• Asian equity markets began the week somewhat cautious on lingering trade concerns and after disunity at the APEC summit
• UK PM May stated over the weekend that there has not yet been enough number of letters required to trigger a no-confidence vote
• ERG sources are said to be confident of reaching the 48 letters required on Monday to trigger a no-confidence vote against UK PM May
• Looking ahead, highlights include potential comments from Fed’s Williams, UK PM May to speak at the CBI Conference

ASIA

Asian equity markets began the week somewhat cautious on lingering trade concerns and after disunity at the APEC summit over the weekend which failed to agree on a joint communique for the first time in history due to US-China tensions.  ASX 200 (-0.6%) and Nikkei 225 (+0.5%) traded mixed in which nearly all of Australia’s sectors were in the red aside from miners, while Nikkei 225 was positive as participants digested mixed trade data which showed a jump in imports. Elsewhere, Hang Seng (+0.2%) and Shanghai Comp (+0.5%) were choppy amid trade-related uncertainty following the verbal jabs between US and China in which Chinese President Xi warned that countries which embraced protectionism were doomed to fail and US Vice President Pence later commented the US could more than double the tariffs imposed on Chinese goods. Finally, 10yr JGBs futures rose to match the YTD high as they tracked the recent upside in T-notes and with the BoJ also present in the market for JPY 800bln of JGBs in the belly to the short-end of the curve.

APEC summit ended without an agreement on a joint communique for the first time in its history after China refused to sign amid US-China tensions, while there had been comments from Chinese President Xi Jinping that countries which embraced protectionism were "doomed to failure" and US Vice President Pence later commented that he was prepared to "more than double" the tariffs imposed on Chinese goods. (BBC/AFR)

China's recent trade offer to the US is said to include additional purchases of US natgas and improved intellectual property protection. (Newswires)

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9245 (Prev. 6.9377)

Japanese Trade Balance Total (JPY)(Oct) -449.3B vs. Exp. -70.0B (Prev. 139.6B, Rev. 131.3B). (Newswires)
Japanese Exports (Oct) Y/Y 8.2% vs. Exp. 9.0% (Prev. -1.2%, Rev. -1.3%)
Japanese Imports (Oct) Y/Y 19.9% vs. Exp. 14.5% (Prev. 7.0%)

UK/EU

UK PM May stated over the weekend that there has not yet been enough number of letters required to trigger a no-confidence vote, while she added that that lawmakers should think about the need to deliver on Brexit and that the government would come back with proposals for the next step if Parliament votes against the deal. In separate reports, 42 Tory MPs have given assurances in letters to not support PM May which is still 6 below the 48 needed for a no-confidence vote, while ERG sources are said to be confident of reaching the 48 letters required on Monday to trigger a no-confidence vote against UK PM May. (Newswires/Twitter)

Stephen Barclay was announced as the new Brexit Secretary on Friday, while The Sun’s Political Editor said the Brexit Secretary role is being stripped down to just cover the domestic delivery of Brexit and that PM May will have sole charge of the final negotiations. There were also comments from UK Brexit Secretary Barclay said we must continue to build on momentum to finalise Brexit agreement. (Newswires)

EU Chief Negotiator Barnier reportedly floated the idea of extending Brexit transition period by 2 years to end of 2022. (Newswires)

UK Labour Party leader Corbyn said the Labour Party cannot support PM May's Brexit deal. There were also separate comments from former UK Foreign Minister Johnson that the UK should massively speed up preparations to exit the EU on WTO terms and Former UK Brexit Secretary Raab said PM May's plan is fatally flawed but can be saved, while Raab added the EU is bullying UK and that he still supports PM May. (Newswires) Furthermore, Raab refused to rule himself out of the running if PM May is removed from office. (Telegraph)

Irish Foreign Minister Coveney said there are no plans to start preparation of infrastructure for a potential hard border and that if Brexit looks inevitable, we need discussion on how to avoid a hard border. (Newswires)

UK business morale deteriorated to its lowest since 2009, according to data firm IHS Markit. (Newswires)

UK Rightmove House Price Index (Nov) M/M -1.7% (Prev. -1.0%). (Newswires)
UK Rightmove House Price Index (Nov) Y/Y -0.2% (Prev. +0.9%)

ECB's Villeroy said asset purchases are probably to end in December and that the outlook for inflation in the Euro area is firmer., while he also commented that the ECB could contemplate new TLTROs again if warranted and that he does not view a need for precise reinvestment horizon in December. Furthermore, Villeroy commented we are on track to normalise policy, but it will be gradual and predictable. (Newswires)

S&P affirmed Switzerland at AAA; Outlook stable and affirmed Netherlands at AAA/A-1+; Outlook stable. (Newswires)

FX

FX markets were little changed amid a relatively quiet calendar and with the greenback flat as it moved into the holiday-shortened week. As such, EUR/USD held near the prior week’s highs around the 1.1400 level and GBP/USD consolidated as it awaited the next developments of the Brexit-related saga with PM May standing defiant in the face of a rising mutiny and although the Tory rebels are lacking 6 letters out of the 48 needed to trigger a no-confidence vote, ERG sources are said to be confident of reaching the threshold later today. Elsewhere, antipodeans slightly pulled back following recent gains and USD/JPY was softer on trade-related uncertainty, while some also suggested the GPIF’s recent announcement that it is now able to hedge against currency risks, was another factor driving flows into the JPY.

COMMODITIES

Commodities were mixed with WTI crude futures back above the USD 57.00/bbl level after having rebounded from Friday’s intraday dip and as recent reports suggested that Saudi Arabia is said to want prices at around USD 80/bbl, while nat gas outperformed the energy complex following the recent snow storm in north-eastern parts of US which resulted to mass power outages and with China's trade offer to the US said to include additional purchases of US nat gas. Conversely, gold and copper prices were softer on profit taking from last week’s advances and as the greenback composed itself from Friday’s dip.

Baker Hughes Rig Count (16/Nov): Oil up 2 rigs at 888, gas down 1 rig at 194, total rigs up 1 at 1082. (Newswires)

Saudi Arabia reportedly wants oil prices around USD 80/bbl and also want to chart energy policy independent of US goals. (WSJ)

US forecasts a cut to Iranian crude sales by April of at least 40% to 900k BPD vs pre-sanctions levels, according to people familiar with the sanctions waivers. (Newswires)

GEOPOLITICAL

US is said to seek high-level talks with North Korea by early next month, while there were also reports that South Korea and US to set up working group regarding North Korea. (Newswires/Yonhap)

US special envoy to Afghanistan said hopes to strike a final peace agreement with the Taliban by April next year. (Newswires)

CIA has reportedly concluded that the killing of journalist Khashoggi was ordered by Saudi Crown Prince Mohammed bin Salman. (Newswires)
 

US

Although Treasury yields were lower by between 4-5.5bps across the curve, major curve spreads saw some modest steepening, with the exception of the 2s5s part of the curve. Continued Brexit newsflow helped support have FI in European trade as Cabinet members announced their resignations. The complex stabilised after the US cash equity opened, and the T-Note future was traversing sideways, dipping only on Trump supposedly positive on trade talks with China; however, after officials walked-back from Trump’s comments, there was some slight selling, though the T-Note remained near session highs. US T-note futures (Z8) settled 11 ticks higher at 119-05.

US President Trump said China wants to make a deal on trade and that it is not acceptable as it is now, while he added that US may not have to impose further tariffs. Trump also commented that hopefully US can make a deal with China but there must be reciprocal trade and that China list of tariff proposals is nearly complete although 4 or 5 things have been left out. (Newswires)

White House officials said that US President Trump was simply expressing optimism about current negotiations with China when he mentioned a halt in tariffs and added we shouldn't believe a deal is imminent. (CNBC/Twitter)

Fed's Evans (non-voter, dove) said US economy is doing well and expects 3.25% GDP growth this year and 3.5% next year, while he added that wages have increased but not as much as would have expected.  Furthermore, Evans added he sees the current rate a little bit below neutral, getting to neutral is the "first order job" for the Fed. (Newswires)

Fed's Harker (non-voter, dove) does not believe that a December rate hike is prudent and said there is rising uncertainty about the outlook. (Newswires)