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European bourses firmer, US futures tilt lower, DXY bid and Crude soars on geopolitical tensions - Newsquawk US Market Open

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Tuesday, Jan 02, 2024 - 11:05 AM
  • European equities are firmer, though have significantly pared much of their initial gains; US equity futures are mixed and generally more contained.
  • DXY holds onto modest gains above 101.50, JPY lags
  • Fixed benchmarks hold onto a negative bias ahead of a busy slate throughout the week
  • Crude soars amid geopolitical tensions; Gold also gains whilst base metals are mixed
  • Israel says it will pull out thousands of troops from Gaza. However, PM Netanyahu has cautioned that the war will go on for many more months
  • Looking ahead, Canadian & US Manufacturing PMI, US Construction Spending

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EUROPEAN TRADE

EQUITIES

  • European equities, Eurostoxx50 (+0.4%), are on firmer footing, with Defensive and Energy names benefitting from recent Red Sea flareups; the FTSE 100 is in the red having lagged throughout the session.
  • European sectors have a positive tilt; Autos and Telecommunications are found towards the top of the pile whilst Financial Services lags.
  • US equity futures are mixed, unable to share some of the positive sentiment seen in European trade; ES -0.1%, RTY +0.4%.
  • Nokia (+1.8%) shrugs off initial weakness despite anticipating missing FY23 targets due to delayed license renewals and a more challenging than expected Q4.
  • ASML (-0.1%) is modestly weaker as it cancels shipments of some machines to China after a US request, via Bloomberg; additionally, their license has been partially revoked by the Dutch government.
  • Pharma names: Major pharmaceutical companies like Pfizer (PFE), Sanofi (SAN FP), and Takeda (4502 JT) intend to increase prices on over 500 drugs in the US in January, Reuters reported citing data by healthcare research firm 3 Axis Advisor.
  • Click here and here for the sessions European pre-market equity newsflow, including earnings.
  • Click here for more details.

FX

  • DXY holds onto modest gains and edges towards the upper end of today's range between 101.71-33 in a quiet start to a packed week of Tier 1 data.
  • EUR is weaker and circulates around the 1.10 mark, with the EZ PMI and M3 data unable to sway sentiment.
  • The JPY is the G10 laggard; USD/JPY trades towards the top end of today's ranges, approaching Dec 29th highs of 141.91.
  • Antipodeans diverge with the AUD the best G10 performer, benefitting from the AUD/NZD cross, which has led the Kiwi lower.
  • Click here for more details.
  • Click here for the Option Expires for the NY Cut.

FIXED INCOME

  • USTs conform with the bearish EGB action with the belly of the yield curve leading, though still shy of 4.0%.
  • Bunds are pressured amid marked upside in the Energy space and potentially as market participants re-evaluate pronounced action towards end-2023; EZ Flash HICP due later in the week.
  • Gilt price action is in-fitting with the broader risk tone with UK newsflow light as the year begins.
  • Click here for more details.

COMMODITIES

  • WTI and Brent are bid as geopolitical tensions remain in-focus; recent flare ups in the Red Sea region has led Maersk to pause shipping in the area.
  • Spot Gold is firmer as the risk tone is contained Stateside ahead of a busy week; Base metals hold onto a mixed bias, ultimately capped by varied Chinese PMI data.
  • China announces 179mln/MT (prev. 118.8mln) of crude import quotas for 2024, via Reuters citing sources; +60% Y/Y.
  • Outokumpu (OUT1V FH) intends to temporarily restrict production of Ferrochrome due to weak market conditions. Intend to keep furnace and sintering plant closed until autumn 2024, ferrochrome production will continue at 80% of full capacity during this. Stainless steel market has slowed significantly, negatively impacting ferrochrome deliveries.
  • LME Stocks: Aluminium +17.33k (prev. -2k)
  • Click here for more details.

NOTABLE EUROPEAN HEADLINES

  • ECB's De Cos says uncertainty over data remain high; inflation is expected to continue its downward trend

DATA RECAP

  • UK S&P Global/CIPS Manufacturing PMI Final (Dec) 46.2 vs. Exp. 46.4 (Prev. 46.4)
  • EU HCOB Manufacturing Final PMI (Dec) 44.4 vs. Exp. 44.2 (Prev. 44.2)
  • Spanish HCOB Manufacturing PMI (Dec) 46.2 (Prev. 46.3)
  • Italian HCOB Manufacturing PMI (Dec) 45.3 (Prev. 44.4)
  • French S&P Global Manufacturing PMI (Dec) 42.1 (Prev. 42)
  • German HCOB Manufacturing PMI (Dec) 43.3 (Prev. 43.1)
  • EU Money-M3 Annual Growth (Nov) -0.9% vs. Exp. -1.0% (Prev. -1.0%); EU Loans to Households (Nov) 0.5% (Prev. 0.6%); EU Loans to Non-Fin (Nov) 0.0% (Prev. -0.3%)

NOTABLE US HEADLINES

  • Click here for the US Early Morning Note.

GEOPOLITICS

  • Israel says it will pull out thousands of troops from Gaza. However, PM Netanyahu has cautioned that the war will go on for many more months.
  • US is to bring the USS Gerald R. Ford aircraft carrier back from the eastern Mediterranean Sea.
  • On the 31st of December, Danish shipping giant Maersk suspended transits in the Red Sea for 48 hours following an attack by Houthis over the weekend. Further ahead, Maersk's latest schedule shows it intends to transit over 30 container vessels through Suez Canal/Red Sea "in the time ahead". Elsewhere, Hapag-Lloyd is scheduled to provide an update on Tuesday; currently, the Co. is diverting vessels away from the region.
  • Most recently, Iran dispatched a warship to the Red Sea after the US Navy destroyed three Houthi boats.

CRYPTO

  • Bitcoin, +4.5%, tops USD 45k for the first time since April 2022 whilst Ethereum, +2.5%, posts gains though to a lesser degree.

APAC TRADE

  • The region traded with modest pressure, Shanghai Composite -0.4%, as the official NBS Manufacturing PMI for December came in softer than expected despite the Services figure lifting from the prior modestly and the Caixin Final seeing an unexpected upward revisions. Newsflow has been light as desks return from the New Year break with focus primarily on geopolitics going into a week headlined by key data points in the US. Antipodean bourses are the relative outperformers, ASX 200 +0.5%, supported by industrial metals given the Caixin print and as desks expect steel mills to begin restocking raw materials for production requirements during the February Lunar New Year break.

NOTABLE HEADLINES

  • A magnitude 7.6 earthquake occurred in the Noto peninsula, Japan at 07:10GMT on January 1st, resulting in Tsunami warnings being issued though this have since been downgraded but saw 1 metre high waves impact on the western coast.
  • Earthquake with an intensity of upper-5 on Japan's scale hits Ishikawa, Japan; no tsunami warning, via NHK
  • BYD (1211 HK) sold 3.02mln vehicles in 2023, +61.9% Y/Y; selling 1.6mln battery EVs.
  • Fitch Ratings: growth headwinds and policy shifts weigh on Greater China sector outlooks

DATA RECAP

  • Chinese Caixin Manufacturing PMI Final (Dec) 50.8 vs Exp. 50.4 (Prev. 50.7)
  • Chinese NBS PMIs (Dec): Manufacturing 49.0 vs Exp. 49.5 (Prev. 49.4); non-Manufacturing 50.4 (Prev. 50.2)
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