• Modest pressure in European/US equities after a similar APAC handover given some Fed pushback
• Fed's Mester (2024) says markets are a bit ahead of the Fed on rate cuts; Goolsbee (2023 voter) may need to shift focus to jobs
• DXY pressured around 102.50, EUR above 1.09 with limited reaction to Ifo; JPY lags into BoJ
• EGBs printed session highs after German Ifo with USTs contained & 30yr yield eyeing 4.00% to downside
• Crude benchmarks pressured post-data but off lows as BP announces a halt to tanker transits in the Red Sea
• Looking ahead, highlights include US NAHB, NZ Trade, ECB’s Schnabel, Lane, Wunsch & Fed's Goolsbee

EUROPEAN TRADE

EQUITIES

• European bourses are a touch softer, Euro Stoxx 50 -0.3%, continuing the decline from the APAC session where markets were focused on geopols and a slight pushback from the Fed.
• Sectors are mixed with outperformance in Energy & Basic Resources alongside Telecom names, the latter bolstered by Vodafone (+6.5%) striking a deal with Iliad.
• Stateside, futures are contained with the ES +0.3% in relative proximity to Friday's peak ahead of Goolsbee today and Bostic throughout the week before PCE on Friday.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• DXY is modestly pressured and has traded on either side of 102.50 in a 102.37-63 bound; Friday's range of 101.83-102.64.
• EUR back above 1.09 with no real action on the poor German Ifo, given PMIs last week, ahead of ECB's Lane & Schnabel.
• USD/JPY around the 142.56 200-DMA ahead of the December BoJ announcement (preview available), session high in proximity to the 14th December 142.89 best.
• Antipodeans the best performers with support coming after additional PBoC liquidity and a firmer Yuan fix.
• PBoC set USD/CNY mid-point at 7.0933 vs exp. 7.1135 (prev. 7.0957); strongest level since June 5th
• Fitch affirmed Brazil at 'BB'; Outlook Stable. Affirmed Hungary at 'BBB'; outlook Negative.
• Brazil's lower house approved the main text of reform on consumption taxes, according to Reuters.
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Contained trade for USTs ahead of Fed speak, modest upward bias with overall action bull steepening slightly while the US 30yr yield eyes 4.00% to the downside.
• Bunds lifted to session highs on the December German Ifo which saw Business Climate & Expectations print below the forecast range. Holding around 137.35 off the 137.46 peak and just shy of Friday's 137.48 best.
• Gilts outperform with BoE speak fairly limited though we did get some slight pushback from Broadbent who echoed the statement in wanting to see a "more protracted and clearer decline" in wage series before making a conclusion.
• Click here for more details.

COMMODITIES

• Crude benchmarks initially contained but began to slip on the German Ifo and have continued to decline since, but remain above Friday's trough with specifics light.
• WTI & Brent Feb down to USD 70.64/bbl and USD 75.76/bbl at worst; though, contracts have lifted from lows in the wake of reports that BP (BP/ LN) is to pause all tanker transits via the Red Sea, via Bloomberg.
• 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.
• 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.
• Yellow metal benefitting from the lower yield environment with limited initial follow through from geopols, XAU at the mid-point of USD 2016-2027/oz bounds.
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NOTABLE EUROPEAN HEADLINES

• ECB's Vasle says market pricing for the start of rate cuts, and the totality for 2024, is excessive. Recent accomodation priced into rates is inconsistent with the stance appropriate to get inflation to target. Inflation will rebound in H1, ECB should reassess policy outlook only after observing the trend. Wage formation in Q1 is crucial for the policy outlook.
• BoE's Broadbent says "given the volatility in the official estimates of wage growth, and the disparity (such as it is) among the various indicators we have, it will probably require a more protracted and clearer decline in these series before the MPC can safely conclude that things are on a firmly downward trend."

DATA RECAP

• German Ifo Business Climate New (Dec) 86.4 vs. Exp. 87.8 (Prev. 87.3, Rev. 87.2); Conditions New (Dec) 88.5 vs. Exp. 89.7 (Prev. 89.4); Expectations New (Dec) 84.3 vs. Exp. 85.9 (Prev. 85.2, Rev. 85.1)

NOTABLE US HEADLINES

• 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.
• Fed's Mester (2024) says markets are a bit ahead of the Fed on rate cuts, says next phase is not when to reduce rates even though that's where markets are, it is about how long policy should remain restrictive, via FT.
• 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.
• China's Apple iPhone (AAPL) ban has reportedly been accelerated across government and state firms, according to Bloomberg.
• United States Steel (X) to be acquired by Nippon Steel (5401 JT), via Nikkei; value expected to be over JPY 1tln.
• Click here for the US Early Morning Note.

GEOPOLITICS

• 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.
• 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.

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.
• Iranian state media and Israeli state media says that 'predatory sparrow' hacking group has claimed responsibility for outages at Iranian petrol stations.

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.

CRYPTO

• Bitcoin is a touch softer and has lost the USD 41k handle with specifics for the Crypto space light. As such, BTC remains within the boundaries of the last two weeks and continues to give back the pronounced gains from the first few sessions of December.

APAC TRADE

• 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.

NOTABLE 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.
• Japan's Keidanren Chief Tokura says the BoJ should normalise monetary policy as soon as possible; big wage hike should not be a one-off.

DATA RECAP

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