• European bourses are firmer this morning as sentiment is supported by APAC newsflow
• China is to increase penalties related to IP theft and will examine lowering the threshold for violators according to fresh government guidelines
• Hong Kong Pro-democracy candidates achieved a landslide win following a record turnout in Hong Kong District Council elections
• Datapraxis analysis on YouGov data projected a UK Conservative majority of 48 seats with a total of 349 seats
• LVMH is to acquire Tiffany (TIF) for USD 135/shr, and London transport regulator will not grant Uber (UBER) a license for the city
• Looking ahead, highlights include ECB’s Mersch & Fed's Powell

ASIA-PAC

Asian equity markets began the week on a positive note with sentiment underpinned by encouraging reports from the Greater China region in which Beijing released fresh guidelines to increase penalties on IP theft and after protesters eased tensions in Hong Kong for elections where pro-Democracy candidates achieved a landslide victory. ASX 200 (+0.3%) was led higher by the trade sensitive sectors such as tech and materials although financials lagged amid continued losses in Westpac due to the AUSTRAC breaches which prompted its Chairman Maxsted to put CEO Hartzer on notice that he could be fired if the scandal continues to destabilise the reputation of the bank, while Nikkei 225 (+0.8%) was underpinned by a weaker currency and with commodity-related sectors front running the advances. Hang Seng (+1.5%) and Shanghai Comp. (+0.7%) conformed to the optimism after China’s steps to increase penalties on IP theft, which despite being vague in its promise, is still seen as an effort to appease the US side. In addition, Hong Kong was buoyed following the District Council elections where protests quietened to avert the risk of a cancellation and in which the pan-democratic camp won more than six-fold the number of seats than the pro-Beijing establishment, although gains in the mainland were to a lesser extent following a substantial CNY 180bln net liquidity drain by the PBoC. Finally, 10yr JGBs were relatively uneventful as focus centred on riskier assets, but with mild gains seen amid the BoJ’s presence in the market for JPY 890bln of JGBs with varying maturities.

PBoC skipped open market operations for a net daily drain of CNY 180bln. (Newswires) PBoC set CNY mid-point at 7.0397 vs. Exp. 7.0421 (Prev. 7.0306)

China is to increase penalties related to IP theft and will examine lowering the threshold for violators according to fresh government guidelines, while reports added that the promise was vague and local governments will have the responsibility of implementing the changes. (Newswires)

Global Times tweeted that contrary to negative media reports, China and US are very close to a phase one deal and China remains committed to continuing talks for a phase two, or even a phase three deal with the US on equal footing, citing experts close to the government. (Twitter)

US National Security Adviser O’Brien said an initial trade agreement with China is still possible before year-end although he added that President Trump will not turn a blind eye to what is happening in Hong Kong or the South China Sea. In related news, a senior White House official said the Dec. 15th additional 15% tariffs are currently scheduled to go into effect on Chinese imports but added that things could change with potential good will if there is a phase one trade deal. (Newswires/Fox)

An ambitious “phase two” trade deal between the US and China is said to look less likely as the two countries struggle to strike a preliminary “phase one” agreement, according to reports citing US and Beijing officials, lawmakers and trade experts. (Newswires)

Hong Kong Pro-democracy candidates achieved a landslide win following a record turnout in Hong Kong District Council elections in which the results showed pan-democratic candidates won 390 seats of the 452 seats, while it was also reported that protests were quiet as protesters decided to ease tensions heading into the election to avoid the risk of a cancellation. (Newswires)

China is planning a record sales of USD sovereign bonds with a potential USD 6bln offering (3yr, 5yr, 10yr, 20yr,), according to SCMP sources. (SCMP)

US

Michael Bloomberg entered the race for the 2020 US Presidential Election as a Democratic Candidate. (Newswires)

China's Foreign Ministry reading the US designation Huawei and ZTE as national security threats, urges the US to stop its abuse of the concept of national security and Chinese Co's. (Newswires)

UK/EU

Datapraxis analysis on YouGov data projected a Conservative majority of 48 seats with a total of 349 seats, Labour 213, Lib Dems 14, SNP 49, Plaid Cymru 5, Green Party 1, Speaker 1. (Twitter) Elsewhere, according to Electoral Calculus, using research from five surveys carried out between November 14th-19th, the Conservatives are set to gain a 64-seat majority. (Telegraph)

Opinium UK election poll showed Conservatives at 47% (+3), Labour 28% (Unch.), Lib Dems 12% (-2) and Brexit Party 3% (-3), while Panelbase poll showed Conservatives at 42% (-1), Labour 32% (+2), Lib Dems 14% (-1) and Brexit Party 3% (-2), in surveys both conducted November 20th-22nd. (Guardian/Newswires) YouGov showed Conservatives at 42% (unch), Labour 30% (Unch.), Lib Dems 16% (+1) and Brexit Party 3% (-1), conducted November 21st-22nd. (Twitter)

UK PM Johnson launched the Conservative party manifesto in which he pledged to deliver Brexit by January 31 and spend GBP 100bln on infrastructure spending, while the policies included ruling out increases in income tax, National Insurance and VAT for 5 years. (Politico/BBC)

UK opposition Labour Party leader Corbyn said he would stay neutral in a 2nd Brexit referendum in an effort to rally support and carry out the will of the people. (Newswires)

SNP’s Leader Sturgeon says that they would be willing to support a Labour government if no party achieves a majority, but would not enter a formal coalition; scrapping of the Trident nuclear system would be a ‘red line’. (BBC)

German Ifo Business Climate New (Nov) 95.0 vs. Exp. 95.0 (Prev. 94.6, Rev. 94.7)

- Curr Conditions New (Nov) 97.9 vs. Exp. 98.0 (Prev. 97.8)

- Expectations New (Nov) 92.1 vs. Exp. 92.5 (Prev. 91.5, Rev. 91.6)

EQUITIES

Major European bourses (Euro Stoxx 50 +0.4%) are modestly firmer in quiet Monday morning trade (but off highs), as the region continues to benefit from weekend tailwinds in the form of further promises from the Chinese on IP and an easing of tensions in Hong Kong to allow for elections. Sectors are all in the green, with Consumer Discretionary (+1.2%) and Materials (+0.8%) in the lead, with the former boosted by outperformance in LVMH (+2.0%) after the luxury goods maker agreed to purchase Tiffany & Co. (+6.0% pre-market) for USD 135/shr, or USD 16.3bln. Further consolidation within the industry has prompted other luxury names, including Christian Dior (+2.0%), Richemont (+1.8%) and Kering (+0.9%) to move higher in sympathy. Elsewhere in M&A, Novartis (+0.4%) has agreed to acquire The Medicines Co. for a transaction value of USD 9.7bln on a fully diluted basis that includes outstanding stock options and convertible debt. Moreover, BHP (+1.1%) caught a bid amid price action within the base-metal complex, whilst reports stated that the Co. reportedly intends to increase its stake in SolGold further to 14.7% from 11%. In other notable stock specific news; IAG (+0.9%) are higher after British Airways agreed to a pilot pay deal to stop strike action with pilot union Balpa. Petrofac (-1.7%) is lower on the news that it had been identified as the energy Co. accused of having fake account for the purpose of disguising bribe payment to foreign government officials. Finally, of note for Just Eat (+0.2%); US competitor Uber (-5.6% pre-market) was not granted an operating license from London’s public transport regulator TfL.

LVMH (MC FP) – Co. has reached a deal to acquire Tiffany (TIF) for USD 135/shr in cash or USD 16.3bln, LVMH state that the acquisition is expected to close in the middle of 2020. (Newswires) Tiffany are approx. 5.95% higher in pre-market trade

Apple (AAPL) – Expects strong shipments for their 5G iPhones as according to sources. (DigiTimes)

Uber (UBER) – London’s transport regulator states they will not be granting the Co. a license. (Newswires) Co. are lower by circa 6% in pre-market trade.

Charles Schwab (SCHW SW) – Co. confirming they are to acquire TD Ameritrade (AMTD) in all stock acquisition at USD 26bln. (Newswires)

GEOPOLITICS

North Korea leader Kim visited a military site and urged the army to be prepared for regular mobilization, while it was also reported that they will increase war-like drills. (Newswires)

Turkey is reportedly testing the S-400's radar system, according to reports. (Newswires)

FX

DXY, Yuan - The USD and Index kick-start a new week relatively directionless amid consolidation from Friday’s advances. The Dollar succumbed to slight pressure in APAC/early EU hours from trade developments over the weekend after vague reports that China will tighten laws around IP theft, which is seen as a step to appease the US amid stumbling blocks in Phase 1 talks. DXY remains above the 98.00 mark and around recent highs (98.30) and having sound support at its 50 DMA at 98.22. Meanwhile, the CNH feel some reprieve amid the China steps coupled with a firmer-than-forecast PBoC fixing. USD/CNH hovers around 7.0300 having gapped lower at the open last night, currency nearer to the bottom of the 7.0280-0420 daily band.

GBP, EUR - Sterling stands as the marked outperformer thus far and stages similar gains to last Monday as some weekend polls show a steady uptrend in the Conservative’s lead over the Labour party. Furthermore, analysis on YouGov data could be adding further fuel to the bullish fire as it projects the market-friendly Tory party with a parliamentary majority of 48. Cable has reclaimed 1.2850+ status having currently clocked in a range of 1.2842-85 as it eclipses its 21 DMA at 1.2878. Meanwhile, the Single Currency remains relatively uneventful and little swayed by the German Ifo Survey which printed a modest improvement in the three metrics but was caveated by cautious comments from the institute, who noted that it is too early to speak of a German economic turnaround. EUR/USD stay afloat just above 1.1000 with touted support around 1.0990-94 should the round figure be breached with ECB’s Mersch and Lane the EZ highlights post-Ifo, although some calendars also highlight hawk Holzmann on the docket.

AUD, NZD, JPY - All moving according with risk, albeit antipodeans have drifted off highs (amid a firming Buck) following an upbeat APAC performance due their China exposure and in light of the aforementioned China IP announcement, seemingly a concession in trade talks with the US. Further, Hong Kong saw a more peaceful weekend as local elections went underway – which concluded with a landslide win for the pro-democratic candidates and hopes of calm in the region in the aftermath. AUD/USD trades flat intraday having tested 0.6800 to the upside overnight (with AUD 800mln in options expiring between strikes 0.6780-90), although pressure on the Aussie could also stem from the AUD/NZD cross which backed off after failing to breach 1.06 to the upside. The cross also keeps the Kiwi buoyed and still above 0.6400 vs. the USD, having traded within a 20-pip range thus far. Elsewhere, USD/JPY hovers near session highs after printing a high of 108.90 in early trade after surpassing its 21 DMA at 108.76 with added upside in the pair as the Dollar gains traction.

EM - The Lira experiences renewed pressure amid reports that Turkey is testing the radars on the Russian made S-400 missile systems, thus potentially prompting backlash from US lawmakers who have threatened CAATSA sanctions should the system be activated. The news of the tests largely overshadows reports of Turkey ceasing military operations in Northern Syria as per its agreement with Russia. USD/TRY topped its 100 and 21 DMAs (5.7100 and 5.7317 respectively) ahead of potential resistance at its 50 DMA (5.7500) with eyes now on any action from US Congress.

Notable FX option expiries for today's NY cut:

- AUD/USD: 0.6780-90 (800M)

- USD/JPY: 108.50-60 (500M)

SNB Economist Lenz says that it is too early to tell when the deposit rate will move back above, zero, adding that rates could be cut further, albeit, they cannot fall on an indefinite basis. (Newswires)

Taiwan Government are to purchase more US goods to avoid being named a currency manipulator, which includes military equipment, oil, gas and agri products., sources. (Newswires)

FIXED INCOME

A slightly softer start to the week for bonds, as sentiment remains supported by the weekend’s developments out of Asia with the Hong Kong elections recording record turnout and an overwhelming win for the pre-Democracy parties. Additionally, China are to increase IP theft penalties, a positive sign given this has been one of the sticking points throughout negotiations; although, reports noted this commitment is vague. Turning to price action Bunds are rangebound within relatively tight parameters around the 171.0 mark. Today’s highlight thus far has been the German Ifo survey which printed broadly in-line, spurring little Bund reaction, with ING noting this adds to the evidence of a bottoming out for the European powerhouse but caveating that it does not equate to a recovery. From a technical perspective, 171.35 and 170.26 may present resistance and support respectively in the event of a break from ranges. Elsewhere, from a UK perspective Gilts are flat this morning and in close proximity to opening levels, with some initially downside in the bond on weekend polling showing the Conservative party maintains a significant lead (as much as 19pp above Labour) and are projected by some to win a comfortable circa 50 seat majority. Looking ahead and to the States where the schedule is sparse at the starts of a holiday week with no data points, but Fed’s Powell is to speak at 00:00GMT/19:00ET for the Greater Providence Chamber of Commerce. Note, the US curve is currently bear steepening.

COMMODITIES                                      

Crude markets are in consolidation, with WTI and Brent front months contracts rangebound just below the USD 58.00/bbl and USD 63.80/bbl levels respectively, as the complex largely fails to garner any impetus from the more favourable macro backdrop. Crude specific news flow has been on the light side; there have been some scheduling updates – JMMC and OPEC meetings will reportedly both take place on the 5th of December, with OPEC+ meeting a day later. In terms of the metals; more favourable risk appetite has seen copper advance; the red metal managed to eke out two-week highs and trades just above its 21 DMA at USD 2.6567/lb. Meanwhile, lack of demand for havens sees gold under pressure; the precious metal is now rangebound around the USD 1458/oz level. Finally, Dalian iron ore futures climbed over 3.0% with upside attributed to trade optimism amid the latest headlines.

Goldman Sachs sees 2019 WTI prices at USD 56.90/bbl and 2020 at USD 55.50/bbl, while it sees 2020 non-OPEC supply to increase 2.1mln bpd and demand growth of 1.2mln bpd. Goldman Sachs said its 2020 top trade recommendation is long oil-heavy enhanced S&P GSCI Index and that it sees oil returns of 10% next year despite maintaining USD 60/bbl oil forecast, while it affirmed its bullish gold target of USD 1600/oz. (Newswires)

OPEC and JMMC meetings will both take place on the 5th December, according to Energyintel's Bakr. (Twitter)