• European equities pared a bulk of the earlier upside seen from above-forecast major global PMIs
• Chinese markets welcomed the encouraging PMI data which aside from the headline beat, also showed Non-Manufacturing PMI and Caixin Manufacturing PMI topping estimates
• US-China deal was said to be stalled because of Hong Kong legislation according to Axios sources, China Global Times noted that the trade deal must include tariff rollbacks
• Global Times Editor noted that China will come up with follow-up actions if US continues to provoke China over Hong Kong
• Recent polling data showed a narrowing lead for PM Johnson’s Conservatives
• Looking ahead, highlights include US Construction Spending & ISM Manufacturing PMI, ECB President Lagarde

ASIA-PAC

Asian equity markets kick-started December on the front-foot with risk appetite stimulated by a flurry of better than expected Chinese data including official Manufacturing PMI which expanded for the first time in 7-months. ASX 200 (+0.2%) and Nikkei 225 (+1.0%) were higher with Australia led by outperformance in the defensive and financial sectors but with upside capped by energy following the recent slump in oil prices after Russian Energy Minister Novak triggered doubts for a deal extension at this week’s OPEC+ meeting, while the advances in Tokyo were mainly fuelled by a weaker currency. Hang Seng (+0.4%) and Shanghai Comp. (+0.1%) welcomed the encouraging PMI data which aside from the headline beat, also showed Non-Manufacturing PMI and Caixin Manufacturing PMI topped estimates, although gains were limited by continued PBoC inaction, the resumption of violence in Hong Kong protests over the weekend and ongoing trade uncertainty with Beijing said to be insistent on a tariff rollback and as other reports suggested Hong Kong legislation may have stalled the US-China agreement but that a phase one deal would still probably occur by year-end at the soonest. Finally, JGBs were lower amid similar pressure in T-notes and with demand for bonds sapped by the mostly upbeat sentiment, while the BoJ’s presence for a respectable JPY 890bln of JGBs did little to help 10yr JGB prices after having slipped through prior support at the 153.00 level.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0262 vs. Exp. 7.0247 (Prev. 7.0298)

US-China deal was said to be stalled because of Hong Kong legislation according to reports citing a source close to President Trump's negotiating team, although the article noted the phase one deal would probably happen year-end at the earliest. (Axios)

China Global Times noted that the trade deal must include a tariff rollback with Beijing insisting that a pledge to scrap new tariffs in December cannot replace rolling back existing tariffs in a phase one agreement. (SCMP)

China is to take further actions as US interferes in Hong Kong issues, according to CCTV, China sanctions several US non-government organisation. China's Foreign Ministry has suspended the review for US maritime vessels visiting Hong Kong in response to the HK bill which passed into law. (Newswires) Meanwhile, China Global Times Editor noted that China will come up with follow-up actions if US continues to provoke China over Hong Kong. (Twitter) 

Hong Kong Police clashed with protesters over the weekend as protests resumed following the recent lull in violence. (Newswires)

Chinese Manufacturing PMI (Nov) 50.2 vs. Exp. 49.5 (Prev. 49.3). first expansion in 7 months. (Newswires) Chinese Non-Manufacturing PMI (Nov) 54.4 vs. Exp. 52.0 (Prev. 52.8) Chinese Composite PMI (Nov) 53.7 (Prev. 52.0) Chinese Caixin Manufacturing PMI (Nov) 51.8 vs. Exp. 51.4 (Prev. 51.7)

US

US President Trump cites how markets are up 21% since the announcement of tariffs at the start of 2018, talks of how the US is taking in massive amounts of money from the tariffs. US President Trump added that he will restore tariffs on all Steel and Aluminium imported from Brazil and Argentina; calls on the Fed to lower rates and loosen policy. (Twitter)

White House lawyer responded that President Trump cannot be fairly expected at December 4th impeachment hearing after the US House judiciary committee deadline passed, while other reports noted that White House lawyers are sceptical about cooperating in the impeachment hearings and instead are focusing on how to prepare for the eventual Senate battle. (Newswires/Axios)

The Fed are looking at potential introducing a new rule that would let inflation run above it’s 2% goal in an attempt to avoid an entrenchment of US prices undershooting its target. (FT)

WTO found that EU failed to withdraw all subsidies to Airbus (AIR FP) in its latest compliance review, sources state. (Newswires)

UK/EU

UK Election Polls:

·        YouGov/Sunday Times poll: Conservatives 43% (Unch.), Labour 34% (+2), Lib Dems (13% (Unch) and Brexit Party 2% (-2), conducted November 28th-29th. (Sunday Times/Twitter)

·        UK Election Survation/Good Morning Britain poll: Conservatives 42% (+2), Labour 33% (+3). Lib Dems 11% (-4), Brexit Party 3% (-2), conducted November 26th-30th. (Newswires)

·        Other polls from over the weekend showed varying margins of victory for the Conservatives with Observer showing Conservatives 15 ahead (vs. Prev 19), Delta 13 ahead (vs. Prev. 13), ComRes 10 ahead (vs. Prev. 10), BMG ahead by 6 (vs. Prev. 13). (Twitter)

EU's Dombrovskis warned City of London regarding post-Brexit access in which he stated that the bloc could cut off UK access if it diverges from Brussels standards. (FT)

In Germany, Finance Minister Scholtz lost his bid to become leader of the SPD after suffering defeat at the hands of Norbert Walter-Borjans and Saskia Esken, who have been highly critical of the coalition between their party and the CDU/CSU. The Chief economist at the Centre for European Reform noted that Walter-Borjans and Esken have been critical of the debt brake but accept that it probably cannot be changed, adding that it is unlikely the coalition will collapse but the SPD will likely make the GroKo more painful for the CDU. (BBC/Twitter)

EU Markit Manufacturing Final PMI (Nov) 46.9 vs. Exp. 46.6 (Prev. 46.6) (Newswires) UK Markit/CIPS Manufacturing PMI Final (Nov) 48.9 vs. Exp. 48.3 (Prev. 48.3)

EQUITIES

Better than expected PMI data out of China overnight followed by slight revisions higher to manufacturing PMIs across Europe have somewhat spurred risk appetite; subsequently, major European bourses (Euro Stoxx 50 +0.1%), but has pared back a bulk of its gains in recent trade. Sectors are mostly in the green, led by Energy (+0.7%), in-line with rallying crude prices, while the defensive Utilities (-1.3%) sector is the laggard. In terms of individual mover, Tullow Oil (+4.3%) is the top Stoxx 600 gainer, as reports circulate alleging the Co. has agreed to sell a stake in its Ugandan oil fields. Lufthansa (+1.5%) received a boost on the news that Qatar Airways may be interested in taking a stake in the Co., which could lead to a partnership, although the Co. pushed back on the news stating that the Co. was not privatised in Germany to be nationalised in Qatar. Elsewhere, positive broker moves for Rio Tinto (+0.7%) and EDF (+2.4%) sees the Co.’s shares supported. In terms of the laggards, Hiscox (-3.4%) is set to receive the boot from the FTSE 100 in its quarterly reshuffle on Wednesday, while Fresnillo (-3.7%) and Kingfisher (+1.5%) are also reportedly at risk. easyJet (-0.1%), Just Eat (Unch) and GVC (+1.0%) could be promoted, according to Elsewhere, at the bottom of the FTSE 100 is Ocado (-8.6%), whose shares sunk on the news that the Co. is to issues GBP 500mln worth of bonds which will be convertible into shares as it seeks cash to fund its tech arm’s commitments. 

FX

NZD/AUD - The Kiwi has made a flying start to December on the back of significantly stronger than forecast NZ terms of trade for Q3 that has lifted Nzd/Usd over the 0.6450 mark to test early November resistance (around 0.6466) and nudged the Aud/Nzd cross down through 1.0500 to test Fib support even though the Aussie is also doing well in the G10 arena in wake of encouraging Chinese PMIs, with Aud/Usd climbing above 0.6775 and rebounding towards 0.6800.

EUR/CHF/CAD/GBP/JPY - All softer vs a generally solid Greenback, bar the aforementioned Antipodean Dollar outperformance, as the DXY meanders between 98.272-368 awaiting the full return of US markets/participants from Thanksgiving. Eur/Usd is just maintaining 1.1000+ status with the aid of better than flash or forecast Eurozone PMIs that have offset some of the investor qualms over German politics due to the failed attempt by Finance Minister Scholz to become SPD chief over the weekend. However, more hefty option expiry interest may keep the single currency supressed, as 1.2 bn runs off from 1.0995-1.1000 and a further 1.1 bn between 1.0005-20. Elsewhere, the Franc is pivoting parity after Swiss retail sales and the manufacturing PMI both beat consensus, but slowed from previous levels and the Loonie is hovering just above 1.3300 Canada’s manufacturing survey amidst a firm rebound in oil prices that is also helping the NOK pare some of its recent declines. Indeed, Eur/Nok has eased back from around 10.1600 vs a more elevated Eur/SEK following falls in Norwegian and Swedish manufacturing PMIs (albeit the former still growth vs the latter contracting faster). Meanwhile, Cable continues to labour on the 1.2900 handle, with weekend polls indicating a tighter UK election race and an upward revision to the manufacturing PMI not really providing the Pound with any momentum due to weak sub-components. Similarly, the Yen did not derive much impetus from Japan’s manufacturing headline rebounding closer to 50.0 as Usd/Jpy hovers near the middle of a 109.49-72 range and stays technically bullish after a 3rd close above a key chart level (109.37 Fib).

EM - Depreciation against the Buck almost across the board, with Usd/Cnh hovering around 7.0400 after China’s retaliatory moves in response to the US bill in favour of HK protestors and Usd/Try skirting 5.7600 following scant reaction to a rebound in Turkish GDP or upturn in manufacturing PMI.

FIXED INCOME

It remains to be seen whether the bounce is transitory or more sustainable, but for now it appears that sellers have been sated and reluctant to pushed prices further beyond 169.91 in Bunds, 131.99 in Gilts and 128-23+ in the 10 year T-note. In the interim at least, tech proponents will be aware that chart support for futures is close by, at 169.87, 131.82 and 128-21 respectively, and this could have tempted some short term traders or specs/jobbers to initiate countertrend longs looking for retracement, while Gilts have actually carved out a fresh Liffe intraday high at 132.44 (-32 ticks vs -77 ticks at one stage) on renewed pre-UK election positioning/hedging. Ahead, US markets re-open for the first full session since last Wednesday and of the new month of course with manufacturing PMI, ISM and construction spending to digest along with the 2nd Fed repo for year end that could raise more eyebrows if oversubscribed again.

COMMODITIES                                      

Crude oil prices are firmer during Monday morning trade, with dual tailwinds in the form of better than expected PMIs out of China and talk of OPEC+ producers considering a 400k deepening of existing cuts acting as a tailwind for the complex. Front month WTI and Brent futures have managed to recover nearly half of Friday’s steep losses, the former eclipsing USD 56.50/bbl to the upside (vs. lows of USD 55.00/bbl), the latter briefly topping the USD 62.00/bbl mark (vs. USD 60.40/bbl lows). Weekend comments from Iraqi Oil Minister Ghadhba hinted the cartel will mull deepening existing oil output cuts by about 400k bpd to 1.6mln bpd, comments which further corroborated by sources this morning; the touted a cut of at least 400k BPD which could last until at least June. Moreover, the latest analysis from OPEC sees a significant oil glut and inventory build in H1 2020 in the absence of further cuts, said multiple sources. In terms of the metals; gold is well off last Friday’s highs of around USD 1467/oz, as lack of haven demand on better global PMI data puts the precious metal under pressure. Copper, meanwhile, received a fleeting overnight boost on better Chinese PMIs but has since retreated from highs and is fairly flat on the day as the red metal balances trade implications from China’s action against the Hong Kong bill which passed into law in Washington. 

Iraq’s Oil Minister Ghadhban suggested that OPEC+ producers will consider deepening their existing oil output cuts by about 400k bpd to 1.6mln bpd at their meetings this week. Meanwhile, sources stated that OPEC+ are currently debating whether to deepen current oil reductions by at least 400k bpd until at least June. (Newswires)