• European bourses are modestly firmer this morning, as sentiment struggles to find direction on the mixed trade remarks
• White House Economic Adviser Kudlow said we are getting close to a trade deal with China; noted, US President Trump is not ready to sign off
• IEA Monthly Oil Report: maintains oil demand growth estimates for 2019 and 2020
• USD is little changed thus far and remains in a tight bank with the Fixed complex equally rangebound
• Looking ahead, highlights include US NY Fed Manufacturing, Import & Export Prices, Retail Sales, Industrial Production, Baker Hughes Rig Count, BoC’s Poloz, BoC’s Lane

ASIA-PAC

Asia equity markets traded mostly higher as sentiment remained at the whim of the temperamental trade rhetoric with risk appetite spurred after White House Economic Adviser Kudlow suggested they are getting close to an agreement and the sides were on the short strokes of a phase 1 deal, and although Kudlow noted US President Trump was not yet ready to sign off, his comments were at a sharp contrast to prior reports the trade teams were struggling to complete a deal. ASX 200 (+0.9%) and Nikkei 225 (+0.7%) are positive with Australia underpinned by the recent increase in rate cut bets after chances for a cut next month more than doubled to 29% according to ASX 30-Day Interbank Cash Rate Futures and with its implied yield curve heavily leaning towards a cut at the subsequent meeting in February, while a deluge of earnings has been a key driver in Japan alongside tailwinds from a weaker currency. Hang Seng (U/C) and Shanghai Comp. (-0.6%) were mixed as Hong Kong attempted some composure from this week’s protest-triggered declines, although the mainland was somewhat unconvinced by the conflicting trade headlines, as well as the PBoC’s tepid actions in which it skipped reverse repos and instead opted for its medium-term lending facility, albeit at half the amount of the prior operation. Finally, 10yr JGBs were choppy as they initially extended above the 153.00 level although prices then reversed from intraday highs amid the positive risk tone and after a relatively light BoJ Rinban operation for just JPY 130bln in longer-dated JGBs.

PBoC skipped open market operations but announced to lend CNY 200bln through 1yr MLF at 3.25% vs. Prev. CNY 400bln at 3.25%, while it noted the 2nd phase of its targeted RRR cut that took effect today released CNY 40bln. (Newswires)

PBoC set CNY mid-point at 7.0091 (Prev. 7.0083)

White House Economic Adviser Kudlow said we are getting close to a trade deal with China, while he added the mood music has been very good and talks have been very constructive. Kudlow also noted US President Trump is not ready to sign off, but suggested US and China are on the short strokes of a phase 1 deal. (Newswires/WSJ)

Chinese China House Prices (Oct) Y/Y 7.8% (Prev. 8.4%). (Newswires)

Hong Kong Government to step up coordination between departments and take "more decisive measures" to end the violence. (Newswires)

US

White House Economic Adviser Kudlow says working on second-term tax cut package geared to improve economic growth and help middle income earners, while he added that Fed policy is headed in the right direction. (Newswires)

Fox News Nevada Democratic primary presidential poll: Biden at 24%, Sanders at 18%, Warren at 18% and Buttigieg at 8%. (Fox News)

UK/EU

ITV's Peston tweeted the Brexit Party is compiling a dossier of complaints from its candidates of alleged inducements and bullying from senior Tories to persuade them to step down, which suggested could hurt PM Johnson’s election ambitions. (Twitter/ITV)

EU HICP Final YY (Oct) 0.7% vs. Exp. 0.7% (Prev. 0.7%)

- EU HICP-X F&E Final YY (Oct) 1.2% vs. Exp. 1.2% (Prev. 1.2%)

- EU HICP-X F,E,A&T Final YY (Oct) 1.1% vs. Exp. 1.1% (Prev. 1.1%)

GEOPOLITICS

North Korea government reportedly warned South Korea of a last chance to remove their facilities before they demolish joint resort buildings near the border. (Newswires)

Turkish Vice President says Faith Drilling Ship has commenced operations off the coast of Northern Cyprus. (Newswires)

EQUITIES

Major European Bourses (Euro Stoxx 50 +0.5%) are modestly in the green, albeit off highs amid tailwinds from encouraging US/China trade comments from White House Economic Advisor Kudlow overnight, albeit upside may be capped by earlier FT reports that China’s stance is jeopardising chances of a final Phase One agreement being reached in the coming days. DAX Dec’ 19 futures for now sit well within this week’s range, appearing bound by 13140-13300 parameters for now. The sector performance table is reflective of the markets tentative risk-on tone; Materials (+0.6%) and Tech (+0.6%) lead the way, while Utilities (+0.1%) and Consumer Staples (-0.2%) lag. Energy (-0.2%) is lower and weighed by lower crude prices. In terms of stock specific news; Whitbread (+2.9%) is the top Stoxx 600 gainer, buoyed by an upgrade to overweight from equalweight at Barclays. Closely behind is Subsea 7 (+4.0%), higher on the news of a potential merger agreement with Saipem (+1.3%). Elsewhere, Orange (+2.1%) is on the front foot on reports that the Co. intend to split its mobile towers into a separate company to capitalise on investor interest, boosting its valuation by up to EUR 10bln. ArcelorMittal (+1.4%), meanwhile, is firmer on the news that is has secured approval from the highest Indian court regarding the completion of the Essar Steel takeover for USD 5.8bln. In terms of the laggards; Elekta (-13.2%) sunk after a downgrade at SEB Enskilda. Similarly, Uniper (-1.6%) was pressured by a downgrade at SocGen. BT (-2.4%), meanwhile, managed to pare the worst of early losses, triggered by jitters over UK Opposition Labour Party proposals to nationalise the company as part of a push to provide free full-fibre broadband to the whole of the UK.

Italy is to go ahead with the US web tax introduction despite threats of retaliation from the US, according to the Italian deputy foreign minister. (Newswires)

FX

DXY, Yuan – Trade developments set the stage for the European session thus far as participants balance mixed newsflow, with sources cited by the FT noting that China is jeopardising chances of an imminent Phase One deal whilst NEC Director Kudlow stated that the two sides are ever closer to an accord. Nonetheless, DXY remains contained within a tight band thus far (98.12-23), albeit closer to the top of the range and in anticipation of further clarification. The Yuan meanwhile has derived modest impetus on the back of Kudlow, which saw USD/CNH retest 7.000 to the downside overnight, but the pair has drifted off lows and almost back to pre-Kudlow levels with participants sceptical amid conflicting reports.

AUD, NZD, CAD - The high-beta currencies have unwound some of its Kudlow-induced APAC gains in which the Aussie climbed to a whisker away from 0.6800 vs. the Buck, whilst its Kiwi counterpart edged towards 0.6400 before fading gains. The antipodeans meander just below the respective round figures but have drifted lower in recent trade as the Buck prints fresh session highs and again the currencies await clarity on the status of US-Sino talks. The Loonie meanwhile saw a more pronounced move overnight amid the risk-driven pop higher in the crude complex in which USD/CAD tested 1.3220 to the downside (ahead of its 50 DMA at 1.3208) before advancing back up towards the half-figure in early European trade with around USD 1.2bln of options expiring between strikes 1.3240-50.

CHF, JPY – Despite the pull-back in high-betas, the overnight softness in the safe haven FX has persisted, although more-so as the Greenback gains traction in early trade with USD/JPY eclipsing its APAC high of 108.62 with the next level to the upside the round 109.00 which coincides with its 200 DMA. The Franc meanwhile has reclaimed 0.99+ status against the Buck and resides near the top of the range alongside its JPY counterpart with the next level to the upside its 50 DMA at 0.9923.

EUR, GBP - Sterling remains little moved on the day amid a lack of fresh catalysts on the UK election front and with little action derived by news that the European Commission has opened a legal case against the UK for failing to name a new EU Commissioner as its hands are tied by the general election. Cable remains modestly softer within a 1.2868-86 band, albeit closer to the bottom of the range and at the whim of the USD. Meanwhile, EUR/USD remains flat intraday and closer to the bottom of today’s 1.1030-15 band as in-line final EZ CPI figures unsurprisingly did little to excite traders. It’s worth noting a hefty EUR 1.2bln expiring at strike 1.1000 at today’s NY cut which may see a gravitation of price depending on news-flow.

Notable FX Expiries, NY Cut:

- EUR/USD: 1.1000 (1.2BLN), 1.1050 (230M), 1.1100-15 (650M)

- USD/CHF: 0.9870 (766M).

- GBP/USD: 1.2825 (400M), 1.2900 (701M), 1.2950 (1.4BLN)

- USD/CAD: 1.3130-40 (830M), 1.3190-1.3200 (1BLN), 1.3225 (230M), 1.3240-50 (1.2BLN).

- USD/JPY: 108.50 (621M)

FIXED INCOME

A quiet end to the week for the debt complex thus far, as price action remains relatively rangebound and an early test of the 171.0 mark to the upside in Bunds failed to hold just after the European cash/equity open as the early trade induced risk-on feeling appeared poised to fade. Market drivers this morning have been scarce as focus remains on the constructive Kudlow remarks; for the German 10yr explicitly this resides towards the top of the day’s range but has not been able to successfully retain the 171.0 handle with 171.05 printed at best thus far, ahead of resistance at 171.15. Data wise, EZ CPI (Final) was largely unrevised and as such unable to spur any momentum. Elsewhere, after a busy week on the UK data front, Gilts are set to end the week slightly subdued given the broader risk theme, though downside may be capped by support at 131.36; 24 ticks below the current session low just under 131.60. Stateside, price action has the opportunity to become more lively with retail sales amongst the scheduled prints; on this, Lloyds are expecting a rebound from Septembers fall although, they do caveat that, retail sales for October can be negatively impacted by consumers awaiting the Black Friday sales event on the 29th of November. For reference, USTs are currently mirroring their European counterparts with the curve marginally steeper at present.

COMMODITIES

Crude markets are lower during early Friday trade after unwinding gains from the positive US/China trade comments from White House Economic Advisor Kudlow since the arrival of European participants as traders balance hot and cold trade news. Brent Jan’ 19 futures have now fallen below support in the form of yesterday’s USD 62.15/bbl low, with WTI Dec’ 19 futures following and also breaking below yesterday’s low at USD 56.64/bbl. In terms of crude specific news; in its monthly oil report, the IEA maintained its forecast for oil demand growth for 2019 and 2020, at 1mln BPD and 1.2mln BPD respectively. Moreover, the report highlighted that Global oil supply rose 1.5mln BPD in October as Saudi Arabian production returned to normal and on increases from Norway, Canada and the US. Meanwhile, OPEC crude oil production was 29.9mln BPD at 101 mln BPD, with world oil supply was 1.2 mb/d below year-ago levels with OPEC down 2.5 mln BPD. As a reminder, yesterday OPEC also maintained its forecast for global oil demand growth for 2019 and 2020 at at 980k BPD for 2019 and 1.08mln BPD for 2020. Earlier in the week, the US EIA cut its forecast for 2019 oil demand growth 90k BPD to a 750k BPD increase but raised its 2020 forecast by 70k BPD to an increase of 1.37mln BPD. Looking ahead, US Retail Sales, NY Fed Manufacturing, Industrial Production and Import Prices populate an otherwise modest data docket, while traders will as always have their ears to the ground for further US/China trade updates. In terms of the metals; Gold is on the back foot amid the market’s lukewarm risk tone and a stronger Dollar and is consolidating around the USD 1465/oz mark. Meanwhile, Copper, which has been on the back foot in recent days, appears to be have stabilised, with support at the USD 2.615/lbs level (23 October and yesterday’s lows) providing a floor for the time being.

IEA Monthly Oil Report: maintains oil demand growth estimates for 2019 and 2020 at 1mln BPD and 1.2mln BPD respectively

- Global oil supply rose 1.5mln BPD in October as Saudi Arabian production returned to normal and on increases from Norway, Canada and the US

- OPEC crude oil production was 29.9mln BPD At 101 mln BPD, world oil supply was 1.2 mb/d below year-ago levels with OPEC down 2.5 mln BPD. Non-OPEC output growth is set to increase from 1.8mln BPD this year to 2.3mln BPD in 2020.

- The call on OPEC crude in 2020 is estimated at 28.9mln BPD, 1mln BPD below current production

- For 2019 as whole, crude demand is likely to decline for the first time since 2009, albeit by only 90k BPD