• European bourses are under pressure, Euro Stoxx 50 -0.5%, in a continuation of the tepid APAC tone amid minimal newsflow.
• Goldman Sachs lifts its 2023 EZ GDP forecast to 0.6% (prev. -0.1%), no longer expects a euro-area recession.
• US futures are similarly contained and are diverging slightly around the unchanged mark pre-Powell; newsquawk primer available.
• Dollar is trying to regroup ahead of Fed Chair Powell, but DXY is heavy on the 103.000 handle and mixed vs majors.
• Bonds retreat further from peaks in consolidation and consideration of heavy conventional and syndicated issuance.
• Crude benchmarks spent much of the European morning little changed, but have recently broken out of and eclipsed initial parameters, with upside of circa. USD 0.50/bbl as such.
• Looking ahead, highlights include a speech from Fed's Powell & supply from the US.

EUROPEAN TRADE

EQUITIES

• European bourses are underpressure, Euro Stoxx 50 -0.5%, in a continuation of the tepid APAC tone amid minimal newsflow.
• US futures are similarly contained and are diverging slightly around the unchanged mark pre-Powell.
• Amazon (AMZN) intends to close three UK warehouses (will impact 1,200 jobs), according to the PA.
• Click here for more detail.

FX

• Dollar is trying to regroup ahead of Fed Chair Powell, but DXY is heavy on the 103.000 handle and mixed vs majors.
• Kiwi marginally outperforming as Aussie retreats with Yuan after some Chinese officials warn about 2-way volatility in 2023.
• AUD/NZD cross reverses towards 1.0800 from 1.0860+, USD/CNH bounces from 6.7585 to almost 6.8000.
• Euro consolidates on a 1.0700 handle vs Buck, but Pound runs into resistance pips from 1.2200
• PBoC set USD/CNY mid-point at 6.7611 vs exp. 6.7613 (prev. 6.8265)
• Click here for more detail.

FIXED INCOME

• Bonds retreat further from peaks in consolidation and consideration of heavy conventional and syndicated issuance.
• Bunds sub-137.00 and very close to Monday's base, Gilts mostly under 102.00 and T-note below par within a 114-19+/11 range.
• Focus on Central Bank speakers at a Riksbank symposium where ECB's Schnabel has already been hawkish.
• Saudi Arabia has begun marketing a three-part USD bond, via Bloomberg.
• Click here for more detail.

COMMODITIES

• Crude benchmarks spent much of the European morning little changed, but have recently broken out of and eclipsed initial parameters, with upside of circa. USD 0.50/bbl as such.
• Barclays remains constructive on the space reiterating its Brent 2023 forecast of USD 98/bbl; writing there is the potential for USD 15-25/bbl of downside if the slump in global manufacturing worsens..
• Goldman Sachs cut its Summer 2023 TTF price forecast by EUR 80 to EUR 100/MWh, citing exceptionally warm realised and forecast weather, as well as strong energy conservation.
• Iraq's December crude production was unchanged from November at 4.43mln BPD; in-line with its OPEC+ quota.
• Large Chinese nickel producer Tsingshan is in talks with struggling Chinese copper plants regarding processing its material which could double Chinese refined nickel output this year, according to Mining.com.
• LME says further work will be required to prepare and communicate to the market a detailed implementation plan re. the Oliver Wydman review.
• Spot gold and silver are diverging a touch and remain in close proximity to the unchanged mark in similarly narrow ranges, base metals are generally contained though the negative APAC bias remains in play.
• Click here for more detail.

NOTABLE HEADLINES

• Goldman Sachs lifts its 2023 EZ GDP forecast to 0.6% (prev. -0.1%), no longer expects a euro-area recession.
• ECB's Schnabel says greening monetary policy requires structural changes to our monetary policy framework rather than adjustments to our reaction function. Preliminary inflation data for December point to a persistent build-up of underlying price pressures even as energy price inflation has started to subside. Interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive.
• WHO Emergency Committee to meet re. COVID on January 27th.

NOTABLE DATA

• US NFIB Business Optimism Index (Dec) 89.8 (Prev. 91.9)
• UK BRC Retail Sales Like-For-Like YY (Dec) 6.5% (Prev. 4.1%); Total Sales YY (Dec) 6.9% (Prev. 4.2%)
• Barclaycard UK December consumer spending rose 4.4% Y/Y.
• Norwegian Consumer Price Index MM (Dec) 0.1% vs. Exp. 0.3% (Prev. -0.2%); YY (Dec) 5.9% vs. Exp. 6.1% (Prev. 6.5%)
• Norwegian Core Inflation MM (Dec) 0.4% vs. Exp. 0.2% (Prev. -0.1%); YY (Dec) 5.8% vs. Exp. 5.7% (Prev. 5.7%)

NOTABLE US HEADLINES

• Click here for the US Early Morning note.
• Click here for the Fed Chair Powell primer.

GEOPOLITICS

• US Pentagon is mulling sending Stryker armoured vehicles to Ukraine in an upcoming aid package, according to people familiar with the matter cited by Politico.
• UK is willing to send battle tanks to Ukraine with PM Sunak supportive of Challenger II supply that could provide Ukrainian President Zelensky with a ‘knockout punch’, according to The Telegraph.
• Russian Defence Minister Shoigu says Moscow will develop its nuclear triad and be the main guarantee of Russian sovereignty, according to Interfax.

CRYPTO

• Bitcoin is support above the USD 17k mark, holding towards the top-end of USD 17133-17294 parameters.

APAC TRADE

• APAC stocks traded mostly lower as the risk appetite in the region stalled following a similar handover from Wall St where the major indices failed to sustain early gains despite a further dovish Fed repricing.
• ASX 200 was lacklustre amid weakness in industrials and mining stocks, although price action was rangebound amid the lack of any major fresh drivers.
• Nikkei 225 outperformed as it played catch-up to Monday’s advances on return from the extended weekend but with upside capped as participants also reflected on weak Household Spending and firm Tokyo CPI data releases.
• Hang Seng and Shanghai Comp were indecisive as the border reopening euphoria faded and despite reports that China will cut VAT for small businesses, while the PBoC also continued to drain liquidity.

NOTABLE ASIA-PAC HEADLINES

• Chinese state media noted that the COVID-19 wave is past its peak in many parts of China.
• China's embassy in South Korea stopped issuing short-term visas for Korean citizens visiting China and said it will adjust policy subject to the lifting of South Korea's discriminatory entry restrictions against China, according to Reuters. Subsequently, the embassies in Japan took the same step.
• China's State Planner publishes registration rules for mid- & long-term foreign borrowings by companies, aimed at promoting orderly offshore financing.
• PBoC is to increase financial support for domestic demand and the supply system, to guide the balance sheets of high-quality real estate enterprises back to a safe range, ensure steady and orderly property financing.

DATA RECAP

• Tokyo CPI YY (Dec) 4.0% vs. Exp. 4.0% (Prev. 3.8%)
• Tokyo CPI Ex. Fresh Food YY (Dec) 4.0% vs. Exp. 3.8% (Prev. 3.6%); Ex. Fresh Food & Energy YY (Dec) 2.7% vs. Exp. 2.7% (Prev. 2.5%)
• Japanese All Household Spending MM (Nov) -0.9% vs. Exp. -0.5% (Prev. 1.1%); YY (Nov) -1.2% vs. Exp. 0.5% (Prev. 1.2%)