• European and US Futures are modestly lower, amid the broader negative risk tone
• Boeing -8.5% pre-market after the FAA ordered a grounding/inspection of 737 Max 9 operated by US airlines
• Dollar holds within a tight range; Antipodeans lag & JPY bid in-fitting with the risk-averse environment
• Bonds divergent, with Treasuries holding around flat whilst Bunds dip lower
• Crude is markedly lower alongside base metals, hampered by a firmer Dollar and the tone
• Looking ahead, US Employment Trends, Consumer Credit, NY Fed Survey of Consumer Expectations, Japanese All Household Spending & Tokyo CPI, Speech from Fed’s Bostic, Earnings from Brunello Cuccinelli.

EUROPEAN TRADE

EQUITIES

• European equities, Stoxx600 -0.2%, on the backfoot amid a cautious risk tone; the FTSE 100 -0.3% underperforms amid broad based losses in the Energy space.
• European sectors are mainly in the red; though Airbus (+1.7%) lifts Industrial Goods & Services whilst Energy and Basic Resources are hampered by downbeat commodity benchmarks.
• US Equity Futures (ES, -0.2%) are modestly lower, in-fitting with the broader risk tone in APAC and early European trade; Boeing (-8.4%) slumps after the FAA directed over 170 Boeing 737 Max 9 planes to be grounded for inspection.
• Alaska Air (ALK) temporarily grounded all of its Boeing (BA) 737-9 aircraft following the mid-air window blowout on Friday, while the FAA ordered a temporary grounding and inspection of certain Boeing 737 MAX 9 aircraft operated by US airlines which affects 171 aircraft worldwide and said the planes will remain grounded until it is satisfied that they are safe. Furthermore, it was also reported that Spirit AeroSystems (SPR) had manufactured and installed the plug door involved in the incident.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• DXY is choppy and within a tight range between 102.32-62 with little upside resistance until 103.00.
• EUR is a touch softer and towards the bottom of a 1.0924-52 range and unreactive to mixed German data.
• JPY is the G10 outperformer, starting the week on firmer footing after hefty selling in the prior week; resides just shy of its 144.92 peak.
• Antipodeans are softer against the Dollar alongside losses in Chinese stocks overnight.
• PBoC set USD/CNY mid-point at 7.1006 vs exp. 7.1499 (prev. 7.1029)
• Czech Central Bank Vice Governor Zamrazilova said interest rate cuts will continue in relation to the decline in inflation and that a faster decline could lead to larger than 25bps lowering steps, according to Reuters.
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are contained given an absence of overnight trade owing to the Japanese holiday. Little by way of specific newsflow aside from weekend commentary from Fed's Logan.
• Bunds began the session on the backfoot and overall unreactive to mixed German data; recently Bunds have edged higher in tandem with peers.
• Gilts lag against its European peers with action largely a continuation of last week's moves as markets scale back the magnitude of easing expected across 2024 from the BoE.
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COMMODITIES

• WTI and Brent (-2.2%) continue to edge lower amid the firmer Dollar and broader risk aversion in early European trade; Saudi Aramco slashed its OSPs further hampering the complex.
• Precious metals are falling victim to the firmer USD with Base Metals also suffering from the downbeat risk tone; XAU falls below USD 2050/oz and under its 21 DMA at 2035/oz.
• Saudi Arabia cut its February light crude OSP to Asia by USD 2/bbl from January to a premium of USD 1.50/bbl over Oman/Dubai quotes which is a 27-month low, while it set light crude OSP to NW Europe at a premium of USD 0.90/bbl over ICE Brent settlement and light crude OSP to the US at a premium of USD 5.15/bbl over ASCI, according to Reuters.
• Qatar set February marine crude OSP at Oman/Dubai minus USD 0.75/bbl and set land crude OSP at Oman/Dubai minus USD 0.75/bbl, according to Reuters.
• Libya’s NOC declared a force majeure in the Sharara oil field effective on Sunday due to its closure by protesters and said that negotiations are ongoing to resume production as soon as possible.
• "Report on an attack on the Al-Omar oil facility in eastern Syria, where there is an American presence", according to Walla News' Elster
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NOTABLE EUROPEAN HEADLINES

• UK’s RMT trade union said strike action on the London Underground planned for this week was suspended after the union made progress in discussions with TFL, according to Reuters.
• British employers increased pay and regained some of their appetite for hiring in December, according to a survey from the Recruitment and Employment Confederation.
• Germany’s GDL train drivers’ union called for a rail strike in Germany on January 10th-12th, according to Reuters.
• EU Council President Michel will run in the election for the European Parliament in June and will leave his post in mid-July if elected, according to an interview with De Standard.

DATA RECAP

• German Industrial Orders M/M (Nov) 0.3% vs. Exp. 1.0% (Prev. -3.7%, Rev. -3.8%); excluding large-scale -0.6% M/M
• German Imports MM SA (Nov) 1.9% vs. Exp. 0.2% (Prev. -1.2%); German Exports MM SA (Nov) 3.7% vs. Exp. 0.3% (Prev. -0.2%); German Trade Balance, EUR, SA (Nov) 20.4B vs. Exp. 17.9B (Prev. 17.8B)
• EU Sentix Index (Jan) -15.8 vs. Exp. -15.5 (Prev. -16.8)
• EU Retail Sales YY (Nov) -1.1% vs. Exp. -1.5% (Prev. -1.2%, Rev. -0.8%); MM (Nov) -0.3% vs. Exp. -0.3% (Prev. 0.1%, Rev. 0.4%)
• EZ Economic Confidence 96.4 (exp. 94.2), Consumer Confidence -15.0 (prev. -15.1), via European Commission
• Swiss CPI YY (Dec) 1.7% vs. Exp. 1.5% (Prev. 1.4%); MM (Dec) 0.0% vs. Exp. -0.2% (Prev. -0.2%)

NOTABLE US HEADLINES

• Fed’s Logan (2026 voter) said the Fed should slow the pace of the asset runoff as the overnight reverse repurchase balances approach a low level, while they need to maintain sufficiently restrictive financial conditions. Logan said a premature easing of financial conditions could allow demand to pick back up and shouldn’t rule out another rate increase given the recent easing in financial conditions.
• US House Speaker Johnson said congressional leaders reached a spending level deal in which the topline figure for FY24 is USD 1.6tln, while President Biden said the deal moves the US a step closer to preventing a government shutdown and reflects funding levels that he negotiated with both parties, according to Reuters.
• US President Biden stated via X that he looks forward to delivering the State of the Union speech on March 7th.
• Former President Trump plans to keep the 21% corporate tax rate if he is elected which is a shift from a previous desire to lower it to 15% and wants to make permanent the 2017 individual tax cuts that he enacted, according to Bloomberg.
• Indonesia temporarily grounds Boeing (BA) 737-9 Max, according to the Ministry cited by Bloomberg
• Nvidia (NVDA) in Q2 2024 reportedly plans to start mass production of its AI chip designed for China which comply with US export rules, according to Reuters sources; initial production will be limited
• Click here for the US Early Morning Note.

GEOPOLITICS

• Israel said it has destroyed Hamas as a fighting force in northern Gaza and that the war is moving into a fresh phase with a more targeted focus on the centre and south of the Palestinian enclave, according to FT. It was separately reported that Israel’s military chief of staff asserted there would be ongoing military operations in Gaza throughout the entire year, while PM Netanyahu instructed to prepare for a return of residents to the Gaza town of Sderot by February 4th, according to Al Arabiya.
• Hezbollah said it hit an Israeli observation post with 62 rockets as a preliminary response to the killing of Hamas’s deputy chief.
• Qatar’s PM said the killing of a senior Hamas official on Tuesday has affected Qatar’s efforts to negotiate between Hamas and Israel, but Qatar continues to negotiate.
• US Secretary of State Blinken said this is a moment of profound tension in the region and conflict could easily metastasize, while he added that they will continue to defend maritime security in the region after Houthi attacks on shipping in the Red Sea.
• Jordan’s King Abdullah warned US Secretary of State Blinken of the catastrophic repercussions of the continuation of the war in Gaza and said Washington should put pressure on Israel to agree to an immediate ceasefire in Gaza, according to a royal court statement.
• EU foreign policy chief Borrell said it is ‘absolutely necessary’ to avoid Lebanon being dragged into a regional conflict and no one will win from a regional conflict, while he visited Saudi Arabia to discuss steps toward peace in the region.
• French Foreign Minister Colonna said she told her Iranian counterpart that the risk of regional conflagration has never been greater, while she added that Iran and proxies must immediately stop their destabilising actions, according to Reuters.
• US Central Command said an unmanned aerial vehicle launched from Yemen was shot down in self-defence by USS Laboon in international waters of the southern Red Sea which was in the vicinity of multiple commercial vessels, according to Reuters.
• Russia launched a large-scale air assault on several Ukrainian regions with all of Ukraine under air raid alerts, according to Ukraine's military cited by Reuters.
• South Korea’s military said North Korea fired shots on Sunday into the sea north of Yeonpyeong Island, while it urged North Korea to cease military activity raising tensions near the border and said North Korea’s provocation will face an overwhelming response.
• North Korea’s army said it conducted a coastal artillery firing drill on Sunday and that the drill did not pose any threat to the enemy. There was also a prior report that North Korean leader Kim’s sister said North Korea did not fire artillery shells but instead detonated explosives and she warned that the army would launch a ‘baptism of fire’ at any provocation, according to state media.

CRYPTO

• Bitcoin holds around the USD 44k, whilst Ethereum, -1.1%, is a touch softer on the session.
• US House Majority Whip Emmer says “If the second Trump administration takes place, the president will be a lot more friendly to the crypto industry”, via Politico.
• Click here for the newsquawk analysis on Bitcoin ETF prospects.

APAC TRADE

• APAC stocks gradually deteriorated following a muted start and last Friday’s post-data whipsawing stateside with Japanese participants absent for Respect for the Aged Day and markets awaiting this week's key inflation data releases.
• ASX 200 declined as initial gains in energy, resources and financials were overshadowed by losses in miners and tech.
• KOSPI was initially underpinned by strength in Samsung Electronics after its unit showcased a line-up of various foldable displays, although the gains were later faded amid geopolitical tensions after North Korea conducted a third day of artillery firing on Sunday.
• Hang Seng and Shanghai Comp were pressured amid shadow banking woes and geopolitical frictions, with the losses in Hong Kong exacerbated by tech selling and as China Evergrande New Energy Vehicle shares slumped following the arrest of its vice chairman.

NOTABLE HEADLINES

• China’s State Council issued guidelines on improving operating budget systems for state-owned capital.
• US lawmakers reportedly push to defuse China's dominance of older-generation chips with House panel leaders reported to have sent a letter to the Commerce and Trade Secretaries urging action including possible tariffs, according to WSJ.
• China is to sanction five US defence manufacturers regarding US arms sales to Taiwan, according to Bloomberg.
• Taiwan's Defence Ministry said they detected three Chinese balloons flying over the Taiwan Strait on Sunday.
• US intelligence sees a less likelihood that Chinese President Xi will contemplate major military action in the coming years due to several examples of the impact of graft and corruption in China’s Rocket Forces, according to Bloomberg.
• Sony (6758 JT) is reportedly set to call off the USD 10bln Zee (ZEEL) merger, according to Bloomberg citing sources.