• European equities are mostly lower as the region failed to follow a positive APAC lead, Boeing shares are down 2.0% after freezing 737 Max production
• UK PM Johnson is to bolster his Brexit legislation by outlawing a delay to the transition period with the EU beyond December 2020
• RBA meeting minutes saw the central bank reiterating it has the ability to add further stimulus if needed and is ready to ease again if required
• In FX, DXY hovers around 97.00, Sterling weakend on no-deal Brexit risk, AUD fell post-RBA minutes
• Looking ahead, highlights include US Building Permits and Housing Starts, Industrial Production, JOLTS, APIs, ECB’s Kazmir, Lane, Fed’s Kaplan, Rosengren, Williams, BoE’s Carney

ASIA-PAC

Asian equity markets traded mostly higher as the region took mild impetus from the gains on Wall St where all major indices notched fresh record highs once again due to the recent trade developments and in which desks noted a large equity buy programme helping spur the pre-Christmas rally. ASX 200 (Unch.) and Nikkei 225 (+0.5%) both opened higher but with the advances in Australia later retraced amid weakness in financials and Westpac shares after APRA announced it is launching an investigation related to AUSTRAC breeches and doubled its capital requirement add-ons for the big 4 lender to AUD 1bln, while upside in Tokyo was also restricted by a pullback in JPY-crosses. Hang Seng (+1.2%) and Shanghai Comp. (+1.3%) rallied due to trade optimism and after local press reports suggested the potential for 2 targeted RRR cuts by the PBoC next year, although both were initially kept tepid by continued PBoC liquidity inaction and as China remained tight-lipped regarding agriculture purchase commitments. Finally, 10yr JGBs were subdued after spillover selling from USTs, with demand dampened by gains in stocks and after the 20yr JGB auction which pointed to showed results across all metrics.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set USD/CNY reference rate at 6.9971 vs. Exp. 6.9970 (Prev. 6.9915)

China is said to grant more regular tariff waivers for US farm imports, according to sources. (Newswires)

China’s NDRC said consumer prices are expected to remain stable in the future and that China has the confidence, as well as the conditions to reach this year's economic targets, while it added that China will not resort to massive stimulus for building infrastructure. (Newswires)

UK/EU

ITV's Peston tweeted that PM Johnson is to change the Withdrawal Agreement Bill to put into law that transition arrangements with EU, during which UK is in effect non-voting member of EU, must end 31 Dec 2020, which he noted will be seen as increasing the risk of delayed no-deal Brexit. (Twitter)

UK Employment Change (Oct) +24k vs. Exp. -10k (Prev. -58k) (Newswires) UK Avg Earnings (Ex-Bonus) (Oct) 3.5% vs. Exp. 3.4% (Prev. 3.6%) UK Claimant Count Unem Chng (Nov) 28.8k vs. Exp. 24.5k (Prev. 33.0k, Rev. 26.4k) UK ILO Unemployment Rate (Oct) 3.8% vs. Exp. 3.9% (Prev. 3.8%)

ECB's Rehn says regenerative monetary policy is expected to continue until inflation expectations return clearly close enough to 2% and until its effects can also be seen in core inflation. (Newswires)

ECB’s Muller says ECB should have flexibility around the inflation target, should consider a band around the objective. (Newswires)

EQUITIES

A mostly downbeat session for European equities thus far following on from a somewhat optimism APAC session, which saw Chinese bourses outperform on trade optimism and fresh-record tailwinds State-side. Europe’s bellwether - Euro Stoxx 50 (-0.7%) is largely weighed on by heavyweight Unilever (-5.8%) whose shares slumped amid a profit warning, with the company citing “challenges in certain markets”. Thus, the consumer staples sector (-1.7%) is seeing significant underperformance vs. its peers. DAX (-0.9%) underperforms vs the regions with a bulk of the losses attributed to downside in SAP (-3.5%) in light of a negative broker move at BofA. Meanwhile, the FTSE 100 (Unch) attempts to balance downside in Sterling with more a pronounced risk of a cliff-edge Brexit - after reports that PM Johnson is attempting to outlaw another extension beyond Dec 2020. UK Homebuilders have reverse a bulk of their post-election poll gains whilst banks mostly fail to benefit from BoE’s stress test green-light, which saw HSBC (+0.9%), Barclays (-3.2%), Lloyds (-4.7%), RBS (-2.0%) and Standard Chartered (+1.0%) all pass – albeit HSBC and Standard Chartered are less exposed to the UK given their overseas operations. Elsewhere, Airbus (+0.5%) benefits following Boeing’s (-1.3% pre-market) announcement that it is to freeze 737 Max production in January. That said, aero supplier Safran (-3.6%) alongside airline names suffer: easyJet (-4.3%), Ryanair (-3.1%), IAG (-2.5%), with the latter side-lining news that British Airways pilots agreed to back a revised pay off to end strikes. Last but not least, FTSE-listed NMC Health (-14.9%) plumbed the depth after activist short-seller Muddy Waters noted of serious doubt regarding the company’s financial statement, its asset values, cash balance, reported profits, and reported debt levels.

Boeing (BA) – Co. announced it is to freeze 737 Max production in January. Co. said no furlough or lay-offs are expected at this time amid suspension of production. Co. said it will provide financial information regarding production suspension in connection with Q4 2019 earnings release in early. Co. shares are down 2.0% pre-market. (Newswires)

FX

GBP - Sterling has given up more of its GE-related gains as attention switches back to Brexit and the risk that a no deal departure from the EU could yet unfold if UK PM Johnson manages to prevent parliament from seeking an extension to the transition phase alongside the WAB motion that will be presented to the HoC on Friday. Cable retreated further from last week’s lofty 1.3500+ pinnacle through Monday’s session low before tripping stops on a break of 1.3200 and testing post-election result/exit poll levels circa 1.3159 that roughly align with a Fib retracement of the whole relief rally from voting day trough to peak. Meanwhile, Eur/Gbp extended its rebound to around 0.8470 from close to 0.8300 at one stage yesterday and under the big figure when the Pound hit aforementioned heights after the landslide Tory win. Note, some solace via the latest jobs data even though the claimant count and headline AWE were both weaker than forecast.

AUD/NZD/CAD - The Aussie is underperforming on the back of latest RBA minutes underscoring a willingness to ease further if necessary and flagging a full assessment of the situation at the next policy meeting in February 2020. Aud/Usd has recoiled to just below 0.6850 and Aud/Nzd is back under 1.0450 as Nzd/Usd holds up a tad better between 0.6570-0.6605 in wake of another improvement in NZ business sentiment and expections on top of the Kiwi supportive cross flows. Elsewhere, the Loonie has lost momentum and slipped through 1.3150 ahead of Canadian manufacturing sales, and as the Greenback attempts to form a base, albeit at the expense of others, with the DXY hovering above 97.000 in a 97.058-303 band.

EUR/CHF/JPY - All narrowly mixed against the Dollar, as Eur/Usd meanders from 1.1130 to 1.1160, Usd/Chf idles within 0.9820-45 extremes and Usd/Jpy remains anchored to 108.50 with rallies confined or capped ahead of early month highs/near double top resistance.

NOK/SEK - Not quite all change, but a distinct turnaround in fortunes for the Scandi Crowns that started Norges Bank and Riksbank meeting week in the ascendency. Eur/Nok and Eur/Sek have both bounced after testing, but not breaking chart support back towards 10.0900 and 10.4800 respectively.

RBA Minutes from the December meeting stated the board agreed it is important to reassess the economic outlook at the February meeting and that it has the ability to add further stimulus if needed and is ready to ease again if required. Furthermore, RBA reiterated the economy appears to have reached a gentle turning point but noted that persistently low growth in household income is a source of concern and that current wage growth is not fast enough to reach inflation and consumption goals, while it also stated consumers are increasingly gloomy on the economy and media coverage is also more negative. (Newswires)

New Zealand ANZ Business Confidence (Dec) -13.2% (Prev. -26.4%). (Newswires) New Zealand ANZ Activity Outlook (Dec) 17.2% (Prev. 12.9%)

FIXED INCOME

Debt futures remain in recovery mode after yesterday’s fall from grace at the hands of a rally in risk assets partly positional for the looming year end and perhaps belatedly or on a 2nd take of the US-China phase 1 trade deal. However, trade is typically erratic for seasonal reasons and turnover light, as Bunds, Gilts and US Treasuries stand firm, albeit shy of their intraday peaks (172.29, 131.99 and 128-23 respectively) and Monday’s marginally higher session bests as the focus switches to a decent 2nd half line-up (on paper at least) including data, Fed and ECB speakers plus API crude/product inventories.

COMMODITIES

WTI and Brent futures are contained within tight intraday ranges of around USD 0.5/bbl with little to report by way of fresh fundamental catalysts for the complex. Brexit-risk aside, the broader sentiment in the markets remains positive given the developments in the US-Sino sphere. ING notes that constructive energy fundamentals – including declining inventories – is reflected in the ICE Brent time spread, but they continue to meander deep in backwardation. “We expect downward pressure on oil prices to resume as we move into 1H20”, ING says, but the forecast remains contingent on the Phase One trade deal details alongside OPEC+ action to tackle surplus. In terms of commentary, JP Morgan raised Brent crude 2020 price forecast to USD 64.50/bbl from USD 59.00/bbl but sees prices in 2021 at USD 61.50/bbl, while it expects WTI prices averaging USD 60.00/bbl in 2020 and USD 57.50/bbl in 2021. Looking ahead, tonight’s weekly API report is expected to show crude stocks declining by 1.75mln barrels over the last week, whilst in terms of products, gasoline stocks are forecast to build by 2mln barrels and distillates to draw by 500k barrels. Elsewhere, spot gold has seen some support in decent trade which coincided with downside in stocks. The yellow metal sees modest intraday gains but remains below recent resistance at USD 1480/oz. Copper prices remain rangebound around the USD 2.80/lb, although modest downside in the red metal coincided with the release of China’s refined copper output which rose 19.6% Y/Y, hitting record highs. Finally, Dalian iron ore declined almost 3.0%, slipping for a second straight session amid rising shipments from large miners - Australian and Brazilian shipments rose 22.15mln tonnes last week, +462k tonnes W/W.

JP Morgan raised Brent crude 2020 price forecast to USD 64.50/bbl (Prev. USD 59.00/bbl) but sees prices in 2021 at USD 61.50/bbl, while it expects WTI prices averaging USD 60.00/bbl in 2020 and USD 57.50/bbl in 2021. (Newswires)

GEOPOLITICS

US Defense Secretary Esper said North Korea tests are likely if they don't feel satisfied and that he is hopeful about diplomatic efforts but noted that Pyongyang rhetoric is concerning. (Newswires)

Pakistani PM, speaking on India’s new citizenship bill, says “we are worried it could lead to a conflict between the two nuclear-armed nations”. (Newswires)