• European equities are choppy and ultimately flat ahead of a deluge of risk events
• US President Trump is likely to meet with top trade advisers on Thursday regarding December 15th tariffs, according to sources
• Half of the latest UK Election Polls show a maintenance in the Tory/Labour spread and the other half show a slight narrowing
• SNB left Monetary Policy settings unchanged, whilst CBRT conducted a deeper-than-forecast cut and maintained their stance
• Looking ahead highlights include, UK General Election, ECB Rate Decision, US Initial Jobless Claims & BoJ Tankan Survey, US 30yr, ECB’s Lagarde & BoC’s Poloz

CENTRAL BANKS

SNB maintained rates at -0.75%, as expected. SNB reiterated their language around the CHF and their willingness to intervene in FX markets. In terms of forecasts 2019 growth has been increased, while the 2020 and 2021 inflaton forecasts have been cut slightly. This was not enough to prompt a significant move in EUR/CHF, as focus for the CHF will be on external factors today namely the ECB and UK General Election; most notably, the SNB maintained their rate projection for the forecast period at -0.75%.

CBRT cut by 200bp to 12.0% vs. Exp. 12.5% (Prev. 14.0%) Maintained their cautious stance and noted the disinflation process in on track, forecast show that inflation is likely to materialise closer to the lower bound of October’s projections. Following the decision the TRY saw some modest strength.

Brazil Central Bank cut the Selic rate by 50bps to 4.50% as expected via unanimous decision and stated the economic recovery is gaining steam but current stage of the cycle warrants caution in its next steps. BCB added it sees two-way risks to inflation and that stimulative policy is still required but noted that data shows the economy has gained traction from Q2 onwards and it assumes recovery will continue at a gradual pace. (Newswires)

ASIA-PAC

Asian equity markets were varied for most of the day as ongoing trade uncertainty heading into this week’s tariff deadline and today’s looming risk events slightly dampened the momentum from Wall St where sentiment was mildly underpinned following the FOMC meeting. Nonetheless, ASX 200 (-0.7%) and Nikkei 225 (+0.2%) traded mixed as the former suffered from broad losses across its sectors including underperformance in tech and financials, while the Japanese benchmark was kept afloat by a predominantly weaker currency but with gains also limited by a surprise 4th consecutive contraction in Machinery Orders which represented the longest streak of declines in over a decade. Elsewhere, Hang Seng (+1.3%) outperformed and topped the 27k level with the index led by a surge in Chinese tech names, although sentiment in the mainland was less optimistic with Shanghai Comp. (-0.3%) subdued by the tariff-threat overhang and as participants await statements from China’s Central Economic Work Conference which is expected to finish today. Finally, 10yr JGBs tracked the post-FOMC gains in T-notes and with prices also underpinned following the abysmal Machine Orders data from Japan, despite slightly weaker demand at the enhanced liquidity auction for longer-dated JGBs.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY reference rate at 7.0253 vs. Exp. 7.0252 (Prev. 7.0385)

US President Trump is likely to meet with top trade advisers on Thursday regarding December 15th tariffs, according to sources. (Newswires)

China Industry Ministry official sees GDP at 6.1%-6.2% for 2019 and 6.0% for 2020, while Industrial Production is forecast at 5.5%-5.6% in 2019 and around 5.9% for 2020. (Newswires)

Chinese buyers have signed a deal to purchase 585k tons of US soybeans, in the largest collective purchase by China since April., Global Times Business citing US Department of Agriculture. (Newswires)

Japanese Machinery Orders (Oct) M/M -6.0% vs. Exp. 0.9% (Prev. -2.9%). (Newswires) Japanese Machinery Orders (Oct) Y/Y -6.1% vs. Exp. -1.8% (Prev. 5.1%)

GEOPOLITICS

US warned North Korea of consequences if it carries out threats of a spectacular weapons test in the new year but added it will be flexible if it stays in talks. (Guardian)

North Korea says it is ready to respond to any corresponding measures that the US chooses, adds that it is clear that US has nothing to offer even if talks are resumed, reported via KCNA. (Newswires)

US

USTR Lighthizer is expected to brief Republican Senators regarding USMCA during lunch today after many GOP Senators were said to have complained of being in the dark on the deal the White House struck with Democrats. (Newswires)

UK/EU

UK General Election polling: Half the polls out show a maintenance in the Tory/Labour spread and the other half a slight narrowing (5-12pp range)

·       Survation poll showed Conservatives at 45% (Unch), Labour 34% (+3), Lib Dems 9% (-2), Brexit Party 3% (-1) taken December 10th-11th. (Newswires)

·       Savanta/ComRes poll showed Conservatives at 41% (Unch.), Labour 36% (+3), Lib Dems 12% (Unch.), Brexit Party 3% (Unch.) taken December 9th-10th. (Newswires)

·       Kantar poll showed Conservatives at 44% (Unch.), Labour 32% (Unch.), Lib Dems 13% (-2), Brexit Party 3% (+1) taken December 9th-11th. (Newswires)

·       Deltapoll poll showed Conservatives at 45% (+1), Labour 35% (+2), Lib Dems 10% (-1), Brexit Party 4% (+1) taken December 9th-10th. (Newswires)

·       Ipsos-Mori for Evening Standard poll showed Conservatives 44% (U/C), Labour 33% (+1pp), Liberal Democrats 12% (-1pp) (Newswires)

Spain's King Felipe has asked PM Sanchez to form a government to end the political deadlock, PM Sanchez has accepted the invitation to do so. Sanchez is to meet the leaders of all other political parties next week. (Newswires)

EQUITIES

European bourses trade choppy but tread water in modest positive territory [Eurostoxx 50 +0.3%) ahead of looming risk events (ECB, UK General Election) with FOMC now out of the way. UK’s FTSE 100 modestly outperforms (+0.5%) with banks, and homebuilders supported as election voting gets underway – with exit polls expected around 22:00GMT (Full preview available on the Newsquawk Research Suite). Sectors have shown somewhat of a recovery since the open and now trade mostly in the green vs. a mixed start – defensives retreat whilst cyclicals gain traction. In terms of individual movers, Tullow Oil (+11.8%) continues to pare back from its recent 70% slump with the aid of rising oil prices acting as tailwind. Elsewhere, Balfour Beatty (+4.2%) benefits from its latest trading update which sees FY profit from operations ahead of expectations. Similarly, a positive trading update sees Ocado (+2.5%) supported. Nestle (+0.5%) shares are underpinned by source reports that it is mulling the sale of its ice cream business, which could be valued at USD 4bln. On the flip side, Germany’s Metro (-1.7%) is subdued post-earnings, whilst AB InBev (-1.5%) hovers near the bottom of the Stoxx 600 after Australia competition watchdog ACCC expressed concern about Asahi Group’s proposed purchase of AB InBev’s Carlton & United Breweries unit.

Boeing (BA) - China's Aviation Regulator Official has raised serious concerns with the Co. regarding design changes to the 737 Max. (Newswires)

FX

USD - The DXY is clinging to the 97.000 handle amidst broad-based Greenback depreciation in wake of the FOMC that contained enough dovish elements to keep the index depressed, including a muted view of inflation, flat 2020 dot plots and Fed Chair Powell raising the bar for any reversal of the mid-cycle insurance easing. On that note, US PPI data comes hot on the heels of the last 2019 policy meeting and yesterday’s mixed CPI metrics, while initial claims provide the first post-NFP snapshot of the labour market that may not be as tight as the Central Bank previously perceived.

CHF/EUR/TRY- All paring gains vs the Buck, with the Franc taking some heed of more NIRP and currency intervention backing from the SNB that is flagging no rate normalisation for the duration of the forecast horizon. Usd/Chf has nudged up to circa 0.9830 from 0.9810 and Eur/Chf is near the top of a 1.0924-48 range even though the Euro has drifted down against the Dollar within 1.1145-25 parameters ahead of the ECB. The single currency may be wary about key technical resistance just above 1.1150 in the form of the 200 DMA (1.1155) rather than any fundamental change in language or policy insight from new head Lagarde, while flow-wise decent option expiry interest between 1.1120-25 and 1.1090-1.1100 (1 bn and 2.2 bn respectively) could be exerting some downside pressure. Meanwhile, the TRY firmed in light of the latest CBTR decision which kept its cautious stance despite a deeper than forecast 200bps cut. Further, the Central Bank noted of signs that inflation is close to materialise close to lower bound of its October projects. USD/TRY breached 5.7800 to the downside to low of 5.7740 (vs. 5.7980 pre-announcement) before stabilising around 5.7800.

AUD/GBP/SEK/NOK - The Aussie continues to outperform across the board, as Aud/Usd squeezes higher and through a longer term downtrend to target 0.6900 and Aud/Nzd consolidates around 1.0450 given a more subdued Kiwi vs its US counterpart after losing altitude on the approach to 0.6500, while Sterling is meandering on GE day, with Cable pivoting 1.3200 and Eur/Gbp straddling 0.8430. Note, a hefty 1.1 bn option expiry at the 1.3200 strike may keep the Pound tethered awaiting the vote outcome. Elsewhere, another swing in sentiment for the Scandi Crowns after dismal Swedish jobs data vs a boost in Norwegian oil investment. Eur/Sek nudging 10.4500, Eur/Nok off near 10.1500 highs.

Israel’s Parliament approved a motion to conduct a new national election on March 2nd, which will be the 3rd election in less than a year. Recent polling suggests that neither of the two main parties (Blue & White and Likud) would achieve a 61-seat majority. (Newswires/BBC)

Swiss Government Forecasts - GDP Growth: 2019, 0.9% (Prev. 0.8%), 2020 1.7% (Prev. 1.7%). Inflation: 2019 0.4% (Prev. 0.5%), 2020 0.1% (Prev. 0.4%)

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1050-55 (850M), 1.1090-1.1100 (2.2BLN), 1.1120-25 (1BLN) 1.1140-50 (850M), 1.1200 (750M)

-        GBP/USD: 1.3150 (500M), 1.3200 (1.1BLN), 1.3250 (250M), 1.3300 (416M)

-        USD/JPY: 108.70-75 (650M), 109.00 (400M)

-        AUD/JPY: 74.60-75 (1.4BLN)

FIXED INCOME

ECB TLTRO-3 2nd Allotment: EUR 97.7bln vs. EUR 146.8bln early retirement from the previous facility (1st allotment was EUR 3.396bln). (Newswires)

The main UK bond remains in pole position among core debt peers, but whether that is still the case for PM Johnson when all the votes are cast and counted is yet to be determined of course. Gilts are just shy of a fresh 132.25 Liffe intraday high and only 2 ticks away from emulating Monday’s session best, while Bunds are bid though lagging and perhaps flagging on Eurozone spread flows as Italian paper outpaces counterparts in the run up to the ECB. Elsewhere, consolidation and curve realignment continues to weigh on US Treasuries, with steepening along the curve also likely to be underway in concession for long bond supply that follows the Fed and data in the shape of PPI and weekly claims.

COMMODITIES 

A relatively slow session initially for commodities in the aftermath of the FOMC which saw crude future nurse some EIA-induced wounds. WTI and Brent futures saw a very modest pop higher shortly after the release of the IEA Monthly Oil Market report - which aligned itself more with the OPEC report as they both kept global demand growth forecasts unchanged for 2019 and 2020 whilst EIA saw a modest revision higher of 50k BPD to its 2020 forecast. The report also noted that global oil demand rose by 900k BPD in Q3 2019 – highest annual growth in year. WTI and Brent futures meander around session highs above 59/bbl and 64/bbl respectively as the complex eyes awaits its next catalyst(s) and have seen some upside on the recent geopolitical rhetoric out of China. Elsewhere, spot gold is flatlining around USD 1475/oz ahead of its FOMC high of USD 1478.90/oz and on stand-by for upcoming events. Copper meanwhile touched resistance just under USD 2.8/lb amid a strengthening USD and some consolidation following six sessions of consecutive gains. Finally, nickel prices hit their highest in almost two weeks – with touted FOMO the main driver.

IEA Monthly Oil Market Report maintains global oil demand growth for 2019 and 2020 at 1mln and 1.2mln BPD respectively. Projected oil demand is set to fall by 75k BPD in 2019, will be the first annual decline. Projected OPEC output is still 700k BPD above Q2 2020 demand for its crude and 1mln BPD above Q2 demand. Even if OPEC+ strictly follow pact, only 530k BPD of crude would be withdrawn from the market vs. November. (Newswires)

The IEA report aligns itself more with the OPEC report as they both kept global demand growth forecasts unchanged for 2019 and 2020 whilst EIA saw a modest revision higher of 50k BPD to its 2020 forecast. (Newsquawk)