• US President Trump said it is probably better to wait until after the 2020 presidential election for a China deal
• USTR office said France's digital services tax discriminates against US companies and that it will take action against regimes that discriminate against US companies
• US President Trump said the EU has to shape up or "things will get very tough", EU said it is prepared to react strongly
• European bourses wiped out earlier gains on Trump, CAC 40 dented on tariffs, FTSE 100 underperforms on a firmer GBP
• Looking ahead, highlights include, ECB’s Coeure, NATO Summit Begins

TRADE

US President Trump said it is probably better to wait until after the 2020 presidential election for a China deal, there is no deadline on China deal. Trump added that he is doing very well in talks with China. (Newswires)

USTR office said France's digital services tax discriminates against US companies and that it will take action against digital tax regimes which discriminate against US companies. Furthermore, USTR office said it is exploring whether to open Section 301 investigations on digital services taxes in Austria, Italy and Turkey, while it is soliciting comment on proposed duties of up to 100% of certain French products over digital services tax and that list of French products subject to potential duties are valued at USD 2.4bln. (Newswires) USTR office said there is no basis in WTO report for Airbus (AIR FP) claims that US tariffs in aircraft subsidy case should be lowered by USD 2bln. In related news, USTR spokesperson said the US will consider higher EU tariffs following the WTO ruling that the EU aid to Airbus (AIR FP) continues to cause adverse effects at the expense of US firms and noted that strong action is needed, while the US reportedly may add other items to the current tariff list. (Newswires)

US President Trump said the EU has to shape up or "things will get very tough". In related news, French Finance Ministers said the EU is prepared to react strongly to the latest US tariff threat. EU Commission says the EU will act as one on US tariffs on French goods. (Newswires)

White House is considering kicking Huawei out of the US banking system, according to sources. (Newswires)

ASIA-PAC

Asian equity markets retreated amid headwinds from the US where the major indices all but wiped out last week’s gains due to fresh trade concerns with lacklustre ISM Manufacturing data also adding to downbeat tone. ASX 200 (-2.2%) and Nikkei 225 (-0.6%) were lower with underperformance in Australia due to hefty losses across its sectors including financials amid continued Westpac-related woes and with life insurers facing increased capital penalties, while sentiment in Tokyo was dragged by the adverse currency flows. Hang Seng (-0.2%) and Shanghai Comp. (+0.3%) also weakened on the trade uncertainty (although the latter pared losses heading into the close) with some analysts reading in between the lines of the metal tariff resumption on Brazil and Argentina, suggesting that it could be another front in the trade war following the nations’ recent agricultural deals with China. In addition, China’s retaliation to the Hong Kong bill by sanctioning US non-profit groups and barring US military visits to Hong Kong, as well as expectations for the US House to pass a Xinjiang-related bill further exacerbated the already-opaque trade environment. Finally, 10yr JGBs failed to take advantage of the widespread risk averse tone, as prices remained dejected following the recent bond rout and with selling also triggered after the 10yr JGB auction showed weaker results across all metric including the lowest b/c since August 2016.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 7.0223 vs. Exp. 7.0223 (Prev. 7.0262)

US 

Senator Chuck Grassley suggested a final deal over USMCA is “close” and that the USMCA deal is needed this week for year-end completion.

US President Trump's nomination of Dan Brouillette for Energy Secretary was confirmed through vote at the Senate. (Newswires)

UK/EU

Kantar UK Election poll: Conservatives 44% (+1); Laour 32% (unch); Tories widen lead over Labour to 12 points (prev. 11 points)

Eurozone Finance Ministers are reportedly providing pushback to the ECB's negative interest rate policy, according to sources. (Newswires)

ECB's de Cos says low interest rates for longer could spur risk-taking by some economic actors, which could threaten financial stability; added that maintaining low interest rates for longer could hurt banking transmission channels of our monetary policy. (Newswires)

EQUITIES

Major European bourses (Euro Stoxx 50 Unch) are mixed, having reversed earlier gains US President Trump said that there was no deadline on a China deal, and that it may be better to wait until after the November 2020 Presidential Election to strike a deal. Elsewhere, some underperformance is being seen in the FTSE 100 on unfavourable currency effects, while the CAC 40 is being weighed by under performance in some of its heavy weight luxury names, Kering (-1.4%), LVMH (-1.4%) and Hermes (-1.9%), on US/EU trade concerns after the US responded to France’s digital sales tax.Meanwhile, sectors are mostly in the red, apart from Utilities (+0.4%), Tech (+0.5%) and Healthcare (+0.1%). In terms of individual movers of note; easyJet (-0.5%) shares were initially higher on the news that the Co. is set to return to the FTSE 100 and will replace Hiscox (-1.3%), although gains have since reversed. Elsewhere, Telenor (+1.2%) was buoyed by an upgrade at Citigroup. Laggards include Aston Martin (-5.5%), who sunk after being downgraded to neutral from buy at Goldman Sachs.

FX

AUD, NZD - Both outperforming in the G10 FX sphere, more-so the Aussie in the aftermath of the RBA’s latest monetary policy meeting in which the Cash Rate was left unchanged. Key themes in the statement were largely a copy-and-paste job from recent meetings which repeated the gentle turning point in the economy but reaffirmed data dependency and the readiness to inject further stimulus if needed. However, desks note of a slightly more positive tone in the statement which linked rising house prices to a potential lift in spending and residential construction. AUD/USD extends its gains above the 0.6800 level and surpassed its 100 and 21 DMA (at 0.6818 and 0.6820 respectively) to a current high of 0.6860 (vs. low of 0.6815) with clean air until the psychological 0.6900 mark. The Kiwi piggybacks on its antipodean partner’s gains and covers more ground above the recently claimed 0.6500 level vs. the USD to a high of 0.6530 ahead of its 200 DMA at 0.6544.

GBP, EUR - Sterling rose in the G10 ranks in early European hours after the retrieval of 1.2950+ status vs the Dollar spurred upside momentum (amid potential stops/orders), and with tailwinds from the latest election Kantar poll (showing a widening gap between Tories and Labour) underpinning the currency in recent trade. Cable rose to a current high of 1.2994 after eclipsing its Nov 18th high (1.2985) with eyes remaining on election developments as election day looms. Meanwhile, the Single Currency held onto most of its gains vs. the Buck despite France’s growing trade tension with the US which prompted the latter to propose duties of up to 100% on certain French imports. EUR/USD meanders around the middle of a tight 1.1072-1.1086 intraday band, ahead of potential resistance at 1.1097 (Nov 21st high), with little impetus derived from ECB Board nominees and sources reports of pushback on the ECB’s NIRP by EZ finance ministers.

DXY, JPY, CNH - The broad Dollar and Index resumes their downward trajectories following yesterday’s dismal manufacturing prints and with little by way of fresh fundamental catalysts. DXY hovers around the bottom of today’s current 97.74-94 range with little on the today’s docket in terms of tier 1 data. Meanwhile, USD/JPY convincingly fell below the 109.00 mark (to a low of 108.84 vs. high 109.20) after US President Trump signalled no rush for a US-Sino trade deal. USD/JPY also sees hefty options of around USD 1bln expiring between strikes 109.00-10 and a further USD 1bln at 109.50. Subsequently, USD/CNH was bolstered to fresh session highs of 7.0690 (vs. low of 7.0360) in light of Trump’s comments on trade.

EM - The EM space trades mostly on the backfoot with the Rand underperforming as South Africa’s economy contracted on a QQ basis, missing expectations for modest growth. USD/ZAR took out its 200 DMA to the upside (14.5772) to a high of 14.6900 with little seen by way of resistance ahead of 14.7000. Meanwhile, the Lira recovered from initial loses which emanated from US senators urging Secretary of State Pompeo to sanction Turkey over its purchase and testing of the Russian-made S-400 system. The TRY has since pared back a bulk of its losses as President Trump continues to support Turkey.

FIXED INCOME

It was initially a more contained start to the morning for European debt markets with German Bunds halting their descent at 169.74 and subsequently reclaiming 170.00 to the upside, to reside in positive territory; yields remain around -30bps. Trade remains a key focus for paper in the aftermath of recent trade escalations with the US setting their sights on France with the US proposing 100% tariffs on USD 2.4bln of French goods as a response to the digital services tax. US President Trump has today continued to stick the boot into the EU by warning the US will get “very tough” on the bloc unless they “shape up”. Debt markets remained relatively resilient in the wake of these comments before being propelled higher above 170.25 (Mar’20 Bund), where stops were said to reside after US President Trump noted it is probably better to wait until after the 2020 presidential election for a China deal, adding there is no deadline on China deal. From a UK perspective, Gilts are lagging their peers with gains minor in comparison to Bunds and USTs with the Mar’20 contract back above 132.00, having earlier printed a low of 131.96. Fundamental catalysts from a UK standpoint are on the light side with a firmer than expected UK construction PMI (45.3 vs. Exp. 44.5) unable to sway markets ahead of a solid 10yr auction from the DMO. Finally, USTs are firmer on the session, having extended gains above 129.00 and taking out the overnight high of 129.03+ in the wake of the aforementioned comments from US President Trump with the curve now marginally bull steepening and the 10yr yield back below 1.8%. Looking ahead, today’s calendar sees a lack of tier 1 US data points or speakers with markets bracing themselves for the next developments on the trade front. 

COMMODITIES 

Crude markets are flat/higher and off best levels, as risk assets take a hit following the latest US President Trump’s trade comments. However, price action remains well within yesterday’s ranges; technicians will be eyeing resistance at the USD 56.65/bbl and USD 62.10/bbl levels and support at the USD 55.65/bbl and USD 60.78/bbl levels for WTI Jan’ 20 and Brent Feb’ 19 futures (yesterday evening’s trading range). Crude specific news flow has been light; Russian Energy Minister Novak said that Russia is yet to finalise their position for OPEC+ meeting in Vienna, which takes place at the end of the week. Amid rumours that OPEC+ are considering up to an additional 400k bpd in production cuts, the Russians are known to have been resistant to further cuts, instead preferring an extension of existing cuts until mid-2020. In terms of the metals, gold gained as risk soured, with the yellow metal briefly advancing above USD 1,470/oz from overnight lows of USD 1,460/oz. Meanwhile, trade concerns are hitting copper; the red metal has slumped from overnight highs of USD 2.6550/lbs to near USD 2.6300/lbs lows. , Iron Ore prices gained overnight after its largest miner, Vale, lowered its production outlook. On Monday, the miner said that it would cut output from it Brucutu mine in Brazil for up to two months while the stability of the nearby Laranjeiras dam in assessed. 

Russian Energy Minister Novak says the nation is yet to finalise their position for OPEC+ meeting in Vienna (Dec 5th-6th). (Newswires)

Goldman Sachs said it expects Brent prices to remain around USD 60/bbl in 2020 with persistent backwardation, while it expects an extension of current OPEC+ cuts through next meeting in June. (Newswires)

GEOPOLITICS

Chinese President Xi said they will work with Russia to counter western interference during talks with Russian Security Council Secretary Patrushev. In other news, China Global Times tweeted that China and Iran have reached several agreements on the Iranian nuclear issue and will keep deepening their ties and amid the difficulties and challenges caused by US sanctions and the withdrawal from the JCPOA. (Newswires/Twitter)

North Korea Foreign Ministry said dialogue with US has been nothing but a trick and that it will not continue talks with US which is using them for the upcoming election, while it warned of a year-end deadline in which it stated it is up to US what Christmas gift it will receive. (KCNA)