• Major European equities are lower across the board (Eurostoxx 50 -0.8%) as the sentiment seen in Asia spills over onto the region
• WTI and Brent lost the USD 60/bbl and USD 70/bbl handles respectively, after the complex entered into bear market territory
• GBP has lost momentum and is underperforming alongside the NOK within the G10 ranks
• Looking ahead, highlights include US PPI, Baker Hughes, Fed’s Williams, Harker, Quarles, BoE’s Haldane, Tria to meet with Centeno

 ASIA

Asian equity markets traded lower following a lacklustre lead from Wall St where the mid-term stock rally stalled as focus shifted to the FOMC. ASX 200 (-0.1%) and Nikkei 225 (-1.1%) were lower with energy stocks pressured after a continued slump in oil prices and as soft earnings results also clouded over Tokyo sentiment. Hang Seng (-2.4%) and Shanghai Comp. (-1.4%) were the worst hit in the region as tech and energy stocks lagged, while continued PBoC liquidity inaction and inline inflation data proved to be inconclusive for sentiment. Finally, 10yr JGBs were flat with prices uneventful as the pressure from the recent losses in T-notes was counterbalanced by the risk averse tone and BoJ’s presence in the market for JPY 980bln of JGBs across the curve.

PBoC skipped open market operations and are net neutral for the week vs. Prev. CNY 490bln net drain last week. (Newswires)
PBoC set CNY mid-point at 6.9329 (Prev. 6.9163)

Chinese CPI (Oct) Y/Y 2.5% vs. Exp. 2.5% (Prev. 2.5%). (Newswires)
Chinese PPI (Oct) Y/Y 3.3% vs. Exp. 3.3% (Prev. 3.6%)

Japanese government are reportedly considering a JPY 10tln stimulus to offset the second phase of the planned sales tax hike. (Newswires)

UK/EU/US

UK GDP Prelim QQ Q3 0.6% vs. Exp. 0.6% (Prev. 0.4%)

UK GDP Estimate YY (Sep) 1.5% vs. Exp. 1.5% (Prev. 1.5%)

UK GDP Estimate MM (Sep) 0% vs. Exp. 0.1% (Prev. 0.0%)

UK Goods Trade Balance GBP Sep -9.731B vs. Exp. -11.25B (Prev. -11.2B, Rev. -11.724B)

UK Goods Trade Balance Non-EU Sep -2.343B vs. Exp. -3.9B (Prev. -4.22B, Rev. -4.561B)

UK Manufacturing Output MM Sep 0.2% vs. Exp. 0.1% (Prev. -0.2%, Rev. -0.1%)

UK Manufacturing Output YY Sep 0.5% vs. Exp. 0.4% (Prev. 1.3%)

EU is said to want a customs border in the Irish Sea in the event of a no-deal Brexit, according to reports which cited a letter from PM May. However, the letter noted that PM May said she would never allow this to occur, while a spokesperson also said the government will not agree to anything that results to a hard border on Ireland, nor will it accept a division of the UK into 2 customs territories. (Times)

BBC Political Correspondent Iain Watson tweets that no date yet for the next cabinet meeting and that Cabinet Minister Jeremy Wright tells him the PM will never do a deal that would lead to a border in the Irish Sea (Newswires)

EU is reportedly demanding certain fishing rights in UK waters as price for an all-UK divorce deal to solve the Irish backstop issue. (Telegraph)

British Junior Brexit Minister Walker says is optimistic that Britain and the EU will reach breakthrough in Brexit talks soon (Funke Media Group)

Italy's Deputy PM Di Maio and Finance Minister Tria say that they are committed to the 2.4% deficit goal in 2019, with Di Maio adding that he does not think the EU will levy fines on Italy. EU's Dombrovskis said that the EU are assessing the need to open excessive deficit procedure vs. Italy. (Newswires)

Norwegian Consumer Price Index YY Oct 3.1% vs. Exp. 3.4% (Prev. 3.4%). (Newswires)
Norwegian Consumer Price Index MM Oct -0.2% vs. Exp. 0.1% (Prev. 0.6%)

Trump lawyer Rudy Giuliani and Chris Christie are said to be under consideration for Attorney General. (CBS)

TRADE

Mexico Economy Minister Guajardo said new USMCA trade agreement will be signed at the G20 on November 30th. (Newswires)

EU's Malmstrom says the US still shows little interest in tariff cuts deal. (Newswires)

EQUITIES

Major European equities are lower across the board (Eurostoxx 50 -0.8%) as the sentiment seen in Asia spills over onto the region. Material names lag amid the slump in base metal prices, while consumer staples outperform. The finance sector is also experiencing weakness with the likes of Spanish banks exposed to Mexico (BBVA -6.7%, Sabadell -2.8%, Santander -2.4%) pressured after Mexican banks fell overnight amid a surprise proposal from the incoming President AMLO to scrap bank fees. (Note: BBVA made 28% of its revenues and 34% of its operating income from Mexico last year.) Meanwhile, UBS (-4.3%) shares declines after the US Justice Department filed a lawsuit against the bank for defrauding investors in its sales of mortgage-backed securities leading up to the global financial crisis. Over in Germany, steel-maker Thyssenkrupp (-11.0%) shares slumped after the company announced a profit warning due to provisions for an ongoing cartel probe and quality problems at its auto business. Elsewhere, Richemont (-6.7%) shares declines amid disappointing earnings, hitting the likes of European Luxury names (LVMH -2.0%, Kering -3.6%) in sympathy.

FX

DXY - The buck appears to have stopped for the Greenback on Wednesday, and its resurgence from mid-term election lows has been fuelled to a degree by the latest FOMC policy statement that effectively underpins market expectations for a December hike. Amidst almost universal gains vs currency counterparts, the index is now nudging 97.000 from just shy of 95.700 at one stage and the 2018 peak of 97.201 is back within striking distance.

GBP - Brexit impulses continue to ebb and flow between positive vibes on deal prospects and the proverbial cliff edge withdrawal, but the bottom line is that Irish border and back-stop differences remain unresolved to leave the UK at risk of failing to agree terms at home and/or with the EU. Hence, Sterling has lost momentum and is underperforming alongside the NOK (undermined by much softer than expected Norwegian inflation data to trade down around 9.5700 vs the Eur) within the G10 ranks, as Cable teeters above 1.3000, and largely shrugged off a barrage of UK data (GDP firm and trade above consensus, but other elements less encouraging).

CAD/EUR - The next worst majors, with Loonie hit by collapsing oil prices and sliding towards 1.3200 vs its US peer, while the single currency continues its relatively sharp and abrupt pull-back from 1.1500 to retest support ahead of the 1.1300 ytd low. Ongoing Italian-EU budget differences are weighing along with more signs of a slowdown, or even weakness in the Eurozone economy, while hefty option expiries are also eyed (1.1300 in 1.1 bn, 1.1340-50 in 2.0 bn and 1.1375 in 1.3 bn for example).

AUD/NZD - Also falling prey to their US rival’s revival and hardly helped by neutral or wait-and-see policy guidance from the RBA or RBNZ, as Aud/Usd recoils to sub-0.7250 and Nzd/Usd backs off further from almost 0.6800 to under 0.6750.

JPY/CHF - More divergence between the ‘safe-havens’ as the Jpy bucks the overall trend and holds its own vs the Usd, albeit weakening to 114.00+ at one stage overnight, while the Franc is depreciating and not far from 1.1000.

COMMODITIES

WTI (-1.6%) and Brent (-1.4%) lost the USD 60/bbl and USD 70/bbl handles respectively, after the complex entered into bear market territory amid rising supply and concerns of a slowdown in global economic growth. Both benchmarks declined around 20% from the four-year highs reached at the front end of October and are set for a fifth straight week of declines, while North Sea Brent Crude hit seven-month lows. The slide has been exacerbated by US’ decision to permit eight countries to continue importing Iranian oil after the imposition of sanctions on the OPEC member, as well as record production of crude oil over in the States. Looking ahead, investors and traders will be focusing on this weekend’s meeting of OPEC and its allies where they are set to discuss output strategies in Abu Dhabi on Sunday. During the week, there were source reports that Russia and Saudi are to start discussing oil production cuts in 2019. This comes after OPEC’s October production reached the highest level since 2016, while Russia hiked its output in the prior month to recent highs of 11.4mln BPD. Producers on Sunday will have to discuss the threat of a glut alongside the prospect of lower demand from faltering EM economies and repercussions from US-Sino trade disputes.

Elsewhere, metals trade lower across the board with copper underperforming amid post-FOMC dollar strength and concerns regarding slowing global economic growth. Among precious metals, spot gold (-0.3%) tracks USD action, with the yellow metal dropping to the lowest level this month, while spot silver (-0.4%) is set for its largest weekly percentage decline in nine weeks.

US Federal judge blocked Keystone XL Pipeline stating that US administration's justification for the approval was incomplete, while the judge added that the State Department failed to evaluate climate impact, oil spills and cultural resources. (Newswires)

GEOPOLITICS

North Korea cancelled a meeting scheduled with the US after learning US President Trump will not attend, while US Ambassador to the UN Haley said North Korea postponed meeting with US Secretary of State Pompeo because they weren't prepared. Furthermore, Haley commented that Russia wants to lift banking restriction on North Korea but the US will not let that happen. (Newswires) Reports thereafter suggested that North Korea and US are rescheduling there postponed talks. (Yonhap)

FIXED INCOME

Bunds and Gilts have both advanced further amidst the broadly risk-off environment and with extra incentive from the more pronounced sell-off in crude, while the former will also be keeping note of Italian debt as Roman Government officials and their EU peers continue to wrangle over budget issues, ahead of Tria’s showdown with Centeno. Bunds are just off a 159.82 peak and Gilts have eased off 121.59 (+45 and +41 ticks respectively), while BTPs are closer to the bottom end of a 121.41-122.10 range vs yesterday’s 122.05 close. Elsewhere, US Treasuries are back in bull-flattening mode following the Fed and looking towards PPI data before Michigan sentiment and wholesale trade.