• APAC stocks traded mixed with the region mostly negative after the unwinding of central bank rate cut pricing.
• European equity futures are indicative of a contained open with Euro Stoxx 50 future flat after the cash market closed down 1.0% on Wednesday.
• DXY is a touch softer vs. peers, EUR/USD eyes 1.09, USD/JPY failed to hold above 148.
• Crude futures marginally extended on the prior day's rebound amid geopolitical risks, Bunds languish near monthly lows.
• Looking ahead, highlights include US Building Permits, IJC, Philly Fed Business Index, NZ Manufacturing PMI, Japanese CPI, ECB Minutes, BoE Credit Conditions Survey, comments from Fed’s Bostic & ECB’s Lagarde, supply from Spain, France & US.

US TRADE

EQUITIES

• US stocks were pressured amid the unwinding of central bank rate cut pricing following a slew of hawkish economic data including a hot UK CPI report and large beats in US Retail Sales, while there was a further ECB pushback against imminent cuts.
• SPX -0.56% at 4,739, NDX -0.56% at 16,736, DJI -0.25% at 37,267, RUT -0.73% at 1,913.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Beige Book January stated a majority reported little change in activity since the November report, while lower rates were cited as a source of optimism and signs of a cooling labour market were also cited. Furthermore, wage growth is expected to fall further and there are mixed inflation expectations.
• US House Speaker Johnson said he had a productive meeting with US President Biden and must insist border be the top priority. It was also reported that Senate Majority Leader Schumer said there was a Democratic and Republican agreement to help Ukraine and he is more optimistic now that they can come to an agreement on border and Ukraine in one package, while he also noted that President Biden said he was willing to move forward on the border.

APAC TRADE

EQUITIES

• APAC stocks traded mixed with the region mostly negative after the unwinding of central bank rate cut pricing.
• ASX 200 was dragged lower by the mining-related sectors with attention on BHP's lower quarterly iron ore output.
• Nikkei 225 swung between gains and losses after recent currency weakness and disappointing machinery orders.
• Hang Seng and Shanghai Comp were mixed as the Hong Kong benchmark composed itself following yesterday's near-4% collapse, while the mainland index slipped to its lowest level since 2020 after recent data and rate disappointment.
• US equity futures traded sideways after the recent strong data and tempering of aggressive rate cut expectations.
• European equity futures are indicative of a contained open with Euro Stoxx 50 future flat after the cash market closed down 1.0% on Wednesday.

FX

• DXY kept to within a narrow range of 103.16-103.39 after failing to sustain yesterday's initial data-induced gains.
• EUR/USD briefly reclaimed the 1.0900 status after the ECB's relentless pushback against market rate cut expectations.
• GBP/USD remained afloat after the recent hot inflation data from the UK which spurred an adjustment in rate cut pricing.
• USD/JPY struggled to hold above 148.00 which it reclaimed after strong US data and subsequent widening of yield differentials.
• Antipodeans found some reprieve from recent losses but with the rebound limited amid the cautious risk appetite, while AUD/USD also briefly wobbled following soft jobs data.
• PBoC set USD/CNY mid-point at 7.1174 vs exp. 7.1976 (prev. 7.1168).

FIXED INCOME

• 10yr UST futures attempted to claw back some of the losses from yesterday's bear-flattening.
• Bund futures languished near a monthly low after numerous ECB officials continued to push back against immediate rate cuts.
• 10yr JGB futures followed suit to the recent losses across global counterparts and eventually slipped below 147.00 after mixed results from the 20yr JGB auction which resulted in a higher bid-to-cover but at lower-than-previous accepted prices.

COMMODITIES

• Crude futures marginally extended on the prior day's rebound amid geopolitical risks as the US conducted a fourth round of strikes against Houthi targets and Pakistan targeted Baluchi militants in Iranian territory in a tit-for-tat response to recent similar actions by Iran, although the gains were capped by the cautious risk tone and mostly bearish private-sector inventory data.
• US Energy Inventory Data (bbls): Crude +0.5mln (exp. -0.3mln), Gasoline +4.9mln (exp. +2.2mln), Distillates +5.2mln (exp. +0.9mln), Cushing -2.0mln.
• Qatar set March-loading Al-Shaheen crude term price at USD 0.88/bbl above Dubai quotes.
• IEA's Birol said the oil market will be in a comfortable state in 2024, barring major geopolitical surprises, while Red Sea disruptions have had a limited oil price effect as output is not impacted.
• Spot gold was contained after recent dollar strength dragged the precious metal to near the USD 2,000/oz level.
• Copper futures found some reprieve from recent selling albeit with the recovery limited by the subdued risk appetite.

CRYPTO

• Bitcoin traded indecisively with prices choppy but with losses cushioned by support around the USD 42,500 level.

NOTABLE ASIA-PAC HEADLINES

• Working group of US Treasury and Chinese officials will meet on Thursday in Beijing for the first time, while the topics to be discussed include financial stability, cross-border data regulations, capital markets, sustainable finance, anti-money laundering, financial terrorism and IMF policies, according to FT.

DATA RECAP

• Japanese Machinery Orders MM (Nov) -4.9% vs. Exp. -0.8% (Prev. 0.7%)
• Japanese Machinery Orders YY (Nov) -5.0% vs. Exp. 0.2% (Prev. -2.2%)
• Australian Employment (Dec) -65.1k vs. Exp. 17.6k (Prev. 61.5k)
• Australian Unemployment Rate (Dec) 3.9% vs. Exp. 3.9% (Prev. 3.9%)
• Australian Participation Rate (Dec) 66.8% vs. Exp. 67.1% (Prev. 67.2%)

GEOPOLITICS

MIDDLE EAST

• US Central Command said a drone launched from Houthi-controlled areas in Yemen struck a US-owned vessel in the Gulf of Aden, while there were no injuries and some damage reported. US military also announced it conducted strikes on 14 Houthi missiles that were loaded to be fired from Yemen and said the missiles presented an imminent threat to merchant vessels and US Navy ships in the region.
• Houthi-controlled Saba News Agency said US and British aircraft targeted several governorates in Yemen.
• UK Foreign Secretary Cameron met with the Iranian Foreign Minister at the WEF and condemned the attacks in Erbil, Iraq, while he also made it clear that the Houthi attacks on shipping in the Red Sea are illegal and unacceptable, according to Reuters.
• Pakistan's Foreign Minister held a call earlier with his Iranian counterpart and underscored the attack conducted by Iran inside Pakistani territory was a serious breach of Pakistan's sovereignty and a violation of international law, while he added that Pakistan reserved the right to respond to this provocative act. It was later reported that Pakistan hit Baluchi militant targets in Iranian territory.
• Pakistan Foreign Ministry said it undertook a series of military strikes against terrorist hideouts in the Sistan and Baluchistan Province of Iran, while it added that Pakistan fully respects the sovereignty and territorial integrity of Iran and it will continue to endeavour to find joint solutions with Iran against terrorism, according to Reuters.
• Lebanon's Foreign Minister said the war on Lebanon is not easy for Israel and will be a regional war, adds if a regional war breaks out, rockets will fall on Israel from all sides, according to Al Arabiya.

OTHER

• Russian Defence Ministry said air defence units shot down Ukrainian drones in Moscow and Leningrad regions, according to Reuters.
• Chinese Foreign Ministry official and Philippines Deputy Foreign Secretary reaffirmed that the South China Sea dispute is not the whole story of bilateral relations and they believe maintaining communication and dialogue is essential to maintaining maritime peace. Furthermore, they agreed to improve maritime communication and continue to properly manage maritime conflicts and differences through friendly consultations, while they agreed to properly handle maritime emergencies in certain waters of the South China Sea.
• Philippines Foreign Ministry said the Philippines and China had frank and productive discussions to de-escalate the situation in the South China Sea, while both sides agreed to calmly deal with any incidents through diplomacy and they assured each other of mutual commitment to avoid escalation of tensions, according to Reuters.

UK/EU

NOTABLE HEADLINES

• UK PM Sunak's Rwanda bill passed the third reading in the Commons by 320 votes to 276.
• ECB's Nagel said the German outlook for 2024 appears to be a little better and the ECB has achieved a lot on inflation but added that core inflation remains rather sticky. Nagel also stated rate cuts will come sooner or later and should wait for incoming data before deciding on rates, according to Bloomberg.
• ECB's de Cos said he backs US proposals to impose more stringent requirements on banks than their US and EU counterparts and said countries should go beyond global regulations if required, according to FT.
• Maersk (MAERSK DC) says winter weather conditions and Red Sea contingencies are expected to affect operations across Europe and hub terminals

DATA RECAP

• UK RICS Housing Survey (Dec) -30.0 vs. Exp. -34.0 (Prev. -43.0, Rev. -41)

Source: Newsquawk