• European bourses are subdued as risk-off sentiment takes hold as US-Sino tensions resurface
• Chinese Global Times Chief Editor said China is prepared for a prolonged trade war, but believe the sides can reach a deal
• US Senate unanimously approved the Hong Kong Human Rights bill and sent it to House of Representatives
• DXY is firmer this morning, with trade sensitive currencies subdued on the overnight updates
• Looking ahead, highlights include Canadian CPI, DoEs, FOMC Minutes, ECB’s Lane

ASIA-PAC

Asian equity markets traded mostly lower as investor sentiment continued to hang on the US-China trade uncertainty and after the US Senate unanimously passed the legislation aimed at supporting Hong Kong protests, which was met by condemnation from China and spurred concerns of a derailment in trade talks. ASX 200 (-1.4%) and Nikkei 225 (-0.6%) were both negative with Australia pressured by losses in its largest weighted financials sector after Westpac was accused by AUSTRAC of 23mln breaches related to anti-money laundering, while the weakness in Japan was a function of the JPY-risk dynamic, tumultuous trade headlines and disappointing data including a larger than expected contraction in the nation’s Exports. Elsewhere, Hang Seng (-0.8%) and Shanghai Comp. (-0.8%) conformed to the subdued picture following China’s stern response to the US Senate’s passage of the Hong Kong Human Rights Bill, in which it called on the US to stop interfering in its affairs and suggested that it must take necessary measures to safeguard its sovereignty and security. However, losses in the mainland were somewhat limited by optimistic comments from US Commerce Secretary Ross that they still think there's hope a China deal can be done and following the PBoC’s 5bps reduction to its Loan Prime Rates. Finally, 10yr JGBs tracked the gains in T-notes and was spurred by safe-haven demand following China’s retaliation threat, while the 20yr JGB auction was inconclusive as the results showed stronger demand at lower accepted prices.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0118 vs. Exp. 7.0115 (Prev. 7.0030)

PBoC 1-Year Loan Prime Rate 4.15% vs. Exp. 4.20% (Prev. 4.20%). PBoC 5-Year Loan Prime Rate 4.80% vs. Exp. 4.85% (Prev. 4.85%)

US Senate unanimously approved the Hong Kong Human Rights bill and sent it to House of Representatives. (Newswires) China Foreign Ministry said it strongly condemns the US Senate measure on Hong Kong and resolutely opposes the action, while it called for the US to stop interfering in Hong Kong and China affairs, as well as stop the latest bills on Hong Kong from becoming law. Furthermore, it added China must take necessary measures to safeguard its sovereignty and security, while it summoned the US Embassy representative in China and lodged stern representations with US over the Senate action on Hong Kong. (Newswires)

Reports suggest, a phase 1 trade deal between US-China could turn into something much larger if US President Trump agrees to Beijing's demands to roll back existing tariffs, according to reports citing sources familiar with the discussions. (Newswires)

Chinese Global Times Editor tweets that few Chinese believe that China and the US can achieve a trade deal soon; given poor China policy from US belief is that the significance of a potential deal will be limited, are prepared for prolonged trade war. (Newswires)

China Global Times tweeted that US President Trump again threatened the US will raise tariffs even higher if a deal he likes isn't reached, while it added the 18-month trade war shows that China does not respond to such threats and that it is not a good way to negotiate. (Twitter)

Japanese Trade Balance (JPY)(Oct) 17.3B vs. Exp. 301.0B (Prev. -123.0B, Rev. -124.8B). (Newswires) Japanese Exports (Oct) Y/Y -9.2% vs. Exp. -7.6% (Prev. -5.2%) Japanese Imports (Oct) Y/Y -14.8% vs. Exp. -16.0% (Prev. -1.5%)

UK/EU

ECB's de Guindos says side effects of monetary policy are becoming more evident, don't believe we are close to reversal rate. (Newswires)

ECB’s Makhlouf says that external risks are heightened at present, macroeconomic outlook is mixed, sees protracted weakness in the Euro Area; hard and soft H2 data points to continuing moderate growth. (Newswires)

EQUITIES

Concerns regarding the state of US/China trade negotiations are weighing on major European bourses (Euro Stoxx 50 -0.8%) on Wednesday morning, after the US Senate unanimously voted in favour of the Hong Kong Human Rights bill and sent it to the House of Representatives overnight, drawing strong condemnation from China and raising fears that trade talks will be complicated. Downside has extended during European trade, with negative comments from China’s Global Times Editor Hu Xijin only exacerbating things. In terms of the sectors, Energy (-1.6%) is the laggard, as yesterday’s steep decline weighs. Other more risk sensitive sectors including Consumer Discretionary (-1.0%), Tech (-0.5%) and Financials (-1.3%) are also suffering, while defensive sectors are holding up better. Moving on to the most notable stock specific movers; Nexi (+3.1%) tops the Stoxx 600 table, with the news that it is in preliminary talks with Intesa Sanpaolo (-0.4%) regarding a possible commercial partnership supportive. Moreover, positive broker moves for Novozymes (+2.5%) and ADP (+1.5%) from Citigroup and RBC respectively saw their shares move higher. In terms of the laggards; Kingfisher (-6.7%) sunk after downbeat earnings, in which the Co. noted there is clearly much to be done to improve performance and that they had not found the correct balance between group scale benefits and local market. Sage Group (-3.6%) is lower after underlying operating profit and EPS fell, although the Co. did increase its FY dividend. Swedbank (-3.8%) shares are lower, with US authorities investigating the Co’s Baltic unit to determine if transactions violated US sanctions on Russia; the Co.’s CEO said he was not aware of any violations and internal investigations to be concluded early next year. Elsewhere amongst the laggards are Wirecard (-2.8%); auditors at EY have reportedly refused to approve Co’s 2017 Singapore accounts, reported Handelsblatt citing documents.

Lowe's Companies Inc (LOW) Q3 19 (USD): adj. EPS 1.41 (exp. 1.35), Revenue 17.4bln (exp. 17.68bln). Raises FY EPS view 5.63-5.70 (exp. 5.67), affirms FY revenue view; SSS +2.2% and affirm FY 19 SSS +3%. (Newswires) Circa 5% higher in pre-market trade

Pinduoduo Inc (PDD) Q3 revenue CNY 7.514bln vs. Exp. CNY 7.49bln, MaUs +85% YY to 429.6mln. (Newswires)

GEOPOLITICS

Israel attacked buildings belonging to Iranian militias in southern Damascus where heavy explosions were reported. (Newswires)

US aircraft carrier strike group Abraham Lincoln transited through the Strait of Hormuz on Tuesday according to US Navy statement, which officials had been considering and suggested would send a strong message to Iran. (Newswires)

Russia's Foreign Ministry said the US decision to remove sanction waivers for the Iranian Fordow nuclear plant violates US international commitments and that Moscow continues to cooperate with Iran on Fordow reconfiguration. (Newswires)

Turkey does not plan to launch new operations in Syria despite earlier comments, according to Russian Foreign Affairs Minister Lavrov. (Newswires)

FX

DXY, Yuan - The broad Dollar and Index gains traction in early European trade amid underlying safe-haven support given the bleaker rhetoric out of China regarding an imminent Phase One deal and potential complications from the US Hong Kong bill. On trade, Global Time’s Chief Editor highlighted China’s readiness for a prolonged trade spat, aiding the DXY to test 98.00 to the upside (vs. an overnight low of ~97.80) shortly after the cash open and eclipse its 100 DMA (98.02) before stabilising below the round figure. Meanwhile, China condemned the US bill supporting Hong Kong protesters which was unanimously passed in Senate and makes way to the House for a re-vote, with some wondering whether this could be another wedge in trade talks despite the official previously highlighting the issues are separate. USD/CNH sees renewed upside in early hours (after little move on the expected PBoC LPR cut) with the pair now above its 21 and 100 DMAs (7.0288 and 7.0411) and at the top of its current 7.0250-0430 intraday range.

AUD, NZD, CAD - All moving in-line with the current trade-induced risk aversion. The non-US Dollars are all pressured in wake of the aforementioned pilling of bearish-sentiment factors which dwindle the prospect of a long-lasting truce between the two nations. AUD/USD reversed a bulk of yesterday’s gains and retested 0.6800 to the downside at one point, currently residing just off the lower bound of today’s 0.6800-30 parameter. Similarly, its Kiwi counterpart fell below its 100 DMA (0.6432) in overnight trade following China’s condemnation of US Senate’s action and tested support at 0.6400 (vs. high of 0.6435). The Loonie meanwhile bears the brunt of softer energy prices but looks forwards to the Canadian CPI metrics with the headline YY remaining steady at 1.9%. USD/CAD took out its 200 DMA (1.3275) in early EU hours as it takes a stab at 1.3300 to the upside.

JPY, CHF - Supported by their safe-haven statuses as the trade landscape shifts away from the recent hopefulness. USD/JPY meanders a touch below the 108.50 mark ahead of a Fib level and its 50 DMA both at 108.26 whilst notable option expiries include USD 1bln at strikes 108.50-65. Correspondingly, the Franc sees modest gains with EUR/CHF back under its 100 DMA and 21 DMAs both at 1.0960.

GBP, EUR - Both modestly softer and largely at the whim of a firming Buck. Last night’s UK leadership debate provided little by way of new substance, whilst a YouGov snap poll on performance (1600 respondents) showed the leaders more-or-less neck and neck, and the election survey from the same pollster indicated a slight narrowing in Tory’s lead over Labour. GBP/USD hovers around a 38.2.% Fib level just above 1.2900 having dipped below the figure earlier on a firmer Buck. EUR/USD losses more ground below its 100 DMA (1.1089) but found a base at 1.1060 ahead of its 21 DMA at 1.1042.

Notable FX Expiries, NY Cut:

- EUR/USD: 1.1000-05 (1.1BLN), 1.1045-55 (700M), 1.1100-15 (1BLN)

- AUD/USD: 0.6825 (200M), 0.6845-50 (700M), 0.6940 (1.4BLN)

- USD/JPY: 108.00 (410M), 108.20-30 (700M), 108.50-65 (1-BLN), 108.75 (250M)

FIXED

Debt is boosted this morning in a mid-week turnaround from the first two lacklustre sessions for the complex; although, the day’s calendar is once again relatively light so focus will remain on US and China trade and Hong Kong tensions. Bunds are in proximity to the top-end of the sessions range, deriving support from aforementioned updates, with a high of 171.56 printed at best thus far, ahead of this from a technical perspective the way is clear until the psychological 172.0 mark in the event a catalyst presents itself. Elsewhere, the remainder of the fixed income complex is benefitting from the overnight updates with no clear debt underperformer at present; illustrated by both core and periphery bonds firmer by a similar magnitude. Note, Gilts are similarly supported and do not appear to have been significantly moved following yesterday’s leaders’ debate, which snap polling indicated was roughly a draw. Finally, USTs are in-line with European counterparts though upside in the 10-year has been capped by the 50-DMA at 129.29 thus far; for reference, the curve itself is continuing to flatten today.

COMMODITIES

Crude futures are relatively flat following a mammoth sell-off in the prior session where anti-production cut commentary out of Russia and bearish supply updates in Europe saw the complex sell off. There was little by way of reactions to last night’s mixed API Inventory data; headline crude stocks built much more than expected but gasoline and distillates posted larger than expected draws, and front month WTI and Brent contracts stabilised around the USD 55.20/bbl and USD 60.80/bbl levels overnight, although both have since crept slightly lower since the arrival of European players. Subdued risk appetite has lent a hand to gold, which advanced to near the USD 1480/oz mark before pulling back slightly, with upside being capped by a firmer buck. Meanwhile, copper was caught between the conflicting forces of the PBoC’s latest LPR cuts and negative developments on the US/China trade front overnight, but has since seen some upside since the arrival of European players, making new highs for the week at USD 2.666/lbs.

US API Weekly Crude Stocks (19 Nov) +6.0mln vs. Exp. +1.5mln Prev. -0.5mln). (Newswires)

Libya currently pumps 1.25mln BPD of oil,. according to the state oil firm head. (Newswires)

Russian Energy Minister Novak says he is not yet ready to announce stance on upcoming OPEC+ meeting; sees 2020 oil demand at around 1mln BPD. (Newswires)