• European bourses are tentative as newsflow is limited ahead of a key week
• China’s trade data was weaker than expected, with exports surprisingly contracting though imports did post surprise growth
• USTR Lighthizer and US Democrats are reportedly nearing a deal for Congress to pass USMCA, although hurdles remain
• UK Election polls have around an 8-14pp spread in the Conservative-Labour lead, YouGov MRP to be released tomorrow
• Looking ahead, highlights include US 3yr Supply, RBA’s Lowe

TRADE

China ordered government offices and public institutions to remove all foreign computer equipment and software in 3 years. (Newswires)

China top diplomat Yang spoke with US Secretary of State Pompeo on Saturday in which he stated the US has seriously violated international relations by passing the Hong Kong and Uighur bills, while he urged the US to correct its mistakes and immediately stop interfering with China’s internal affairs. (Newswires) China’s Xinjiang region Governor said the US bill on Xinjiang is a severe violation of international law, while the Governor added the US bill has no regard for facts and has made groundless accusations against the human rights situation as well as the Chinese government. (Newswires)

China is to lower tariffs further at an appropriate time., Mofcom. (Newswires) Unclear on exactly what tariffs the spokesman is referring to with this remark. Elsewhere, China Global Times Chief Editor tweets that "Because of US obstruction, WTO's appellate body which settles disputes between members will be unable to function on Tuesday. And it is the most important platform to ensure fair trade."

China's President Xi hopes to achieve a China-EU investment agreement as soon as is possible., Chinese State TV. (Newswires)

ASIA-PAC

Asian equity markets were mixed as the tailwinds from Friday’s stellar US NFP report was offset by mostly weaker than expected Chinese trade data including a surprise contraction in Exports and with some hesitation observed heading into a risk-packed week. ASX 200 (+0.3%) and Nikkei 225 (+0.3%) saw a firm start to the session led by outperformance in energy names following the OPEC+ agreement, although both indices briefly retraced the majority of their gains amid heavy losses in Australia’s gold miners and as recent JPY strength suppressed the effect of a firm upward revision to Q3 GDP. Hang Seng (U/C) and Shanghai Comp. (+2.4%) traded indecisively after the largely disappointing Chinese trade data and as China continued to voice discontent with US “interference” regarding the Hong Kong protests and Uighur Muslims. Furthermore, China reportedly denied entrance into Macau for the President of the American Chamber of Commerce in Hong Kong and have also ordered government offices and public institutions to remove all foreign computer equipment and software in 3 years. Finally, 10yr JGBs declined on spill-over selling from T-notes and with the pressure also a function of the gains in stocks, firm GDP revisions and tepid BoJ Rinban announcement valued at JPY 180bln.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY reference rate at 7.0405 vs. Exp. 7.0400 (Prev. 7.0383)

Hong Kong protesters conducted a large-scale march which organizers claimed a turnout of 800k but police only estimated 183k, which was largely peaceful although a few fires were set at the entrance of the High Court and Court of Final Appeal. Furthermore, the protests have reached a 6th month milestone, while analysts suggested Hong Kong retail businesses could experience 15% decline in holidays sales and restaurants may suffer 30% drop in sales from the protests. (Newswires)

Chinese Trade Balance (USD)(Nov) 38.73B vs. Exp. 46.3B (Prev. 42.81B). (Newswires) Chinese Exports (USD)(Nov) Y/Y -1.1% vs. Exp. 1.0% (Prev. -0.9%) Chinese Imports (USD)(Nov) Y/Y 0.3% vs. Exp. -1.8% (Prev. -6.4%) Chinese Trade Balance (CNY)(Nov) 274.2B vs. Exp. 294.0B (Prev. 301.3B). (Newswires) Chinese Exports (USD)(Nov) Y/Y 1.3% vs. Exp. 1.9% (Prev. 2.1%) Chinese Imports (USD)(Nov) Y/Y 2.5% vs. Exp. 0.9% (Prev. -3.5%)

Japanese GDP (Q3 F) Q/Q 0.4% vs. Exp. 0.2% (Prev. 0.1%). (Newswires) Japanese GDP (Q3 F) Y/Y 1.8% vs. Exp. 0.7% (Prev. 0.2%)

GEOPOLITICS

In related news, there were also Twitter reports of sirens sounding near Baghdad International Airport in Iraq from potential rockets targeting the airport. (Newswires)

White House National Security Adviser O'Brien warned US has many tools to deal with North Korea if it reneges on denuclearization commitments. (Newswires) Subsequently, North Korean Official notes that Pyongyang has nothing to lose, in response to US President Trump., Yonhap. Refers to: US President Trump stating that North Korean Leader Kim Jong Un could void the special relationship, occurring during reports that NK conducted tests at missile sites US

USTR Lighthizer and US Democrats are reportedly nearing a deal for Congress to pass USMCA, although hurdles remain according to reports citing sources familiar with the discussions. (WSJ)

Mexico Foreign Minister Ebrard said Mexico will not accept US labor inspections in USMCA trade pact and will not accept US steel proposal for USMCA without 5-year period to go into effect, while he added that over 90% of USMCA is not open to revision, but there will be an addendum to the deal. (Newswires)

Bank for International Settlements stated that the turmoil in the repo market during September was exacerbated by hedge funds borrowing cash to bolster returns on their trades and also suggested the reluctance of banks to lend was also a key factor. (FT)

UK/EU

UK Election Polls: Have the Conservatives lead over Labour at 14pp at best, with a spread of around 8-14pp across polls. Note, the second YouGov MRP will be released on Tuesday

-        BMG Research poll: Conservatives 41% (+2), Labour 32% (-1), Lib Dems 14% (+1), Brexit Party 4% (Unch.), December 4th-6th

-        Deltapoll poll: Conservatives 44% (-1), Labour 33% (+1), Lib Dems 11% (-4), Brexit Party 3% (Unch.), December 5th-7th.

-        Opinium poll: Conservatives 46% (Unch.), Labour 31% (Unch.), Lib Dems 13% (Unch.), Brexit Party 2% (Unch.), December 4th-6th.

-        Savanta/ComRes poll: Conservatives 42% (Unch.), Labour 36% (+4), Lib Dems 11% (-1), Brexit Party 4% (+1), December 2nd-5th.

-        Survation/Good Morning Britain poll: Conservatives 45% (+2), Labour 31% (-2), Lib Dems 11% (Unch.), Brexit Party 4% (+1), December 5th-7th

-        UK Election YouGov poll: Conservatives 43% (+1), Labour 33% (unch), Lib Dems 13% (+1), Brexit Party 3% (-1), December 5th-6th.

-        DataPraxis MRP Model suggest Conservatives will win 344 seats (+27), Labour 221 (-41), Lib Dems 14 (+2), SNP 47 (+12).

A leaked Department for Exiting the EU document seen by the FT has revealed warnings that implementing Boris Johnson’s Brexit deal would see Northern Ireland remain as part of the EU customs code, subsequently presenting “major” challenges. (FT)

French Finance Minister says the nation is prepared to go to the WTO to challenge US President Trump’s threat to put tariffs on certain US goods. (CNBC)

German Trade Balance, EUR, SA* (Oct) 20.6B vs. Exp. 19.0B (Prev. 19.2B); Exports MM SA* (Oct) 1.2% vs. Exp. -0.7% (Prev. 1.5%). (Newswires)

EQUITIES

European equities kick the week off broadly lower, albeit marginally [Eurostoxx 50 -0.2%] after the NFP optimism waned and as sub-par Chinese data dented the mood. Sectors are mostly in the red – and with no clear standouts and little by way of a split between cyclicals and defensives to reflect the risk tone, although material names are underpinned by the Friday’s surge in base-metal prices. In terms of individual movers: Osram Licht (+14.4%) soared to the top of the pan-EU index after AMS (-3.0%) announced it has succeeded on its second attempt with a EUR 4.6bln bid for Osram which comes after it lowered the necessary acceptance rate to 55% vs. Prev. 62.5%. Elsewhere, Tesco shares (+5.4%) are supported after confirming exploration of options for its Thai and Malaysian units (which account for 10% of Co’s sales), including a possible sale which could fetch up to USD 9bln. Meanwhile, Just Eat (+0.5%) shares are underpinned after Prosus increased its offer for the Co. to GBP 7.40/shr, valuing the Co. at approx. GBP 5.1bln; additionally, acceptance level for the deal has been reduced to a simple majority. Number 10 shareholder Cat Rock (owns 2.6% of Just Eat) noted that Prosus’ offer needs to be at least GBP 9.25.shr to compete with Takeaway.com’s offer. Takeaway.com believe that their offer for the Co. remains ‘far superior’ to the Prosus one. On the flip side, Tullow Oil (-59.0%) shares plummeted after the Co. was hit by a double whammy in the form of a production outlook downgrade and the departure of its CEO. Other downside movers include the likes of Sanofi (-0.5%) and Kerry Group (-0.9%) – both on M&A news – with the former acquiring Synthorx for USD 2.5bln, whilst the latter is reportedly mulling acquiring DuPont’s Nutrition business – which could be valued around USD 25bln.

FX

GBP - Sterling is off best levels, but still firmly bid as the clock ticks down to Thursday’s GE and polls continue to flag victory for the Tories, albeit to varying degrees and ahead of the final YouGov MRP due to be published tomorrow evening. Indeed, the Pound continues to outperform G10 counterparts and is defying a broadly risk-off start to the week on the back of disappointing Chinese trade data that is undermining high beta currencies and those with closest connections naturally. Cable extended gains to circa 1.3181 at one stage, while Eur/Gbp probed just below 0.8400 before running into offers and bids respectively.

AUD/CAD/NZD - Predictably, the Aussie is bearing the brunt of the aforementioned smaller than forecast Chinese trade surplus that was largely due to an unexpected drop in exports, with Aud/Usd hovering around 0.6425 and Aud/Nzd retesting support ahead of 1.0400, like a 1.0407 Fib that only just held las Friday. Meanwhile, the Kiwi is pivoting 0.6550 vs its US peer and the Loonie is trying to pare losses in wake of starkly contrasting NA labour data in a relatively tight range either side of 1.3250 ahead of Canadian housing starts and building permits.

JPY/EUR/CHF - All narrowly mixed against the Greenback, as the DXY meanders between 97.602-725 parameters, but with the Yen benefiting from a grinding safe-haven bid and picking away at stops said to be sitting south of 108.50, while the Euro is straddling 1.1065 and Franc 0.9900 in the run up to ECB and SNB policy meetings hot on the heels of the Fed.

SEK/NOK - The Scandi Crowns are also feeling the adverse effects averse sentiment, as Eur/Sek rebounds towards 10.5500 and Eur/Nok nudges off sub-10.1000 lows on the back of technically delayed and mixed monthly Norwegian GDP prints for October.

EM - The Lira looks somewhat unimpressed with Turkey’s efforts to spur bank lending via targeted RRR tweaks, as Usd/Try trades close to 5.800 and multi-month peaks.

South Africa's Eskom has, this morning, lost additional generation units which has increased unplanned breakdowns to 14200MW; flooding at some power stations, further impairing supply. (Newswires)

FIXED INCOME

Bunds and holding just below a new Eurex high of 172.44 and the base of a small resistance zone protecting an even more pronounced bounce from post-NFP lows that could expose 172.50 ahead of 172.66. However, outperformance elsewhere in the Eurozone, such as Italian BTPs and Spanish Bonos ahead of Thursday’s ECB meeting may also be capping the core debt future, while Gilts remain off best levels on UK election positioning and hedging for a conclusive outcome rather than no clear result. Elsewhere, US Treasuries are also nursing some losses after Friday’s strong NFP releases and the curve is fractionally flatter ahead of a data-less session, but supply via Usd38 bn 3 year notes.

COMMODITIES 

The energy complex continues to drift lower following last week’s OPEC-induced surge in prices which received tailwinds from a blockbuster US jobs report. WTI Jan’20 futures have re-dipped below the 59/bbl mark whilst Brent Feb’20 futures gave up the USD 64/bbl in EU trade, with the magnitudes of the moves relatively tepid compared to Friday’s upside action. Analysts at ING believe that the action taken by OPEC+ (500k BPD deeper cuts and Saudi’s 400k BPD voluntary cuts on top of earlier curtailed output) will continue to support prices, thus the bank sees ICE Brent averaging USD 60/bbl in Q1 next year, with Q2 outlook contingent on the cartel’s next move in early March. ING note that upside risks to their forecast includes significant supply disruptions and meaningful progress on the US-China front. On that note, BofA expects Brent could be boosted to USD 70/bbl in the case of strong OPEC+ compliance and positive economic developments. Elsewhere, spot gold holds onto most of Friday’s losses with prices fluctuating within a relatively tight band ahead of its 21 DMA at USD 1464.65/oz and a risk-packed week. Copper has pared some of Friday’s gains as prices are modestly pressured by the latest Chinese trade data (which came in narrower than forecasts in USD and CNY terms) but cushioned by the breakdown, in which imports topped estimates and China copper imports hit a 13-month high on improved factory activity. Finally, iron ore prices feel little reprieve after November iron ore imports from China fell for a second straight month.

BofA says Brent prices could be boosted to USD 70/bbl ahead of schedule due to in the case of strong OPEC+ compliance coupled with positive economic developments. (Newswires)

Venezuela government and opposition are reportedly considering providing private oil companies operating rights including Chevron (CVX), Rosneft and CNPC, although PDVSA would hold a majority stake according to sources. (Newswires)

Iron ore options began trading in the Dalian Commodity Exchange today. (Newswires)