• European bourses are mixed, with clear outperformance in the CAC 40 as Richemont earnings lift the luxury sector; US equity futures trade in tandem, with NQ leading amid tailwinds from TSMC earnings.
• Dollar is flat with a slight negative bias, Antipodeans are bid in-fitting with risk tone, and JPY trims some of yesterday's losses.
• Bonds contained in catalyst-thin trade; Treasuries grind higher attempting to pare US Retail Sales low, Bunds underperform amid the recent hawkish ECB rhetoric.
• Crude is firmer amid continued geopolitical tensions; base metals are modestly firmer, in-fitting with risk tone, and precious metals move with the Dollar.
• Looking ahead, US Building Permits, IJC, Philly Fed Business Index, NZ Manufacturing PMI, Japanese CPI, ECB Minutes, Comments from Fed’s Bostic & ECB’s Lagarde, Supply from the US, Earnings from United Airlines.

EUROPEAN TRADE

EQUITIES

• Bourses are mixed and have traded fairly contained throughout the European morning, though have just edged towards session highs in recent trade. The CAC 40 (+0.5%) outperforms, lifted by gains in the Luxury sector, post Richemont (+8.7%) earnings.
• European sectors are mixed; Significant outperformance in Travel & Leisure, due to hefty gains in Flutter (+10.7%) after strong earnings. Tech is also higher after strong TSMC earnings; ASML (+1.6%), ASM International (+3.5%).
• US equity futures are meandering around the unchanged mark, with slight outperformance in the NQ (+0.2%); with optimism filtering through into the Tech-heavy index post TSMC earnings.
• TSMC (2330 TT / TSM) guidance: Sees Q1 revenue between USD 18-18.8bln (exp. 18.26bln); Sees Q1 operating margin between 40-42% (vs 41.6% in Q4), sees Gross Margin between 52-54% (vs 53% in Q4); says 2023 was a "challenging year"
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• DXY is contained albeit with a slight downward bias, with the index within a 103.14-39 intraday parameter at the time of writing in the absence of news flow ahead of the weekly jobless claims - in which initial claims coincide with the BLS survey period.
• EUR trades in tandem with the Dollar after seeing more pushback against market pricing for an ECB cut yesterday; EUR/USD sits in the middle of a 1.0875-1.0906 range with the 50 DMA (1.0913) to the upside.
• A firm session for the JPY with overnight desks citing importers supporting the currency at the Tokyo fix, whilst USD/JPY continued to retrace yesterday's upside which took the pair to a 148.52 peak.
• Antipodeans benefit amid their high-beta status with the broader market risk tone holding above water with the support of firmer commodities.
• PBoC set USD/CNY mid-point at 7.1174 vs exp. 7.1976 (prev. 7.1168).
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are steadily grinding higher since yesterday's Retail Sales hit which prompted a decline to the 111-09 region before edging back towards 111-20 highs in early European hours.
• Bunds are contained having kicked off the session subdued but found support at 134.15 despite a lack of drivers this morning; contracts are languishing not far off overnight lows following the recent slew of pushback from ECB officials on market pricing.
• Gilts resumed trade at 98.25 (vs yesterday's 98.33 close) with the UK bonds attempting to trim some of the losses from yesterday's hotter-than-expected CPI.
• Spain sells EUR 6.265bln vs exp. EUR 5.5-6.5bln 2.50% 2027, 1.25% 2030, 3.90% 2039 Bono
• France sells EUR 11.99bln vs exp. EUR 10.5-12bln 2.50% 2027, 2.75% 2029, 0.50% 2029 OAT
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COMMODITIES

• Crude futures are firmer following yesterday's mixed settlement, with the contracts seemingly underpinned by the expanding geopolitical arena. Prices saw fleeting downticks on the IEA OMR which, after suggestions that the IEA "stands ready to respond decisively if there is a supply disruption".
• Precious metals trade horizontally with modest gains in the absence of a catalyst in the European morning and amid a stead Dollar; XAU is confined to a tight USD 2,005.02-2,013.89/oz intraday range.
• Base metals are mostly but modestly firmer trade across base metals, in fitting with the broader performance seen in European equities.
• IEA OMR (Jan): 2024 global oil demand growth forecast upgraded by 180k BPD to 1.24mln BPD, citing improved GDP outlook and Q4 23 price drop; "IEA stands ready to respond decisively if there is a supply disruption"
• Iraqi oil minister said oil exports are not affected by the Red Sea as most of the country's oil goes to Asia
• Qatar set March-loading Al-Shaheen crude term price at USD 0.88/bbl above Dubai quotes.
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NOTABLE EUROPEAN HEADLINES

• 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
• EU27 New Car Registrations (Dec) -3.3% Y/Y ". This drop can be attributed to the high baseline performance in December 2022. December also marked the first month of contraction after 16 consecutive months of growth."
• A primer for the ECB Minutes at 12:00GMT/ 07:00 ET can be found here.
• DHL (DHL GY) CEO says still have sufficient air freight capacity despite pressure on supply chains amid Red Sea attacks; says e-commerce is rising after the post-COVID-19 dip
• BoE Credit Conditions Survey - 2023 Q4: Lenders reported that the availability of secured credit to households increased in the three months to end-November 2023 (Q4). It was expected to be unchanged over the next three months to end-February 2024.
• BoE Bank Liabilities Survey - 2023 Q4: Lenders reported that total funding volumes increased in the three months to end-November 2023 (Q4). Total funding volumes were expected to decrease in the three months to end-February 2024 (Q1)
• UK PM Sunak's Rwanda bill passed the third reading in the Commons by 320 votes to 276.

DATA RECAP

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

NOTABLE US HEADLINES

• 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.
• Apple (AAPL) US DoJ prepares to file Apple (AAPL) antitrust case focused on software and hardware limits as soon as March, according to Bloomberg. DoJ hopes to file a suit in Q1 of the year, though that timing could slip.

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.
• Pakistan's armed forces are on "extremely high alert", adds that any more "misadventure" from Iran will be met forcefully, according to Reuters citing Pakistan's top security official

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.
• Russian-installed official says Ukraine attempted to attack Russian oil terminal in St. Petersburg with drones overnight,

CRYPTO

• Bitcoin is trading modestly softer having fallen below the USD 42.5k.

APAC TRADE

• 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.

NOTABLE 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.
• “The possibility of the BOJ being behind the curve in addressing inflationary risks is small; “There’s no pressure to rush towards the exit", according to sources cited by Asahi

DATA RECAP

• Japanese Machinery Orders MM (Nov) -4.9% vs. Exp. -0.8% (Prev. 0.7%); 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); Unemployment Rate (Dec) 3.9% vs. Exp. 3.9% (Prev. 3.9%); Participation Rate (Dec) 66.8% vs. Exp. 67.1% (Prev. 67.2%)