- Asian equities traded mostly lower despite Friday’s firmer close on Wall Street
- In FX, commodity-linked currencies were mildly pressured as WTI crude pulled back from USD 59/bbl, which also coincided with the broad China-led weakness
- Looking ahead, highlights include US New Home Sales
Asia stocks took a turn for the worse and failed to sustain the early momentum from last week’s Black Friday optimism in US, where the S&P 500 and Nasdaq posted fresh record levels. ASX 200 (+0.1%) was choppy after the 6,000 level provided resistance and Nikkei 225 (-0.3%) gave up opening gains and then some, as Japanese sentiment soured amid flows into JPY. Chinese markets were among the laggards in the region, with Hang Seng (-0.6%) and Shanghai Comp. (-0.9%) negative after a net-neutral PBoC liquidity operation in the backdrop of the recent bond market jitters, while Industrial Profits also slightly cooled. Finally, 10yr JGBs were lacklustre with prices below 151.00 and demand suppressed after a tepid BoJ Rinban announcement for only JPY 550bln in the belly to short-end.
Chinese Industrial Profits (Oct) Y/Y 25.1% (Prev. 27.7%). (Newswires)
PBoC injected CNY 70bln via 7-day reverse repos, CNY 60bln via 14-day reverse repos and CNY 10bln via 63-day reverse repos, for a total zero net daily liquidity injection. (Newswires)
PBoC set CNY mid-point at 6.5874 (Prev. 6.5810).
BoJ Board Member Suzuki said he is closely observing the side effects of monetary policy and that NIRP has a significantly large impact on earnings at financial institutions. Suzuki added he doesn’t not see a need for additional measures and commented that powerful easing must be maintained to reach target at early date, but that the BoJ could fine-tune policy prior to reaching the price goal. (Japan Times)
UK PM May said the atmosphere was very positive after meeting with EU’s Tusk on Friday and that ‘we are still progressing’ but issues still need to be resolved, while EU’s Tusk said that ‘sufficient progress’ in Brexit talks at the December Council meeting is possible but remains a “huge challenge” and said that December 4th is the absolute deadline for the UK to make additional efforts. (Newswires)
Ireland’s EU Commissioner commented that Dublin will “play tough to the end” regarding Brexit discussions and that they have always insisted there must not be hard border between Republic of Ireland and Northern Ireland, while UK Trade Minister Fox said Northern Ireland border cannot be settled until after an EU trade deal agreement. (Newswires)
German Chancellor Merkel is said to be under pressure from the conservative bloc to aim for a quick coalition agreement with the SPD without giving up too much ground on key matters such as immigration. (Newswires)
Ireland PM Varadkar stated that political matters need to be resolved by Tuesday or the country will go to an election and that an election hinges on Tuesday’s no-confidence motion, while he also commented that he hopes Deputy PM Fitzgerald does not resign. (Newswires)
The Catalan independence movement is split over how to move forward as opinion polls suggest the December regional elections are too close to call. (Newswires)
Commodity-linked currencies were mildly pressured as WTI crude pulled back from USD 59/bbl, which also coincided with the broad China-led weakness and saw AUD/USD briefly give up 0.7600 to the downside. Elsewhere, a deterioration in risk sentiment spurred flows into the safe-haven JPY, while USD/HKD slumped to below the 7.8000 amid higher money market rates in Hong Kong in which the 1-month Hibor gained to its highest since 2008. Finally, the crypto front also remained in the limelight with Bitcoin above USD 9500 after reports that South Korea’s 2nd largest bank was testing a bitcoin vault and wallet.
Qatar central bank’s Alkhater said that other Arab countries are attempting to undermine QAR in offshore FX markets. (Newswires)
Commodities were mixed in which WTI crude futures marginally pulled back from the USD 59.00/bbl, as prices took a breather from the recent gains ahead of the OPEC/Non-OPEC producer meeting where an output deal extension is anticipated. Conversely, natural gas outperformed and gapped higher at the open on expectations of colder weather, while safe-haven gold was slightly underpinned and profit taking seen in copper with the dampened risk appetite the main influence on price action.
Saudi Arabia and Russia reportedly agreed that extension of output cuts should be announced at the November 30th meeting, according to reports citing sources on Friday. There were also separate comments from the UAE Energy Minister who is said to be optimistic OPEC is to extend the output cut deal. (Newswires/Twitter)
There were reports on Friday that North Korea’s nuclear force is almost at stage of completion. (Newswires) In related news, North Korea said that its nuclear program is only directed at US and not other countries. (Rodong Sinmun) Furthermore, North Korea was reportedly lobbying China to relax sanctions. (Nikkei)
Israel threatened to destroy all Iranian facilities within 40km proximity of Golan Heights in Syria. (Newswires)
Trading was thin in Treasuries and ranges were tight on Friday, with yields higher by between 1.5bps and 2.5bps across the curve. It left some of the major parts of the curve slightly steeper, though there was nothing to really write home about. US 10-Year T-Note futures Settle 4+ ticks lower at 124-31.
US President Trump is to meet with members of the Senate Finance Committee today, according to the White House. (Newswires)
US President Trump said it is a big week for tax cuts and that the tax bill is getting better and better, while he added that the Senate GOP will hopefully come through on measures. (Newswires)
US GOP Senator Daines reportedly is withholding support on tax bill. (Axios)
Republican deficit hawks reportedly remain concerned that although the Senate tax bill proposes to wind back tax cuts after 2025, as there is an expectation for a future Congress to simply extend them which would raise the debt level further. (Newswires)