• Mixed reports on meaningful vote deal leads to a meandering GBP
• Risk sentiment remains soft, as trade uncertainty remains at the forefront
• Looking ahead, highlights include US JOLTS, BoC’s Lane and BoE’s Cunliffe

ASIA

Asian equity markets began the week lower following last Friday's sell-off on Wall St and Non-Farm Payrolls miss, with sentiment also dampened by disappointing Japanese GDP and Chinese trade data, as well as uncertainty regarding US-China trade relations. As such, ASX 200 (-2.3%) was led lower by tech and financials to print lows last seen in around 2 years, while Nikkei 225 (-2.1%) was pressured by a firmer JPY and larger than expected downward revision to Q3 GDP which had already been in contraction territory. Hang Seng (-1.2%) and Shanghai Comp. (-0.8%) were also negative after Chinese Exports and Imports data fell short of estimates and amid concerns regarding US-China trade tensions. This was after USTR Lighthizer declared the 90-days was a 'hard deadline' for China, while there were also reports China’s Vice Foreign Minister summoned the US and Canadian Ambassadors to China regarding the arrest of Huawei’s CFO and warned of consequences if she is not immediately released. Finally, 10yr JGBs were underpinned by safe-haven demand and with the BoJ also present in the market for a respectable JPY 1.2tln of JGBs with 1yr-10yr maturities.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.8693 (Prev. 6.8664)

US Trade Representative Lighthizer said 90 days is a 'hard deadline' for China trade deal and that new tariffs will be imposed if there is no agreement by March 1st. (Newswires)

Huawei CFO is to face prosecution in the US for fraud charges, according to Canadian court hearing. In related news, China’s Vice Foreign Minister has summoned US Ambassador to China regarding the arrest, while it had also summoned the Canadian Ambassador and warned there would be consequences if she is not released immediately. (Newswires)

Chinese Trade Balance (USD)(Nov) 44.75B vs. Exp. 34.0B (Prev. 34.02B). (Newswires)
Chinese Exports (Nov) Y/Y 5.4% vs. Exp. 10.0% (Prev. 15.6%, Rev. 15.5%)
Chinese Imports (Nov) Y/Y 3.0% vs. Exp. 14.5% (Prev. 21.4%, Rev. 20.8%)

Chinese CPI (Nov) Y/Y 2.2% vs. Exp. 2.4% (Prev. 2.5%). Newswires)
Chinese PPI (Nov) Y/Y 2.7% vs. Exp. 2.7% (Prev. 3.3%)

Japanese GDP (Q3 F) Q/Q -0.6% vs. Exp. -0.5% (Prev. -0.3%). (Newswires)
Japanese GDP (Q3 F) Y/Y -2.5% vs. Exp. -1.9% (Prev. -1.2%)

UK/EU/US

UK PM May warned if Parliament rejects her Brexit deal, Britain could be left in the EU and the opposition Labour party could be brought to power. (Newswires)

UK PM May reportedly held discussions on Sunday with EU leaders as she anguished over postponing Brexit vote, in which she explained that MPs would kill off the deal and possibly her premiership, unless Brussels could hand her a lifeline. UK Brexit Secretary Barclay said PM May will not postpone Brexit vote on December 11th even though the government almost certainly faces defeat. (Newswires)

There were also reports that former cabinet ministers Johnson, Raab and McVey have all signalled a willingness to bid for the leadership amid speculation PM May will face a crushing defeat at Tuesday’s vote. (Newswires). In addition, there were separate reports that UK PM May reportedly faces prospect of 48 letters this week. (Independent.ie/Times) Furthermore, there are also suggestions that May’s cabinet is split over whether to stage a second referendum if her deal is rejected tomorrow. (Times)

UK opposition Labour Party Leader Corbyn said we have to respect the result of the referendum, while he added that PM May's deal is likely to be rejected in parliament and that no deal Brexit must be avoided at all costs. Furthermore, there were also reports on Friday that UK Labour party was said to be lining up rebel Tories for a no confidence vote. (The Times)

ECJ rules that Britain can unilaterally reverse its decision to leave the EU without consulting the other member states. (Newswires)

Irish Foreign Minister Coveney says the deal agreed between UK and EU will not change; adding that the backstop is a negotiated solution that both sides agreed on. (Newswires)

Telegraph's Steven Swinford tweets, The Cabinet conference call is being held at 11.30. Ministers are now assuming she will delay the meaningful vote. (Newswires)

UK PM May Spokeswoman says the meaningful vote will happen on Tuesday as planned, adding that PM May will update minister on her weekend calls with EU leaders. Spokeswoman added that PM May is confident she will win tomorrow's meaningful vote. (Newswires)

Faisal Islam of Sky tweets, EU27 source: “remains the case that there won’t be any changes to the Withdrawal Agreement but Downing St still working on an sop to backbenchers - saying they’ll be offered a ‘greater say’ on the backstop”. (Twitter)

UK PM May is said to pull tomorrow's meaningful vote on her Brexit deal; according to sources. (Newswires)

EU Spokeswoman quoting European Commission President Juncker says "we will not renegotiate Brexit" and reiterated that the current Brexit deal is the "best and only possible deal. (Newswires)

Owen Bennett of CityAM tweets, Source tells me the vote is up, backing up what is currently being said. (Newswires)

UK GDP Estimate YY (Oct) 1.5% vs. Exp. 1.6% (Prev. 1.5%)

UK GDP Est 3M/3M (Oct) 0.4% vs. Exp. 0.4% (Prev. 0.6%)

French President Macron is to address the nation with an important announcement at 2000CET following street rioting and protests. Furthermore, it was reported that Macron is expected to announce tax reductions and subsidies to lower income families in an attempt to suppress the rioting (Newswires)

Italian government is to hold top-level talks today, while it was also reported that Italian PM Conte is reportedly seeking accord on 2% budget deficit and that Finance Minister Tria continues to seek a 1.9% target. (Newswires/Messaggero)

Moody’s affirmed Switzerland at AAA; Outlook Stable, while S&P affirmed Estonia at AA-; Outlook Stable and affirmed Iceland at A; Outlook Stable. (Newswires)

White House Chief of Staff Kelly confirmed he has resigned, while his replacement Is to be announced in the approaching days. (Newswires)

EQUITIES

Major European bourses are red across the board (Euro Stoxx 50 -0.3%) with the FTSE 100 (unch.) outperforming its peers amid currency effects (with the ongoing Brexit turmoil) and a boost by BAE Systems (+0.8%) following the Co. being shortlisted to build the next Royal Navy frigates. Over in Germany, DAX (-0.5%) is hampered by shares in heavyweight BASF (-4.9%) after the Co. significantly lowered their 2018 EBIT forecasts. Major sectors are largely in the red, with underperformance seen in materials in the wake of softer-than-expected Chinese CPI alongside further strain on US-China trade relations after the Huawei CFO is to face prosecution in the US for fraud charges as China demands her release.

Other notable movers include technology names such as Dialog Semiconductor (-2.5%) who are in the red in sympathy with poor performance in tech names overnight in Asia, while Standard Chartered (-1.5%) declined amid reports that the Co. was amongst the banks who have been misled by Huawei.

FX

GBP,EUR  – More volatile trade for the Pound amidst ongoing Brexit uncertainty with all eyes on the 11.30GMT Cabinet conference call where Minister are now assuming PM May will delay the meaningful vote due to wide anticipation that the deal will be rejected in Parliament. GBP/USD currently languishing below 1.2700 ahead of the recently-made YTD low of 1.2657 having seen some reprieve following the ECJ ruling that the UK can unilaterally reverse Brexit without consulting the EU27 members. However, the upside was short-lived ahead of UK data which was weaker overall, with industrial productions considerably weaker than forecasts. Meanwhile, EUR benefits from the softer buck and pound with EUR/GBP near the top of a 0.8988-57 range.

NOK, SEK – Stronger than expected Norwegian inflation data just ahead of Thursday’s Norges Bank interest rate decision, weighed on EUR/NOK with the pair making a substantial move sub-9.7000 post-data with a low print of around 9.6500, before paring back a fraction of the move to stabilise around 9.6700. Conversely, further political angst in Sweden after the Centre party leader Loof noted that talks with Social Democrats have failed, adding they will not support their leader Leader Lofven as PM. This subsequently (alongside the NOK/SEK spillover) pushed EUR/SEK to session highs north of 10.3350 vs. a low print of 10.2973.

JPY – Moving in tandem with swings in risk sentiment more so than the wider-than-expected contraction in Japanese Q3 GDP, with USD/JPY currently nearer the highs of a 112.75-25 range with the downside contained  by big options (1.13bln at 112.40-50) and a fib at 112.46.

EMs – USD/CNY rose to just shy of 6.9150 in the wake of lower-than-expected inflation data alongside continuous US pressure after US Trade Representative Lightizer solidified the 90-day negotiating period as “a hard deadline” with new tariffs imposed by March 1st should the parties not reach an agreement. Meanwhile, TRY has largely recovered from the miss in Turkish GDP with USD/TRY clipping 5.3000 post-data before edging lower to around 5.2800. Elsewhere, ZAR is on the backfoot on a more technical note as traders cite the USD/ZAR breach above 14.2000 as the catalyst.

DXY – Still on the backfoot, albeit off worst levels, in a continuation of the move following Friday’s NFP miss with the index and broad dollar closer to the top of a 96.684-358 range and awaiting more impetus data in the form of JOLTS and employment trends.

AUD, NZD – Antipodeans deriving support from their softer US counterpart having initially wobbled on weaker Chinese trade data overnight. Kiwi hovers just below 0.6900 as the AUD/NZD remains capped ahead of 1.0500 and AUD/USD struggles to hold above 0.7200.

FIXED INCOME

Gilts were essentially unreactive to the disappointing UK output data and in-line GDP data, trading at the top of a 123.40-123.71 range with the UK benchmark driven mixed reports of the possible delay on Tuesday’s meaningful, with some support found from stock weakness. Bunds have broken the key 163.17 support level to the downside and hover around the 163.10 level vs. 163.02 at worst as technical factors have taken hold of the benchmark. This has squeezed the in-focus OAT-Bund spread, that has widened to over 40bps (double that of a month ago) with widening driven by the yellowjacket protests that have lowered the Bank of France’s GDP forecast by 10 bps, as investors look ahead to President Macron’s speech at 7pm. BTPs are outperforming and testing 124.00 to the upside post lower-house budgetary approval and strong output data, as reports circulate that PM Conte is reportedly seeking a 2% level with Tria looking for 1.9% ahead of  top-level talks today.

US Treasuries are essentially flat as yields hang above the 2.85% with support found at 2.78-80% as traders look forward to the JOLTS data and supply on the short end in the form of USD 39bln in 13-week bills and USD 36bln in 26-week bills later in the day

COMMODITIES 

Brent (-1.0%) and WTI (-1.3%) have retreated somewhat from gains seen after Friday’s agreement by OPEC+ to cut output by 1.2mln BPD from October levels for 6 months, with the deal to be reviewed in April. Russian Energy Minister Novak stated that Russia is to cut production by 228,000 BPD as part of this agreement. Separately, sources have commented that congress is increasingly likely to vote on the NOPEC bill, which will allow the DoJ to sue OPEC on anti-trust violations. Elsewhere, Libya’s NOC has declared a force majeure following a production suspension at the Sharara oil field due to safety concerns because of protestors at the oil field; which will result in a 315k BPD production cut, while Zawiya refinery is also at risk due to its dependence on the Sharara field.

Gold (Unch) has remained steady following Friday’s NFP miss which led to some speculation that the Fed may halt interest rates hikes sooner than was previously expected. Elsewhere, a Chinese government consultancy expects 2018 crude steel output to hit an annual record of 923mln tonnes

Iraq oil Minister Ghadhban says that the county's oil exports have improved after November's drop in exports due to bad weather