• European equities trade marginally lower following a mixed APAC lead, US futures in-fitting
• A choppy session thus far for the USD, to the mixed fortune of peers with the CNH softer despite Chinese data
• Core fixed benchmarks are downbeat after UK and German data, with USTs in tandem directionally but with magnitudes more contained ahead of Fed's Williams
• WTI and Brent diverge given the lack of settlement while both precious and base metals continue to drift
• Looking ahead, highlights include Canadian CPI, Speech from Fed's Williams, Earnings from Goldman Sachs, Morgan Stanley & United Airlines.

MLK DAY HEADLINE RECAP

• Turkey's Bosphorus Strait was shut after a vessel became wedged against its banks, the vessel was subsequently freed and the Strait reopened.
• US Treasury Secretary Janet Yellen will meet with senior Chinese official Liu He on Wednesday, according to WSJ
• China is reportedly to extend some income tax breaks until end-2023, via Bloomberg
• UK PM spokesperson says they would guide away from speculation that the UK and EU are to enter "tunnel" talks re. N. Ireland, adding there are still significant gaps between the sides. In the context of updates that a framework showing progress might be announced between the EU and UK negotiators, though this will not be a final deal, with subsequent updates downplaying the extent of any progress somewhat
• China flagged nearly 60k COVID deaths since easing restrictions in December and noted severe hospitalisations remained high but had already peaked.

EUROPEAN TRADE

EQUITIES

• European equities trade marginally lower following a mixed APAC lead, Euro Stoxx 50 -0.3%
• Sectors in Europe are now mostly lower with no overall bias, but with Chemicals and Industrials outperforming and Autos and Energy towards the bottom.
• US equity futures are softer but off worse levels with the ES holding above 4,000 throughout the Tuesday session.
• Click here for more detail.

FX

• A choppy Tuesday session thus far for the Dollar as the index matched yesterday’s 102.56 peak in APAC hours before waning towards the unchanged mark ahead of the European cash open.
• CNH is softer intraday despite supportive Chinese data overnight, which saw Q4 GDP, IP and Retail Sales top expectations across the board.
• USD/JPY is choppy in a 128.23-129.13 parameter, but within recent ranges, whilst the technical “death cross” is more evident as the 50 DMA (135.60) falls further below the 200 DMA (136.67).
• Mixed trade seen across both the EUR and GBP with the latter leading the way following the UK jobs data following strong wages metrics which subsequently lifted BoE market pricing for a 50bps hike (at the time) to around 72% from 63% pre-release.
• PBoC set USD/CNY mid-point at 6.7222 vs exp. 6.7234 (prev. 6.7135)
• Click here for more detail.

FIXED INCOME

• Core benchmarks are downbeat after UK and German data, with USTs in tandem directionally but with magnitudes more contained ahead of Fed's Williams.
• Bunds and, post-open, Gilts printed session lows of 137.66 and 103.37 respectively post-UK jobs data, with the benchmarks nearing but not retesting these points after a particularly strong ZEW release.
• Following the UK jobs data, we have seen an uptick in BoE pricing for 50bp in February to a 75% probability from circa. 63% pre-release.
• Click here for more detail.

COMMODITIES

• WTI and Brent front-month futures diverge intraday on account of the US MLK holiday on Monday which resulted in no WTI settlement.
• WTI Feb holds onto a USD 79/bbl status whilst Brent trades on either side of USD 85/bbl in what has been a choppy session.
• Spot gold has been drifting lower as the Dollar remains firm, with the yellow metal trundling lower from highs of USD 1,919/oz down to around USD 1,905/oz.
• Base metals are softer across the board (but to varying degrees) despite the supportive Chinese data overnight as a firmer Dollar exerts pressure on the complex.
• China's state planner, NDRC is to lower retail prices of gasoline an diesel by CNY 205/tonne and CNY 195/tonne respectively as of January 18th.
• Radio Free Europe's Jozwiak writes "Review underway on the Russian oil price cap. Currently at USD 60 but I understand there is a good chance that it might be lowered a bit in upcoming weeks".
• OPEC Secretary General is very bullish on China, and cautiously optimistic on the global economy; Chinese demand will grow by 500k barrels this year; waiting to see what happens after China's New Year holiday (Jan 21st-29th).
• Click here for more detail.

NOTABLE HEADLINES

• ECB's Centeno says Q4 growth within Europe is likely to be positive.
• European Economy Commissioner Gentiloni says we have to strengthen competitiveness by streamlining state aid rules, have a good EU-US partnership; need to support competitiveness, not begin a subsidy war with the US.
• European Commission President von der Leyen says to avoid fragmenting the EU's single market and to support clean tech across the EU, EU has to step up finding; For medium term will prepare a European sovereignty fund but it will take time.
• Germany's BDI President says mild recessionary tendencies will predominate at the start of the year, sees upward trend; Economy expected to shrink by 0.3% in 2023; sees real 1% increase in export of goods and services this year (vs 1.5% global trade).

NOTABLE DATA

• UK ILO Unemployment Rate (Nov) 3.7% vs. Exp. 3.7% (Prev. 3.7%); Employment Change (Nov) 27k vs. Exp. 10k (Prev. 27k)
• UK Average Week Earnings 3M YY (Nov) 6.4% vs. Exp. 6.2% (Prev. 6.1%, Rev. 6.2%); Ex-Bonus (Nov) 6.4% vs. Exp. 6.3% (Prev. 6.1%)
• German ZEW Economic Sentiment (Jan) 16.9 vs. Exp. -15.0 (Prev. -23.3); Current Conditions (Jan) -58.6 vs. Exp. -58.0 (Prev. -61.4)
• First time since February 2022 the indicator is in positive territory, more favourable situation on the energy markets and the German gov't energy price caps have contributed to this in particular.

NOTABLE US HEADLINES

• UK PM Sunak backed down on the online safety bill following a Tory rebellion, according to Telegraph.
• UK's post-Brexit economy is reportedly facing a shortfall of over 300k workers, according to an estimate by the UK in a Changing Europe and the Centre for European Reform think tanks cited by FT.
• National Education Union announced that teachers will conduct strikes over pay in England and Wales on certain dates in February and March, while the Royal College of Nursing union announced additional strike dates on February 6th and 7th as nurses prepare to conduct strike action this week, according to the BBC.
• ECB's Lane said they need to bring rates into restrictive territory with rates now at "ballpark" neutral, while he noted that rates must be raised high enough to restrict growth, according to an interview with FT.
• ECB's de Cos reiterated that significant rate hikes will continue and incoming data will determine policy decisions.
• Click here for the US Early Morning note.

GEOPOLITICS

• Russian Defence Ministry discussed increasing the number of military personnel to 1.5mln (vs ~1.3mln in 2022), according to Tass; says major changes in Russian army will take place from 2023-26.
• Ukrainian President Zelensky said the attack in Dnipro underscores the need for new and faster decisions on weapons supplies, while he added they expect key decisions from partners on arms supplies at the Ramstein meeting.
• Russian-installed Donetsk authorities confirm that Russia has control of Soledar, via Tass.
• Russia deployed an SU-27 fighter plane to escort a German naval aircraft over the Baltic, according to Interfax.
• Russian Kremlin when asked about a potential meeting between the CIA's Burns and Russia spy chief says "this kind of dialogue is beneficial".
• UK is reviewing whether to designate Iran’s Revolutionary Guards as a terrorist organisation, according to FT.
• China's Foreign Ministry spokesperson says they are discussing the details of a visit from US Secretary of State Blinken.
• Iran's IRGC have conducted "major drills" in the Persian Gulf, according to Tasnim; details light.

CRYPTO

• Bitcoin is essentially unchanged on the session and resides in particularly narrow sub-USD 400 parameters after last week's marked upside.

APAC TRADE

• APAC stocks traded mixed in which most bourses lacked firm direction in the absence of a lead from the US due to MLK Jr. Day and despite the better-than-expected Chinese economic growth and activity data.
• ASX 200 was subdued with the index contained after it hit resistance at the 7,400 level, while an improvement in Westpac Consumer Confidence and an increase in Rio Tinto’s quarterly output did little to inspire trade.
• Nikkei 225 outperformed with strength in the auto sector driving the advances and as the BoJ kicked off its 2-day policy meeting with markets second-guessing what the central bank will decide regarding its ultra-easy policy.
• Hang Seng and Shanghai Comp were lacklustre despite encouraging data in which Chinese GDP, Industrial Production and Retail Sales figures all topped estimates. Nonetheless, the 3.0% growth for 2022 was much lower than the ‘abandoned’ target of around 5.5% and President Xi’s hint of at least 4.4% growth, while China also noted its population shrunk for the first time since 1961 and the death rate was the highest since 1974.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 205bln via 7-day reverse repos with the rate kept at 2.00% and injected CNY 301bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 504bln net injection.
• China's Customs said GDP grew 3.0% Y/Y in 2022 and that China was able to stabilise the economy, but added that the foundation for economic recovery is not solid yet, according to Reuters.
• China's stats bureau stated China's population in 2022 shrunk for the first time since 1961 and the death rate was the highest since 1974, although the stats bureau chief later noted they should not worry about China's population decline and overall labour supply still exceeds demand. The stats bureau chief also said that benign inflation in China will create room for macro policies and that the property sector's drag on economic growth this year will not be larger than in 2022, according to Reuters.

DATA RECAP

• Chinese GDP QQ SA (Q4) 0.0% vs. Exp. -0.8% (Prev. 3.9%); YY (Q4) 2.9% vs. Exp. 1.8% (Prev. 3.9%)
• Chinese Industrial Output YY (Dec) 1.3% vs. Exp. 0.2% (Prev. 2.2%); Retail Sales YY (Dec) -1.8% vs. Exp. -8.6% (Prev. -5.9%)