Last checked at 
STOXX 600 down 0.2%
*
Oil stocks lead fallers
*
Australia raises interest rates by 25 bps
*
U.S. stock index futures edge higher
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at
LOOK OUT FOR 2023'S "BABY BULL" MARKET (1218 GMT)
After an "apocalyptically bad" 2022, things can only get better for the European credit market next year, according to BofA Global Research. Investment grade corporate debt should be the "go-to" asset class in 2023, given that spreads are still discounting recession, the bank says. And much like soccer, 2023 will be a year of two halves.
Rate hikes, stagflation and credit events will make for a tough H1, meaning spreads will struggle. "We look for the 'big rip' later on in 2H, as the spectre of 2024 ECB rate cuts approaches, and T.I.N.A. is back for credit," BofA says.
"We see a 'baby' bull market for credit returns next year: 5.5-6% total for investment grade and 7.5% total for high yield," the bank says. But it's not all rosy. "HY remains cheap globally, but will have to contend with an unfamiliar foe next year: defaults."
EUROPEAN RETAIL: A STOCKPICKERS SECTOR IN 2023 (1133 GMT)
The STOXX 600 Retail Index has underperformed the broader market in 2022 as rising interest rates and high inflation put pressure on household budgets, but analysts at RBC see some opportunities in the sector for 2023.
"Investors should remember the early to fall, early to rise nature of the sector and also that downturns tend to lead to an increasingly polarised performance, with the stronger getting stronger," RBC analysts say in a research note.
The Canadian-based bank expects it to be a "stockpickers sector" next year and says investors should position for 10 key themes:
1) The strong to get stronger
2) Omnichannel outperformance
3) Americas expansion and sourcing pivot
4) Asia/China recovery
5) UK interest rate pass through
6) Softer UK hardlines sales
7) Supply chain pressures easing
8) Higher discounting activity
9) Potential cash returns
10) Consolidation on more attractive multiples
Based on those themes, RBC favours Zara-owner Inditex, JD Sports and WH Smith.
UKRAINE'S ARTILLERY USE 10 TIMES WHAT U.S. CAN PRODUCE (1112 GMT)
That's an eye-catching stat coming from a Citi note looking into the very high demand for artillery shells created by the war in Ukraine and exploring what's in it for European defence names in the transatlantic NATO alliance.
In terms of boosts to earnings, procurement of costly missiles is even more interesting and Sweden's SAAB looks to be the top beneficiary. Citi estimates inventories could reach 3 to 4 times the pre-Ukraine levels.
"We see missile systems as a more interesting growth area, partly because even a man portable missile will typically cost 10-15x more than an artillery shell and partly because European defence companies have a much more significant exposure," say analysts at the U.S. bank.
Both artillery and missile weapon systems, though, are seen as "vital for Ukraine's war effort and vital for the ability of European countries to pose a credible deterrent", they add.
Turning to ammunition, Citi envisages a large restocking effort providing a "helpful tailwind" for BAE Systems, for which munitions make around 3% of the business.
"It is highly likely that NATO nations will significantly increase ammunition production/procurement over the next five years, both to replenish stores sent to Ukraine and to increase inventories to a multiple of previously held levels".
Over the summer Ukrainians reportedly fired 6,000-7,000 artillery rounds per day, potentially meaning a yearly consumption of nearly 2 million rounds, against U.S production of around 180,000, Citi say.
Aerospace and defence stocks have been a winning bet for investors this year. A European gauge of stocks in the sector has risen nearly 22% so far in 2022, against a 4.6% drop for the broader STOXX 600 benchmark index.
THE DOLLAR? JUST ANOTHER HIGH-YIELD CURRENCY (1028 GMT)
The greenback is the quintessential safe-haven asset for several reasons, including that it is the world's reserve currency and the denomination for many business deals.
However, the economic backdrop and market perception has changed since September, when the dollar peaked and started to fall from its two-decade highs.
"The greenback is also the highest-yielding currency in the G10 universe," Ulrich Leuchtmann, head of FX and Commodity Research at Commerzbank, says.
"If a large number of industrialised nations and possibly some emerging market economies slide into a recession next year, it will be the Fed with the highest potential for rate cuts and, thus, the highest potential of damaging its currency," he adds.
"Even in the absence of rising unemployment (in the U.S.), there might therefore be reasons for the Fed to lower its key rate once inflation pressure eases," he adds.
SG analysts expect the dollar to be "the weakest of the G10 currencies in 2023, though it won't fall in a straight line," as the Fed is closer to the end of its rate-hiking cycle than most.
The U.S. dollar index is holding mostly steady this morning, following its biggest rally in two weeks after strong U.S. data.
EUROPE HITS AN OIL SLICK (0910 GMT)
European shares have got off to a wobbly start, as losses in the oil and gas sector are being offset by gains in the likes of consumer staples. The STOXX 600 is down around 0.1% on the day so far.
Shell, BP and TotalEnergies are three of the biggest negative weights on the pan-European index following the near-3.5% slide in crude oil prices overnight . Shell and BP are down by around 1-1.2%, while France's Total is off 0.7%. Nestle and Unilever rank among some of the biggest gainers on a weighted basis - up 0.6% and 0.7%, respectively.
In percentage terms, Aeroports de Paris is down by almost 12% - set for its biggest one-day fall since early 2020 - after Royal Schiphol Group said it had sold off its remaining stake in the French airports company at a sharp discount.
UK equipment rental company Ashtead is the standout performer, up 3.3%, but it hasn't been enough to give the FTSE 100 an edge. The London blue-chip index is down around 0.1% on the day, versus a 0.1% rise in the DAX, thanks to gains in financial services company Allianz, which is up 1% and Munich Re, up 0.8%.
MORNING BID; POWERLESS
Just as missile attacks fuel worries of emergency blackouts in Ukraine, global equities are also feeling the pain from U.S. economic data that is stoking fears the Fed could go higher for longer.
Treasury yields are up, the dollar is standing firm after its biggest rally in two weeks and risk-off sentiment is holding sway. For the euro zone, however, there is little in the way of good news. Business activity declined for a fifth month in November, indicating the economy was headed for a mild recession as consumers slash spending amid surging inflation.
Industrial orders data from Germany, the biggest economy in the euro zone, is the only economic indicator worth watching on Tuesday.
While the euro bloc's economy remains fragile, economists still expect the European Central Bank to add 50 basis points to its deposit rate next month as it attempts to fight runaway inflation.
Down Under, Australia's central bank raised interest rates to a 10-year high and stuck with its projection that more hikes are needed.
Meanwhile, British consumer spending edged up last month at a rate that greatly lagged inflation, according to surveys on Tuesday that highlighted the pressure on household budgets ahead of Christmas.
In the cryptocurrency world, Britain's Treasury is finalising plans for a package to regulate the industry, including limits on foreign companies selling into the country and restrictions on advertising, the Financial Times reported.
The campaign to shore up investor confidence on Credit Suisse goes on. Chairman Axel Lehmann told media the embattled bank is "definitely stable" and has seen a stabilisation in client funds outflows.
This comes days after the bank reported sharp outflows as wealthy clients move assets elsewhere, while it focuses more on its flagship wealth management franchise and pruning its investment banking business.
In news outside the markets, Prince Harry said Britain's royal household regularly leak stories about each other, calling it a "dirty game".
Anshuman Daga
ON THE SLIDE (07.42)
European equity futures are pointing to a softer open as share markets around the world continue to treat good news out of the U.S. as bad news.
Eurostoxx 50, FTSE 100 and DAX futures are all down around 0.3% after declines in most Asian markets earlier in the day, and falls on Wall Street the previous day after strong U.S. services data that again suggested the Federal Reserve might stick longer with aggressive interest rate increases.
That also boosted the dollar and U.S. Treasury yields, as most asset classes continued to trade broadly in unison.]
The STOXX 600 has fallen for the past two sessions having hit a six-month top last week.
British life insurer Phoenix and baked goods vendor SSP Group are on investors' radars on Tuesday, the former having announced a $1.8 bln 2025 new business cash target and the latter saying its sales on average rose above pre-pandemic levels in the first eight weeks of the new financial year.
