• European equities eke mild gains with sentiment somewhat supported by earlier China MOFCOM comments
• China's MOFCOM said US and China maintain close communication, reiterates if a Phase One deal is reached then tariffs should be reduced
• OPEC+ are to discuss deeper oil output cuts of more than 400k BPD as the main scenario, according to sources
• In FX, DXY meanders around 97.50, GBP remains the top gainer, NZD is supported by RBNZ hiking capital requirements, AUD trades lower on downbeat data
• Looking ahead, highlights include OPEC Meeting + Press Conference, US Trade, Initial Jobless, Factory Orders & Fed’s Quarles

ASIA-PAC

Asian equity markets were mostly positive as they took their cue from global peers after the trade mood flip-flopped once again to a more positive tone yesterday. ASX 200 (+1.2%) was led by outperformance in the tech and energy sectors amid the trade optimism and recent 4% surge in crude prices, with banks also welcoming the RBNZ’s increased capital requirements as some now expect a lower impact than they had previously anticipated. Nikkei 225 (+0.7%) was underpinned by recent currency moves and with Japan set for a multi-trillion stimulus package, as well as talks with South Korea this month to address the trade spat. Elsewhere, Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were also lifted on the trade hopes and following the announcement of measures to support the Hong Kong economy, but with gains capped given the lack of actual meaningful breakthrough on the trade front and amid continued PBoC liquidity inaction. Finally, 10yr JGB were initially lower on spill-over selling from USTs and as demand was sapped by the gains across equities, although prices were later rebounded which was helped after the results of the 30yr JGB auction showed slight improvements across all metrics.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY reference rate at 7.0521 vs. Exp. 7.0515 (Prev. 7.0382)

China Global Times tweeted an opinion that if US ignores China's warning and continues interfering in Hong Kong affairs, the Chinese government will certainly step up its countermeasures. (Twitter)

China's MOFCOM says US and China maintain close communication, reiterates if a Phase One deal is reached then tariffs should be reduced, no more details on trade talks; no more information regarding the unreliable entity list. (Newswires)

Japan government will compile JPY 26tln stimulus package including JPY 13.2tln of fiscal spending which is expected to boost GDP by 1.4%, according to government sources. (Newswires)

GEOPOLITICS

US is considering sending 14k more troops to the Middle East to counter threats from Iran, according to WSJ. (WSJ)

French police are firing tear gas at protesters in Nantes., BFM TV. (Newswires) Amidst widespread strikes in France over pensions/retirement

US

The mood is reportedly not upbeat after USMCA talks between Mexico’s Seade and USTR Lighthizer, while Seade commented there is no deal yet and they need to resolve “very difficult issues”, according to Politico's Rodriguez. (Twitter)

UK/EU

UK Election Savanta/ComRes poll showed Conservatives 42% (-1), Labour 32% (-1), Lib Dems 12% (-1), Brexit Party 3% (-1), conducted December 2nd-3rd. (Newswires)

UK PM Johnson pledged millions will get a GBP 200 tax cut within weeks of the Conservatives being elected. In other news, PM Johnson said he will bring forward measures to tax internet companies, but it won't be heavy handed and won't start a trade war. (Telegraph/Newswires)

EQUITIES

Major European bourses (Euro Stoxx 50 +0.6%) are higher as the market maintains a positive risk tone as it awaits further news on the US/China trade front and the outcome of today’s OPEC & JMMC meetings. The FTSE 100 (-0.1%) is again the laggard, amid a firmer Pound. Elsewhere, the CAC 40 (+0.4%) is holding up well despite France being hit by nationwide strikes, as workers across a range of professions protest French President Macron’s proposed pension reforms. Subsequently, a walk out by air traffic controllers has however resulted in some airlines being hit; Air France (-1.0%) said it was axing 30% of internal flights and 15% of short-haul international routes and easyJet (-0.8%) reportedly cancelled 223 domestic and short-haul international flights and warned that others risk being delayed, although yesterday’s approximate 4% rally in crude oil prices is also likely weighing on airlines in general – other names including IAG (-1.1%) and Deutsche Lufthansa (-1.2%) are also lower. Elsewhere, luxury names including Hermes (+1.6%) and Swatch Group (+1.6%) are on the front foot after Kering (+1.6%) reportedly held explanatory talks with Moncler (+9.2%) regarding a potential combination, which would mark continued consolidation within the sector following LVMH’s (+0.9%) buyout of Tiffany & Co. last month. Sectors are mostly in the green, barring Tech (unch.), Materials (unch.) and Telecoms (-0.1%), the latter weighed by continued underperformance in Orange (-0.7%), with the Co. still suffering following yesterday’s disappointing dividend outlook. In terms of other individual movers; Novartis (+0.7%) shares are underpinned by the news that around 90 innovative new molecular entities are emerging from the Co.’s institutes for BioMed research. Elsewhere, Fiat Chrysler (-0.9%) shares are under pressure after reports that the Co. is in talks with Italian tax authorities regarding an audit, which added that the Co. may be liable for up to USD 1.5bln in “exit tax”. Metro Bank (+0.6%) shares are supported following the resignation of its CEO Donaldson, who will be replaced by Frumkin on an interim basis. Finally, negative broker moves for Siemens (-0.7%), Berkley Group (-0.6%), Vinci (-0.5%) and Tullow Oil (-0.2%) weighs on their shares.

Tiffany & Co (TIF) Q3 19 (USD): EPS 0.65 (exp. 0.85), Revenue 1.01bln (exp. 1.04bln); SSS +1%. Co says strong double-digit growth in China Mainland was offset by domestic sales in Americas. (Newswires)

FX

GBP, EUR - Sterling remains on a firmer footing in early EU trade, with the latest poll (Savana/ComRes) showing the market-friendly Conservatives maintaining its lead over Labour vs. the prior survey as election day looms. Aside from that, little pertinent news flow thus far to influence price action. GBP/USD extends gains above 1.3100 before hitting a wall just under the 1.3150 mark, ahead of resistance in the form of a Fib level at 1.3168 followed by 1.3185. Meanwhile, the EUR derives support from a marginally softer USD and largely side-lined a slump (and significant miss) in German industrial orders, albeit the country’s construction PMI indicated a decent rebound. EUR/USD continues to eke modest gains to session highs just under the 1.1100 mark (1.1078-93 intraday range thus far), with hefty options eyeing today’s NY cut – EUR 1.0bln between 1.1090-1.1100 and EUR 2.4bln around 1.1110-25.

NZD, AUD, CAD - Mixed trade down under with the Kiwi buoyed by the RBNZ’s attempt to bulletproof its financial system via a capital requirement hike in order to withstand economic volatility. The Central Bank also gave lenders an extra two years to raise the required capital and flexibility on how they raise it. NZD/USD remains underpinned but has subsided a bulk of its overnight gains with the pair still in the green but back below its 200 DMA (~0.6540), having hit resistance around 0.6562-65. Meanwhile, the Aussie remains lacklustre on the back of further sub-par data, this time in the form of retail sales and trade balance, with the former printing flat and the latter a smaller surplus than had hoped. AUD/USD remains in the red and closer to the bottom of the current intraday band (0.6855-31) with the pair’s 100 and 50 DMAs (0.6814 and 0.6811 respectively) in the way of the psychological 0.6800. Elsewhere, the CAD remains modestly firmer in the aftermath of yesterday’s BoC hawkish hold and upbeat view on the economy, although traders will be eyeing BoC’s Lane on the docket later today (1245GMT) who is likely to speak on the economy. USD/CAD remains sub-1.3200 having touched a base around 1.3180.

DXY, JPY - The broad Dollar and Index remain under pressure given the recent string of downbeat data and ahead of the monthly US jobs report tomorrow. DXY manages to stay afloat above 97.50 (just about) having clocked in a current range of 97.49-60 with little in terms of scheduled data/speakers to influence price action. Finally, USD/JPY is relatively flat and just a whisker away from the 109.00 mark, albeit above its 200 DMA at 108.87, with USD 1.4bln in options set to expire around 109.00-15.

Indian Repo Rate 5.15% vs. Exp. 4.9% (Prev. 5.15%); Decision was unanimous. RBI says is to continue with accommodative monetary policy, stance is to be retained as long as inflation remains within target and as long as necessary to revive growth, adding that there is monetary space for future action. Revises down 2019/20 real GDP growth forecast to 5.0% vs. Prev. 6.1%. (Newswires)

RBNZ raised capital requirement for banks as expected, with the four largest banks to hold 18% in total capital and smaller banks to hold 16% in total capital from current 10.5%, while the time frame to meet the requirements was set for 7 years from July 2020. (Newswires)

Australian Retail Sales (Oct) M/M 0.0% vs. Exp. 0.3% (Prev. 0.2%). (Newswires) Australian Trade Balance (AUD)(Oct) 4.50B vs. Exp. 6.10B (Prev. 7.18B) Australian Exports (Oct) M/M -5.0% (Prev. 3.0%) Australian Imports (Oct) M/M 0.0% (Prev. 3.0%)

FIXED INCOME

European debt is downbeat today as market sentiment remains positive for now as the risk landscape gradually improved overnight, today’s notable risk factors are largely crude based as the OPEC meeting begins; while, as always, US-China updates may well dominate with this mornings news flow has been neutral/positive. European bonds are currently subdued by around 20/30 ticks, with the Bund having moved below yesterday’s low of 172.44 to a session low of 172.18. From a technical perspective, below the 172.0 handle support resides at 171.97 and then we have Tuesday’s low of 171.61 if the move was to extend. Data wise, this mornings Industrial orders out of Germany missed, but didn’t dictate too much price action and contributed to the assessment that the Germany economy is not beginning a turnaround. Additionally, the EZ GDP metrics were unrevised though retail sales were slightly softer than expected. Elsewhere, Gilts are similarly subdued in-line with European counterparts; note, the most recent election polling out of Savanta/ComRes maintaining the Conservative-Labour lead at 10pp; looking ahead for the UK tomorrow sees the next UK election debate featuring Johnson and Corbyn. Stateside, USTs are little changed at present and as such holding up better than their European peers ahead of a number of US data prints and potential comments from Fed’s Quarles; and with tomorrow’s jobs report moving into focus.

COMMODITIES – OPEC Meeting scheduled to begin at 14:00GMT/09:00ET 

Crude markets eke mild gains as the complex consolidates following yesterday’s strong price action and with participants cautious as they await the outcome of today’s JMMC and OPEC meetings; the former has already begun, while the latter is scheduled to begin at 14:00 GMT. Tomorrow OPEC+ will meet and the final decision on the cartels production cuts will be made. Sources this morning suggested that OPEC+ are to discuss deeper oil output cuts of more than 400k BPD as the main scenario, news which triggered some fleeting upside in crude markets and something which has been alluded to by the Iraqi oil minister on multiple occasions in recent days. This contrasts somewhat with the reported consensus amongst OPEC minister yesterday that a deeper cut will "be harder to pull off this time". Russian Oil Minister Novak has so far declined to reveal the country’s stance for the upcoming OPEC+ meeting, but the country is expected to resist any push for further cuts; "Russia's reluctance to deepen the cuts at the risk of compromising its market share and undermining the predictability of its oil rent is now well-known," said Aperio Intelligence, adding "Russia's strategy will be to seek to preserve the status quo without either overplaying its hand or overreaching". Moreover, the country is also pushing to have its condensate output to become exempt from its quota, a request which may prove contentious, especially with Iranian Energy Minister stating that condensates of gas in the OPEC quota system is not a OPEC discussion. In terms of other crude specific news flow; the latest Platts Oil Survey revealed that OPEC pumped 29.65mln BPD of crude in November, with 11 quota members achieving cut compliance of 145%. The survey found that Iraq and Nigeria are still supplying in excess of the cap but are moving closer to compliance. Poor compliance by these members is a point of frustrations for the Saudis; just yesterday, it was reported that the Saudis are threatening to increase production back to its quota level, rather than reducing production by more than is required, due to growing frustration with those not complying with the existing OPEC cut agreement. Thus far, the Saudi’s have shouldered the bulk of the cuts, with recent analysis suggesting that without the Saudi’s overcompliance, OPEC+ compliance would be just 70%. On a different note, Goldman and Barclays provided some updates oil market forecasts; Goldman expects a Brent-WTI differential of USD 4.50/bbl in 2020, from the YTD levels of close to USD 7.0/bbl, while Barclays forecasts Brent to average USD 62/bbl and WTI to average USD 57/bbl for Q4 2019 and 2020. Moving over to metals; gold is slightly lower, amid a lack of demand for havens, but is relatively rangebound about the USD 1480/oz level. Meanwhile, positive risk tone has underpinned copper, which has this morning managed to eclipse yesterday’s USD 2.6655/lbs high, albeit only slightly.

OPEC+ are to discuss deeper oil output cuts of more than 400k BPD as the main scenario, according to sources. (Newswires)

-        Russian Energy Minister Novak declines to comment regarding Russia's stance for the upcoming OPEC+ meeting, adds that we will learn everything today. (Newswires)

-        Iran OPEC envoy Kazempour says Tehran would back any OPEC majority decision to cut oil production, according to Shana

-        Iranian Oil Minister says overproducers should bear the brunt of any further cuts, will not accept any limits on Iranian oil but will support OPEC+ agreement to cut output further; does not see any reason for any difficult for this round of OPEC discussions

-        Iranian Oil Minster Zangeneh says Russia's proposal for condensates of gas in the OPEC quota system is not a OPEC discussion, according to energy journalist Zandi

OPEC pumps 29.65mln BPD of crude in November, 11 quota members achieved cut compliance of 145%; Iraq and Nigeria are still supplying in excess of the cap, but this is moving closer to compliance., Platts Oil Survey. (Twitter)