• European equities and US futures are mixed, having spent much of the early session in the green; the FTSE 100 (-0.4%) is weighed on by losses in Sainsbury’s
• Dollar is softer and EUR is modestly firmer, with several upside OPEX strikes for the Single-Currency
• Bonds are bid, though still unable to pare back all of Tuesday’s advances
• Crude is softer, Gold and Base Metals are firmer amid a subdued Dollar
• Looking ahead, US MBA, Wholesale Sales, Chinese M2 Money Supply, ECB’s Schnabel, Fed’s Williams, Supply from the US

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 +0.1%, moved modestly into the green after a subdued open following a negative APAC handover, however we have now slipped back towards unchanged/incrementally into the red in light newsflow; FTSE100 (-0.4%) lags, hampered by losses in Sainsbury's (-4.7%) post earnings.
• Sainsbury's (SBRY LN) Q3 grocery sales +9.3% (prev. +5.6% Y/Y), Retail (exc. fuel) sales +6.5% (prev. +5.2% Y/Y), General Merchandise sales -0.6% (prev. +4.6%), Christmas grocery sales +8.6%, with stronger volumes growth offsetting lower inflation.
• European sectors hold a negative bias; Real Estate is propped up by gains in Vonovia (+1.9%) and Segro (+1.2%) following broker upgrades. Construction & Materials is hampered by Sika (-2.1%) earnings while UK Insurance names lag after a piece in the Insurance Post.
• US equity futures are treading water, with modest outperformance in the NQ (+0.3%), continuing to build on the prior day's strength and as US yields retreat a touch. Specifics relatively light thus far ahead of remarks from Fed's Williams before the highly anticipated December CPI print on Thursday.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• The Dollar is softer and within a tight (but busy) range of 102.64-35, with participants cautious ahead of tomorrow's US CPI print.
• EUR remains in consolidation mode and on a 1.09 handle, with the Single-Currency unreactive to remarks from ECB's de Guindos who mentioned the "rapid pace of disinflation in 2023 is likely to slow in 2024."; Several large OPEX clips above spot price; Schnabel Q&A scheduled.
• Yen is the G10 underperformer, with USD/JPY climbing briefly above the 145 mark but currently holding around 144.80.
• The Aussie was initially softer after lower than expected CPI, though now outperforms with the AUD/NZD cross higher by 0.2%. Similarly, NOK is firmer despite cooler than expected Norwegian CPI.
• PBoC set USD/CNY mid-point at 7.1055 vs exp. 7.1618 (prev. 7.1010)
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs outperform EGBs but are similarly yet to pare back all of Tuesday's sell off, with the 10yr yield back below 4.0%; participants await a 10yr sale and remarks from the influential Fed's Williams.
• Bunds are bid, in a slight easing from Tuesday's trough, with fresh fundamentals light ahead of a Q&A with ECB's Schnabel.
• BTPs are the standout outperformer after Tuesday's stellar reception for a new 7yr, making a fresh WTD peak of 118.40.
• UK DMO says they are to launch a new conventional Gilt maturing July 2045, launched via syndication in the week commencing January 22nd. More broadly, Gilts are in-fitting with EGBs and saw only fleeting reaction to another particularly strong auction.
• UK sells GBP 4bln 3.75% 2027 Gilt: b/c 3.44x, average yield 3.887% & tail 0.2bps.
• Germany sells EUR 4.43bln vs exp. EUR 5bln 2.20% 2034 Bund: b/c 1.7x, and average yield 2.19%.
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COMMODITIES

• Crude is softer despite a subdued Dollar and initial strength in the equities space, failing to hold onto modest gains after a larger-than-expected draw in private inventory crude stocks.
• Gold and Base Metals trade with an upside bias amid a softer Dollar, but within recent ranges amid catalyst-thin trade in the European session; XAU in proximity to yesterday's high at USD 2042.03/oz.
• Indian steel ministry has no immediate plans to seek higher import taxes on steel products; steel mills want authorities to raise taxes from the prevailing 7.5% on several steel products to curb imports, sources added
• US Energy Inventory Data (bbls): Crude -5.2mln (exp. -0.7mln), Gasoline +4.9mln (exp. +2.5mln), Distillate +6.9mln (exp. +2.4mln), Cushing -0.6mln.
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NOTABLE EUROPEAN HEADLINES

• ECB's de Guindos says "Our future decisions will continue to follow a data-dependent approach to determining the appropriate level and duration of restriction."
• German Engineering Orders in November -13% Y/Y (Domestic -15%, Foreign -13%), according to VDMA; Order in Sep-Nov -12% Y/Y (Domestic -17%, Foreign -11%)
• German wholesalers and exporters sees nominal revenues down 2% in 2024 after 3.75% fall in 2023; the BGA said sentiment within the country is "on the floor"

DATA RECAP

• Norwegian Consumer Price Index MM (Dec) 0.1% vs. Exp. 0.2% (Prev. 0.5%)
• Norwegian Core Inflation YY (Dec) 5.5% vs. Exp. 5.6% (Prev. 5.8%); Core Inflation MM 0.2% vs. Exp. 0.2% (Prev. -0.2%); Consumer Price Index YY 4.8% vs. Exp. 4.8% (Prev. 4.8%)
• Swedish GDP MM (Nov) 0.2% (Prev. 1.00%); Retail Sales MM (Nov) -0.5% (Prev. 1.4%)
• French Industrial Output MM (Nov) 0.5% vs Exp. 0.0% (Prev. -0.3%)
• Italian Retail Sales SA MM (Nov) 0.4% (Prev. 0.4%); Retail Sales NSA YY 1.5% (Prev. 0.3%)

NOTABLE US HEADLINES

• Tesla (TSLA) says the upgraded Model 3 is now available in North America.
• Boeing (BA) executive tells staff loose bolt findings are being treated as a quality control issue and checks under way at Boeing and Spirit AeroSystems (SPR).
• Hewlett Packard Enterprise (HPE) is to acquire Juniper Networks (JNPR) for USD 40/shr with the deal valued at USD 14bln.

GEOPOLITICS

• US Navy said four warships from Operation Prosperity Guardian were engaged in fighting and that around 50 merchant vessels were in the area of what was the largest attack so far by Houthi militias on merchant vessels in the Red Sea, according to CNBC. It was later reported that US and British forces shot down 21 drones and missiles fired from Yemen, according to AFP News Agency.
• US, EU, UK and partner nations issued a joint statement which condemned North Korea's export and Russia's procurement of North Korean ballistic missiles and Russia's use of missiles against Ukraine on December 30th. In relevant news, the White House said National Security Adviser Sullivan discussed North Korea's transfer of missiles to Russia in a call with South Korean counterpart.

CRYPTO

• It was initially reported that the SEC granted approval for Bitcoin ETFs for listing on all registered national securities exchanges. However, the US SEC then noted that Bitcoin ETFs had not received approval on Tuesday and SEC Chair Gensler said the SEC account on X was compromised which resulted in an unauthorised post.
• Bitcoin ETF analysis can be found here

APAC TRADE

• APAC stocks mostly declined after the flimsy handover from Wall St and tentativeness ahead of key inflation data and earnings.
• ASX 200 was dragged lower by the mining, materials and resources sectors, while monthly CPI data was softer than expected but remained well above the 2%-3% inflation target.
• Nikkei 225 surged above 34,000 for the first time in over three decades, while soft wages added to the case for a delayed BoJ exit.
• Hang Seng and Shanghai Comp were subdued amid the lack of any major positive drivers and a tepid PBoC liquidity operation, while HSBC and Citigroup lowered their Hang Seng Index targets due to earnings and China policy doubts.

NOTABLE HEADLINES

• US and Chinese defence officials held policy coordination talks at the Pentagon on Monday and Tuesday in their first such in-person meetings since before the pandemic, according to Bloomberg.
• China's Defence Ministry said it urges the US to reduce military deployment and provocations in the South China Sea and to stop providing support to provocations of certain countries. Furthermore, it urged the US to abide by the One China Principle and stop arming Taiwan, while it added that the US should strictly restrain front-line forces and stop hyping up security issues, according to Reuters.

DATA RECAP

• Japanese Labour Cash Earnings YY (Nov) 0.2% vs Exp. 1.5% (Prev. 1.5%)
• Australian Weighted CPI YY (Nov) 4.3% vs. Exp. 4.4% (Prev. 4.9%)