• APAC stocks eventually traded mixed after a subdued start to the session with news flow light and the BoJ failing to induce any macro price action.
• JPY was hit after the BoJ unanimously left its rate and YCC unchanged, whilst forward guidance was also maintained and the Bank acknowledged the recent cooling in inflation.
• Fed's Daly (2024 voter) said it is appropriate for the Fed to begin looking ahead to lowering interest rates in 2024 because of how inflation has improved this year.
• The US and its allies agreed to a Red Sea naval task force, according to Associated Press; Yemen Houthi officials said the group will be able to confront any possible coalition that could be formed by the US in the Red Sea.
• Looking ahead, highlights include EZ HICP (Final), US Building Permits/Housing Starts, Canadian CPI, Japanese Trade Balance, NBH Announcement, Fed's Bostic, Goolsbee; BoE's Green; ECB's Elderson, and Supply from the UK.

CENTRAL BANKS

• The BoJ maintained its policy settings, as expected. The rate was left at -0.1% via unanimous decision, forward guidance was untouched, BoJ maintained the yield target and 1.0% reference rate for 10yr JGB, with the decision on YCC unanimous. BoJ said the Y/Y rate of rise in CPI is slower than a while ago, mainly due to the effects of pushing down energy prices. BoJ reiterated that it will not hesitate to take additional easing measures if necessary. Click here for the full release.
• RBA Minutes from the December meeting stated that members considered whether to raise the cash rate target by a further 25bps or to hold the cash rate target steady; the board noted RBA staff forecast had inflation returning to the top of the band by the end of 2025. Click here for the full release.

US TRADE

EQUITIES

• US stocks were mixed on Monday but the NDX and SPX closed in the green in what was a session without a clear catalyst.
• SPX +0.45% at 4,740, NDX +0.64% at 16,729, DJIA +0.00% at 37,306, RUT -0.14% at 1,982.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Daly (2024 voter) said it is appropriate for the Fed to begin looking ahead to lowering interest rates in 2024 because of how inflation has improved this year, via WSJ. "While much of the initial decline in inflation this summer stemmed from supply-chain healing, more recent declines appear to have been driven by a cooling in demand-driven components", Daly said. Click here for the full headlines.
• BoC Governor Macklem sees the BoC cutting rates sometime in 2024 but needs to see several months of sustained downward momentum in core inflation first, according to Bloomberg.
• Apple (AAPL) reportedly plans a rescue for USD 17bln watch business in the face of a ban, according to Bloomberg; Apple engineers are said to be racing to develop fixes for patent issues.
• Tesla (TSLA) is reportedly planning a 10% or higher hourly pay rate increase for some workers at its Nevada battery factory in January, according to CNBC.

APAC TRADE

EQUITIES

• APAC stocks eventually traded mixed after a subdued start to the session with news flow light and the BoJ failing to induce any macro price action.
• ASX 200 was supported from the start by its Gold and Energy sectors, whilst no major move was seen on the release of the RBA minutes.
• Nikkei 225 was subdued at the start of the session but later shot higher on its return from lunch break after the BoJ opted to keep all settings unchanged unanimously in what was a straightforward meeting to round off the year.
• Hang Seng and Shanghai Comp were softer throughout the session with the former dragged lower once again by its property sector, whilst the latter saw its losses cushioned by another sizeable liquidity injection via 7-day and 14-day reverse repos.
• US equity futures (ES flat) had a softer bias at the start of the session but futures drifted off worst levels to trade flat/mixed.
• European equity futures are indicative of a slightly firmer open with the Euro Stoxx 50 +0.2% after cash markets closed -0.7% on Monday.

FX

• DXY was pushed to session highs of 102.63 amid the Yen's BoJ-induced weakness, but before that DXY was contained to a tight range between 102.42-51 in uneventful trade.
• USD/JPY spiked higher after the BoJ unanimously agreed to keep all policy settings unchanged, with the pair moving from a pre-announcement level of 142.63 to a high of 143.78.
• EUR/USD was flat and caged in a narrow 1.0916-29 APAC range.
• GBP/USD managed to hold above 1.2650 throughout most of the overnight session but price action was minimal.
• Antipodeans were modestly firmer with the AUD edging higher after the RBA minutes from the December meeting suggested the Board considered whether to hike by 25bps or keep rates steady.
• PBoC set USD/CNY mid-point at 7.0982 vs exp. 7.1347 (prev. 7.0933)

FIXED INCOME

• 10-year UST futures were uneventful for most of the session after the prior day's bear-steepening, which some attributed to the supply-shock risk emanating from the Red Sea.
• Bund futures tested resistance near 137.00 following the BoJ meeting, but gains later pared back.
• 10yr JGB futures gapped higher after the Tokyo lunch break as traders reacted to the BoJ decision, although futures trimmed gains whilst other reports suggested the 20-year JGB reduction will be front-loaded by the MOF amid waning demand.
• Japan's MOF is to reportedly front-load reduction of 20-year bonds by JPY 200bln from January, reflecting waning investor demand amid rising interest rates, according to Reuters sources.

COMMODITIES

• Crude futures were flat overnight as prices took a breather from the prior session's Red Sea-driven gains, whilst geopolitical headlines overnight were also on the quieter side.
• Spot gold saw mild pressure as a function of the Dollar, with the yellow metal re-approaching its 21 DMA (USD 2,018.25/oz) after finding support near the level on Monday.
• Copper futures were flat with 3M LME copper finding resistance at USD 8,500/t overnight.
• Codelco said on Monday it reached contract agreements with three unions, putting off the risk of a strike, according to Reuters. Codelco said the three new agreements "respond to the current business context and seek to increase the company's competitiveness," though it did not disclose their financial details.
• Black Sea's CPC blend oil loadings resumed on December 16th after the storm, according to Reuters sources.
• Goldman Sachs said disruptions in the Red Sea are unlikely to have large effects on crude oil and LNG prices because vessel redirection opportunities imply that production should not be directly affected, according to Reuters,

CRYPTO

• Bitcoin edged higher to reclaim the USD 43,000 level before trimming gains.
• US SEC delays Grayscale Futures Ethereum (ETH) ETF, according to The Block.

NOTABLE ASIA-PAC HEADLINES

• Japan to set FY 2024 draft budget of more than JPY 110tln, according to Asahi.
• Japan's Economy Minister Shindo attended today's BoJ policy meeting, according to Reuters citing the government.
• PBoC injected CNY 119bln through 7-day reverse repos at 1.80% and CNY 182bln via 14-day reverse repos at 1.95%; both rates maintained.
• China state planner spokesperson expects CPI to rise mildly next year, according to Reuters.
• China state planner said they approved 144 fixed-asset investment projects worth a total of CNY 1.28tln in January-November, according to Reuters.
• At least 118 people died after a 6.2 magnitude earthquake struck northwestern China, according to state media.

DATA RECAP

• New Zealand Trade Balance (Nov) -1.234B (Prev. -1.709B, Rev. -1.730B)
• New Zealand Exports (Nov) 5.99B (Prev. 5.4B, Rev. 5.37B)
• New Zealand Imports (Nov) 7.23B (Prev. 7.11B, Rev. 7.10B)
• New Zealand ANZ Business Outlook* (Dec) 33.2% (Prev. 30.8%)
• New Zealand ANZ Own Activity* (Dec) 29.3% (Prev. 26.3%)

GEOPOLITICS

MIDDLE EAST

• US and allies agreed to a Red Sea naval task force, according to the Associated Press.
• Yemen Houthi official said the group will be able to confront any possible coalition that could be formed by the US in the Red Sea, according to Al Jazeera. Yemen Houthi officials reiterated that shipping lanes travelling in the Red and Arabian Seas are safe except for ships belonging to Israel.
• US Central Command said bulk cargo ship M/V Clara reported an explosion in water near their location; this attack is separate from the attack on Swan Atlantic, according to Reuters.

OTHER

• US, Japan, and South Korea activate trilateral real-time data sharing for tracking North Korea missiles; establish a multi-year plan for trilateral exercises to begin in 2024, according to a statement.
• North Korean leader Kim said the country is ready to take swift action in the event Washington makes a misguided decision against North Korea, according to state media; nuclear force will be ready to quell any military crisis or war.

EU/UK

NOTABLE HEADLINES

• The EU is to suspend until the end of March 2025 retaliatory tariffs against the US regarding the steel/aluminium tariff dispute, according to an EU official journal cited by Reuters.

GLOBAL

• Argentina Central Bank is to switch benchmark interest rate from 28-day Leliq to 1-day reverse repo; will no longer hold Leliq auctions, according to Reuters.