• European equities are weaker despite starting the session on a firmer footing; US equity futures oscillate the unchanged mark, though the RTY outperforms
• Dollar is softer largely as a function of a firmer JPY after BoJ Ueda’s hawkish-leaning press conference
• Bonds are softer, in tandem with JGB price action; US supply later today
• Crude is softer, giving back the prior day’s advances; Base metals are entirely in the green, benefitting from Chinese stimulus hopes
• Looking ahead, Canadian New Housing Price Index, EZ Consumer Confidence (Flash), US Richmond Fed Index, NZ CPI, Australian PMI, Japanese Trade Data, Supply from the US, Earnings from Johnson & Johnson, Procter & Gamble & Netflix.

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx600 (-0.3%), started the session on a firmer footing, though dipped at the open and continued to edge into negative territory throughout the European morning; APAC bourses were mostly firmer at the handover, focus on BoJ & Chinese stimulus reports.
• European sectors are similarly pressured overall; though, Basic Resources tops the pile helped by higher base metals prices following Chinese stimulus optimism.
• US equity futures are on a mixed footing, with futures (bar the RTY) oscillating on either side of the unchanged mark with US specific newsflow light into key earnings and New Hampshire tonight; the Russell (+0.7%) continues yesterday’s outperformance.
• Click here and here for the sessions European pre-market equity newsflow, including earnings.
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FX

• A softer morning for the broader Dollar largely as a function of JPY price action following the BoJ press conference; DXY trades towards the bottom of a 102.98-103.39 range after eclipsing yesterday's high (103.37).
• JPY is the marked G10 outperformer as BoJ Governor Ueda delivered a hawkish-leaning press conference after the central bank maintained policy settings across the board whilst the latest Outlook Report also provided very little to catch markets off guard.
• EUR benefits slightly from the softer Dollar but gains capped by the firmer JPY; EUR/USD trades around the middle of a 1.0877-1.0915 range.
• Antipodeans hold an upward bias following overnight gains in the Yuan coupled with upside in commodities as sentiment in APAC hours was lifted by reports China is said to consider an equity market rescue package.
• PBoC set USD/CNY mid-point at 7.1117 vs exp. 7.2033 (prev. 7.1105).
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• USTs are bear-steepening, though only modestly so, after BoJ's Ueda press conference and with the Fed in Blackout; docket has a US 2yr outing (USD 60bln due) and Philadelphia/Richmond Fed surveys.
• JGBs were choppy on the initial BoJ announcement, where settings/guidance was maintained. Thereafter, there was some marked bearish action during Ueda's press conference which was hawkish overall.
• Bunds are pressured in tandem with JGBs, German Green supply passed without note. Unreactive to the latest ECB Bank Lending Survey, where credit standards tightened in Q4 and are expected to continue to do so in Q1.
• Netherlands sells EUR 1.72bln vs exp. EUR 1.5-2.0bln 0.00% 2038 DSL: average yield 2.759% (prev. 2.992%)
• Orders for the UK 2054 Gilt exceed GBP 70bln (prev. GBP 60bln); price guidance set at 1.75bps over 2053 Gilt (prev. 1.75-2.25bps), via Reuters citing bookrunner.
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COMMODITIES

• WTI and Brent hold a mild downward bias after crude contracts settled higher by USD 1.50/bbl apiece yesterday, with today's price action somewhat muted; Brent holds below the USD 80/bbl level.
• Precious metals see a modest upward tilt amid the softer Dollar, but price action is capped ahead of this week's key risk events including US Q4 GDP, Dec PCE & ECB. XAU sits within recent ranges in a USD 2,019.38-2,037.79/oz band.
• Base metals are firmer across the board as a function of the weak Greenback coupled with overnight headlines that China is said to consider an equity market rescue package backed by USD 278bln - in turn lifting sentiment in China.
• German Economy Minister Habeck says we have started a trend reversal in offshore wind and demand is high
• Norway's prelim December oil production 1.847mln BPD (prev. 1.779mln BPD in Nov); December gas production 11.75bcm (prev. 10.90bcm in Nov)
• Dubai set the official crude differential for April at parity to DME Oman
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NOTABLE EUROPEAN HEADLINES

• UK train drivers called off extra walkouts as the threat of an anti-strike law was dropped, according to FT.
• ECB Bank Lending Survey: Credit standards tightened in Q4 for firms and households; further tightening expected in Q1. Demand for loans by firms and households continued to decrease substantially, albeit less steeply than in the previous quarter. Banks expect a small net increase in demand for loans to firms and for housing loans in the first quarter of 2024. Bank lending conditions tightened more in real estate and construction than in other sectors. Across loan categories, the decline in demand was driven by the general level of interest rates. Moreover, lower fixed investment dampened firms’ demand for loans, while subdued consumer confidence and housing market prospects reduced demand from households for loans.

DATA RECAP

• UK PSNCR, GBP (Dec) 12.863B (Prev. 12.453B, Rev. 12.583B); UK PSNB, GBP (Dec) 6.846B (Prev. 13.409B, Rev. 12.781B)

NOTABLE US HEADLINES

• United Airlines Holdings Inc (UAL) - Q4 2023 (USD): Adj. EPS 2.00 (exp. 1.70), Revenue 13.60bln (exp. 13.54bln). Passenger revenue USD 12.42bln (exp. 12.39bln). Cargo revenue USD 402mln (exp. 345.6mln). Other revenue USD 803mln (exp. 805.9mln). Revenue passenger miles 60.67bln (exp. 61.04bln). Available seat miles 73.73bln (exp. 73.48bln). Load factor 82.3% (exp. 83.2%). Sees Q1 adj. diluted loss/shr 0.35-0.85 (exp. loss 0.22). Sees FY adj. EPS USD 9.00-11.00 (exp. 9.45). Sees Boeing (BA) 737 MAX 9 grounding impact about 3ppts of incremental CASM-ex in Q1 based on fleet grounded January 6th-31st. (United Airlines) Shares +6.1% after-hours.
• Bank of America (BAC) has cut around 20 investment banker jobs in Asia, according to Reuters sources impacts HK bankers.
• Amazon (AMZN) Union group at a Staten Island Amazon warehouse is broken amid internal clashes with leadership, according to the WSJ.

GEOPOLITICS

• Israel proposed a two-month fighting pause in Gaza for the release of all hostages, according to Axios.
• US and British forces conducted a fresh round of strikes in Yemen against Houthi targets, while the US, UK, Bahrain and other nations confirmed in a joint statement that an additional round of proportionate and necessary strikes was conducted against 8 Houthi targets in Yemen, according to Reuters.
• White House said President Biden and UK PM Sunak discussed in a call the ongoing Iranian-backed Houthi attacks against merchant and naval vessels in the Red Sea and discussed securing the release of hostages held by Hamas.

CRYPTO

• Bitcoin falls back below the USD 40k level printing a trough at USD 38.8k, with Ethereum also weaker and back under USD 2.25k.

APAC TRADE

• APAC stocks mostly gained after the fresh record levels on Wall St but with gains capped ahead of risk events, while the region also digested the BoJ policy decision and reports of a potential Chinese equity market rescue package.
• ASX 200 was led higher by financials, tech and defensives, while stocks also shrugged off mixed business surveys.
• Nikkei 225 extended on gains after the BoJ maintained its ultra-easy policy, as widely expected, which briefly lifted the index to just shy of the 37,000 level where it then hit resistance and eventually wiped out all its earlier spoils.
• Hang Seng and Shanghai Comp were somewhat varied with Hong Kong boosted by reports that China was mulling an equity market rescue package which could be announced as soon as this week, while tech names were also helped after China's gaming regulator took down draft rules for controlling spending on video games from its website. Conversely, the mainland lagged as the initial support from the news of a potential equity market rescue waned given that potential support measures remain speculation and more stimulus will likely be needed to revive the property sector.

NOTABLE HEADLINES

• China is to reportedly expand stock selling curbs to insurers, according to Bloomberg
• China is said to consider an equity market rescue package backed by USD 278bln, according to Bloomberg sources.
• BoJ kept its policy settings unchanged, as expected, with rates at -0.10% and QQE with YCC to flexibly target 10yr JGB yields at around 0%, while it maintained the 1% upper bound reference rate for market operations. BoJ made no change to its forward guidance as it reiterated that it will continue with QQE with YCC for as long as needed and won't hesitate to take additional easing steps if needed. BoJ also noted that inflation expectations are gradually heightening and inflation will likely gradually accelerate towards the BoJ target through to the end of the projected period. Furthermore, the BoJ cut the Fiscal 2023 Real GDP median forecast to 1.8% from 2.0% but raised the Fiscal 2024 Real GDP median view to 1.2% from 1.0%, while it cut its Fiscal 2024 Core CPI median forecast to 2.4% from 2.8% but raised the Fiscal 2025 Core CPI median view to 1.8% from 1.7% in the latest Outlook Report.
• BoJ Governor Ueda says that Japan's economy is to gradually pick up in the coming months; says the likelihood of achieving 2% inflation is rising gradually; must carefully watch financial and FX moves alongside the impact on the economy and prices. Full press conference can be found here.
• Japanese Chief Cabinet Secretary Hayashi says monetary policy falls under the BoJ's jurisdiction, no comment on the government's view of the BoJ decision.
• PBoC leaders will hold a press conference on Wednesday at 07:00GMT/02:00EST to introduce the implementation of the CEWC decisions and financial support for the real economy, according to reports

DATA RECAP

• Australian NAB Business Confidence (Dec) -1 (Prev. -9); NAB Business Conditions (Dec) 7 (Prev. 9)
• New Zealand Services Index (Dec) 48.8 (Prev. 51.2, Rev. 51.1)