• Asian equity markets traded mixed as the region lacked conviction in the absence of any fresh catalysts and following a relatively quiet session on Wall Street
• US Treasury Secretary Mnuchin said President Trump just wants a level playing field with China and the enforcement mechanism is very strong in the China deal
• S&P affirmed UK at AA; Outlook revised to Stable from Negative and Fitch affirmed the UK at AA; Outlook revised to Negative from Rating Watch Negative
• US House has enough votes to impeach President Trump with the majority in favour and is expected to conduct a vote today
• Looking ahead, highlights include German IFO, UK & Canadian CPI, EZ CPI (Final), DoEs, NZ GDP, Trade Balance, ECB’s Lagarde, Coeure, Fed’s Brainard and Evans

1ASIA-PAC

Asian equity markets traded mixed as the region lacked conviction in the absence of any fresh catalysts and following a relatively quiet session on Wall Street heading into the holiday season, where stocks consolidated around record highs due to the improved trade climate and after several encouraging tier-2 data releases. ASX 200 (+0.1%) and Nikkei 225 (-0.5%) were mixed as defensives just about offset the losses in miners, tech and financials to keep Australia afloat, while sentiment in Tokyo was weighed by adverse currency flows and mixed trade data in which Exports contracted for a 12th consecutive month albeit at a slightly narrower than expected decline. Hang Sang (+0.1%) and Shanghai Comp. (+0.1%) were indecisive amid diminishing effects from the US-China phase one agreement, while the PBoC’s first liquidity injection in 21 sessions also failed to spur prices despite announcing a total of CNY 200bln via 7-day and 14-day reverse repos at a reduced rate (2.65% vs Prev. 2.70%) on the 14-day operation. Finally, 10yr JGBs were higher following the bull-steepening in the US and with the BoJ also in the market for over JPY 1.1tln of JGBs in 1yr-10yr maturities, but with advances restricted as the BoJ kick starts its 2-day policy meeting.  

PBoC injected CNY 50bln via 7-day reverse repos and CNY 150bln via 14-day reverse repos with the 7-day reverse repo rate kept at 2.50% and 14-day reverse repo rate lowered to 2.65% from 2.70%. (Newswires) PBoC set USD/CNY reference rate at 6.9969 vs. Exp. 6.9975 (Prev. 6.9971)

CNBC's Yoon suggested the PBoC 14-day reverse repo rate cut is a sign it remains in easing mode and may be just enough to convince banks to make another 5bps cut this Friday to the Loan Prime Rate citing Capital Economics. (Twitter)

US Treasury Secretary Mnuchin said President Trump just wants a level playing field with China and the enforcement mechanism is very strong in the China deal. (Newswires)

Japanese Trade Balance (JPY)(Nov) -82.1B vs. Exp. -369.0B (Prev. 17.3B, Rev. 15.7B). (Newswires) Japanese Exports (Nov) Y/Y -7.9% vs. Exp. -8.6% (Prev. -9.2%) Japanese Imports (Nov) Y/Y -15.7% vs. Exp. -12.7% (Prev. -14.8%)

UK/EU

S&P affirmed UK at AA; Outlook revised to Stable from Negative and Fitch affirmed the UK at AA; Outlook revised to Negative from Rating Watch Negative. (Newswires)

The Times Shadow MPC saw a 7-2 vote in favour of standing pat on rates at 0.75% with the two dissenters voting for a rate increase (vs. two dovish dissenters on the actual MPC). The Panel said the BoE should abandon its bias towards lower rates next year. (Times)

Poland’s Supreme Court warned the country may be forced to leave the EU if controversial reforms advocated by the ruling party is pushed through which would permit the dismissal of judges if they questioned the government's judicial reforms. (BBC)

FX DXY remained slightly firmer and marginally extended above the 97.00 level after the recent flurry of better than expected data releases including Industrial Production and Housing Starts. In addition, the greenback also benefitted from recent weakness in its major counterparts in which EUR/USD retreated from its 200DMA of 1.1152 and GBP/USD continued its rout to briefly below 1.3100 after Brexit cliff fears were triggered yesterday. Elsewhere, USD/JPY and JPY-crosses were lower amid the lacklustre risk appetite in Japan and mixed trade data, while antipodeans were also uneventful due to their high beta statuses and as CNY weakened past the 7.0000 level against USD.

COMMODITIES

Commodities were lacklustre overnight in which WTI crude futures pulled back from the prior day’s gains as the advances were stalled by resistance at the USD 61.00/bbl level with the reversal exacerbated by a bearish API release which showed a surprise build in headline crude inventories, as well as much larger than expected builds in gasoline and distillate stockpiles. Elsewhere, gold prices remained flat with the precious metal constrained by the mild appreciation for the greenback, while copper was subdued and tested the USD 2.8/lb level as the US-China phase one trade euphoria dwindled.

API Energy Inventories Crude +4.7mln vs. Exp. -1.3mln (Prev. +1.4mln). (Newswires) US 

The Treasury curve saw slight bull-steepening on Tuesday, though the magnitude of the moves was not anything to write home about. The complex pared gains after decent data (housing starts/permits, as well as IP/manufacturing output), while desks also continue to cite the US/China phase one deal, while remarks from Fed's Kaplan (who votes in 2020) favoured rates being where they are. Some analysts also observed that Treasury vol in the longer dated part of the curve was the lowest in six months, as desks wind down for the year amid few major catalysts to trade ahead of year-end. T-note (H0) futures settled 1 tick higher at 128-14+.

Fed's Rosengren (non-voter in 2020, hawk) said additional policy easing is likely unnecessary in the near term and the economy is currently in a good place, which has performed as expected despite recent concerns about slower global growth and trade uncertainty. Rosengren added that an economic downturn is unlikely in 2020 given generally positive economic conditions and the continuation of accommodative monetary and fiscal policies, and assuming no significant negative shock, (Newswires)

US House had enough votes to impeach President Trump with the majority in favour and is expected to conduct a vote today and the House Rules Committee set a rule for 6-hour debate ahead of the Trump impeachment vote. (Newswires)

US Rep. Hoyer said the House will consider the USMCA trade pact on Thursday. (Newswires)