In a day that will be remembered for the first major snowstorm to hit New York in 2014 and test the clean up capabilities and resolve of the city's new populist mayor (not starting on a good note following reports that JFK airport will be closed at least until 8:30 am Eastern), it was only fitting that there was virtually no overnight news aside for the Chinese non-manufacturing PMI which dropped from 56.0 to 54.6, a new 4 month low. Still, following yesterday's ugly start to the new year, stocks in Europe traded higher this morning, in part driven by value related flows following the sell-off yesterday. Retailers led the move higher, with Next shares in London up as much as 11% which is the most since January 2009 and to its highest level since 1988 after the company lifted profit forecast after strong Christmas trading performance. Other UK based retailers with likes of AB Foods and M&S also advanced around 2%. Looking elsewhere, peripheral bonds continued to outperform their core counterparts, with IT/GE 10y spread below 200bps mark for the first time since July 2011 and SP/GE 10y spread below 200bps mark for the first time since May 2011. The recent flow into peripheral bonds said to have driven by domestic accounts, together with international real money accounts putting on new trades for 2014. A combination of a sharp drop in EONIA fixing, together with the release of better than expected UK macroeconomic data meant that GBP/USD outperformed EUR/USD. On that note, analysts have noted that sharp decline in EONIA fixing leaves EUR/USD vulnerable to the downside. In summary, the Italian and Dutch markets are the best-performing larger bourses, Swiss the worst. The euro is weaker against the dollar. Portuguese 10yr bond yields fall; Spanish yields decline. Commodities little changed, with zinc, nickel underperforming and silver outperforming. New York ISM, U.S. vehicle sales data released later. Looking at the day ahead, it will likely be a quiet end to the week with little on the data docket to note and inclement weather on the US east coast possibly preventing some market participants from returning to their desks. Today’s European data include Euroarea money supply and Spanish/Italian CPI readings. December auto sales is the main data release in the US. Bernanke, Lacker, Plosser and Stein are scheduled to speak at the American Economic Association annual meeting in Philadelphia although some may not make it due to the weather. Recap: S&P 500 futures down 0% to 1827.3 Stoxx 600 up 3% to 326.7 US 10Yr yield down 1bps to 2.98% German 10Yr yield down 1bps to 1.94% MSCI Asia Pacific down 0.4% to 140.3 Gold spot up 0.5% to $1231/oz EUROPE 17 out of 19 Stoxx 600 sectors rise; retail, real estate outperform, insurance, basic resources underperform 67.5% of Stoxx 600 members gain, 29.8% decline Top Stoxx 600 gainers: Next PLC +8.6%, Banco Espirito Santo SA +5.1%, Dixons Retail PLC +4.9%, Telecom Italia SpA +4.7%, Valiant Holding AG +4.2%, Marks & Spencer Group PLC +4%, Debenhams PLC +3.5%, Eutelsat Communications SA +3.5%, Hays PLC +2.9%, Azimut Holding SpA +2.9% Top Stoxx 600 decliners: International Personal Finance -2.7%, Swiss Re AG -2.7%, DKSH Holding AG -2.3%, Remy Cointreau SA -2.3%, Lonmin PLC -2.2%, Commerzbank AG -1.6%, Rexam PLC -1.3%, Rotork PLC -1.2%, Pearson PLC -1.2%, Coca- Cola HBC AG -1.2% ASIA Asian stocks fall with the Hang Seng underperforming. MSCI Asia Pacific down 0.4% to 140.3 Nikkei 225 closed, Hang Seng down 2.2%, Kospi down 1.1%, Shanghai Composite down 1.2%, ASX down 0.3%, Sensex down 0.3% 2 out of 10 sectors rise with health care, consumer outperforming and energy, tech underperforming Gainers: ANTA Sports Products Ltd +8.7%, Celltrion Inc +6.1%, Chongqing Changan Automobile C +5.8%, Advanced Info Service PCL +4.8%, Kasikornbank PCL +4.7%, Kasikornbank PCL +3.8%, Ranbaxy Laboratories Ltd +3.5%, OCI Co Ltd +3.4%, United Spirits Ltd +3.3% Decliners: Thai Oil PCL -6.9%, China Taiping Insurance Holdin -6%, Eclat Textile Co Ltd -5.8%, Banpu PCL -5.4%, Belle International Holdings L -5.1%, Astra Agro Lestari Tbk PT -4.9%, First Pacific Co Ltd/Hong Kong -4.9%, Adaro Energy Tbk PT -4.7%, CITIC Securities Co Ltd -4.7%, E-Mart Co Ltd -4.4% Overnight headline bulletin fromRanSquawk European stocks trade higher following yesterday's sell-off, with the peripheral markets outperforming as Italian and Spanish spreads continue yesterday's tightening. UK Mortgage Approvals came in at the highest since January 2008, with UK Nationwide House Prices showing the biggest rise since August 2009. Going forward, market participants will get to digest the release of the latest EIA Nat Gas Storage report, DoE data and US vehicle sales. Asian Headlines Chinese Non-Manufacturing PMI (Dec) M/M 54.6 (Prev. 56.0); 4-month low South Korean finance minister Hyun stated a need to closely monitor JPY's movements, adding that they may need to strengthen support measures for smaller companies following the weak JPY and that Japan may face international pressure on currency. EU & UK Headlines UK Mortgage Approvals (Nov) M/M 70.8K vs. Exp. 69.7K (Prev. 67.7K, Rev. to 68.0K) - highest since January 2008 - UK November net lending to non-financial businesses at GBP -4.656bln vs October GBP -1.121bln, biggest fall since series began in May 2011. UK PMI Construction (Dec) M/M 62.1 vs Exp. 62.0 (Prev. 62.6) UK Nationwide House PX (Dec) M/M 1.4% vs Exp. 0.7% (Prev. 0.6%, Rev. 0.7%) - Biggest rise since August 2009 - Nationwide House PX NSA (Dec) Y/Y 8.4% vs Exp. 7.1% (Prev. 6.5%) Spanish Unemployment Net ('000s) (Dec) M/M -107.6 (Prev. -2.5) Swiss PMI Manufacturing (Dec) M/M 53.9 vs 56.3 (Prev. 56.5) Analysts at UBS believe that any BoE rate increases may be as small as 5bps. Saying that the withdrawal will be cautious if inflation and wage growth remain subdued, suggests 5bps rate rises to emphasize that any more will be incremental and hesitant. German government will not increase taxes, according to draft of annual economic report of German government. No major Tier 1 data from the US data, with focus on the energy markets as today sees the release of the DoE Inventories and EIA Natural Gas Storage Change. US volumes today may be impeded by adverse weather conditions. According to the National Weather Service, a combination of storms will impact areas from the southern Appalachians into New England into Friday. Heaviest snow will fall from central New York to the Massachusetts coast. Blizzard conditions are possible for eastern Long Island and the Massachusetts coast. Bitter cold will move into the Midwest and East following the storm. Equities Following yesterday's sell-off in European equities, stocks have managed to trade with gains this morning, with Next in the UK being the notable outperformer. This follows the Co.'s pre-market update, with Q4 sales coming in significantly higher than expected. This news for Next has seen other UK stocks including AB foods and M&S trade higher for the session. Elsewhere, the periphery is leading the way across Europe, with Telecom Italia supporting the FTSE MIB after pre-market reports that Telefonica are to review the feasibility of Telecom Italia Brazil unit breakup next week. FX In FX markets overnight, the South Korean Finance Minister said that they need to closely monitor JPY's movements and that Japan may face international pressure on currency with USD/JPY then running through stops at 104.50 to the downside. Following the release of a better than expected UK PMI Construction, GBP/USD has outperformed EUR/USD, with EUR also under pressure from JPY strength. There is also market talk of real money accounts selling in EUR/GBP. Analysts at Credit Suisse say that any setbacks in GBP/USD towards 1.6320/00 offers a chance to re-establish long positions as med-term outlook remains bullish Commodities Nomura forecasts Brent oil average price at USD 100/bbl in 2014 and forecasts WTI crude average price at USD 90/bbl in 2014. Iraq starts fixing oil pipeline that was damaged by a bomb yesterday evening. There is no definite date to complete repairs as there was extensive damage according to North Oil. China's November copper products output rises 25% on year to 1.5 mil mt. * * * Finally, here is the complete overnight recap from DB's Jim Reid DM equities had a soft start to 2014 with both the S&P500 (-0.89%) and Stoxx600 (-0.74%) recording their worst opening day performances since 2008. S&P500 volumes were on the low-side, even for a first trading day of the year, and it may drop further today after winter storm Hercules hit the US north east late on Thursday prompting a state of emergency to be declared in New York State and New Jersey. There are reports of flight cancellations, highway closures and reduced transport services in major cities in the north east, while NYC is expected to receive up to 9 inches of snow on Thursday night/Friday morning accompanied by a sharp drop in temperatures. Coming back to markets, yesterday saw a partial reversal of one of the major themes of 2013, being that of stronger DM equities and subdued fixed income performance. All ten industry sectors in the S&P500 and Stoxx600 closed in the red yesterday, with utilities, financials and resources bearing the brunt of the selloff. On the fixed income side, peripheral European bonds had an impressive day with both Spain and Italian 10 year yields closing below the 4% mark. US treasury yields reached an early high 3.05% before rallying to close at 2.989% (-4bp on the day) - partially reversing some of the losses from the last trading day of 2013. The weaker-than-expected ISM data (more below) helped sentiment in USTs as did the weakness in US equities which opened lower and stayed low for the entire session. The USD had a strong start to the year (USD index +0.65%) while emerging market assets experienced the opposite as worries permeated across Turkey, Thailand and LATAM. The MSCI EM index fell 1.2% for its largest drop in more than a month and the TRY, BRL and MXN all struggled against the USD. Reviewing the data flow, the latest round of ISM/PMI surveys showed that manufacturing activity ended 2013 on a mixed note. The US manufacturing ISM for December fell 0.3pt from November’s levels to 57.0 but this was still slightly above the Bloomberg consensus estimate of 56.8. DB’s economists noted that this was a similar performance to the Chicago PMI which was released earlier in the week, but they also noted some positives in ISM report including the fact that both the new orders (64.2 vs. 63.6 previous) and employment components (56.9 vs. 56.5 previous) made new multi-year highs. The ISM data had minimal effect on markets though 10yr yields dropped a couple of basis points following its release. Across the Atlantic, the Euro-area manufacturing PMI for December came out in line with the flash estimate at 52.7 but the surprise was in the strength of the numbers in Spain (50.8 vs 49.8 forecast) and Italy (53.3 vs 51.7 forecast). Meanwhile in the core, the divergence between Germany and France continued to widen (+1.1 to 52.7 for & -1.4 to 47.0 respectively). Outside of the manufacturing data, US initial jobless claims for the last full week of 2013 dropped -2k to 339k though the week-to-week numbers have been impacted by seasonal factors of late. Looking at overnight markets, Asian equities are taking the lead of the US and Europe with losses paced by the Hang Seng (-1.9%) and KOSPI (-1.1%). USDJPY remains under some pressure, dropping 0.6% early today while Japanese stock markets remain closed for New Year holidays. All eyes remain on the wobbles in EM and the latest data flow from China hasn’t helped sentiment there either. The official Chinese December services PMI (released overnight) came in at 54.6 which is a four-month low and is 1.4 pts lower than November’s reading. This follows the weaker-than-expected official manufacturing PMI (51.0 vs 51.2 expected) released earlier this week. Thailand’s SET equity index is faring better today (-0.7%) following yesterday’s 5.2% fall which brought the index to an 18-month low. Asian EM credit spreads are about 3-4bp wider in general. Chinese bank funding pressures remain of some concern but the 7-day repo rate has eased around 15bp this morning. Amid the recent worries about debt levels at Chinese local governments, there is talk that a number of local governments may tap onshore Chinese USD funding markets after Shanghai Chengtou Corp issued the first onshore USD-denominated bond by a local-government financing vehicle in China as yuan borrowing costs surge (Bloomberg). Returning to DM, 2013 will be partly remembered for being a robust year for M&A, leveraged financings and IPOs particularly in North America – and there are signs that 2014 will be another healthy year for corporate activity. The buyouts of Verizon Wireless, Heinz and Dell were amongst the standout buyout deals of 2013, and the first out of the gates this year is auto-maker Fiat who announced on New Year’s Day a $4.4bn deal to acquire the remaining 41% portion of Chrysler. The fully-merged Fiat-Chrysler group is aiming to list in New York within the year according to the Financial Times. Speaking of buyouts, it will be also interesting to track the LBO pipeline with the improving optimism in that market evident in the latest buyout stats from Reuters that show that the median EBITDA multiple in US LBOs jumped to 9.8x in 2013 from 8.3x in 2012, citing data from market research firm Preqin. Thomson Reuters also notes that the US leveraged bank lending posted a record $510bn in volumes in 2013 (up 55% over 2012) and the average LBO debt levels crept up to 6.2x in 2013. So valuations and leverage levels crept upwards in 2013, supported by accommodative debt and equity funding markets - whether this can be sustained in 2014 is the big question. On a related note, following a gain of more than 30% in 2013, the S&P500 is predicted to gain around 5.5% in 2014 according to the average of 20 analyst estimates compiled by Bloomberg. That outlook is the lowest forecast since 31 Dec 2004. Looking at the day ahead, it will likely be a quiet end to the week with little on the data docket to note and inclement weather on the US east coast possibly preventing some market participants from returning to their desks. Today’s European data include Euroarea money supply and Spanish/Italian CPI readings. December auto sales is the main data release in the US. Bernanke, Lacker, Plosser and Stein are scheduled to speak at the American Economic Association annual meeting in Philadelphia.