• European bourses are little changed in thin trading conditions on an early US close
• EZ CPI (Flash) printed above expectations, headline YY 1.0% vs. Exp. 0.9%
• Both FX and debt are choppy with month end flows potentially the cause
• Hong Kong Polytechnic University siege was confirmed to have ended as police swept through a vacant but devastated campus yesterday
• Looking ahead, highlights include Canadian GDP, Black Friday, ECB’s de Guindos & de Cos, early US close

THURSDAY NEWSFLOW

USTR Office has granted exclusions for tariffs imposed on Chinese product, this will apply as of the September 24, 2018, effective date of the USD 200bln action, to August 7, 2020, according to a Federal Register statement. (USTR)

China were considering placing the drafters of the Hong Kong Bill on the no-entry list for the Mainland, Hong Kong and Macau; out of respect to Trump. Subsequent reports indicate that Speaker Pelosi, Secretary of State Pompeo and Republicans Rubio and Cruz may be placed on this list. (Twitter/Global Times)

ECB recognises flaws in inflation gauge but there is no good alternative; ECB Officials do not expect major changes from the strategic review. (Newswires)

North Korea has fired two projectiles towards the East Sea from the South Hamkyong Province, reports indicate that this missiles were short range and landed outside of Japan’s EEZ. (Yonhap/Twitter/Newswires)

ASIA-PAC

Asian markets were mostly subdued after the holiday closure stateside for Thanksgiving Day and amid continued trade uncertainty, despite a more conciliatory tone from China’s State Council and with the retaliation so far to US President Trump's Hong Kong bill signing seen as a mere slap on the wrist. ASX 200 (-0.3%) initially prodded record levels but with gains later reversed by underperformance in miners and the largest weighted financials sector, while the opening gains for the Nikkei 225 (-0.5%) eventually succumbed to the pressure from currency flows and substandard data in which Industrial Production matched its worst contraction since January last year. Hang Seng (-2.0%) and Shanghai Comp. (-0.6%) declined as markets second-guessed China’s retaliation measures for the HK bill and after PBoC’s inaction this week resulted to a CNY 300bln net liquidity drain, with the losses in the Hong Kong benchmark exacerbated as all its components resided in negative territory following the recent increased IPO activity and as the city braces for a resumption of protests over the weekend. Finally, 10yr JGBs weakened in an extension of yesterday’s post-2yr auction selling pressure and with demand also kept subdued by the lack of BoJ presence in the market, as well as mixed Japanese data releases.

PBoC skipped open market operations for a net weekly drain of CNY 300bln vs. Prev. CNY 300bln injection last week. (Newswires) PBoC set CNY mid-point at 7.0298 vs. Exp. 7.0288 (Prev. 7.0271)

Hong Kong Polytechnic University siege was confirmed to have ended as police swept through a vacant but devastated campus yesterday, while there were separate reports that Hong Kong is said to gear up for a weekend of protests following lull in violence. (WSJ/Straits Times)

BoK kept 7-Day Repo Rate unchanged at 1.25% as expected with board member Shin the lone dissenter, while BoK Governor Lee suggested the local economy is seen as passing the bottom. Furthermore, BoK lowered 2019 GDP growth forecast to 2.0% from 2.2% and 2020 GDP to 2.3% from 2.5%. (Newswires)

South Korea Trade Ministry said it agreed to hold senior-level talks with Japan during 3rd week of December with talks aimed at exchanging views on export controls and resolve pending issues,  while a senior official also stated they will try to reverse the trade curbs taken by South Korea and Japan since July. (Newswires)

Japanese Tokyo CPI (Nov) Y/Y 0.8% vs. Exp. 0.4% (Prev. 0.4%). (Newswires) Japanese Tokyo CPI Ex. Fresh Food (Nov) Y/Y 0.6% vs. Exp. 0.6% (Prev. 0.5%) Japanese Tokyo CPI Ex. Fresh Food & Energy (Nov) Y/Y 0.7% vs. Exp. 0.7% (Prev. 0.7%) Japanese Industrial Production (Oct P) M/M -4.2% vs. Exp. -2.1% (Prev. 1.7%); matches worst reading since January 2018. Japanese Industrial Production (Oct P) Y/Y -7.4% vs. Exp. -5.3% (Prev. 1.3%)

UK/EU

UK PM Johnson suggested there will not be a trade agreement with the US if President Trump wants the NHS on the table and that the NHS is more important than a trade deal with US. (Newswires/ITV)

Spain’s Socialist said it had constructive dialogue with Catalan separatist party ERC at meeting on formation of a new government and next meeting will be held on 3rd December. (Newswires)

UK GfK Consumer Confidence (Nov) -14.0 vs. Exp. -14.0 (Prev. -14.0). (Newswires) UK Lloyds Business Barometer (Nov) 9 (Prev. 6)

EU HICP Flash YY (Nov) 1.0% vs. Exp. 0.9% (Prev. 0.7%)

- HICP-X F&E Flash YY (Nov) 1.5% vs. Exp. 1.3% (Prev. 1.2%)

- HICP-X F, E, A & T Flash YY (Nov) 1.3% vs. Exp. 1.2% (Prev. 1.1%)

- Unemployment Rate (Oct) 7.5% vs. Exp. 7.5% (Prev. 7.5%, Rev. 7.6%)

GEOPOLITICS

US President Trump said Taliban peace talks are to resume and that US is substantially drawing down its troops in Afghanistan during a surprise visit to the country. (Newswires)

EQUITIES

Major European bourses (Euro Stoxx 50 +0.1%) are mixed and off of morning lows, after a broadly negative Asia-Pac session during which sentiment was undermined by the hangover from recent trade concerns. Month-end factors coupled with low liquidity also seem likely to distort the price action. Sector performance is mixed with no clear standout. In terms of individual movers; Ocado (+12.4%) shares shot higher on the news that the Co. has agreed to a partnership with Japanese grocer Aeon, the companies first partnership in the region. Elsewhere, positive broker moves for Bouygues (+1.5%) and Scout24 (+0.8%) saw their respective shares supported. In terms of the laggards; St James’ Place (-3.5%) fell to the bottom of the Stoxx 600 following a downgrade at Goldman Sachs. Elsewhere, negative broker movers put Remy Cointreau (-1.2%), Air France (-1.5%) and Royal Mail (-2.2%) shares under pressure. Separately, E.ON (+2.0%) posted strong Q3 earnings, which were roughly 20% above the prior year’s figures, while the Co. also raised the outlook on the completion of Innogy’s (-0.2%) transaction. On which note, Innogy and E.ON presented proposals for the restructuring of Innogy’s Npower unit - which could lead to 4.5k in job losses and closures of a number of call centres. Finally, Renault (+1.4%) shares are supported amid reports that the Co. is reportedly mulling a program that would boost efficiency with Nissan and Mitsubishi.

Huawei may challenge the US Federal Communication Commissions decision restricting US suppliers from using a USD 8.5bln government funds to purchase from the Co., Global Times citing sources. (Twitter)

Amazon (AMZN) - German Verdi Union calls for strikes at several German Amazon sites during Black Friday and Cyber Monday. (Newswires)

Warren Buffet reportedly attempted to buy Tech Data (TECD) in a thwarted USD 5bln deal. (CNBC)

FX

NZD/SEK - The major outperformers and movers outside of recent ranges, as an improvement in NZ consumer confidence gives the Kiwi a further fillip following more upbeat business sentiment or less bleak to be precise on Thursday. Nzd/Usd is extending gains above 0.6400 and threatening to break free from the 0.6425 level that has been keeping the pair tethered, while Eur/Sek is now eyeing the psychological 10.5000 mark in wake of firmer than forecast Swedish Q3 GDP that has given the Swedish Krona a fundamental lift on top of renewed bullish technical impetus after the cross retreated through 10.5500 chart support more convincingly.

GBP - Far from hero to zero, but Sterling is losing more of its YouGov pre-UK election poll mojo with negative month end cross winds also weighing on the Pound via Eur/Gbp demand. Cable has now lost grip of the 1.2900 handle and briefly slipped below the 21 DMA (1.2884), while 0.8500 continues to cushion the aforementioned cross.

AUD/EUR/JPY/CAD/CHF - All narrowly mixed vs the Dollar that is still doing well if not quite defying gravity amidst rebalancing models flagging various strains of Greenback selling for month end (DXY holding ‘comfortably’ above 98.000 and towards the upper end of a 98.412-301 range). The Aussie is trying to piggy-back its Antipodean counterpart, but remains top heavy into 0.6800 and Aud/Nzd has pulled back from 1.0550 again after weaker than expected private sector credit data overnight. In similar vein, Eur/Usd seems destined to stay anchored around 1.1000 with yet more hefty option expiries hampering attempts to the upside vs decent technical support limiting losses beneath the big figure, while mixed Eurozone data is broadly being ignored. Elsewhere, Usd/Jpy, Usd/Cad and Usd/Chf are also treading familiar ground in narrow parameters of 109.60-45, 1.3292-79 and parity-0.9980 respectively, with the Yen torn between conflicting Japanese data and standard BoJ policy rhetoric from Governor Kuroda, Franc largely shrugging off a decline in the Swiss KOF indicator and Loonie awaiting Canadian GDP along with any USMCA developments for some independent direction.

Chilean Central Bank announced a USD 20bln FX intervention in which it will sell USD 10bln in spot market and will offer USD 10bln in FX hedges. (Newswires)

Australian Private Sector Credit (Oct) M/M 0.1% vs. Exp. 0.3% (Prev. 0.2%). (Newswires)

Australian Private Sector Credit (Oct) Y/Y 2.5% vs. Exp. 2.7% (Prev. 2.7%)

New Zealand ANZ Consumer Confidence Index (Nov) 120.7 (Prev. 118.4). (Newswires)

New Zealand ANZ Consumer Confidence (Nov) M/M 1.9% (Prev. 4.0%)

New Zealand Building Permits (Oct) M/M -1.1% vs. Exp. -2.5% (Prev. 7.2%)

FIXED

Bunds appear to have led a broad bounce on a mixture of tech buying at the lows, intraday jobbing and maybe some latent month end demand, with the core Eurozone bond posting a new 171.40 Eurex best compared to 171.12 at the low. However, the rebound could also be attributed to safe-haven positioning given more BTP underperformance/fall-out from not that well received Italian supply yesterday allied to firmer than consensus data earlier, as recoveries in Gilts and US Treasuries are comparatively muted (former fading at 133.19 vs 132.94 at worst and 10 year note falling short of the 129-20 overnight peak). Note also, German and EZ peers are still lagging in terms of position rolls/switching from December futures into March so intra market spread activity is likely to be in the mix.

COMMODITIES

Crude markets are subdued (albeit off intraday lows) amid a lack of fresh catalysts, as prices pull back slightly following a strong finish to yesterday’s session. In terms of crude specific news; OPEC’s Economic Commission Board yesterday reportedly suggested that OPEC does not need to implement deeper cuts over H1 2020, premised on the assumption that the surplus in production over the first half of the year will be later offset by a deficit in the latter part of the year. This is broadly in line with expectations for the outcome of the 5-6 December meeting, as indicated by multiple sources in recent weeks. Elsewhere, Russian oil production for the month of November stood at 11.24mln BPD, according to IFAX citing sources, which is relatively unchanged from the prior month. In terms of metals, gold prices are subdued and well within recent ranges; the precious metal managed to meander just under yesterday’s 1458.32/oz high, but has since pulled back slightly, and remains well off this week’s USD 1470/oz high. Copper prices, meanwhile, continue to slip, with poor Industrial Output/Production readings out of Japan and South Korea overnight doing little to help sentiment.