• European equities are mixed after having initially opening higher across the board, DAX underperforms while FTSE 100 is buoyed by a weaker GBP
• DXY has extended recovery gains beyond 97.000 and through its previous ytd peak to top out just shy of 97.600
• Looking ahead, the calendar includes a lack of tier 1 data, ECB’s Lautenschlaeger, Fed’s Daly. US Veteran’s Day – no market closures

 ASIA

Asian equity markets eventually traded mostly positive but with gains limited as some cautiousness lingered from the uninspiring performance on Wall St last Friday, where ongoing global growth concerns and continued declines in commodities weighed on sentiment. ASX 200 (+0.3%) and Nikkei 225 (+0.1%) both recovered from the early declines and traded marginally positive although weakness in tech and financials capped gains in Australia, while recent flows into JPY restricted upside for the Japanese benchmark. Elsewhere, Shanghai Comp. (+0.8%) and Hang Seng (+0.1%) were initially lower amid growth and trade-related uncertainty, while the PBoC also recently noted that China’s economy is under increasing downward pressure. However, Chinese markets then recovered as officials continued to pledge measures to support businesses including wider tax cuts and with China also upbeat following record-breaking Singles Day sales. Finally, 10yr JGBs were relatively flat with price action contained as pressure from the improvement in regional sentiment was counterbalanced by the BoJ presence in the market.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9476 (Prev. 6.9329)

PBoC quarterly monetary policy implementation report reiterated it will maintain prudent and neutral policy, while it added that it will change policy only as appropriate to make the financial sector better serve the real economy. (Newswires)

China's Finance Minister said China will step up tax cuts, further lower fees for companies and will lower tax burden for exporters, while the China State Administration of Taxation chief said they are to implement a greater and broader scale tax reduction to support the private sector. (Newswires)

UK/EU/US

UK PM May was forced to drop her plan for an emergency cabinet meeting on Monday to approve a Brexit deal as she faced strong opposition from both her cabinet and the EU, which lessens the likelihood for an EU summit taking place later this month. (Independent) As a reminder, Brexit negotiators said on Friday that a draft treaty is close and that both sides were aiming for political approval this week, while separate reports noted that the EU is to require more movement from the UK on Brexit backstop. (FT/Newswires) UK Government source saying that no British cabinet meeting was ever scheduled for today, Brexit negotiations are still ongoing. (Newswires)

Top Brexiteers have told UK PM May that they remain deeply opposed to her Chequers plan with sources suggesting negotiators on both sides had agreed it would be impossible for the UK to unilaterally exit its backstop on Northern Ireland. (Guardian). Furthermore, The Telegraph reported that senior Tory backbenchers and DUP figures are to insist they will vote against PM May’s proposals unless she backs down. (Telegraph) Two ministers told the BBC that they believe there is little chance that PM May’s deal would get the Parliament’s backing. (BBC)

European Commission President Juncker said on Sunday that he thinks EU and UK are edging closer to a definitive Brexit deal that will be concluded in the coming weeks. (Newswires)

UK Trade Secretary Fox said a contentious number of issues remain for a Brexit deal to be reached and that UK may not be able to reach a deal on its departure from the EU. (Newswires)

Former UK Foreign Minister Boris Johnson accused the UK government of being on the brink of total surrender in Brexit negotiations, while he stated UK PM May recommended staying in the EU customs union under backstop and abdicating power to leave the backstop. (Telegraph)

Four UK ministers who support 'Remain' are said to be near to quitting PM May's government. (Newswires)

Former UK Minster Greening has said that UK PM May's possible deal won't pass parliament, the deal is over (Newswires)

UK PM May spokesman says there is nothing to suggest that other ministers are thinking about resigning and the Cabinet has backed PM May in moving forward on a Brexit deal, and expects the Cabinet to continue to do so. This follows weekend reports that four UK ministers who support ‘remain’ are said to be near to quitting the PM’s government. (Newswires)

Chartered Institute of Personnel and Development said UK employers expect to raise median base pay by 2% in the 12-months to September 2019. (Newswires)

Italy is seeking to lower its budget 2019 growth forecasts to between 1.0%-1.2% from 1.5% to get an EU budget deal. Italian Deputy PM Salvini said on Sunday that the Italian government could halt EU budget decisions. (Newswires)

Italy's PM Conte and Deputy PM's Salvini and Di Maio are to meet today to discuss the budget. (Newswires) However, there were contradicting reports from the PM’s office that PM Conte is not holding a budget meeting ahead of the re-submission deadline tomorrow, while ANSA reported that Deputy PM Di Maio did not attend talks. (Newswires/ANSA)

EU Commission President Juncker saying they are working at all levels to avoid escalation of trade conflicts with the US and will see Trump at the G20 summit in Buenos Aires. (Newswires)

US House Democrats are to probe US President Trump’s role regarding hush payments in 2016, while there were also reports that Federal prosecutors have gathered evidence that US President Trump participated in hush money payments to Stormy Daniels and Karen McDougal which would violate campaign laws. (WSJ) in related news, US House Democrats are to probe US President Trump for targeting CNN and Washington Post, while they are also expected to probe Trump’s actions related to Amazon and AT&T. (Axios/Newswires)

CENTRAL BANKS

BoE's Broadbent (Neutral) says limited and gradual rate guidance does not mean 1 rate hike per year precisely and there are signs that there will be somewhat weaker UK economic growth in Q4, adding that UK wage growth is materially higher and is now seeing signs of domestic inflation pressure. Broadbent also said reaching a Brexit deal is still the most likely outcome in his opinion;

ECB's VP de Guindos says the ECB is on track to policy normalisation; adding that downside risks have become more prominent and spillover from Italy have been quite contained. Also citing that Italy is the most prominent case of debt sustainability concerns. (Newswires)

PBoC advisor Ma Jun saying that pressure on the yuan could ease. (Newswires) PBoC said it has extended their 350bln yuan currency swap with the US for another 3 years. (Newswires)

EQUITIES

Major European indices are mixed, with Germany’s DAX (-0.8%) lagging, weighed on by Infineon (-5.3%) following a projected revenue decline and SAP (-3.2%) after the company stated they are taking over Qualtrics International. UK’s FTSE 100 (+0.2%) is outperforming amid currency effects and as several big names are in the green (BHP +2.8%, Shire +2.3%, Anglo American +2.0%) outweighing the significant losses for British American Tobacco (-9.1%) and Imperial Brands (-4.1%) following reports of FDA commissioner pursuing a ban on menthol cigarettes. Similarly, sectors are mixed with IT names lagging and energy names outperforming, with FTSE giant BP (+1.8%) benefiting from the rebound in oil.

In terms of individual equities, Telecom Italia (+4.6%) are leading the Stoxx 600 after reports in Italian press that the Italian government are pushing a fibre deal with the Co. Elsewhere, Rio Tinto (+3.4%) rose to the top of the UK benchmark following the completion of a share-buyback programme. 

FX

USD - The Dollar is firmly back in the ascendency, albeit partly due to underperformance in major counterparts due to specific bearish factors. However, the DXY has extended recovery gains beyond 97.000 and through its previous ytd peak to top out just shy of 97.600 at 97.583, with bulls now eyeing relatively strong Fib resistance around 97.871 ahead of 98.000.

GBP - More Brexit-related weakness in Sterling has tipped Cable through another big figure, and just under 1.2850 at one stage, while Eur/Gbp has rebounded further from recent sub-0.8700 lows towards 0.8775 on latest threats of revolt within the UK Government and time running out fast to reach a withdrawal deal with the EU. From a technical perspective, nearest support in Cable comes in around 1.2810, which coincides with a Fib and decent option expiry interest.

EUR - The single currency is also under considerable pressure, and after triggering stops at 1.1300 vs the Greenback, losses accumulated quickly to 1.1250 where hefty bids stalled further downside for a while. The catalyst, ongoing Italian-EU budget angst ahead of Tuesday’s deadline for the Government to resubmit a fiscal plan, and another meeting between key Roman officials later today. Note also, 1.1 bn option expiries roll off at the 1.1250 strike, with the same size capping any rebounds to 1.1300.

CHF/AUD - Both around 0.4-0.45% weaker vs a generally bid Usd, with the France testing 1.1000 and Aud back below 0.7200 amidst renewed weakness in the Yuan.

NZD - The Kiwi is holding up moderately better than its antipodean peer, as Nzd/Usd maintains 0.6700+ status (just) and the Aud/Nzd cross retests support/bids around 1.0700.

CAD/JPY - Relative outperformers, or at least keeping pace with the Usd as the Loonie pivots 1.3200 and derives underlying support from a rebound in oil prices, while the latter pares losses from circa 114.20 to just above 114.00 due to its greater safe-haven allure.

EM - Broad declines in regional currencies vs the resurgent Dollar, but with Usd/Try slipping back from 5.5000+ levels in wake of Turkish current account data revealing another y/y improvement.

COMMODITIES

WTI (+0.4%) and Brent (+1.0%) bounced back with a vengeance as markets had the first opportunity to digest developments from the JMMC meeting during the weekend. The complex was on track for the longest losing streak since 1984, before Saudi Energy Minister Al-Falih said the kingdom plans to reduce oil supply by 500K BPD in December due to a seasonal demand decline. Meanwhile, the JMMC decided not to take decisions on market adjustments on Sunday, with UAE’s Energy Minister noting that 2019 will require a change in OPEC strategy, adding that the new strategy is definitely not going to involve hiking output. Furthermore, in early European trade, the Kuwaiti Oil Minister stated that oil exporters discussed some kind of supply cut for next year but no volume was mentioned. Note: weekly API and DoE inventory data have been pushed back by a day due to US Veterans’ day.

Elsewhere, gold (-0.1%) fell to levels last seen in mid-October as the yellow metal tracked USD moves with the DXY reaching new YTD highs in early European trade. Meanwhile, copper is taking a breather from the recent sell-off and nickel extended losses to hit 11-month lows, pressured by concerns of slowing Chinese demand for steel.

At the weekend JMMC meeting, the committee decided not to take decisions on market adjustment, while Saudi Arabia Energy Minister Al-Falih said it is too premature for OPEC to discuss production cuts but stated that Saudi will reduce oil supply by 500k bpd in December amid seasonal decline in demand. (Newswires)

Saudi Energy Minister Al Falih says that they need to cut 1mln BPD from the Oct. level; adding that he cannot promise that there is no consideration of disbanding OPEC. (Newswires)

Russian average daily oil production stood at 11.39mln barrels between November 1st to 11th. (Newswires)

GEOPOLITICS

UK Foreign Minister Hunt is to meet the Saudi Crown Prince in regard to the killing of Journalist Khashoggi. This comes after Turkish President Erdogan said he gave Britain, US, France, Germany and Saudi access to the audio recording of the journalist’s killing. (Times/Washington Post)

FIXED INCOME

The pace has slowed somewhat further, but Bunds and Gilts have both extended gains to marginal new highs on Eurex and Liffe, at 160.39 and 122.47 respectively (+36 and +65 ticks on the day) amidst ongoing/heightened Brexit and Italian budget anxiety, which have taken their toll of BTPs, the Gbp and Eur along with wider risk sentiment. Note, the 10 year Italian bond is back below 122.00 and close to a 121.85 base vs 122.59 at one stage, while US Treasuries have also latched on to the safe-haven bid in EU benchmarks with the curve faller again, albeit volumes crimped by Veterans Day. Back to Bunds, and technically speaking 160.56-58 looms next in terms of upside objectives.