• Equities are firmer, though have been dipping lower as attention turns to US CPI and geopolitics intensify
• Oil tanker (St. Nikolas) has reportedly been boarded by Iranians in the Gulf of Oman; prompting crude upside and denting risk appetite somewhat
• Dollar is flat and Yen falls back below the 145.50 level; Kiwi outperforms benefitting from AUD/NZD cross
• Bonds bid though within ranges, benchmarks seemingly capped by energy upside ahead of US CPI
• Looking ahead, US CPI, IJC, Philly Fed Manufacturing Business Outlook Survey, Supply from US, Speak from Fed's Barkin and Mester

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (+0.2%), are on the front-foot, though did dip off best levels at the cash open and have been edging lower since, potentially affected by geopols in the Gulf of Oman.
• Marks & Spencer (-5.2%) sank at the open after a trading update, anticipating higher prices in 2025; Tesco ( -0.5%) also slips after its own Christmas update.
• European sectors have a positive tilt; Basic Resources benefit from the positive risk tone. Banks in the red, hampered by lower yields, with clear underperformance in SocGen (-3.3%) and Deutsche Bank (-3.3%); both of which were subject to a cautious note at Kepler.
• US equity futures are firmer across the board, albeit to a lesser degree than their European counterparts; with mild outperformance in the NQ (+0.3%), building on yesterday’s tech-led advances and as yields tilt lower into CPI.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• Dollar is contained within a 102.17-40 range with participants cautious ahead of US CPI; Upside target at 102.64 (10th Jan high) and downside target 102.10 (9th Jan low)
• EUR remains supported after hawkish ECB speak from Schnabel on Wednesday, where she pushed back on rate cuts.
• Yen back below 145.50 as the recent rally comes to a halt ahead of US CPI; ex-BoJ Board Member says April is the most likely time to end negative rates.
• Antipodeans are the G10 outperformers in-fitting with the broader constructive risk tone; the Kiwi performs better with the AUD/NZD cross weaker and on a 1.073 handle.
• PBoC set USD/CNY mid-point at 7.1087 vs exp. 7.1667 (prev. 7.1055).
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are firmer into US CPI for any fresh insight around the timing for the first Fed cut; yields lower across the curve with no overt flattening/easing bias thus far.
• Bunds are bid but within ranges ahead of US CPI. Newsflow specifically for the region/complex light, but if the upside resumes, 135.71 is Wednesday's peak before 88 from Tuesday.
• Note, the core complex generally stalled at the current session highs as geopolitical developments around the Gulf of Oman received wider coverage.
• BTPs are, once again, the EGB outperformer after stellar syndication earlier in the week drew demand of over EUR 150bln for 15bln of total issuance, though no further upside after a relatively unremarkable first outing.
• Italy sells EUR 4bln vs exp. EUR 3.75-4bln 2.95% 2027: b/c 1.48x, average yield 3.03%
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COMMODITIES

• Crude futures are firmer after geopolitical updates near the Strait of Hormuz where an oil tanker that was once at the centre of a crisis between Iran and the US has been boarded by "armed unauthorised persons" in military uniforms. WTI Feb'24 and Brent Mar'24 up to respective USD 72.86/bbl and USD 78.30/bbl peaks.
• Precious metals diverge slightly with the yellow metal underpinned by the geopolitical ongoings in the Middle East; XAU remains within recent ranges but approaches its 21 DMA (2,039.33/oz). Base Metals are modestly firmer in-fitting with the broader performance across stocks.
• Azerbaijan exported 11.8bcm of natural gas to Europe in 2023 (vs 12bcm touted by the President), according to the Energy Ministry
• Barclays lowers 2024 Brent price forecast by USD 8/bbl to USD 85/bbl; says despite the extension of voluntary OPEC+ reductions through Q1 2024, their 2024 balance estimate is largely unchanged. Maintains forecast of 300k BPD Q4-to-Q4 oil growth in 2024. Reiterate long USD 70-75/bbl call spread recommendation on the September 2024 WTI contract. Not think there was a 200k BPD surplus last year and expect a similar surplus this year. In its baseline view, Brent demand momentum picked up sequentially and non-OPEC+ supply growth decelerated sharply in 2024.
• Italy's Industry Minister says the government plans to reverse course at ex-llva steel plant by changing crews and outlining a national steel plan
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NOTABLE EUROPEAN HEADLINES

• ECB's de Cos said future ECB moves will depend on data but uncertainty is high and risks to economic growth are still skewed to the downside. De Cos added that the Euro area economy probably stagnated in Q4 and said the ECB must avoid insufficient and excessive tightening.
• ECB's Villeroy says the French economy is slowing, but is more robust than feared. Confirms the 2024 growth estimate of 0.9%
• Ryanair (RYA ID) calls on the German government to cut aviation taxes/charges and lower airport charges. Could double German traffic in the next six years, if competitive charges introduced
• M&S (MKS LN) says there are some impacts from Red Sea delays, but not seeing it yet; expecting some slight delays in clothing and home deliveries from the Red Sea issues
• Maersk (MAERSKB DC) CEO has warned that it could take months to reopen the Red Sea trading route, risking economic and inflationary hits to the global economy, firms, and consumers, according to the FT

DATA RECAP

• Spanish Ind Output Cal Adj. YY (Nov) 0.8% (Prev. -1.5%, Rev. -1.4%)
• Italian Industrial Output YY WDA (Nov) -3.1% (Prev. -1.1%); Industrial Output MM SA (Nov) -1.5% vs. Exp. -0.2% (Prev. -0.2%)

NOTABLE US HEADLINES

• Fed's Williams said the Fed's work to bring inflation back to 2% is not done and that the Fed can cut rates when confident inflation is moving to 2% but added that the Fed will need a restrictive policy stance for some time. Williams said the outlook is still uncertain and rate decisions are to be made meeting-by-meeting and will be driven by the totality of data, while he added that risks to the economy are two-sided. Furthermore, he said the Fed is in a good place and has time to think about what's next for rates, as well as noted that policy is still quite restrictive and Fed eventually needs to get policy back to more neutral levels.
• Reuters/Ipsos poll showed President Biden and former President Trump are tied in the 2024 US Presidential Election contest with 35% support each.
• Chris Christie (R) has pulled out of the Republican Presidential nomination race
• Ryanair (RYA ID) CEO says Boeing (BA) Max 9 issue is concerning but has no read across to Max 8 or 10, citing contact with the FAA, EASA, and Boeing.
• Alphabet (GOOG) EUR 2.42bln EU antitrust fine should be upheld by EU top court, according to Reuters citing the court adviser.
• Amazon (AMZN) did not offer EU antitrust remedies to regulators which were examining the iRobot (IRBT) deal, according to the EU Commission
• US CPI Preview can be found here

Gulf of Oman

• An oil tanker that was once at the centre of a crisis between Iran and the US has been boarded by "armed unauthorised persons" in military uniforms on Thursday morning off the coast of Oman, according to Sky News
• Earlier reports from the UKMTO said it received reports of vessel being boarded by unauthorised persons at approximately 0330 UTC; CSO reports unknown voices heard over the phone. Unable to make further contact with the vessel at this time
• Subsequently, Tanker Trackers reported that the St Nikolas tanker was boarded by Iranians in the Gulf of Oman; tanker is carrying Iraqi oil; an update which caused upside in WTI Feb'24 and Brent Mar'24 crude benchmarks.
• Most recent reports from UKMTO said CSO reported vessel in the Gulf of Oman has altered its course towards Iranian waters and communication with the vessel has been lost; Empire Navigation spokesperson said the vessel was loaded with 145k tonnes of oil loaded from Basra, Iraq

GEOPOLITICS

• Israeli officials noted the decision Israel has to take is whether to accept a deal that would end the war and withdraw from Gaza but added that Qatar's proposal is not much different from previous proposals, according to Al Jazeera.
• IDF Chief of Staff said after the war in Gaza, the IDF will know how to fight in Lebanon if needed, according to Al Arabiya.
• US intelligence officials warned of increasing risk that Hezbollah militants could strike Americans in the Middle East and even potentially hit inside the US, according to sources cited by Politico.
• White House's Kirby said Houthi attacks in the Red Sea are escalatory and that the US does not seek conflict, while he said they will consult with partners about the next steps if attacks continue and will do everything they can to protect shipping in the Red Sea.
• UN Security Council approved a resolution demanding Yemen's Houthis immediately cease shipping attacks, while a Houthi spokesman said the UN resolution on navigation in the Red Sea is a political game and it is the US that is violating international law.
• An armed drone was shot down over an air base housing US forces in northern Iraq, according to Reuters sources.
• White House threw its support behind legislation that would allow the seizing USD 300bln of frozen Russian assets to help rebuild Ukraine, according to Bloomberg.
• US and China security officials discussed security issues on Wednesday including challenges in the Middle East, Russia's war against Ukraine and cross-Strait issues, according to the White House.
• US President Biden is to send former top officials to Taipei after Taiwan’s election on Saturday in a move that could complicate efforts to stabilise Sino-US relations, according to FT sources.
• China's Taiwan Affairs Office said Taiwan independence is incompatible with peace across the Taiwan Strait and runs counter to the interests and well-being of Taiwanese people. Furthermore, it hopes the majority of Taiwan compatriots would recognise the extreme harm of DPP's Taiwan independence line and the extreme danger of presidential frontrunner Lai's triggering of cross-strait confrontation.

CRYPTO

• Bitcoin (+1.6%) holds just below the USD 47k whilst Ethereum, +4.5%, continues to build on the prior day's gains amid the SEC approving a number of spot Bitcoin ETFs.
• US SEC approved 11 spot Bitcoin ETFs, while the CBOE also approved the listing of spot Bitcoin ETFs from multiple asset managers.
• US SEC Chair Gensler said investors should remain cautious about the myriad of risks associated with Bitcoin and products with values tied to crypto. Furthermore, he said while we approved the listing and trading of certain spot Bitcoin ETP shares today, we did not approve or endorse Bitcoin.

APAC TRADE

• APAC stocks followed suit to the gains stateside despite the lack of major catalysts as markets await US CPI.
• ASX 200 climbed back above 7,500 with the index led by outperformance in financials, tech and consumer stocks.
• Nikkei 225 continued its stellar rally and broke above 35,000 for the first time since February 1990.
• KOSPI remained afloat after the BoK kept rates unchanged, as expected, while it omitted the reference regarding judging the need to raise the base rate further from its policy statement and Governor Rhee also stated they see less need for rate hikes.
• Hang Seng and Shanghai Comp were firmer as Hong Kong conformed to the positive mood with advances driven by strength in tech and autos, while the mainland somewhat lagged ahead of potential frictions from the upcoming election in Taiwan.

NOTABLE HEADLINES

• PBoC approved a total of CNY 100bln (USD 14bln) in group housing leasing loans, supporting eight pilot cities to purchase commercial properties for long-term rental purposes, according to Economic Observer.
• China took measures to facilitate foreign nationals coming to China with the easing of some visa requirements to make it easier for foreigners to travel for business, education and tourism. Furthermore, Global Times reported China's National Immigration Administration officially implemented five new measures to facilitate foreign nationals coming to China and said foreigners with permanent residence permits in China can apply for financial services, including banking, securities, and foreign exchanges.
• US Treasury Secretary Yellen said some tariffs are appropriate to maintain and the Biden administration is focused on a China tariff review, while she added that tariffs could be made more 'strategic'.
• BoJ is fully prepared to put an end to the world’s last negative interest rate and April is the most likely time for when it might do so, according to former BoJ board member Sakurai cited by Bloomberg.
• OECD urged for the BoJ to gradually raise short-term interest rates and continue modifying YCC policy to increase flexibility, while the OECD Secretary-General said Japan's monetary policy can gradually and modestly begin tightening.
• BoK maintained its base rate at 3.5%, as expected, but removed the phrase "To judge the need to raise the base rate further" from its policy statement. BoK Governor Rhee said the rate decision was unanimous and sees less need for rate hikes, while he added that any premature rate cut could adversely affect the economy and it is best to wait until inflation stabilises. Rhee also stated that five board members see the terminal rate at 3.50% and most board members agreed to deploy targeted support measures to help small to medium-sized firms. Furthermore, he stated it is too early to discuss rate cuts, as well as noted that board members see no rate cuts for the next three months and see little chance of rate cuts for the next six months.
• BoJ Nagoya Branch Manager says momentum for wage increases is heightening though some small firms say they find it difficult to increase pay; there is uncertainty on the outlook for wages

DATA RECAP

• Australian Trade Balance (AUD)(Nov) 11.4B vs. Exp. 7.5B (Prev. 7.1B)
• Australian Exports MM (Nov) 1.7% (Prev. 0.4%)
• Australian Imports MM (Nov) -7.9% (Prev. -1.9%)