• European bourses/US futures are mixed but generally contained amid minimal newsflow pre-NFP/Fed speak; ES +0.2%
• DXY remains downbeat but off worst and yet to test 96.00 with main peers little changed and both EUR and GBP unreactive to respective data
• Core debt is similarly confined while crude continues to climb absent catalysts though geopols draw focus
• China may still ease policy in Q1 despite the hawkish Fed, according to reports citing China's Securities Journal
• Crypto markets saw hefty losses overnight with Bitcoin (BTC) falling below its recent flash-crash low
• Looking ahead, highlights include US and Canadian Labour Market Reports, Fed's Barkin, Bostic & Daly and President Biden

CORONAVIRUS UPDATE

Japan's government is reportedly seeking approval to declare COVID "quasi-emergency" in Okinawa, Hiroshima and Yamaguchi prefectures. (Newswires)

• Japan's daily COVID cases to exceed 6k for the first time September 15th, via NHK

Pre-departure testing for travellers entering the UK has been scrapped as of 04:00GMT. New arrivals will no longer have to isolate until they get a negative PCR test. They will have to take a lateral flow test at the end of Day 2 in the UK. If that result is positive, they will require a further PCR test. (Sky News)

ASIA

Asia-Pac equities traded mostly higher but off best levels following a choppy Wall Street session – which saw the Russell 2000 close in the green whilst mild losses were seen across the Dow Jones, Nasdaq and S&P 500. US equity futures resumed trade with modest gains but the upside momentum faded, with the ES Mar'22 on either side of 4,700 in the run-up to the US jobs data. European equity futures traded flat with an upside bias for most of the overnight session. In APAC, the ASX 200 (+1.3%) was supported by its Financials, Energy, and Consumer Discretionary sectors. The Nikkei 225 (unch) was choppy but ultimately negative, with the index subdued by reports the Japanese government is seeking approval to declare COVID "quasi-emergencies" in three prefectures. The KOSPI (+1.2%) saw its Tech sector among the top performers after Samsung Electronic rose over 1.5% following its prelim earnings. The Hang Seng (+1.8%) and Shanghai Comp (-0.2%) held onto the mild gains seen at the cash open, although the property sector felt no reprieve as Shimao – thought to be one of the safer property firms – reportedly defaulted on a trust loan, thus triggering freefalls across its stock and bonds. In fixed income, US 10yr cash yield trimmed some of the prior session's gains.

• PBoC set USD/CNY mid-point at 6. 3742 vs exp. 6. 3720 (prev. 6.3728)
• PBoC injected CNY 10bln via 7-day reverse repo at maintained rates of 2.20% for a net daily drain of CNY 100bln (rev. CNY 100bln); for a weekly drain of CNY 660bln - the largest in two months. (Newswires)

Samsung Electronics (005930 KS) reported Q4 prelim Revenue KRW 76tln vs exp. KRW 75.6tln, Operating Profit KRW 13.8tln vs exp. KRW 15.2tln; Earnings reflected a one-time cost of special bonus payments. The operating profit was impacted by the one-time bonus. (Newswires)

Kaisa Group (1638 HK) has agreed to the Shenzhen government's request to generate a plan by end-January to repay wealth management products to investors, according to Reuters sources. (Newswires)

China may still ease policy in the first quarter of this year despite the hawkish Fed rhetoric, according to reports citing China's Securities Journal. (Newswires)

UK/EU

UK Markit/CIPS Construction PMI (Dec) 54.3 vs. Exp. 54.0 (Prev. 55.5)

EU HICP Flash YY (Dec) 5.0% vs. Exp. 4.7% (Prev. 4.9%); Ex-Food & Energy Flash YY (Dec) 2.7% vs. Exp. 2.6% (Prev. 2.6%)

• Ex-Food, Energy, Alcohol & Tobacco Flash YY (Dec) 2.6% vs. Exp. 2.5% (Prev. 2.6%)

GEOPOLITICS

US and Japanese joint statement expressed serious concerns over human rights in Xinjiang and Hong Kong alongside efforts by China to undermine rules-based order. The statement highlighted commitment to deepening cooperation between Japan, US and South Korea. (Newswires)

Kazakh President says order has generally been restored; will continue with counterterrorist actions. (Newswires)

A Russian submarine collided with a Royal Navy warship on patrol in the North Atlantic. A UK defence source said it was unlikely the collision was deliberate. (BBC)

Foreign Ministers within NATO will today discuss a common approach to the Russian military build-up in and around Ukraine. (Politico)

EQUITIES

European equities trade mixed/flat (Stoxx 600 -0.1%) with the Stoxx 600 on course to end the week in minor positive territory as markets await the December US NFP report. The handover from Asia was a mixed bag with upside seen for the ASX 200 (+1.3%) and Hang Seng (+1.8%) whilst the Nikkei (unch) was unable to gain much traction to the upside amid reports the Japanese government is seeking approval to declare COVID "quasi-emergencies" in three prefectures. Stateside, after yesterday’s session which saw the Russell 2000 close in the green and modest losses for the Nasdaq and S&P 500, futures are indicative of a relatively flat open with the ES +0.2%. In a recent note, Morgan Stanley suggested that this year’s equity set-up is “is best in Europe and Japan, where estimates look low while valuations are undemanding.” Sectors in Europe are mixed with Basic Resources the clear outperformer amid price action in underlying commodity prices whilst Rio Tinto (+2.0%) has also garnered support from a broker upgrade at Berenberg. Banking names are taking a breather today after gains of 4.4% for the Stoxx 600 Banking Index this week amid the more favourable yield environment seen since the beginning of the year. To the downside, Travel & Leisure names lag peers with no obvious catalyst behind the move whilst Real Estate and Food & Beverage names are also seen lower. In terms of individual movers, STMicroelectronics (+5.5%) is the best performer in the Stoxx 600 after Q4 prelim. revenue exceeded expectations, citing better than anticipated operations in an ongoing dynamic market; gains in the Co. have provided support for the likes of Infineon (+2.8%) and ASML (+2.1%). Shell (+0.2%) has seen marginal, but waning, support after announcing that the remaining USD 5.5bln of proceeds from the Permian divestment are to be distributed in the form of share buybacks at pace. To the downside, Airbus (-1.2%) is a laggard in the CAC after reports that Qatar Airways is seeking compensation regarding surface flaws on the A350.

FX

DXY - Not much deviation and perhaps inclination for the Dollar to venture too far before the latest BLS report that may be key in terms of determining whether the Fed pulls the rate hike trigger in March and sets the ball rolling for QT at the next or a nearby FOMC meeting. The index remains finely poised between 96.086-299 parameters amidst fractionally softer US Treasury yields and another downturn in broad risk sentiment, albeit relatively mild compared to previous episodes of aversion this week. Moreover, several Greenback/G10 pairings could be preoccupied with option expiries in the run up to the jobs data (and after pending the outcome) given hefty interest rolling off at today’s NY cut.

EUR/GBP - The Euro and Pound are marginally outperforming, with the former reclaiming 1.1300+ status vs the Buck and latter retesting resistance around 1.3550 that includes the 100 DMA. However, Eur/Usd has faded multiple times above the round number and needs to breach 1.1350 convincingly to turn the corner, so 1.5 bn option expiry interest from 1.1290 to 1.1300 may still prove to be an impediment. Conversely, Eur/Gbp continues to hold above the 0.8333 mark that equates to the psychological 1.2000 level in the inverse cross to offer the Euro support and cap Sterling regardless of another encouraging UK PMI (construction this time) or flash Eurozone inflation flash ‘surprising’ to the upside (in line with Germany’s preliminary CPI outcome yesterday).

NZD/CAD - Aud/Nzd dynamics rather than NZ specifics might be propping up the Kiwi as well, while the Loonie is deriving traction from ongoing strength in crude oil (WTI pivoting Usd 80/brl and Brent basically bid within a Usd 82-83 range) before Canada’s LFS. Nzd/Usd is hovering around 0.6750, as the aforementioned Antipodean cross probes 1.0600 and Usd/Cad is inching towards 1.2700.

CHF/AUD/JPY - The Franc is treading water sub-0.9200 against its US counterpart with little reaction to an unexpected dip in Swiss sa unemployment or an acceleration in retail sales, while the Aussie and Yen both look trapped by option expiries very close or not far outside intraday extremes. Note, Aud/Usd has been up to 0.7178 and down to 0.7143 and Usd/Jpy topped and tailed at 116.05 and 115.75, so well within striking distance of 2.6 bn at 0.7160, 2.2 bn at 0.7200, 1.1 bn between 115.45-50 and 2.7 bn at 116.00.

SCANDI/EM - More fuel for the Nok via Brent, but also Norway’s Petroleum Directorate noting an oil discovery near the Fram Field in the North Sea with a potential size of 3.3-5.2 mn standard cubic meters of recoverable oil, while the Rub is also maintaining its recovery momentum alongside the Zar and WTI is underpinning the Mxn. Meanwhile, the Cnh has bounced off lows close to 6.4000 on technical/sentimental grounds following reports in the China Securities Journal suggesting further easing in Q1 remains possible, and the Czk has been boosted by upbeat Czech data points and hawkish CNB rhetoric hot on the heels of policy meeting minutes. In short, Benda contends that rates are bound to surpass 4% (from 3.75% at present) and may get close to 5%, with 50 bp or more tightening possible next month.

Japanese Finance Minister Suzuki said FX stability is important and they are closely monitoring market moves and closely watching FX impact on the economy. (Newswires)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1250 (980M), 1.1290-1.1300 (1.5BN), 1.1355-60 (955M), 1.1450 (715M)
• USD/JPY: 115.00-20 (615M), 115.45-50 (1.1BN), 116.00 (2.7BN)
• AUD/USD: 0.7160 (2.6BN), 0.7200 (2.2BN)
• USD/ZAR: 15.2500 (1.5BN), 16.5000 (1.8BN)

FIXED

Bond bears were prowling again in early EU trade, but appear to have retracted claws and are biding time to see what NFP brings in terms of more rationale to go short or a better opportunity to sell. Hence, Bunds have bounced from a deeper 170.12 Eurex low (-22 ticks vs +19 ticks at best), Gilts recently probed above parity for the first time on Liffe at 123.36 compared to 123.06 at worst and US Treasuries are inching back up from overnight lows, with the curve effectively flat. Also to come in the pm, Canadian jobs data and Ivey PMIs plus more Fed commentary from Daly, Bostic and Barkin with the greater focus on the latter two most likely given that the former spoke on Thursday.

COMMODITIES

Crude benchmarks are firmer in European trade with action directionally following, but eclipsing in magnitude, broader equity/risk performance. Currently, posting gains of around USD 1.0/bbl featuring WTI back above USD 80.00/bbl and Brent probing USD 83.00/bbl. Specific newsflow has been limited. Focus remains on geopolitics with increasingly punchy rhetoric emanating from Kazakhstan leaders regarding fuel-protests, though updates to output there remain limited after the sparse developments yesterday, highlighted by the Tengiz facility making a temporary adjustment. Elsewhere, adding to the positive tones from earlier in the week, the French Foreign Minister says there has been progress in Iranian nuclear discussions, but caveated that time is running out. Moving to metals, spot gold and silver are essentially unchanged at present despite some modest gyrations around the APAC/Europe crossover with newsflow sparse and broader sentiment cagey pre-NFP. Note, the weekly BofA Flow Show highlights the first inflow in a five-week period for precious metals, amounting to USD 0.3bln. Elsewhere, particularly for the copper watchers, a magnitude 5.2 earthquake occurred in Ricardo Palma, Peru – does not appear to be in direct proximity to a copper mine though, no commentary/guidance on any potential impacts yet.

A Texas judge ruled against lawsuit by 23 states to revive the Keystone XL pipeline. (Newswires)

CRYPTO

Bitcoin (BTC) fell below its recent flat crash low and dipped under USD 42,000 to hit levels last seen in September last year.

GameStop (GME) is launching a division to develop a marketplace for nonfungible tokens (NFTs) and establish crypto partnerships as plans to turn a profit, WSJ sources state. (WSJ) Shares spiked over 20% after-market.