• European equities and US futures are modestly weaker; Russell (-0.9%) underperforms giving back yesterday’s advances
• Dollar is incrementally firmer, Yen continues to make up ground
• Bonds are modestly pressured, Gilts got a slight boost after a strong Gilt auction
• Crude extends gains as it attempts to pare back the prior day's losses and amid geopolitical tailwinds
• Looking ahead, US International Trade, Canadian Building Permits, Trade Balance, US RCM/TIPP Economic Optimism, Japanese Labour Wages, Fed Discount Rate Minutes, Speeches from ECB’s Villeroy & Fed's Barr, Supply from US

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (-0.3%), initially began the session on a firmer footing echoing APAC optimism before succumbing to selling pressure as sentiment dwindled.
• IBEX 35 (-1.7%) underperforms, dragged down by Grifols (-42%) following a Gotham City Research report which said "we believe shares are uninvestable, likely zero"; Grifols to hold a board meeting on Tuesday.
• European sectors hold a negative tilt; Energy holds at the top of the pile as it attempts to nurse the prior day's hefty losses whilst Tech lags after outperforming yesterday. Recruitment names have been hit by a profit warning from London-listed Hays (-12%).
• US equity futures are lower, in tandem with price action in Europe; RTY (-0.9%) underperforms after strength yesterday, ES (-0.3%) NQ (-0.4%).
• Micrsoft's (MSFT) ties with OpenAI said to face potential EU merger investigation, according to Bloomberg sources.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• DXY is directionless and contained within a 102.10-41 range, with the 21DMA residing just below the trough at 102.07.
• EUR continues to oscillate around the 1.0950 mark in light of a lack of fresh catalysts; session low at 1.0934.
• Yen is the best G10 performer, looking to make up ground lost last week, but still some way from its 28th December base at 140.24.
• Australian Building Approvals and Retail Sales initially supported the AUD, though strength faded alongside weakness in Iron prices.
• PBoC set USD/CNY mid-point at 7.1010 vs exp. 7.1502 (prev. 7.1006).
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are within yesterday's bounds but pressured with concession ahead of a 3yr auction which is likely factoring; yield curve incrementally flatter thus far.
• Bunds are pressured but remain above the prior sessions respective 135.15 and 135.06 troughs. Overall, action appears to be influenced by concession as corporate supply remains in focus.
• Gilts were initially the relative laggard, given looming supply, though after the strong Gilt auction (record investor demand) the benchmark jumped back above 100.00, but shy of the initial 100.26 session high.
• Netherlands sells EUR 2.08bln vs. Exp. EUR 2.0-2.5bln 2.5% 2030 DSL; average yield 2.334% vs. prev. 2.950%
• UK sells GBP 2.25bln 4.75% 2043: b/c 3.62x, average yield 4.391%, 0.2bps tail.
• Italy to raise EUR 10bln from new 7yr BTP (demand was over EUR 73bln), and EUR 5bln from a tap of a 30yr, according to leads (demand was over UR 91bln).
• Saudi Arabia completes first issuance of USD international bonds worth USD 12bln, according to a statement.
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COMMODITIES

• Crude futures are largely retracing some of yesterday’s hefty losses coupled with added tailwinds from geopolitics – with recent reports suggesting three Hezbollah members were killed in an Israeli strike.
• Spot gold is trading within recent ranges and trimming some of the prior day’s losses despite a relatively rangebound Dollar and quiet newsflow; Base metals show a mixed picture with the breadth of the market narrow.
• Motiva's Port Arthur, Texas refinery (636k BPD) large crude unit and coker were shut on Monday.
• Hezbollah is reportedly attempting to target to target Israel's offshore gas infrastructure “Karish” with drones, Saudi Al-Hadath reports citing sources via journalist Oseran; Aurora Intel clarifies a FPSO was targeted and not a gas rig.
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NOTABLE EUROPEAN HEADLINES

• Hapag Lloyd (HLAG GY) says it deems the situation in the Red Sea as "still dangerous" and will continue to sail around the Cape of Good Hope; will take next decision as of January 15th
• ECB's Centeno says the ECB will not have to wait until May to make policy decisions, via econostream.
• Barclays said UK December consumer spending rose 2.3% Y/Y (prev. 2.9%).
• French PM Borne resigned and will act as caretaker until a new government is named. It was later reported that a new French PM is to be named on Tuesday morning, according to AFP.

DATA RECAP

• German Industrial Output MM (Nov) -0.7% vs. Exp. 0.2% (Prev. -0.4%, Rev. -0.3%); "production therefore decreased for the sixth month in succession."
• French Trade Balance, EUR, SA (Nov) -5.943B (Prev. -8.597B, Rev. -8.455B); Imports, EUR (Nov) 55.395B (Prev. 58.268B, Rev. 58.200B); Exports, EUR (Nov) 49.451B (Prev. 49.671B, Rev. 49.745B)
• UK BRC Retail Sales Like-For-Like YY (Dec) 1.9% (Prev. 2.6%); Total Sales YY (Dec) 1.7% (Prev. 2.7%)
• EU Unemployment Rate (Nov) 6.4% vs. Exp. 6.5% (Prev. 6.5%)

NOTABLE US HEADLINES

• Fed's Bowman (voter) said policy appears to be sufficiently restrictive to hit the 2% goal but noted important upside inflation risks remain and she will stay cautious in her approach to considering changes to the policy rate. Bowman also commented that inflation could fall further with the policy rate held steady for some time and that it will eventually become appropriate to lower the Fed's policy rate should inflation fall closer to 2%, while she remains willing to raise the policy rate at a future Fed meeting should inflation progress stall or reverse.
• United Airlines (UAL) found loose bolts so far on close to 10 Boeing (BA) 737 MAX aircraft during inspection with the loose bolts all in the same location, while it was separately reported that Alaska Airlines (AAL) found loose hardware on some Boeing (BA) 737 MAX 9 planes.

GEOPOLITICS

• Israeli officials said they will tell US Secretary of State Blinken that Palestinians will not return to northern Gaza unless Hamas releases more hostages, according to Al Jazeera.
• US Secretary of State Blinken said he found leaders in the Middle East determined to prevent a wider conflict but added they all recognised hurdles and nobody thinks anything will happen overnight.
• Three Hezbollah members were reportedly killed in a targeted strike on a vehicle in Ghandouriyeh in southern Lebanon, according to Reuters sources.
• Hezbollah says it attacked the Northern Command base with drones in retaliation for the killing of Arouri and the commander of the Radwan force, according to Walla News' Elster.

CRYPTO

• Bitcoin continues to give back some of the prior day's advances, paring back below the USD 47k level.

APAC TRADE

• APAC stocks traded higher as the region took impetus from the gains on Wall Street where tech outperformed as risk appetite was fuelled by a lower yield environment and a drop in oil prices.
• ASX 200 climbed above 7,500 with the index led by tech and consumer-related sectors owing to softer yields.
• Nikkei 225 printed its highest since March 1990 and rallied to just shy of 34,000 where it hit resistance.
• KOSPI was clouded after disappointing preliminary quarterly earnings from Samsung Electronics.
• Hang Seng and Shanghai Comp initially benefitted amid the broad constructive mood and recent PBoC hints at tools to boost credit including RRR although the upside was reversed after the PBoC drained liquidity and with Chinese oil majors pressured by the recent fall in oil prices.
• Taiwanese Election (on January 13th) Primer can be found here.

NOTABLE HEADLINES

• Taiwan's ruling party presidential candidate Lai said Taiwan will build up defence deterrence and economic security, while he will maintain the status quo and current President Tsai's policies.
• Japanese police are investigating a suspicious object which was discovered in front of the main gate of the national diet building, via NTV
• ByteDance is further scaling back its ambitions in the gaming industry and is in talks to sell game titles to several prospective buyers, according to WSJ
• China's CPCA (auto industry) says China sold 2.37mln passenger vehicles in December, +8.3% Y/Y. 2023 retail passenger vehicle sales +5.6% Y/Y
• China's CPCA says China's auto exports set to overtake Japan as the largest in both volume and value terms in 2023
• "China’s economic growth in 2024 is forecast to continue to gain pace, with the estimated annual GDP growth rate to reach 5.3%, said a report by the Center for Forecasting Science under Chinese Academy of Sciences on Tuesday", according to Global Times
• Chinese Commerce Ministry says China is looking to further suspend tariff cuts on products including agriculture, fishery, machinery, auto parts and textiles from Taiwan

DATA RECAP

• Japanese All Household Spending MM (Nov) -1.0% vs. Exp. 0.2% (Prev. -0.1%); Japanese All Household Spending YY (Nov) -2.9% vs. Exp. -2.3% (Prev. -2.5%)
• Tokyo CPI YY (Dec) 2.4% vs. Exp. 2.5% (Prev. 2.6%, Rev. 2.7%); CPI Ex. Fresh Food YY (Dec) 2.1% vs. Exp. 2.1% (Prev. 2.3%); CPI Ex. Fresh Food & Energy YY (Dec) 3.5% vs. Exp. 3.5% (Prev. 3.6%)
• Australian Building Approvals (Nov) 1.6% vs. Exp. -2.0% (Prev. 7.5%, Rev. 7.2%); Retail Sales MM (Nov) 2.0% vs. Exp. 1.2% (Prev. -0.2%)