• European equities and US Equity futures are firmer awaiting the Fed Policy Announcement
• Dollar is bid to the detriment of G10 pairs; Kiwi underperforms following the larger NZ current account deficit; Pound lags amid dismal GDP data
• Gilts gap higher post-data though benchmarks await the FOMC & German fiscal clarity
• Crude teeters around the unchanged mark having spent much of the European session in the red; Base metals are mostly softer awaiting the Fed
• Looking ahead US MBA, PPI, NZ GDP, Fed & BCB Policy Announcement, Fed Chair Powell at the FOMC Press Conference

EUROPEAN TRADE

EQUITIES

• European equities, Eurostoxx50 (+0.2%) are trading on a firmer footing; though the IBEX 35 underperforms (U/C) amid losses in Repsol (-2.1%).
• European sectors are mixed with a slight positive bias, though the breadth of the market to the upside is fairly narrow; Chemicals is the clear outperformer, propped up by gains in BASF (+3.4%) and Arkema (+3.6%); Energy lags due to broader losses in crude prices.
• US equity futures are trading in the green, posting gains similar to their European counterparts, NQ (+0.2%), as attention turns to US PPI and the much-awaited Fed Policy Announcement.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• A positive start to the session for the broader Dollar and index with some assistance from a weaker GBP and as the clock ticks down to the FOMC policy announcement.
• Sterling is among the G10 laggards following the dismal GDP data on the eve of the BoE, although the data will likely not have any influence on tomorrow’s decision, where expectations are for the MPC to stand pat.
• The NZD lags in the G10 bunch following the larger NZ current account deficit reported overnight coupled with reports that New Zealand passed the law to return the RBNZ to a single inflation mandate
• 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.
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FIXED INCOME

• USTs are essentially unchanged heading into the FOMC announcement with yields incrementally lower across the curve.
• Bunds are a touch firmer, holding towards the midpoint of 135.07-135.41 parameters and as such within Tuesday’s 134.80-135.60 bounds; awaiting clarity on the 2024 German budget.
• Once again, Gilts buck the trend having gapped higher from Tuesday’s 98.73 close to a 99.02 open before extending in short order to the current 99.48 session high, driven by soft October growth data.
• UK sells GBP 2bln 3.75% 2053 Gilt: b/c 2.70 (prev. 2.34x), average yield 4.43% (prev. 4.664%) & tail 0.5bps (prev. 1.5bps)
• Italy sells EUR 6bln vs exp. EUR 5-6bln 3.85% 2026 & 4.00% 2030 BTP; EUR 3bln 3.85% 2026: b/c 1.56x (prev. 1.54x) & gross yield 3.24% (prev. 3.75%); EUR 3bln 4.00% 2030: b/c 1.54x (prev. 1.50x) & average yield 3.63% (prev. 4.21%)
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COMMODITIES

• WTI Jan and Brent (U/C) Feb futures are essentially flat after being softer at the beginning of the session, futures initially trundled lower in APAC hours with little by way of fresh fundamentals in the European session to shift sentiment for the complex.
• Spot gold remains flat ahead of today’s risk events, with the yellow metal contained to a USD 1,972.78-82.59/oz parameter.
• Base metals are mostly softer as the Dollar remains firm and risk remains cautious in the run-up to the FOMC decision.
• 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.
• 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.
• Azerbaijan oil output at 27.6mln tons between Jan-Nov (vs 25.3mln between Jan-Oct), according to the Energy Ministry cited by Reuters
• Gulf Keystone Petroleum says there remains no official timeline for reopening of Iraq-Turkey pipeline
• OPEC to issue monthly oil market report at 12:23GMT (07:23 EST)
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NOTABLE EUROPEAN HEADLINES

• German government has reportedly come to an agreement over the dispute for the 2024 budget, via Reuters citing government sources; German coalition officials to deliver a briefing at 11:00GMT/06:00EST, on the 2024 budget. Furthermore, the Germany government has agreed, at least initially, to not declare an emergency situation which would suspend the debt brake for 2024, according to government sources cited by Reuters
• German economy to contract 0.5% in 2024 due to budget crisis, via IW Economic Institute
• IFW Institute German Forecasts - GDP: 2023 -0.3% (prev. -0.5%), 2024 +0.9% (prev. +1.3%). 2025 +1.2% (prev. +1.5%); Inflation: 2023 5.9%, 2024 2.3%, 2025 1.8%
• 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.
• HSBC sees S&P 500 2024 year-end price target of 5,000, says a soft-landing scenario could pave the way for further upside
• Goldman Sachs (GS) cuts UK's 2023 GDP growth forecast to 0.5% (prev. 0.6%); cuts 2024 forecast to 0.6% (prev. 0.7%)
• JP Morgan lowers its 2023 UK GDP forecast to 0.5% from 0.6% with 2024 cut to 0.2% from 0.4%
• 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.

DATA RECAP

• UK GDP Estimate MM (Oct) -0.3% vs. Exp. 0.0% (Prev. 0.2%); falls in every sector (services, construction & production); Estimate 3M/3M (Oct) 0.0% vs. Exp. 0.1% (Prev. 0.0%); UK GDP Estimate YY (Oct) 0.3% vs. Exp. 0.6% (Prev. 1.3%)
• UK Services YY (Oct) 0.2% vs. Exp. 0.4% (Prev. 1.1%); MM (Oct) -0.2% vs. Exp. 0.0% (Prev. 0.2%)
• UK Manufacturing Output MM (Oct) -1.1% (Prev. 0.1%); YY (Oct) 0.8% vs. Exp. 1.9% (Prev. 3.0%)
• UK Industrial Output MM (Oct) -0.8% vs. Exp. -0.1%; YY (Oct) 0.4% vs. Exp. 1.1% (Prev. 1.5%)
• UK Construction O/P Vol YY (Oct) 1.1% vs. Exp. 1.2% (Prev. 2.8%)
• UK Goods Trade Bal. Non-EU (Oct) -4.828B GB (Prev. -4.45B GB, Rev. -4.45B GB); Goods Trade Balance GBP (Oct) -17.032B GB vs. Exp. -14.3B GB (Prev. -14.288B GB, Rev. -14.288B GB)
• EU Industrial Production MM (Oct) -0.7% vs. Exp. -0.3% (Prev. -1.1%, Rev. -1.0%); YY (Oct) -6.6% vs. Exp. -4.6% (Prev. -6.9%, Rev. -6.8%)
• Swedish Money Market CPIF Inflation 1 Year (Dec) 2.4% (Prev. 2.8%); Swedish Money Market CPIF Inflation 5 Years (Dec) 2.1% (Prev. 2.1%)
• South African CPI MM (Nov) -0.1% vs. Exp. 0.1% (Prev. 0.9%); YY (Nov) 5.5% vs. Exp. 5.6% (Prev. 5.9%)
• South African Core Inflation MM (Nov) 0.2% vs. Exp. 0.1% (Prev. 0.4%); YY (Nov) 4.5% vs. Exp. 4.4% (Prev. 4.4%)

NOTABLE US HEADLINES

• Click here for the US Early Morning Note.

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.
• 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 officials 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.
• UK Maritime Organisation has received report of an incident in the vicinity of Bad El Mandeb, Yemen. Authorities are investigating. Report issued at 05:30GMT, incident time 03:45GMT; subsequently another report of an incident approximately 90mn South of AL DUQM (off the coast of Oman); Authorities are investigating
• "The Houthis targeted a Marshall Islands-flagged oil tanker coming from India and heading towards the Suez Canal with an armed crew on it", according to Al Jazeera citing AP

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.

CRYPTO

• Bitcoin and Ethereum (+0.2%) are modestly firmer with the former continuing to reside below the USD 42k mark.

APAC TRADE

• 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.

NOTABLE 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.
• Japanese PM Kishida says the government and the BoJ are in agreement on the goal of achieving economic growth accompanied by wage gains, as well as the need for sustained stable achievement of price target

DATA RECAP

• Japanese Tankan Large Manufacturing Index (Q4) 12.0 vs. Exp. 10.0 (Prev. 9.0); Large Manufacturing Outlook 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); 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); Current Account Annual -30.6B vs. Exp. -29.5B (Prev. -29.8B)
• New Zealand Current Account/GDP (Q3) -7.6% vs. Exp. -7.5% (Prev. -7.5%)
• China Money Data (November): Aggregate Financing (CNH) : 2.45tln (exp. 2.595tln); M2 Money Supply: 10% Y/Y (exp. 10%); New Yuan Loans (CNH): 1.09tln (exp. 1.3tln)