• Asian bourses traded mixed as the region failed to sustain the momentum from the record levels on Wall St
• US and China sources noted that both sides want to have a Phase 1 trade deal down on paper by the end of next week
• However, source reports stated the US plan to roll back China tariffs faces fierce internal opposition, no final decision has been made
• Chinese trade figures topped estimates but continued to show a contraction in both USD-denominated exports and imports
• Looking ahead, highlights include German Imports, Exports, Trade Balance; French Industrial Output; Canadian Labour Market Report; US University of Michigan Sentiment, Baker Hughes Rig Count; Fed’s Bostic, Williams, Daly, Brainard; Norges Bank Deputy Governor Matsen, Moody’s on UK

TRADE

US and China trade sources from both sides said they are still negotiating using the APEC timeframe and that both want to have a Phase 1 deal down on paper by the end of next week. (Fox Business News/Twitter)

NEC Director Kudlow said there will be tariff concessions if there is a Phase 1 deal. Furthermore, there were also separate comments from a US government spokesperson that the first China trade deal would include a tariff roll back and a White House aide also noted they very optimistic a deal with China will be reached soon. (Newswires)

Source reports stated the US plan to roll back China tariffs faces fierce internal opposition where no final decision has yet been made, while a US source also stated there are no plans to roll back any tariffs in exchange for phase one and that Chinese officials are trying to renegotiate the deal to their advantage. In related news, sources stated that China wants all tariffs rolled back as phases of the trade deals are completed, while the US has offered to roll back some tariffs but wants to keep a majority in place until the Chinese reach certain milestones after the full trade deal is completed. (Newswires/WSJ/Fox Business News)

ASIA-PAC

Asian equities traded mixed as the region failed to sustain the momentum from the record levels on Wall St. where sentiment was initially boosted after US and China were said to have agreed to cancel existing tariffs in different phases, although some of the gains were later reversed on reports of fierce internal opposition from the US regarding the tariff rollbacks. ASX 200 (Unch.) and Nikkei 225 (+0.1%) were both lifted at the open although the sentiment in Australia gradually deteriorated amid hefty losses for gold miners and a growth forecast downgrade by the RBA, while Tokyo stocks also reversed course as a choppy currency overshadowed confirmation of an economic package and higher than expected Household Spending. Elsewhere, Hang Seng (-0.6%) and Shanghai Comp. (Unch.) were mixed as participants digested the latest trade figures which were better than expected but continued to show a contraction in both USD-denominated Exports and Imports, with the mainland bourses slightly favoured after MSCI raised China A-shares weighting in its Emerging Market Index to 4.10% from 2.55%. Finally, 10yr JGBs were lower amid spillover selling from USTs and with prices reeling from the recent rise in yields, while weaker results in the 10yr inflation-indexed auction added to the uninspiring tone.

PBoC skipped open market operations and were net neutral on the week vs. Prev. CNY 590bln drain last week. (Newswires) PBoC set CNY mid-point at 6.9945 vs. Exp. 6.9947 (Prev. 7.0008)

A Hong Kong student who fell from a car park while police and protesters were clashing last weekend passed away according to hospital officials, which reports suggested could likely further escalate tensions. (AFP)

• Chinese Trade Balance (CNY)(Oct) 301.3B vs. Exp. 283.3B (Prev. 275.15B). (Newswires)
• Chinese Exports (CNY)(Oct) Y/Y +2.1% vs. Exp. -1.4% (Prev. -0.7%)
• Chinese Imports (CNY)(Oct) Y/Y -3.5% vs. Exp. -5.4% (Prev. -6.2%)
• Chinese Trade Balance (USD)(Oct) 42.81B vs. Exp. 40.83B (Prev. 39.65B). (Newswires)
• Chinese Exports (USD)(Oct) Y/Y -0.9% vs. Exp. -3.9% (Prev. -3.2%)
• Chinese Imports (USD)(Oct) Y/Y-6.4% vs. Exp. -8.9% (Prev. -8.5%)

UK/EU

EU Commission President Juncker said he doesn't think that US President Trump will implement auto tariffs on the EU. (Newswires)

FX

In FX markets, the DXY remained firm and held above the 98.00 level as a result of the improving US-China trade climate and lacklustre trade in its major counterparts with EUR/USD stuck around 1.1050, while GBP/USD briefly attempted a breakdown of support at 1.2800 following the dovish BoE meeting where the MPC kept rates unchanged at 0.75% as expected but with surprise dissent as Haskel and Saunders opted for a 25bps reduction. Elsewhere, USD/JPY traded choppy in reflection of the wavering overnight risk tone and antipodeans were subdued with AUD/USD mildly pressured after the RBA Monetary Police Statement reiterated a willingness to ease policy further if required and lowered the year-end GDP growth forecast, but with downside stemmed by the recent CNY strength in which the PBoC set the reference rate firmer than 7.0000 against the greenback for the first time in over 3 months.

RBA Statement on Monetary Policy noted the board is prepared to ease policy further if required and that the pause in November allows time to assess effects of past easing and global events. RBA added the board is mindful rates are very low, that further cuts bring closer other policy options, and is aware more easing could convey overly negative view of the economy. Furthermore, RBA stated the Australian economy is gradually coming out of a soft patch and that global financial markets appear to have passed a trough of pessimism, while it lowered GDP growth forecast for December 2019 to 2.25% (Prev. 2.50%) but maintained December 2020 growth forecast at 2.75% and kept underlying inflation forecasts unchanged. (Newswires)

COMMODITIES

Commodities were uninspiring in which WTI crude futures retreated below the USD 57.00/bbl level with overnight price action at the whim of the conflicting trade news, as the prior day’s advances that were fuelled by the positive US-China trade developments, later stalled on reports that tariff rollback plans face fierce opposition from within the US. Elsewhere, gold remained subdued on the continued USD strength but with losses stemmed after having recently found support at the October low around USD 1460/oz, while copper prices pulled back as the risk appetite gradually waned overnight on the conflicting trade rhetoric.

US

The TPLEX continued its march lower on Thursday, following some reprieve on Wednesday, as reports confirmed the US and China were moving to both remove tariffs on each other. The US sold 19bln in 30-year bonds tailing the 2.424% WI by 0.6bps, whilst being covered by 2.23x, in line with the six-auction average; the takedown was impressive, however, with dealers taking a record low share of 20.7%, directs took an impressive 20.5%, whilst indirects took 58.8%, in line with their average. However, although an impressive 30-year auction, it did little to change the dial on the sell-off in the debt complex. By settlement the US Treasury curve had re-steepened from Wednesday, with the 2s/10s just over 3bps wider, with the 2-year yield just over 7bps higher itself. T-note futures (Z9) settled 30 ticks lower at 128-12+.

Fed's Bostic (Non-Voter, Dovish) said the US economy is on solid footing and that monetary policy is accommodative, while he added further adjustments will be data dependent and that he is comfortable with standing pat to weigh economic data over the upcoming months. Furthermore, Bostic said he expects economic data released before end of the quarter to boost GDP growth and that he would not have supported the last rate cut if he had a vote on the policy committee. (Newswires)

US House Committees subpoenaed acting White House Chief of Staff Mulvaney in Trump impeachment inquiry. (Newswires)