Futures Rise Ahead Of Jobs Data, Oil Rebounds

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by Tyler Durden
Thursday, Jan 05, 2023 - 01:09 PM

US stock-index futures were steady on Thursday, recovering from earlier losses as investors brushed off mostly hawkish commentary from the latest Fed minutes amid further signs of reopening and stimulus in China. Contracts on the S&P 500 and the Nasdaq 100 were both up 0.2% as of 7:15 a.m. ET following a positive session in Asia, driven by a rally in Chinese mainland and Hong Kong equity gauges on news the border with China will gradually reopen. Cautious Fed minutes on Wednesday evening failed to stem optimism, while investors await a private US jobs report later today. Europe's Stoxx Index was also positive, erasing earlier losses, with retailers leading gains after Next Plc raised its profit forecast. Oil snapped a two-day drop, while the dollar was flat and 10Y TSY yields erased earlier gains.

In premarket trading, Amazon rose after the company announced it is laying off a record 18,000 employees, its biggest corporate workforce reduction ever. Exxon also rose after posting modest gains and analysts noted a positive outlook for its refining business, even as the oil giant forecast that lower oil and natural gas prices will hurt fourth-quarter earnings. Here are some other notable premarket movers:

  • US Foods rises 2.7% as Barclays raises the food service group to overweight, noting compelling valuations and signs it had overcome last year’s troubles.
  • Western Digital climbs 6% after Bloomberg reported that the data storage maker had restarted merger talks with Japan’s Kioxia.
  • Geron drops 11% after announcing an offering of $175m shares. Stock closed 33% higher on Wednesday’s regular trading session after a late-stage trial met its primary and key secondary endpoints.
  • US-listed Chinese stocks fall in premarket trading, after the Nasdaq Golden Dragon China Index scored its best start to a year on record. Alibaba shares decline 1.4% after a 13% surge on Wednesday; Baidu drops 1.1%, -2.8%
  • Gap falls as much as 4.8% and Victoria’s Secret drops 3.5% after UBS downgrades both retailers to sell, analyst says that the market “underestimates the pressure on industry sales from an expected recession and overestimates the margin benefit from supply chain costs easing.”
  • Comcast shares rise as much as 1.4% after Truist upgrades the cable company to buy from hold. Charter Communications also gains 1.4% after being upgraded to buy, with the broker saying that 2022’s “mad rush” to exit the stocks has resulted in oversold conditions.
  • Geron shares drop as much as 14% after announcing an offering of $175m shares via Goldman Sachs, Stifel, Wedbush, Baird, B. Riley, Needham. Shares closed 33% higher in Wednesday’s regular trading session after a late-stage trial met its main goals.
  • Shares in US Foods rise 2.7% as Barclays raises the food service group to overweight, noting compelling valuations and signs it had overcome last year’s troubles.
  • Silvergate Capital sinks much as 35% after the crypto bank announced it is reducing headcount by approximately 200 employees, or 40%, and estimates the costs associated will be about $8 million.
  • Vyant Bio soars 170% after the company said it had engaged LifeSci Capital as its financial adviser to help in exploring strategic options.
  • Western Digital climbs as much as 7.4% after Bloomberg reported that the data storage maker had restarted merger talks with Japan’s Kioxia. Analysts said any deal between the two would create a company with notable scale in the NAND flash memory market.

Yesterday the S&P 500 closed firmly in positive territory, despite minutes from the December FOMC meeting showing officials committed to bring down inflation, while cautioning against an “unwarranted” loosening of financial conditions that would hurt their efforts to achieve price stability, and vowing there would be no rate cuts in 2023.Meanwhile, as Bloomberg notes, mega caps continue to drag US stocks, with just a few stocks responsible for most of the underperformance of the S&P 500 over the past six months. An equally-weighted S&P 500 has outperformed the market-cap weighted index by 5% percentage points since the end of September.

“The underlying bullish sentiment is seen as still alive and as long as the momentum remains, a rebound over the new short-term floors established this week will stay as the most likely scenario,” said Pierre Veyret, technical analyst at ActivTrades. “However, market operators are also likely to become increasingly cautious for the end of the week, waiting for today’s major data.”

Investors are looking to today's ADP Private Payrolls report and nonfarm payrolls on Friday for clues on the labor market and its implications for monetary policy, after Fed minutes showed officials cautioned against underestimating their will to keep interest rates high for some time. While US stocks pared gains after the minutes, traders are still pricing in rate cuts by end-2023.

“Pricing in the market still shows that investors continue to bet that the Fed will start cutting rates before the end of this year,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. “Yes, there are some data pointing at slowing economic activity in the US, but the jobs market – which is closely watched by the Fed - remains surprisingly tight.”

In Europe, the Stoxx 600 erased earlier losses, spurred by retail, mining and travel shares. The benchmark has risen 3.6% this week in local currency, outperforming the S&P 500’s 0.3% gain. Here are the biggest equity movers:

  • Next shares jump as much as 9.3% after the fashion retailer’s profit guidance beat expectations. Analysts note the company’s strong trading during the Christmas period. Next’s positive release also buoys the wider retail sector, making it the best- performing subgroup on Europe’s Stoxx 600
  • Ryanair rises as much as 5.3% in Dublin, after the airline operator boosted its full- year profit forecast following stronger-than-expected demand during the Christmas travel period
  • Sonova shares climb as much as 1.7% after launching a new earbud product for patients with slight hearing loss, that Vontobel says will help broaden the company’s portfolio
  • Electrolux gains as much as 5% after Bank of America upgrades the stock to buy from underperform, noting that margin pressure is likely to come to an end in 2023
  • B&M shares rise as much as 2.7% after reporting third-quarter sales. Analysts said the like-for-like sales during the period were strong, but highlighted the lowered Ebitda guidance
  • Pearson falls as much as 5%, the most since December 1, after Bank of America downgraded the firm to underperform in a note on the European media and internet sector
  • Outokumpu fall as much as 9.3% after Danske Bank cut its recommendation for the Finnish steelmaker to sell from hold, also trimming its target price to EU4 from EU4.70
  • Modern Times Group shares fall as much as 10%, the most since July, after Citi opened a negative catalyst watch on the media group ahead of its FY results
  • Societe Generale falls as much as 2.1% after KBW cut its recommendation to market perform from outperform in a note on the European investment banking sector
  • Close Brothers Group fell as much as 2.3% after Investec cut the British bank to sell from hold, citing slowing loan growth and “pretty ordinary” returns

Earlier in the session, Asian stocks were on track for a fifth-straight daily gain, as investors continued to buy shares in China and Hong Kong on positive policy momentum and after news the border with China will gradually reopen. The MSCI Asia Pacific Index gained as much as 1.1%, before paring much of that advance. Internet giants Alibaba and Meituan were among the biggest boosts to the index, helped by China’s moves to ease its tech crackdown as well as support property firms and smooth geopolitical relations.

“Approval for Ant Group to expand its consumer finance business marked another positive step in easing regulatory risks,” Jun Rong Yeap, market strategist at IG wrote in a note. Benchmarks in Singapore, Taiwan and Malaysia also climbed, as investors look beyond the cautious stance of Federal Reserve officials in the minutes of their December meeting. Indonesia’s benchmark fell the most since May 12 as investors look to increase allocations to cheaper northern markets. Better prospects for China’s reopening and economic growth have boosted Asian stocks in recent sessions, driving the MSCI regional gauge up 18% from an October low. The measure lost more than 19% last year amid worries about a slowdown in the West and China’s bumpy path to reopening

Japanese stocks edged higher after US stocks advanced following signs of a slowing American economy and mixed Federal Reserve commentary from its latest meeting. The Topix closed less than a point higher at 1,868.90, while the Nikkei advanced 0.4% to 25,820.80. Out of 2,162 stocks in the Topix, 731 rose and 1,336 fell, while 95 were unchanged. The rose slightly after weakening 1.2% against the dollar on Wednesday. In minutes from the latest Fed meeting, many officials highlighted the need to curb inflation without slowing the economy too much. Meanwhile, US data released Wednesday showed manufacturing activity contracted for a second month in December. US Manufacturing Contracts for a Second Month, Prices Ease “Japanese stocks rose as the FOMC announcements passed without incident, with US stocks bought back,” said Takeru Ogihara, chief strategist at Asset Management One. He also noted that the yen’s strengthening had eased a bit.

Key stocks gauges in India bucked the generally bullish trend and fell for a second straight session as selloff in banks and financial companies extended amid emerging worries over loan growth. The S&P BSE Sensex fell 0.5% to 60,353.27 in Mumbai, while the NSE Nifty 50 Index declined 0.3%, sending the measures to their lowest close in two weeks. The gauges are now more than 4% down from their record highs seen on December 1. Fourteen of BSE Ltd.’s 20 sector indexes advanced, led by oil and gas companies, which rallied after India announced $2.4 billion of federal aid to expand hydrogen production. Financial companies were the worst performers on the index, with top shadow lender Bajaj Finance plunging 7.2% — its biggest single-day drop since April — after its quarterly loan and asset size growth failed to impress analysts. “Investors are steadily booking profit to trim their positions due to the challenging and uncertain global environment,” according to Kotak Securities analyst Shrikant Chouhan. “Investors are guarded in their equity exposure, as rising interest-rate regime and geo-political tensions are key hurdles that could trigger a major sell-off.”             

In rates, treasuries were slightly cheaper vs Wednesday’s close with losses led by front end of the curve, continuing to pressure 2s10s spread lower. The 10-year TSY yield are higher on the day by less than 1bp at 3.69%, flattening 2s10s by 2.4bp; across long end, 20-year sector continues to outperform, tightening 10s20s30s fly by 1bp. A wider flattening move was seen in German yields where 2-year notes are cheaper by 4bp on the day while long-end trades richer. Flattening move across core rates continues in aftermath of Wednesday’s FOMC minutes, which pushed back against potential for rate cuts soon. Despite the hawkish tone of Fed minutes, hedge funds have recently flipped to a record net long SOFR futures position in a sharp u-turn from elevated net short in September.

In FX, the Bloomberg Dollar Spot Index was little changed as the greenback traded mixed versus its Group-of-10 peers, though moves were confined to narrow ranges. Treasuries inched lower.

  • The euro rose to a day high of 1.0631, before paring. Bunds and Italian bonds fell, underperforming Treasuries and snapping three-day gains. Money markets added to ECB tightening wagers after the Fed pushed back against easing bets in its December minutes
  • The pound slipped and gilts inched lower. The Bank of England said business leaders see inflation accelerating in the years ahead and wage growth strengthening, adding to concerns about upward pressures on prices
  • The Australian dollar fell while bonds gained as data showed China’s services activity contracted in December amid surging Covid infections
  • The Egyptian pound extended its decline, adding to a 6.2% drop from Wednesday, as the north African nation grapples with its worst foreign- exchange crunch in half a decade

In commodities, WTI trades within Wednesday’s range, adding 2.6% to near $74.71. Most base metals trade in the green. Spot gold falls roughly $5 to trade near $1,849/oz.

Bitcoin is essentially unchanged on the session, in-fitting with the USD and US equity performance ahead of data/Fed speak.

Looking to the day ahead, data releases include Italian CPI for December and Euro Area PPI for November, whilst in the US there’s the ADP’s report of private payrolls for December, the weekly initial jobless claims, the November trade balance, and the final services and composite PMIs for December from both the US and the UK. Otherwise, central bank speakers include the Fed’s Harker, Bostic and Bullard.

Market Snapshot

  • S&P 500 futures down 0.2% to 3,866.25
  • MXAP up 0.4% to 158.25
  • MXAPJ up 0.7% to 521.05
  • Nikkei up 0.4% to 25,820.80
  • Topix little changed at 1,868.90
  • Hang Seng Index up 1.2% to 21,052.17
  • Shanghai Composite up 1.0% to 3,155.22
  • Sensex down 0.5% to 60,346.44
  • Australia S&P/ASX 200 little changed at 7,063.63
  • Kospi up 0.4% to 2,264.65
  • STOXX Europe 600 down 0.2% to 439.31
  • German 10Y yield little changed at 2.31%
  • Euro up 0.2% to $1.0625
  • Brent Futures up 2.4% to $79.68/bbl
  • Gold spot down 0.3% to $1,849.12
  • U.S. Dollar Index little changed at 104.18

Top Overnight News from Bloomberg

  • European bond traders face greater volatility in early 2023 as governments look set to sell record volumes of debt to a market no longer propped up by central bank purchases
  • Inflation numbers are the most important data drivers lately, yet Friday’s US nonfarm payrolls data could be the catalyst for a new round of volatility in the market following the minutes of the Fed’s December meeting
  • German Chancellor Olaf Scholz is coming under renewed pressure from political allies and opponents in Germany to supply additional heavy weapons to help Ukraine fight off Russia’s military invasion
  • The world’s pile of negative-yielding debt has vanished, as Japanese bonds finally joined global peers in offering zero or positive income
  • Southeast Asian yield curves flattened last year as central banks rushed to hike interest rates. In 2023, things are likely to go the other way
  • Europe is set for the warmest January in years, easing an energy crunch that has hammered the region for months. Mild conditions are likely to persist across the region until the end of the month, with a strong weather front blocking out cold polar air, according to forecaster Maxar Technologies Inc
  • Chinese officials this week extended trading hours for the onshore yuan as part of its attempt to increase international use of the currency. Admittedly, it’s a small step, but it follows a push to boost its use in transactions with major energy and commodity exporters and data showing rapid growth in yuan trading activity
  • The border between mainland China and Hong Kong will gradually reopen from Sunday, paving the way for a restoration of economic and social ties that have been disrupted for three years

A more detailed look at global markets courtesy of Newsquawk

Asia-Pac stocks traded positively throughout most of the session but bourses later drifted off best levels. ASX 200 was initially buoyed by gold miners, but the index briefly dipped into the red as the yellow metal waned. Nikkei 225 faded the bulk of its gains after approaching levels close to 26,000, whilst most of the support emanated from its Banking sector. Hang Seng and Shanghai Comp were firmer from the open and Hong Kong initially outperformed with Tech leading the gains, whilst China said it will gradually reopen the border between Hong Kong and the Mainland on January 8th and will increase flights between the Mainland, Hong Kong, and Macau. PBoC loosens mortgage rates for cities with home price declines, according to local reports.

Top Asian News

  • China Weighs Cap on Property Agent Commissions to Bolster Sales
  • Xi and Marcos Agree to Resume Oil and Gas Talks, Expand Ties
  • Hong Kong Reopening With China Comes With 60,000-Person Cap
  • Ambani Focuses on $75 Billion Green Bet as Scions Step Up
  • Jokowi’s Revised Job Creation Law Challenged as Unconstitutional

European bourses are mixed but with a slight negative bias, Euro Stoxx 50 -0.2%, following a similar APAC handover ahead of US data. Sectors are mostly in the red, but with Retail outperforming after updates from the likes of Next while Travel & Leisure names are similarly lifted by Ryanair's upside. Stateside, futures are close to the unchanged mark and are yet to convincingly break from the morning's initial ranges ahead of data and Fed speak. Foxconn (2317 TT) December Sales TWD 629bln, -12.3% YY. FY22 sales +10.5% YY; Q1 is expected to be roughly in line with market consensus. UK CMA reportedly will not publish its final report on the Activision Blizzard (ATVI)-Microsoft (MSFT) acquisition until April 26th (at the latest), a delay from the previously planned March 1st.

Top European News

  • Next Raises Forecast as Christmas Sales Defy Retail Gloom
  • BMW Takes Cues From Apple With Radical Interior Overhaul
  • Scholz Faces Renewed Heat in Germany to Supply Tanks to Ukraine
  • EU Urges Covid Travel Screening for Passengers From China
  • Worst Day of Train Strikes Threatens to Bring UK to a Halt


  • Dollar mixed awaiting busy pm agenda on the eve of NFP and after choppy moves post-FOMC minutes, DXY in tighter 104.420-103.980 band vs 104.730-103.800 yesterday.
  • Euro still keeping close tabs on 1.0600 vs Greenback and adjacent to 10 and 21 DMAs.
  • Aussie unwinding some underperformance against Buck in consolidative price action between 0.6845-00.
  • PBoC set USD/CNY mid-point at 6.8926 vs exp. 6.8955 (prev. 6.9131); strongest since September 2nd 2022.

Fixed Income

  • Core benchmarks have managed to lift from initial lows, with the initial move lower seemingly occurring without driver at the time, though in the wake of FOMC minutes, and the move perhaps just being the benchmarks running out of steam from recent action.
  • Currently, Bund, USTs and Gilts are within touching distance of the unchanged mark, with yields diverging slightly between EGBs and USTs.
  • On the supply front, French issuance passed without marked move while Gilts await a 2027 sale shortly.


  • WTI and Brent are firmer on the session, though the upside stalled on approach to the USD 75/bbl and USD 80/bbl handles respectively with the benchmarks still lower by over USD 5/bbl WTD.
  • Colonial Pipeline said Line 3 is currently down for unscheduled maintenance, and downstream schedules will be impacted by the downtime, Line 3 is expected to restart on January 7th; the remainder of the system will operate as normal, according to Reuters.
  • US Private Inventory Data (bbls): Crude +3.3mln (exp. +1.2mln), Cushing +0.7mln, Gasoline +1.2mln (exp. -0.5mln), Distillates -2.4mln (exp. -0.4mln)
  • Occidental (OXY) said Q4 output was impacted by a combined 10mln BOEPD by North American winter storm Elliott, according to Reuters.
  • Marathon (MPC) reports an unplanned flaring event at its Carson, LA refinery (363k BPD)
  • German Miro Refinery says it has taken one of its three crude oil distillation facilities out of service on December 25th due to a technical defect; expects the facility to be down for around four weeks.
  • Spot gold is little changed and remains in close proximity to the USD 1850/oz mark, having pulled back slightly from Wednesday’s USUD 1864/oz peak, which was the highest price point since June 13th at USD 1877/oz.
  • Base metals are bid having recovered from APAC pressure as China’s accelerated reopening is marred by COVID concerns.


  • An oil tanker chartered by Chevron (CVX) was reportedly loading Venezuelan crude oil for delivery to the United States. "This is the first such transfer in four years amid sanctions. It is part of a debt settlement program", according to TankerTrackers.
  • Turkish President Erdogan spoke via the phone with Russian President Putin, discussed energy and grains corridor, via Turkish Presidency. Called on Putin to declare a ceasefire against Ukraine.

US Event Calendar

  • 07:30: Dec. Challenger Job Cuts YoY, prior 416.5%
  • 08:15: Dec. ADP Employment Change, est. 150,000, prior 127,000
  • 08:30: Dec. Initial Jobless Claims, est. 225,000, prior 225,000
    • Continuing Claims, est. 1.73m, prior 1.71m
  • 08:30: Nov. Trade Balance, est. -$63b, prior -$78.2b
  • 09:45: Dec. S&P Global US Services PMI, est. 44.4, prior 44.4

Central Bank speakers

  • 07:30: Fed’s Harker Discusses the Economic Outlook
  • 09:20: Fed’s Bostic Makes Welcoming Remarks at Markets Conference
  • 13:20: Fed’s Bullard Discusses the Economy and Monetary Policy

DB's Jim Reid concludes the overnight wrap

Staying in advertising mode this is the first January for three years where normal service has resumed in terms of research outlooks around various parts of the world. For those fed up with Zoom, I’ll be joining Mark Wall, Matt Luzzetti and George Saravelos in the Nordic Outlook seminars next week (Weds-Thurs 11/12th Jan). That feels like an Oceans 11 type DB research cast list! I won’t say who I think is Clooney or Pitt. We will be presenting in Helsinki, Stockholm, Copenhagen and Oslo. We have around 600 people already signed up which is great but if you haven’t yet done so please see the link here. For those interested in Euro HY, our European leveraged finance research team will be holding an event at DB in London next Wednesday going through their top trade recommendations and market outlook. You can register via the link here

Markets continued their positive start to the year yesterday, with investors latching onto fresh signs of easing inflation that would allow central banks to ease up on their rate hikes. Indeed, yesterday saw an unexpected decline in French inflation, a further round of energy price declines, and the prices paid component of the ISM manufacturing print came in at its lowest level since April 2020. All those factors triggered a sizeable rally for equities and bonds (particularly in Europe), even as other data pointed to a tight US labour market that could force the Fed to hike even further. Indeed the Fed minutes late in the session confirmed that the Fed are concerned about financial conditions loosening too much.

In terms of those various drivers, the tone for the day was set from the outset by that French CPI release, which showed that inflation unexpectedly fell in December to +6.7% on the EU-harmonised measure (vs. +7.3% expected). So that’s further good news on the heels of the downside surprises from Spain and Germany, and bodes well for the full Euro Area release tomorrow. In response, investors moved to dial down the amount of rate hikes they expect from the ECB this year, with the rate priced in by the December meeting coming down by nearly 15bps on the day. In speaking to DB’s Mark Wall though he says that for the ECB their hiking profile will be about “peak versus persistence”. While its very welcome that European headline inflation is past the peak, Mark suggests the resilience of core inflation in December is more important than these downside surprises. The immediate European growth outlook is better than feared a few months back which might make the labour market tighter than was expected. See here for the latest on Mark’s 3.25% terminal ECB call from December.

For now though these signs of downward pressure on headline inflation were given further momentum by the latest moves in energy prices. In particular, European natural gas futures fell nearly -10% to a one-year low of €65.00 per megawatt-hour, which comes amidst unusually warm weather in Europe for this time of year that’s helping to cut energy demand. Furthermore, oil prices saw substantial declines of their own, with Brent crude down by -5.19% yesterday to $77.84/bbl, whilst WTI fell -5.32% to $72.84/bbl. That’s adding to the good news for central banks and consumers on the inflation side, and also means that the cost of government subsidies could prove to be much less than feared.

Amidst these positive signs on the inflation front, sovereign bond yields saw further declines on both sides of the Atlantic. In Europe, yields on 10yr bunds (-11.7bps), OATs (-13.8bps) and BTPs (-22.2bps) all fell for a 3rd consecutive session, which continued their very strong start to the year. Meanwhile in the US, the declines were more muted, but yields on 10yr Treasuries still fell -5.6bps on the day to 3.683%. This morning in Asia, they are back up around +3.2bps as we go to print.

The main interruption to the buoyancy in markets yesterday (although not enough to throw it off course) came from the US JOLTS report for November and the FOMC minutes. This former is closely followed by the Fed, and yesterday’s release showed that the labour market remained incredibly tight towards the end of last year, thus pointing to further inflationary pressures ahead. For instance, the number of job openings came in at 10.458m (vs. 10.050m expected), and the previous month’s figure was also revised higher. That means that the number of job openings per unemployed individual ticked up to 1.74 in November, which is still way above its pre-pandemic levels of around 1.2. In addition, the quits rate of those voluntarily leaving their job (which is strongly correlated with wage growth) ticked back up to 2.7% in November. So there’s still plenty of ammunition for the hawks even as inflation looks to have passed its peak now.

Speaking of hawkish voices, one person we did hear from yesterday was Minneapolis Fed President Kashkari. He’s a voting member on the FOMC this year, and said that “it will be appropriate to continue to raise rates at least at the next few meetings until we are confident inflation has peaked”. He said he had the Fed pausing at 5.4%, but that “any sign of slow progress that keeps inflation elevated for longer will warrant, in my view, taking the policy rate potentially much higher.”

Later in the session, we also got the latest FOMC minutes from the December meeting. Almost exactly a year after the 2021 December Fed meeting minutes that marked the hawkish turn in Fed policy, yesterday saw Fed officials reaffirm their conviction to keeping interest rates restrictive as long as it takes to quell inflation. The committee is clearly concerned with financial conditions easing as a response to the Fed slowing interest rate hikes. Officials cited that “an unwarranted easing in financial conditions, especially if driven by a misperception by the public of the committee’s reaction function, would complicate the committee’s effort to restore price stability.” There was no explicit discussion hinting at a further slowdown of rate hikes to 25bps in February, as “most participants emphasized the need to retain flexibility and optionality when moving policy to a more restrictive stance." However that does not mean that a further slowing is off the table. The market pricing on the February meeting was unchanged with 33bps priced in, and 52bps priced in through the March FOMC meeting.

Against this backdrop, equities finished solidly higher after a volatile US afternoon. The S&P 500 was up roughly +1.0% just ahead of the FOMC minutes, before whipsawing about 30pts in both directions before the close. In the last 15 minutes of the US trading session the index rallied +0.67% to finish up +0.75% overall on the day. The gains were led by the more cyclical industries, and the NASDAQ also advanced +0.69%. The best performing industry in the S&P 500 was autos (+4.42%), led by Tesla (+5.12%) but Ford (+2.8%) and GM (+2.6%) also saw solid gains as well. The one industry that dragged and caused the NASDAQ to underperform was Software (-1.03%).

The solid gains also came in spite of a further deterioration in the ISM manufacturing print, which fell to 48.4 in December (vs. 48.5 expected). That it’s lowest level since May 2020, although to be fair we did get some more positive news in that the prices paid component fell for a 9th consecutive month to 39.4, which marks its longest run of consecutive declines since 1974-5. Back in Europe, the equity advances were larger yesterday as markets closed before the FOMC minutes, with the STOXX 600 (+1.38%) bringing its YTD gains to +3.60% after just three sessions.

Asian equity markets are trading higher this morning following a higher close on Wall Street overnight. Also, risk appetite across the region is seeing a further boost on the China reopening trade as well as the PBOC’s pledges for more targeted economic measures. As I type, Chinese stocks are topping gains with the CSI (+1.71%) and the Shanghai Composite (+0.95%) both trading in positive territory while the Hang Seng (+1.01%) is further extending its previous session gains amid a broad rally in Chinese tech stocks. Elsewhere, the Nikkei (+0.43%) and the KOSPI (+0.34%) are also higher. Outside of Asia, US stock futures are pointing to a slightly negative start with those on the S&P 500 (-0.09%) and the NASDAQ 100 (-0.17%) edging lower.

Coming back to China, the Caixin services PMI for December came in at 48.0 (v/s 46.8 expected), rising from a 6-month low of 46.7 in November.

Back in the US, there’s no sign of a resolution yet in terms of who’ll be the next Speaker of the House of Representatives. In terms of the latest, House Republican leader Kevin McCarthy failed to win a majority of House members in an additional three ballots yesterday. Republicans hold a very slim majority of seats in the lower chamber and McCarthy can only afford to lose 4 GOP votes, but he has consistently lost around 20 votes on multiple ballots now. While this is not yet a market moving story, it does portend the kind of fight that Congress can see around the upcoming debt ceiling negotiations.

When it comes to yesterday’s other data, UK mortgage approvals fell by more than expected to 46.1k in November (vs. 53.0k expected), which is their lowest level in over a decade if you exclude the pandemic months of April-June 2020. Separately, the final Euro Area composite PMI for December was revised up half a point from the flash reading to 49.3 (vs. flash 48.8).

To the day ahead now, and data releases include Italian CPI for December and Euro Area PPI for November, whilst in the US there’s the ADP’s report of private payrolls for December, the weekly initial jobless claims, the November trade balance, and the final services and composite PMIs for December from both the US and the UK. Otherwise, central bank speakers include the Fed’s Harker, Bostic and Bullard.