• APAC stocks tracked the advances on Wall Street whereby US stocks saw a slight unwinding of hawkish positioning post-Powell.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.6% after the cash market closed down 0.3% yesterday.
• DXY remains on a 103 handle, AUD gained post-CPI, EUR/USD, Cable and USD/JPY sit on 1.07, 1.21 and 132 handles respectively.
• Crude futures were pressured following a large surprise build of crude in private sector inventories.
• Looking ahead, highlights include EIA Inventories, Supply from Germany & US, Earnings from Boston Scientific.

US TRADE

• US stocks were firmer with a bias to the riskier sectors despite the move higher in yields and with moves framed around pre-CPI positioning amid a lack of major catalysts, while there was a slight unwinding of hawkish positioning after Fed Chair Powell provided very little in the way of relevant policy commentary.
• SPX +0.70% at 3,919, NDX +0.88% at 11,206, DJIA +0.56% at 33,704, RUT +1.49% at 1,823.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bowman (voter) said there is still a lot of work to do on inflation despite recent declines and she is committed to taking further actions to bring it back down with rate hike increments to be data dependent. Bowman also said she is looking for compelling signs inflation has peaked and more consistent indicators inflation is on a downward path, while she added the Fed needs to hold the policy rate there "for some time" when a sufficiently restrictive rate level is reached.
• Fed's Kashkari (voter) pushed back on market expectations of rate cuts in which he stated that "They are going to lose the game of chicken", according to WSJ.
• Fed Discount Rate Minutes noted that 9 of 12 Fed bank boards sought a 50bps discount rate hike in December. Federal Reserve bank directors reported that economic activity had remained steady or expanded modestly across sectors and districts overall, while several directors noted that consumer spending and demand continued to be strong, particularly for travel services.
• US Treasury Secretary Yellen told President Biden that she planned to stay on as Treasury Secretary and Biden welcomed the decision, according to WSJ citing White House officials.
• US, Canada and Mexico are to explore standards to develop hydrogen as a regional clean energy source, while they will forge regional supply chains and promote targeted investment in key industries of the future including semiconductors and EV batteries.

APAC TRADE

EQUITIES

• APAC stocks initially tracked the advances on Wall Street after Fed Chair Powell refrained from any major policy rhetoric and as participants looked ahead to upcoming US CPI data with hopes of softening price growth.
• ASX 200 tested the 7,200 level to the upside with the index led by outperformance in the mining and materials sectors, while participants also digested better-than-expected Retail Sales and a pickup in monthly inflation metrics.
• Nikkei 225 gained as earnings trickled in with outperformance in Yaskawa Electric after growth in its top and bottom lines, while there was encouragement from news that Fast Retailing will boost wages by as much as 40%.
• Hang Seng and Shanghai Comp were firmer for a bulk of the session after the PBoC pledged support measures including for the property sector and boosted its short-term liquidity efforts ahead of next week’s Lunar New Year celebrations, although gains were capped in the mainland after the recent mixed loans and aggregate financing data.
• US equity futures were uneventful (ES +0.1%) and sat near the prior day's best levels amid the lack macro of drivers.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.6% after the cash market closed down 0.3% yesterday.

FX

• DXY remained constrained with the index in a tight 103.10-103.38 range.
• EUR/USD was indecisive on a 1.07 handle and failed to benefit from the slight easing of growth concerns for the bloc in which EU’s Gentiloni noted eurozone GDP is to fall less than feared and Goldman Sachs also dropped its recession call.
• GBP/USD lacked firm direction with price action contained by resistance at the 1.2200 level.
• USD/JPY marginally extended on yesterday’s gains which had initially been facilitated by rising US yields with the pair lingering above the 132 mark.
• Antipodeans kept afloat with mild support from stronger-than-expected Australian Retail Sales data and the resurgence of monthly CPI which ANZ suggested reduces the likelihood of a pause from the RBA next month.
• PBoC set USD/CNY mid-point at 6.7756 vs exp. 6.7776 (prev. 6.7611)

FIXED INCOME

• 10yr UST futures rebounded from the prior day’s bear steepening with the recovery facilitated after a strong 3yr auction and unwinding of hawkish positioning post-Powell
• Bund futures clawed back some of the recent losses after having been pressured amid the easing of growth concerns and hawkish rhetoric on inflation from ECB's Schnabel.
• 10yr JGB futures returned to flat territory after rebounding from earlier losses, while mostly stronger results at the 30yr auction and the announcement of unscheduled purchase operations by the BoJ did little to spur prices.

COMMODITIES

• Crude futures were pressured following a large surprise build of crude in private sector inventories, albeit with losses contained amid the constructive risk tone and after upward revisions to EIA oil demand growth forecasts.
• US Energy Inventory Data (bbls): Crude +14.9mln (exp. -2.2mln), Gasoline +1.8mln (exp. +1.2mln), Distillate +1.1mln (exp. -0.5mln), Cushing +2.3mln.
• EIA STEO noted 2023 world oil demand growth forecast was raised by 50k BPD to a 1.05mln BPD Y/Y increase and the 2024 forecast is seen rising 1.72mln BPD to 102.2mln BPD.
• US Treasury Secretary Yellen said the first month of the Russian crude oil price cap is achieving its goals of keeping Russian oil on the market while limiting Russia's revenues, while she added that some Russian officials have admitted that the oil price cap has cut into Russia's energy revenues.
• Spot gold traded sideways.
• Copper futures was rangebound and held onto the prior day's spoils amid gains in stocks.

CRYPTO

• Bitcoin was marginally lower after recent upward momentum stalled just shy of the 17,500 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 65bln via 7-day reverse repos with the rate kept at 2.00% and it injected CNY 22bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 71bln net daily injection.
• Analysts noted there is room for China to cut RRR and interest rates this year, while analysts also see room for a rate cut in the property sector, according to China Securities Journal.
• BoJ offered to buy JPY 100bln in 1-3yr JGBs, JPY 100bln in 3-5yr JGBs, JPY 300bln in 5yr-10yr JGBs, JPY 200bln in 10yr-25yr JGBs and JPY 50bln in 25yr+ JGBs, while it also offered to buy an unlimited amount of JGBs at a fixed rate with maturities of 1yr-3yr and 3yr-5yr in an unscheduled announcement.

DATA RECAP

• Australian CPI YY (Nov) 7.3% vs Exp. 7.3% (Prev. 6.9%)
• Australian Trimmed Mean CPI YY (Nov) 5.6% vs Exp. 5.5% (Prev. 5.3%)
• Australian Retail Sales MM Final * (Nov) 1.4% vs. Exp. 0.6% (Prev. -0.2%, Rev. 0.4%)

GEOPOLITICS

• Russia's ambassador to the US commented that the US training of Ukrainian troops on Patriot systems confirms Washington's de facto participation in the conflict and that the US administration's goal is to inflict the most damage on Russia on the battlefield by the hands of Ukrainians, according to Reuters.
• Russia and Iran are working on a new shipping corridor to bypass sanctions and are looking to work with India, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• ECB's Centeno said they are approaching the end of the rate hike process and inflation may have some resistance in January and February but will fall again from March, while he added inflation is still too high.
• Head of France's CFDT Union said all unions will call for strikes and demonstrations on January 19th to protest against government pension reform plans and called on all workers to mobilise against reforms.
• Belgium's PM De Croo expressed concerns to European Parliament that the US was undermining EU industry with its Inflation Reduction Act and said the only answer to the IRA was to introduce similar subsidies, according to FT.