• European bourses are modestly firmer with US futures posting gains of a similar magnitude
• The Dollar is uneventful meandering around the 104 level; Antipodeans outperform paring back yesterday’s losses and benefiting from positive risk sentiment
• Fixed saw initial EGB/UST divergence but Bunds have faded and move in-line with USTs which pause for breath pre-ADP
• Crude continues to slip whilst base metals are almost entirely in the green given the risk tone
• Looking ahead US MBAs, ADP National Employment, International Trade, Canadian Trade, NBP & BoC Policy Announcements

EUROPEAN TRADE

EQUITIES

• European equities, Eurostoxx50 +0.3%, are trading modestly firmer on the back of a positive handover from APAC trade overnight, though the DAX, +0.1%, marginally lags; hampered by losses in Merck -13%.
• European sectors are mixed with a slight positive tilt; Travel & Leisure and Basic Resources outperform, with the former propped up by Tui +10% whilst the latter benefits from higher base metals prices.
• US equity futures are also trading on a firmer footing, posting gains similar to their European counterparts; ES +0.3%.
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FX

• A choppy European morning for the Dollar thus far, within confined ranges on either side of 104.00 between 103.88-104.05 as macro newsflow this morning remains light.
• Aussie, Kiwi and Loonie are all firmer amid the broader upbeat risk sentiment and rebound in base metals, following yesterday’s session of losses.
• The Japanese Yen is slightly lower and back above 147.00; BoJ's Himino suggested the central bank does not have a present schedule in mind on an exit from easy policy.
• PBoC set USD/CNY mid-point at 7.1140 vs exp. 7.1476 (prev. 7.1127).
• China's major state-owned banks were seen selling dollars for yuan in the onshore spot FX market, according to sources cited by Reuters.
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FIXED INCOME

• Another session of differing initial performance for Gilts and EGBs with UK debt beginning on the backfoot to the modest benefit of the region's yields.
• USTs in-fitting with Gilts throughout the morning, as yields lift off lows as participants take a slight pause after recent marked dovish action with ADP due.
• Though, Bunds have retreated from the aforementioned high after failing to test touted Fib resistance at 135.27; a high that printed as part of a gradual post-data move.
• Overall, market pricing remains extremely dovish, with participants/notes continuing to focus on Schnabel's commentary from early Tuesday.
• UK sells GBP 3bln 0.875% 2033 Green Gilt: b/c 2.66x (prev. 2.56x), average yield 4.091% (prev. 4.315%) and tail 1.3bps (prev. 1.3bps)
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COMMODITIES

• WTI and Brent, -1.1%, have resumed downward price action in recent trade having consolidated overnight; nothing by way of fresh fundamental behind the move, though attention is on Russian President Putin arriving in the UAE.
• Base metals bolstered by the broader risk sentiment and following the gains in some major APAC markets overnight; modest upside in XAU, but well within recent ranges as we await fresh impetus on next year's monetary expectations.
• US Energy Inventory Data (bbls): Crude +0.6mln (exp. -1.4mln), Gasoline +2.8mln (exp. +1.0mln), Distillate +0.9mln (exp. +1.5mln), Cushing +4.3mln.
• Saudi Arabia set January Arab light crude OSP to Asia at Oman/Dubai + USD 3.50/bbl, to NW Europe at ICE Brent + USD 2.90/bbl and to US at ASCI + USD 7.15/bbl, according to Aramco/pricing document cited by Reuters.
• Venezuelan President Maduro said he would authorise oil exploration in an area around the Esequibo River which is a disputed territory with Guyana. It was also that US official Nichols said they are seeing Venezuela's illicit oil trade move back into the formal sector.
• Iran's Revolutionary Guard Navy seized two vessels smuggling 4.5mln/ltrs of fuel, according to Tasnim.
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NOTABLE EUROPEAN HEADLINES

• ECB's Kazaks says there is now no need to cut rates in H1, but if the situation changes then ECB decisions might change, via Econostream.
• German coalition sources, to Reuters, have said that little budgetary progress was made overnight with the parties still far apart; Green leader Lang added the budget will not be discussed at Cabinet on Wednesday.
• EU finance ministers are discussing debt reduction targets as part of a fiscal overhaul which could include a fiscal buffer of 1.5% of GDP, according to Bloomberg.
• UK CMA says it is undertaking wider piece of work looking at competition in groceries sector, and has set out latest findings and next steps in its ongoing review.
• BoE FSR: FPC is maintaining the UK countercyclical capital buffer (CCyB) rate at its neutral setting of 2%; The full impact of higher interest rates will take time to come through; The overall risk environment remains challenging, reflecting subdued economic activity, further risks to the outlook for global growth and inflation, and increased geopolitical tensions.

DATA RECAP

• German Industrial Orders MM (Oct) -3.7% vs. Exp. 0.2% (Prev. 0.2%)
• EU Retail Sales MM (Oct) 0.1% vs. Exp. 0.2% (Prev. -0.3%, Rev. -0.1%); YY -1.2% vs. Exp. -1.1% (Prev. -2.9%)
• UK S&P Global/CIPS Construction PMI (Nov) 45.5 vs. Exp. 46.3 (Prev. 45.6)
• EU HCOB Construction PMI (Nov) 43.4 (Prev. 42.7)
• German HCOB Construction PMI (Nov) 36.2 (Prev. 38.3)
• French HCOB Construction PMI (Nov) 44.6 (Prev. 41)
• Italian HCOB Construction PMI (Nov) 52.9 (Prev. 51.8)

NOTABLE US HEADLINES

• Nio (9866 HK/NIO) is said to be planning to spin off its battery manufacturing arm, according to Reuters sources; could happen as early as the end of the year
• Nvidia (NVDA) CEO says plan is to continue working with the US government to come up with a new set of products that comply with new chip export regulations
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GEOPOLITICS

• Hamas official said there will be no negotiations or exchange of detainees until the aggression against Gaza stops.
• US President Biden will participate in a meeting with G7 leaders today and Ukrainian President Zelensky will also join the G7 leaders video summit, according to Reuters.
• US Treasury Secretary Yellen said the US would be responsible for Ukraine's defeat if Biden's funding request fails to win approval by Congress and noted US aid to Ukraine is essential to keep the government operating and maintain IMF financial support to Ukraine.
• Russian Upper House of Parliament proposes to hold elections on March 17th 2024, via Tass; will consider the election date order on December 7th.
• Islamic Resistance in Iraq say Harir base in Erbil targeted by drone in response to the bombing of Gaza, according to Al Jazeera.

CRYPTO

• Bitcoin, +0.2%, and Ethereum takes a breather following the prior days advances
• Japan is to make long-term corporate crypto holdings tax-exempt, according to Nikkei.

APAC TRADE

• APAC stocks were mostly higher with risk sentiment underpinned by softer yields as market focus remained on data releases and with the recent drop in US job openings stoking hopes for Fed rate cuts.
• ASX 200 saw broad gains across sectors amid lower yields and with markets unfazed by mixed GDP data.
• Nikkei 225 climbed back above 33,000 as the 10yr JGB yield declined to its lowest since August.
• Hang Seng and Shanghai Comp were somewhat varied as the Hong Kong benchmark conformed to the overall upbeat mood, while the mainland lagged after the PBoC continued to drain liquidity and Moody’s revised China’s credit outlook to negative.

NOTABLE HEADLINES

• Chinese official Liu said the Biden-Xi meeting cannot solve US-China problems and domestic US politics could pose problems for US-China ties, while Liu added US policy towards China is unlikely to change in the near future and the outcome of Taiwan elections may affect US-China relations.
• Fitch said there are no further updates after it affirmed China's A+ rating with a stable outlook in August and S&P also said there was no change to China's credit rating or outlook, according to Reuters.
• BoJ Deputy Governor Himino said the BoJ will patiently maintain easy policy until a sustained and stable achievement of the price target is in sight, while he added that Japan's financial system is likely resilient enough to weather stress from transition to higher interest rates. Furthermore, Himino stated they must make appropriate decisions on the timing of the exit and procedure by scrutinising wage and inflation developments.
• Japan is reportedly considering a tax carryover for loss-making wage hikes, via Kyodo
• Japanese MOF official suggest some Japan primary dealers said 20yr JGB sales should be reduced, according to Bloomberg
• Chinese November Retail Passenger Vehicle Sales Y/Y 25% (prev. 10.2% Y/Y), according to China's PCA
• Moody's has placed 26 Chinese LGFVs ratings on review for a downgrade following sovereign action; Moody's affirms Hong Kong SAR's Aa3 rating, changes outlook to negative from stable

DATA RECAP

• Australian Real GDP QQ SA (Q3) 0.2% vs. Exp. 0.4% (Prev. 0.4%); YY SA (Q3) 2.1% vs. Exp. 1.8% (Prev. 2.1%)