• APAC stocks traded mostly higher after the positive handover from Wall St as yields continued to decline.
• Chinese Industrial Production topped estimates but Retail Sales disappointed despite showing double-digit percentage growth.
• European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.2% after the cash market closed up 0.2% yesterday.
• DXY hovers around the 102 mark, EUR/USD lingers just below 1.10 and USD/JPY sits around the 142 level.
• Looking ahead, highlights include EZ, UK & US PMIs (Flash), EZ Trade Balance, US Capacity Utilisation, Industrial Production, NY Fed Manufacturing, Quad Witching, CBR Policy Announcement, BoE’s Ramsden & BoC’s Macklem.

US TRADE

EQUITIES

• US stocks were choppy but finished mostly higher as yields continued to decline in the aftermath of the FOMC, while participants also digested a slew of central bank updates and several encouraging data releases including stronger-than-expected Retail Sales and lower-than-expected Jobless Claims.
• SPX +0.27% at 4,720, NDX -0.15% at 16,538, DJI +0.43% at 37,248, RUT +2.72% at 2,000.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Treasury Secretary Yellen said the Financial Stability Oversight Council is adding artificial intelligence to its list of potential risks to the financial system, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mostly higher after the positive handover from Wall St where sentiment remained underpinned amid encouraging data and as yields continued to decline following the recent dovish Fed pivot, while the region also digested mixed Chinese activity data.
• ASX 200 was led higher by the commodity-related sectors after gains in oil and metal prices which helped the index shrug off the latest flash PMIs from Australia which slightly improved but remained in contractionary territory.
• Nikkei 225 was lifted at the open and briefly returned to above the 33,000 level amid the global risk-on mood.
• Hang Seng and Shanghai Comp were varied with notable outperformance in the Hong Kong benchmark amid tech strength although the mainland lagged after mixed Chinese data in which Industrial Production topped estimates but Retail Sales disappointed despite showing double-digit percentage growth, while House Prices continued to decline and attention was also on the PBoC which maintained its 1-year MLF rate at 2.50% but delivered a record net injection through the facility.
• US equity futures (ES +0.1%) were steady amid a lack of conviction heading into the quad witching hour.
• European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.2% after the cash market closed up 0.2% yesterday.

FX

• DXY remains around the102.00 level after the fallout from the Fed's dovish pivot despite the recent stronger-than-expected US Retail Sales and lower Jobless Claims, while the greenback was also pressured by strength in its major counterparts across the pond following the slew of central bank decisions which were much less dovish than the FOMC.
• EUR/USD was kept afloat near the 1.1000 level after strengthening in the aftermath of the ECB meeting, while sources noted the central bank is largely united on forecasting rate cuts later than market bets and officials do not expect to revise their stance before March.
• GBP/USD took a breather after its post-BoE outperformance where the message was that policy will need to remain restrictive.
• USD/JPY was choppy and ultimately slipped back beneath the 142.00 handle owing to the recent fall in US yields.
• Antipodeans were initially underpinned by the positive risk appetite and firmer yuan reference rate setting.
• PBoC set USD/CNY mid-point at 7.0957 vs exp. 7.1132 (prev. 7.1090).
• Mexican Central Bank kept its Interest Rate at 11.25%, as expected, while it lifted its inflation forecasts for 2024 and maintained its guidance that the reference rate must be held at its current level for some time.
• Brazil’s Finance Minister Haddad said extended tax exemption on payrolls was not included in the 2024 budget and it would be difficult to deliver it, while an alternative measure to extended tax exemption on payrolls will be presented this year.

FIXED INCOME

• 10-year UST futures marginally eased back following the prior day’s bull flattening as strong retail sales, lower jobless claims and a less dovish ECB, capped the front-end's post-FOMC rip.
• Bund futures continued to fade their recent rally with prices back below the 136.00 level.
• 10-year JGB futures followed suit to the pullback in global peers amid the absence of additional BoJ buying.

COMMODITIES

• Crude futures are marginally firmer amid the positive risk appetite with Brent and WTI crude futures eyeing the USD 77/bbl and USD 72/bbl levels, respectively, after the recent rebound in oil prices from a six-month trough.
• Qatar reportedly sells February-loading cargoes at discounts and lowest levels in years, according to Reuters sources.
• A disagreement between Shell (SHEL LN) and Venezuela's PDVSA over future LNG prices has gridlocked talks on a license for Shell and Trinidad's National Gas Company to operate a Venezuela gas field, according to Reuters citing sources.
• Spot gold lacked direction with price action rangebound after plateauing north of USD 2030/oz.
• Copper futures traded sideways but held on to most of the prior day's spoils and remained near USD 3.90/lb.
• Workers at Chile's Centinela Copper mine approve contract offer which ends the risk of strike, according to Reuters.

CRYPTO

• Bitcoin is marginally lower after trickling back beneath the USD 43,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC conducted CNY 1.45tln in 1-year MLF lending with the rate kept unchanged at 2.50% for a net injection of CNY 800bln.
• China stats bureau spokesperson said China's economy recovers as macro policy effects kick in but added that domestic demand is still not sufficient and the economic recovery needs further consolidation. Furthermore, the spokesperson said China is to increase the intensity of macro policies and full-year development targets are expected to be achieved, while short-term adjustments in the property sector are said to be conducive for the stable and sound development of the sector in the long run.
• China is likely to set the 2024 GDP growth target at around 5% and is to target a budget deficit of 3% of GDP in 2024 vs. a revised ratio of 3.8% for 2023, while it may issue off-budget special bonds if the economy requires extra fiscal support, according to Reuters sources.
• China's MOFCOM said it determined that restrictive trade measures taken by Taiwan against it constitute trade barriers and stated that Taiwan's restrictive trade measures have caused negative impacts on relevant mainland industries and enterprises. Taiwan's government later stated they can talk anytime if China is sincere and that issues can be dealt with under WTO mechanisms as both are WTO members, while Taiwan's government also said China's trade barrier probe does not accord with the facts and called on China to stop politicking.

DATA RECAP

• Chinese Industrial Production YY (Nov) 6.6% vs. Exp. 5.6% (Prev. 4.6%)
• Chinese Retail Sales YY (Nov) 10.1% vs. Exp. 12.5% (Prev. 7.6%)
• Chinese Urban Investment YTD YY (Nov) 2.9% vs. Exp. 3.0% (Prev. 2.9%)
• Chinese China House Prices YY (Nov) -0.2% (Prev. -0.1%)
• Japanese Manufacturing PMI Flash SA (Dec) 47.7 (Prev. 48.3)
• Japanese Services PMI Flash SA (Dec) 52.0 (Prev. 50.8)
• Australian Manufacturing PMI Flash (Dec) 47.8 (Prev. 47.7)
• Australian Services PMI Flash (Dec) 47.6 (Prev. 46.0)

GEOPOLITICS

• Israel reportedly told Washington intensive raids and the large-scale ground operation will be completed within two or three weeks, according to Al Jazeera via social media platform X.
• Yemen's Houthis said it carried out an operation against a Maersk cargo ship on its way to Israel and that it targeted the ship with a drone after the ship's crew refused to respond to calls from Yemeni naval forces. Furthermore, US Central Command said a ballistic missile was fired from the Houthi-controlled area of Yemen towards the international shipping lane north of Bab-El-Mandeb Strait on Thursday but there were no injuries or damage from the ballistic missile attack.
• US President Biden's administration sent messages to the Houthi rebels in Yemen via several channels recently warning them to stop their attacks on ships in the Red Sea and against Israel, according to Axios.
• US President Biden and Turkish President Erdogan discussed the importance of strengthening the NATO alliance including the importance of welcoming Sweden as an ally. Biden expressed support for recent constructive steps in the relationship between Turkey and Greece, while they discussed efforts to increase humanitarian assistance to Gaza and protect civilians and the need for a political horizon for Palestinians, according to the White House.
• EU agreed to open accession talks with Ukraine, while it was separately reported that Hungary’s PM Orban said Ukraine's membership in the EU is a bad decision and that talks continue on the modification of the budget.
• Hungary held up the deal on EUR 50bln of financing for Ukraine and EU leaders postponed the discussion to January. Furthermore, Dutch PM Rutte said he is fairly confident the EU can reach a breakthrough early next year on Ukraine financing and the EU budget revision, according to Reuters.
• Japan is to ban imports of Russian diamonds for non-industrial use and will impose new sanctions on Russia-related groups and individuals, according to the Foreign Ministry.
• Guyana and Venezuela agreed to continue dialogue on pending matters related to the territorial dispute and to avoid conflict escalation, while the sides agreed to meet again in Brazil to continue dialogue over border issues, according to St Vincent's PM.

EU/UK

NOTABLE HEADLINES

• UK government signalled it will not step in to help France’s EDF fund Hinkley Point C after its Chinese partner CGN halted payments to cover mounting cost overruns on Britain’s flagship nuclear power project, according to FT.
• ECB is largely united on forecasting rate cuts later than market bets, according to Bloomberg.
• EU is to extend the trade truce with the US until after the presidential election, according to FT.
• ECB's Muller says it is still a little early to celebrate victory over inflation; still a little bit to go to reach 2% inflation, and its still too early to talk about near-term rate cuts, according to Bloomberg. Adds, markets are a bit optimistic if they see cuts in H1.

DATA RECAP

• UK GfK Consumer Confidence (Dec) -22.0 vs. Exp. -22.0 (Prev. -24.0)