• European bourses and US Futures are weaker though the FTSE 100 (+0.8%) outperforms post-CPI
• Dollar remains propped up; Pound lags after softer-than-expected CPI; Yen outperforms
• Fixed is higher led by outperformance in Gilts as attention turns to US 20yr supply
• Crude is firmer with overall specifics light; Spot Gold gives back some of yesterday's gains whilst base metals are generally in the green
• Looking ahead, EZ Consumer Confidence (Flash), US Consumer Confidence, BoC Minutes (Dec), ECB's Lane; Fed's Goolsbee, Supply from the US

EUROPEAN TRADE

EQUITIES

• European bourses, Eurostoxx50 (-0.2%), are marginally weaker having spent much of the morning the green; the FTSE 100 (+0.8%) outperforms post-UK CPI.
• European sectors are mixed with Energy outperforming lifted by gains in underlying Crude prices and Telefonica (+5%) helps lift Telecoms; Technology narrowly lags.
• US Equity Futures are lower across the board as the Santa Rally comes to a pause, ES (-0.2%); FedEx (-9.9%) extends losses in the pre-market post-earnings.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• DXY propped up by the softer Pound and Euro, though with gains capped by upside in the Yen; within a 102.14-34 range.
• The Pound is the G10 laggard post-CPI, falling to a session low of 1.2648.
• EUR is weighed on by the firmer Dollar, with softer German PPI unhelpful for the Single-Currency while EUR/GBP action offers only marginal respite.
• The Yen is the best performer amongst the G10s, paring back some of yesterday's BoJ's induced losses, but yet to test 143.00.
• PBoC sets USD/CNY mid-point at 7.0966 vs exp. 7.1300 (prev. 7.0982)
• Click here for more details.
• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are modestly higher in tandem with Gilts as markets await the US 20yr auction and further speak from Fed's Goolsbee.
• Gilts outperforms after cooler-than-expected UK CPI, adding to dovish expectations for 2024; gapped higher by almost 100 ticks and thereafter eclipsed 103.00.
• Bunds are bid in conjunction with Gilts and after its own softer Producer Prices metrics; German 10yr yield sub-2.0% for the first time since March.
• Click here for more details.

COMMODITIES

• WTI and Brent (+1.2%) are bid having spent the overnight session relatively indecisive; specifics have been light and largely led by geopolitical themes.
• Spot Gold (-0.1%) resides on either side of the unchanged mark, holding on to the prior day's gains; Base metals are generally in the green, though with gains capped amid poorer sentiment in China overnight.
• Intensive talks are underway on a potential second Gaza truce, via Reuters citing sources; envoys looking at which hostages could go free.
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• ECB's Nagel says there is a high probability that the interest rate peak has been reached, according to t-online; would say to everyone who is speculating on an imminent interest rate cut: be careful, some people have already speculated.
• France and Germany see an EU deal on fiscal rules on Wednesday, according to Bloomberg.
• Bank of France Survey: Expectations for inflation one year out ease to 3.5% in Q4 (prev. 4%); 3.5% increase in wages (prev. 3%)

DATA RECAP

• UK CPI YY (Nov) 3.9% vs. Exp. 4.4% (Prev. 4.6%); MM -0.2% vs. Exp. 0.1%; All Services 6.3% (prev. 6.6%). Click here for more
• UK Core CPI MM (Nov) -0.3% vs. Exp. 0.2% (Prev. 0.3%); YY 5.1% vs. Exp. 5.6% (Prev. 5.7%)
• UK RPI-X (Retail Prices) MM (Nov) -0.2% (Prev. -0.3%); YY 4.1% (Prev. 4.8%); MM -0.1% vs. Exp. 0.2% (Prev. -0.2%); YY 5.3% vs. Exp. 5.7% (Prev. 6.1%)
• UK PPI Input Prices YY NSA (Nov) -2.6% vs. Exp. -3.3% (Prev. -2.6%); MM -0.3% vs. Exp. -0.8% (Prev. 0.4%)
• UK PPI Output Prices YY NSA (Nov) -0.2% vs. Exp. -0.5% (Prev. -0.6%); MM -0.1% vs. Exp. -0.2% (Prev. 0.1%)
• UK PPI Core Output YY NSA (Nov) 0.2% (Prev. 0.2%, Rev. 0.4%)
• German Producer Prices MM (Nov) -0.5% vs. Exp. -0.3% (Prev. -0.1%); YY -7.9% vs. Exp. -7.5% (Prev. -11.0%)
• German GfK Consumer Sentiment (Jan) -25.1 vs. Exp. -27.0 (Prev. -27.8, Rev. -27.6)
• EU27 November New Car Registrations 6.7% (prev. 14.6%)

NOTABLE US HEADLINES

• FedEx Corp (FDX) Q2 2024 (USD): adj. EPS 3.99 (exp. 4.20), Revenue 22.2bln (exp. 22.41bln); expects to buyback added 1bln of stock during FY24 Shares seen -9.9% in pre-market
• Click here for the US Early Morning Note.

GEOPOLITICS

• US reportedly weighs whether to attack Houthis beyond defensive task force and possible strikes on Houthis in Yemen considered, according to Bloomberg sources; no decision made yet on striking Houthis. The US and its allies are considering possible military strikes against Houthi rebels in Yemen, in recognition that a newly announced maritime task force meant to protect commercial ships in the Red Sea may not be enough to eliminate the threat to the vital waterway. Planning is underway for actions intended to cripple the Houthis’ ability to target commercial ships by hitting the militant group at the source.
• Israel is offering to pause the fighting in Gaza for at least one week as part of a new deal to get Hamas to release more than three dozen hostages, according to Axios sources.
• Malaysia bans Israeli-based shipping firm Zim from its ports, with the ban set to take effect immediately, according to the Malaysian PM.

CRYPTO

• Bitcoin (+0.6%) and Ethereum (+1.2%) are extending gains as BTC sets its sight on USD 43k.
• BlackRock, Nasdaq, SEC met regarding a Bitcoin (BTC) ETF, via CoinDesk

APAC TRADE

• APAC stocks traded mostly positively following the tailwinds from Wall Street, although newsflow overnight was on the quieter side amid the pre-Christmas lull.
• ASX 200 saw its upside supported by the Energy and Metals sectors, whilst Tech lagged with shallower gains.
• Nikkei 225 surged as the index reacted to BoJ Governor Ueda's dovish press conference following the unchanged announcement yesterday.
• Hang Seng and Shanghai Comp traded mixed with the former's gains spearheaded by large caps with US listings, including Alibaba, JD.com, and Baidu. Mainland China was subdued after PBoC maintained its Loan Prime Rates as expected and despite more liquidity injections by the central bank.

NOTABLE HEADLINES

• PBoC maintained its 1-year and 5-year LPRs at 3.45% and 4.20% respectively, as expected.
• PBoC injected CNY 134bln through 7-day reverse repos at 1.80% and CNY 151bln via 14-day reverse repos at 1.95%; both rates maintained
• The Japanese government is to raise its long-term interest rate estimate to 1.9% for FY24 from 1.1% in FY23, according to Nikkei.
• Japanese Cabinet projects that income will increase more than prices in FY24, according to Nikkei.
• State-backed developer China South City averts default on July 2024 note after consent from bondholders, according to SCMP.
• RBNZ Governor Orr said interest rates are restricting spending and levels of core inflation remain too high, according to the Parliamentary hearing. He noted that Q3 GDP was surprisingly subdued, and inflation remains too high and the committee remains wary of ongoing inflationary surprises. He said the neutral interest rate is now 2.5%.
• New Zealand DMO and fiscal update: gross bond issuance for four years to June 2027 now totals NZD 136bln, up from NZD 129bln in the budget. 2023/24 gross bond issuance increases to NZD 38bln from NZD 36bln in budget. Treasury sees GDP growth in Q4 23 and through 2024.
• Japan is to draft an initial FY24 budget of JPY 112tln, via Kyodo News
• Japanese government is to lower the scheduled sales of JGBs to market by 11.2% from FY23 plan to JPY 171tln in FY24/25, via Reuters citing a draft

DATA RECAP

• Japanese Trade Balance Total Yen (Nov) -776.9B vs. Exp. -962.4B (Prev. -662.5B, Rev. -661.0B)
• Japanese Imports YY (Nov) -11.9% vs. Exp. -8.6% (Prev. -12.5%); Exports YY -0.2% vs. Exp. 1.5% (Prev. 1.6%); fell for the first time in three months
• Australian MI Leading Index MM (Nov) 0.1% (Prev. 0.0%)

LATAM

• Brazil raised to BB from BB- by S&P, Outlook Stable, following tax reform approval.
• Chilean Interest Rate (Nov) 8.25% vs. Exp. 8.5% (Prev. 9.0%); decision unanimous
• Colombian Central Bank cuts rates by 25bps to 13.00%, as expected, marking the first cut in three years, and decision backed by a "majority" of board members