• Asian equity markets were higher across the board as the region took the impetus from the mostly positive close on Wall St
• UK press reports suggest that Johnson and Gove now agree that Britain should increase its Brexit divorce bill offer above GBP 20bln
• Looking ahead, highlights include US existing home sales, APIs, ECB’s Coeure and Fed’s Yellen

ASIA

Asian equity markets were higher across the board as the region took the impetus from the mostly positive close on Wall St, with Nikkei 225 (+0.9%) underpinned as exporters benefitted from JPY weakness. The benchmark Japanese index briefly broke above the 22,500 level as stocks coat-tailed on the rebound in USD/JPY, with Toshiba reprieved from yesterday’s slump to sit among the biggest gainers. ASX 200 (+0.3%) also traded with broad-based optimism across its sectors albeit to a lesser extent and Chinese markets completed the upbeat picture following another significant liquidity operation by the PBoC, with the Hang Seng (+1.5%) leading on continued gains in its largest weighted stock Tencent which recently became a member of the exclusive USD 500bln market-cap-club. Finally, 10yr JGBs were relatively flat tspanoughout the session with demand subdued by the broad positive risk tone and a tepid longer-dated enhanced liquidity auction, although a mild uptick was seen in late trade as prices broke above 151.00.

PBoC injected CNY 130bln in 7-day reverse repos, CNY 40bln in 14-day reverse repos and CNY 10bln in 63-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.6356 (Prev. 6.6271)

EUROPE

ECB is said to be edging towards taking small steps in guidance on QE exit, according to press reports, while there were also comments from ECB's Villeroy that the central bank took a decisive step towards QE end. (Newswires/Telegraaf)

German Chancellor Merkel said she is not planning a minority government and that the goal is to form a stable government. (Newswires)

UK

BoE's Ramsden commented on unwinding QE in which he said it won't be a consideration until the Bank Rate is at a level from which it can be 'materially' cut around 150bps. Ramsden also stated that low long-term rates are due to long-term growth prospects. (Newswires)

UK Foreign Minister Johnson and Environment, Food and Rural Affairs Minister Gove have agreed for the first time that Britain should increase its Brexit divorce bill offer above GBP 20bln if the EU is prepared to make concessions in return. (Telegraph) However, reports in the Times suggest that Senior Tory Brexiteers demanded last night that PM May should exploit German Chancellor Merkel’s political weakness and suspend plans to offer billions of pounds more to the EU. (Times)

FX

AUD/USD weakened upon the release of the RBA minutes which suggested a cautious tone, as it stated there is considerable uncertainty on how fast wages might pick up and noted that a pass tspanough to inflation may be delayed by many factors. This pressured AUD-related crosses in which AUD/JPY pulled back below the 85.00 handle, while NZD/USD tested 0.6800 to the downside in sympathy. The remainder of FX was relatively quiet in which USD/JPY just about maintained the upper-112.00 range, amid the heightened risk tone and as USD index just about held above 94.00.

RBA minutes from November 7th meeting stated that any further appreciation in AUD would slow expected pick-up in inflation and the economy. The minutes also stated that there is considerable uncertainty on how fast wages might pick up and add to inflation, while it added that a pass tspanough to inflation may be delayed by many factors. (Newswires)

S&P affirmed Canada ratings at AAA; Outlook Remains Stable. (Newswires)

COMMODITIES

Oil futures relatively unchanged on the session, while gold only managed to nurse some of yesterday’s losses as a broad positive risk tone kept safe-haven demand subdued. Copper maintained most of the prior session’s gains with prices supported by the risk appetite and amid gains in Chinese steel and iron ore prices on optimism for increased demand following the winter season.

Nebraska regulators have approved the Keystone XL pipeline, clearing the way for the controversial and long-delayed project to progress. (BBC)

GEOPOLITICAL

US President Trump labelled North Korea as a state sponsor of terrorism and the Treasury Department is said to announce fresh sanctions against the rogue nation, while US Secretary of State Rex Tillerson commented that the designation will help dissuade third parties from supporting Pyongyang. (Nikkei)

US

The holiday-shortened week got off to a very quiet start. Markets were aligned in a risk-on fashion, with equities rising, Treasuries selling-off, gold sharply lower, and safe-haven FX down. With US lawmakers away on Thanksgiving leave until next week, there isn’t expected to be much progress on the fiscal front this week – which has been one of the key drivers of US trading sentiment in recent weeks. Volumes are also expected to be thin this week. This week’s Fed meeting minutes are likely to be a non-event, confirming the December hike narrative. There is little by way of other tier-one releases this week.

TREASURIES: US Dec 2017 T-Note futures settle 7 ticks lower at 124-22. The US yield curve bear-flattened on Monday, with yields from the fronts to the 10-year sector rising, though yields in the long-end were slightly lower. This left the major curves to flatten slightly again, with 5s30s breaching 70bps, and 2s10s came close to piercing 60bps (low was 60.6bps); 2s30s, meanwhile, flattened by around 2bps by settlement, holding just above 103bps. This week’s Fed meeting minutes are expected to continue to point to a December hike, which has been driving short-end yields higher; however, continuing concerns about the prospects of long-term growth and inflationary pressures have kept the long-end bid.