| Good morning. Stocks and bonds slump, conflict in the Red Sea intensifies and British executives urge the Bank of England to slash interest rates. Here's what people are talking. Traders hoping that a pan-markets year-end rally would pick up where it left off got the opposite on 2024's first trading day, a session that featured one of the worst-ever concerted drops in stocks and bonds to start a year. The SPDR S&P 500 ETF Trust and iShares 20+ Year Treasury Bond ETF each fell 0.6% Tuesday, the first time they've both slumped so much to start the year since the bond gauge began trading in 2002. Iran's dispatch of a warship to the Red Sea is its most audacious move yet to challenge US forces in the key trade route, emboldening Houthi militants whose missiles have disrupted shipping over the past two months. Tehran's move has raised tensions after the Houthis started attacking vessels they claimed were headed to or owned by firms in Israel in a bid to end the military assault on Gaza. British company executives urged the Bank of England to slash interest rates soon to prop up the flagging economy after "depressed" confidence sank to a four-month low. Mounting recession fears helped drive the Institute of Directors' Economic Confidence Index down to minus 28 in December from minus 21 the previous month, hitting the lowest level since August and close to 2023's low. The survey measures directors' optimism about the UK economy for the next 12 months. Recent economic surveys are underplaying the resilience of China's commodities consumption, according to Capital Economics, which pointed to robust imports and its own assessments of economic activity. The latest factory gauges suggest the outlook for the nation's manufacturers remains fragile. But lower prices at the factory gate have yet to sap China's appetite for commodities imports, which have stayed buoyant in recent months in part due to expectations that Beijing's steps to support the economy will lift consumption. European stocks are poised to inch lower as investors pare bets on interest-rate cuts. The cautious outlook comes as the Fed delivers minutes from its December policy meeting. Expected data include German and Spanish unemployment. France's Argan is scheduled to report sales results. This is what's caught our eye over the past 24 hours The US dollar will find support as market pricing for a March interest rate cut is looking quite aggressive, particularly if the slew of upcoming US economic data comes anywhere close to matching the median forecast in Bloomberg's survey. Monthly payroll data due Friday is predicted to show a gain of 170k in employment and 3.9% y/y rise in average hourly earnings. Inflation figures on Jan. 11 are expected to show a rise of 3.2% y/y in December, up from 3.1% the prior month, with core inflation remaining elevated at 3.8% y/y. Even ISM services is expected to remain in expansionary territory at 52.5. If the data come in anywhere near these expectations, that's hardly signaling the US economy is going to crash anytime soon -- nor that the inflation genie is back in the bottle. Investors see an 80% probability the US central bank will cut rates by 25bps in March. That likely will need to be dialed back significantly if the actual data matches expectations, which will also support the dollar. David Finnerty is an FX strategist and contributor to the Markets Live blog for Bloomberg News in Singapore. | 
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