• APAC stocks traded mostly negatively following a weekend heavy with geopolitical headlines and as markets look to wind down for the Christmas break.
• DXY held a downward bias and traded on either side of 102.50 within a 102.44-63 range amid light macro newsflow and ahead of this week's BoJ confab and US PCE data.
• North Korea fired a long-ranged ICBM overnight, which landed outside of Japan's EEZ. The North Korean ICBM ballistic missile test could have a range covering all of the US, according to AFP citing Japan.
• Fed's Bostic said rate cuts are not 'an imminent thing, Goolsbee did not rule out the possibility of cutting rates in March
• European equity futures are indicative of a softer cash open, with Euro Stoxx 50 future -0.2% after cash markets closed +0.2% on Friday.
• Looking ahead, highlights include German Ifo, Canadian NAHB, NZ Trade, ECB’s Schnabel & Lane, and BoE’s Broadbent.

US TRADE

EQUITIES

• US stocks closed mixed on Friday in what was a whipsaw session on the final quad-witching of the year, with the DJIA making fresh intraday record highs.
• SPX Unch at 4,719, NDX +0.4% at 14,814, DJIA +0.2% at 37,305, RUT -0.8% at 1,985.

NOTABLE HEADLINES

• Fed's Bostic (2024 voter) said he agrees with NY Fed President Williams; "we need to be willing and comfortable to keep rates higher for longer." Bostic said rate cuts are not 'an imminent thing,' but has instructed staff to begin developing possible principles, and thresholds, to guide the process. Bostic sees two quarter-percentage-point interest rate cuts in 2024, with the first 'sometime in the third quarter', assuming expected progress on inflation continues. Bostic sees 2024 GDP growth at just over 1%, unemployment at 4% by the end of next year, and PCE inflation at 2.4%. He said the US economy is 'still a way' from the Fed's 2% inflation target, though progress has been coming 'faster than I expected', according to Reuters. Click here for the full comments.
• Fed's Goolsbee (2023 voter) did not rule out the possibility of cutting interest rates at the March meeting and said the Fed may need to shift focus to jobs from inflation, according to WSJ. He said he would support a rate hike if data supported that, but if inflation continues on the current path, cuts could be appropriate. He said with inflation falling to the 2% target, it could be appropriate to be more mindful of the risk that unemployment rises. Goolsbee expects rates to be lower next year than now, but not significantly.
• US NEC Director Brainard said financial markets reflect a more positive view about the economy's path, and she sees no evidence for wage-price spirals, and sees rents bringing down core inflation, according to Reuters.
• BoC Governor Macklem said the 2% inflation target is now in sight; "we're not there yet" but conditions increasingly appear to be in place to get them there, according to Reuters. Click here for the full comments.
• BoC is to change the time of rate announcements to 09:45 EST (vs 10:00 EST) from January, and there will be a press conference with the Governor and Deputy Governor after every meeting, according to Reuters.
• China's Apple iPhone (AAPL) ban has reportedly been accelerated across government and state firms, according to Bloomberg.

APAC TRADE

EQUITIES

• APAC stocks traded mostly negatively following a weekend heavy with geopolitical headlines and as markets look to wind down for the Christmas break.
• ASX 200 saw losses in the Gold and Energy sectors somewhat cushioned by modest gains in Tech.
• Nikkei 225 fell at the open with the deepest losses seen in Real Estate and Financial stocks, although the index trimmed losses after finding support near 32,500, whilst traders also look ahead to the BoJ announcement on Tuesday.
• Hang Seng and Shanghai Comp were lower with the former seeing losses in Financials and Property stocks, whilst the latter was initially cushioned with PBoC resuming cash injections via 14-day reverse repos to meet year-end liquidity demands.
• US equity futures (ES +0.3%) held an upward bias overnight but with price action capped ahead of US PCE.
• European equity futures are indicative of a softer cash open, with Euro Stoxx 50 future -0.2% after cash markets closed +0.2% on Friday.

FX

• DXY held a downward bias and traded on either side of 102.50 within a 102.43-63 range amid light macro newsflow and ahead of this week's BoJ confab and US PCE data.
• EUR/USD tilted higher and reclaimed 1.09+ status as the Dollar remained subdued, but the pair remains some way off Friday's high (1.1003).
• GBP/USD edged higher in tandem with the Dollar softness, but met overnight resistance at 1.2700.
• USD/JPY traded under its 200 DMA (142.56) in a 142.08-45 range, with all eyes on the BoJ due on Tuesday.
• Antipodeans were supported by the extra PBoC liquidity and firmer CNY fix, whilst the NZD outperformed after the Performance of Services Index rose back into expansion territory.
• PBoC set USD/CNY mid-point at 7.0933 vs exp. 7.1135 (prev. 7.0957); strongest level since June 5th

FIXED INCOME

• 10-year UST futures inched higher overnight but remained within Friday's range.
• Bund futures traded flat and held onto a bulk of Friday's PMI-induced gains.
• 10-year JGB futures held an upward bias whilst participants await the BoJ meeting, in which no changes are expected.

COMMODITIES

• Crude futures were initially propped up by weekend geopolitical headlines but waned off best levels amid the broader negative risk tone.
• Spot gold saw modest support from the subdued Dollar but gains were minimal.
• Copper futures traded on a softer footing due to the mild risk aversion, but later clambered off worst levels as the Dollar inched lower.
• Baker Hughes Weekly Rig Count (15/Dec): Oil rigs -2 at 501 (cut rigs for the first time in five weeks); Nat gas rigs unch at 119.
• Russian Deputy PM Novak said Russia is to increase oil export cuts as part of the OPEC+ deal already in December, with the number to exceed 300k BPD by May-June, according to Ifax. He added Russia's oil exports are to be lower than 247mln tonnes in 2023.
• Russia does not yet see grounds for lifting the ban on winter diesel export, according to Ifax.
• Russia is not interested in extending the Black Sea grain deal, according to RIA citing the Agriculture Minister.
• Goldman Sachs moderates range for 2024 Brent prices by USD 10/bbl to USD 70-90/bbl as they now expect only a modest deficit and slightly less elevated long-dated prices; still look for range-bound oil prices and only moderate price volatility in 2024, according to Reuters.
• Australia has reportedly opened a door to AUD 40bln in government funding for copper and nickel projects, alongside other materials, putting them on a list of materials deemed essential to the global energy transition, according to Reuters.

CRYPTO

• Bitcoin slipped over the weekend and briefly fell under the USD 41,000 mark from a Saturday high north of USD 42,500.

NOTABLE ASIA-PAC HEADLINES

• China's economy in 2024 faces more opportunities than challenges, and favourable conditions are stronger than unfavourable factors, according to state media.
• China's Central Finance office said there are blockages in the economic cycle domestically, demand is insufficient, and consumption and enterprise investment willingness are not strong enough, according to state media. Issuance of an additional CNY 1tln of Treasury bonds this year, as well as cuts in interest rates, tax and fee cuts, and other policy effects, will continue into next year. Click here for the detailed headline.
• A growing number of Chinese chip design firms are reportedly tapping Malaysian Cos to assemble a portion of their high-end chips, in a bid to hedge risks of US-expanded sanctions on China's chip industry, according to Reuters sources.
• PBoC injected CNY 184bln through 7-day reverse repos at 1.80% and CNY 60bln via 14-day reverse repos at 1.95%; both rates were maintained, according to Reuters.
• Hong Kong Chief Executive John Lee will provide updates on political and economic situation of Hong Kong in a meeting with Chinese President Xi and Premier Li on Monday afternoon according to SCMP sources.
• A Chinese developer partially owned by the city of Shenzhen warned it can’t pay interest due Wednesday, according to Bloomberg.

DATA RECAP

• New Zealand Westpac Consumer Survey 88.9 (Prev. 88.9)
• NZ Performance of Services Index (PSI) 51.2 (Prev. 49.2)

GEOPOLITICS

MIDDLE EAST

• Israeli PM Netanyahu said Israel has received requests to cease fire and remove troops in Gaza talks but will not do so, and added they have serious criticism of Qatar but right now are trying to complete the recovery of hostages, according to Reuters.
• Israeli Defense Minister said his country can 'copy and paste' what it is doing to Hamas onto Hezbollah, according to Spectator Index.
• Syrian air defence intercepted Israeli targets in the vicinity of Damascus, according to the state news agency.
• Yemeni Houthis were reportedly in Oman-mediated talks over 'operations' in the Red Sea, according to a Houthi spokesman cited by Reuters.
• Yemeni Houthis said they carried out a military operation against 'sensitive targets in southern occupied Palestine' with a large batch of drones, according to a statement.
• Yemen Houthi official said Yemen is ready with all defensive options to respond to any American, Israeli, or Western hostile moves, according to Al Mayadeen TV, and added that any hostile move against Yemen will have dire consequences and great costs.
• USS Carney shot down 14 Houthi armed attack drones on Saturday in the Red Sea, according to Fox's Griffin.
• UK Defence Minister said a UK navy ship has shot down a suspected attack drone targeting merchant shipping in the Red Sea, according to Reuters.
• Iran executed an "agent of Israel's Mossad" intelligence service, according to Iranian media.

OTHER

• US military reportedly plans to resume permanent deployment of fighter jets at an American base in Okinawa but with fewer planes than before, according to Nikkei. The service intends to deploy 36 F-15EX aircraft.
• North Korea fired a long-ranged ICBM overnight, which landed outside of Japan's EEZ. The North Korean ICBM ballistic missile test could have a range covering all of the US, according to AFP citing Japan.
• North Korea launched a short-range ballistic missile over the weekend, which appeared to have landed outside of Japan's EEZ, according to the South Korean military and Japan's Defence Ministry.
• China's Foreign Minister met with the North Korean counterpart on December 18th, according to Chinese state media.
• US Secretary of State Blinken said the Hong Kong national security law changes unjustly target overseas democracy advocates, including US citizens based in the United States and Hong Kong, according to Reuters.
• US approved the possible sale of command, control, communications, and computer support to Taiwan's de facto embassy in Washington for USD 300mln, according to the Pentagon.
• Russian President Putin said Russia has no interest in fighting with NATO, according to Reuters.

GLOBAL

• Kuwait announced 40 days of mourning and closure of official departments after the passing of Sheikh Nawaf al-Ahmad al-Jaber al-Sabah on Saturday, according to Reuters.
• Brazil's lower house approved the main text of reform on consumption taxes, according to Reuters.
• Panama Canal on Friday said it will increase the number of booking slots available in its Panamax and Neopanamax locks after a severe drought, according to Reuters.
• Argentina agreed to a USD 960mln bridge loan with CAF to meet IMF debt obligations, according to Reuters.
• Chilean right-wing UDI party concedes in the referendum; Chileans reject second proposed new constitution in the referendum, according to Bloomberg.
• Fitch affirmed Brazil at 'BB'; Outlook Stable.
• Fitch affirmed Hungary at 'BBB'; outlook Negative.

EU/UK

NOTABLE HEADLINES

• ECB policymakers do not expect to change the message on steady rates before the March meeting, according to Reuters sources, and any cut before June is difficult, sources said. Some said the divergence between the ECB and the market could be boiled down to diverging views on inflation, and investors expect the recent marked fall in inflation to continue, while most central bankers thought it would prove temporary.
• BoE Q1 QT operations: To sell short-dated Gilts across four auctions of GPB 800mln (prev. GBP 670mln each in Q4); medium-dated across four auctions of GPB 750mln (prev. GBP 670mln); long-dated across three auctions of GBP 650mln (prev. GBP 670mln in four).