• APAC stocks traded positively throughout most of the session but bourses later drifted off best levels; the US closed in the green after some FOMC-related volatility
• FOMC December minutes highlighted how no Fed official sees a rate cut in 2023 albeit there was no discussion about the magnitude of the hike in February
• DXY was choppy and briefly dipped under 104.00 to a session low of 103.98 before reversing to print an overnight peak; JPY outperformed among G10s and high-betas lagged
• Republican McCarthy lost six rounds of voting for the post of Speaker of the House. House voted to adjourn until noon on Thursday. McCarthy proposed key concessions.
• Amazon (AMZN) confirmed plans to cut just over 18,000 roles (vs exp. "more than 17,000", vs prev. guided 10,000), according to Bloomberg.
• Looking ahead, highlights include German Trade Balance, EZ Construction PMI, UK and US Services and Composite Final PMIs, EZ PPI, US Challenger Layoffs, Canadian Trade Balance, US IJC, US EIA Inventories, speeches from Fed's Bostic and Bullard, and supply from the UK

US TRADE

• US stocks closed in the green on Wednesday although index lows and highs were made before midday in NY, whilst some volatility was seen on the release of the FOMC minutes.
• SPX +0.75% at 3,853, NDX +0.48% at 10,915, DJIA +0.40% at 33,269, RUT +1.25% at 1,772
• Click here for a detailed summary.

FOMC MINUTES

• The minutes from the December meeting were in fitting with Fed commentary, highlighting how no Fed official sees a rate cut in 2023 albeit there was no discussion about the magnitude of the hike in February.
• The minutes did reveal participants were wary that an unwarranted easing in financial conditions would complicate their effort to restore price stability while several noted the median view on the dot plot, which tracked notably above market expectations, underscores the Fed's commitment to return inflation to target.
• On inflation, participants generally indicated that upside risks to the inflation outlook remained a key factor shaping the outlook for policy. A couple of participants noted that risks to the inflation outlook were becoming more balanced. Participants welcomed inflation drops in October and November but concurred it would take "substantially more evidence" of progress to be confident of a sustained downward path.
• Many officials highlighted the need to balance two-sided risks: 1) Insufficiently restrictive monetary policy could cause inflation to remain above target for longer than anticipated, leading to unanchored inflation expectations and eroding purchasing power. 2) The lagged cumulative effect of policy tightening could end up being more restrictive than is necessary and lead to an unnecessary reduction in economic activity. Note, Bloomberg sentiment data suggested the December minutes were modestly more hawkish than November.

NOTABLE HEADLINES

• Republican McCarthy lost six rounds of voting for the post of Speaker of the US House of Representatives. US House voted (216-214) to adjourn until noon on Thursday.
• US Republican McCarthy proposed key concessions, according to CNN's Raju, "This still likely won’t get him to 218, per several GOP sources. But it will close the gap"
• Amazon (AMZN) confirmed plans to cut just over 18,000 roles (vs exp. "more than 17,000", vs prev. guided 10,000), according to Bloomberg. "That would represent the most reductions revealed so far at a major technology company", according to WSJ. Amazon has a total workforce of around 1.5mln.
• Exxon (XOM) said Q4 2022 upstream earnings were negatively impacted by the change in liquids and gas prices. Liquids saw a negative impact of USD 1.3-1.7bln vs Q3, and the change in gas prices saw a negative impact of USD 2.0-2.4bln vs Q3). Losses were mitigated by upstream mark-to-market derivative gains of as much USD 1.5bln, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded positively throughout most of the session but bourses later drifted off best levels.
• ASX 200 was initially buoyed by gold miners, but the index briefly dipped into the red as the yellow metal waned.
• Nikkei 225 faded the bulk of its gains after approaching levels close to 26,000, whilst most of the support emanated from its Banking sector.
• Hang Seng and Shanghai Comp were firmer from the open and Hong Kong initially outperformed with Tech leading the gains, whilst China said it will gradually reopen the border between Hong Kong and the Mainland on January 8th and will increase flights between the Mainland, Hong Kong, and Macau.
• US equity futures were choppy (ES -0.1%) but held a downward bias throughout most of the session after resuming trade flat.
• European equity futures are indicative of a slightly softer open with Euro Stoxx 50 -0.1% after cash markets closed higher by 2.4% yesterday.

FX

• DXY was choppy and briefly dipped under 104.00 to a session low of 103.98 before reversing to print its overnight peak. The weakness seen in early APAC hours was seemingly a function of a firmer JPY at the time.
• JPY strengthened in early APAC hours with some attributing the move to expectations of a more hawkish BoJ in April following the rhetoric seen in December last year. JPY later trimmed the gains and USD/JPY climbed back above 132.00 from a 131.69 Asia low.
• EUR/USD rose back above its 21 DMA (1.0612) while GBP/USD topped out at 1.2077 as EUR/GBP reclaimed 0.8800+ status.
• High beta currencies underperformed with AUD and CAD the laggards amid a pullback in commodity prices.
• PBoC set USD/CNY mid-point at 6.8926 vs exp. 6.8955 (prev. 6.9131); strongest since September 2nd 2022.

FIXED INCOME

• 10yr UST futures were flat following the bid seen on Wall Street on Wednesday amid tumbling oil prices and soft European inflation data.
• Bund futures were on a softer footing intraday following the prior day’s strength.
• 10yr JGB futures were firmer with the corresponding yield under 0.45%, whilst earlier in the session the 20yr JGB yield briefly rose to 1.35% - the highest since October 2014.
• First 10yr JGB Auction of 2023: Japan sold JPY 2.7tln 10yr JGBs: b/c 4.76x (prev. 6.03x), average yield 0.50% (prev. 0.25%).

COMMODITIES

• Crude futures consolidated with mild gains in APAC hours after both contracts settled lower by over USD 4/bbl on Wednesday, with desks pointing to ongoing global demand concerns, highlighted by the weak ISM manufacturing data.
• Spot gold moved inversely to the Dollar and eventually gave up earlier gains and meandered around USD 1,850/oz.
• Base metal futures eventually traded lower as stocks trimmed gains and the Dollar recovered.
• Colonial Pipeline said Line 3 is currently down for unscheduled maintenance, and downstream schedules will be impacted by the downtime, Line 3 is expected to restart on January 7th; the remainder of the system will operate as normal, according to Reuters.
• US Private Inventory Data (bbls): Crude +3.3mln (exp. +1.2mln), Cushing +0.7mln, Gasoline +1.2mln (exp. -0.5mln), Distillates -2.4mln (exp. -0.4mln)
• Occidental (OXY) said Q4 output was impacted by a combined 10mln BOEPD by North American winter storm Elliott, according to Reuters.
• Saudi Arabia kept its oil exports steady in December, according to Bloomberg citing officials.

CRYPTO

• Bitcoin was uneventful and traded flat at around USD 16,800 whilst Ethereum remained near USD 1,250.
• US Prosecutor told FTX bankruptcy judge the US DoJ is in the process of seizing Robinhood Markets (HOOD) shares that are subject to BlockFi claims, according to Reuters.

NOTABLE ASIA-PAC HEADLINES

• The border between Hong Kong and Mainland China is to open on January 8th, according to the Chinese State Department; China will no longer require COVID PCR tests upon arrival, according to a statement cited by Reuters. China said it will increase flights between the Mainland, Hong Kong, and Macau
• EU countries have failed to agree on a united policy on pre-departure testing for travellers from China. They could only agree to “strongly encourage” testing. It is understood that most member states will do so, according to journalist Keating.
• Samsung Electronics (005930 KS) Consumer Products CEO expects the tech slump to continue through 2023, according to WSJ.
• China reported 1 COVID death in the Mainland on Jan 4th (vs. 5 a day prior), according to Reuters.
• PBoC injected CNY 2bln via 7-day reverse repos with the rate maintained at 2.00%; daily net drain CNY 356bln
• Upward revisions to BoJ's inflation forecast are unlikely to trigger immediate rate hikes, according to Reuters sources. BoJ is said to be increasingly focused on super core CPI in gauging price trends; likely to raise FY22 and FY23 forecasts

DATA RECAP

• Chinese Caixin Services PMI (Dec) 48.0 (Prev. 46.7)
• Chinese Caixin Composite PMI (Dec) 48.3 (Prev. 47.0)
• Australian Services PMI Final (Dec) 47.3 (Prev. 46.9)
• Australian Composite PMI Final (Dec) 47.5 (Prev. 47.3)
• Japanese Monetary Base YY (Dec) -6.1% vs Exp. -3.2% (Prev. -6.4%)

GEOPOLITICS

• The US is to send a delegation of trade and economic officials to Taiwan in efforts to bolster commercial ties, according to FT citing a US official.
• US President Biden said he is concerned with how China is handling COVID-19 right now and calls on China to be more forthcoming with COVID-19 data, according to Reuters.
• An oil tanker chartered by Chevron (CVX) was reportedly loading Venezuelan crude oil for delivery to the United States. "This is the first such transfer in four years amid sanctions. It is part of a debt settlement program", according to TankerTrackers.

EU/UK

NOTABLE HEADLINES

• UK PM Sunak is poised to announce minimum strike legislation as soon as Thursday, according to Times' Swinford; "It will enable employers to sue unions and sack employees if they refuse to accept". "Hearing six sectors covered - NHS, schools, rail, borders, fire, nuclear".