• European bourses are weaker whilst US Futures are firmer, attempting to pare back the prior day's losses
• Dollar is lacklustre in holiday-thinned trade, Yen outperforms
• Fixed benchmarks are incrementally firmer with outperformance in Gilts continuing Wednesday’s CPI-driven dovish move
• Crude futures are tilting lower though within recent ranges; Spot gold remains unchanged amid similar USD action
• Looking ahead, US GDP Final, PCE, Philly Fed Business Index, IJC, Canadian Retail Sales, Japanese CPI, CBRT Policy Announcement, ECB 5-yearly Capital Key Adjustment, ECB’s Lane, Supply from the US.

EUROPEAN TRADE

EQUITIES

• European bourses, Eurostoxx50 (-0.5%), posts significant losses as the region reacts to the late doors Wall St. selloff.
• Marked underperformance in the AEX (-0.7%), hampered by heavyweight Philips (-2.1%).
• European sectors have a negative bias; Autos lag hampered by WSJ reports that the Biden administration is mulling raising tariffs on EVs.
• US Equity Futures are firmer, NQ (+0.7%), across the board attempting to reverse some of the hefty losses seen in yesterday's session; Chip names extend gains post-Micron earnings; MU (+6.5%), NVDA (+1.3%), AMD (+1.0%)
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
• Click here for more details.

FX

• DXY is in consolidation mode amid quieter trade; the index is contained between 102.25-45.
• EUR meanders around the unchanged mark against the Dollar and marginally firmer against the Pound.
• GBP holds a slight negative bias against the Dollar post-borrowing figures, though trade is secured between a tight range of 1.2651-1.2613.
• The Yen is the G10 best performer vs. the Dollar as the gap continues to close on the pre-BoJ announcement level of 142.65.
• PBoC set USD/CNY mid-point at 7.1012 vs exp. 7.1401 (prev. 7.0966)
• Click here for more details.
• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are incrementally firmer but around 5 ticks shy of the WTD 112.31+ best, despite a poor 20yr auction.
• Gilts are once again the standout outperformer in a continuation of Wednesday's CPI-driven dovish move.
• Bunds retain an underlying bid though with overall action contained as attention turns to ECB's Lane.
• Click here for more details.

COMMODITIES

• WTI and Brent display contained and rangebound action and well within yesterday's parameters as newsflow remains light; market participants await developments in the Red Sea.
• Note, crude benchmarks have most recently come under some modest pressure and have tilted incrementally into the red, despite a lack of fresh fundamental drivers.
• Dutch TTF remains bid as Red Sea concerns continue and we await any update on Wednesday's reporting of a corridor being formed.
• Spot Gold is around unchanged on the session, in sympathy with a lacklustre Dollar and Base Metals trade with little direction.
• Global crude steel output +3.3% Y/Y to 145.5mln tonnes, China +0.4% to 76.1mln tonnes, according to Worldsteel.
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• ECB's de Guindos "Once we see inflation is clearly converging in a stable manner to our target of 2%, monetary policy might then start to ease. But it’s still too early for that to happen. The data have been favourable but still not enough for us to change our monetary policy. It’s therefore too early to talk about a cut in interest rates."
• JPMorgan says the risk of Turkey pivoting from orthodox monetary policy moves is not significant

DATA RECAP

• UK Lloyds Business Barometer (Dec) 35 (Prev. 42); Own Price Expectations: 59 (Prev. 61)
• UK PSNCR, GBP (Nov) 12.453B GB (Prev. 13.329B GB, Rev. 11.808B GB); GBP 13.409B GB (Prev. 13.972B GB, Rev. 15.103B GB)
• UK PSNB Ex Banks GBP (Nov) 14.333B GB vs. Exp. 12.9B GB (Prev. 14.896B GB, Rev. 16.027B GB)
• French Business Climate Manufacturing (Dec) 100.0 vs. Exp. 98.0 (Prev. 99.0)

NOTABLE US HEADLINES

• Norwegian safety regulator says it has opened an inquiry into Tesla (TSLA) suspension issues; says a decision on whether to recommend recalling affected vehicles could be made by Christmas, via Reuters
• UPS (UPS) EUR 1.74bln claim for EU compensation in blocked merger has been rejected
• Micron Technology Inc (MU) Q1 2024 (USD): Adj. EPS -0.95 (exp. -0.97), Revenue 4.726bln (exp. 4.64bln). Q2 revenue view 5.1-5.5bln (exp. 5.03bln), EPS view -0.35 to -0.21 (exp. -0.62). Adj. FCF USD 1.4bln (exp. 1.25bln). Adj. op. expenses USD 992mln (exp. 952mln). Micron expects business fundamentals to improve throughout 2024 with record industry TAM projected for calendar year 2025. Shares rose 4.8% after market. Click here for commentary.
• Click here for the US Early Morning Note.

GEOPOLITICS

• The Biden administration is reportedly mulling raising tariffs on some Chinese goods, including EVs, WSJ sources said, in an attempt to bolster US clean energy against cheaper Chinese exports. Other targets for potential tariff-rate increases are Chinese solar products and EV battery packs, sources added.
• US Senator Rubio calls on the Biden administration to sanction Chinese chip designer Brite Semiconductor following the Reuters report that Brite offers chip design services to at least six Chinese military suppliers and is part-owned by SMIC.
• US Central Command says rocket fired at Al Assad Air Base in Iraq on Dec. 20, with no injuries or damage caused, according to Reuters.
• North Korea's Kim said the recent ICBM launch showed North Korea's strategy not to hesitate even a nuclear attack when the enemy provokes it with nukes, according to KCNA.
• Russian and Chinese militaries held strategic consultations in Beijing on Dec 20th, according to the Chinese Defence Ministry. The two sides had an in-depth exchange of views on the international and regional security situation and relations between the two militaries.
• Chinese Finance Ministry said China will suspend some tariff cuts on imports from Taiwan from Jan 1st 2024, according to Reuters.
• India's Basmati rice exports could be impacted if challenges around the Red Sea persist, via Reuters citing sources

CRYPTO

• Bitcoin holds above the USD 43k mark, whilst Ethereum (+2.2%) eclipses by USD 2.2k.

APAC TRADE

• APAC stocks traded mostly lower as the downbeat sentiment from Wall Street reverberated despite a lack of major catalysts to spark the global equity selloff, although Mainland Chinese markets eventually eked out gains.
• ASX 200 saw the deepest losses in its Tech and Gold sectors, and the index briefly fell under 7,500.
• Nikkei 225 slipped at the open and underperformed throughout the session, and consumer-geared sectors were among the worst performers, whilst JPY dynamics did not help the index.
• Hang Seng and Shanghai Comp started in the green with the former initially conforming to the broader risk tone before ebbing lower with Tech and Energy among its biggest losers. Mainland China was supported following a hefty PBoC liquidity operation via 7 and 14-day reverse repos.

NOTABLE HEADLINES

• Japanese government raises FY23/24 GDP growth forecast to +1.6% (prev. +1.3%); raises FY24/25 forecast to 1.3% (prev. 1.2%), according to Reuters citing the Cabinet Office.
• Japanese PM Kishida's Cabinet set to approve draft budget for fiscal year starting April that will reduce spending for the first time in 12 years, according to Nikkei. Japan's fiscal 2024 proposal calls for JPY 1tln in reserves for programs to ease the burden of inflation and promote wage hikes.
• Japanese unions reportedly target over JPY 1,600/hr minimum wage by 2035, according to NHK.
• Analysts cited by Chinese Securities Journal see room for moderate "downward movement in the follow-up LPR".
• PBoC injected CNY 195bln through 7-day reverse repos at 1.80% and CNY 226bln via 14-day reverse repos at 1.95%; both rates maintained.
• South Korea to relax capital gains tax threshold for large shareholders, says capital gains tax for listed shares will hit those holding more than KRW 5bln starting 2024, according to the Finance Ministry.
• Japanese FX Diplomat Kanda says if Japan is not attractive as an investment decision, it is natural for the JPY to weaken
• China's MOFCOM says the US is abusing export control measures
• China's large banks are to cut deposit rates on Friday, via Guangzhou Daily; China's major commercial banks to cut time deposits on Friday, via Reuters citing sources; 1yr & 2yr expected to be cut by 10bp & 20bp respectively, 3yr & 5yr by 25bp
• China's Ministry of Finance says it is adjusting the import tax for some goods; adjusting import/export tariffs from January 1st. Products include ethylene and propylene. To cut export tariffs on high-purity aluminium.
• China bans exports of some rare-earth processing technologies, via Bloomberg

DATA RECAP

• South Korean PPI Growth YY (Nov) 0.6% (Prev. 0.8%)
• South Korean PPI Growth MM (Nov) -0.4% (Prev. -0.1%)
• South Korean Dec 1-20 exports +13.0% Y/Y; imports -9.2% Y/Y, according to the Customs Agency
• Hong Kong Consumer Price Index (Nov) 2.6% vs. Exp. 2.7% (Prev. 2.7%)
• Chinese FDI (YTD) (Nov) -10.0% (Prev. -9.4%)