• US stocks again saw losses on Wednesday with the Russell 2k heavily underperforming, with two-way action seen on the release of an overall balanced FOMC minutes.
• FOMC Minutes stated that participants viewed the policy rate as likely at or near its peak. Several participants observed that circumstances might warrant keeping the policy rate at the current level longer than they currently anticipate.
• APAC stocks traded lower across the board as the risk aversion continued to seep from Wall Street despite the lack of a clear catalyst; energy stocks outperformed.
• DXY briefly topped 102.50 and printed a session high before waning to a fresh session low. Antipodeans narrowly outperformed. EUR/USD and GBP/USD were flat while USD/JPY was choppy.
• European equity futures are indicative of a flat open after Euro Stoxx 50 cash closed -1.4% on Wednesday.
• Looking ahead, highlights include EZ, UK, US Services & Composite PMI (Final), German State and Nationwide CPI, US Initial Jobless Claims, BoE Monthly Decision Maker Panel, supply from UK, France, Spain & US.

FOMC MINUTES

• FOMC Minutes stated that participants viewed the policy rate as likely at or near its peak. Members generally viewed the addition of the word 'any' to comments on possible additional firming as relaying their judgment that rates were likely at or near the peak of the cycle. A number of participants highlighted uncertainty around how long restrictive policy would need to be maintained.
• Several participants observed that circumstances might warrant keeping the policy rate at the current level longer than they currently anticipate. Participants generally reaffirmed it would be appropriate for policy to remain restrictive until inflation was 'clearly moving down sustainably'.
• Several participants remarked that the Committee's balance sheet plans indicated that it would slow and then stop the decline in the size of the balance sheet when reserve balances are somewhat above the level judged consistent with ample reserves. These participants suggested that it would be appropriate for the Committee to begin to discuss the technical factors that would guide a decision to slow the pace of runoff well before such a decision was reached in order to provide appropriate advance notice to the public.
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US TRADE

EQUITIES

• US stocks again saw losses on Wednesday with the Russell 2k heavily underperforming, and with two-way action seen on the release of an overall balanced FOMC minutes.
• SPX -0.80% at 4,704, NDX -1.06% at 16,368, DJIA -0.76% at 37,430, RUT -2.66% at 1,959.
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• NOTABLE HEADLINES*

DATA RECAP

• Atlanta Fed GDPnow (Q4): 2.5% (prev. 2.0%)

APAC TRADE

EQUITIES

• APAC stocks traded lower across the board as the risk aversion continued to seep from Wall Street despite the lack of a clear catalyst.
• ASX 200 was the relative outperformer, with losses cushioned by the energy sector following the rise in crude prices
• Nikkei 225 returned from its long break and caught up with the losses in the region seen yesterday, although the downside was limited amid the recent weakening in the JPY.
• Hang Seng and Shanghai Comp were both lower but the former saw shallower losses due to gains in oil majors, whilst the latter failed to benefit from the improvement in Chinese Caixin Services PMI, although the release suggested domestic and foreign demand remain insufficient.
• US equity futures traded flat with a mild upward bias following another session of losses yesterday, with the ES in a tight range on either side of 4,750.
• European equity futures are indicative of a flat open after Euro Stoxx 50 cash closed -1.4% on Wednesday.

FX

• DXY was choppy and briefly topped 102.50 before heading back to a fresh session low as it traded in a 102.38-102.52 range for most of the session.
• EUR/USD and GBP/USD were largely flat ahead of Final PMIs and traded in tandem with the USD, with the former holding above 1.0900 whilst the latter found resistance near yesterday's high.
• USD/JPY eventually topped yesterday's 143.73 high towards the end of the APAC session following yesterday's rise from a 141.85 low, and with Japanese players back from their break.
• Antipodeans eventually outperformed among the G10s after early sideway trade, with the NZD leading the gains overnight as AUD/NZD fell towards 1.0750.
• PBoC set USD/CNY mid-point at 7.0997 vs exp. 7.1504 (prev. 7.1002)

FIXED INCOME

• 10yr UST futures was modestly subdued ahead of today's ADP and tomorrow's NFP after the prior session's choppiness, in which further supply-led selling was pared after dovish ISM Mfg. and JOLTS data.
• Bund futures held a slightly firmer bias and moved on either side of 137.50 ahead of the German prelim. CPI.
• 10yr JGB futures returned from holiday and traded in the green before eventually dipping into the red.

COMMODITIES

• Crude futures held a firmer bias following Wednesday's sizeable gains on the back of rising Middle Eastern tensions and supply disruptions in Libya.
• Spot gold initially drifted higher before finding overnight resistance before USD 2,050/oz.
• Copper futures conformed to the broader downbeat mood across markets and 3M LME copper dipped back under USD 8,500/t.
• US Private Energy Inventory Data (bbls): Crude -7.4mln (exp. -3.7mln), Gasoline +6.9mln (exp. -0.2mln), Distillate +6.7mln (exp. +0.6mln), Cushing +0.8mln
• OPEC+ to hold monitoring meeting on February 1st, according to Reuters sources.
• Chile's Codelco Copper Production -16% Y/Y to 114.1k tonnes in November, according to Cochilco .Escondida copper production +6.3% to 84.8k tonnes in November. Collahuasi copper production +2.8% to 48k tonnes.

CRYPTO

• Bitcoin rose back above USD 43,000 following yesterday's hefty losses towards lows of around USD 41,200.
• US SEC and stock exchange officials meet ahead of potential Spot Bitcoin (BTC) ETF approval; "The meetings are seen as a positive sign that the SEC is nearing approval of some or all of the dozen applications", FBN sources said.

NOTABLE ASIA-PAC HEADLINES

• Fitch downgraded four Chinese National asset management companies by one notch; three on rating watch Negative - "reflecting reduced government support expectations."
• PBoC injected CNY 15bln through 7-day reverse repos at a maintained rate of 1.80% for a net drain of CNY 585bln.
• Japanese PM Kishida said he plans to carry out cabinet approval on January 9th to use reserve funds to cover damages caused by the earthquake, according to Reuters.
• BoJ Governor Ueda said he hopes for Japan's economy to achieve balanced rises in wages and inflation; he added if wages and inflation rise in a balanced manner, it can encourage firms to invest in equipment, research, and development, according to Reuters.
• South Korean Finance Ministry sees 2024 growth at 2.2% (vs prev. 2.4%) and 2024 inflation at 2.6% (vs prev. 2.3%), according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Dec) 52.9 (Prev. 51.5); Composite 52.6 (Prev. 51.6) - "It is also crucial to note that domestic and external demand is still insufficient", according to Caixin
• Australian Judo Bank Services PMI Final (Dec) 47.1 (Prev. 47.6)
• Australian Judo Bank Composite PMI Final (Dec) 46.9 (Prev. 47.4)
• Japanese JibunBK Manufacturing PMI Final SA (Dec) 47.9 (Prev. 47.7)

GEOPOLITICS

• The Israeli Army says they bombed Hezbollah targets in Lebanon and will continue to defend their borders against any threat, according to Al Arabiya.
• Hezbollah Head said if Israel wages war on Lebanon, there will be "no ceilings, no rules" to Hezbollah's fighting; "war with us will be very costly" and that anyone waging war against Lebanon "will regret it as Hezbollah will fight until the end". He added that the Israeli killing of Hamas Deputy Chief is a 'major, dangerous crime which we cannot be silent".
• IRGC Quds Force commander said the Kerman bombing was carried out by "agents of Israel and America", via Al Arabiya.
• White House said the US will continue to maintain a significant force presence in the Middle East, according to Reuters, and added the US will not shrink from defending US interests and the free flow of international commerce. White House added actions in the Red Sea directly threaten freedom of navigation.
• Members of Biden's national security team convened a White House meeting on Wednesday to review possible options against the Houthis, including strikes against Houthi targets in Yemen, according to officials cited by NBC. "The meeting on Wednesday afternoon was aimed at fleshing out details of various options that are more robust than those the White House has previously considered and that could include responding alongside other nations, the officials said." "White House has not approved any of the options for strikes on the Yemen-based rebels that have been prepared by the US military, current and former officials said."
• US State Department says the US was not involved in any way and has no reason to believe Israel was involved in explosions in Iran; the US remains incredibly concerned about the risk of the Gaza conflict spreading to other fronts.
• Iran's President Raisi cancels his planned visit to Turkey on January 4th after bloody Kerman attacks, according to IRNA citing an official.