• APAC stocks began the week mostly lower amid headwinds from China after several areas announced fresh virus restrictions.
• European equity futures were softer overnight with the Euro Stoxx 50 future -0.3% after cash markets closed higher by 1.2% on Friday.
• DXY is back on a 107 handle with EUR/USD, Cable and USD/JPY on 1.02, 1.18 and 140 handles respectively.
• Fed’s Bostic (2024 voter) believes that another 75bps-100bps tightening will be warranted and sufficient to rein in inflation.
• Looking ahead, highlights include German Producer Prices, Speech from BoE’s Cunliffe & Supply from the US.

US TRADE

• US stocks were choppy on Friday in a quiet newsflow session with underperformance seen in the Nasdaq although a late session bid did see all indices finish in the black and traders noted the ramp into the close was accompanied by a hefty buyside Market-on-Close order imbalance, likely influenced by option expiries.
• SPX +0.48% at 3,965, NDX unch. at 11,677, DJIA +0.59% at 33,746, RUT +0.58% at 1,850.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed’s Bostic (2024 voter) said he is ready to move away from 75bps hikes at the December meeting and believes that another 75bps-100bps tightening will be warranted and sufficient to rein in inflation over a reasonable time horizon, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks began the week mostly lower amid headwinds from China after several areas announced fresh virus restrictions including lockdowns and the country also reported its first COVID-19 deaths in about six months.
• ASX 200 was constrained by underperformance in the mining-related sectors amid a decline in commodity prices and with BHP shares pressured amid reports its chairman is considering retiring next year.
• Nikkei 225 lacked direction amid further political tremors in the Kishida government after Internal Affairs Minister Terada resigned due to involvement in a funding scandal and was the third cabinet member to step down in under a month.
• KOSPI declined amid geopolitical concerns after North Korea's recent missile launches and with sentiment subdued as data for the first 20 days of November showed exports fell 16.7% Y/Y and imports fell 5.5% Y/Y.
• Hang Seng and Shanghai Comp suffered losses due to the worsening COVID situation in the mainland, while the Hong Kong benchmark was the worst hit with the special administrative region said to be near to cutting non-emergency services at public hospitals amid a surge in COVID cases and its Chief Executive Lee also tested positive for COVID-19. Furthermore, the PBoC maintained its key lending rates with the 1-Year and 5-Year LPR kept at 3.65% and 4.30%, respectively, although this was widely expected.
• US equity futures were subdued amid China's COVID woes and with participants lacking commitment ahead of this week's FOMC and Thanksgiving holiday. E-mini S&P -0.3%.
• European equity futures were softer overnight with the Euro Stoxx 50 future -0.3% after cash markets closed higher by 1.2% on Friday.

FX

• DXY climbed above 107.00 amid the risk-averse mood with price action gradual ahead of this week’s key events including the FOMC Minutes and with US markets to observe a shortened trading week for Thanksgiving.
• EUR/USD retreated below 1.0300 owing to the stronger greenback and with the single currency also not helped by geopolitical concerns after the latest shelling of the Zaporizhzhia nuclear power plant.
• GBP/USD traded softer after its recent failure to hold on to the 1.1900 handle and despite reports that businesses will urge UK PM Sunak to seek better relations with the EU and soften the impact of Brexit including by opening doors to more immigration. It was also reported that Britain is mulling Swiss-style ties with Brussels although Health Minister Barclay said he did not recognise the report and warned he would not support such a relationship with the EU.
• USD/JPY was marginally lifted by a firmer dollar and JPY-crosses softened amid the risk aversion.
• Antipodeans were lower following recent weakness in commodity prices although NZD/USD was partially cushioned ahead of the RBNZ meeting this week where the central bank is expected to shift to a more aggressive hiking pace of 75bps following the prior five consecutive 50bp rate increases.
• PBoC set USD/CNY mid-point at 7.1256 vs exp. 7.1203 (prev. 7.1091)

FIXED INCOME

• 10yr UST futures were marginally higher amid the risk-aversion and after rebounding from Friday’s lows, while there were also comments during the weekend from Fed’s Bostic who is ready to move away from 75bps hikes at the December meeting and believes another 75bps-100bps tightening will be sufficient to rein in inflation.
• Bund futures extended on gains above the 140.00 level but with upside capped by a lack of fresh catalysts.
• 10yr JGB futures traded rangebound with prices failing to benefit from the BoJ’s presence in the market for JPY 1.75tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude retreated with WTI back below the USD 80/bbl level amid the risk-averse mood and fresh virus restrictions in China, while Goldman Sachs also lowered its Q4 Brent crude estimate by USD 10/bbl owing to China COVID concerns.
• A large explosion reportedly hit Russia’s Gazprom pipeline amid suspicions of sabotage related to Russia’s war in Ukraine, according to the Daily Mail.
• Kuwait’s oil revenues for FY21/22 rose 84.5% Y/Y to KWD 16.33bln, according to the Finance Ministry.
• US VP Harris said the US will use its APEC host year to set new ambitious sustainability goals and she proposed setting a new aggregate target for reducing carbon emissions from the power sector in APEC, while she also proposed to set a goal for reducing methane emissions and said the US will introduce a new initiative on a just energy transition, according to a White House official cited by Reuters.
• UN climate agency published a new COP27 cover decision draft deal text and approved a proposal covering funding arrangements loss and damage from climate change suffered by vulnerable countries. However, it was also reported that EU climate policy chief Timmermans said the deal is not enough of a step forward and that the mitigation programme agreement allows some parties to hide from their commitments, while he added that too many parties are not ready to make more progress, according to Reuters.
• Goldman Sachs cut its Q4 Brent oil outlook by USD 10/bbl to USD 100/bbl due to China COVID concerns, while it sees elevated oil flows from China ahead of EU curbs and a price cap.
• Spot gold marginally declined amid a firmer dollar but with downside stemmed ahead of this week's FOMC Minutes.
• Copper was pressured alongside weakness across the commodities complex owing to China's COVID woes.

CRYPTO

• Bitcoin was subdued and briefly dipped below the USD 16,000 level alongside the cautious mood.
• FTX launched a strategic review of its global assets and is beginning to prepare businesses for sale or reorganisation, while it seeks court relief to resume limited operations in consultations with regulators. FTX also stated that exchanges should be aware that certain funds were transferred from FTX Global and related debtors without authorisation on November 11th and said exchanges should take all measures to secure these funds to be returned to the bankruptcy estate, according to Reuters. Furthermore, it was also reported that FTX businesses owe over USD 3bln to its largest creditors, according to FT.

NOTABLE ASIA-PAC HEADLINES

• PBoC 1-Year Loan Prime Rate (Nov) 3.65% vs. Exp. 3.65% (Prev. 3.65%)
• PBoC 5-Year Loan Prime Rate (Nov) 4.30% vs. Exp. 4.30% (Prev. 4.30%)
• China reported 2,365 (prev. 2,267) new coronavirus cases in the mainland on November 20th, 24,730 (prev. 22,168) new asymptomatic cases and 2 COVID deaths, which follows its first COVID-related death in six months on Saturday.
• Beijing’s Chaoyang district urged residents to remain at home on Monday as cases continue to rise, according to Reuters. It was also reported that the Baiyun district in China's Guangzhou imposed a 5-day lockdown from November 21st-25th and China's Shijiazhuang city is to conduct mass coronavirus testing in certain areas.
• Hong Kong is near to cutting non-emergency services at public hospitals again amid a surge in COVID cases, according to SCMP. It was also reported that Hong Kong Chief Executive John Lee tested positive for COVID-19.
• Taiwan’s representative at APEC Morris Chang said he had a very happy interaction with Chinese President Xi during a brief meeting, according to Reuters.
• US VP Harris met with Chinese President Xi briefly at APEC and she noted to Xi that they must maintain open lines of communication to responsibly manage the competition between their countries, according to a White House official. Furthermore, Harris said that the US does not seek conflict or confrontation and welcomes competition, while she added that her Asia trip signifies the significance of the relationship between the US and its allies and partners in the region, according to Reuters.
• US House GOP leader McCarthy said he will form a select committee on China if he is elected as House Speaker, according to Reuters.
• Germany plans to tighten disclosure rules for companies exposed to China and plans to assess company disclosures to decide whether they should conduct stress tests on China risks, according to a draft document cited by Reuters.
• APEC leaders’ declaration affirmed the commitment to promote strong, balanced, secure sustainable and inclusive growth and stated that they are determined to uphold and further strengthen the rules-based multilateral trading system, while they welcomed progress this year in advancing the free-trade area of the Asia-Pacific. Furthermore, APEC is determined to achieve a post-COVID economic recovery and recognised that more intensive efforts are needed to address challenges such as rising inflation, food security, climate change and natural disasters, according to Reuters.
• Japanese PM Kishida accepted the resignation of Internal Affairs Minister Terada in order to prioritise parliamentary debate and which follows the latter’s involvement in funding scandals, while it was later reported that Japan appointed former Foreign Minister Matsumoto as the new Internal Affairs Minister, according to Reuters.
• South Korean November 1st-20th Exports fell 16.7% Y/Y, Imports fell 5.5% Y/Y and Trade Balance was at a provisional deficit of USD 4.42bln.
• Malaysia's election ended in a hung parliament with opposition leader Anwar Ibrahim’s coalition securing 82 of 222 parliamentary seats, while former premier Muhyiddin Yassin’s coalition followed with 73 seats and the ruling BN coalition only won 30 seats, according to Al Jazeera.
• NZIER said the majority of its RBNZ Shadow Board favours a 75bps rate increase this week.

GEOPOLITICS

RUSSIA-UKRAINE

• IAEA said powerful explosions shook the area of Ukraine’s Zaporizhzhia nuclear power plant on Saturday evening and Sunday morning with more than a dozen blasts heard within a short period during the morning. It was also reported that Ukraine’s Energoatom said Russia's military shelled the Zaporizhzhia nuclear power plant on Sunday morning and that there were at least 12 hits on the plant’s infrastructure facilities, while Russia’s Defence Ministry said Ukraine fired shells at power lines supplying the nuclear power plant, according to Reuters and TASS.
• US Defense Secretary Austin said Russia is carrying out atrocities in Ukraine and said that ‘these aren’t just lapses’, while he added that China, like Russia, is seeking a world where ‘might makes right’. Austin said autocrats like Russian President Putin are watching the Ukraine conflict and could seek nuclear weapons, while he added autocrats could conclude obtaining ‘nuclear weapons would give them a hunting licence of their own’, according to Reuters.
• UK PM Sunak told Ukrainian President Zelensky that the UK will provide a GBP 50mln air defence package to Ukraine which will include 125 anti-aircraft guns and technology to counter Iranian-supplied drones, according to Reuters.

NORTH KOREA

• G7 Foreign Ministers condemned North Korea’s latest intercontinental ballistic missile launch and said North Korea’s launches pose a serious threat to regional and international peace, while they added that the UN Security Council needs to take further significant measures, according to Reuters. Furthermore, it was separately reported that the US and its allies called for a UN Security Council meeting on November 21st to address North Korea.
• North Korea said the UN Secretary-General has failed to maintain impartiality and objectivity, according to KCNA.
• South Korea said the US sent strategic bombers for joint air defence drills, according to Sky News.

OTHER

• Turkish air strikes destroyed 89 Kurdish militant targets in northern Syria and northern Iraq, according to Reuters. There were also reports that a Turkish soldier and two police were wounded in a rocket attack on Turkey’s Kilis province on the Syrian border, according to Anadolu Agency.
• Iranian ballistic missiles and drones reportedly hit targets near Erbil, Iraq and sirens were sounded at the US consulate, according to ELINT News. Furthermore, it was stated that the Iranian ballistic missiles hit the HQ of the Kurdish Democratic Party in Erbil and other Kurdish camps including near Suleimaniya were attacked with missiles.

EU/UK

NOTABLE EU/UK HEADLINES

• UK PM Sunak will be urged by businesses on Monday to seek better EU relations and will face pressure from businesses to soften the impact of Brexit such as by opening doors to more immigration to fill holes in the nation's labour market, according to FT.
• UK was reportedly considering Swiss-style ties with the EU and the government believes that EU relations are thawing which could lead to 'frictionless' trade, according to The Times. However, UK Health Minister Barclay said he did not recognise a report that the government wants to shift to a Swiss-style relationship with the EU, according to Reuters.