• European equities are markedly firmer with sectoral performance led by geopolitical tensions and a negative Burberry update; US mixed into bank earnings
• US & UK conducted a joint strike against Houthi targets in Yemen, which has led to marked upside in Crude; Brent back above USD 80/bbl
• Dollar is marginally firmer awaiting US PPI, Antipodeans firmer in-fitting with the risk tone
• Treasuries are unchanged whilst EGBs are modestly firmer deriving support from escalated geopolitical tensions; slight pullback on BoJ sources
• Looking ahead, US PPI, ECB’s Lane & Fed’s Kashkari, Earnings from JP Morgan, Wells Fargo, Citi, BofA & Delta Airlines.

EUROPEAN TRADE

EQUITIES

• European equities, Stoxx600 +0.8%, are firmer across the board, having started the session in the green and continue to build on strength throughout the session.
• European sectors have largely been dictated by geopolitics and the Burberry update; Industrials leads after the US and UK conducted a joint strike against Houthi targets. Luxury hampered by Burberry cutting guidance.
• Burberry (BRBY LN) -9.3% now expect FY results to be below the prior guidance. "The slowdown in luxury demand is having an impact on current trading". Reminder; Richemont reports next Thursday.
• US equity futures are mixed with the NQ (-0.2%) incrementally lagging, paring back some of the mild outperformance seen yesterday; focus broadly on upcoming earnings metrics.
• UnitedHealth Group Inc (UNH) Q4 2023 (USD): adj. EPS 6.16 (exp. 5.98), Revenue 94.4bln (exp. 92.14bln). -0.2% pre-market
• BlackRock Inc (BLK) Q4 2023 (USD): Adj. EPS 9.66 (exp. 8.84), Revenue 4.63bln (exp. 4.63bln). AUM 10.01tln (exp. 9.78tln); BlackRock to buy GIP for USD 3bln. Shares +0.9% after initial weakness of -0.7% pre-market (vs +0.2% pre-release)
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• DXY is marginally firmer though within contained parameters of 102.17-40. USD in consolidation mode as CPI failed to have a lasting impact, PPI next.
• EUR is steady vs. the USD with EUR/USD failing to breach 1.10 after printing a high of 1.0999 yesterday; a deluge of option expiries will be in focus 1.0920-25 (1.2BLN), 1.0940-50 (1.5BLN), 1.0975-80 (1.3BLN),1.0990-1.1000 (2.1BLN),1.1050-55 (2BLN).
• JPY is lingering around the 145 mark as it looks for some respite from yesterday's USD/JPY rally which took the pair to 146.41. JPY relatively unreactive to BoJ sources in which it sees the economy making progress towards criteria for ending negative rates.
• Antipodeans are benefitting from the favourable risk environment. AUD/USD back on a 0.67 handle but chart formation still one of consolidation.
• PBoC set USD/CNY mid-point at 7.1050 vs exp. 7.1592 (prev. 7.1087).
• Peru Central Bank cut its reference rate by 25bps to 6.50%, as expected, while it stated the rate cut does not necessarily imply a cycle of successive reductions to the interest rate and that annual inflation is expected to reach the target range in the next months.
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FIXED INCOME

• USTs around unchanged in a narrow nine tick range ahead of PPI and Fed's Kashkari (2026 Voter), though in the meantime US focus will likely be on the commencement of bank earnings; benchmarks dipped slightly following BoJ sources.
• Bunds are bid despite more contained UST action, fleeting pressure around a JGB auction and a lessening of the magnitude of China's deflation. Likely deriving support from the escalation in geopolitical tensions overnight between UK/US & Houthis.
• Gilts were unreactive to November GDP and largely trading in tandem with core EGB peers. Inched above Thursday's peak to a current 100.60 best, but nine ticks shy of the WTD best.
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COMMODITIES

• Crude is markedly firmer as geopolitical risk premium continues to be woven in after yesterday’s events near the Strait of Hormuz, with reports overnight that the US and UK conducted a joint airstrike against Houthi rebel targets; Brent around USD 80.10/bbl, at session highs.
• Precious metals post mild gains whilst the Dollar remains rangebound amid heightened geopolitical tensions in the Middle East; Base metals are mostly firmer with participants citing expectations of a rate cut in China to support the economy.
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NOTABLE EUROPEAN HEADLINES

• Goldman Sachs cuts the UK's 2024 GDP growth forecast to 0.5% (prev. 0.6%)

DATA RECAP

• UK GDP Estimate MM (Nov) 0.30% vs. Exp. 0.20% (Prev. -0.30%); GDP Est 3M/3M (Nov) -0.20% vs. Exp. -0.10% (Prev. 0.00%); GDP Estimate YY (Nov) 0.20% vs. Exp. 0.20% (Prev. 0.30%, Rev. -0.10%)
• UK Goods Trade Bal. Non-EU (Nov) -2.838B GB (Prev. -4.828B GB, Rev. -3.919B GB); Goods Trade Balance GBP (Nov) -14.189B GB vs. Exp. -15.7B GB (Prev. -17.032B GB, Rev. -15.936B GB)
• UK Construction O/P Vol YY (Nov) 0.9% vs. Exp. 1.3% (Prev. 1.1%, Rev. 1.3%); Construction O/P Vol MM (Nov) -0.2% vs. Exp. 0.2% (Prev. -0.5%, Rev. -0.4%)
• UK Industrial Output MM (Nov) 0.3% vs. Exp. 0.3% (Prev. -0.8%, Rev. -1.3%); Industrial Output YY (Nov) -0.1% vs. Exp. 0.7% (Prev. 0.4%, Rev. -0.5%)
• UK Manufacturing Output MM (Nov) 0.4% vs. Exp. 0.3% (Prev. -1.1%, Rev. -1.2%); Manufacturing Output YY (Nov) 1.3% vs. Exp. 1.7% (Prev. 0.8%, Rev. 0.2%)
• UK Services MM (Nov) 0.40% vs. Exp. 0.20% (Prev. -0.20%, Rev. -0.10%); Services YY (Nov) 0.10% vs. Exp. 0.10% (Prev. 0.20%, Rev. -0.20%)
• French CPI (EU Norm) Final YY (Dec) 4.1% vs. Exp. 4.1% (Prev. 4.1%); CPI (EU Norm) Final MM (Dec) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
• Spanish HICP Final YY (Dec) 3.3% vs. Exp. 3.3% (Prev. 3.3%); CPI YY Final NSA (Dec) 3.1% vs. Exp. 3.1% (Prev. 3.1%)

NOTABLE US HEADLINES

• 5.9 magnitude earthquake reported in south-eastern Alaska
• Apple (AAPL) directors Al Gore and James Bell are to retire; Wanda Austin is to join board of directors
• Disney (DIS) CEO Iger has talked about Pixar making less content and Pixar has yet to determine how many employees will lose their jobs although no layoffs are imminent, according to a source

US/UK strikes on Houthi targets

• US and UK conducted a joint strike against Houthi targets in Yemen which targeted Houthi radar, air defence sites, weapon storages and launch sites. US and allies released a joint statement that Yemen strikes were intended to disrupt and degrade the capabilities the Houthis use to threaten global trade, while their aim remains to de-escalate tensions and restore stability in the Red Sea but will not hesitate to defend lives and protect the free flow of commerce in one of the world's most critical waterways in the face of continued threats.
• US President Biden said US military forces together with the UK and with support from Australia, Bahrain, Canada and the Netherlands successfully conducted strikes against targets in Yemen used by Houthi rebels and the strikes were a direct response to Houthi attacks against international maritime vessels in the Red Sea, while he added that they will not hesitate to direct further measures.
• US senior official said Houthi actions present a threat to the US and the entire world, while the official added there is no intent to escalate the situation after strikes on Houthi targets and that US and British forces in the Red Sea remain well prepared to defend themselves following the Yemen strikes. Furthermore, they believe Iran has been involved in every phase of Houthi attacks and that they hold Iran responsible for the role it has played in attacks against US forces.
• Yemen's Houthis spokesman said there is no justification for the US-UK attack on Yemen and the targeting of ships heading towards Israel will continue. It was also separately reported that Iran strongly condemned the US-UK attack against Houthis and said it is a violation of Yemen's sovereignty and territorial integrity.
• Russian letter to Security Council members considers the use of force in Yemen a violation of the UN Charter, while Russia requested a UN Security Council meeting regarding the US-UK strikes on Yemen.
• Saudi Arabia said it so closely monitoring with great concern the air strikes on Yemen and it emphasises the importance of maintaining the security and stability of the Red Sea, while it called for restraint and avoiding escalation in light of the events taking place in the region.
• US military said Iranian-backed Houthis fired an anti-ship ballistic missile into international shipping lanes in the Gulf of Aden on Thursday but there were no injuries or damage reported from the attack.
• Houthis says "All US-British interests have become legitimate targets in response to aggression", according to Sky News Arabia

GEOPOLITICS

• US Secretary of State Blinken said the State Department is imposing sanctions on three Russian entities and one individual involved in the transfer and testing of North Korea's ballistic missiles for Russia's use against Ukraine.
• China's Military says they will always maintain the highest level of vigilance and "smash" any form of "Taiwan independence" separatist plot, according to the Chinese Defence Ministry

CRYPTO

• Bitcoin, -0.5%, takes a breather and holds just shy of USD 46k, whilst Ethereum, +0.5%, continues to build on the prior day's advances.

APAC TRADE

• APAC stocks traded mixed with the major indices mostly rangebound alongside geopolitical concerns after the US and UK conducted joint strikes on Houthi targets, while participants also digested Chinese inflation and trade data.
• ASX 200 was subdued as strength in commodity-related sectors was offset by weakness in defensives.
• Nikkei 225 continued to rally and is up over 6% this week with gains helped by strong earnings from top-weighted Fast Retailing.
• Hang Seng and Shanghai Comp struggled for direction despite the latest Chinese trade data which either improved or topped forecasts although 2023 USD-denominated exports contracted for the first time since 2016, while the Chinese inflation figures were mixed but ultimately deflationary on a Y/Y basis.
• US equity futures (ES -0.2%) were contained after whipsawing post-CPI, while participants also await big bank earnings.
• European equity futures are indicative of a higher open with Euro Stoxx 50 future +0.7% after the cash market closed lower by 0.6% yesterday.

NOTABLE HEADLINES

• China's Customs said China's 2023 exports and imports of goods are better than expected but noted complexity and uncertainty of the external environment are expected to rise in 2024, while it added more efforts are needed to improve China's trade stabilisation in 2024.
• Chinese Foreign Minister Wang Yi held a call with his Canadian counterpart and said the current difficult situation in China-Canada relations is not what China wants to see but added that China is open to contacts and dialogue with Canada. Wang noted the fundamental reason why relations have fallen to a low point in recent years is that there has been a serious deviation in Canada's perception of China and he hopes the Canadian side will interpret China's domestic and foreign policies objectively, rationally and correctly.
• Japanese government is reportedly mulling issuing a deficit-covering bond worth JPY 500bln as a source of funding to double budget reserves to JPY 1tln for FY24 for earthquake relief, according to Reuters citing TV Tokyo.
• BoJ policymakers see the economy making progress towards meeting the threshold for ending negative rates, though they are divided on how long they should wait, according to Reuters sources and recent BoJ minutes.
• European Commission investigators are to visit Chinese EV names within China in the coming weeks, via Reuters citing sources; as part of a subsidies probe, could result in tariffs. BYD (1211 HK), Geely (0175 HK), SAIC (600104 CH).

DATA RECAP

• Chinese CPI MM (Dec) 0.1% vs. Exp. 0.2% (Prev. -0.5%); CPI YY (Dec) -0.3% vs. Exp. -0.4% (Prev. -0.5%); PPI YY (Dec) -2.7% vs. Exp. -2.6% (Prev. -3.0%)
• Chinese Trade Balance (USD)(Dec) 75.3B vs. Exp. 74.8B (Prev. 68.4B); Exports YY (USD)(Dec) 2.3% vs. Exp. 1.7% (Prev. 0.5%); Imports YY (USD)(Dec) 0.2% vs. Exp. 0.3% (Prev. -0.6%)
• Chinese Trade Balance (CNY)(Dec) 540.9B (Prev. 490.8B); Exports YY (CNY)(Dec) 3.8% (Prev. 1.7%); Imports YY (CNY)(Dec) 1.6% (Prev. 0.6%)
• China Aggregate Financing (Dec): CNY 1.94tln (exp. 2.16tln)