• European equities trade on the front foot though the FTSE100 is once again hampered by losses in Basic Resources; US Futures are in the red
• DXY trades around the unchanged mark, with the Aussie underperforming post RBA hold
• Fixed was initially driven higher by ECB Schnabel’s comments; though now off best levels after EZ PMI revisions
• ECB's Schnabel (Hawk) says that further hikes are now “rather unlikely” following the November inflation data.
• Crude is on a modestly firmer footing whilst spot Gold takes a breather following yesterday's hefty losses
• Looking ahead US Composite & Services Final PMIs, ISM Services PMI, JOLTS & Australian AIG Manufacturing Index

EUROPEAN TRADE

EQUITIES

• European equities, Eurostoxx50 +0.3%, are mixed, with the FTSE100, -0.2%, once again the relative underperformer, largely hampered by ongoing losses in Basic Resources which is the worst performing sector.
• European sectors are mixed with a slight positive tilt; Real Estate outperforms following broker upgrades at British Land, +1.3%, and Land Securities, +0.8%.
• US equity futures are trading on the backfoot, continuing the losses seen in the prior days' session as the year's final few key events/releases begin with JOLTS.
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FX

• DXY extended on the upper end of its overnight range towards 103.84 ahead of the European equity cash open and now resides within the middle of today's range of 103.84-53.
• EUR/USD is trading around flat having bounced off lows on revisions higher to Services & Composite PMI data.
• The Japanese Yen is the G10 outperformer at the time of writing amid a combination of a pullback in US yields coupled with the broader risk aversion overnight.
• AUD, NZD, CAD are all softer to varying degrees amid the initial broader risk tone, but the Aussie is the marked G10 laggard in the aftermath of the RBA policy decision which lacked hawkish undertones.
• PBoC set USD/CNY mid-point at 7.1127 vs exp. 7.1476 (prev. 7.1011).
• China's major state-owned banks were seen acquiring dollars via onshore swaps and selling them in the spot FX market, while it was also reported that the RBI was likely selling dollars near the 83.38-83.39 rupee level, according to sources and traders cited by Reuters.
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FIXED INCOME

• ECB's Schnabel (Hawk) says that further hikes are now “rather unlikely” following the November inflation data.
• Commentary which drove Bunds to a 134.17 peak; though, upward revisions to PMIs have prompted a pullback, but one that is limited by the reports internal commentary.
• Similar action has been seen in Gilts which perhaps derived initial support from the latest YouGov findings as well.
• Finally, USTs are directionally in-fitting but with magnitudes more contained at the mid-point of 110.10 to 110.18 parameters ahead of JOLTS & PMIs/ISM.
• UK sells GBP 1.5bln 0.75% 2033 I/L Gilt: b/c 2.68x (prev. 2.94x) and real yield 0.724% (prev. 0.831%)
• Germany to sell EUR 3.66bln vs exp. EUR 4.5bln 3.10% 2025 Schatz: b/c 2.48x (prev. 1.7x), average yield 2.64% (prev. 3.06%), retention 18.67% (prev. 17.82%)
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COMMODITIES

• WTI and Brent, +0.7%, front-month futures are on firmer footings after choppy trade on Monday amid continued fallout from OPEC+ in the backdrop of cooling economic data and volatile Middle East tensions.
• Metals are mixed with precious metals moving horizontally as the DXY trades flat intraday spot gold and spot silver taking a breather following yesterday’s hefty losses.
• Libya's NOC Chair says current production is 1.3mln BPD (vs 1.218mln on 6th Nov), planning a bidding round for offshore/onshore blocks for end-2024. In the early stage to identify blocks. Says seeing a lot of interest for upcoming bid round from US, European and Asian firms. On track to increase production capacity to 2mln BPD in the next three-five years. Says hopefully oil production will increase by 100k BPD by end-2024.
• Russia's Kremlin, when asked if Russian President Putin will discuss coordinated actions on oil market, says such discussions are held in OPEC+ format but the issue is always on the agenda; Kremlin confirms Putin will visit Saudi and UAE on Wednesday. Russian President Putin is to discuss oil market issues in the UAE and Saudi Arabia, according to Tass
• Brazilian miner Vale expects iron ore market to remain tight in the coming years, says China cannot control the price of iron ore and there is no supply coming
• China's NDRC will cut retail gasoline and diesel prices by CNY 55/ton and CNY 50/ton, respectively, commending Dec 6th; NDRC sees weaker oil prices in the short term
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NOTABLE EUROPEAN HEADLINES

• ECB's Schnabel says current level of restriction is sufficient, has increased confidence that 2% target will be met in 2025; must not declare victory prematurely; further hikes "rather unlikely" after November inflation data. Must be more cautious with rate cuts than markets pricing; further hikes "rather unlikely" after November inflation data. Inflation developments are encouraging, fall in core prices is remarkable
• YouGov/Citi survey showed the British public's expectation for inflation in 5yr-10yr's time rose to 3.5% from a prior 3.3% view in September.
• German Ifo: Retailers Expect Little Help from Christmas Sales; Business Situation -8.8 (prev. -13.5).
• Kantar UK Supermarket update (Nov): grocery price inflation 9.71% in the four weeks to Nov 26th; UK grocery sales +6.3% Y/Y.
• ECB Survey of Consumer Expectations (October 2023): median consumer inflation expectations for the next 12 months and for three years ahead remained unchanged.
• The London Stock Exchange (LSEG LN) is currently investigating an issue impacting its trading/information system. We are now resuming trading on impacted instruments. Instruments will go into auction at 09:55GMT with uncrossing beginning at 10:15GMT. All live orders remain on the system. LSE: Impacted securities are now in regular trading.

DATA RECAP

• EZ PMI data across the board (bar Spain) showed a mild upward revision, though remained comfortably within contractionary territory; internal commentary was bleak on the growth outlook with potential technical recessions in the EZ & Germany while price/inflationary pressures remain.
• UK S&P Global/CIPS Services PMI Final (Nov) 50.9 vs. Exp. 50.5 (Prev. 50.5); Composite PMI Final 50.7 vs. Exp. 50.1 (Prev. 50.1)
• German HCOB Services PMI (Nov) 49.6 vs. Exp. 48.7 (Prev. 48.7); Composite Final PMI 47.8 vs. Exp. 47.1 (Prev. 47.1)
• EU HCOB Services Final PMI (Nov) 48.7 vs. Exp. 48.2 (Prev. 48.2); Composite Final PMI 47.6 vs. Exp. 47.1 (Prev. 47.1)
• Spanish Services PMI (Nov) 51.0 vs. Exp. 51.5 (Prev. 51.1)
• Italian HCOB Composite PMI (Nov) 48.1 (Prev. 47.0); Services PMI 49.5 vs. Exp. 48.2 (Prev. 47.7)
• French S&P Global Services PMI (Nov) 45.4 vs. Exp. 45.3 (Prev. 45.3); Composite PMI 44.6 vs. Exp. 44.5 (Prev. 44.5)
• UK BRC Retail Sales YY (Nov) 2.6% vs. Exp. 2.5% (Prev. 2.6%)
• EU Producer Prices MM (Oct) 0.2% vs. Exp. 0.2% (Prev. 0.5%); YY -9.4% vs. Exp. -9.5% (Prev. -12.4%)

NOTABLE US HEADLINES

• NIO Inc (NIO/9866 HK) Q3 2023 (USD): EPS -0.31 (exp. -0.30), Revenue 2.39bln (exp. 2.66bln). Q3 deliveries +75.4% Y/Y at 55,432; expects Q4 deliveries between 47,000-49,000. Shares -3.4% in the pre-market.
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GEOPOLITICS

• Israel is reportedly mulling a plan to flood Gaza tunnels with seawater, according to WSJ.
• Israel's army said its fighter jets attacked Hezbollah positions, infrastructure and military in response to a recent shooting, according to AJA Breaking via social media platform X.
• Investors with prior knowledge of the October 7th attack on Israel by Hamas made at least tens of millions of pounds shorting Israeli stocks, according to The Telegraph.
• US National Security Advisor Sullivan said attacks on vessels in the Red Sea are a threat to international peace and stability, while they have every reason to believe these attacks were fully enabled by Iran. Sullivan also said the US is engaging with allies on the next steps after the Red Sea attacks and weapons used by the Houthis in the attacks are being supplied by Iran.
• White House warned that a failure to approve additional aid for Ukraine would 'kneecap' Kyiv, according to FT.

CRYPTO

• Bitcoin, -0.7%, takes a breather after yesterday's spike, whilst Ethereum, -1.7%, posts losses of a slightly larger magnitude.

APAC TRADE

• APAC stocks declined following the mostly negative lead from Wall St where the major indices were choppy and ultimately weighed amid a rebound in yields ahead of key data releases.
• ASX 200 was led lower by the commodity-related industries with underperformance in gold miners after the precious metal faded the recent surge, while sentiment was also not helped by weak data and after the unsurprising RBA rate decision in which the central bank kept rates unchanged and reiterated its forward guidance.
• Nikkei 225 continued to weaken and slipped below the 33,000 level despite softer-than-expected Tokyo inflation data.
• Hang Seng and Shanghai Comp retreated which saw the latter breach the psychological 3,000 level to the downside amid lingering frictions after China criticised the US for seeing it as a threat following calls by Commerce Secretary Raimondo for more funds to back chip curbs, while encouraging Caixin Services PMI data which printed a 3-month high at 51.5 (exp. 50.7) only provided a brief tailwind.

NOTABLE HEADLINES

• RBA kept the Cash Rate Target unchanged at 4.35%, as expected, while it reiterated its forward guidance that whether further tightening is required to ensure inflation returns to the target in a reasonable timeframe will depend upon data and evolving assessment of risks. RBA also repeated that the Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome, as well as noted there are still significant uncertainties around the outlook and that the limited information received on the domestic economy since the November meeting has been broadly in line with expectations.
• Moody's affirms China's A1 rating; changes outlook to Negative from Stable. Reflects risks relating to persistently lower medium-term economic growth and ongoing downsizing of the property sector.
• Chinese Finance Ministry says Chinese economy will maintain its rebound and positive trend; we expect the Q4 economy to keep the positive trend
• Foxconn (2317 TW) November Sales +17.95% Y/Y (October -4.56% Y/Y); outlook for Q4 should be better than the original guidance for "significant growth"; revenue performance in the first two months of Q4 has been slightly higher than expected

DATA RECAP

• Chinese Caixin Services PMI (Nov) 51.5 vs. Exp. 50.7 (Prev. 50.4); Composite PMI 51.6 (Prev. 50.0)
• Tokyo CPI YY (Nov) 2.6% vs. Exp. 3.0% (Prev. 3.3%); CPI Ex. Fresh Food YY 2.3% vs. Exp. 2.4% (Prev. 2.7%); CPI Ex. Fresh Food & Energy YY (Nov) 3.6% vs. Exp. 3.7% (Prev. 3.8%)
• Australian Current Account Balance (AUD)(Q3) -0.2B vs. Exp. 3.1B (Prev. 7.7B)
• Australian Net Exports Contribution (Q3) -0.6% vs. Exp. -0.2% (Prev. 0.8%)