Initial optimism over China's reopening fizzles

Notes/Observations

- Initial optimism over China's reopening fizzled.

-China's COVID surge due to recent reopening continued to weigh on sentiment as markets fear of international restrictions as part of response to tame global spread. Airline stocks underperform.

- Trading volume thin as year-end approaches.

-China Health Officials noted cases have peaked in Beijing, Tianjin and Chengdu, but increase monitoring for COVID variants. Officials denied to be with-holding variant sequencing data.

-Asia closed lower with KOSPI under-performing at -1.9%. EU indices are mixed to flat. US futures are +0.2% to +0.6%. Gold 0.0%, DXY -0.4%; Commodity: Brent -1.9%, WTI -2.1%, TTF +1.6%; Crypto: BTC -0.4%, ETH +0.3%.

Asia

- South Korea Nov Industrial Production M/M: +0.4% v -0.8%e; Y/Y: -3.7% v -4.9%e [2nd straight y/y decline].

- South Korea Nov Retail Sales M/M: -1.8% v -0.2% prior [3rd straight decline].

- Australia said to be willing to reconsider WTO case against China if Beijing ends trade sanctions.

- Japan 20-year JGB yield rises to 1.285%, highest since late Oct [despite stepped up and unscheduled BOJ bond buying].

- Former Bank of Japan (BOJ) Dep Yamaguchi said to be becoming contender for next BOJ Gov.

Europe

- UK govt said to plan a business energy support package into 2024, to extend the Energy Bill Relief Scheme (EBRS) for non-domestic customers.

Energy

- Weekly API Crude Oil Inventories: -1.3M v -3.1M prior.

Speakers/fixed income/fx/commodities/erratum

Equities

Indices [Stoxx600 -0.03% at 427.34, FTSE -0.38% at 7,467.59, DAX +0.11% at 13,940.95, CAC-40 -0.02% at 6,509.03, IBEX-35 -0.26% at 8,236.96, FTSE MIB +0.08% at 23,790.00, SMI -0.17% at 10,794.40, S&P 500 Futures +0.28%].

Market focal points/key themes

European indices trade broadly flat following weakness in Wall Street indices yesterday. Energy sector underperfoming others as concerns remain that Chinese COVID spread could again trigger some movement restrictions worldwide.

On still quiet corporate front, shares of London-listed healthcare firm Allergy Therapeutics down over 50% following delay in publishing earnings results. Shares of Adocia in Paris sharply higher following positive Phase 1 data.

Elsewhere, Antofagasta shares trade slightly lower as it announced access to its Los Pelambres operation in the Coquimbo Region being blocked by a small group of people, but to date there has been no material impact on group’s production.

No major earnings expected in the upcoming US premarket session.

Equities

- Consumer discretionary: Basic-Fit [FBIT.NL] +1% (memberships guidance).

- Financials: Argo Blockchain [ARB.UK] -4% (completes sale).

- Healthcare: Adocia [ADOC.FR] +10% (positive study for BioChaperone Lispro), Allergy Therapeutics [AGY.UK] -56% (delays results), Cellectis [ALCLS.FR] -1% (enters €40M credit facility with the European Investment Bank).

- Materials: Antofagasta [ANTO.UK] -1.5% (update on mine operations), Ferrexpo [FXPO.UK] -1.5% (confirms shareholder detained).

Speakers

- Hungary PM Chief of Staff Gulyas stated that govt to submit tweaked 2023 budget to Parliament by mid-January.

- Thailand Central Bank noted that economic activity likely to continue in December.

- China Commerce Ministry (MOFCOM) promised to restore and increase consumption; To focus on stabilizing car consumption.

- China State Council commented on tariffs. To raise export tariffs on aluminum and aluminum alloys; effective Jan 1st 2023. To scrap import tariffs for certain cancer drugs.

Currencies/fixed income

- FX markets limped into year-end as focus turned on China reopening. A number of countries have adopted an additional layer of testing for travelers arriving from China reflect hobbled resumption of travel amid China's outbreak. Markets have questioned the speed at which China had scrapped Covid rules which now appeared to have overwhelmed its health system and sparked concerns about the spread of the virus.

Economic data

- (FI) Finland Nov House Price Index M/M: -1.2% v -1.0% prior; Y/Y: -3.4% v -2.2% prior.

- (RU) Russia Dec Manufacturing PMI: 53.0 v 53.2 prior (8th month of expansion).

- (TR) Turkey Dec Economic Confidence: 97.6 v 96.9 prior.

- (TH) Thailand Nov Current Account Balance: -$0.4B v +$1.5Be; Overall Balance of Payments (BOP): $0.6B v $1.2B prior; Trade Account Balance: $0.5B v $1.7B prior; Exports Y/Y: -5.5% v -3.6% prior; Imports Y/Y: 8.2% v 5.4% prior.

- (ES) Spain Nov Adjusted Retail Sales Y/Y: -0.6% v +1.0% prior; Retail Sales (unadj) Y/Y: -0.6% v +1.5% prior.

- (HK) Hong Kong Nov Trade Balance (HKD): -27.1BB v -25.0Be; Exports Y/Y: -24.1% v -16.2%e; Imports Y/Y: -20.3% v -13.8%e.

- (EU) Euro Zone Nov M3 Money Supply Y/Y: 4.8% v 5.0%e.

Fixed income issuance

- (DK) Denmark sold total DKK200M in 3-month and 6-month bills.

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 06:00 (BR) Brazil Dec FGV Inflation IGPM M/M: 0.5%e v -0.6% prior; Y/Y: 5.6%e v 5.9% prior.

- 06:45 (US) Daily Libor Fixing.

- 07:00 (CA) Canada Dec CFIB Business Barometer: No est v 50.0 prior.

- 07:00 (CL) Chile Nov Unemployment Rate: 8.0%e v 8.0% prior.

- 07:30 (BR) Brazil Nov Nominal Budget Balance (BRL): -61.7Be v -14.5B prior; Primary Budget Balance (BRL): -16.5Be v 27.1B prior; Net Debt to GDP Ratio: 58.2%e v 58.3% prior.

- 08:00 (RU) Russia Gold and Forex Reserve w/e Dec 23rd: No est v $581.7B prior.

- 08:00 (UK) No Daily Baltic Dry Bulk Index.

- 08:30 (US) Initial Jobless Claims: 225Ke v 216K prior; Continuing Claims: 1.71Me v 1.672M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Weekly DOE Oil Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 14:00 (AR) Argentina Oct Wages M/M: No est v 6.7% prior.

- (AR) Argentina Dec Consumer Confidence: No est v 35.2 prior.

- (EG) Egypt Q3 GDP Constant Q/Q: No est v 0.1% prior.

- 18:00 (KR) South Korea Dec CPI M/M: +0.2%e v -0.1% prior; Y/Y: 5.1%e v 5.0% prior; CPI Core Y/Y: 4.6%e v 4.8% prior.

- 21:00 (SG) Singapore Nov M2 Money Supply Y/Y: No est v 3.2% prior; M1 Money Supply Y/Y: No est v -6.8% prior.

- 22:00 (TH) Thailand to sell THB40B in 6-month bills.