• European bourses are mixed-flat in tentative trade ahead of the US-China Phase One Signing
• US Treasury Secretary Mnuchin stated that tariffs will stay in place until there is a Phase 2 agreement with China
• Soft UK CPI and comments from BoE’s Saunders have seen market pricing for a January cut increase to 60%
• Russian Energy Minister Novak states there are no plans to delay the March OPEC+ meeting
• FX complex is similarly tentative while gilts are driving upside in debt
• Looking ahead, highlights include NY Fed Manufacturing, US PPI, DoEs, US & China Phase One Deal Signing, OPEC Monthly Report (12:40GMT), BoE’s Cunliffe, Fed’s Harker
• Earnings: Goldman Sachs

ASIA-PAC: Phase One Analysis available on the Newsquawk feed

Asian equity markets followed suit to the cautious performance on Wall St where there was a bias to the downside for most major indices on trade-related headwinds after US officials confirmed that China tariffs are to remain until after the US election despite the Phase 1 deal, although the DJIA remained afloat helped by banking names including JPMorgan at the start of earnings season. ASX 200 (+0.5%) extended on record highs and edged closer to the 7000 landmark amid mild gains in financials and as gold miners outperformed after a rebound in the precious metal, while Nikkei 225 (-0.5%) was lacklustre following the recent pullback from the 24k level and near its yearly high. Hang Seng (-0.4%) and Shanghai Comp. (-0.5%) also traded subdued on disappointment that the Phase 1 deal will not include a tariff rollback, which overshadowed the liquidity efforts by the PBoC that had announced CNY 300bln in MLF lending and to inject CNY 100bln through 14-day reverse repos ahead of the Lunar New Year scheduled next week. Finally, 10yr JGBs oscillated beneath the 152.00 level with participants sidelined ahead of a 5yr JGB auction and after BoJ Governor Kuroda failed to provide any fresh insights regarding monetary policy ahead of next week’s meeting, although prices later recovered as all metrics pointed to a stronger 5yr auction.

PBoC injected CNY 100bln via 14-day reverse repos and CNY 300bln through 1yr MLF at 3.25% vs. Prev. 3.25%. (Newswires) PBoC set USD/CNY mid-point at 6.8845 vs. Exp. 6.8832 (Prev. 6.8954)

US Treasury Secretary Mnuchin stated that tariffs will stay in place until there is a Phase 2 agreement with China and suggested that structural reforms under a Phase 2 deal could lead to additional Chinese purchases. (Newswires)

US Senate introduced legislation aiming to create a Western competitor to Huawei and reduce China’s dominance in global 5G networks. In related news, the US government is reportedly close to publishing a new rule that would increase its power to block sales of foreign-made goods to Huawei, while a separate article also noted that the ongoing tech issues is likely to keep US-China relations on edge despite the Phase 1 deal. (SCMP/WSJ)

US

The Trump administration are looking at plans to impose new procedures surrounding the release of market-sensitive data that will prevent new organisations from preparing stories on data events under embargo, according to sources. (Newswires)

US has reportedly increased pressure on Taiwan Semiconductor (TSMC), to produce is chips for military use within the US; to guarantee that the high-security chips are produced without Chinese interference., Nikkei citing sources. (Nikkei)

FBN Lawerence on the US-China signing: sources say the Chinese delegation will be at the White House at 11am ET, then will meet with President Trump prior to the signing, issue of Huawei will not be specially addressed in the agreement. (Fox)

GEOPOLITICS

US Senator Kaine said he's secured a majority of support needed for a revised war powers resolution which would require US President Trump to get approval from Congress prior to taking further military action against Iran. (Newswires)

India Foreign Minister says have shut the door on prospect of a China-led regional economic pact. (Newswires)

Iranian President Rouhani said US forces are not safe in the region today and EU forecast may be in danger tomorrow, reported via Al-Jazeera. (Twitter) This may not explicitly refer to "today" and "tomorrow" - likely a reference to US forces being in danger now and EU forces soon. Iranian President Rouhani also stated that all steps taken to distance themselves from the deal are reversible, adds foreign forces should leave the Middles East . Iranian Foreign Minster Zarif said he did not ask for US troops to be withdrawn from Iraq. (Newswires)

UK/EU

BoE's Saunders (Dove, Dissenter) says it will probably be appropriate to maintain an expansionary monetary policy stance, and possibly cut rates further. He stated his view is that, even if the economy improves slightly from the recent pace, risks for the next year or two are on the side of a more protracted period of sluggish growth than the MPR forecast. Saunders stated the neutral level of interest rates may have fallen further over the last year or two, both in the UK and externally and in order to reduce risks of a sustained undershoot of the 2% inflation target. With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present. (Newswires)

UK CPI YY (Dec) 1.3% vs. Exp. 1.5% (Prev. 1.5%); MM 0.0% vs. Exp. 0.2% (Prev. 0.2%)

-        Core CPI YY (Dec) 1.4% vs. Exp. 1.7% (Prev. 1.7%); MM 0.0% vs. Exp. 0.2% (Prev. 0.2%)

-        ONS notes that falling hotel prices weighed on the rate of inflation, whilst women's clothing prices also fell due to discounting.

German Full Year GDP (2019) 0.6% vs. Exp. 0.6% (Prev. 1.5%) (Newswires) Pantheon Macro notes that based on the FY reading and allowing for rounding Q4 GDP will print around 0.1-0.2%.

German Economy Ministry said weak phase in German industrial sector is not yet over but orders and business expectations are sending a more positive signal, industrial sector likely to reach a turning point, German exports remain subdued. (Newswires) 

EQUITIES

European equities mostly see a relatively lacklustre session [Euro Stoxx 50 -0.1%] ahead of the much-anticipated Phase One deal signing with the region holding a more cautious bias. This follows on from a similar APAC performance which saw Chinese markets subdued on disappointment that US will not currently roll back on existing China tariffs. UK’s FTSE 100 outperforms on the back of a weaker Sterling boosting exporters in light of further dovish rhetoric from BoE dissenter Saunders coupled with sub-par UK CPI readings.  Sectors are mixed with no clear reflection of the overall risk sentiment in the market. Healthcare outperforms with support from Roche (+0.6%) after the Pharma-giant announced commercial availability of a test which will help healthcare professionals better monitor and manage transplant patients at risk of infections. Elsewhere, the IT sector is underpinned by ASM International (+9.6%) whose share were bolstered by an upgrade to prior guidance. In terms of individual movers, Chr Hansen (-6.8%) fell to the foot of the Stoxx 600 following overall downbeat earnings and a downgraded outlook. Elsewhere, RBS (-2.7%), Eurazeo (+3.3%), Safran (+1.5%) have all been influenced by broker action.

BlackRock Inc (BLK) Q4 19 (USD): EPS 8.34 (exp. 7.33), Revenue 3.98bln (exp. 3.82bln); Assets under management USD 7.43trl vs. Exp. USD 7.28trl

Target Corp. (TGT) Nov/Dec sales +1.4% Y/Y, missing its goal for a 3-4% gain, affirms Q4 EPS (USD) 1.54-1.74 (exp. 1.70)

UnitedHealth Group Inc (UNH) Q4 19 (USD): adj. EPS 3.90 (exp. 3.75), Revenue 61.0bln (exp. 61.06bln) - affirms FY20 outlook; sees FY20 adj. EPS 16.25-16.55 (exp. 16.45)

FX

GBP - The Pound wasn’t that perturbed about typically dovish commentary from BoE’s Saunders, but Cable subsequently retreated towards recent sub-1.3000 lows and Eur/Gbp rebounded to circa 0.8570 from just under 0.8540 when headline and core UK inflation both missed consensus by some distance. Indeed, the former printed at its weakest y/y pace in 3+ years and latter slowed to 1.4% from 1.7% previously and forecast to tip January easing expectations over 60% compared to less than evens ahead of remarks from one of the resident MPC rate cut dissenters.

AUD - Revelations that US-China trade deal Phase One will not come with any further tariff roll-backs or removal of existing levies on Chinese goods have undermined the Aussie more than most majors given its closer correlation to sentiment surrounding the issue and Yuan moves by proxy. Hence, Aud/Usd has reversed through 0.6900 again, as Usd/Cnh pares more losses and hovers above the latest lower Usd/Cny midpoint fix in contrast to the recent trend.

CHF/JPY/EUR/CAD/NZD/NOK/SEK - The Franc continues to outperform its G10 peers in wake of Switzerland’s inclusion on the list of currency manipulators compiled by the US Treasury, but Usd/Chf and Eur/Chf are also slipping on technical grounds and an element of safe-haven positioning to around 0.9655 and 1.0745 respectively. Similarly, Usd/Jpy is probing lower amidst an unwind of risk-on flows, and after topping out only a pip or so over 110.00 compared to 110.20 at one stage on Tuesday, while Eur/Usd is forging fresh 1.1150+ peaks after finally breaching aligning DMAs (21/200 marks both at 1.1138). Elsewhere, the Loonie remains softer within 1.3055-78 parameters against the backdrop of softer crude prices that are also niggling the Norwegian Krona, but not quite as much as its Swedish counterpart following a wider trade surplus vs broadly in line/benign CPI and CPIF metrics.

EM - Some respite for the Rand as SA retail sales exceed forecast, but little consolation for the Lira due to ongoing Libya angst.

FIXED INCOME

Gilts have gleaned even more impetus via UK CPI rather than BoE’s Saunders reinforcing his rate cut credentials are now eyeing their early December high (133.35) at 133.29 having ducked under 65 bp in 10 year cash yield terms. Meanwhile, Bunds have largely shrugged off a sluggish 2050 offering on the basis that German issuance was unlikely to be deemed that attractive in outright ROI terms relative to syndications at the Eurozone margins that are witnessing extreme levels of interest even after record demand for Spain’s new 2030 Bono. Elsewhere, US Treasuries are close to best levels and the curve still re-flattening ahead of PPI data, the Empire State survey and of course the WH event to sign Phase 1 of the US-China trade accord scheduled to take place in between speeches from Fed’s Harker and Kaplan.

COMMODITIES

Relatively uneventful, more so tentative session thus far for energy and precious metals markets – with WTI and Brent front-month futures somewhat lacklustre after the Russian and UAE Energy Ministers dismissed source reports that the OPEC+ is to delay the March 5th/6th meeting to June. WTI Feb’20 futures reside just above the USD 58/bbl mark having dipped below the figure earlier in the session ahead of the 200DMA around USD 57.84/bbl. As a reminder, the OPEC Oil Market Report is to be released at 12:40GMT following yesterday’s EIA STEO which downgraded its 2020 world oil demand growth. Meanwhile, today will also see the weekly EIA crude stocks release after last night’s API figures printed a surprise build of 1.1mln barrels (vs. exp. draw of 500k barrels) which added selling pressure to the complex. Elsewhere, spot gold saw modest gains as APAC traders digested reports that US will not be rolling back existing China tariffs until after the election – with the yellow metal meandering around 1550/oz. Meanwhile, copper prices fell from 8-month highs on the aforementioned tariff reports which potentially dampens demand prospects for the red metal. Finally, Dalian iron ore futures swayed within tight ranges as traders juggled the US tariffs on China with lower port inventories.

Russian Energy Minister Novak states there are no plans to delay the March OPEC+ meeting; and should define further steps at this meeting., IFX. (Newswires) This follows yesterday reports that OPEC+ is mulling the delay of its March meeting to June and could extend output cuts till then if so, according to reports citing sources. (Tass)