• APAC stocks were mostly positive as the region took impetus from the gains on Wall St.
• European equity futures are indicative of a slightly higher open with Euro Stoxx 50 future +0.1% after the cash market closed up 0.4% yesterday.
• DXY is softer but contained in a tight range around the 104 mark, antipodeans and JPY lead gains vs. the greenback.
• Bunds and USTs firmer despite poor US 3yr and 10yr auctions, crude continued to edge higher.
• Looking ahead, highlights include UK Employment, EZ & German ZEW, US CPI, Japanese Tankan, Supply from UK & US.

US TRADE

EQUITIES

• US stocks were predominantly higher after they caught a bid from the open with the advances led by outperformance in the Nasdaq 100 despite notable weakness in several of the heavyweight stocks. The data calendar was light for the US and globally ahead of this week's risk events although the latest NY Fed Consumer Inflation expectations saw the volatile 1-year ahead forecasts ease.
• SPX +0.39% at 4,622, NDX +0.85% at 16,221, DJIA +0.43% at 36,404, RUT +0.15% at 1,883.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US GOP Rep. McClain said the US House is to vote on the Biden impeachment inquiry on Thursday, while a House Republican leadership aide said the Biden impeachment vote is expected on Wednesday.
• US Commerce Secretary Raimondo expects to make 10-12 semiconductor chips funding awards within the next year including multi-billion announcements.
• White House is to release aviation fuel subsidy guidance by the end of the week.
• Fitch said US state and local government ratings are in a strong fiscal position with a recession looking less likely in 2024 and that the US should be able to avoid tipping into a technical recession in 2024.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive as the region took impetus from the gains on Wall St where the major indices steadily edged higher in a catalyst-light session ahead of upcoming major risk events.
• ASX 200 was led by outperformance in tech but with the upside capped following mixed data in which Westpac Consumer Sentiment improved but NAB Business Confidence printed its worst reading since 2012.
• Nikkei 225 surged at the open and briefly reclaimed the 33,000 level after a recent dovish BoJ source report although the index then reversed nearly all of its gains as the effects of a firmer currency seeped through.
• Hang Seng and Shanghai Comp were both initially underpinned after China convened the Central Economic Work Conference to discuss the 2024 growth target and the State Council issued measures on integrated development of domestic and foreign trade, although the mainland index ultimately lagged and was contained beneath the psychological 3,000 level.
• US equity futures (ES unch.) held on to the prior day's spoils as markets awaited the incoming US inflation data.
• European equity futures are indicative of a slightly higher open with Euro Stoxx 50 future +0.1% after the cash market closed up 0.4% yesterday.

FX

• DXY was uneventful with price action confined to a thin range of 103.91-104.08 ahead of the US inflation data scheduled today and with tomorrow’s FOMC announcement to kick off this week’s central bank bonanza.
• EUR/USD struggled for direction with trade stuck at the 1.0700 handle ahead of the ECB on Thursday.
• GBP/USD eked slight gains above 1.2550 with attention turning to the incoming UK jobs and wages data.
• USD/JPY declined below 146.00 and continued to fade the surge that was triggered by dovish BoJ sources.
• Antipodeans were firmer as they benefitted alongside the mostly positive risk environment.
• RBNZ's annual review of the TWI saw the weighting of yuan cut to 22.6% (prev. 25.6%), while USD weighting increased to 14.5% (prev. 13.8%) and AUD weighting rose to 17.7% (prev. 16.5%).
• PBoC set USD/CNY mid-point at 7.1174 vs exp. 7.1772 (prev. 7.1163).

FIXED INCOME

• 10-year UST futures extended on the rebound from support at 110.00 despite poor 3yr and 10yr auctions.
• Bund futures gradually broke through resistance at Monday’s peak and climbed above the 135.00 level.
• 10-year JGB futures saw two-way trade with early pressure after inline-to-firmer PPI data although caught a mild bid on return from the Tokyo lunch break which was limited by a mixed 5yr JGB auction.

COMMODITIES

• Crude futures edged higher in a continuation of Monday's intraday rebound and amid reports that a Norwegian-flagged tanker was hit by a missile that was suspected to be fired by Yemen's Houthi rebels.
• OPEC+ oil output cuts of 2.2mln BPD in Q1 may not be long enough as crude oil physical and futures show increasing signs of a surplus ahead of their implementation, according to analysts and traders.
• Guyana said oil producers are moving ahead despite the Venezuela threat and it is ready to defend its territory from Venezuela, while Guyana’s President said he has Brazilian President Lula's unwavering support.
• Spot gold traded sideways around the USD 1985/oz level ahead of the looming risk events in the US.
• Copper futures were steady with price action contained amid the cautious gains in other risk assets.

CRYPTO

• Bitcoin climbed back above USD 41,500 and regained composure after the prior day's aggressive pullback.

NOTABLE ASIA-PAC HEADLINES

• China's government advisers said they would recommend economic growth targets for 2024 ranging from 4.5% to 5.5%, with the majority favouring a target of around 5%, according to Reuters.
• US Commerce Secretary Raimondo said the US will take the “strongest possible” action to protect its national security when asked how the Commerce Department will respond to Huawei's recent chipmaking breakthrough. Furthermore, she said the Biden administration is in discussions with Nvidia (NVDA) about permissible AI chip sales to China but emphasised that it cannot sell its most advanced semiconductors to Chinese firms, according to Reuters.
• US judge upheld the ban on state employees and public university faculty using TikTok on state-owned devices or networks.

DATA RECAP

• Japanese Corporate Goods Prices MM (Nov) 0.2% vs. Exp. 0.2% (Prev. -0.4%, Rev. -0.3%)
• Japanese Corporate Goods Prices YY (Nov) 0.3% vs. Exp. 0.1% (Prev. 0.8%, Rev. 0.9%)
• Australian Westpac Consumer Confidence Index (Dec) 82.1 (Prev. 79.9)
• Australian Westpac Consumer Sentiment W/W (Dec) 2.7% (Prev. -2.6%)
• Australian NAB Business Confidence (Nov) -9.0 (Prev. -2.0)
• Australian NAB Business Conditions (Nov) 9.0 (Prev. 13.0)

GEOPOLITICS

ISRAEL/HAMAS/MIDDLE EAST

• Israel's army said supplies will not enter Gaza from Israel but will still enter via crossing with Egypt.
• Israeli Defence Minister said they are close to the "breaking point" in the campaign in northern Gaza and Gaza City, while he called on Hamas militants and commanders in the field to surrender or be killed. Furthermore, he said Israel has no intention to stay permanently in the Gaza Strip and is open to discussing all alternatives regarding who will control Gaza as long as it is not hostile to Israel, while it is open to a possible agreement with Hezbollah if it includes a safe zone along border and guarantees.
• UKMTO received a report of an incident affecting a vessel in the vicinity of Bab Al-Mandab west of Yemen's Port Mokha where there was a fire onboard a vessel. Furthermore, a US defence official later stated that a land-based cruise missile launched from Houthi-controlled Yemen hit a Norwegian-flagged vessel causing some damage and a fire, while US Navy ship Mason was on scene to render aid and no casualties were reported in the attack.
• Hezbollah's military chief vowed to block all Western ships from passing at the ports of Tyre, Saida and Jounieh until the Shebaa Farms are liberated from Zionist control, according to Houthis TV.

OTHER

• Russian Defence Ministry said a Ukrainian-launched tactical ballistic missile was shot down over the Belgorod region in Russia, according to Reuters.
• China's Embassy in the UK said China firmly opposes and strongly condemns the groundless accusation made by the UK and it urges it to respect China's territorial sovereignty and maritime rights and interests in the South China Sea. This was in response to a UK statement criticising the “unsafe and escalatory tactics deployed by Chinese vessels” against the Philippines, according to Global Times.

EU/UK

NOTABLE HEADLINES

• Catalonia's President Aragones says they will be pursuing their right to an independence referendum in order to resolve the sovereignty conflict. (FT)