• European equities reside in modestly positive territory, FTSE 100 outperforms on a softer Sterling
• China is reportedly to implement tariff waivers for some purchases of soybeans and pork from the US but has taken countermeasures against US limit on diplomats, sources state
• OPEC+ additional 500k BPD output cuts could be split roughly 2/3 for OPEC and 1/3 for Non-OPEC, according to sources
• In FX, GBP softened on potential profit taking, DXY trades on the firmer side and Kiwi outperforms peers thus far
• Looking ahead, highlights include OPEC+ meeting, US and Canadian Jobs Reports, Uni. Of Michigan, Baker Hughes Rig Count, UK General Election Debate

TRADE

US National Security Advisor O'Brien suggested the sides are close on a phase 1 deal and that he spoke with Treasury Secretary Mnuchin as well as USTR Lighthizer earlier, while he added the US is monitoring Hong Kong situation closely. (Newswires)

China is reportedly to implement tariff waivers for some purchases of soybeans and pork from the US., Xinhua. Separately, China has taken countermeasures against US limit on diplomats., according to sources citing Chinese TV. (Newswires)

China Global Times tweeted that contradictory statements by US officials over the phase one deal might just be Washington testing the waters, while it also stated that trade talks remain on track citing an expert. (Newswires/Twitter)

ASIA-PAC

Asian equity markets were higher across the board as the recent US-China trade optimism reverberated in the region, but with gains capped as the OPEC/OPEC+ meetings stole much of the limelight and as looming US NFP jobs data kept participants tentative. ASX 200 (+0.4%) and Nikkei 225 (+0.2%) traded positively in which gold miners outperformed the broad but mostly tepid gains for Australia’s sectors, while upside in Tokyo was also limited by recent currency strength and after Household Spending contracted by the most in over 5 years. Hang Seng (+1.0%) and Shanghai Comp. (+0.4%) were kept afloat after the PBoC conducted a CNY 300bln MLF operation which was larger than the prior operation of CNY 200bln and the CNY 187.5bln of maturing loans, while the trade rhetoric continued to suggest talks are going well and are on track with a phase 1 deal said to be close, although other reports were less optimistic and noted the sides were still at odds on agriculture purchases. Finally, 10yr JGBs were lower which was initially the aftermath of the prior day’s pullback amid gains in riskier assets, while prices remained subdued ahead of the December 2019 futures contract rolling over this weekend and with the BoJ’s presence in the market for JPY over 1.1tln of JGBs in 1yr-10yr maturities doing little to spur a rebound.

PBoC conducted CNY 300bln 1-year Medium-term Lending Facility operations at 3.25% vs. Prev. 3.25%. (Newswires) PBoC set USD/CNY reference rate at 7.0383 vs. Exp. 7.0368 (Prev. 7.0521)

Hong Kong Police Commissioner urged protesters to reject violence ahead of Sunday’s major demonstration from the Civil Human Rights Front which was approved by authorities. (Newswires/SCMP)

Japanese All Household Spending (Oct) M/M -11.5% vs. Exp. -9.8% (Prev. 5.5%); largest decline since April 2014. (Newswires) Japanese All Household Spending (Oct) Y/Y -5.1% vs. Exp. -3.0% (Prev. 9.5%); largest decline since March 2016.

GEOPOLITICS

US President Trump tweeted that the story regarding US sending 12k troops to Saudi Arabia is false and called it fake news. (Twitter)

Russia and Turkey are steadily working on a contract for a new batch of Russian S-400 missile defence systems, according to IFX citing a senior Russian official. (Newswires) US

US House Speaker Pelosi said she doesn't think the US is heading for a shutdown, while she also commented that USMCA issues relate to workers' rights and pharmaceuticals. In related news, Canadian Deputy PM Freeland said USMCA signatories face difficult challenge to get the treaty ratified by US. (Newswires)

UK/EU

UK Election Britain Elects/New Stateman tracker of polls showed Conservatives at 42.4% (+0.1), Labour 32.8% (+1.4), Lib Dems 13.1% (-1.0) and Brexit Party 3.4% (-0.4). (Newswires)

EQUITIES

Major European bourses (Euro Stoxx 50 +0.4%) are in the green, as the region benefits from overnight US/China trade tailwinds, although the onset of pre-NFP caution is keeping trade subdued. As a reminder, US President Trump yesterday said that “something” could happen with regards to tariffs on December 15th, although it is not being discussed yet, but the US is holding discussions with China which are going well. The FTSE 100 (+0.7%) outperforms its peers as Sterling pulls back from recent highs. The DAX (+0.3%) is comparatively muted, after German industrial data this morning disappointed which suggests “that the German economy is continuing to flirt with stagnation and contraction in the final quarter of the year”, according to ING. The CAC 40 (+0.5%) continues to brush off ongoing strikes that have brought much of the country to a standstill. Sectors are all in the green, with the more risk sensitive sectors the outperformers; Tech (+0.8%) and Consumer Discretionary (+0.7%) are the current leaders, while Health Care (+0.1%), Utilities (+0.2%) and Telecoms (+0.1%). In terms of individual movers; Ipsen (-20.6%) shares tanked after the Co. partially delayed two studies into Palovarotene. Swiss Re (+2.6%) was buoyed on the news that the Co. is to sell its Reassure unit to Phoenix Group (+0.3%) in a cash and stock deal valued at GBP 3.2bln. In terms of earnings, Carl Zeiss (-6.5%) is under pressure despite solid gains in FY19 revenue and EBIT; traders were reportedly disappointed by margin targets and, following a run of recent strong earnings reports. Finally, in broker moves, upgrades for Lufthansa (+1.3%), Ryan Air (+1.3%) and Pernod Ricard (+0.7%) saw their respective shares supported, while downgrades for Sanofi (-0.6%), Siemens Healthineers (-1.9%) and Petrofac (-1.6%) saw their shares under pressure.

FX

DXY, CAD - The broad Dollar and index trades on a firmer footing heading into the much-anticipated US Labour market data (albeit more on the back of a softer GBP – see below), with forecasts for 180k jobs to be added in November, slightly ahead of 3-,6- and 12-month trends rates (Full preview available on the NEWsquawk research suite). DXY remains in the green at time of writing, and just above the middle of the current 97.36-44 intraday band ahead of the main event. Alongside this, Canada will also be releasing its respective jobs report, with the region expected to have added 10k jobs in November. USD/CAD trades at the whim of energy prices thus far as the OPEC+ cartel convenes. The pair resides just under the 1.3200 mark with USD 750mln of options expiring between strikes at 1.3165-75. In terms of pertinent levels, the pair sees its 21 WMA at 1.3212, 100 WMA at 1.3118 and its 200 WMA at 1.3080.

GBP, JPY, EUR - Sterling trades softer on the day with little fresh fundamental news-flow, although participants could be cashing in on the impressive gains seen throughout the week ahead of the last batch of weekend polling prior to the election. In terms of the latest, Britain Elects/New Stateman tracker of polls points to a strong lead for the Tories over Labour, but the spread has modestly narrowed. Meanwhile, Ipsos Mori’s poll also showed a slight narrowing in Tory’s lead over Labour. Participants remain on the lookout for the Panelbase poll which may be released today. GBP/USD retains a 1.31+ status at time of writing, but off its current daily and weekly high of 1.3166 (vs. intraday low of 1.3111), with touted support at 1.3080 should it break the 1.3100 psychological mark. That said, today’s options expiries include ~GBP 750mln at strike 1.3100 which could influence price action, contingent on the NFP numbers Stateside and any UK election polling released in the interim. Meanwhile, the JPY remains supported by the GBP/JPY cross which dipped below 142.50 in early trade, although the Sterling softness did provide the Dollar with some impetus and thus keeps USD/JPY at bay just above the 108.50 as the pair bides its time ahead of the US labour market report. Finally, EUR/USD saw downside amid the aforementioned Dollar strength in early EU trade, with the pair dipping below the 1.1100 mark to a low of around 1.1095 ahead of touted support at 1.1090. EUR/USD options today see EUR 1.1bln expiring between 1.1095-1.1100 and EUR 1.3bln around 1.1120-25 - again, options’ influence today is contingent on the US jobs numbers.

NZD, AUD - Both modestly firmer in early EU trade in a continuation of support seen during the back end of yesterday’s session, and with potential buoyancy from reports that China could be implementing tariff waivers for some purchases of soybeans and pork; a possible olive branch to the US. The Kiwi outperforms its Aussie counterpart on the back of optimistic reiterations from RBNZ’s Deputy Governor, who touched upon persisting downside risk appearing to be more balance now. Bascand also took note of strong commodity prices supporting the New Zealand economy, while adding that fiscal stimulus could increase the country’s growth next year. NZD/USD took out yesterday high (0.6562) and resides just off session highs of 0.6573 (vs. low 0.6541) at the time of writing. Meanwhile, its Aussie counterpart inches towards the 0.6850 mark having found an intraday base at 0.6830 and with around AUD 1.0bln in options expiring at strike 0.6835.

RBNZ Deputy Governor Bascand reiterated the economy looks close to turning point and that downside risks persist but are more balanced, while he added strong commodity prices are supporting the economy and fiscal stimulus could boost growth next year. (Newswires)

Notable FX Expiries:

-        EUR/USD: 1.1040-50 (1.8BLN), 1.1075 (900M),1.1095-1.1100 (1.1BLN) 1.1120-25 (1.3BLN)

-        GBP/USD: 1.3100 (753M), 1.3170 (350M), 1.3200 (320M)

-        AUD/USD: 0.6835 (1BLN)

-        USD/CAD: 1.3165-75 (750M)

FIXED INCOME

Debt is setting up for a slower finish to a turbulent week, though it may be a holding pattern until the day’s highlight via the US jobs report (Exp. +180k). Newsflow has been comparatively quiet this morning for Europe, while Gilts are the marginal outperformer this morning but are only 20 ticks into positive territory at best. Price action occurred as sterling came under some pressure this morning threatening a test of key levels; though Gilts are yet to convincingly attain the 132.0 mark, 132.05 at best, on a lack of fundamental drivers. European bonds are overall little changed, with periphery debt ever so slightly in the red and core counterparts marginally positive, technically resistance in the Bund lies around the 172.45 mark and note above this yesterday’s high of 172.66; no significant events remain on the European slate so all eyes will be on the NFP print. Stateside, ahead of this, USTs are roughly in-line with their European counterparts as such the curve is little changed at present.

COMMODITIES 

Crude markets are jittery, with participants keeping their powder dry ahead of key risk events in the form of the US jobs report at 13:30 GMT and the outcome of today’s OPEC+ meeting, where a final decision on output cuts will be finalised. The complex has been relatively unresponsive to the latest headlines; consensus is for OPEC+ to agree to 500k bpd worth of additional cuts, which could be split 2/3 for OPEC and 1/3 for Non-OPEC, according to the latest sources. This is relatively in-line with the thinking yesterday that the split would 350k bpd to 150k bpd in cuts for OPEC and Non-OPEC countries respectively. However, ING flag the risk of potential market disappointment; “the key question is whether these reported cuts will actually reflect fresh cuts, and so help to reduce the surplus in 1Q20, or whether they will just formalise the over-compliance that we have seen from the group as a whole (thanks to Saudi Arabia)”. The latter would constitute disappointment, the analysts believe. Elsewhere, Russia, who had expressed reluctance to agree to deeper cuts, appear to have been brought on side by having their request to remove the condensate portion of its output removed from its production cut quotas, meaning roughly 800k bpd in Russian output will not be subject to any output cuts. Elsewhere, Angola reportedly stormed out of the talks in protest to the consensus for deeper cuts and now wants to quit the cartel. Furthermore, yesterday’s post meeting press conference was cancelled, with talks reportedly dragging on due to issues with Iraq, although the Iraqi Oil Minister has since said the country will comply with the agreed cuts. Today’s OPEC+ meeting has already begun, with a press conference pencilled in for 13:00 GMT, although, as is usually the case with OPEC+, timings are more a guideline. WTI and Brent front month contracts sees losses as US participants enter the market with the former dipping below USD 58/bbl and the latter eyeing USD 63/bbl. In terms of metals, copper and gold are subdued ahead of NFP, the latter consolidating around the USD 1475/oz mark, although with a slight downwards bias on account of the market’s more constructive risk tone.

OPEC+ additional 500k BPD output cuts could be split roughly 2/3 for OPEC and 1/3 for Non-OPEC, according to sources. (Newswires) Roughly in-line with yesterdays delegates reports

Iranaian Oil Minister says in the next 3 or 4 months we will have a extraordinary OPEC meeting, and around half a million of new cuts has been agreed to. (Twitter)

Russia Energy Minister Novak commented the quota split is to be decided on Friday and confirmed that gas condensate output of 760k BPD is now excluded from Russia's quota. (Newswires)

Saudi Oil Minister Abdulaziz said we cannot say we have an agreement until we meet Non-OPEC, while other reports noted that Saudi Arabia's new target is likely to be above 10.1mln bpd vs. current 10.31mln bpd citing delegates. (Newswires)

Kuwait Oil Minister stated OPEC is in agreement but did not comment on what was agreed, although several twitter reports suggested a quota adjustment of 500k bpd was agreed in principle although the details still need to be discussed with OPEC+. (Newswires/Twitter)