• US President Trump and Chinese President Xi Jinping announced a truce at the G20 in which the US agreed to delay hiking tariffs on USD 200bln of Chinese goods to 25% for 90 days
• Russia President Putin spoke with Saudi Arabia’s Crown Prince in which they agreed to extend the OPEC+ agreement, although haven’t decided on the precise volume of production cuts
• Italian PM Conte is reportedly preparing for a deficit of 1.9%-2.0%, while Italian Deputy PMs Salvini and Di Maio are said to be ready to accept new target
• Looking ahead, highlights include EU, UK, US Markit Manufacturing PMIs, Fed’s Quarles, Williams, Brainard, Kaplan, BoE’s Haldane Speaking

TRADE

US President Trump and Chinese President Xi Jinping announced a truce at the G20 in which the US agreed to delay hiking tariffs on USD 200bln of Chinese goods to 25% for 90 days to allow for discussions, while China agreed to buy a "very substantial" amount of agricultural, industrial and energy products from the US. Furthermore, there were reports that the G20 draft statement agreed that the current global trading system has flaws and is in need of reform. (Newswires/BBC)

US President Trump tweeted that China has agreed to reduce and remove tariffs on cars coming into China from the US which are currently at 40%. (Twitter)

Goldman Sachs said the actual amount of concrete progress at the Trump-Xi meeting seems quite limited as expected, while it added that there is just over 50% probability that discussions will fail and that the tariff increase to 25% will still happen in March or later. (Newswires)

ASIA

Asian equity markets were higher across the board with global risk appetite boosted following the US-China trade truce at the G20. News of the tariff ceasefire spurred a rally in US equity futures in which the Emini S&P and DJIA futures reclaimed the 2800 and 26000 levels respectively, with the blue-chip index up nearly 500 points. ASX 200 (+1.8%) and Nikkei 225 (+1.1%) advanced with Australia led by commodity-related sectors as energy benefitted from the positive trade developments and Russia-Saudi agreement to extend the OPEC+ accord, while the JPY-risk dynamic was very much in play for Tokyo trade. Elsewhere, Hang Seng (+2.4%) and Shanghai Comp. (+2.6%) outperformed on the easing of trade tensions, with sentiment also supported by better than expected Chinese Caixin Manufacturing PMI and after the CFFEX relaxed domestic stock index futures trading conditions. Finally, 10yr JGBs initially saw a bout of weakness at the open amid the heightened risk appetite, although prices later recovered amid the BoJ’s presence in the market for JPY 800bln of JGBs with maturities of up to 5yrs.

PBoC skipped open market operations. (Newswires)
PBoC set CNY mid-point at 6.9431 (Prev. 6.9357)

Chinese Caixin Manufacturing PMI (Nov) 50.2 vs. Exp. 50.1 (Prev. 50.1). (Newswires)

China Financial Futures Exchange CFFEX relaxed restrictions on domestic stock index futures trading with reports noting that some margin requirements and commissions arel be lowered. (Xinhua)

UK/EU

UK PM May was reportedly under renewed pressure as the DUP threatened to abandon support for her in a confidence vote if she failed to get her Brexit deal approved in Parliament. (Times)

UK PM May's chief Brexit adviser Oliver Robbins secretly warned her the PM that customs backstop is a "bad outcome" for the UK which will see regulatory checks in the Irish Sea and put security co-operation at risk, according to the Telegraph. (Telegraph)

UK Secretary of State for Environment, Food and Rural Affairs Gove, has told Conservative rebels that there was a “real risk” of a second Brexit referendum if they don’t back PM May’s deal with Brussels. (Times)

UK Shadow Brexit Secretary Starmer said that Labour would almost certainly seek a vote of no confidence if UK PM May loses the key Commons vote on her Brexit deal on December 11th. (The Guardian)

UK trade body EEF raised 2018 manufacturing production growth forecast to 1.1% from 0.9% but cut 2019 forecast to 0.3% from 0.5%. (Newswires)

Italian PM Conte stated they are examining several options for a budget deal with the EU in which a solution could be made within days. (Newswires) Later it was reported, that Italian PM Conte is reportedly preparing for a deficit of 1.9%-2.0%, while Italian Deputy PMs Salvini and Di Maio are said to be ready to accept new target, according to Messaggero. (Messaggero)

Swiss government said on Friday to adopt provisional ban on trading of Swiss shares on European stock exchanges amid row with EU over new treaty to take effect on January 1st 2019. (Newswires)

S&P affirmed Ireland at 'A+/A-1'; Outlook Stable, while Fitch affirmed Belgium at 'AA-'; Outlook Stable and affirmed Portugal at 'BBB'; Outlook Stable. (Newswires)

FX

In FX markets, USD was softer as the US-China trade truce spurred outflows from safe-haven currencies which also underpinned JPY-crosses and benefitted most of the greenback’s major counterparts. As such, EUR/USD strengthened with the pair also supported by hopes of a potential Italian budget solution within days, while gains in GBP/USD were moderate amid ongoing Brexit-related uncertainty with the DUP threatening to abandon support for PM May in a confidence vote if her Brexit deal fails in Parliament. Elsewhere, AUD, NZD and CAD appreciated due to their high-beta statuses and amid a surge in commodity prices in which WTI crude futures and several Chinese base metals rallied over 5%.

COMMODITIES

Commodities were higher across the board in which WTI crude futures stole the limelight as it gained over 5% in the aftermath of the G20 developments including the US-China trade truce and Russia-Saudi agreement to extend the OPEC+ accord. The oil rally was further exacerbated as Shanghai commodities trade got underway and amid reports Canada’s Alberta is to cut oil output by 9% due to a supply glut. Elsewhere, gold saw marginal gains with upside restricted amid lack of demand for safe-havens, while copper gapped higher amid outperformance in China and broad strength across Shanghai commodities trade.

Baker Hughes Rig Count (30/Nov): Oil up 2 rigs at 887, gas down 5 rigs at 189, total rigs down 3 at 1076. (Newswires)

Russia President Putin spoke with Saudi Arabia’s Crown Prince in which they agreed to extend the OPEC+ agreement, although haven’t decided on the precise volume of production cuts. (Newswires)

Canada's Alberta mandates 325k bpd or 9% output reduction in oil to ease supply glut effective January. (Newswires)

OPEC Economic Panel recommended an output cut from October levels according to reports on Friday, while it was also noted that a 1.3mln bpd cut seen as efficient to balance the market. (WSJ)

GEOPOLITICAL

South Korean President Moon and US President Trump agreed to revive momentum regarding negotiations for North Korea denuclearization. In related news, South Korean President Moon said a visit by North Korean Leader Kim to Seoul is still open and possible this year, while US President Trump is said to be targeting a summit with North Korean leader early 2019. (Newswires/Nikkei)

US

The Treasury complex seemed to have been detached from the broader themes (G20/trade/etc) on Friday and once again put in a lacklustre performance with a thin range, as traders refrained from making any major moves ahead of the outcome of the dinner between Trump/Xi, as well as on month-end. Fed’s Kashkari (dove, non-voter) also lent some support to the complex, though in reality, it was a rattling-off of his usual dovish views. Major curve spreads narrowed modestly by between 0.5bps to 2bps, though 10s30s were a touch wider. US T-note futures (Z8) settled 4 ticks higher at 119-17+.