• APAC stocks were mostly kept afloat following the gains on Wall St where the major indices unwound recent losses (S&P 500 +1.4%).
• Hong Kong Chief Executive Lee announced an end to the COVID contact tracing app requirement and will eliminate the three-day arrival monitoring period.
• European equity futures were firmer with the Euro Stoxx 50 future up 0.4% after the cash market closed with losses of 0.5% yesterday.
• DXY sits just below the 105 mark with peers broadly modestly firmer against the Dollar, antipodeans narrowly outperform.
• Looking ahead, highlights include UK Unemployment, German ZEW, US CPI, Japanese Tankan, Supply from UK, Italy & US.

US TRADE

• US stocks were firmer to start the week and unwound Friday's PPI losses with particular strength going into the final hour of cash trade in New York despite the lack of an obvious catalyst.
• SPX +1.43% at 3,990, NDX +1.24% at 11,706, DJIA +1.58% at 34,004, RUT +1.22% at 1,818.
• Click here for a detailed summary.

NOTABLE HEADLINES

• White House said it believes there is enough time to get a government spending bill done and said 'so be it' if lawmakers need extra days for the funding bill, according to Reuters.
• Goldman Sachs (GS) is reportedly cutting hundreds more jobs and is moving beyond routine culls, according to Bloomberg.

DATA RECAP

• US Federal Budget (USD)(Nov) -249B vs. Exp. -248.0B (Prev. -88.0B).

APAC TRADE

EQUITIES

• APAC stocks were mostly kept afloat following the gains on Wall St where the major indices unwound recent losses although the upside was capped in Asia ahead of US CPI data and a slew of central bank rate decisions.
• ASX 200 was underpinned by strength in tech, industrials and financials, albeit with gains limited by weakness in miners and after an improvement in consumer confidence was offset by a deterioration in business surveys.
• Nikkei 225 briefly reclaimed the 28,000 level which it failed to sustain amid tentativeness before the risk events.
• Hang Seng and Shanghai Comp were varied as Hong Kong benefitted from reopening optimism amid reports that quarantine-free travel is to begin in January and with Chief Executive Lee announcing an easing of restrictions, while the mainland lacked conviction after weaker-than-expected financing data and with Japan and the Netherlands agreeing in principle to join the US in controlling exports of chipmaking equipment to China.
• US equity futures took a breather (ES +0.1%) and held on to the gains from the prior day's firm rebound.
• European equity futures were firmer with the Euro Stoxx 50 future up 0.4% after the cash market closed with losses of 0.5% yesterday.

FX

• DXY was flat near the 105.00 level with price action rangebound ahead of today’s US CPI data, tomorrow’s FOMC and the slew of other central bank decisions on Thursday, while catalysts for the dollar were light during US trade with only brief support seen after Fed whisperer Timiraos noted cracks are beginning to emerge among the Fed over stubborn inflation, while NY Fed's Consumer Survey saw a decline in inflation expectations for 1yr-, 3yr-, and 5yr-ahead horizons.
• EUR/USD eked mild gains after yesterday’s price swings but was then contained by resistance near 1.0550.
• GBP/USD was indecisive but held on to recent gains in the aftermath of GDP and Industrial Production data.
• USD/JPY took a breather from its prior outperformance which was helped by widening yield differentials and expectations of a further divergence of policy rates between global central banks and the BoJ.
• Antipodeans were kept afloat by the mostly positive risk tone and mild rebound in the commodities complex.
• PBoC set USD/CNY mid-point at 6.9746vs exp. 6.9758 (prev. 6.9565)

FIXED INCOME

• 10yr UST futures partially faded the bear-flattening seen on Monday which had coincided with a bounce in oil prices and mixed auctions (strong 3yr auction, awful 10yr), with attention now shifting to the US inflation data.
• Bund futures remained subdued after recent fluctuations but with the downside stemmed by a floor near 140.00.
• 10yr JGB futures JGBs were lacklustre following the uninspired mood in global peers and despite the firmer demand at the enhanced liquidity auction for longer-dated JGBs.

COMMODITIES

• Crude extended on its rebound as the Keystone pipeline outage added to the lift from the risk tone.
• US total shale regions oil production for January is seen up about 95k BPD at 9.318mln BPD (prev. 91k BPD rise in Dec), according to EIA.
• Ecuador's state oil firm Petroecuador said a weather power outage affected hundreds of wells in its most productive blocks, according to Reuters.
• Spot gold was flat with price action contained by an uneventful dollar.
• Copper traded marginally higher amid the cautious gains in stocks.

CRYPTO

• Bitcoin was lacklustre but remained above the USD 17,000 level with little impact from SBF's arrest.
• Bahamas police arrested FTX founder Sam Bankman-Fried at the request of the US government and he faces charges including fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy and money laundering, while the SEC is to separately file charges against the FTX founder, according to Reuters and NYT.

NOTABLE ASIA-PAC HEADLINES

• China's ambassador to the US Qin Gang said he believes China's COVID-19 measures will be further relaxed in the near future and international travel to China will become easier, according to Reuters.
• China-Hong Kong quarantine-free travel is to begin in January, according to a report citing local press. Hong Kong Chief Executive Lee later announced an end to the COVID contact tracing app requirement and will eliminate the three-day arrival monitoring period, while the Amber code on international arrivals is to be lifted on Wednesday.
• Japan and Netherlands have agreed in principle to join the US in tightening controls on exports of advanced chipmaking equipment to China, according to people familiar with the matter cited by SCMP. Japanese Trade and Industry Minister Nishimura stated that they will take appropriate measures on chip-related export curbs to China taking into consideration each country's regulations, while they are checking with Japanese companies on the impact of chip curbs to China and are not hearing of any major impact.
• Japan's government is to use construction bonds for part of SDF facilities as part of efforts to boost spending, according to Kyodo. However, Japanese Finance Minister Suzuki later stated there was no decision yet on whether to issue construction bonds to pay for developing self-defence forces facilities and that generally speaking, it is difficult to regard bonds as a stable funding source, according to Reuters.

DATA RECAP

• Australian Westpac Consumer Sentiment Index (Nov) 80.3 (Prev. 78.0)
• Australian Westpac Consumer Sentiment MM (Dec) 3.0% (Prev. -6.9%)
• Australian NAB Business Confidence* (Nov) -4 (Prev. 0)
• Australian NAB Business Conditions* (Nov) 20 (Prev. 22)

GEOPOLITICS

RUSSIA-UKRAINE

• Ukraine President Zelenskiy asked G7 countries to help Ukraine obtain an additional 2bln cubic metres of natural gas and has asked for supplies of modern tanks, artillery, shells and long-range missiles, according to Reuters.
• US shipped the first portion of its grid equipment aid to Ukraine, according to US officials.
• EU ambassadors unanimously approved in principle a financial support package to provide Ukraine with EUR 18bln in 2023, according to the Czech Republic.
• Iran wants to limit the range of the missiles it plans to provide Russia for the war in Ukraine, according to Axios citing sources.

OTHER

• South Korean envoy for Korean peninsula peace said North Korea is becoming more aggressive and blatant in its nuclear threat, while South Korea, Japan and the US will coordinate sanctions and close gaps in the international sanctions regime. Furthermore, the US envoy for North Korea said Pyongyang's behaviour presents one of the most serious security challenges in the region and beyond, while the Japanese envoy for North Korea said the three countries have elevated their security cooperation to an unprecedented level and they will examine all options including counter-strike capabilities and will be more vigilant against North Korea's cyber threat, according to Reuters.

EU/UK

NOTABLE HEADLINES

• EU lawmakers agreed to tougher draft labour rules for the gig economy ahead of negotiations with EU countries to work out the details, according to Reuters.
• Italy's Industry Minister and EU's Breton agreed the EU should draft a proposal on industry policy at the European level to face challenges from China and the US, according to a statement.