• APAC stocks traded mixed after recent data releases including stronger-than-expected jobs data from the US and worsening deflation in China, while this week’s upcoming risk events, including US CPI data and a slew of central bank updates, added to the cautious mood.
• DXY eked slight gains albeit with trade confined to a tight range; 10-year UST futures were little changed which provided some mild respite from post-NFP selling pressure; crude futures marginally extended on Friday's recovery but with the upside limited by the glum mood and lack of drivers.
• Bitcoin was pressured and tumbled by more than 5% in early trade to briefly below USD 42,000 and Ethereum also suffered a heavy intraday drop despite the lack of immediate news catalysts although does follow the recent surge in prices.
• Israeli national security advisor said the country 'can no longer accept' Hezbollah's presence on the northern border; Hezbollah lawmaker Fadallah said Israeli air strikes in south Lebanon mark a new escalation.
• Looking ahead, highlights include US Employment Trends, US NY Fed Survey of Consumer Expectations, Chinese M2 Money Supply, FDI, Speech from RBA’s Bullock, Supply from US.
• Click here for the Newsquawk Week Ahead.

US TRADE

EQUITIES

• US stocks finished higher on Friday after having reversed an initial hawkish reaction to the hot NFP report, although the gains across the major indices were limited as participants prepare for the upcoming week's risk events including US CPI and FOMC meeting.
• SPX +0.41% at 4,604, NDX +0.39% at 16,085, DJI +0.36% at 36,248, RUT +0.67% at 1,881.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Democratic Senator Chris Murphy said Republican border security demands are currently unreasonable, according to NBC News.
• WSJ's Timiraos noted via social media platform X that Fed officials aren’t likely to have a serious discussion regarding cuts this week but the prospect of lower rates is coming into view, while he added there are plenty of things that could cause them to say that they are not in a rush to do this.

APAC TRADE

EQUITIES

• APAC stocks traded mixed after recent data releases including stronger-than-expected jobs data from the US and worsening deflation in China, while this week’s upcoming risk events, including US CPI data and a slew of central bank updates, added to the cautious mood.
• ASX 200 just about kept afloat as outperformance in the energy sector atoned for the lacklustre mood in metal miners and tech.
• Nikkei 225 gained following a pushback on recent BoJ speculation in which a source report on Friday noted recent comments by BoJ Governor Ueda were taken out of context and there was no intention to signal anything about the timing for a policy change.
• Hang Seng and Shanghai Comp were pressured amid weakness in tech and property, while the data over the weekend showed a larger-than-expected decline in China’s consumer inflation and factory gate prices which suggests weak domestic demand.
• US equity futures were lacklustre was participants braced for the looming risk events.
• European equity futures are indicative of a flat/firmer open with Euro Stoxx 50 future +0.1% after the cash market closed up 1.1% on Friday.

FX

• DXY eked slight gains albeit with trade confined to a tight range of between 103.92-104.09 following a quiet weekend of newsflow from the US and with participants awaiting tomorrow’s US inflation data and Wednesday's FOMC.
• EUR/USD traded uneventfully with the single currency stuck firmly below the 1.0800 level ahead of the ECB meeting this week.
• GBP/USD was little changed and oscillated around 1.2550 ahead of a crucial week for UK PM Sunak as the Rwanda Bill risks deepening the divisions in the Tory party and with the BoE also set to announce its policy decision on Thursday.
• USD/JPY reclaimed the 145.00 status amid gains in Japanese stocks and the recent pushback against BoJ speculation.
• Antipodeans were subdued alongside the mixed risk appetite and as the deflation in China continued to suggest weak demand.
• PBoC set USD/CNY mid-point at 7.1163 vs exp. 7.1690 (prev. 7.1123).

FIXED INCOME

• 10-year UST futures were little changed which provided some mild respite from post-NFP selling pressure.
• Bund futures lacked direction but were off Friday’s lows after finding some support near the 134.50 level.
• 10-year JGB futures languished firmly beneath the 146.00 level with demand subdued in the absence of additional BoJ purchases.

COMMODITIES

• Crude futures marginally extended on Friday's recovery but with the upside limited by the glum mood and lack of drivers.
• OPEC Secretary General Al-Ghais said at COP28 that they need an all-energies and all-technologies approach, while he added that realistic approaches are needed to tackle emissions, according to Reuters.
• UN climate chief Stiell said at COP28 that the areas where options need negotiating have narrowed and they must clear blockages to get a deal, while Stiell added everything is on the table and everyone is focused on getting an outcome in the next 24 hours.
• Venezuela began contacting energy firms involved in a long-idled offshore gas project to push them to begin new exploration and operations near its maritime border with Guyana, according to a report on Friday by Reuters citing sources.
• Spot gold trickled beneath the USD 2,000/oz level amid slight gains in the dollar and as markets await the Fed.
• Copper futures were subdued owing to the cautious mood in the region and deflationary concerns in China.

CRYPTO

• Bitcoin was pressured and tumbled by more than 5% in early trade to briefly below USD 42,000 and Ethereum also suffered a heavy intraday drop despite the lack of immediate news catalysts although does follow the recent surge in prices.

NOTABLE ASIA-PAC HEADLINES

• China’s Industry Minister met with the Saudi Investment Minister and said that China is willing to cooperate with Saudi Arabia on new energy vehicles, aviation, photovoltaics and AI, according to Reuters.
• Japanese PM Kishida plans to replace Industry Minister Nishimura, Chief Cabinet Secretary Matsuno and ruling party policy chief Haguida, while it was later reported that PM Kishida said he wants to consider appropriate measures at an appropriate time when asked about a cabinet reshuffle, according to Reuters.

DATA RECAP

• Chinese CPI MM (Nov) -0.5% vs. Exp. -0.1% (Prev. -0.1%)
• Chinese CPI YY (Nov) -0.5% vs. Exp. -0.1% (Prev. -0.2%)
• Chinese PPI YY (Nov) -3.0% vs. Exp. -2.8% (Prev. -2.6%)

GEOPOLITICS

ISRAEL/HAMAS/MIDDLE EAST

• Israeli PM Netanyahu said Israel will continue the war to eliminate Hamas and achieve its objectives, while he added that countries cannot both support Israel’s elimination of Hamas whilst pressing it to end the Gaza war prematurely, according to Reuters.
• Israeli PM Netanyahu spoke with Russian President Putin on Sunday and voiced disapproval of Russian statements against Israel at the UN and Russia’s dangerous cooperation with Iran, while he also told Putin that any country would have responded as Israel has to the Hamas attack, according to Reuters.
• Israel's National Security Adviser Hanegbi suggested Israel may have to go to war against Hezbollah once Hamas is defeated and said it could no longer dare to tolerate the danger of the prevailing situation in the north with Hezbollah’s forces at the border, according to The Times of Israel.
• Al Jazeera reported heavy Israeli raids and artillery shelling on Khan Younis in the southern Gaza Strip, via social media platform X.
• Israeli national security advisor says the country 'can no longer accept' Hezbollah's presence on the northern border, according to The Spectator Index.
• Hezbollah lawmaker Fadallah said Israeli air strikes in south Lebanon mark a new escalation and Israeli escalation will not deter Hezbollah from continuing to defend Lebanon and supporting Gaza. Furthermore, Hezbollah is said to be responding to Israeli escalation with new types of attacks whether in the nature of weapons or targeted sites, according to Reuters.
• US Secretary of State Blinken said it is imperative that Israeli military operations protect Palestinian civilians and that durable, sustainable peace must follow the military operations. Blinken also said durable peace must lead to a Palestinian state, according to CNN.
• Qatar’s PM said talks for a fresh Gaza pause are ongoing and Qatar will continue to pressure Israel and Hamas to continue a truce despite narrowing chances, while he added that the entire generation in the Middle East is at risk of being radicalised because of the Gaza war.
• Yemen’s Houthi military spokesman said they warn all shipping companies against cooperating with Israel and said if Gaza does not receive the food and medicine it needs, all ships in the Red Sea bound for Israel ports will become a target for their armed forces regardless of their nationality, according to Reuters.
• Jordan’s Foreign Minister said Israel is implementing a systematic policy to push Gazans out of the enclave beyond eliminating Hamas, while an Israeli government spokesperson called Jordan’s allegation that Israel wants to expel Gazans ’outrageous and false’.
• UN General Assembly is likely to vote on Tuesday on demanding an immediate humanitarian ceasefire in Gaza, according to diplomats cited by Reuters.
• Iraqi Kataeb Hezbollah militia said jihad operations against US forces will continue until the last US soldiers exit Iraq, while the Iran-aligned group added that an attack on US interests on Friday was just the beginning of a new engagement although they didn’t claim responsibility for the attack.
• Syria’s air defence intercepted Israeli rockets fired on Damascus surroundings, according to state media.
• A Swede jailed in Iran faces charges of acts against national security and spying for Israel, while the Swede also faces the charge of corruption on earth which can carry the death penalty, according to ISNA news agency.

OTHER

• US President Biden invited Ukrainian President Zelensky to the White House for a meeting on Tuesday and Zelensky was also invited to address US Senators on Tuesday at 14:00GMT/09:00EST, while Zelensky’s office said he will concentrate on defence cooperation and unity in his US visit, according to Reuters.
• Russian Foreign Minister Lavrov said the West’s 500-year domination of the world is coming to an and that the West has ignored everything that happened in Ukraine before February 2022, while he added that Russia has become stronger due to the conflict in Ukraine.
• Philippines Coast Guard said supply vessels were water cannoned and rammed by Chinese Coast Guard vessels in the South China Sea. Furthermore, Philippines President Marcos said aggression and provocations by China's coastguard and maritime militia have only further steeled determination to defend and protect the nation's sovereignty, while Philippines Foreign Ministry spokesperson said they are utilising all forms of diplomatic actions available and the Chinese ambassador had been summoned, according to Reuters.
• US State Department said China interfered with lawful Philippine maritime operations and China has no lawful maritime claims to waters around the Second Thomas Shoal. US State Department said it stands with Philippine allies in the face of these dangerous and unlawful actions, as well as reaffirmed Article IV of the 1951 US-Philippines Defense Treaty.
• China’s Coast Guard said Japanese ships intruded into the territorial waters of the Senkaku/Diaoyu Islands on December 9th.
• White House National Security Adviser Sullivan travelled to South Korea to meet with Japanese and South Korean counterparts and had an extended discussion on deepening ties between Russia and North Korea, while the US has confidence shared by Japan and South Korea that North Korea is supplying weapons to Russia being used in the battlefield in Ukraine. Sullivan also commented that North Korea is irresponsible to walk away from the inter-Korean agreement and that the US and South Korea are preparing for all scenarios. Furthermore, it was reported that the US, Japan and South Korea reached an agreement on expanding their security partnership, according to Reuters.
• A US fighter jet crashed in South Korea during drills, while North Korea denounced South Korea and the US for staging joint military drills and called it a "futile" provocative act that will only hasten the South's destruction, according to Yonhap.

EU/UK

NOTABLE HEADLINES

• A split within the UK government regarding migration policy widened as PM Sunak braces for a crucial week ahead which includes a vote on the Rwanda bill and a grilling in the UK Covid inquiry, according to FT.
• Goldman Sachs sees the first BoE rate cut in August 2024, with the pace of reductions faster than previously forecast, according to Bloomberg.
• Public sector workers in Germany's federal states agreed on a wage deal with employers, according to Reuters citing the verdi union.

DATA RECAP

• UK Rightmove House Price Index MM (Dec) -1.9% (Prev. -1.7%)
• UK Rightmove House Price Index YY (Dec) -1.1% (Prev. -1.3%)