• Asian equity markets began the week somewhat cautiously following the downbeat lead from Wall St. in which the three major bourses closed lower by around 2% each
• PM May’s Deputy David Lidington and Number 10 Chief of Staff Gavin Barwell dismissed reports from The Times that they were preparing for a second referendum behind PM May's back
• UK Attorney General Cox has reportedly told Cabinet Ministers that PM May must be “removed” after Brexit (March 29th), so others can renegotiate her deal
• Looking ahead, highlights include Eurozone CPI (F), NY Fed Mfg, ECB’s Smets

ASIA-PAC

Asian equity markets began the week somewhat cautiously following the downbeat lead from Wall St. in which the three major bourses closed lower by around 2% each. The Dow plunged almost 500 points to its lowest level since early May, led lower by shares in Apple and Johnson & Johnson, while the S&P and Nasdaq were dragged down by tech names as the sector lagged. ASX 200 (+1.0%) was buoyed by material and mining names after MOFCOM confirmed the suspension of retaliatory tariffs on US vehicles and auto parts, while Nikkei 225 (+0.7%) initially outperformed on currency effect as the export-heavy index benefitted from the weaker JPY. Elsewhere, Hang Seng (Unch) and Shanghai Comp. (Unch) traded choppy and swung between gains and losses in which the indices initially dipped in the red as industrial names were again pressured in a continuation from the weak IP data last week, housing names then provided the bourses with some support amid an improvement in house prices data. Finally, 10yr JGB yields touched over 5-month lows as fears of slower global growth boosted demand for the debt.

China Finance Ministry confirmed the suspension of retaliatory tariffs on US vehicles and auto parts for 3-months from 40% to 15% effective 1st Jan. (Newswires)

Chinese China House Prices YY Nov 9.3% (Prev. 8.6%)

PBoC set CNY mid-point at 6.8908 (Prev. 6.8750) (Newswires)
PBoC injected CNY 160bln via 7-day reverse repos

PBoC said it will guide reasonable growth of credit and social financing and are to further improve monetary policy transmission channels. (Newswires)

PBoC Adviser Songchen said China should defend the USD/CNY at the 7.00 level. (Newswires)

BoJ Tankan inflation survey shows Japanese firms expect inflation to rise 0.9% a year from now (vs. Prev. 0.8%)

UK

PM May’s Deputy David Lidington and Number 10 Chief of Staff Gavin Barwell dismissed reports from The Times that the two senior ministers were preparing for a second referendum behind PM May's back. (Newswires)

PM May is being urged to allow Tory MPs a free vote in a series of ballots over different options regarding Brexit's next steps, including a second referendum. PM May will meet her Cabinet on Tuesday to outline options. (The Guardian)

UK Attorney General Cox has reportedly told Cabinet Ministers that PM May must be “removed” after Brexit (March 29th), so others can renegotiate her deal; according The Telegraph citing sources. (The Telegraph) Senior Tories who had showed loyalty to PM May as she faced a no-confidence vote were secretly organising leadership bids to replace her. (The Times) UK PM May is set to be put under more pressure on Tuesday to step up preparations for leaving the EU without a deal, with 11 Cabinet ministers understood to be in favour of a "managed" no-deal. (Telegraph)

UK Foreign Secretary Hunt said the UK will "flourish and prosper" even in the event of a no-deal Brexit. (The Telegraph)

A row has reportedly erupted in Labour Leader Corbyn's top team over the timing to push a vote of no confidence in PM May's government. Labour sources declined to rule out tabling a no-confidence motion this week, but the party is said to be more likely to strike after the meaningful vote in January. (The Independent) Labour activists have launched a fresh campaign for a second referendum, pressuring Labour Leader Corbyn to drop his resistance to a new public vote. (BBC)

A poll by Opinium Research shows PM May received an approval rating of 47%, the highest since the start of her premiership. (Sky News)

The European Commission, on Wednesday, will publish its contingency action plans for a no-deal Brexit, covering up to 13 areas that threatens chaos. (The Times)

UK Rightmove House Price Index M/M (Dec) -1.5% (Prev. -1.7%) (Newswires)
UK Rightmove House Price Index Y/Y (Dec) 0.7% (Prev. -0.2%)
 

EU

Italian government has the resources to afford a 2.04% deficit/GDP target; according to ANSA. The newspaper also reported that Italy's Cabinet Undersecretary Giorgetti said if the current government fails, Italy should go to early elections. (ANSA)

Italy's Deputy PMs Di Maio, Salvini and PM Conte are in "total agreement" on 2019 budget figures to propose to Brussels; according to a League spokeswoman. (Newswires)

French PM Phillip said France’s 2019 budget deficit is likely to stand at around 3.2%. (Les Echos)
 

FX

In FX markets, most majors were uneventful as the DXY remained little changed sub-97.500 ahead of the FOMC meeting later this week, as such EUR/USD remained above 1.1300 while GBP/USD traded within a tight range near Friday’s levels. Elsewhere, antipodeans traded sideways for most of the session as AUD shrugged off a downgrade to 2018/19 GDP forecast by the Treasury (2.75% vs. Prev. 3.00%) and NZD was little impacted by a weaker-than-prior services PMI. Elsewhere, JPY was marginally weaker as USD/JPY crept closer to 113.50 with traders attributing the softness to Hitachi’s transaction to purchase 80% of Swiss listed ABB’s power grids in a deal valued at USD 11bln. Finally, MXN outperformed in the EM scope after Mexican President AMLO unveiled the country’s budget over the weekend with 2019 targets of 2% growth, 3.4% inflation, USD/MXN at 20.00 and an average export price for Mexican crude at USD 55/bbl, lawmakers have until the end of the year to pass the budget.

Mexican President AMLO proposed a primary surplus of 1% of GDP for 2019 and his administration expects this year’s surplus to be about 0.8%. The budget targets 2019 growth of 2% growth, 3.4% inflation, USD/MXN at 20.00 and an average export price for Mexican crude at USD 55/bbl, lawmakers have until the end of the year to pass the budget. (Newswires)

New Zealand Services PMI (Nov) 53.5 (Prev. 55.4) (Newswires)

Australia Mid-year Economic and Fiscal Outlook: Cut 2018/19 GDP to 2.75% (Prev. 3.00%) (Newswires)

Fitch affirmed Turkey at BB; outlook negative. (Newswires)

COMMODITIES

WTI (+0.2%) traded with no firm direction amid a lack of fresh catalysts alongside book closing, deleveraging and position setting ahead of Christmas closures. Elsewhere, gold was little changed and traded sideways amid a lack of drivers for the precious metal alongside a relatively docile USD ahead of this week’s FOMC meeting, Meanwhile, copper bounced off last week’s lows but traded choppy amidst the undecisive risk tone.

Baker Hughes Rig Count (14/Dec): Oil down 4 at 173, NatGas unchanged at 198; total down 4 at 1071. (Newswires)

GEOPOLITICAL

Canada said it has been granted consular access to one of the two men detained by China this week (Newswires) It was later reported via SCMP that Canada’s Ambassador to China McCallum has met with the second detained Canadian Kovrig. (SCMP)

North Korea Foreign Ministry condemned US administration for stepping up sanctions and pressure to drop nuclear programme; adding that if US doesn't ease, disarming could be completely off the table. (Newswires)

US

US President Trump is reportedly mulling the prospect of preventing a partial government shutdown and delaying the border wall fight until January; according to Politico citing two sources familiar with the negotiations. (Politico)

US President Trump announced Mick Mulvaney (Director of the Office of Management and Budget) as acting White House Chief of Staff following the departure of General John Kelly. (Twitter)

US Interior Secretary Zinke is to step down at the end of the year amid an ongoing ethics probe, US President Trump is to announce his replacement this week. (Newswires)