• European bourses are under modest pressure, Euro Stoxx 50 -0.3%, as the complex lifts off post-BoJ lows in limited newsflow.
• JPY is the standout outperformer after the BoJ widened the 10yr yield band, sending USD/JPY to a test of 132.00 vs 137.00+ initial levels.
• DXY has been pushed below 104.00 to the modest benefit of G10 peers across the board; though, JPY-cross action is limiting this.
• Core debt has bounced from worst levels, though remains heavily hampered with yields bid and the curve steepening.
• Crude has recovered from its initial downside, currently posting modest upside; Dutch TTF cools as we await ICE's review
• Looking ahead, highlights include Canadian Retail Sales, US Building Permits, EZ Consumer Confidence.

EUROPEAN TRADE

EQUITIES

• European bourses are under modest pressure, Euro Stoxx 50 -0.3%, as the complex lifts off post-BoJ lows in limited newsflow.
• US futures are moving in tandem with the above, ES -0.1%, ahead of a handful of stateside data prints.
• JPMorgan lowers its Apple (AAPL) iPhone volume forecasts for the December quarter to around 70mln (prev. forecast ~74mln).
• Click here for more detail.

FX

• JPY is the standout outperformer after the BoJ widened the 10yr yield band, sending USD/JPY to a test of 132.00 vs 137.00+ initial levels.
• Amidst this, the DXY has been pushed below 104.00 to the modest benefit of G10 peers across the board.
• Though, the read across from the USD's downside to peers is being hampered somewhat by the pronounced action in JPY-crosses.
• Elsewhere, antipodeans are the incremental laggards following the ANZ survey and post-RBA minutes, which has a dovish tilt.
• PBoC sets USD/CNY mid-point at 6.9861 vs exp. 6.9862 (prev. 6.9746)
• Click here for more detail.

Notable FX Expiries, NY Cut:

• Click here

FIXED INCOME

• Benchmarks have bounced from BoJ induced worst levels with modest assistance from German PPI and UK supply.
• However, core debt is lower by around 100 ticks for Bunds and Gilts, with the German 10yr approaching 2.3% at best.
• Stateside, USTs are directionally in-fitting though magnitudes are slightly more contained ahead of the US session, yields bid across the curve and bear-steepening.
• Click here for more detail.

COMMODITIES

• Crude benchmarks slipping in tandem with broader sentiment initially and in the hours since have pared this pressure and are now posting upside just shy of USD 1.0/bbl.
• Currently, Dutch TTF Jan’23 remains under modest pressure, but is yet to slip below the EUR 100/MWh mark.
• Germany's BDEW (energy industry association) says it is concerned about the EU gas price cap, it needs monitoring and adjusting if results in too little gas reaching Europe.
• The yellow metal is a handful of ounces above the USD 1800/oz handle while base metals are firmer in action that is for the most part in-fitting with the above risk tone/dynamics.
• Click here for more detail.

NOTABLE HEADLINES

• ECB's Villeroy says France should be able to avoid a recession, any recession would be temporary.
• ECB's Vasle says the economic slowdown won't notably ease inflation.
• ECB's Muller says rate hikes so far are not enough; hard to say what the terminal rate should be.
• ECB's Kazimir says monetary policy should tighten at a stable pace

NOTABLE DATA

• German Producer Prices YY (Nov) 28.2% vs. Exp. 30.6% (Prev. 34.5%); MM (Nov) -3.9% vs. Exp. -2.5% (Prev. -4.2%)

NOTABLE US HEADLINES

• Steel Dynamics (STLD) is to replace ABIOMED (ABMD) in the S&P 500 effective prior to the market open on December 22nd, according to S&P Dow Jones Indices.
• US Congress' USD 1.7tln FY23 funding bill has been introduced; 885bln for defense, 772bln for non-defense discretionary spending; lawmakers incl. Boeing (BA) 737 Max certification extension and USD 2bln for Taiwan weapons purchases within the proposed funding bill.
• 6.3 magnitude earthquake occurs in the northern California regions, via USGS.

GEOPOLITICS

• North Korea said Japan's counterattack capabilities are effectively pre-emptive strike capabilities; said Japan's new security strategy is bringing security crisis in the region. North Korea said it has the right to take "decisive" military measures to protect its rights in response to the changing security environment, via KCNA.

CRYPTO

• Bitcoin is firmer to the tune of 1.0%, though once again remains within relatively narrow ranges.

APAC TRADE

BOJ

STATEMENT

• BoJ unexpectedly tweaked its Yield Curve Control (YCC) in which it widened the 10yr yield band to +/-0.5% (prev. +/-0.25%) and unexpectedly announced it is to increase bond purchases to JPY 9tln/m (prev. JPY 7.3tln/m) in Q1. The BoJ kept its rate unchanged at -0.10% and maintained 10yr JGB yield target of around 0% as expected. The decision on the YCC was unanimous. The adjustment is intended to “improve market functioning and encourage a smoother formation of the entire yield curve while maintaining accommodative financial conditions,” the central bank said. BoJ said it is to make nimble responses for each maturity by increasing the amount of purchases even more and conducting fixed-rate purchases operations when deemed necessary. BoJ maintained its rate guidance. Click here for the detailed headline

GOVERNOR KURODA

YCC:

• Market functionality was decreasing. Domestic market has been hit by volatility abroad. Decision was made today as deteriorating market functions could threaten corporate financing.
• Decision is not an exit of YCC or a change in policy, appropriate to continue easing policy.
• There is no need to further expanding the allowance band, not likely that the market calls for another increase of the yield cap maximum limit.

Broader Policy:

• It is too early to debate the exit to current monetary policy; today's decision is not a rate hike.
• Won't hesitate to ease monetary policy further if necessary.
• No intention to hike rates or tighten policy. Not thinking about revising the 2013 gov't-BoJ joint statement.

OTHER

• BoJ announced an unscheduled bond operation: BoJ offered to buy JPY 100bln in up to 1-3yr JGBs, JPY 100bln in 3-5yr JGBs, JPY 300bln in 5-10yr JGBs and JPY 100bln in 10-25yr, according to Reuters. BoJ to conduct unlimited bond buying in the 1-5yr tenors, according to Bloomberg.
• Japanese Finance Minister Suzuki said it is not true that the government and the BoJ have decided on a policy to revise its joint statement, according to Reuters.
• Japanese Economy, Trade, and Industry Ministry Nishimura said it is important to continue carrying out economic revitalisation based on the joint statement with the BoJ, according to Reuters.
• Japan Securities Clearing Corporation has issued an emergency margin call re. JGB futures.

EQUITIES

• APAC stocks traded lower across the board with the broader risk profile hit by the BoJ's unexpected tweak to its Yield Curve Control.
• Nikkei 225 fell over 2.5% as it reacted to the BoJ's move, with the index briefly dipping under 26,500, although bank stocks soared.
• ASX 200 was dragged lower by its Tech and IT sectors whilst Banks and Utilities were the better performers.
• Hang Seng and Shanghai Comp conformed to the downbeat tone across the equity market, with the former seeing its housing stocks slip after the PBoC opted to maintain its 5yr LPR unchanged vs some expectations for a cut.

NOTABLE ASIA-PAC HEADLINES

• RBA Minutes (Dec): Board considered several options for the cash rate decision at the December meeting: a 50bps increase; a 25bps increase; or no change in the cash; members also noted the importance of acting consistently. The Board did not rule out returning to larger increases if the situation warranted. Click here for the detailed headline
• PBoC maintained the 1yr and 5yr Loan Prime Rates (LPRs) at 3.65% and 4.30% respectively, as expected, according to Bloomberg.
• BoK Governor said the board believes it is premature to cut rates. BoK said consumer inflation is to gradually slow after hovering around 5% for some time; uncertainty is high over how swiftly consumer inflation will slow, according to Reuters. BoK Governor said the risk of USD/KRW rate surging at an unusual pace has decreased.
• China reports five COVID-related deaths in the mainland on Dec 19 vs two a day earlier, according to Reuters.
• Hong Kong Chief Executive Lee said Hong Kong will further ease social distancing measures, according to Bloomberg; subsequently, Hong Kong Health Authorities are to drop the rapid antigen COVID test requirement to enter bars/nightclubs from Thursday, no capacity limit on such venues.
• Japan is reportedly mulling issuing JPY 500bln of green transformation economic transition bonds (GX bonds) in FY23, according to Japanese press Yomiuri.
• Japanese government reportedly looking to issue around JPY 35.5tln of new JGBs for FY23/24, according to Reuters sources.
• PBoC injected CNY 5bln via 7-day reverse repos with the rate maintained at 2.00%; injects CNY 141bln via 14-day reverse repos with the rate maintained at 2.15%; daily net injection CNY 144bln.

DATA RECAP

• New Zealand ANZ Business Outlook (Dec) -70.2% (Prev. -57.1%); Own Activity (Dec) -25.6% (Prev. -13.7%)