• APAC stocks traded mixed with participants cautious heading into the FOMC announcement.
• European equity futures are indicative of a flat open with Euro Stoxx 50 future unchanged after the cash market closed down 0.1% yesterday.
• DXY remains sub-104 pre-FOMC, JPY unfazed by improved Tankan data, NZD lags.
• USTs and Bunds are marginally firmer post-strong 30yr US auction, crude futures languished near 6-month lows.
• Looking ahead, highlights include UK GDP, Services, Manufacturing Output, EZ Industrial Production, US MBA, PPI, NZ GDP, Fed & BCB Policy Announcement, Fed Chair Powell at the FOMC Press Conference, Supply from Italy and UK

US TRADE

EQUITIES

• US stocks finished mostly higher after the initial downside seen amid the release of the November US CPI figures was unwound during the session. The inflation figures printed mostly in line with expectations and are unlikely to see any last-minute changes to the Fed's Dot Plot due to be released on Wednesday, while a strong 30yr auction (first stop-through since June) also supported the recovery in stocks.
• SPX +0.46% at 4,643, NDX +0.82% at 16,354, DJIA +0.48% at 36,577, RUT -0.13% at 1,881.
• Click here for a detailed summary.

NOTABLE HEADLINES

• White House economic adviser Brainard said real wages are up despite inflation and addressing prices remains a top priority for President Biden, according to Bloomberg.
• US Senate Minority Leader McConnell said it is practically impossible for Congress to pass a supplemental funding bill including aid for Ukraine before Christmas.

APAC TRADE

EQUITIES

• APAC stocks traded mixed with participants cautious heading into the FOMC announcement.
• ASX 200 was led by strength in healthcare after Sigma shares surged by over 70% shortly after the return from a trading halt and the recent announcement of a merger with Chemist Warehouse, while the energy sector lagged after yesterday’s continued slide in oil prices.
• Nikkei 225 was underpinned by an encouraging Tankan survey which mostly beat expectations and showed sentiment amongst Japan’s large manufacturers and non-manufacturers was at the highest since March 2020 and November 1991, respectively.
• Hang Seng and Shanghai Comp were pressured despite the detailing of China’s policy focus for next year and support pledges, as the statement from the Central Economic Work Conference refrained from any major stimulus announcements.
• US equity futures (ES +0.1%) sat near the prior day's best levels after having shrugged off the initial post-CPI wobble.
• European equity futures are indicative of a flat open with Euro Stoxx 50 future unchanged after the cash market closed down 0.1% yesterday.

FX

• DXY eked slight gains but remained beneath the 104.00 level amid rangebound trade ahead of the FOMC announcement and following the prior day’s fluctuations and eventual weakening in the aftermath of the US inflation data.
• EUR/USD was uneventful with the single currency marginally easing back from resistance at 1.0800.
• GBP/USD remained stuck near 1.2550 ahead of the latest UK Industrial Production and monthly GDP estimates.
• USD/JPY traded on both sides of 145.50 with little reaction seen in the currency from the improved Tankan data.
• Antipodeans were lacklustre with underperformance in NZD/USD following a wider-than-expected Current Account deficit and after Westpac cut its New Zealand Q4 CPI forecast to 0.3% from 0.6% due to November data.
• PBoC set USD/CNY mid-point at 7.1126 vs exp. 7.1717 (prev. 7.1163).
• Argentina's Economy Minister Caputo said that they will move forward with eliminating taxation on exports and will reduce energy and transport subsidies, while he announced FX rate will weaken to 800 pesos per dollar. Argentina's Economy Ministry also stated the Central Bank will announce measures related to monetary policy, interest rate and debt on Wednesday.

FIXED INCOME

• 10-year UST futures were marginally higher after rebounding from yesterday’s post-CPI selling with the recovery helped by a strong 30yr auction which was sold at 4.344% and saw a stop-through of 0.3bps for the first stop-through since June.
• Bund futures edged mild gains after finding some support around the 135.00 level.
• 10-year JGB futures followed suit to the gains in global counterparts with the BoJ in the market for over JPY 1.1tln of JGBs.

COMMODITIES

• Crude futures languished near 6-month lows with WTI beneath USD 69/bbl after slumping yesterday despite the lack of an obvious catalyst, while a cut in the EIA STEO world oil demand growth forecasts and mixed private sector inventory data provided little to spur prices.
• US Energy Inventory Data (bbls): Crude -2.3mln (exp. -0.7mln), Gasoline +5.8mln (exp. +1.9mln), Distillates +0.3mln (exp. +0.6mln), Cushing +1.4mln.
• EIA STEO stated 2023 world oil demand growth forecast was cut by 30k BPD to a 1.85mln BPD Y/Y increase, while the 2024 forecast was cut by 60k BPD to a 1.34mln BPD Y/Y increase.
• COP28 draft text was published which didn't include the words 'phase out' but called on parties to accelerate efforts towards a phase-down of unabated coal power, according to Reuters.
• Spot gold traded sideways with participants tentative ahead of the incoming wave of central bank updates.
• Copper futures were lacklustre owing to the widespread cautiousness and China stimulus disappointment.
• Chilean copper miner Antofagasta (ANTO LN) and workers at the Centinela mine extend talks to allow workers to vote on a new contract offer, according to the union cited by Reuters.

CRYPTO

• Bitcoin was pressured and gradually retreated to beneath the USD 41,000 level.

NOTABLE ASIA-PAC HEADLINES

• China senior party official said China should set fiscal deficit and special local government bonds at appropriate levels in 2024. The official added that the key is to optimise the structure of fiscal expenditure, as well as improve the efficiency of fiscal fund utilisation and policy effectiveness, according to Reuters.
• Australian government's Mid-Year Economic and Fiscal Outlook sees 2023/24 budget deficit at AUD 1.1bln vs 13.9bln forecast in May, while it sees a budget deficit of AUD 18.8bln in 2024/25 and a deficit of AUD 35.1bln in 2025/26. Furthermore, it forecasts GDP growth at 1.75% in 2023/24, 2.25% in 2024/25 and 2.50% in 2025/26.
• New Zealand passed the law to return the RBNZ to a single inflation mandate, as expected.

DATA RECAP

• Japanese Tankan Large Manufacturing Index (Q4) 12.0 vs. Exp. 10.0 (Prev. 9.0)
• Japanese Tankan Large Manufacturing Outlook (Q4) 8.0 vs. Exp. 9.0 (Prev. 10.0)
• Japanese Tankan Large Non-Manufacturing Index (Q4) 30.0 vs. Exp. 27.0 (Prev. 27.0)
• Japanese Tankan Large Non-Manufacturing Outlook (Q4) 24.0 vs. Exp. 25.0 (Prev. 21.0)
• Japanese Tankan Large All Industry Capex Estimate (Q4) 13.5% vs. Exp. 12.4% (Prev. 13.6%
• South Korean Unemployment Rate (Nov) 2.8% (Prev. 2.5%)
• New Zealand Current Account - Quarterly (NZD)(Q3) -11.5B vs. Exp. -10.8B (Prev. -4.2B)
• New Zealand Current Account- Annual (NZD)(Q3) -30.6B vs. Exp. -29.5B (Prev. -29.8B)
• New Zealand Current Account/GDP (Q3) -7.6% vs. Exp. -7.5% (Prev. -7.5%)

GEOPOLITICS

ISRAEL/HAMAS/MIDDLE EAST

• UN General Assembly voted overwhelmingly to adopt a resolution demanding an immediate humanitarian ceasefire in Gaza, the immediate and unconditional release of all hostages and ensuring humanitarian access, in which the resolution passed by a majority vote of 153 in favour vs 10 against and 23 abstentions.
• Israel’s military has begun to pump seawater into Hamas’s tunnels in Gaza which is part of an intensive effort to destroy the underground infrastructure that has underpinned the group’s operations, according to WSJ citing US officials.
• Israeli PM Netanyahu said he would block the Biden administration’s post-war plan to have the Palestinian Authority take over Gaza, according to WSJ. It was separately reported that US President Biden said the government in Israel is making it very difficult for the world and that PM Netanyahu has to change his government.
• Houthi official commented via social media platform X that vessels navigating through the Red Sea should not turn off radios and must respond to Houthi orders, while vessels navigating through the Red Sea were advised not to travel towards "occupied Palestine".
• A source noted via social media platform X that there were reports of casualties following an Israeli airstrike in southern Lebanon.

OTHER

• US President Biden said Russian President Putin has failed to subjugate Ukraine and is banking on the US failing to deliver for Ukraine, while Biden added that he will not walk away from Ukraine and neither will the American people. Biden also stated that his team is trying to find bipartisan compromise on immigration and he confirmed USD 200mln in additional military aid to Ukraine. Furthermore, Biden said National Security Adviser Sullivan will visit Israel and Defense Secretary Austin will also travel to the Middle East, while he responded assertions are being made that there are no hostages in tunnels when asked about reports of Israel flooding Hamas tunnels.
• Ukrainian President Zelensky said the idea of giving up territory to end the war is insane and stated who controls the skies controls the war's duration, while it was also reported that Zelensky told US senators that Ukraine is considering the conscription of men over the age of 40.

EU/UK

NOTABLE HEADLINES

• ECB's Villeroy said inflation's path to 2.4% from 10.6% is impressive while he also commented that Europe needs a plan to deepen its financial and economic unity if it is to emerge from crises affecting its democracy and society.
• UK PM Sunak has seen off a Conservative rebellion over his flagship Rwanda bill but still faces a battle to get it through Parliament, according to the BBC.