• Asia equity markets were subdued following a similar close on Wall St where the S&P 500 and DJIA pulled back from intraday record levels
• In FX, antipodeans stole the limelight in which NZD/USD briefly reclaimed 0.6900, AUD was underpinned by better than expected Retail Sales and an unsurprising RBA rate decision
• Looking ahead, highlights include Eurozone, UK and US Services PMIs, US Trade, ISM Non-Mfg, APIs

ASIA

Asia equity markets were subdued following a similar close on Wall St where the S&P 500 and DJIA pulled back from intraday record levels and tech underperformed as rotation out of the sector resumed. ASX 200 (-0.2%) and Nikkei 225 (-0.2%) were negative as tech names tracked the weakness of their US counterparts. Hang Seng (-0.4%) was also subdued by tech woes, while Shanghai Comp. (-0.1%) traded indecisive after encouraging Caixin Services and Composite PMIs were counterbalanced by continued PBoC inaction, which resulted to net daily drain of CNY 170bln. Finally, 10yr JGBs were lacklustre with demand sapped amid a 10yr auction, which showed weaker demand and lower accepted prices than prior.

Chinese Caixin Services PMI (Nov) 51.9 vs. Exp. 51.5 (Prev. 51.2). (Newswires)

Chinese Caixin Composite PMI (Nov) 51.6 (Prev. 51.0)

PBoC skipped open market operations again today, for a net daily drain of CNY 170bln. (Newswires)

PBoC set CNY mid-point at 6.6113 (Prev. 6.6105)

UK/EUROPE

UK BRC Retail Sales YY (Nov) 0.6% (Prev. -1.0%). (Newswires)

Downing Street sources insisted it wasn't just the DUP intervention that meant no deal, as citizens' rights and ECJ were still not finalised. Reports in the Times suggest that PM May believes she has four days to salvage a Brexit deal in the wake of yesterday’s DUP intervention. Separately, EU’s Tusk said the time for a Brexit deal is now getting very tight, but an agreement next week is still possible. (Newswires) This comes in the context of comments from EU's Juncker that it was not possible to reach a complete deal adding that there are still just two or tspanee issues and is ready to resume negotiations later this week.

FX

In FX markets, antipodeans stole the limelight in which NZD/USD briefly reclaimed the 0.6900 handle after RBNZ Acting Governor Spencer suggested an unwillingness for policy framework changes and noted some risk on the upside for inflation and interest rates. AUD refused to be outdone with the currency underpinned by better than expected Retail Sales and after an unsurprising RBA rate decision, in which some noted that the central bank omitted its reference for inflation to stay low for 'some time'. Other major currencies were relatively quiet which provided GBP/USD much-needed respite from the prior day’s swings where a divorce deal remained elusive after the DUP, which back PM May’s Conservative Party for a working majority in Parliament, refused to support plans to keep Northern Ireland aligned with EU laws.

RBA kept the Cash Rate at 1.50% as expected and reiterated it judged steady policy is consistent with growth and inflation targets. Furthermore, the central bank repeated that rising AUD would slow economy and inflation, while it also commented that forecast remains for inflation to increase gradually and that the outlook for non-mining business investment further improved. (Newswires)

Australian Retail Sales MM (Oct) 0.5% vs. Exp. 0.3% (Prev. 0.0%, Rev. 0.1%). (Newswires)

Australian Net Exports Contribution (Q3) 0.00% vs. Exp. 0.25% (Prev. 0.30%)

Australian Current Account Balance (Q3) -9.10B vs. Exp. -9.20B (Prev. -9.60B)

RBNZ Acting Governor Spencer said should be cautious on making any recommendations for changes to current policy framework and that there remains broad confidence in effectiveness of current framework. Spencer also commented that weak global inflation is assumed to persist in line with the forecasts of the international institutions, which now puts some risk on the upside for inflation and interest rates. (Newswires)

COMMODITIES

Commodities prices were lacklustre overnight in which WTI crude futures languished below USD 58/bbl following recent profit taking and broad declines across the energy complex. Elsewhere, gold and copper prices were similarly uneventful, with participants looking ahead to this week’s riskier events culminating with Friday’s US NFP jobs data.

Goldman Sachs raised its Brent and WTI spot forecasts to USD 62/bbl and USD 57.50/bbl respectively.

US

The US Treasury curve bear-flattened in Monday trade on light volume, as traders took encouragement by the progress on tax reform; there is also increased optimism that there will be a bill for the President to sign by the end of the year. Short-dated yields rose by about 3bps at settlement, while longer-dated yields only rose by about 1.6bps. The shape of the curve itself was little changed, with 2s10s and 2s30s narrowing by around 2bps, while 5s30s narrowed by circa 2.5bps. 10-Year T-Note Futures for March settle 5+ ticks lower at 124-08.

US House voted 222-192 for motion to go to conference with Senate on tax bill. (Newswires)