• European bourses have benefited from the post-Powell surge, US futures more contained pre-data
• Additional support derived in APAC hours from China's PMIs and COVID adjustments
• DXY remains downbeat given the dovish Powell reaction, JPY is the standout beneficiary given rate differentials
• EGBs are bid with pricing for December's ECB tilting towards 50bp given the magnitude of overnight price action, Lane speaks later
• Crude benchmarks are little changed overall but have been choppy throughout the morning with specific developments limited
• Looking ahead, highlights include US Final Manufacturing PMI, US ISM, IJC, PCE Price Index, Speeches from Fed's Barr, Bowman & Logan,  ECB's Lane & Elderson
• Click here for the Week Ahead preview

EUROPEAN TRADE

EQUITIES

• European equities benefited at the cash-open from the post-Powell surge in US stocks. Fresh macro drivers for Europe have been lacking thus far and therefore some of the enthusiasm at the cash open has scaled back somewhat.
• Sectors in Europe are mostly firmer with Tech stocks following suit to the strong showing during US hours yesterday, whilst Real Estate names are also posting solid gains. To the downside, Autos, Consumer Products and Energy names are the only sectors in the red.
• US futures are flat/softer as markets pause for breath following yesterday’s impressive rally which took the ES to just shy of the 4.1k mark.
• JPMorgan lowers its 2023 S&P 500 EPS forecast to USD 205 (prev. 225); sees the index at 4,200 by end-2023; expects the S&P 500 to re-test its 2022 lows (at around 3,577) in H1 2023
• Click here for more detail.

FX

• The Dollar index remains suppressed in the post-Powell aftermath of dovishly-received remarks from the Fed Chair, with today's base at 105.30 matching the lows set on the 15th and 28th of November.
• Most G10s are firmer against the USD but to varying degrees.
• The JPY has been the greatest beneficiary of the Powell-induced narrowing in the Fed-BoJ differential and as US yields sold off yesterday.
• The Loonie stands as the underperformer with no clear reason aside from a breather from the Dollar and crude-induced gains yesterday and in the run-up to the Canadian jobs report tomorrow.
• South Africa President Ramaphosa is reportedly considering resigning over the farm scandal, according to Bloomberg.
• PBoC set USD/CNY mid-point at 7.1225 vs exp. 7.1231 (prev. 7.1769)
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Notable FX Expiries, NY Cut:

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FIXED INCOME

• EGBs are bid across the board as participants react to the commentary from Chair Powell on Wednesday; as such, ECB pricing has tilted towards 50bp, Chief Economist Lane speaks later.
• USTs have continued to climb with yields lower across the curve and particularly at the long-end given Powell stressing they do not want to overtighten and ahead of key data including October’s PCE.
• The European morning has digested a substantial amount of supply with over EUR 11bln taken down between France, Spain and the UK; overall, the issuance was well received and marks the last outings for France and Spain this year
• Click here for more detail.

COMMODITIES

• WTI Jan and Brent Feb futures are somewhat choppy with the initial upside paring back in recent trade despite a distinct lack of news flow and a steady Dollar at the time.
• Spot gold benefits from the decline in the Dollar as the yellow metal extends on gains above USD 1,775/oz as it sets its sight on the 200 DMA at USD 1,796.07/oz ahead of USD 1,800/oz.
• Base metals are firmer across the board following the recent China optimism and Dollar-induced boost, with 3M LME copper briefly topping the USD 8,300/t mark.
• OPEC November oil output fell 710k BPD from October to 29.10mln BPD after the OPEC+ production cut decision, while quota-bound members complied with 163% of pledged cuts in November, according to a Reuters OPEC survey.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• German Ifo says companies are hiring despite the upcoming winter recession, employment barometer increased to 99.6 for November (prev. 97.8). First increase after five consecutive declines.
• Germany's VDMA says Engineering Orders in Oct -12% Y/Y (Domestic -13%; Foreign -11%); Aug-Oct Orders -4% Y/Y (Domestic -8%; Foreign -2%).
• ECB's Stournaras says inflationary pressures will ease, as such advocates the ECB takes greater account of the risk of an economic crisis in monetary policy, via Handelsblatt.
• ECB's Enria says the new risk environment warrants some adjustments to supervisory approach; supervisors will closely scrutinise capital planning and challenge management actions to ensure an appropriate level of conservatism.

NOTABLE EUROPEAN DATA

• German Retail Sales MM Real (Oct) -2.8% vs. Exp. -0.6% (Prev. 0.9%); YY Real (Oct) -5.0% vs. Exp. -2.8% (Prev. -0.9%)
• UK Nationwide House Price MM (Nov) -1.4% vs. Exp. -0.3% (Prev. -0.9%); YY (Nov) 4.4% vs. Exp. 5.8% (Prev. 7.2%)
• UK S&P Global/CIPS Manufacturing PMI FNL (Nov) 46.5 vs. Exp. 46.2 (Prev. 46.2)
• EU S&P Global Manufacturing Final PMI (Nov) 47.1 vs. Exp. 47.3 (Prev. 47.3); German S&P Global/BME Manufacturing PMI (Nov) 46.2 vs. Exp. 46.7 (Prev. 46.7)
• EU Unemployment Rate (Oct) 6.5% vs. Exp. 6.6% (Prev. 6.6%)

NOTABLE US HEADLINES

• Click here for the US Early Morning Note.

CRYPTO

• Sam Bankman-Fried said the FTX US platform is fully funded and he believes withdrawals could be opened, while he denied committing fraud and said that FTX had huge management failures.

GEOPOLITICS

RUSSIA-UKRAINE

• US is considering a dramatic expansion in the training the US military provides to Ukraine including instructing as many as 2,500 Ukrainian soldiers a month in a US base in Germany, according to CNN citing sources.
• Chinese President Xi told European Council President Michel that China will continue to strengthen strategic coordination with the EU and hopes EU will establish an objective and correct perception of China. Xi added that China and EU should strengthen macroeconomic policy coordination and complementary advantages and jointly create new growth engines, and should jointly ensure the safety, stability, and reliability of industrial supply chains. Xi said China will remain open to European companies and hope EU can provide a fair and transparent business environment for Chinese firms, according to Bloomberg.
• Russian Foreign Minister Lavrov says a channel for negotiations has been established between the Russian and US special forces, via Reuters.

OTHER

• US Defence Secretary Austin informed his Turkish counterpart of his strong opposition to a new Turkish military operation in Syria, according to Reuters.
• US lawmakers are poised to back as much as USD 10bln to bolster Taiwan's defences against growing tensions and threats from China as part of a compromise annual defence authorisation bill, according to Bloomberg.
• Japanese Chief Cabinet Secretary Matsuno said they informed China and Russia through diplomatic channels of severe concerns regarding frequent joint air force activities around Japan, while they are closely monitoring increasing military cooperation between China and Russia with concern, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks took impetus from the strong rally on Wall Street after Fed Chair Powell’s speech which signalled the Fed is ready to slow the pace of rate increases as soon as the December meeting, with sentiment in the region also helped by China reopening optimism and with Chinese Caixin PMI data not as bad as feared.
• ASX 200 was firmer with outperformance in the mining industry amid the heightened global risk appetite and as participants shrugged off the mixed-to-softer domestic data releases.
• Nikkei 225 was boosted at the open after Japanese firms' recurring profits hit a record for Q3 although the index moved off its highs after hitting resistance just shy of the 28,500 level.
• Hang Seng and Shanghai Comp advanced after several large Chinese cities relaxed some COVID controls and Vice Premier Sun Chunlan noted that the country’s fight against the virus is entering a new phase, while the latest Caixin Manufacturing PMI data topped forecasts although remained in contraction territory.

NOTABLE ASIA-PAC HEADLINES

• Beijing is to allow some low-risk COVID patients to home isolate which represents a major COVID policy shift, while COVID protests and stretched infrastructure were said to have led to the change, according to Bloomberg.
• China is to release supplementary COVID-19 measures in the coming days, via Reuters citing sources; to allow positive cases to quarantine at home with conditions, to allow close contacts of positive cases to quarantine at home with conditions. Step up antigen testing for COVID, reduce the frequency of mass testing and regular PCR tests.
• Chinese Vice Premier says weakening pathogenicity of Omicron has created conditions to improve COVID prevention measures, via State Media.
• Beijing City reports 2,126 new local COVID cases (prev. 2,378) during 15 hours to 3pm on Thursday.
• BoJ Board Member Noguchi said the BoJ must maintain monetary easing and keep interest rates at low levels now as achievement of the 2% inflation target remains uncertain. Noguchi noted that they cannot say that Japan has stably and sustainably achieved the BoJ's 2% inflation target, while he added that consumer inflation is likely to fall back below 2% once cost-push factors dissipate.

DATA RECAP

• Chinese Caixin Manufacturing PMI (Nov) 49.4 vs. Exp. 48.9 (Prev. 49.2)
• Japanese Company Profits Y/Y (Q3) 18.3% vs Exp. 16.1% (Prev. 17.6%); Sales Y/Y (Q3) 8.3% vs Exp. 10.8% (Prev. 7.2%)
• Japanese Business Capex (MOF) YY (Q3) 9.8% vs Exp. 6.4% (Prev. 4.6%)
• Australian Manufacturing PMI (Nov F) 51.3 (Prev. 51.5)
• Australian Capital Expenditure (Q3) -0.6% vs. Exp. 1.5% (Prev. -0.3%); Private Capital Expenditure 2022-2023 (AUD) (Est. 4) 155.7B (Prev. 146.4B)