• European bourses are lower with underperformance in the SMI post-Novartis earnings; US equity futures are mixed, though with clear underperformance in the NQ after MSFT, AMD & GOOG earnings
• Dollar continues its contained trade, AUD underperforms amid softer CPI data
• Bonds modestly firmer; Bunds off best levels post-German data
• Crude is weaker amid the downbeat risk tone; XAU in a holding pattern awaiting impetus from the FOMC
• Looking ahead, German CPI, US ADP, Employment Wages, Canadian GDP, Fed & BCB Policy Announcement, Fed Chair Powell's Press Conference, Supply from Germany, US Treasury Refunding Announcement Earnings from Boeing, Boston Scientific, Thermo Fisher Scientific, Mastercard & Phillips 66

EUROPEAN TRADE

EQUITIES

• European bourses are generally lower, with clear underperformance in the SMI, post-Novartis earnings.
• European sectors hold a positive tilt; Retail lags hampered by losses in H&M (-8.8%) post-earnings; Insurance tops the pile.
• US equity futures (ES -0.5%, NQ -1.3%, RTY +0.4%) is on a mixed footing; with clear underperformance in the tech-heavy NQ following after-hours earnings from MSFT (-1.5%), GOOG (-5.5%) and AMD (-6.6%), detailed below.
• Click here and here for the sessions European pre-market equity newsflow, including earnings from Novartis, Novo Nordisk, GSK & more.
• Click here for more details.

FX

• The Dollar Index is marginally firmer but once again finds itself pivoting around the 103.50 mark as has been the case in recent sessions. For now it is contained within yesterday's 103.31-82 range with impetus expected from the FOMC.
• The EUR is a touch softer vs. the USD as the single-currency digests a soft French CPI and hawkishly-viewed German State CPI; EUR/USD is holding onto a 1.08 handle but a breach would see the YTD low at 1.0769 come into view.
• JPY is the marginal outperformer vs. the USD; still contained within yesterday's 147.10-92 range with techs highlighting 10DMA at 147.86 and 100DMA at 147.47.
• AUD is the laggard within the antipodes as soft CPI metrics drag the currency lower. AUD ventured to a low of 0.6560 and further Downside sees 23rd Jan low at 0.6551. NZD steady on a 0.61 handle in what has been dull trade for the pair in recent sessions.
• PBoC set USD/CNY mid-point at 7.1039 vs exp. 7.1727 (prev. 7.1055).
• Click here for more details.
• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are currently bid and the yield curve is marginally steeper, benchmark up to a 112-02 high. The docket is dominated by Quarterly Refunding (Monday's estimates point to a smaller increase than forecast) and thereafter the FOMC/Powell.
• Bunds were initially bullish and shrugged off a hawkish handover from JGBs after the BoJ SOO; however, the deluge of German State CPIs were hotter Y/Y than consensus for the mainland implies and spurred a hawkish move down to 135.19.
• Gilt price action has largely taken impetus from EGBs awaiting the BoE on Thursday.
• Italy opens books to sell 15-year EUR benchmark; guidance seen +13bps to BTPs; pricing today
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COMMODITIES

• Softer trade across crude amid the overall downbeat risk tone in the market and the firmer Dollar. Sentiment for the complex is weighed on by Chinese Manufacturing PMI remaining in contraction whilst bullish Private Inventories, geopolitics, and energy commentary this morning are largely overlooked.
• Contained trade in spot gold ahead of the FOMC policy decision; XAU sees its 21 DMA (USD 2,030.10/oz) and 50 DMA (2,029.83/oz) converge.
• Chinese PMIs weighed on base metals overnight as Manufacturing PMI remained in contraction territory for a fourth consecutive month.
• US Energy Inventory Data (bbls): Crude -2.5mln (exp. -0.2mln), Gasoline +0.6mln (exp. +1.5mln), Distillate -2.1mln (exp. -0.4mln), Cushing -2.0mln.
• US seeks to buy about 3mln bbls of US-produced sour crude for the SPR for a June delivery.
• Click here for more details.

NOTABLE EUROPEAN HEADLINES

• The Times shadow MPC voted 8-1 in favour of keeping the base rate unchanged at 5.25% with the lone dissenter voting for a 25bps hike, while it said the BoE should avoid signalling to investors where it intends to shift monetary policy over the coming months.
• UK Chancellor Hunt has reportedly warned his cabinet that tax cuts in the Spring budget could be smaller than expected amid “major structural weaknesses” in the UK economy, according to The Times. Hunt reportedly said there is likely to be less headroom for tax cuts than in the Autumn statement.
• Hapag-Lloyd (HLAG GY) CEO says freight rates are rising in Q1 2024 vs Q4 2023; better profit prospects for current quarter; "We do not believe the Red Sea crisis will be over soon, will probably take months"

DATA RECAP

• German North Rhine-Westphalia State CPI MM (Jan) 0.3% (Prev. -0.1%); North Rhine-Westphalia State CPI YY (Jan) 3.0% (Prev. 3.5%); Overall, the state CPIs provide a slight hawkish bias to expectations for the 13:00GMT mainland Y/Y release, while the M/M is broadly in-line. Click here for more detail.
• German Retail Sales MM Real (Dec) -1.6% vs. Exp. 0.7% (Prev. -2.5%)
• German Import Prices YY (Dec) -8.5% vs. Exp. -8.2% (Prev. -9.0%); Import Prices MM (Dec) -1.1% vs. Exp. -0.5% (Prev. -0.1%); Retail Sales YY Real (Dec) -1.7% (Prev. -2.4%)
• German Unemployment Chg SA (Jan) -2.0k vs. Exp. 11.0k (Prev. 5.0k); Unemployment Rate SA (Jan) 5.8% vs. Exp. 5.9% (Prev. 5.9%); Unemployment Total SA (Jan) 2.694M (Prev. 2.703M); Unemployment Total NSA (Jan) 2.805M (Prev. 2.637M)
• French CPI Prelim YY NSA (Jan) 3.10% (Prev. 3.70%); CPI Prelim MM NSA (Jan) -0.2% (Prev. 0.10%); CPI (EU Norm) Prelim YY (Jan) 3.4% vs. Exp. 3.3% (Prev. 4.1%)
• French Producer Prices MM (Dec) 0.1% (Prev. 2.4%, Rev. 2.3%); Producer Prices YY (Dec) -0.90% (Prev. 0.30%)
• Spanish Retail Sales YY (Dec) 3.1% (Prev. 5.2%)
• UK Lloyds Business Barometer (Jan) 44 (Prev. 35)
• UK Nationwide house price yy (Jan) -0.2% vs. Exp. -0.9% (Prev. -1.8%); UK Nationwide house price mm (Jan) 0.7% vs. Exp. 0.1%; "While a rapid rebound in activity or house prices in 2024 appears unlikely, the outlook is looking a little more positive."
• Italian Unemployment Rate (Dec) 7.2% vs. Exp. 7.6% (Prev. 7.5%, Rev. 7.4%)
• Swiss Retail Sales YY (Dec) -0.8% (Prev. 0.7%, Rev. -1.5%)

NOTABLE US HEADLINES

• Alphabet Inc (GOOGL) Q4 2023 (USD): EPS 1.64 (exp. 1.59), Revenue 86.31bln (exp. 85.33bln), Google advertising revenue USD 65.52bln (exp. 65.8bln). YouTube ads revenue USD 9.20bln (exp. 9.16bln). Google Services revenue USD 76.31bln (exp. 75.97bln). Google Cloud revenue USD 9.19bln (exp. 8.95bln). Shares fell 5.8% aftermarket after advertising revenue missed expectations.
• Microsoft Corp (MSFT) Q2 2024 (USD): EPS 2.93 (exp. 2.78), Revenue 62.02bln (exp. 61.1bln). Cloud revenue 33.7bln (exp. 32.31bln) Sees Q3 Revenue between USD 60bln-61bln (exp. 60.86bln) and Intelligent Cloud rev. 26.0bln-26.3bln (exp. 25.9bln), More Personal Computing rev. 14.7bln-15.1bln (exp. 15.4bln). Shares fell 0.3% aftermarket.
• A Delaware judge voided the USD 56bln pay package of Tesla (TSLA) CEO Musk, according to CNBC. Shares fell 2.6% aftermarket.

EARNINGS

• Alphabet Inc (GOOGL) - Q4 2023 (USD): EPS 1.64 (exp. 1.59), Revenue 86.31bln (exp. 85.33bln). Google advertising revenue USD 65.52bln (exp. 65.8bln). YouTube ads revenue USD 9.20bln (exp. 9.16bln). Google Services revenue USD 76.31bln (exp. 75.97bln). Google Cloud revenue USD 9.19bln (exp. 8.95bln). Other Bets revenue USD 657mln (exp. 298.6mln). Co. is taking action to optimise global office space. Executive says Co. saw ad strength in retail, while CFO says search remained the biggest contributor to revenue growth and operating cost increase primarily reflected by growing R&D expenses. (Newswires) Shares -5.5% pre-market
• Advanced Micro Devices Inc (AMD) - Q4 2023 (USD): Adj. EPS 0.77 (exp. 0.77), Revenue 6.17bln (exp. 6.12bln). Data centre revenue USD 2.28bln (exp. 2.3bln).Gaming revenue USD 1.37bln (exp. 1.25bln). Client revenue USD 1.46bln (exp. 1.51bln). Embedded revenue USD 1.06bln (exp. 1.06bln). Sees Q1 rev. USD of approximately USD 5.4bln +/- USD 300mln (exp. 5.77bln). Sees Q1 adj. gross margin about 52% (exp. 51.8%). (Newswires) Shares -6.7% pre-market
• Microsoft Corp (MSFT) - Q2 2024 (USD): EPS 2.93 (exp. 2.78), Revenue 62.02bln (exp. 61.1bln). Cloud revenue 33.7bln (exp. 32.31bln). Revenue breakdown (USD): Intelligent Cloud revenue 25.88bln (exp. 25.29bln). Productivity and Business Processes revenue 19.25bln (exp. 19.03bln). More Personal Computing revenue 16.89bln (exp. 16.8bln). Other metrics: (USD) Capital expenditure 9.74bln. Operating income 27.03bln. Says 6 points of Azure revenue growth is attributable to AI, up from 3 points growth in the prior quarter, via co. exec in an interview. Office Commercial paid seats rose to 400mln from 382mln in Q3 23. CEO says now 53,000 Azure AI customers and one-third were new to Azure in the past 12 months, adds over half of Fortune 500 companies use Azure's OpenAI AI services, seeing an increase in billion-dollar-plus Azure commitments. Q3 Guidance (via earnings call). Sees Q3 rev. USD 60bln-61bln (exp. 60.86bln) .Sees Productivity and Business Processes rev. 19.3bln-19.6bln (exp. 19.5bln).Sees Intelligent Cloud rev. 26.0bln-26.3bln (exp. 25.9bln). Sees More Personal Computing rev. 14.7bln-15.1bln (exp. 15.4bln). Sees Operating Expenses 15.8bln-15.9bln (exp. 16.5bln).Sees COGS 18.6bln-18.8bln (exp. 19.5bln)Shares -1.3% pre-market
• Novo Nordisk (NOVOB DC) - FY (DKK): Revenue 232.26bln (exp. 229.24bln), EPS 18.62 (exp. 18.32). New share buyback programme of up to DKK 20bln. The outlook reflects the gradual roll-out of Wegovy with capped volumes in international operations. Started increasing lower strength Wegovy within the US during January. Sees continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. Q4: Wegovy Sales 9.62bln (prev. 2.45bln). Revenue 65.86bln (exp. 62.27bln). EBIT 26.7bln (exp. 24.9bln). FY24 Guidance: Sales: 18-26% (exp. 23.3%). Capex 45bln. adj. FCF 64-74bln. Co. has around a 2.8% weighting in the Stoxx Europe 600 (the largest in the index). Shares +1.1% in European trade
• Novartis (NOVN SW) - Q4 (USD): Revenue 11.4bln (exp. 11.7bln), Core EPS 1.53 (exp. 1.67), Core Net Income 3.12bln (exp. 3.34bln), Operating Income 3.8bln. FY23 dividend 3.30/shr, +3.1% (exp. 3.60). Net sales growth was driven primarily by strong performance for Entresto +31%, Kesimpta +99%, Kisqali +75%, Pluvicto +261% & Semblix +179%. Expect sales growth of 5% per annum until 2028, core operating margin at circa. 40% by 2027. (Newswires) Co. has around a 2% weighting in the Stoxx Europe 600 & and around a 16% weight in the SMI. Shares -3.5% in European trade
• GSK (GSK LN) - FY (GBP): Sales 30.33bln (exp. 29.81bln), adj. EPS 1.55 (exp. 1.52), adj. Operating Profit 8.78bln (exp. 8.77bln), Dividend 0.58/shr (exp. 0.57/shr). FY (continued): Shingrix sales 3.4bln, +17% (exp. increase mid-teen %) Arexvy sales 1.2bln (exp. 0.9-1.0bln). Vaccine sales +25% (exp. around 20%). adj. Speciality Medicine sales +15% (exp. increase low double-digit). Q4: adj. EPS 0.289 (exp. 0.299). Revenue 8.05bln (exp. 7.29bln). FY24 Guidance Dividend 0.60/shr (exp. 0.61/shr). Adverse impact of lower COVID-19 sales seen at 1pp of growth in sales. Commentary/CEO: 2031 sales outlook increased to over 38bln (upgraded). 2021-2026 outlook increased to sales more than +7% CAGR and Adjusted operating profit more than +11% CAGR. 2028-2030 is expected to see stable operating margins; given the likely loss of exclusivity for Dolutegravir during the period within the EU & US. Planning for at least 12 major launches from 2025. Strong pipeline progress, with 4 major product approvals: Arexvy RSV vaccine; Apretude for HIV prevention; Ojjaara for myelofibrosis and Jemperli in 1L endometrial cancer. (Newswires) Shares -0.9% in European trade

GEOPOLITICS

• Iran's envoy to the UN said any attack on Iran, its interests or its nationals outside of its borders will be met with a definitive response, according to IRNA.
• US military said it shot down an anti-ship cruise missile fired by Yemen Houthis into the Red Sea, according to Reuters.
• Houthis say they fired missiles at US warship Greifley, and say they will target US, UK warships in 'self-defence', according to Al Arabiya

CRYPTO

• Bitcoin (-1.9%) falls back below USD 43k, whilst Ethereum (-3.2%) posts losses to a slightly higher degree.

APAC TRADE

• APAC stocks were mostly subdued amid a deluge of earnings releases and key data releases at month-end.
• ASX 200 shrugged off early weakness and printed record highs as yields fell after softer-than-expected inflation.
• Nikkei 225 initially retreated following disappointing Industrial Production and Retail Sales data, while hawkish-leaning comments from the BoJ Summary of Opinions also provided a headwind for stocks. However, the index then gradually recovered all of its losses.
• KOSPI was subdued after results from Samsung Electronics which topped estimates but its profits declined.
• Hang Seng and Shanghai Comp underperformed following the latest Chinese PMI data in which Manufacturing PMI matched estimates and remained in contraction territory for a 4th consecutive month.

NOTABLE HEADLINES

• BoJ Summary of Opinions from the January meeting stated a member said that the BoJ must patiently maintain monetary easing under YCC, while the positive wage-inflation spiral must strengthen further and wage growth must exceed 2% to reach the price target. A member said the prerequisite for policy change including ending negative rates, appears to be falling into place given improvements in the economy and prices, while a member said they are now likely at a phase where they need to confirm through specific data the likelihood of achieving 2% inflation. Furthermore, a member said there is a strong chance they can judge that policy normalisation is possible once they can confirm the impact of the quake on the economy in the coming 1-2 months, while a member stated they must deepen the exit debate as the likelihood of achieving the price target has heightened and it was also stated that BoJ could be forced to sharply tighten monetary policy if its decision to end the negative rate comes too late.
• Chinese President Xi promised US President Biden that China wouldn’t interfere in the 2024 US presidential election, when they met last November, which China's Foreign Minister reiterated to the US National Security Adviser over the weekend, according to CNN.
• IMF senior official said Chinese authorities need to give a consistent and clear set of messages to address property sector woes and need to separate viable from non-viable while protecting homebuyers, while the official added that going forward, they would prefer if there were more policy rate cuts than bank reserve cuts in China.
• China's major state-owned banks seen selling dollars in onshore foreign exchange market on Wednesday, according to Reuters sources
• Joint Saudi-Kuwaiti statement: Acknowledges the close cooperation between the two sides in the field of energy, and acknowledges the successful efforts of the OPEC+ countries in enhancing the stability of global oil markets, according to Asharq News.
• Saudi Arabia's decision on capacity was reportedly at least six months in the making based on uncertainty around the need for additional spare capacity, according to industry sources cited by Reuters.
• United Microelectronics Corporation (2303 TT) Q4 (TWD): Consolidated revenue 54.96bln (prev. 67.84bln Y/Y). Gross margin 32.4% (prev. 42.9% Y/Y). "We anticipate overall wafer demand will increase mildly, however, customers maintain a cautious approach"

DATA RECAP

• Chinese NBS Manufacturing PMI (Jan) 49.2 vs. Exp. 49.2 (Prev. 49.0);Non-Manufacturing PMI (Jan) 50.7 vs. Exp. 50.6 (Prev. 50.4); Composite PMI (Jan) 50.9 (Prev. 50.3)
• Japanese Industrial Production (Dec P) 1.8% vs. Exp. 2.4% (Prev. -0.9%); Retail Sales YY (Dec) 2.1% vs. Exp. 4.7% (Prev. 5.3%, Rev. 5.4%)
• Australian CPI QQ (Q4) 0.6% vs. Exp. 0.8% (Prev. 1.2%); CPI YY (Q4) 4.1% vs. Exp. 4.3% (Prev. 5.4%); Weighted CPI YY (Dec) 3.4% vs. Exp. 3.7% (Prev. 4.3%)
• New Zealand ANZ Business Confidence (Jan) 36.6 (Prev. 33.2); ANZ Activity Outlook (Jan) 25.6 (Prev. 29.3)