• European equities are mixed, whilst US equity futures are firmer to varying degrees
• Dollar is marginally bid though off post-Powell highs; Aussie lags after weak building approvals data
• Bonds are mixed; USTs modestly higher whilst Bunds pare yesterday’s dovish data
• Crude is in the green pre-JMMC whilst base metals are lower across the board, in-fitting with the broader risk tone
• Looking ahead, US IJC & ISM Manufacturing, BoE Policy Announcement, Comments from ECB’s Lagarde & Lane, BoC's Macklem & Rogers, OPEC JMMC Meeting, BoE's Bailey post-announcement press conference, Earnings from Apple, Merck, Amazon & Meta

EUROPEAN TRADE

EQUITIES

• European equities are mixed with clear underperformance in the CAC40, hampered by losses in BNP Paribas (-8.8%) and Dassault Systemes (-6.6%) post-earnings.
• European sectors hold a mostly negative tilt; Travel & Leisure is propped up by Evolution (+6.2%) whilst the Banking sector remains hampered by losses in BNP Paribas (-8.8%) and ING (-8.9%).
• US equity futures (ES +0.3%, NQ, +0.5%, RTY +0.1%) are trading on a firmer footing and finding some reprieve after the prior day’s hefty selling; with the NQ outperforming after Tech-induced losses yesterday and as yields generally edge lower stateside.
• Click here and here for the sessions European pre-market equity newsflow, including earnings from Shell, BT, Roche, Sanofi, BNP Paribas, Deutsche Bank & more.
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FX

• USD remains supported post-FOMC as traders scale back March easing bets. DXY has advanced to a high of 103.81 with upside seeing 103.82 from Jan 29th and 23rd.
• EUR/USD tripped through 1.08 early doors before finding support at 100DMA at 1.0780 and stopping shy of the 13th Dec low at 1.0773; overall unreactive to EZ Flash HICP.
• Cable has continued to drift lower vs. the USD as has been the case for a lot of other majors but eking out gains with EUR/GBP near a five month low. BoE likely to be the next inflection point for the GBP. A dovish tilt could see Cable open up a test of 1.26 to the downside.
• AUD's tough week has continued with some citing disappointing building approvals data. Elsewhere, China remained on the backfoot overnight and Dalian iron ore fell. Low print of 0.6518 is the lowest since the November 20 low at 0.6499.
• The SEK is softer post-Riksbank which has been viewed as a dovish hold. Losses for SEK vs. EUR relatively minor compared to recent strength which saw EUR/SEK fall from 11.4256 to 11.1956 from mid-Jan.
• PBoC set USD/CNY mid-point at 7.1049 vs exp. 7.1802 (prev. 7.1039).
• Brazil Central Bank cut the Selic rate by 50bps to 11.25%, as expected, while committee members unanimously anticipate further reductions of the same magnitude in the next meetings. BCB said this pace is appropriate to keep the necessary contractionary monetary policy for the disinflationary process and the total magnitude of the easing cycle throughout time will depend on inflation dynamics, expectations and projections, the output gap and balance of risks.
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FIXED INCOME

• USTs are modestly firmer and just off Wednesday's post-Powell high. Developments have since been light with markets digesting the latest verbal guidance ahead of US data (ISM) and Tier 1 events (BoE) elsewhere.
• Bund is the clear fixed laggard as it continues to pare Wednesday's plethora of dovish drivers; though, we remain well above that session's 134.84 trough with support below from Monday at 134.37.
• Gilts are a touch softer as the space pares from Wednesday's dovish US data and hasn't been too swayed by the Fed as focus is firmly on the upcoming BoE.
• Spain sells EUR 6.05bln vs exp. EUR 5.5-6.5bln 1.45% 2029, 0.10% 2031, 3.25% 2034 Bono and EUR 516mln vs exp. EUR 250-750mln 2.05% 2039 I/L.
• France sells EUR 12.988bln vs exp. EUR 11.5-13bln 3.50% 2033, 0.50% 2040, 2.50% 2043 and 3.00% 2054.
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COMMODITIES

• Crude is modestly firmer intraday after both contracts settled lower by almost USD 2/bbl apiece yesterday amid the broader risk aversion. Participants look ahead to the JMMC confab pencilled in for 12:00GMT; currently Brent holds just above USD 82/bbl.
• Mixed trade across precious metals with spot gold resilient against the firmer Dollar (albeit back under USD 2,050/oz) but spot OPEC+ JMMC not expected to make any policy recommendations, according to Reuters sources; meeting poised to begin at 11:00GMT; sources added that talks on extending or unwinding voluntary cuts are yet to begin succumbing.
• Base metals are lower across the board as traders digest the watering-down of rate cut expectations by Fed Chair Powell coupled with the recent underwhelming Chinese PMI data alongside the nation's ongoing property woes.
• OPEC+ JMMC is not expected to make any policy recommendations, according to Reuters sources; meeting poised to begin at 11:00GMT; sources added that talks on extending or unwinding voluntary cuts are yet to begin
• Citi says Saudi Arabia's capacity decision shows that OPEC+ has little room to raise production in the future; expects medium-term oil market fundamentals to get looser, putting downside pressure on oil prices
• US crude oil production rose 84k BPD in November to 13.308mln BPD (prev. 13.224mln BPD in October), according to the EIA.
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NOTABLE EUROPEAN HEADLINES

• ECB Chief Economist Lane said inflation is a "smaller problem" but it is still a challenge and the ECB needs more confidence that inflation is headed to the 2% target.
• ECB's Centeno says if inflation continues on same trajectory in the coming months it is expected that the ECB's next decision is to cut rates; "if that happens we can start a cycle of normalisation of rates".
• ECB's Herodotou expects rates to start to decline this year but must be a data-based approach; any move must not be too fast or too late
• Riksbank maintains its Rate at 4.00% as expected; increases monthly bond sale programme to SEK 6.5bln (prev. 5bln; vs SEB exp 7-8bln); Rate can probably be cut sooner than was indicated in November forecast H1 rate cut cannot be ruled out. Click here for more details.
• Riksbank Thedeen says it is possible to have bond sales and to ease policy at same time in principle.

DATA RECAP

• EU HICP Flash YY 2.8% vs. Exp. 2.8% (Prev. 2.9%); EU HICP-X F,E,A&T Flash YY (Jan) 3.30% vs. Exp. 3.20% (Prev. 3.40%); HICP-X F, E, A, T Flash MM -0.90% (Prev. 0.50%)
• EU Unemployment Rate (Dec) 6.4% vs. Exp. 6.4% (Prev. 6.4%)
• - Italian Consumer Price Prelim YY (Jan) 0.8% vs. Exp. 1.1% (Prev. 0.6%); Consumer Price Prelim MM (Jan) 0.3% vs. Exp. 1.0% (Prev. 0.2%); CPI (EU Norm) Prelim YY (Jan) 0.9% vs. Exp. 0.7% (Prev. 0.5%); CPI (EU Norm) Prelim MM (Jan) -1.1% vs. Exp. -1.3% (Prev. 0.2%)
• UK S&P Global Manufacturing PMI (Jan) 47.0 vs. Exp. 47.3 (Prev. 47.3); "The contraction was widespread, with declines in all three variables seen across the consumer, intermediate and investment goods sub-industries."
• Spanish HCOB Manufacturing PMI (Jan) 49.2 vs. Exp. 48 (Prev. 46.2)
• EU HCOB Manufacturing Final PMI (Jan) 46.6 vs. Exp. 46.6 (Prev. 46.6); "There is a real chance that the manufacturing sector's year-long recession in the eurozone could stretch into the first quarter of this year."
• German HCOB Manufacturing PMI (Jan) 45.5 vs. Exp. 45.4 (Prev. 45.4); "Companies in Germany appear to be weathering problems in the Red Sea quite well, according to the supplier delivery times index."
• French HCOB Manufacturing PMI (Jan) 43.1 vs. Exp. 43.2 (Prev. 43.2)
• Italian HCOB Manufacturing PMI (Jan) 48.5 vs. Exp. 47.3 (Prev. 45.3); "Our HCOB Nowcast anticipates a slight contraction in overall GDP by 0.1% in the first quarter"
• Swedish PMI Manufacturing Sect (Jan) 47.1 (Prev. 48.8, Rev. 48.6)

NOTABLE US HEADLINES

• US House voted 357-70 to pass a bill to expand the child tax credit and restore full business deductions for research and equipment investments.
• Nvidia (NVDA) has reportedly begin taking pre-orders for a new China-specific AI H20 chip, via Reuters citing sources; distributors within China are pricing this on par with Huawei's option

EARNINGS

• Shell (SHEL LN) - Q4 (USD): Adj. EBITDA 16.335bln (exp. 16.304bln). Adj. Profit 7.31bln (exp. 6.14bln). Adj. EPS 1.11 (0.97); Announces a share buyback of USD 3.5bln. SEGMENTS Integrated Gas 3.963bln (Co. exp. 3.473bln). Upstream 3.088bln (Co. exp. 2.488bln) Marketing 692mln (Co. exp. 708mln) Chemical & Product 83mln (Co. exp. -126mln) *ndex Weightings: FTSE 100 (8.5% - largest). AEX (15.8% - largest) Stoxx 600 (2.0% - 5th largest). Shares +2.7% in European trade
• BT (BT/A LN) – 9-month update (GBP): Revenue 15.75bln (prev. 15.34bln), adj. EBITDA 6.12bln (exp. 5.95bln). Q3: Revenue 5.34bln (exp. 5.19bln). Reconfirming all FY24 financial outlook metrics. (Newswires) Shares +1.1% in European trade
• Adidas (ADS GY) - FY23 (EUR): Op. profit 268mln (exp. 290mln; prev. 669mln), Revenue 21.43bln (exp. 21.5bln; prev. 22.51bln). FY24 currency-neutral sales growth view at a "mid-single-digit" rate. Decides not to write off most of its Yeezy inventory. FY24 Op view 500mln (exp. 1.27bln). Says unfavourable currency effects are projected to weigh significantly on the company's profitability in 2024. (Newswires) Index weightings: DAX 40 (2.6%), Euro Stoxx 50 (1%). Shares -5.1% in European trade
• Deutsche Bank (DBK GY) Q4 (EUR): Net 1.26bln (prev. 1.80bln Y/Y). Revenue 6.658bln (exp. 6.783bln). FIC Sales & Trading Revenue 1.50bln (exp. 1.65bln); plans a EUR 675mln share buyback alongside a headcount cut of around 3,500. METRICS Corporate Bank (CB) 1.911bln (exp. 1.869bln). Investment Bank (IB) 1.837bln (exp. 2bln). Private Bank (PB) 2.395bln (exp. 2.315bln). Asset Management 580mln (exp. 635mln). Provisions for credit losses 488mln (prev. 351mln Y/Y). Deposits at year-end 2023 at 622mln (+EUR 11bln Q/Q); slightly above the level of year-end 2022. EUR 900mln in proposed dividends, EUR 0.45 per share, planned for 2023, up 50% over 2022. 2025 TARGETS ~EUR 32bln in revenues, with annual growth targets raised to 5.5%-6.5%. ~EUR 20bln in costs, with EUR 1.3bln savings from measures completed. Positioned to accelerate capital distributions; 2025 dividend guidance of EUR 1.00/shr, subject to a 50% payout ratio. OUTLOOK To be provided at the Annual Media Conference at 09:00 CET today. (Newswires) Index weightings: DAX 40 (1.8%). Shares +4.3% in European trade
• BNP Paribas (BNP FP) - Q4 (EUR): Revenue 10.9bln (exp. 11.4bln). Net 1.07bln (exp. 2.0bln). Sees 2025 ROTE between +11.5-12% (prev. ~12%); announces EUR 1.05bln share buyback; Dividend +18% Y/Y. CET1 ratio 13.2% (exp. 13.3%). ROTE 10.7% (prev. 10.2% Y/Y). OUTLOOK: Affirms CET1 ratio, Net Income, EPS and Cost of Risk guidance. COMMENTARY: "BNP Paribas should continue to grow faster than its underlying economy and to gain market share..". "Personal Finance and Real Estate initiated in 2023 robust adaptation plans and should return to their nominal profitability as early as 2026" (BNP Paribas). Index weightings: CAC 40 (3.94%). Shares -8.2% in European trade
• Dassault Systems (DSY FP) - Q4 (EUR): Non-IFRS EPS 0.36 (exp. 0.37), Revenue 1.64 (exp. 1.64). Guides Q1 EPS 0.29-0.30, Revenue 1.49-1.52bln, +7.8% Y/Y. Guides initial FY24 EPS 1.21-1.31, Revenue 6.35-6.43bln, +8-10% Y/Y. (Newswires) CAC 40 (1.5%) Shares -9.7% in European trade
• Sanofi (SAN FP) - Q4 (EUR): EPS 1.66 (exp. 1.70), Revenue 10.9bln (exp. 11.4bln). Guides initial FY24 Business EPS "-4.5% to -3.5% Y/Y". Francois-Xavier Roger was appointed CFO and member of the executive committee. (Newswires) Index weightings: CAC 40 (6.8% - 3rd largest), Euro Stoxx 50 (3.7% - 5th largest). Shares -2.1% in European trade
• ABB (ABBN SW) - Q4 (USD) EPS 0.50 (exp. 0.47). Revenue 8.25bln (exp. 8.105bln). Net Income 921mln (exp. 872mln); Guides operating EBITDA margin to "slightly improve" in 2024 Y/Y; Raises dividend to CHF 0.87/shr (prev. CHF 0.84/shr); Plans share buyback. COMMENTARY: "In the projects- and systems business we expect continued high customer activity, although we face high comparables from last year when large orders came through at a very high level." "In total, order growth year-on-year should show stronger momentum in the latter part of the year when comparables ease." "We expect to improve on comparable revenues as well as on Operational EBITA margin, and cash flow should benefit from continued strong operational performance and our continued focus on net working capital efficiency." "We also plan to continue utilizing share buybacks as a tool to return excess cash to shareholders also during 2024." (Newswires) Index weightings: SMI (4.8%). Shares +1.7% in European trade
• Roche (ROG SW) - FY (CHF): Net Income 12.35bln (exp. 14.67bln), Revenue 58.72bln (exp. 59.75bln), Core EPS 18.57 (exp. 18.56). Expects to further increase the dividend, proposing 9.60/shr (exp. 9.53/shr). FY (cont). Pharma Sales 44.6bln (44.8bln). Top-five growth drivers Sales 14.8bln, +4.3bln Y/Y. 2024 Sales rising in mid single-digit range. CEO "... exceeded our guidance for 2023. At the same time, the significant appreciation of the Swiss franc versus most currencies strongly impacted results when reported in Swiss francs. We also made good progress in both our pharma and diagnostics product pipeline." Index weightings: SMI (16.2%). Shares +4.2% in European trade

GEOPOLITICS

• US fighter jets targeted 10 unmanned Houthi drones and a ground control centre in western Yemen, while it was also reported that US Central Command said a Houthi anti-ship ballistic missile and Iranian UAVs were shot down in the Gulf of Aden.
• White House said National Security Adviser Sullivan and UK Defence Secretary Shapps discussed preventing escalation in the Middle East and ongoing efforts to defend against Houthi attacks, while they reaffirmed support for Ukraine, according to Reuters.
• White House said National Security Advisor Sullivan and Israeli official Dermer met to discuss the flow of humanitarian aid to Gaza and hostage talks, while it also said the US is not looking for war with Iran.
• US senior cybersecurity official Easterly said the US has ‘found and eradicated’ Chinese cyber intrusions in aviation, water, energy and transportation infrastructure.

CRYPTO

• Bitcoin (-0.7%) continues to trade on a weaker footing, in-fitting with the broader market risk tone.

APAC TRADE

• APAC stocks were mixed after the losses on Wall St owing to banking sector fears and Fed Chair Powell's pushback against a March rate cut, while Chinese Caixin Manufacturing PMI data topped forecasts.
• ASX 200 pulled back from record highs amid weakness in tech and financials, as well as softer data.
• Nikkei 225 retreated amid recent currency strength and with a slew of earnings influencing price action.
• Hang Seng and Shanghai Comp were mixed with early upside from stronger-than-expected Caixin PMI data and further support pledges although the gains were limited after the substantial PBoC liquidity drain and the mainland index gradually reversed course.

NOTABLE HEADLINES

• Chinese President Xi urged efforts to accelerate the development of new productive forces and firmly promote high-quality development, while they must strengthen scientific and technological innovation.
• China's Finance Ministry said it will implement structural tax cuts in 2024 and support tech innovation and the manufacturing sector. China's Vice Finance Minister said 2023 tax and fee cuts and rebates totalled CNY 2.2tln, while fiscal policy will help expand domestic demand and they will appropriately increase investment under the central government budget.
• HKMA maintained its base rate unchanged at 5.75%, as expected.

DATA RECAP

• Chinese Caixin Manufacturing PMI Final (Jan) 50.8 vs. Exp. 50.6 (Prev. 50.8)
• South Korean Trade Balance (USD)(Jan P) 0.3B vs. Exp. 0.8B (Prev. 4.46B); Exports YY (Jan P) 18.0% vs. Exp. 17.8% (Prev. 5.0%); Imports YY (Jan P) -7.8% vs. Exp. -7.6% (Prev. -10.8%)
• Australian Building Approvals (Dec) -9.5% vs. Exp. 1.1% (Prev. 1.6%, Rev. 0.3%)