• Asian equities were mixed following the slide in US stocks with the Nikkei 225 underperforming its peers as Japanese participants returned to market
• US House Democrats have voted to reopen government, defying US President Trump’s veto threat
• UK Cabinet ministers have been told that EU countries are likely to provide assurances to PM May over her Brexit deal’
• Looking ahead, highlights include EZ, UK and US services PMI, EZ CPI, US and Canadian jobs reports, DoEs, Baker Hughes, Fed’s Powell, Bostic and Barkin

ASIA-PAC

Asian equities were mixed following the slide in US stocks as disappointing ISM manufacturing data added to global growth fears after Apple’s trade-related profit warning. The Dow shed in excess of 600 points while the S&P fell further below the 2500 level and the Nasdaq tumbled 3.0% as the tech sector fell over 5.0%. ASX 200 (-0.3%) and Nikkei 225 (-2.6%) both failed to benefit from the higher base metal prices as the indices bore the brunt of the tech decline on Wall St, while the latter also played catch-up after a week-long holiday. Elsewhere, Hang Seng (+1.5%) and Shanghai Comp. (+1.6%) outperformed after erasing opening losses as almost all Chinese sectors turned green (gains led by oil names and financial firms) on the back of constructive trade developments, with China’s MOFCOM confirming that trade talks with the US are to take place next week, while the release of above-forecast Caixin services PMI exacerbated gains in the bourses.

China's MOFCOM has confirmed that US and China are to hold vice-ministerial trade talks on January 7th-8th. (Newswires)

Chinese Caixin Services PMI Dec 53.9 vs. Exp. 53.1 (Prev. 53.8) (Newswires)
Chinese Caixin Composite PMI Dec 52.2 (Prev. 51.9)

PBoC set CNY mid-point at 6.8586 (Prev. 6.8631) (Newswires)
PBoC drained a net CNY 320bln via OMO vs. net injection of CNY 240bln last week

China's Premier Li reiterated that China will take more measures including a targeted RRR cuts and further tax and fee reductions in order to support private and smaller firms; according to a statement. (Newswires)

The BoJ is set to trim its inflation outlook for the next two years amid the oil slump and as cheaper mobile plans weigh on domestic consumer prices. The Central Bank is considering lowering its fiscal 2019 CPI growth forecast to circa 1.0% (Prev. projection 1.4%) at their next policy meeting on January 23rd. Policy makers are also said to be considering a minor downward revision to the fiscal 2020 forecast of 1.5%. (Nikkei)

BoJ Governor Kuroda reiterated that it is important to take consistent policy "patiently and persistently" towards beating deflation. (Newswires)

Japan MOF's Currency Head Asakawa said he is worried about the volatile FX moves and they will take steps on forex if needed. He added that G7 and G20 have confirmed that cooperation on FX is possible if needed and that speculative moves were seen in thin markets, regarding yesterday’s FX flash-crash. (Newswires)

UK/EU

UK Cabinet ministers have been told that EU countries are likely to provide assurances to PM May over her Brexit deal. Assurances could include a promise that the EU does not intend to keep Britain in the backstop on a permanent basis and that it is “not the desired outcome” or that it will be “only for a short period”. (The Times)

Most UK Conservative activists back a no-deal Brexit over PM May's deal; according to a YouGov poll of over 1,200 Tory activists. (FT)

UK BRC Shop Price Index Y/Y 0.3% (Prev. 0.1%) (Newswires)

FX

FX markets were mostly quiet with the DXY relatively choppy in tight range ahead of the Fed Chair Powell’s panel participation and the key US jobs data release later today, as analysts expect an addition of 177k jobs to the headline NFP figure (full preview available on the research suite).  As such EUR/USD traded on either side of 1.1400 for most of the session, ahead of a Fib level at 1.1425 and its 100DMA at 1.1477. Meanwhile, GBP/USD was indecisive and remained just under 1.2650 amid mixed Brexit news flow, as reports that EU countries are likely to provide assurances to PM May’s deal were neutralised by a separate article that most Tory activists would rather back a no-deal Brexit than the negotiated deal. Elsewhere, USD/JPY reclaimed 108.00 to the upside before hitting resistance at 108.50 as the Yen unwound risk premium, while trade-proxy AUD/USD strengthened above 0.7000 following yesterday’s so-called flash-crash as China’s MOFCOM confirmed a date for US-Sino trade discussions shortly before Chinese Caixin services PMI beat forecasts, providing some respite to global growth fears. Subsequently AUD/JPY regained the 76.000 handle to the upside as the pair fully recovered from yesterday’s algo-triggered slump.

GEOPOLITICAL

Iranian Foreign Minister Zarif said the Iranian space vehicle launch and missile tests are not a violation of UN resolution, rejecting US Secretary of State Pompeo’s warning. (Twitter)

Thirteen Canadians have been detained in China since the Huawei CFO arrest; according to Global & Mail citing a Canadian government official. (Newswires)

Japanese PM Abe said he has intentions to push towards a peace treaty with Russia. (Newswires)

COMMODITIES

The oil complex showed mild gains as WTI and Brent futures reclaimed the USD 47.00/bbl and USD 56.00/bbl respectively after the API release showed a larger-than-expected draw in crude stocks. News flow for the complex has been light, and traders will be eyeing the DoE release later today for a fresh catalyst with headline crude stocks expected to show a drawdown of 3.086mln barrels. Elsewhere, gold initially benefitted from the soured risk tone, though the yellow metal gave up gains as sentiment in China improved. Meanwhile, copper rose almost 2%, albeit the red metal is still poised for the biggest weekly loss in two months. Finally, Dalian iron ore futures rose almost 3% at one point to two-month highs amid hopes that steel mills will replenish their inventories of the raw material.

Libya's National Oil Corporation said the 315k BPD El-Sharara oil field will have an accumulated loss of up to 11k BPD even after restart; according to a statement. (Newswires)

US API Weekly Crude Stocks (28 Dec) -4.5mln vs. Exp. -3.1mln (Prev. +3.452mln) (Newswires)
US API Weekly Gasoline Stocks (28 Dec) +8.0mln vs. Exp. +2.0mln (Prev. +1.767mln)
US API Weekly Distillate Stocks (28 Dec) +4.0mln vs. Exp. +1.6mln (Prev. -3.442mln)
US API Cushing Number (28 Dec) +0.483mln (Prev. +1.063mln)

US

The Treasury complex drifted higher on Thursday amid widespread risk-off tone inspired by Apple cutting its revenue estimates and the ‘flash crash’ overnight. Most of the action was concentrated in the front-end and belly of the curve were yields were lower by c.1bps. The complex saw brief downside in response to a massive beat in ADP payrolls though likely to be driven by volatile and temporary factors; focus now shits on the official payroll release due on Friday. Spreads were wider across the curve with the exception of 2s5s which were narrower by just below 1bps. * US T-NOTE FUTURES (H19) SETTLE 31 TICKS HIGHER AT 123-05

US House Democrats have voted to reopen government, defying US President Trump’s veto threat. (Washington Post)

US Senate Minority Leader Schumer (Democrat) is to attend Friday's meeting on the US government shutdown at the White House. (Newswires)

US Vice President Pence said that there can be no deal without border-wall funding. (Fox News)

US President Trump said the US economy is doing “so well”. (Newswires)

Democrat Lawmaker Wyden has re-introduced the bill that requires US President Trump to release tax returns. (Newswires)

US House Speaker Pelosi has invited US President Trump to deliver a State of the Union address on January 29th. (Newswires)