US EARLY MORNING: US futures slide lower in sympathy with Europe; today's Quad Witching will see USD 4tln of options roll-off

SERVICE NOTE: Your friendly neighbourhood squawk analyst is taking an extended break for Christmas, and this note will therefore return on Tuesday, January 3rd, 2023. We wish our readers a very Holiday Holiday. Please also note that on Friday 16th December, the desk will be closing at the earlier time of 18:05GMT/13:05EST after coverage of the Baker Hughes Rig Count.

SNAPSHOT: US index futures were horizontal in overnight trade, but have tilted lower after the London start, as European equities opened lower, with the region continuing to digest a hawkish ECB policy announcement on Thursday. There are a handful of ECB hawks due to speak today, which may influence the macro landscape. In the US, the Senate passed a stopgap funding bill, which averts a partial government shutdown, and gives politicians an additional week to come to a deal to fund federal agencies through the fiscal year. Flash PMI data and some Fedspeak is on today’s docket.

INTO YEAR END: With year-end looming, and with traders eying early exits after most of the key macro releases are now out of the way, the trading tone into the end of the year could take a technical feel. Thursday's downside, which came after a hawkish ECB policy announcement, could suggest equities will consolidate into year-end between 3,900-4,120 parameters, according to some technicians. For 2023, the consensus looks for the S&P 500 to rise to 4,200, according to a recent Reuters poll, although the outcome will hinge on how far the Fed tightens policy. While it has talked a hawkish game this week, guiding its expectations for the terminal rate above the analyst expectations, the market remains unconvinced, and is pricing in a slightly more dovish trajectory. Analysts have warned that any hawkish data could bring the market more in line with the Fed's thinking, which would be a headwind for stocks (given that higher index prices represent a loosening of financial conditions, something the Fed is keen to avoid for now). On that front, there could be a bit of outsized attention on today's flash PMI data for December, given the mixed tone already seen in the regional Empire and Philly Fed reports this week - these data all help to form expectations for the key ISM data, which are due to be released early January.

DAY AHEAD: S&P Global will report flash US PMI data for December, which are expected to also see slight improvement; the regional Empire and Philly Fed releases have been mixed thus far. On the speaker's front, ECB policymaker commentary from hawks Holzmann and Knot, as well as Centeno is due following the ECB's hawkish policy announcement on Thursday; there has been some sourced articles suggesting President Lagarde offered back-to-back 50bps rate hikes to woo the dissenters. Meanwhile, some calendars have Fed's Williams (voter) listed, while remarks from 2024 voters Daly and Mester are due. In EMs, the CBR is expected to stand pat on rates today. It is the second day of the European Council’s meeting. Weekly Baker Hughes rig count data rounds out the day’s releases. Traders should be aware that today sees Quad Witching options expiries, which can result in bouts of choppy, volatile trading conditions. Our full day ahead schedule note can be accessed here.

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16 Dec 2022 - 09:10- EquitiesData- Source: Newswires

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