• European bourses are significantly subdued, as this morning’s stock sell-off accelerates and spreads across markets
• GBP outperforms ahead of tonight’s MRP, with the DXY continuing to print fresh session lows
• A US-China trade deal is not expected this week with the US occupied by USMCA, although new tariffs are not expected according to Chinese press reports
• US House Speaker Pelosi stated that a USMCA trade deal is not agreed to, are close but not yet there
• Looking ahead, highlights include APIs, YouGov MRP, EIA STEO

ASIA-PAC

Asian equity markets resumed the cautious global risk tone heading into this week’s plethora of risk events and amid ongoing trade uncertainty from the looming US-China tariff deadline set for December 15th. ASX 200 (-0.3%) and Nikkei 225 (Unch.) were subdued with Australia pressured by underperformance in most of the trade sensitive sectors but with losses limited by resilience in commodity names, while favourable currency moves also helped stem the downside for Tokyo-listed exporters. Hang Seng (-0.2%) and Shanghai Comp. (Unch.) conformed to the lackadaisical picture as participants second-guessed whether the US will proceed with the 15% tariffs on virtually all of the remaining imports from China scheduled for Sunday and in which China have already set retaliatory tariffs due the same day. Furthermore, continued PBoC liquidity inaction, as well as warnings from a senior Chinese economist on looser fiscal and monetary policies next year also contributed to the subdued risk appetite. Finally, 10yr JGBs fluctuated in which prices were initially pressured and briefly slipped below the 152.00 level amid gains in yields in which the 10yr yield rose to 0.0% for the first time since March, with selling in JGBs exacerbated following the weaker results at the 5yr auction which showed a slightly softer b/c, a drop in accepted prices and wider tail in price, although 10yr JGBs then staged an aggressive rebound to recoup all the earlier losses.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY reference rate at 7.0400 vs. Exp. 7.0398 (Prev. 7.0405)

US Congress is reportedly targeting China in a defense policy bill and are said to have agreed on language of the bill that would ban use of federal funds to purchase Chinese buses and railcars. (Newswires/WSJ)

A US-China trade deal is not expected this week with the US occupied by USMCA, although new tariffs are not expected according to Chinese press reports. (SCMP)

Chinese CPI (Nov) Y/Y 4.5% vs. Exp. 4.2% (Prev. 3.8%); Highest since January 2012 Chinese PPI (Nov) Y/Y -1.4% vs. Exp. -1.5% (Prev. -1.6%)

Chinese M2 Money Supply YY* (Nov) 8.2% vs. Exp. 8.4% (Prev. 8.4%)

Chinese New Yuan Loans* (Nov) 1390B vs. Exp. 1200.0B (Prev. 661.3B)

Chinese Outstanding Loan Growth* (Nov) 12.4% vs. Exp. 12.3% (Prev. 12.4%)

GEOPOLITICS

US is said to now be refusing to sign a letter that would authorize the UN Security Council to hold a meeting on the human rights situation in North Korea according to reports citing diplomats. In related news, US State Department official said the US has asked the UN Security Council to discuss North Korea's missile launches and the possibility of an "escalatory DPRK provocation", while South Korea expects North Korea provocation and possible engine test before Christmas. (Newswires/Time)

Ukrainian President Zelenskiy announced that they agreed steps with Russia to implement full and unlimited ceasefire in the east of the country, with the leaders aiming for a new withdrawal of forces from Ukraine conflict zones by March 2020, Furthermore, Zelenskiy commented that many issues are unresolved but dialogue is good, although other reports noted he was said to regret that very little was achieved at the Paris summit. (Newswires/AFP) 

US

USTR Lighthizer, Trump Advisor Kushner and Canadian Deputy PM Freeland are heading to Mexico today for talks on completing the USMCA trade agreement. (Newswires/CNBC) US House Speaker Pelosi stated that a USMCA trade deal is not agreed to in which that they must see implementing legislation and that we are close but not quite finished yet in reaching a deal. Furthermore, Pelosi commented she expects USMCA treaty to be set by Tuesday, while US House and Ways Committee Chairman Neal also anticipates a USMCA announcement on Tuesday afternoon. (Newswires)

House Judiciary Committee hearing on Trump impeachment concluded and its Chairman Nadler commented that President Trump's conduct is clearly impeachable, while House Democrats are to unveil articles of impeachment on Tuesday in which they are expected to draft 2 articles of impeachment on abuse of power and obstruction of Congress. (Newswires)

UK/EU

A Downing Street memo, dated Dec 7, says the chances of a Corbyn-led coalition have been “seriously underestimated”, as gains of just 12 seats by the SNP, Liberal Democrats and other minor parties would be enough to remove Boris Johnson from No 10. (Telegraph)

UK GDP Estimate MM (Oct) 0.00% vs. Exp. 0.10% (Prev. -0.10%); Estimate YY (Oct) 0.70% vs. Exp. 0.70% (Prev. 0.90%); Estimate 3M/3M (Oct) 0.0%% vs. Exp. 0.00% (Prev. 0.30%)

-        Manufacturing Output MM (Oct) 0.2% (Prev. -0.4%); YY (Oct) -1.2% vs. Exp. -1.4% (Prev. -1.8%)

-        Industrial Output MM (Oct) 0.1% vs. Exp. 0.2% (Prev. -0.3%); YY (Oct) -1.3% vs. Exp. -1.2% (Prev. -1.4%)

-        Construction O/P Vol MM (Oct) -2.3% vs. Exp. -0.2% (Prev. -0.2%); YY (Oct) -2.1% vs. Exp. -0.1% (Prev. 1.2%, Rev. 0.5%)

-        Goods Trade Balance GBP (Oct) -14.486B GB vs. Exp. -11.65B GB (Prev. -12.541B GB, Rev. -11.521B GB)

-        No growth in MM terms for three months in a row, longest such run since Q1 2009; Some signs of stockpiling boost to imports and exports ahead of the Brexit deadline by less than in Q1

German ZEW Economic Sentiment (Dec) 10.7 (Prev. -2.1); Current Conditions (Dec) -19.9 vs. Exp. -22.3 (Prev. -24.7)

-        ZEW state the increase in economic sentiment is on the hope that exports and private consumption will develop better than the prev. expectations for this. Although, unfavorable figures for Industrial Production and income orders (October) illustrate that the economy remains fragile

The French government is considering a delay to the implementation of pension reforms, according to reports. (Les Echos)

Germany's VDMA forecast a 2% production decline in 2019 and 2020; says engineering industry is not in crisis, but many customers delay or halt investment. (Newswires)

EQUITIES

European stocks are plumbing the depths [Eurostoxx 50 -1.1%] with the losses seen at the EU cash open accelerating in early trade. DAX futures and cash have retreated below the key 13k level after the former breached its Dec 5th/6th low ~13045 and its Dec low at 12924, with eyes now on its Nov low (12888.5) and 50 DMA (12880) as the index future gives up the 12900 mark. Other major bourses are broadly in the red with little by way of fresh fundamental factors to add to the overall narrative during the session, that said, participants gear up for a risk-packed week, with the US imposition of China tariffs on Dec 15th still looming. Sectors are all in negative territory, although some resilience is seen in defensives which reflects the overall risk picture in the region. The healthcare sector is outperforming its peers as Sanofi (+4.8%) shares cushion the segment - after the drug-maker released plans to reorganise its business which will see it narrow the number of global business units in an attempt to bolster growth and profits, whilst aiming to save EUR 2.0bln by 2022. Other notable movers include Deutsche Bank (-0.3%) whose shares opened higher after affirming its 2019, 2020 and 2022 targets, albeit shares dipped into negative territory on the DAX’s demise. Elsewhere, Ashtead Group (-7.5%) rests at the foot of the FTSE 100 amid fears that the UK market will remain challenging.

TSMC (2330 TT) November sales rose 9.7% Y/Y to TWD 107.9bln. (Newswires)

FX

NOK - The clear G10 laggard as Eur/Nok bounces further from sub-1.1000 lows towards 10.1900 on the back of the latest Norwegian regional survey revealing downgrades to output over the previous quarter and outlook for 6 months ahead. Norges Bank contacts also reported slower growth in all sectors of the economy and several respondents noted more uncertainty due to the adverse knock-on effects of global trade turbulence. The Q4 findings overshadowed inflation data that came in as forecast across the board in contrast to softer Swedish Prospera CPIF expectations, albeit with relatively little impact on the SEK given the fact that the Riksbank has underscored December repo rate hike intentions.

GBP/EUR - Sterling survived another bout of all round selling pressure amidst rising option volatility ahead of Thursday’s UK election and the final YouGov MRP poll to rebound firmly in Cable and Eur/Gbp cross terms even though data was disappointing on balance (m/m GDP flat, ip sub-consensus and trade gaps much wider than anticipated). In fact, the Pound is probing fresh peaks vs the Dollar circa 1.3190 and retesting 0.8400 against the single currency that has not derived much momentum from upbeat ZEW metrics for Germany and the Eurozone as a whole, with the former somewhat diluted by caveats. Indeed, Eur/Usd only mustered enough strength to register a 1.1080 high before fading and perhaps feeling the weight of hefty option expiries sitting between 1.1065-70 (2.3 bn).

CHF/JPY - The Franc continues to claw back lost ground vs the Greenback and Euro regardless of the looming SNB quarterly policy review and prospect of any tweak in assessment of the Swiss currency, or even direct intervention, with Usd/Chf edging closer to 0.9850 and Eur/Chf eyeing 1.0900. However, the Yen continues to respect 108.50 resistance and a Fib retracement in very close proximity (108.49) amidst decent expiry interest from 108.60-65 (1.5 bn), as the DXY narrowly maintains 97.500+ status).

CAD/NZD/AUD - The Loonie continues to trade on a firmer footing within 1.3245-25 parameters vs its US counterpart alongside the Mexican Peso (between 19.2450-19.2000 on the wide) on USMCA accord hopes, but the Kiwi and Aussie in particular are still treading cautiously ahead of the Fed and US-China tariff deadline, as Nzd/Usd and Aud/Usd pivot 0.6550 and 0.6825 respectively and Aud/Nzd keeps its head above 1.0400.

EM - More volatile trade for the Rand and Eskom-related depreciation overshadowing bullish SA data in the form of manufacturing production, with Usd/Zar elevated within a 14.6275-7700 band.

Australian NAB Business Confidence (Nov) 0 (Prev. 2). (Newswires) Australian NAB Business Conditions (Nov) 4 (Prev. 3)

Notable FX Option Expiries, NY Cut:

-        EUR/USD: 1.1040-50 (700M), 1.1065-70 (2.3BLN), 1.1080 (430M), 1.1100 (615M), 1.1115-20 (850M)

-        GBP/USD: 1.3000 (466M), 1.3070-80 (1.3BLN), 1.3100 (262M), 1.3150 (630M), 1.3200 (567M), 1.3300 (500M)

-        USD/JPY: 107.90-108.00 (2BLN), 108.50 (410M), 108.60-65 (1.5BLN), 109.00 (2.5BLN), 109.10-15 (850M)

South Africa's Eskom is currently implementing Stage 4 rotational loadshedding until 23:00 (local time) tonight. (Newswires)

Norges Bank Regional Network Survey Q4: aggregate output index; 6-months ahead 0.96 (Prev. 1.35), past 3-months 1.06 (Prev. 1.48)

-        Growth has slowed through the autumn, due to lower retail sales and postponements of transport development problems

-        Growth has slowed in all sectors, most in retail, trade, construction domestically orientated manufacturing and domestically orientated oil services

-        A number of contacts describe the economic prospects as more uncertain than one year ago are concerned about contagion effects from global trade turbulence

FIXED INCOME

EU bonds have staged another recovery sortie, and perhaps the latest leg down in stocks has prompted some asset-switching or front running in case the equity selling escalates into a rout. Moreover, US Treasury resilience may be finally spilling over as Bunds pare declines to single digits and Gilts to 14 ticks from -30 and -28 ticks at worst, while the 10 year note future floats above 129-00 and the corresponding yield flirts with 1.80% even though supply looms.

COMMODITIES 

Crude markets are choppy – with recent action attributed to potential technical play. Front-month WTI and Brent futures popped higher to 59.40/bbl and 64.68/bbl respectively from below the round figures and with a lack of fresh fundamental news-flow to influence prices. Energy futures then reversed earlier gains and printed fresh session lows. Crude markets are susceptible to increased volatility as we go through the week with a number of key macro risk events on the radar – including FOMC and ECB monetary policy decisions, UK general election, US’ scheduled imposition of tariffs on USD 160bln worth of Chinese goods, whilst crude specific drivers include the weekly inventory data and the monthly oil reports – with the EIA STEO due later today.  Meanwhile, gold prices remain underpinned by the downside in the equity complex and ahead of the aforementioned events, whilst in terms of commentary – Goldman Sachs and UBS both see the yellow metal prices climbing to USD 1600/oz, above Commerzbank view of USD 1500/oz, amid the current trade environment, but caveat that it is unclear what Central Banks will do during 2020. Meanwhile, copper prices remain on the front-foot and is poised (thus far) for a third straight session of gains as the red metal creeps up to USD 2.75/lb. ING highlight a number of factors driving the upside 1) last week’s positive trade message after china said they would wave tariffs on imports of US pork and soybean, 2) China’s Central Economic Conference vowing to maintain economic growth in a reasonable range – adding to copper demand 3) the downward trend in LME inventories and 4) disappointing short-term scrap import quotas. Finally, Dalian iron ore futures rose in excess of 3.0% to its highest in over four months amid supply uncertainties expected to arise in Q1 2020, with some miners such a Vale also lowering production outlook.

Azerbaijan's oil production (November), was 776k BPD vs. October's 718k BPD., Energy Ministry. (Newswires)

South Africa's impala platinum has shut production at its Rustenburg and Marula mines due to power cuts, according to a spokesman

-        Sibanye Stillwater have shut all deep-level mines since Monday due to South African power shortages, goal is to re-open mines this afternoon., according to a spokesman. (Newswires)