• European bourses dip into the red despite initial gains; US Futures are firmer ahead of US CPI; the FTSE 100 outperforms post UK-data
• Dollar oscillates on either side of the 104.00 mark; Yen is among the G10 outperformers, rebounding from yesterday’s hefty losses
• Bonds lift off post-supply low as attention turns to US CPI later today, Gilts gap higher on UK wages
• Crude is weaker despite overnight reports that a Norwegian-flagged tanker was hit by a missile that was suspected to be fired by Yemen's Houthi rebels; base metals are broadly benefitting from the Dollar pullback
• Looking ahead, US CPI, Japanese Tankan, Supply from the US

EUROPEAN TRADE

EQUITIES

• European equities, Eurostoxx50, (-0.1%) are trading on a weaker footing despite posting initial gains; outperformance in FTSE 100 (+0.6%), propped up by strength in Basic Resources and lower UK wage metrics.
• European sectors are generally firmer, though the overall breadth of the market is fairly narrow. Basic Resources outperform propped up by broker upgrades for both Rio Tinto (+2.1%) and ArcelorMittal (+2.7%) at JP Morgan; Telecommunications lags hampered by OFCOM proposals.
• US equity futures are trading on a slightly firmer footing, building on gains seen in the prior session and ahead of US CPI later today; the NQ (+0.2%) extends on yesterday's outperformance.
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FX

• The DXY trades on either side of the 104.00 mark but with a softer bias in the run-up to the US CPI metrics.
• Sterling fails to benefit from the Dollar's softness in the wake of the softer-than-expected wage metrics for October ahead of the BoE confab on Thursday.
• EUR/USD gains amid the weaker Dollar coupled with EUR/GBP flows whilst the firmer-than-expected ZEW metrics from Germany has little impact on price action, given ZEW caveating the upside as being driven by dovish ECB expectations.
• The Yen is the top G10 gainer at the time of writing following yesterday’s hefty losses in the wake of the BoJ sources which suggested the bank sees little need to end negative rates in December.
• Antipodeans trade firmer following yesterday’s rebound coupled with firmer base metal prices, whilst RBA Governor Bullock said she does not think the RBA is falling behind on the inflation fight and stressed data dependency.
• 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).
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FIXED INCOME

• USTs are firmer having shrugged off Monday’s particularly poor auctions ahead of a 30yr outing today, though for the time being participants are more keenly focused on the November US CPI release.
• Pre-Liffe open UK employment data saw Gilts gap-up to 98.79 from Monday’s 97.52 close and has sparked some additional dovishness in market pricing for the BoE across 2024.
• Bunds reside around the 135.00 mark within 134.80-135.38 bounds and as such shy of Friday’s 135.46 best with 65 & 81 potential resistance points thereafter.
• UK sells GBP 3.75bln 4.50% 2028 Gilt: b/c 2.53x (prev. 2.30x), average yield 4.041% (prev. 4.474%) & tail 0.9bps (prev. 1.0bps)
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COMMODITIES

• Crude is weaker despite overnight reports that a Norwegian-flagged tanker was hit by a missile that was suspected to be fired by Yemen's Houthi rebels.
• WTI Jan is off best levels in a USD 71.27-71.96/bbl parameter while Brent Feb sits between a USD 75.94-76.66/bbl parameter.
• Base metals and spot gold are broadly benefitting from the Dollar pullback; XAU tests USD 1990/oz while silver also experiences some modest reprieve.
• In APAC hours, Singapore iron ore futures hit a 9-month high with traders citing the revival of Chinese stimulus hopes.
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NOTABLE EUROPEAN HEADLINES

• Catalonia's President Aragones says they will be pursuing their right to an independence referendum in order to resolve the sovereignty conflict, via FT.
• German Engineering Group VDMA: Expects 2024 production to decline by 4% (prev. -2%); 2023 production expects -1% (prev. -2%); expect Q4 2023 to be weak after drop in Q3 production; investment activity could wane in US and probably stay weak in China

DATA RECAP

• UK Average Earnings (ex-Bonus) (Oct) 7.3% vs. Exp. 7.4% (Prev. 7.7%, Rev. 7.8%); 3M YY 7.2% vs. Exp. 7.7% (Prev. 7.9%, Rev. 8.0%)
• UK Claimant Count Unemployment Change (Nov) 16.0k vs. Exp. 15.0k (Prev. 17.8k, Rev. 8.9k); Employment Change 50k (Prev. 54k)
• UK ILO Unemployment Rate (Oct) 4.2% vs. Exp. 4.2% (Prev. 4.2%)
• UK HMRC Payrolls Change (Nov) -12k (Prev. 33k)
• UK November Food Price Inflation 7.8% (prev. 8.8%), according to Nielsen IQ
• German ZEW Economic Sentiment 12.8 vs. Exp. 8.8 (Prev. 9.8); ZEW Current Conditions -77.1 vs. Exp. -76.0 (Prev. -79.8)
• EU ZEW Survey Expectations (Dec) 23.0 (Prev. 13.8)
• German Wholesale Price Index YY (Nov) -3.6% (Prev. -4.2%); MM (Nov) -0.2% (Prev. -0.7%)
• Norwegian GDP Month Mainland (Oct) 0.4% (Prev. 0.3%); GDP Month 2.1% (Prev. -2.3%, Rev. -2.2%)
• South African Gold Production YY (Oct) 2.2% (Prev. -0.1%); YY 3.9% vs. Exp. 1.5% (Prev. -1.9%)

NOTABLE US HEADLINES

• Choice Hotels (CHH) is reportedly launching a hostile takeover offer for Wyndham Hotels & Resort (WH), according to WSJ sources; Offer unchanged from prior proposal, equates to USD 90/shr (Wyndham closed at USD 79.56/shr)
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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.
• A source in the Yemeni government said they received an US invitation to participate in a military coalition to protect the Red Sea. "We will participate in the military coalition with a formation of naval forces to confront Houthi operations", Via AJ
• Israeli PM Netanyahu says "We are preparing for a possible confrontation with the Palestinian Authority (PA) security services in the West Bank", according to Sky News Arabia

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.

CRYPTO

• Bitcoin, +1.7%, finds a firmer footing below the USD 42k mark; Ethereum, +0.4%, posts gains but to a lesser degree.

APAC TRADE

• 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.

NOTABLE 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.
• Country Garden (2007 HK) is set to avoid a Yuan-bond default following most holders of a local note agreeing not to seek repayment this week, via Bloomberg citing sources.

DATA RECAP

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