• APAC stocks traded mostly higher albeit with some of the gains in the region capped amid mixed COVID-related headlines.
• China flagged nearly 60k COVID deaths since easing restrictions in December and noted severe hospitalisations remained high but had already peaked.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed up 0.6% on Friday.
• DXY sits just below the 102 mark, EUR/USD and GBP/USD held on to 1.08 and 1.22 handles respectively.
• Note, US markets are closed for MLK Day. 
• Desk Notice, MLK Day: Open for Asia-Pac coverage as usual on Sunday 15th January at 22:00GMT/17:00ET with EU coverage to start at 06:30GMT/01:30ET on Monday 16th January. The desk will shut at 18:00GMT/13:00ET and reopen the same day for the beginning of Asia-Pac coverage at 22:00GMT/17:00ET.

US TRADE

• US stocks were higher on Friday ahead of the long weekend as banks kicked off the Q4 earnings season and following the University of Michigan consumer survey which saw 1yr inflation expectations decline to 4% from 4.4%, although the 5-10yr gauge edged up to 3.0% from 2.9%, similar to the NY Fed's survey. Furthermore, the improved global growth outlook continues to be a theme which saw oil prices close the week at highs amid improved China reopening/demand and with an improvement also to the outlook in Europe.
• SPX +0.40% + 3,999, NDX +0.71% at 11,541, DJI +0.33% at 34,303, RUT +0.58% at 1,887.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden approved a disaster declaration for Alabama and ordered federal aid for areas impacted by tornadoes last week, according to Reuters.
• US House Speaker McCarthy said there is no doom regarding the debt limit and that the US will not reach the debt limit really until the summer. McCarthy added that he wants to sit down with US President Biden to discuss government spending and he believes Democrats would agree to a spending cap, according to a Fox News interview.

APAC TRADE

EQUITIES

• APAC stocks traded mostly higher albeit with some of the gains in the region capped amid mixed COVID-related headlines and ahead of key events including the BoJ policy meeting and economic growth data from China.
• ASX 200 was led by tech amid a broad positive mood which briefly lifted the index to just shy of 7,400.
• Nikkei 225 underperformed with sentiment pressured after firmer-than-expected PPI data and cautiousness ahead of the BoJ policy meeting this week with participants wary of another curveball by the central bank.
• Hang Seng and Shanghai Comp were positive for most of the session after the PBoC provided funds through OMOs and its MLF facility with rates left unchanged, although momentum was initially slow to get going after China flagged nearly 60k COVID deaths since easing restrictions in December and noted severe hospitalisations remained high but had already peaked.
• US equity futures linger around Friday's highs (ES unch.) but with price action limited by the US holiday.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 +0.5% after the cash market closed up 0.6% on Friday.

FX

• DXY resumed its retreat and fell beneath 102.00 to its weakest level since June last year. Note, Monday is set for thinned volumes owing to the US holiday.
• EUR/USD benefitted from the dollar weakness with the single currency at its highest since April last year.
• GBP/USD was firmer with reports noting that the UK could shelve proposed legislation that would rip up some Brexit arrangements for Northern Ireland as a sign of goodwill in negotiations with the EU.
• USD/JPY remained pressured after firmer-than-expected PPI data and with analysts not ruling out a surprise by the BoJ at its meeting this week.
• Antipodeans gained against the buck in which AUD/USD briefly topped 0.7000 for the first time since August.
• PBoC set USD/CNY mid-point at 6.7135 vs exp. 6.7090 (prev. 6.7292)
• Turkish Central Bank set RRR at 0% for TRY deposits with maturities longer than 3 months in a move that seeks to encourage longer maturity in TRY deposits, according to Reuters.

FIXED INCOME

• 10yr UST futures traded rangebound after Friday’s bear flattening and with US cash markets to remain closed on Monday for holiday.
• Bund futures were uneventful but with downside stemmed by support at the 138.00 level.
• 10yr JGB futures gained amid the BoJ additional buying operations for today as the 10yr JGB yield breached the central bank’s ceiling for a second day.

COMMODITIES

• Crude futures pulled back from recent gains after WTI hit resistance at around USD 80/bbl.
• UAE Energy Minister said OPEC+ production capacity is down about 3.7mln bpd due to less investment in the oil sector and OPEC+ is facing volatility in oil markets on both supply and demand sides due to European sanctions. UAE Energy Minister said the world needs to think about how to enable companies to produce more gas to make it available and noted the differential between spot LNG and term contract prices is a problem but added that gas prices will stabilise to something reasonable for both buyers and sellers as seen in the oil market, according to Reuters.
• Iran restricted supply of cheap oil to Syria and told the latter’s officials that they would have to pay more for additional shipments of oil which will double to a market rate of over USD 70/bbl, according to WSJ.
• OPEC+ is watching Chinese demand and the impact of sanctions on Russia, while delegates are said to be cautious regarding setting new policy although it seems there is more reason to expect an increase of output, according to Energy Intel's Bakr.
• Spot gold marginally extended on Friday's advances above the USD 1900/oz level amid a softer dollar.
• Copper futures are slightly softer with commodities tentative amid the absence of US participants on Monday and as markets await tomorrow's GDP data from China.

CRYPTO

• Bitcoin extended on last week's rally with prices back above the 21,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 779bln via 1-year MLF vs CNY 700bln maturing with the rate maintained at 2.75%, while the PBoC injected CNY 82bln via 7-day reverse repos and CNY 74bln via 14-day reverse repos with the rate kept at 2.00% and 2.15%, respectively.
• Chinese health official said China’s COVID fever and emergency hospitalisations have already peaked and the number of hospitalised COVID patients is continuing to decline but added that hospitalised severe cases remain high with the majority being old people. Furthermore, the official noted that hospitalised severe COVID patients reached a peak of 128k on January 5th and stood at 105k on January 12th, while China also reported nearly 60k COVID-related deaths since early December following complaints it was failing to release data, according to Reuters.
• WHO said it welcomes COVID-19 data from China and it requested a more detailed breakdown of the data by province over time, while it said it will continue to work with China, providing technical advice and support, as well as engaging in analysing the situation, according to Reuters.
• A study published in the journal Nature Medicine claimed that nearly all of Beijing’s 22mln residents will be infected with COVID-19 by the end of January, according to Hindustan Times.
• China and Hong Kong resumed their high-speed rail line for the first time after 3 years of COVID restrictions, according to Reuters.
• Japanese PM Kishida said the G7 must address responses to downside risks to the global economy and said the outlook for the global economy is becoming increasingly uncertain. Kishida said he wants to restore bilateral relations with South Korea to a healthy state and he believes China and Japan should engage in dialogue, according to Reuters.
• Former BoJ executive director Momma said the central bank may consider removing YCC as soon as this week’s meeting but it wouldn’t mean a withdrawal of easy policy and instead would be a change of method, according to News Socra.

DATA RECAP

• Chinese House Prices YY* (Dec) -1.5% (Prev. -1.6%)
• Japanese Corp Goods Price MM (Dec) 0.5% vs. Exp. 0.3% (Prev. 0.6%, Rev. 0.8%)
• Japanese Corp Goods Price YY (Dec) 10.2% vs. Exp. 9.5% (Prev. 9.3%, Rev. 9.7%)

GEOPOLITICS

• Russian President Putin said everything with the special military operation is going to plan and he hopes Russian soldiers will deliver more results on the battlefield, while he added that the economic situation in Russia is stable and much better than forecasts, according to Interfax.
• Russian Defence Ministry said Russian forces carried out missile strikes against Ukrainian targets in which Russian missiles hit all identified targets and it stated that Russian forces have made gains towards the Ukrainian city of Bakhmut, according to Interfax and TASS.
• Ukrainian President Zelensky said Russian missile attacks disrupted power in Kyiv and Kharkiv regions and stated that the only way to stop further deaths from ‘Russian terror’ is to supply more weapons to Ukraine. There were also comments from a Ukrainian presidential official that the Russian missile attack hit a residential apartment block in Dnipro and the Energy Minister stated that the approaching days will be difficult after Russian missiles hit energy infrastructure in several regions on Saturday, according to Reuters.
• Ukraine’s top general said Russia fired 28 cruise missiles and 5 guided air-to-surface missiles on Saturday, while Ukraine shot down 18 cruise missiles and 3 guided air-to-surface missiles.
• Russia cancelled a scheduled prisoner exchange swap at the last minute which was scheduled for Saturday, according to Ukrainian officials.
• Belarussian security council said that upcoming joint air force drills with Russia are defensive in nature and Belarus also stated that it was ready for any provocative actions by Ukraine, according to Reuters.
• UK PM Sunak spoke with Ukrainian President Zelensky and agreed to seize the moment with an acceleration of global military and diplomatic support to Ukraine. The UK government later confirmed that the UK will send 14 Challenger 2 tanks and around 30 self-propelled AS90 guns to Ukraine.
• UK Foreign Secretary Cleverly said the UK will temporarily withdraw its ambassador from Tehran for further consultations following the execution of British-Iranian national Akbari, while Cleverly announced that the UK sanctioned Iran’s Prosecutor General.
• Syrian Foreign Minister Mekdad said that there cannot be talk of normal ties with Turkey without an end to the occupation following a meeting with his Iranian counterpart in Damascus, according to Reuters.

EU/UK

NOTABLE HEADLINES

• UK and EU will conduct fresh discussions on the Northern Ireland protocol following progress on data and the report also noted a Tory revolt is brewing regarding MPs claiming a say in a proposed bonfire of EU laws, according to FT. More recently, RTE's Connelly wrote that while the nature of EU UK negotiations has been kept highly confidential, he understands that negotiators will announce what could be an agreed framework/principles on resolving the key N. Ireland Protocol stumbling blocks.
• UK could shelve proposed legislation that would allow the UK to unilaterally rip up some Brexit arrangements for Northern Ireland as a sign of goodwill in negotiations with the EU, according to a report in The Guardian.
• UK government is to announce new proposals on Monday to clamp down on protests and broadening the range of situations police can act to prevent serious disruption.
• Health unions in England threaten more strikes unless there is an improved pay offer, according to FT.
• The German gov't needs to close a EUR 12bln financing gap for 2024 in order to adhere to the debt brake as planned, via Handelsblatt citing a presentations
• Fitch affirmed Luxembourg at AAA; Outlook Stable and affirmed Poland at A-; Outlook Stable on Friday.