• The Fed delivered a widely expected 50bps rate hike and provided hawkish revisions to the dot plots.
• US stocks ultimately finished lower with the S&P 500 back below 4K, APAC stocks were subdued overnight.
• European equity futures were mildly lower with the Euro Stoxx 50 future down 0.4% after the cash market closed with losses of 0.3% yesterday.
• DXY was firmer overnight but sub-104 after swinging between gains and losses in the aftermath of the FOMC
• Looking ahead, highlights include US IJC, Retail Sales & Industrial Production, BoE, ECB, Norges Bank, SNB & Banxico Policy Announcements, European Council Meeting, Press Conferences with ECB's Lagarde, Norges Bank's Bache & SNB's Jordan.

US TRADE

• US stocks ultimately finished lower after wiping out the initial gains heading into the FOMC where the Fed delivered a widely expected 50bps rate hike and provided hawkish revisions to the dot plots with the terminal rate view raised to 5.1% from 4.6%. Furthermore, the SPX retreated below 4k as Fed Chair Powell began the press conference with a hawkish tone in which he noted there is still some ways to go and the Fed needs to see substantially more evidence to have confidence inflation is on a sustained downward path back to target, although there was some reprieve after Powell stated during the Q&A that he thinks that policy is getting to a pretty good place and close to sufficiently restrictive.
• SPX -0.60% at 3,995, NDX -0.79% at 11,740, DJIA -0.42% at 33,996, RUT -0.65% at 1,820.
• Click here for a detailed summary.

FOMC

• Fed hiked FFR by 50bps to 4.25-4.50%, as expected, through a unanimous decision and maintained its language that the Committee anticipates the ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2% over time and said recent indicators point to modest growth in spending and production. Fed also stated that inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, as well as broader price pressures.
• Fed raised its expectation of where rates will peak in which it now sees the terminal rate at 5.1% (in the 5.00-5.25% bracket) vs prev. 4.6% (the 4.50-4.75% bracket) projection in September which implies 75bps of more tightening in this cycle, while rates are anticipated to peak in 2023 but then decline with the FFR forecast at 4.1% by end-2024.
• Fed Chair Powell reiterated that the Fed is strongly committed to bringing inflation back to the 2% goal and said they have covered a lot of ground but noted that they have more work to do. Powell also said they expect that ongoing rate hikes are appropriate to get sufficiently restrictive, while he noted inflation so far for October and November showed a welcome reduction in the monthly pace of inflation but added that risks to inflation weighted to the upside and that it will take substantially more evidence to have confidence that inflation is on a sustained downward path.
• Fed Chair Powell said during the Q&A that they have increased estimates of the peak rate at each subsequent SEP this year and he can't say confidently that they won't upgrade the peak rate view at the next meeting too, depending on data. Furthermore, Powell stated that focus is on moving policy to a sufficiently restrictive stance but added that he thinks that policy is getting to a pretty good place and is getting close to sufficiently restrictive.

NOTABLE HEADLINES

• The majority of the US House voted to pass the one-week government funding bill, which was sent to the Senate, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks were subdued in the aftermath of the FOMC.
• ASX 200 was dragged lower by weakness in nearly all sectors but with losses cushioned by strong jobs data.
• Nikkei 225 declined but just about remained above the 28K level following strong trade numbers in which the value of both exports and imports reached a record for the month of November.
• Hang Seng and Shanghai Comp were negative after disappointing Chinese Industrial Production and Retail Sales data, while property and tech stocks were driving the underperformance in Hong Kong after the HKMA raised rates in lockstep with the Fed, while attention was also on the PBoC which conducted a CNY 650bln 1-Year MLF operation vs. CNY 500bln maturing but maintained the rate at 2.75%.
• US equity futures traded sideways (ES +0.1%) after price action quietened down from the Fed-induced volatility.
• European equity futures were mildly lower with the Euro Stoxx 50 future down 0.4% after the cash market closed with losses of 0.3% yesterday.

FX

• DXY was firmer overnight amid the subdued risk appetite although had swung between gains and losses in the aftermath of the FOMC with an immediate hawkish reaction after the Fed hiked rates by 50bps and raised the projection for the terminal rate to 5.1% from 4.6%, before reversing the gains during the press conference after Powell suggested that policy was getting close to sufficiently restrictive.
• EUR/USD faded recent gains as focus shifts to the ECB rate decision where the central bank is expected to hike by 50bps, while source reports recently noted that ECB forecasts will put inflation comfortably above 2% in 2024.
• GBP/USD pulled back on to a 1.23 handle with participants awaiting the BoE rate decision.
• USD/JPY gained marginally after data showed Japan’s Imports outpaced the surge in Exports.
• Antipodeans failed to benefit despite the better-than-expected Australian jobs and New Zealand GDP data.
• PBoC set USD/CNY mid-point at 6.9343 vs exp. 6.9325 (prev. 6.9535)

FIXED INCOME

• 10yr UST futures were flat and took a breather from yesterday’s choppy performance whereby price action was at the whim of the FOMC.
• Bund futures remained lacklustre after the recent selling pressure but with the downside limited by support at 140.00.
• 10yr JGB futures were slightly softer with prices contained by weaker results at the 20yr auction.

COMMODITIES

• Crude pulled back after recent gains but with the declines limited amid the ongoing Keystone pipeline disruption.
• TC Energy announced it communicated with regulators and customers about the restart of the Keystone pipeline system sections unaffected by the leak but noted that the affected segment remains isolated and will not be restarted until it is safe and they receive approval to do so, according to Reuters.
• Canada said it decided to revoke the time-limited Nord Stream sanctions waiver that was granted to allow turbines to be repaired in Montreal for return to Germany with the decision made working closely with Ukrainian, German and other European allies, according to Reuters.
• Spot gold retreated below the USD 1800/oz level amid a firmer dollar and heavy selling in silver.
• Copper was pressured post-Fed and disappointing Chinese activity data.

CRYPTO

• Bitcoin was slightly lower and slipped beneath the USD 18,000 level in the aftermath of the FOMC.

NOTABLE ASIA-PAC HEADLINES

• PBoC conducted CNY 650bln of 1-year MLF vs. CNY 500bln maturing with the rate kept at 2.75%.
• HKMA raised its base rate by 50bps to 4.75%, as expected, following the Fed rate hike, while Macau's Monetary Authority raised its base rate for the discount window by 50bps to 4.75%.
• China's stats bureau said China's economy maintained its recovery trend in November despite multiple pressures but added that the foundation of the economic recovery is still not solid, according to Reuters.
• US Senate passes bill to ban federal employees from using TikTok on government devices.

DATA RECAP

• Chinese Industrial Output YY (Nov) 2.2% vs. Exp. 3.6% (Prev. 5.0%)
• Chinese Retail Sales YY (Nov) -5.9% vs. Exp. -3.7% (Prev. -0.5%)
• Chinese Urban Investment (YTD)YY (Nov) 5.3% vs. Exp. 5.6% (Prev. 5.8%)
• Chinese China House Prices YY* (Nov) -1.6% (Prev. -1.6%)
• Japanese Trade Balance (JPY)(Nov) -227.4B vs. Exp. -1680.3B (Prev. -2162.3B, Rev. -2166.2B)
• Japanese Exports YY (Nov) 20% vs. Exp. 19.8% (Prev. 25.3%)
• Japanese Imports YY (Nov) 30.3% vs. Exp. 27.0% (Prev. 53.5%)
• Australian Employment (Nov) 64.0k vs. Exp. 19.0k (Prev. 32.2k, Rev. 43.1k)
• Australian Unemployment Rate (Nov) 3.4% vs. Exp. 3.4% (Prev. 3.4%)
• Australian Participation Rate (Nov) 66.8% vs. Exp. 66.6% (Prev. 66.5%)
• New Zealand GDP QQ (Q3) 2.0% vs. Exp. 0.9% (Prev. 1.7%, Rev. 1.9%)
• New Zealand GDP YY (Q3) 6.4% vs. Exp. 5.5% (Prev. 0.4%, Rev. 0.3%)

GEOPOLITICS

• US is planning to send Ukraine advanced electronic equipment that converts unguided aerial munitions into "smart bombs", according to officials cited by Washington Post.
• US defence firms are in talks with Vietnam to sell helicopters and drones, while military deals with the US would signal a shift away from Vietnam's reliance on Russia, according to Reuters.

EU/UK

NOTABLE HEADLINES

• UK PM Sunak eyes anti-strike laws which he vows would protect lives and livelihoods, according to Daily Mail.
• German Chancellor Scholz commented on European Commission President Von Der Leyen's idea of a sovereignty fund in which he noted that they still have a lot of money that has not been disbursed.