• European equities and US Futures are firmer; the RTY (+0.9%) outperforms
• Dollar meanders around the 102 level; Antipodeans benefit from the risk tone whilst EUR lags post PMI
• EGB’s are bid following EZ Flash PMI data whilst USTs are contained pre-Williams; Gilts remain firmer but off highs after their own PMIs
• Crude holds a modest bias in line with a broader positive risk tone post Chinese Industrial Output data.
• Looking ahead, US Capacity Utilisation, Industrial Production, NY Fed Manufacturing, Quad Witching, CBR Policy Announcement, Speeches from Fed's Williams & BoC’s Macklem.

EUROPEAN TRADE

EQUITIES

• European equities, Eurostoxx50 (+0.3%), are building on yesterday's gains; though the FTSE 100 (-0.1%) marginally lags weighed on by losses in heavyweight AstraZeneca (-1.9%)
• European sectors have a strong positive bias; Automobiles & Parts and Basic Resources are the clear outperformers, with the former seemingly benefitting from broad-based gains within the sector, alongside strength in Renault on a buyback update; Chemicals underperform, hampered by Symrise (-9.2%).
• US equity futures are entirely in the green, having traded mixed in yesterday’s session; the RTY (+0.9%) continues to outperform.
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FX

• The Dollar is firmer intraday as a function of the softer EUR post-PMIs, whilst the index attempts to trim the hefty post-Fed losses after the ECB and BoE struck a less dovish tone than their US peer.
• Antipodeans are bid intraday largely a factor of commodities gains after a higher-than-expected Chinese Industrial Output metric.
• EUR on a softer footing amid dismal Flash PMI data whereby France and Germany fell deeper into contraction territory, though labour unit cost pressures remain a concern.
• PBoC set USD/CNY mid-point at 7.0957 vs exp. 7.1132 (prev. 7.1090).
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FIXED INCOME

• USTs are a touch firmer on the session having moved in tandem with the EGB reaction and only paring slightly from their 112.22 peak on the Gilt move, which itself is 6 ticks shy of the contract best.
• EGBs are bid across the board with initial contained performance giving way to an approach of the contract high after the morning’s Flash PMI data for December.
• Gilts were initially bolstered by the EZ figures, but then trimmed on the regions own strong PMI data with Services continuing to prop up the economy and crucially with wage pressures still evident.
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COMMODITIES

• WTI Jan and Brent (+0.7%) Feb futures hold a modest positive bias, in line with the broader risk tone, with prices also underpinned by firmer Chinese Industrial Output overnight.
• Metals trade on a firmer footing, with spot gold holding a mild positive bias keeping its sight on the USD 2,050/oz level to the upside; Base metal futures are firmer across the board after the Chinese Industrial Output data topped forecasts and reignited demand optimism for the sector.
• Commerzbank says OPEC+ production cuts are likely to keep the oil market in balance at the start of next year despite weaker demand; For WTI, expects price of USD 75/bbl at the end of the first quarter; USD 85/bbl in H2'24
• Commerzbank sees a further price increase to USD 2150/oz for Gold in H2'24; Silver price increase to USD 30/oz by end 2024; Sees further significant upside for Copper and price recovery to USD 9200/t over the course of the year; Sees aluminium around USD 2,800/t next year.
• Qatar reportedly sells February-loading cargoes at discounts and lowest levels in years, according to Reuters sources.
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NOTABLE EUROPEAN HEADLINES

• 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.
• ECB's Holzmann says there was no discussion on rate cuts at yesterday's meeting; Majority said there are risks to the upside on inflation; Majority are focus on core inflation; When questioned on whether the ECB is at terminal, the chance has increased but there is a remaining chance that they haven't.
• ECB's Villeroy says they want to express a message of confidence and patience at the December meeting. Change to the inflation outlook was the important signal; Will bring inflation back to target by 2025; Policy transmission is slightly faster than initially expected; Next policy move should be a lowering of rates "unless surprises"
• ECB's Vasle says the current policy rate is to help return inflation to 2%
• UBS now expects ECB to deliver its first rate cut in April (prev. June)
• EU is to extend the trade truce with the US until after the presidential election, according to FT.
• Bundesbank Forecasts: HICP: 2023 6.1%; 2024 2.7%; 2025 2.5%; 2026 2.2%; GDP: 2023 -0.1%; 2024 0.4%; 2025 1.2%; 2026 1.3%
• CBRT Survey (Dec): Repo Rate seen at 36.65% (prev. survey 37.01%), USD/TRY seen at 29.6229 (prev. 29.9961), 12-month CPI seen at 41.23% (prev. 43.94%). End-2023 CPI seen at 65.39% (prev. 67.23%). End-2023 GDP growth seen at 4.2% (prev. 4.1%).

DATA RECAP

• UK Flash Manufacturing PMI (Dec) 46.4 vs. Exp. 47.5 (Prev. 47.2); Services 52.7 vs. Exp. 51.0 (Prev. 50.9); Composite 51.7 vs. Exp. 50.9 (Prev. 50.7)
• EU HCOB Manufacturing Flash PMI (Dec) 44.2 vs. Exp. 44.6 (Prev. 44.2); Composite 47.0 vs. Exp. 48.0 (Prev. 47.6); Services 48.1 vs. Exp. 49.0 (Prev. 48.7)
• French HCOB Composite Flash PMI (Dec) 43.7 vs. Exp. 45.0 (Prev. 44.6); Services Flash 44.3 vs. Exp. 46.0 (Prev. 45.4); Manufacturing Flash 42 vs. Exp. 43.3
• German HCOB Services Flash PMI (Dec) 48.4 vs. Exp. 49.8 (Prev. 49.6); Composite Flash PMI (Dec) 46.7 vs. Exp. 48.2 (Prev. 47.8); Manufacturing 43.1 vs. Exp. 43.2 (Prev. 42.6)
• UK GfK Consumer Confidence (Dec) -22.0 vs. Exp. -22.0 (Prev. -24.0)
• French CPI (EU Norm) Final MM (Nov) -0.2% vs. Exp. -0.3% (Prev. -0.3%); French CPI (EU Norm) Final YY (Nov) 3.9% vs. Exp. 3.8% (Prev. 3.8%)
• Italian Consumer Prices Final YY (Nov) 0.7% vs. Exp. 0.8% (Prev. 0.8%); Italian Consumer Prices Final MM (Nov) -0.5% vs. Exp. -0.4% (Prev. -0.4%)
• Italian Global Trade Balance (Oct) 4.699B EU (Prev. 2.35B EU)
• EU Labour Costs YY (Q3) 5.3% (Prev. 4.5%); Wages In Euro Zone (Q3) 5.3% (Prev. 4.6%); Eurostat Trade NSA, Eur (Oct) 11.1B EU (Prev. 10.0B EU)
• Turkish End Year CPI Fcst/Cb Svy (Dec) 65.39% (Prev. 67.23%)

NOTABLE US HEADLINES

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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.
• UKMTO has received reports of an incident in the vicinity of Hodeideah, Yemen
• US Officials say there is an almost complete halt in ship access to Israel's Eilat port, via AJA Breaking citing Axios

CRYPTO

• Bitcoin, -0.3%, languishes under the USD 43k mark, whilst Ethereum (-1.7%) posts losses to a larger magnitude.

APAC TRADE

• 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.

NOTABLE 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.
• Nio (NIO/ 9866 HK) President says tariffs from EU probe into subsidies for China-made EVs would affect sales forecasts and investments

DATA RECAP

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