• European bourses are subdued as the post-Trump underwhelming tone remains, ahead of potential Auto tariffs and Fed’s Powell
• Tariffs are reportedly emerging as the main stumbling block for US and China to reach a limited trade deal, according to WSJ citing sources
• NZD outperforms after the RBNZ remained on hold overnight, DXY retains some mild firmness
• Looking ahead, highlights include US CPI, EIA STEO, APIs, Japanese GDP, Fed’s Powell, Barkin, Kashkari, RBNZ's Orr, RBA’s Bullock; President’s Trump & Erdogan meeting (approx. 12:00ET)
• Earnings: Cisco

ASIA-PAC

Asian equity markets were lower across the board and US equity futures pulled back from record levels amid continued uncertainty and disappointment following US President Trump’s speech at the Economic Club of New York which failed to provide any fresh insight on US-China trade, with news the USTR office will submit a report on possible auto tariffs to the White House also clouding over the risk climate. ASX 200 (-0.8%) and Nikkei 225 (-0.9%) declined as weakness in the energy, mining and financials sectors weighed on Australia, while Tokyo was also subdued by underperformance in commodity stocks and detrimental currency inflows. Hang Seng (-1.8%) and Shanghai Comp. (-0.3%) conformed to the downbeat tone after US President Trump largely stuck to the script regarding US-China trade but also renewed his criticism on China and threatened higher tariffs if they fail to reach an agreement, with the losses in Hong Kong exacerbated again due to the current no end in sight for the disruption which has already plunged the city into a recession. Finally, 10yr JGBs were in recovery mode after the prior day’s slump with the rebound aided by support around 152.50 and the broad risk averse tone in the region.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0026 vs. Exp. 7.0010 (Prev. 6.9933)

Tariffs are reportedly emerging as the main stumbling block for US and China to reach a limited trade deal, according to sources. Reports suggest that the disagreement stems on whether or not the US removes all existing tariffs in “phase one” or cancels the impending December 15th tariffs. (WSJ)

China's Cabinet says will lower capital ratio requirement for some infrastructural investments projects, according to state media. (Newswires)

US

Fed's Kashkari (2020 Voter, Dove) said he is feeling a little bit better about the US economy than a few months ago and there is a lot of consensus at the Fed that monetary policy is modestly accommodative, while he added that modestly accommodative policy is appropriate. (Newswires)

The National Association of Manufacturers was hacked over the summer and hired a cybersecurity firm, who concluded the attack came from China, according to two sources said; noting, that the incident occurred before a round of formal negotiations between US and Chinese government officials over the contents of potential deal (Newswires)

UK/EU

UK CPI YY (Oct) 1.5% vs. Exp. 1.6% (Prev. 1.7%): BoE October forecast 1.5%

- UK Core CPI YY (Oct) 1.7% vs. Exp. 1.7% (Prev. 1.7%)

- UK CPI MM (Oct) -0.2% vs. Exp. -0.1% (Prev. 0.1%)

- UK Core CPI MM (Oct) 0.1% (Prev. 0.2%)

German CPI Final YY* (Oct) 1.1% vs. Exp. 1.1% (Prev. 1.1%); MM* (Oct) 0.1% vs. Exp. 0.1% (Prev. 0.1%)

- HICP Final YY* (Oct) 0.9% vs. Exp. 0.9% (Prev. 0.9%); MM* (Oct) 0.1% vs. Exp. 0.1% (Prev. 0.1%)

Swedish CPIF YY (Oct) 1.5% vs. Exp. 1.5% (Prev. 1.3%); Riksbank October forecast 1.58%

SNB's President Jordan says monetary policy with negative interest rates and a readiness to intervene is still necessary, CHF remains highly valued. (Newswires)

GEOPOLITICS

Senior US administration official said President Trump's priorities in northeast Syria are to prevent IS resurgence and prevent atrocities in the region, while the official added the US has no intention to end alliance with Kurdish-led SDF militia and needs to resolve the issue with Turkey regarding the latter's purchase of the Russian S-400 system. (Newswires)

Note: US President Trump and Turkish President Erdogan are due to meet today at circa 12:00 ET 

Hong Kong government suspends all schools on Thursday; separately, Chinese Universities in Hong Kong will cancel all of their on-campus classes for November in Hong Kong., SCMP understands. (Newswires/SCMP)

EQUITIES

Risk off trade sees major European bourses (Euro Stoxx 50 -0.8%) lower this morning, following a cautious APAC session in light of US President Trump’s disappointing speech at the Economic Club of New York and separate reports that the USTR office is to submit new potential auto tariffs which Trump could implement on the EU. Potentially contributing to the jitters; today is the approximate deadline for US President Trump to make a decision on EU auto-tariffs. European autonames, including Peugeot (-2.7%) and BMW (-2.0%), are amongst the underperformers. Sector performance is reflective of the markets lack of risk appetite; the more defensive Consumer Staples (+0.7%), Utilities (-0.5%) and Health Care (+0.2%) sectors are the outperformers, the latter buoyed by gains in GlaxoSmithKline (+0.5%), whose Phase III study of Nucala met its primary endpoint. Strong earnings from SSE (+2.0%), meanwhile, is helping to prop up the Utilities sector. The Financial sector (-2.0%) is the marked underperformer; yields have been coming off but the downside likely has as much to do with soft ABN AMRO (-5.5%) earnings. In terms of other notable movers; strong earnings from Salvatore Ferragamo (+3.3%), Bechtle (+1.6%) and Deutsche Wohnen (+1.7%) saw their respective share prices underpinned. Conversely, soft earnings from Lanxess (-3.3%) saw the Co.’s shares pressured. Elsewhere, ArcelorMittal (-3.5%) shares were on the back foot on the news that Italy’s Foreign Minister said he did not seek Chinese investors for the Ilva plant and it would be too soon to discuss alternative options. Finally, Tullow Oil (-26.0%) sunk on after the Co.’s FY19 group oil production forecast came in slightly below guidance, largely due to performance in Ghana.

Alibaba (BABA) is reportedly testing investor appetite for an up to USD 15bln offering that prices this month; may offer stock at 5% discount in Hong Kong, according to Nikkei citing sources. (Nikkei)

FX

NZD/AUD/CAD - In stark contrast to its non-US Dollar counterparts and other high beta/risk sensitive currencies, the Kiwi is sharply outperforming, albeit off 0.6400+ overnight highs vs the Greenback and 1.0670 against the Aussie, on the back of an unexpected unchanged OCR from the RBNZ. To recap, the Bank confounded forecasts for a 25 bp cut that were underpinned and actually rising in wake of a dip in NZ inflation projections just ahead of the latest policy meeting, but the RBNZ opted to hold fire given no immediate need to ease further at the current juncture and with Governor Orr noting that data since the August assessment has been broadly balanced (netting beats and misses vs consensus). Conversely, Aud/Usd is languishing towards the base of a 0.6825-60 range and Usd/Cad has rebounded back above 1.3250 amidst a broad downturn in risk appetite and less optimism on the global trade front after US President Trump failed deliver good news about Phase 1 or auto tariffs late yesterday.

CHF - The next best G10 performer and only partially heeding more verbal SNB intervention following a meeting with the Swiss Government to discuss a variety of issues, but pertinently fragile FX markets and a Franc that is still deemed to be highly valued. Usd/Chf skirting 0.9900 and Eur/Chf 1.0900.

GBP/JPY/EUR - All relatively flat or rangebound against the Buck as Cable pivots 1.2850 and largely shrugs off UK inflation data including headline CPI that slowed to 1.5% vs 1.6% expected, but bang in line with the BoE estimate, while the Yen straddles 109.00 and Euro holds above 1.1000, albeit after a miniscule downside breach and as the DXY drifts back from a fresh recent peak of 98.449 to the middle of its band (down to 98.289 at the other extreme).

NOK/SEK - The Scandi Crowns are slipping in wake of more Swedish data raising questions over the Riksbank’s commitment to hiking the repo in December, with Eur/Sek up over 10.4400 at one stage and Eur/Nok soaking up offers at 10.1600 before fading and also fuelled by a retracement in crude prices

EM - Amidst widespread losses vs the Dollar, Usd/Zar has revisited 15.0000+ territory against the backdrop of Eskom’s ongoing power travails and with SA retail sales missing the mark by some distance. However, Usd/Try is hovering below highs ahead of Turkish President Erdogan’s meeting with his US peer and Usd/Rub is meandering mid-range into Russian Q3 GDP and after the Finance Minister pulled a 2025 OFZ offering.

RBNZ kept the Official Cash Rate unchanged at 1.00% vs. consensus for a 25bps cut, while it said it is prepared to act and will add further monetary stimulus if needed but noted economic developments do not warrant a change to monetary policy at this time and that low rates, as well as government spending will support domestic demand. RBNZ Governor Orr also commented there was no urgency to further ease at this point and suggested ups and downs in data since the August statement broadly offsets each other, while RBNZ's Hawkesby commented that data will determine what the RBNZ does. (Newswires)

Notable FX Expiries, NY Cut:

- EUR/USD: 1.1015 (550M), 1.1035-50 (1.5BLN)

- EUR/GBP: 0.8500 (1.1BLN), 0.8550 (200M), 0.8650 (350M), 0.8700 (755M)

- USD/CAD: 1.3150 (266M), 1.3215 (1BLN), 1.3260 (425M)

FIXED INCOME

Bonds have eased back off best levels, but remain firmly bid and in demand almost across the board amidst a deeper retracement in risk assets after US President Trump underwhelmed in terms of bullish trade expectations. Bunds, Gilts and 10 year US T-notes have been as high as 170.25, 131.41 and 128-27+, with the former somewhat stymied by a rather lacklustre German auction and with the focus shifting to a packed pm agenda including CPI, Fed chair Powell and colleagues.

COMMODITIES

The crude complex is lower, in fitting with the market’s risk-off feel. Front month WTI and Brent futures have been moving lower in line with equities, with WTI earlier testing Monday’s USD 56.25/bbl low and Brent easily clearing this level and making progress towards last week’s USD 60.70/bbl low (although, at USD 61.30/bbl, Brent is still some way off). In terms of crude specific developments; ahead of the December 5-6th OPEC and OPEC+ meetings, OPEC Secretary General Barkindo said it is too early to say if further output cuts are needed. As a reminder; sources have noted that Saudi Arabia and Russia do not want to bear the brunt of deeper reductions, with the former wanting members to comply with the current pact, which could see around 500k BPD out of the market. In separate news, the IEA forecast that global oil demand growth is expected to slow from 2025 as fuel efficiency improves and the use of electrified vehicles increases but is unlikely to peak in the next two decades. Elsewhere, Nigeria's NNPC said current crude output stands at 1.6-1.7mln bpd (vs. 1.93mln in October), and assured the nation will continue to comply with OPEC cuts. Looking ahead, EIA’s Short-Term Energy Outlook is set for release in the afternoon, followed by API Inventory data after the US equity market close, both having been delayed one day due to a Monday holiday in the US. Over in metals, gold prices are modestly firmer and Copper softer, as the broader lack of risk appetite gives havens a boost at the expense of more risk sensitive assets. Following a steep decline so far in the month of November, the precious metal has managed to stabilise, and reclaim the USD 1460/oz mark from USD 1450/oz lows. Meanwhile, downside for copper is being cushioned on the news that further strikes are disrupting operations at Chilean Codelco's northern copper mines.

OPEC Secretary General Barkindo says it is too early to say if further output cuts are needed. (Newswires)

IEA said the world energy outlook central scenario is for global oil demand growth to rise 1mln bpd annually to 2025 then increase 100k bpd annually during 2030s, while it sees oil prices at nearly USD 90/bbl in 2030 and USD 103/bbl in 2040. (Newswires)

Port Hedland October iron ore exports to China 35.8mln tons vs. Prev. 36.05mln M/M and 32.8mln tons Y/Y. (Newswires)