• EUR suffers post-poor flash EZ PMI’s as slowing global growth hurts European exports
• Crude continues its collapse in thin trade and set for 7th consecutive weekly fall
• Gibraltar remains a key issue ahead of Sunday’s Brexit summit
• Looking ahead, highlights include Canadian CPI, ECB’s de Guindos. US markets early close

ASIA

Asian stocks traded mostly lower with sentiment in the region subdued by trade concerns and holiday-thinned conditions in the US, while Japan and India also observed public holidays. ASX 200 (+0.4%) was positive with the index supported by strength in its top-weighted financials sector amid gains in Australia’s largest banks after Macquarie pulled-off a rarity at the banking royal commission in which it emerged unscathed and with its reputation enhanced. Elsewhere, Shanghai Comp. (-2.5%) and Hang Seng (-0.4%) were negative amid ongoing trade uncertainty as China responded to the recent trade report by the US, in which it dismissed the accusations of unfair trade practices as groundless and totally unacceptable. In addition, the US called for its allies to stop using Huawei equipment and weak earnings results from Meituan Dianping in which the online service provider’s losses ballooned, further added to the glum.

PBoC skipped open market operations. (Newswires)

PBoC set CNY mid-point at 6.9306 (Prev. 6.9391)

China responded to the recent US report in which it labelled the accusation by the US of China continuing with unfair trade practices as groundless and totally unacceptable, while it added that it hopes US drops rhetoric and behaviour that are damaging to relations. (Newswires)

China Vice Commerce Minister said trade protectionism and unilateralism are increasing and hopes that China and US can find ways to manage differences through discussions. There were also comments from China’s Vice Finance Minister that trade frictions spur global economic uncertainties, while China’s Assistant Foreign Minister stated that the global economy faces downward pressure. (Newswires)

UK/EU

Tory Brexiteer Iain Duncan Smith stated that the Brexit deal will be killed off by him and his Brexiteer colleagues in Parliament, while he is said to dismiss PM May’s efforts to adopt a tech solution to the Irish border problem and implied it is meaningless, according to ITV’s Peston. (Twitter)

Gibraltar Chief Minister Picardo says an agreement has been reached with his Spanish colleagues, have delivered on Gibraltar. (Newswires)

BuzzFeed's Nardelli tweets "A small, but important, Brexit update: Spain still unhappy, asked others this morning, if Art. 132 (extending transition) can be changed then why can't Art. 184 (negotiations on the future relationship)?". (Newswires)

EU Markit Manufacturing Flash PMI (Nov) 51.5 vs. Exp. 52.0 (Prev. 52.0)

EU Markit Services Flash PMI (Nov) 53.1 vs. Exp. 53.5 (Prev. 53.7)

EU Markit Comp Flash PMI (Nov) 52.4 vs. Exp. 53.0 (Prev. 53.1)

German Markit Manufacturing Flash PMI (Nov) 51.6 vs. Exp. 52.2 (Prev. 52.2)

German Markit Services Flash PMI (Nov) 53.3 vs. Exp. 54.5 (Prev. 54.7)

German Markit Comp Flash PMI (Nov) 52.2 vs. Exp. 53.2 (Prev. 53.4)

French Markit Manufacturing Flash PMI (Nov) 50.7 vs. Exp. 51.0 (Prev. 51.2)

French Markit Services Flash PMI (Nov) 55.0 vs. Exp. 55.0 (Prev. 55.3)

French Markit Comp Flash PMI (Nov) 54.0 vs. Exp. 53.9 (Prev. 54.1)

Italy's Economy Minister Tria said there will be "new elements" regarding the budget once Commission talks start. (Newswires)

Italy's EU Affairs Minister Savona reportedly thinking about resigning in dissent over the government's challenge to EU budget rules. (Corriere) This was later denied

Italian Infrastructure Undersecretary Siri says the budget framework cannot be touched; adding that some budget measures can be improved. (La Stampa)

Italian Deputy PM Di Maio says Italy will not change the pillars of 2019 budget; but will reassure financial markets in the coming days, adding that Italy will show the highest willingness to negotiate with the EU. (La Repubblica)

CENTRAL BANKERS

BoE’s Saunders (Hawk) reiterated that implications on monetary policy from different Brexit outcomes could go either way and that policy stance would need to return to something similar to neutral sooner than curve implies in the event of a smooth Brexit. (Newswires)

ECB's Weidmann (Hawkish) said we are at a maturing economic cycle, that stock markets are fairly high and that there could be corrections to come but added stock market corrections don't worry us from a monetary policy perspective. (Newswires)

ECB's Praet (Dovish) said downside risks have increased but at this stage we still think the picture remains broadly balanced, while he added that core inflation at around 1% are not enough to reach our aim in sustained manner. Praet added that he is confident that underlying inflation pressures are rising but it will take time and it requires monetary policy to remain accommodative. Praet also commented it is too soon to decide new TLTRO or adjustments in key rates. (Newswires)

GEOPOLITICAL

North Korea appear to be expanding operations at its main nuclear site, according to the IAEA, while there were also reports that atomic agency inspectors are said to be demanding North Korea allow nuclear inspectors back into the country amid reactor activity concerns. (Nikkei/SCMP)

China is to reportedly resume the purchase of Iranian oil in November after their waiver. (Newswires)

EQUITIES

After opening with little in the way of firm direction amid holiday thinned markets (US, Japan and India), European equities have posted modest gains with the EuroStoxx 50 higher by 0.2%. Leading the charge in Europe is the FTSE MIB (+0.6%) with Italian assets underpinned by optimism that the populist government could reign in some of their budgetary demands with reports suggesting that the EU Affairs Minister Savona could step down from his position (later denied) due to dissent over Italy’s intentions to violate EU budget laws. This also comes amidst a backdrop of increasing pressure from President Mattarella who wants the technocratic PM Conte to get a deal done with the EC, whilst other Italian press report highlight the need for Italy to increase the sincerity of Italy’s concessions to Europe. In terms of sector specifics, upside in Italian banking names has helped spur gains in European financials with the telecoms sector outperforming. To the downside, energy names lag, in-fitting with price action in the complex with crude seemingly unable to stem recent losses. Individual movers include Renault (+4.2%), who have been granted some reprieve from recent losses following a broker upgrade at Jefferies and as Nissan continue to reorganise their corporate leadership. Elsewhere, GEA Group (-14.3%) are lower after cutting guidance whilst Altice (-9.8%) continue to face selling pressure following yesterday’s disappointing market update.

FX

EUR - Not the most discounted major currency on offer, but cut price in wake of considerably weaker than forecast preliminary PMIs from France, Germany and the Eurozone overall. The single currency is now under 1.1400 vs the Usd and has broken the 10DMA to the downside at 1.1356, with fibs now being eyed ahead of 1.1300, while pivoting 0.8850 against the Gbp even though Sterling is also suffering in sympathy and jittery on Brexit issues following initial euphoria due to the UK-EU Political Declaration.

CAD/NZD/AUD - Also going relatively cheap and underperforming against their US peer, with the Loonie back below 1.3200 amidst an even steeper slide in crude prices ahead of Canadian CPI and retail sales data. Meanwhile, the Aud has retreated through 0.7250 again and hardly helped by overnight developments as ANZ revised its RBA outlook to unchanged until August 2020, and the ASIC launched a probe of CBA for the alleged mis-selling of insurance products. Similarly, the Kiwi has lost grip of 0.6800 amidst speculation that the RBNZ could loosen mortgage restrictions as part of its FSR due next week.

GBP - As noted above, the Pound has lost a bit more positivity after Thursday’s rally on the draft PD reached by Brexit negotiators given a mixed reaction to the details in UK political circles and ongoing doubt about approval by EU leaders. Cable is back below 1.2850 vs circa 1.2900 at best yesterday, albeit ‘comfortably’ above the recent 1.2785 low with decent bids noted at 1.2800.

JPY/CHF - Marginal divergence, as the Jpy keeps its head just above 113.00 vs the Greenback, but trade extremely rangebound given Japan’s market closure just a day after US Thanksgiving and with many US participants widely anticipated to be out again today. Conversely, the Franc has dipped from best levels within a narrow 0.9970-35 range.

DXY - The Dollar has benefited from the aforementioned relative weakness elsewhere, and the index is holding nearer the upper end of 96.394-751 parameters as a result, and on course to end the holiday-shortened week with a net gain, albeit modest having traded up to 96.898 and down to 96.037 at the other extreme.

EM - Some consolidation at the end of a solid week for the likes of the Zar and Try that have both made potentially significant breaks of key levels at 14.0000 and 5.3000 vs the Usd respectively due to a combination of bullish technical and fundamental factors, ie the SARB ¼ point hike yesterday.

COMMODITIES

WTI (-4.3%) and Brent (-2.6%) are on track for their seventh weekly loss with WTI prices briefly breaching the USD 52.00/bbl level to the downside while Brent lingers just above USD 61/bbl. Some traders are citing the recent decline to technical factors, while Saudi Arabia signalled that its output may have reached a record high of above 10.7mln BPD, and the kingdom’s Energy Minister Al-Falih noted that demand for oil will be lower in January 2019 compared to December 2018. This comes amidst the backdrop of this week’s EIA data which showed that US production remained at a record high of 11.7mln barrels, the most since at least 1983; according to government data. Therefore, the complex is suffering from a double whammy with supply glut concerns and weaker demand concerns weighing on traders’ minds.

Oil fell into bear market territory this month after the US granted temporary waivers to eight countries in regard to Iranian oil, in turn pouring cold water on some supply concerns, while sources emerged this morning noting that China are to resume the purchase of Iranian oil in November after their waiver. Some analysts highlighted that due to complications over insurance, shipping and payments, it may take until February or later until some of Iran’s largest buyers such as South Korean and Japan resume purchases.

As a reminder, due to the US Thanksgiving Holiday, WTI had no settlement price yesterday, while Brent Jan’19 contract closed on Thursday at the lowest premium to WTI since August 31st.

Elsewhere, gold (-0.4%) prices saw some downside after the yellow metal felt pressure from the firmer USD and copper weakened amid underperformance in China alongside a decline in Chinese commodity prices. Furthermore, China’s Dalian Exchange are to relax their risk management restrictions on some futures in an attempt to attract more investors to boost liquidity given the recent slump in iron ore prices.

FIXED INCOME

Core EU bonds have extended session highs in wake of the downbeat flash Eurozone PMIs that will be an added concern for those at the ECB already worried about the extent of the economic slowdown. Bunds have inched closer towards the top of a resistance band ahead of 161.00, at 160.97 (+34 ticks) and Gilts recently topped out just above their nearest big figure at 123.02 (+32 ticks), with the former not really or unduly hampered by ongoing strength in Italian BTPs at present (10 year future now off best levels but still 50+ ticks ahead and not far from 123.00 at one stage). However, US Treasuries are rather reluctant to tag along, albeit off overnight session lows ahead of Markit’s preliminary PMI as not many trading desks are expected to be back up to full quota and action, if any, after Thanksgiving, not to mention early market closes that will likely keep turnover depressed.