• BoJ maintained policy settings & forward guidance, Ueda said little chance for BoJ to say policy will change in January
• Dovish reaction in fixed income with JGBs leading and global yields lower, USD/JPY testing 145.00 at best
• European bourses & US futures are firmer, ES remains sub-4800 and Monday’s 4802.25 best
• DXY pivoting 102.50 with Antipodeans once again outperforming with strength also in EUR & GBP
• Crude & European energy benchmarks softer on a breather from Red Sea tensions, but crude has since lifted on Euronav remarks
• Looking ahead, highlights include US Building Permits/Housing Starts, Canadian CPI, Japanese Trade Balance, NBH Announcement, Fed's Bostic, Goolsbee; BoE's Breeden.

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.
• Ueda: Economy gradually picking up, must watch markets carefully, still need to gauge whether prices will rise, not yet confident on sustainable inflation ahead. Will place importance to both data and business surveys and interviews to determine strength of wage growth. Negative real wages are not an obstacle for policy shift if wage outlook points to positive real wages ahead. Generally speaking, any policy change could involve an element of surprise. There are no discussions on taking into account the impact of companies' FY earnings (ending March) in the timing of any policy change. Says there is not much data before January meeting, little chance for BoJ to say that it will change policy next month. Click here for full remarks.
• Japan's Chief Cabinet Hayashi says they expect the BoJ to conduct appropriate monetary policy to sustainable and stably hit the price target, accompanied by wage hikes.
• 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.
• ECB's Villeroy says from now, wages will increase faster than prices. ECB will not hike anymore, lowering should occur at "some time" in 2024.

EUROPEAN TRADE

EQUITIES

• European bourses are marginally firmer with dovish BoJ not having much sway on the broader tape; Stoxx 600 +0.3%.
• Sectors have a slight positive bias, but with Energy names lagging as benchmarks have spent much of the morning pressured after Monday's upside.
• US futures are marginally firmer but the ES is sub-4800 and yesterday's best of 4802.25; ahead of a handful of Fed speakers and data points.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
• Click here for more details.

FX

• DXY has largely been swayed by JPY fluctuations, with USD/JPY the standout outperformer after the BoJ and in reach of 145.00 at best.
• The DXY itself remains within Monday's parameters and for the most part has been fluctuating the 102.50 mark, EUR bid but capped by 1.0950.
• GBP firmer and inching above 1.27 with specifics light ahead of potential remarks from BoE's Breeden.
• Antipodeans are once again the best performers with the AUD benefitting from the December RBA Minutes and NZD on trade data; climbing further above 0.67 and 0.62 respectively.
• PBoC set USD/CNY mid-point at 7.0982 vs exp. 7.1347 (prev. 7.0933)
• Click here for more details.
• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• JGBs outperform post-BoJ, lifting EGBs and USTs in tandem with specifics generally light thus far.
• Bunds and Gilts remain within Monday's range, EGBs unreactive to the German 2024 issuance remit while Gilts experienced some fleeting pressure after the last DMO outing of 2023.
• USTs moving in tandem with the above and after remarks from Fed's Daly on Monday; US yields bull-flattening currently.
• 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.
• Click here for more details.

COMMODITIES

• Crude is under modest pressure as energy benchmarks generally take a breather from Monday's Red Sea related gains, Dutch TTF - 8.0%. Though, Euronav CEO announcing they will be avoiding the Red Sea has lifted WTI and Brent from their USD 71.85/bbl and USD 77.42/bbl toughs, benchmarks nearer to unchanged now.
• Spot gold unchanged despite lower global yields post-BoJ, with action in APAC hours and the European morning thus far minimal given specific/fresh drivers have been particularly light; session low of USD 2021.8/oz, above the 21- & 10-DMAs at USD 2018.45/oz & 2015.1/oz respectively.
• Base metals contained with specifics light though the slightly constructive European tone and contained USD has lent some support.
• 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.
• Maersk (MAERSKB DC) says out of safety, all vessels previously paused and due to sail through the Red Sea will be re-routed around the Cape of Good Hope.
• Euronav CEO says they will avoid the Red Sea until there are convoys to protect ships.
• Click here for more details.

NOTABLE EUROPEAN 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.
• German Finance Ministry says that in 2024 the government intends to issue a total of EUR 440bln in Federal securities; plans to raise a total of EUR 247.5bln vs exp. 240-250bln (prev. 291bln) on capital markets via auction.

DATA RECAP

• EU HICP Final YY (Nov) 2.4% vs. Exp. 2.4% (Prev. 2.4%); X F&E Final YY (Nov) 4.2% vs. Exp. 4.2% (Prev. 4.2%); X F, E, A & T Final YY (Nov) 3.6% vs. Exp. 3.6% (Prev. 3.6%)
• UK CBI Trends, Orders (Dec) -23.0 (Prev. -35.0); highest since September.

NOTABLE US 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
• Click here for the US Early Morning Note.

GEOPOLITICS

• US and allies agreed to a Red Sea naval task force, according to the Associated Press.
• 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.
• 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.

CRYPTO

• Bitcoin is a touch firmer and resides just above the USD 43k mark, specifics light since Monday's Grayscale update.

APAC TRADE

• 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.

NOTABLE 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); Imports (Nov) 7.23B (Prev. 7.11B, Rev. 7.10B)
• New Zealand ANZ Business Outlook (Dec) 33.2% (Prev. 30.8%); Own Activity (Dec) 29.3% (Prev. 26.3%)