• APAC stocks were somewhat mixed with early headwinds from Wall St where risk assets were pressured as bond yields and the Dollar gained
• DXY remained above the 105.00 level, USD/JPY extended on gains with a brief foray above 137.00, and Yuan pared back some recent gains
• RBA hiked its Cash Rate by 25bps and signalled further rate hikes ahead which prompted an adjustment in CBA's forecast for the terminal rate to 3.35% from 3.10%
• Beijing city government said it no longer requires negative PCR test results for people entering supermarkets and commercial buildings
• Looking ahead, highlights include Canadian Trade Balance, Norges Bank Regional Network, Supply from UK & Germany
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US TRADE

• US stocks tumbled in the wake of solid ISM Services PMI data, where the headline was better than the most optimistic analyst forecast. The reaction was risk-off and yields climbed as traders used the familiar Fed normalisation playbook, where better-than-expected data fuelled bets for a more aggressive Fed.
• SPX -1.79% at 3,999, NDX -1.73% at 11,787, DJIA -1.40% at 33,947, RUT -2.78% at 1,840
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Senate Majority Leader Schumer said he and Minority Leader McConnell just had a "productive" meeting off the Senate floor about government funding.
• EU-US document said the sides will explore coordinated actions to foster diversification and make key supply chains more resilient, while it noted preliminary progress was made by the task force on the I.R.A. and that they are committed to solving the issue constructively.
• USTR Tai said the US and EU are on track to meet a 2-year deadline for reaching a steel and aluminium deal.

APAC TRADE

EQUITIES

• APAC stocks were somewhat mixed with early headwinds from Wall St where risk assets were pressured as yields and the dollar gained following strong ISM Services PMI data which stoked concerns for a more aggressive Fed. However, some of the initial losses in the regional bourses were reversed owing to further China reopening efforts.
• ASX 200 was subdued amid mixed data releases and after the RBA rate decision where the central bank delivered an 8th consecutive rate increase, as well as signalled further hikes ahead.
• Nikkei 225 was kept afloat after BoJ Governor Kuroda reaffirmed sticking with current monetary policy but with gains capped by mixed Household Spending data and the largest decline in real cash earnings in 7 years.
• Hang Seng and Shanghai Comp were choppy with initial pressure amid the uninspired mood across the region although the losses were briefly pared owing to further reopening efforts in which Shanghai and Beijing scrapped COVID test requirements for more public venues, while reports also noted that China could announce 10 supplementary COVID measures as soon as Wednesday and could downgrade COVID to a category B management as early as January.
• US equity futures languished after the recent hawkish reaction to the hot ISM Services data.
• European equity futures were slightly softer with the Euro Stoxx 50 future down 0.3% after the cash market closed with losses of 0.5% yesterday.

FX

• DXY remained above the 105.00 level as it held on to the prior day’s gains following the hawkish reaction to the ISM Services data which topped all analysts' expectations, while Fed whisperer Timiraos recently warned that elevated wage pressures could lead the Fed to continue increasing rates to levels higher than investors currently expect.
• EUR/USD failed to recoup recent losses and fell back to a sub-1.0500 level owing to the firmer dollar.
• GBP/USD tested the 1.2200 handle but with the recovery limited after the recent underperformance in cyclical currencies, with sterling also not helped by this month's planned mass strike action and weak PMIs.
• USD/JPY extended on gains with a brief foray above 137.00 as the greenback remained in the driving seat.
• Antipodeans rebounded off lows with AUD supported after the RBA hiked rates by 25bps and signalled further rate hikes ahead which prompted an adjustment in CBA's forecast for the terminal rate to 3.35% from 3.10%.
• PBoC set USD/CNY mid-point at 6.9746 vs exp. 6.9773 (prev. 7.0384)

FIXED INCOME

• 10yr UST futures remained subdued after the bear flattening seen during the prior session owing to the hot ISM Services PMI data which fuelled some bets for a more aggressive Fed.
• Bund futures were contained beneath 142.00 and lacked direction following recent soft data releases from the bloc and comments from ECB’s Makhlouf who anticipates the central bank will likely opt for a 50bps hike in December and conduct further rate hikes next year.
• 10yr JGB futures traded rangebound after recent selling in global peers and mixed 30yr auction results.

COMMODITIES

• Crude failed to make any meaningful recovery following yesterday's selling pressure.
• An oil tanker jam has formed off Turkey after the start of the Russian oil price cap and four oil industry executives said Turkey has demanded new proof of insurance in light of the price cap, according to FT.
• White House firmly believes the Russian oil price cap will lock in a discount on Russian oil and does not believe it will have any impact on long-term global oil prices, while it said US President Biden will continue to evaluate the market needs as appropriate regarding oil.
• Spot gold remained lacklustre following the recent data-driven gains in the dollar and yields.
• Copper eked marginal gains with price action contained by the mixed risk appetite.

CRYPTO

• Bitcoin traded rangebound in which price action was around the USD 17,000 level.
• US FTC is reportedly investigating crypto firms over misleading advertising, according to Bloomberg.
• UK finalises plans to regulate the crypto industry which includes limits on foreign companies selling into the UK and provisions for how to deal with a collapse of companies, as well as restrictions on the advertising of products, according to FT.

NOTABLE ASIA-PAC HEADLINES

• Beijing city government said it no longer requires negative PCR test results for people entering supermarkets and commercial buildings, while it still requires a negative test result to enter internet cafes, bars, KTV lounges, gyms and elderly care institutions. It was also later reported that the Beijing capital airport no longer requires negative COVID test results from people entering the airport, according to Reuters.
• PBoC's recent RRR cut could push the 5-year LPR lower this month, according to Shanghai Securities News.
• BoJ Governor Kuroda said it is premature to debate specifics on the BoJ's monetary policy framework, when asked about board member Tamura's comments calling for a review of the current framework, while Kuroda added that when the achievement of the inflation target comes into sight, the BoJ will likely debate a path toward an exit from easy policy. Kuroda also said the benefits of the current monetary policy currently outweigh the costs and that the BoJ will continue QQE to ensure companies can smoothly raise wages.
• RBA hiked rates by 25bps to 3.10%, as expected, while it repeated that the board expects to increase interest rates further over the period ahead but is not on a pre-set course and that inflation in Australia is too high. RBA said the board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that, while its priority is to re-establish low inflation and return inflation to the 2%–3% target over time.

DATA RECAP

• Japanese All Household Spending MM* (Oct) 1.1% vs. Exp. 1.5% (Prev. 1.8%)
• Japanese All Household Spending YY* (Oct) 1.2% vs. Exp. 1.0% (Prev. 2.3%)
• Japanese Real Cash Earnings YY (Oct) -2.6% vs Exp. -2.1%, largest decline since June 2015
• Japanese Labour Cash Earnings YY (Oct) 1.8% vs Exp. 2.0% (Prev. 2.1%)
• Australian Current Account Balance (AUD)(Q3) -2.3B vs. Exp. 6.2B (Prev. 18.3B)
• Australian Net Exports Contribution (Q3) -0.2% vs. Exp. -0.5% (Prev. 1.0%)

GEOPOLITICS

RUSSIA-UKRAINE

• Kyiv reportedly used unmanned drones to strike two bases in the heart of Russia, while the drones were launched from Ukrainian territory and two planes were destroyed at one of the Russian bases with several more damaged, according to NYT citing a Ukrainian official.

OTHER

• North Korea ordered its military to fire artillery into the sea in response to South Korean drills, according to KCNA.
• China's Defence Ministry dismissed a Pentagon report from last month which stated that China would likely have a stockpile of 1,500 nuclear warheads by 2035 if it continues at the current pace of its nuclear build-up, while China dismissed the report as unfair "gesticulation" and speculation, according to Reuters.

EU/UK

NOTABLE HEADLINES

• ECB's Lane said he is confident that the EZ is near the peak of inflation but more hikes are needed, and added that inflation peak may have been reached or will come in early 2023 and the bulk of the work has been done.
• UK British rail workers union announced plans to strike between December 24th-27th and is putting an offer to members in Network Rail but recommended that its members reject the offer, while the smaller TSSA said it called off strike action planned for December. Furthermore, it said the offer from Rail Delivery Group was rejected, meaning industrial action in train operators remains on the cards unless progress can be made, according to Express & Star.
• Barclaycard UK November consumer spending rose 3.9% Y/Y vs prev. 3.5% increase in October.

NOTABLE HEADLINES

• UK BRC Retail Sales YY (Nov) 4.1% (Prev. 1.2%)
• UK BRC Total Sales Y/Y (Nov) 4.2% (Prev. 1.6%)