• APAC stocks traded mostly positively, although the gains for the rest of the region were limited; China outperformed
• Several Chinese cities accelerated the loosening of COVID-19 restrictions over the weekend including Shanghai and Shenzhen
• OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilise markets
• Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well
• Looking ahead, highlights include EZ, UK & US Final Composite/Services PMIs, EZ Sentix & Retail Sales, US ISM Services PMI & Factory Orders, Speech from ECB’s Lagarde
• Click here for the Week Ahead preview

US TRADE

• US stocks and bonds whipsawed on the hot NFP report with above-expected jobs added and hot wage metrics, igniting a typical, knee-jerk hawkish reaction with stocks and bonds slammed lower while the Dollar ripped. However, the move failed to hold with a gradual reversal seen - which resulted in a mixed and relatively flat close for the major indices.
• SPX -0.12% at 4,072, NDX -0.40% at 11,994, DJIA +0.10% at 34,429, RUT +0.59% at 1,893.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Delta Air Lines (DAL) confirmed it reached an agreement in principle for a new pilot contract after it offered a 34% pay increase to pilots over 3 years, according to Reuters.
• Apple (AAPL) supplier Foxconn (2317 TT) expects full production at its COVID-hit plant in China to resume from late December to early January, while the Co. and the local government are pushing hard on the plant's recruitment drive but many uncertainties remain, according to sources cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mostly positive as Chinese markets led the advances on reopening optimism after several large cities further loosened COVID-19 restrictions, although the gains for the rest of the region were limited after Friday’s mixed post-NFP performance on Wall St and a further deterioration in Chinese Caixin Services and Composite PMI data.
• ASX 200 was higher with the index supported by strength in mining and energy as underlying commodity prices benefitted from the China reopening play.
• Nikkei 225 was indecisive and just about kept afloat throughout the session with price action contained by a lack of pertinent drivers to propel the index closer to the 28,000 level.
• Hang Seng and Shanghai Comp shrugged off the weak Chinese PMI data with risk appetite supported by reopening hopes and as the PBoC’s previously announced RRR cut took effect, while developers were boosted after reports last week that China's top four banks intend to issue loans for domestic developers’ overseas debt repayments.
• US equity futures traded sideways within a tight range and took a breather after the post-NFP fluctuations.
• European equity futures were slightly higher with the Euro Stoxx 50 future up 0.1% after the cash market closed with losses of 0.2% on Friday.

FX

• DXY weakened amid the mostly positive risk tone and after having fully unwound last Friday’s initial hawkish knee-jerk reaction to the forecast-topping US NFP jobs report and firmer-than-expected Average Earnings data.
• EUR/USD benefitted from the softer greenback and following weekend comments from ECB’s Villeroy that he favours a 50bps rate hike this month and that hikes will continue after, but cannot say when they will stop.
• GBP/USD broke through resistance at 1.2300 and shrugged off recession concerns whereby the CBI warned of a year-long recession in 2023 and BoE’s Dhingra noted higher interest rates could lead to a deeper and longer recession.
• USD/JPY traded sideways at the 134.00 level amid the lack of tier 1 data releases from Japan.
• Antipodeans were underpinned amid the constructive mood, gains in commodities and strength in yuan in which USD/CNH steadily retreated below the 7.0000 handle.
• PBoC set USD/CNY mid-point at 7.0384 vs exp. 7.0368 (prev. 7.0542)

FIXED INCOME

• 10yr UST futures marginally softened amid the positive risk tone and following the whipsawing post-NFP data which Fed whisperer Timiraos suggested cemented a 50bp hike this month but also noted a risk that the FOMC may have to hike above 5%, while there were no Fed speakers over the weekend with the blackout period in effect.
• Bund futures were uneventful with price action stuck around 142.00 after Friday's intraday pullback.
• 10yr JGB futures traded with mild losses after a failed test attempt to reclaim the 149.00 level and with demand contained by the lack of additional BoJ buying with the central bank only in the market under its fixed rate operations.

COMMODITIES

• Crude strengthened in early trade after Chinese cities relaxed COVID restrictions and following the OPEC+ decision to maintain its output policy although the group suggested it was ready to make adjustments if needed, while the G7 also recently announced that they are to impose a price cap on Russian oil which takes effect today alongside an EU oil ban on Russian oil. However, prices failed to sustain the momentum and gradually retraced around half of the initial gains.
• OPEC+ ministers formally endorsed the output policy rollover and will hold the next JMMC meeting on February 1st, while it vowed to stand ready to adjust oil output to stabilise markets, according to Reuters and FT.
• Iraqi Oil Minister said OPEC members are committed to the agreed production rates until the end of 2023 and the Algerian Energy Minister said the decision to keep output unchanged is appropriate to market fluctuations. Kuwaiti Oil Minister said OPEC+ decisions are based on market data and ensure its stability, while he added the impact of slow global economic growth on oil demand is a cause for continuous caution, according to Reuters.
• G7 and Australia announced on Friday that a consensus was reached on a price cap for Russian seaborne oil at USD 60/bbl which will enter into force on December 5th or very soon thereafter and they will ‘grandfather’ any revision of the price cap to allow compliant transactions concluded beforehand. Furthermore, US Treasury Secretary Yellen said that the price cap will immediately cut into Russia’s most important source of revenue and preserve stable global energy supplies, while a senior Treasury official stated that the price cap will create an anchor for Russian oil and has already driven prices lower, according to Reuters.
• Ukrainian President Zelensky’s chief of staff commented that the price cap on Russian oil should be capped to USD 30/bbl, according to Reuters.
• Russian Deputy PM Novak said they will not operate under the oil price cap even if they have to cut production and the price cap may affect other countries as well, while he added that they are working on mechanisms to ban supplies which are capped.
• Russia is analysing the price cap imposed by G7 and allies on its oil and made preparations for this, while it will not accept the oil price cap, according to state news agencies citing the Kremlin.
• EU countries cut their gas demand by a quarter last month despite a fall in temperature which shows an effort in reducing the reliance on Russian energy, according to FT.
• Moldova’s Deputy PM Spinu said they will not pay a 50% advance to Gasprom by December 20th for its December gas supplies, according to Reuters.
• Spot gold benefitted from a weaker dollar with the precious metal back above USD 1800/oz.
• Copper traded marginally higher as risk appetite was supported by China reopening optimism.

CRYPTO

• Bitcoin traded relatively flat after rebounding from beneath the USD 17,000 level over the weekend.
• Blockchain.com, Gemini, Bitpanda and Kalshi are among the firms interested in buying FTX’s LedgerX which is up for sale, according to a Bloomberg reporter.

NOTABLE ASIA-PAC HEADLINES

• Several Chinese cities accelerated the loosening of COVID-19 restrictions over the weekend including Shanghai and Shenzhen which scrapped requirements for commuters to present PCR tests for travelling on public transport, while apartment complexes in Beijing indicated that those that tested positive could quarantine at home, according to FT.
• PBoC is reportedly expected to reduce the amount of open market operations towards the end of the year to avoid excess liquidity, according to China Securities Journal.
• Morgan Stanley upgraded MSCI China to overweight from equal weight and said the ROE is likely to rise to 11.1% by end-2023, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Nov) 46.7 vs. Exp. 48.0 (Prev. 48.4)
• Chinese Caixin Composite PMI (Nov) 47.0 (Prev. 48.3)

GLOBAL

• Moldova’s central bank is to conduct an extraordinary meeting on Monday to assess its main policy indicators including the policy rate, according to Reuters.
• Iran’s Attorney General announced that Iran abolished its morality police and is considering changing hijab laws following the protests, according to WSJ.

GEOPOLITICS

RUSSIA-UKRAINE

• US Defense Secretary Austin accused Russia of deliberate cruelty in its war in Ukraine and that it was intentionally targeting civilians, according to Reuters.
• US Director of National Intelligence Haines said they expect a reduced tempo in Ukraine fighting to continue in the coming months, while she added that Russia is not capable of indigenously producing munitions they are expending, according to Reuters.

OTHER

• US Indo-Pacific Commander Aquilino said it is in China’s strategy to encourage nations like North Korea to create problems for the US and he is not optimistic about China doing anything helpful to stabilise the Indo-Pacific region, according to Reuters.

EU/UK

NOTABLE HEADLINES

• BoE’s Dhingra said higher interest rates could lead to a deeper and longer recession which is what she thinks they should all be worried about, while she sees few signs that demands for higher wages are raising the risk of a wage-price spiral, according to the Observer.
• Confederation of British Industry warned the UK will fall into a year-long recession next year as a combination of rising inflation, negative growth and declining business investment weigh on the economy, according to FT.
• UK Conservative Party Chairman and Minister without Portfolio in the Cabinet Office Zahawi said the government is looking at bringing in the military if strikes go ahead in various sectors including the health sector, according to Reuters and Sky News.
• UK RMT union rejected the Rail Delivery Group offer and demanded a meeting on Monday to resolve the dispute, while UK Transport Secretary Harper said the situation is disappointing and unfair to the public, according to Reuters.
• ECB’s Villeroy said that inflation should peak in H1 next year and that he favours a 50bps rate hike at the December 15th meeting, while he added that rate hikes will continue after that but cannot say when they will stop and he expects to beat inflation by 2024-2025, according to Reuters.
• EU Commission President von der Leyen said the US Inflation Reduction Act is raising concerns in Europe and there is a risk it could lead to unfair competition, close markets and fragment supply chains that have already been tested by the pandemic, while she added that competition is good but it must be a level playing field and that they must take action to rebalance the playing field where the IRA or other measures conduct distortions, according to Reuters.