exp. 0.5% (Prev. 0.6%)