So far today has been a replica of yesterday, with the crude rout continuing and pushing WTI under $45, but largely ignored by the FX carry pairs, and thus equity futures, which have seen some positive momentum from overnight trade data out of China where exports jumped 9.7% beating the 6% expectation, while imports fell 2.4% compared to a projected 6.2% decline as the trade surplus narrowed from November’s record $54.4 billion.

For the full year, however, Chinese trade grew at just 3.4%, missing the government’s target of 7.5% growth for the third year in a row as the government quick to blame the slowing global economy. In any event, the USDJPY is well off the overnight lows which means the EuroStoxx is up some 0.8% which, just like yesterday, the E-mini is up some 9 points and rising. It remains to be seen if, just like yesterday, US equities will crash at a precipitous pace after the open, once algos realize that nothing at all has changed.

Back to China, the trade numbers pushed the Shanghai Composite Index modestly higher by 0.2%, even if the overall Chinese stock market is massively overbought in recent months, and helped rebound the USDJPY from 117.80, a level not seen since mid December. Then again, China's GDP print is due for release next wee, and there are rumblings it may miss the government's target of 7.5%, already the lowest in a century, only for the first time since 1998 when it is expected to print between 7.2% and 7.4%.

As a reminder the Chinese slowdown is the true reason for the collapse in commodity prices - among which crude oil - further demonstrated moments ago Copper plunged by another 2.8%, the biggest daily loss since November, and a move that the pundits can hardly blame on "OPEC oversupply."

Elsewhere in Asia, JGBs trade higher supported by weakness in Japanese equities although the Nikkei 225 (-0.64%) bounced off worst levels after shedding over 300 points, weighed on by JPY strength and a further fall in oil prices. Other Asian equity markets trade mixed with outperformance observed across the Hang Seng (+0.01%).

And speaking of global slowdown, the 10 Year continues to tell the real story, and has dropped to 1.88% as of this moment, the lowest since October 15 with the 30 Year new record lows! Bloomberg observes that "signs of short covering in Asia” are pushing yields even lower (as expected), with strong volumes in TYH5, eurodollars, according to InTouch Capital Markets managing director David Fuller writes in note. Stops seen in futures space after taking out highs from New York session.

European equities, however, ignore the macro and focus on micro updates, trading higher amid positive broker moves with consumer discretionary stocks leading the advance with ASOS and Morrisons seen up in excess of 5% following pre-market trade updates. However, the continued decline in oil prices continues to weigh on energy stocks resulting in underperformance in Europe once again. In macro news, the Greek Finance Minister Hardouvelis said Greece could stumble out of the Euro by accident if a new government fails to reach an agreement with international creditors soon after this month’s elections. Separately, ECB’s Nowotny, Noyer and Coeure all signal that the ECB are still in discussion over the details of a potential QE program, ahead of their schedule meeting on the 22nd of January.

In the US, Fed’s Lacker (voter, hawk) said labour slack close to being eliminated underscores view that the Fed should raise rates sooner rather than later to keep inflation under control. (RTRS) Fed's Lockhart (voter, dove) remarked that if data is mixed, prefers later lift-off date and the Fed should be cautious and conservative on rates. (RTRS) Fed's Williams (voter, dove) said June rate rise 'reasonable' amid job gains. (BBG)

In FX, the USD-index (+0.2%) has reversed all of its overnight weakness with EUR/USD breaking below 1.1800. Elsewhere, the lone tier 1 data release this morning was UK Inflation which fell to its lowest level since May 2000 (0.5% vs. Exp. 0.7%) with the ONS stating that the main contributions to the fall came from the December 2013 gas and electricity price rises falling out of the calculation and the continuing drop in motor fuel prices. This prompted GBP/USD to break below 1.5100 to the downside and marks the first time that the BoE will need to write a letter to the UK Chancellor explaining why inflation has ‘undershot’ the Bank’s mandated target of 2%

In summary: European shares near session highs with retail and autos sectors outperforming and tech, basic resources underperforming. China December exports rise more than estimates. U.K. inflation slows more than forecast. Crude oil, copper extend declines, ruble weakens. Japan 5-year bond yield drops to zero for first time. French and German markets are best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Japanese 10yr bond yields fall; French yields decline. Commodities decline, with Brent crude, WTI crude underperforming and natural gas outperforming. U.S. monthly budget statement, JOLT job openings due later.

Market Wrap

• S&P 500 futures up 0.3% to 2028.6
• Stoxx 600 up 0.8% to 342.5
• US 10Yr yield down 3bps to 1.87%
• German 10Yr yield down 1bps to 0.47%
• MSCI Asia Pacific down 0% to 137.8
• Gold spot up 0.5% to $1239.8/oz
• Euro down 0.28% to $1.1801
• Dollar Index up 0.25% to 92.22
• Italian 10Yr yield down 2bps to 1.79%
• Spanish 10Yr yield down 3bps to 1.62%
• French 10Yr yield down 2bps to 0.73%
• S&P GSCI Index down 1.7% to 378.2
• Brent Futures down 4% to $45.6/bbl, WTI Futures down 3.5% to $44.4/bbl
• LME 3m Copper down 2.6% to $5860.5/MT
• LME 3m Nickel down 1.4% to $14889/MT
• Wheat futures up 0.8% to 559.8 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

• European bourses reside in positive territory shrugging off the continued slide in oil prices and the lagging energy sector after WTI broke below USD 45 earlier this morning.
• Looking ahead to the US session highlights include the Fed’s discount minutes, API crude oil inventories and USD 21bln to be sold in a 10yr note auction.

• Treasuries gain, 10Y yield falls to lowest since Oct. 15, 30Y nears record low as WTI crude breaks below $45/bbl. Week’s auctions continue with $21b 10Y, WI 1.885% lowest since May 2013; drew 2.214% in Dec.
• While last year’s 50% plunge in Brent from its June peak prompted most economists to predict a boost to global growth, now that the fall has extended another 21% two weeks into 2015, it risks not being as positive as some first imagined
• Britain’s inflation rate weakened to 0.5% in Dec., lowest in almost 15 years, which will force Governor Mark Carney to write the Bank of England’s first open letter explaining why prices are rising too slowly
• China’s exports rose 9.7% in Dec., more than forecast; imports fell 2.4%, less than expected, leaving a trade surplus of $49.61b, the customs administration said in Beijing
• Jiangsu SOHO Holdings Group Co., a state-owned firm with businesses including finance, property and knitwear, said some units missed payments on their letters of credit, underlining the financial risks of Chinese companies
• An adviser to the EU Court of Justice will say tomorrow whether the ECB’s Outright Monetary Transactions program overstepped the law in a non-binding opinion that may signal whether QE must also be reined in
• Amid anti-austerity promises by Greece’s Syriza party, which leads in polls before Jan. 25 elections, the ECB is signaling a willingness to withdraw EU30b even if it tips Greece into a crisis that ultimately sees it leave the single currency
• Merkel will join a march to promote tolerance after a German group opposing Islam’s influence in Europe drew a record 25,000 people to a rally in Dresden, with both sides hardening their stance over Muslims in the country
• Sovereign yields fall. Asian stocks mixed; European stocks, U.S. equity-index futures gain. Crude falls, with WTI below $45/bbl; copper plunges 2.7%, gold higher

US Event Calendar

• 9:00am: NFIB Small Business Optimism, Dec., est. 98.5 (prior 98.1)
• 10:00am: IBD/TIPP Economic Optimism, Jan., est. 48.7 (prior 48.4)
• 10:00am: JOLTS Job Openings, Nov., est. 4.850m (prior 4.834m)
• 2:00pm: Monthly Budget Statement, Dec., est. +$3b (prior +$53.2b)

Central Banks

• 5:00pm: Fed’s Kocherlakota speaks in New York Supply
• 11:30am: U.S. to sell $30b 4W bills
• 1:00pm: U.S. to sell $21b 10Y notes in reopening

* * *

DB's Jim Reid concludes the overnight recap

The trend lower in crude is indeed continuing as yesterday saw fresh cycle lows again with Brent now following WTI below $50 for the first time since April 2009. Indeed both WTI (-4.74%) and Brent (-5.35%) closed the day at $46.07/bbl and $47.43/bbl – hitting fresh five and a half year lows (and have declined some 1.5%-2% further this morning). Downgraded 2015 broker forecasts appear to be the reason for yesterday’s move with the result an all-too-similar sharp sell off for energy stocks. Yesterdays -0.81% close for the S&P 500 was not helped by a 2.80% decline in the energy sector. Credit markets also weakened with IG23 1.7bps wider on the day. US HY energy stocks fared little better with spreads closing 20bps wider whilst at the US’s second largest oil producer, the latest count of the North Dakota oil rigs showed the number of operating rigs falling to the lowest level since November 2010.

On a related subject, it’ll be interesting to see what today’s inflation data in the UK brings. Following November’s 1% yoy CPI headline reading, our UK economists note that household energy bills have not risen in December (having been up 6.4% a year ago) and petrol prices have dropped by some 5% at the pump. As a result they expect the headline reading to fall well below 1% to 0.6% yoy for December.

Before this number 30 year Gilt yields hit a record low of 2.314% yesterday. While we have plenty of sympathy for why yields will stay relative low for some time we wonder what the average inflation rate in the UK will be over 30 years. Answers on a postcard please. Happy to hear all genuine guesses and I'll average the results in tomorrow's edition. My guess is nearer to 4% but with no sign that we're getting close to that level anytime soon.

Coming back to markets, the fall in Oil and uncertainties continue to support US Treasuries with the 10y benchmark closing at 1.907% and 3.8bps lower on the day. In fact 10y yields are now 27bps lower than they were at the end of 2014 and are trading lower again this morning with the yield just breaking through 1.90% as we go to print (1.894%). In terms of Fedspeak, there was something for everyone. Commenting after the US close, the Fed’s Williams was quoted on Bloomberg saying that ‘I would expect by June that the argument pro and con for lifting off rates will probably be a close call’. The Fed official noted that last week’s data shows ‘significant employment gains’ but that ‘on the other side, wage and price data are still soft’. This comes on the back of comments from Lockhart which we mentioned yesterday, suggesting that the Fed should take a ‘cautious and conservative approach’. Finally in the US, the calendar was quiet data-wise yesterday with just the lesser followed labour market conditions index showing improvement through December (6.1 vs. 2.9 previously).

Although closing off the intraday highs, European equity markets actually closed firmer yesterday with the Stoxx 600 and Dax finishing +0.57% and +1.38% respectively – benefiting from the timing in the oil sell off. On top of this, a second successive stronger day for Greek equities (+3.78%) also helped the better sentiment with the market appearing to come to terms with the latest opinion polls data over the weekend showing SYRIZA maintaining its lead. European government bonds also had a stronger day with 10y yields Bunds closing 1.4bps lower at 0.477% and peripheral bonds also tightening with Spain (-8bps), Italy (-6.7bps) and Portugal (-4bps) all lower. With no significant data releases, the moves were perhaps aided by comments out of the ECB’s Nowotny who lent a hand to those in support of imminent ECB QE by saying that ‘you always have to consider that monetary policy has an impact only after a long delay’, going on to say ‘that means if I want to do something I should do it sooner rather than later’. Comments from the ECB’s Noyer were also interesting with the central bank official noted in the Handelsblatt saying that ‘any QE program would have to have clear limits measured in percent of outstanding debt, to ensure that the majority of government financing goes through the private market’.

Away from the obvious ECB, Fed, Energy and Greece news in the near term, earnings season in the US is also just kicking into gear. Reuters noted that Q4 earnings for S&P 500 companies are expected to have increased 3.8% yoy although earnings for energy stocks could be as much as 21% yoy lower. The early signs overnight were decent with US aluminum producer Alcoa reporting a solid beat in the US after market close and perhaps more importantly, as something of a cyclical bellwether, signaling to a strong 2015 outlook. It’ll be interesting to see the market reaction to those companies with any significant oil exposure however and we should get an early taste of that with Schlumberger reporting on Thursday. We’re also expecting some numbers out of the banks this week too including JP Morgan, Goldman Sachs and Citigroup.

Refreshing our screens this morning, despite both WTI (-1.69%) and Brent (-1.98%) falling further through the Asia session, equity bourses are fairly mixed across the region. The Nikkei (-1.35%) and Kospi (-0.13%) are both lower, however the Shanghai Composite (+0.42%) and Hang Seng (+0.77%) are proving resilient. The latter markets in particular appear to be supported by a better than expected trade surplus print in China with exports (+9.7% yoy vs. +6.0% expected) in particular surprising to the upside through December. Following a larger than expected trade surplus print in Japan too this morning, boosted by a weaker Yen, 5y JGB’s have declined to 0.001% having briefly traded in negative territory – joining just Germany and Switzerland as the only nations with negative 5y yields.

In terms of the rest of today’s calendar, aside from the UK inflation data it’s a quiet morning data-wise with just the German wholesale price index and Italian industrial production. In the US this afternoon, the calendar picks up starting with the NFIB small business optimism survey for December. This is then followed up by the IBD/TIPP economic optimism reading for January and then the JOLTS job opening print for November - important given that it breaks down job openings, hiring’s and separations. Later on this evening we will also get the monthly budget statement out of the US.