• European equities trade lacklustre amid a lack of fresh fundamental catalysts in holiday-thinned trade
• US House voted to impeach President Trump under Article 1 (Abuse of Power) and Article 2 (Obstruction of Congress); as expected
• BoJ kept monetary policy settings were left unchanged, Riksbank hiked, Norges stood pat – all as expected
• Bunds, Gilts and US Treasuries have all extended losses and remain under pressure
• Looking ahead, highlights include BoE policy announcement, US Philadelphia Fed, Weekly Jobs, Existing Home Sales, ECB’s Lane

TRADE

China announces new tariffs exclusions for some US products, exemptions apply to six new US products - effective from Dec 26th 2019 to Dec 25th 2020, according to Xinhua. (Xinhua)

China MOFCOM says US and Chinese trade teams are maintaining close communication regarding the signing of the Phase One deal. China Global Times highlights that MOFCOM refrained from confirming if the Phase One trade deal will be signed in January as suggested by some US officials. (Twitter/Newswires)

US President Trump said we made a great deal with China which gives us a lot of currency to do the phase 2 deal. There were also separate comments from NEC Director Kudlow who suggested the US will monitor China compliance over 6 to 9 months, while Kudlow reportedly stated that Chinese President Xi told Henry Kissinger he would rather deal with President Trump who will focus more on trade rather than Democrats who won't talk about trade issues but instead will focus on human rights and other things. (Newswires/CNBC/Twitter)

ASIA-PAC

Asian equity markets were lacklustre following an indecisive lead from US where the major indices finished flat due to a lack of drivers amid the pre-holiday lull. ASX 200 (-0.3%) was subdued by weakness in energy and the top-weighted financials sector, with early gains in the index wiped out after better than expected jobs data dampened February rate cut hopes, while Nikkei 225 (-0.3%) continued its marginal pullback from the 24k level amid a choppy currency and after a lack of fireworks at the BoJ policy meeting. Hang Seng (-0.3%) and Shanghai Comp. (Unch) traded indecisively and failed to take advantage of another substantial liquidity effort by the PBoC as well as expectations it may fine tune measures and use targeted stimulus next year, with some reports suggesting China’s private enterprises are facing the worst funding squeeze in more than two decades. Finally, 10yr JGBs were lower and prices eyed a test on the 152.00 level to the downside with demand subdued alongside an uneventful BoJ policy announcement where the central bank maintained all policy settings as expected and reiterated its forward guidance that rates will remain at current or lower levels for as long as needed.

PBoC injected CNY 30bln via 7-day reverse repos and CNY 250bln via 14-day reverse repos. (Newswires) PBoC set USD/CNY reference rate at 7.0025 vs. Exp. 6.9987 (Prev. 6.9969)

US  

US House voted (230 vs. 197) to impeach President Trump under Article 1 Abuse of Power and voted (229 vs. 198) to impeach President Trump under Article 2 Obstruction of Congress as expected. The White House released a statement shortly after in which it noted that President Trump is prepared for the next steps and is confident he will be fully exonerated at the Senate trial. (Newswires)

CENTRAL BANKS

BoJ kept monetary policy settings unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0%, while it maintained forward guidance that rates will remain at current or lower levels for as long as needed to guard against risk momentum for hitting price target may be lost. BoJ repeated its assessment that Japan's economy is expanding moderately as a trend but cut the assessment on industrial production in which it states industrial output is falling due to impact of natural disasters. BoJ later announced plans decided in April to lend ETFs to markets under a special facility aimed at improving liquidity in the ETF market, while it will amend the scheme aimed at encouraging banks to increase lending and will allow borrowers to roll over lending under certain conditions. (Newswires)

BoJ Governor Kuroda said overseas risks remain at high levels and warrants attention, appropriate to guide policy with easing bias, BoJ's NIRP is appropriate, deepening negative rates would an option but cannot cut indefinitely as it would affect banks. (Newswires)

Riksbank hiked its Repo Rate by 25bps to 0.00%, as expected. Forecast for repo rate is unchanged, repo rate is expected to remain at 0% in the coming years. Deputy governors Breman and Jansson entered reservations against the rate hike. Improved prospects would justify a higher interest rate. But if the economy were instead to develop more weakly than forecast, the Executive Board could both cut the repo rate and take other measures to make monetary policy more expansionary. (Newswires)

Norges Bank left its Key Policy Rate unchanged at 1.50%, as expected in a unanimous decision. Norges Bank left its rate path unchanged for 2020 and 2021 but upgraded 2022 to 1.60% from 1.50%. Norges noted that monetary stance has become less expansionary and a weaker-than-projected krone implies in isolation a higher policy rate path, whilst on the other hand, the upturn in the Norwegian economy appears to be a little more moderate than previously assumed. (Newswires)

UK/EU

SGH Macro have stated that from what they understand, the EU Commission will formally restart negotiations with the UK on 1st February and believes the Commission “already has in its desk drawers a draft trade agreement for Whitehall to weigh and potentially adopt with limited changes, and which could be moved fairly quickly”. (SGH Macro)

UK State Opening of Parliament will begin today with a speech at 11:40GMT, read by the Queen but written by the Government which will outline the Conservative’s agenda for the year. (BBC)

SNP Leader Sturgeon will publish a ‘detailed case’ for a second independence referendum, and will ask for a power transfer to ensure any vote is legal. UK Government are opposed to second referendum. (BBC)

UK PM Johnson is said to be planning to reduce rates for small businesses. (Daily Mail)

UK Retail Sales MM (Nov) -0.6% vs. Exp. 0.3% (Prev. -0.1%)

German debt agency says Federal government plans to issue EUR 210bln of debt in 2020 ex-linkers. (Newswires) 

EQUITIES

A mostly uninspiring session for European bourses thus far [Euro Stoxx 50 -0.1%] – following on from a similarly lacklustre Asia-Pac session. Sectors are flat/mixed with defensives modestly firmer vs. their cyclical peers, with the exception of energy names who remain buoyed by yesterday’s advances in the complex. Individual stocks stories remain in focus given the lack of fresh macro catalysts. The IT sector failed to capitalise on optimistic earnings from Micron (+4.1% pre-market) late doors yesterday with STMicroelectronics (+0.3%), Micro Focus (-0.1%) and Dialog Semiconductor (-0.1%) all relatively unfazed. Elsewhere, NMC Health (-9.8%) has wiped out yesterday’s gains as the negative note from activist short-seller Muddy Waters continues to cause concern around the Co’s balance sheet. Swatch (-1.2%) and Richemont (-1.4%) are weighed on by a 3.5% YY decline in Swiss watch exports. In terms of other individual movers, Hugo Boss (-2.4%), Capita (-4.2%), TUI (-1.9%) trade near the foot of the Stoxx 600 amid negative broker action.

FX

AUD/NOK - The Aussie and Norwegian Krona are vying for pole position on the G10 grid following better than expected jobs data overnight and a final 2019 Norges Bank policy meeting that was fractionally less dovish than anticipated. Aud/Usd is back within striking distance of 0.6900, albeit off highs and hovering close to a decent option expiry at 0.6875 (1.1 bn), while Eur/Nok has maintained momentum under the psychological 10.0000 level and got close to support from early October (circa 9.9460) as the CB tweaked is rate path to flag 10 bp worth of tightening in 2022.

GBP/EUR - The next best majors or beneficiaries of a flagging Dollar, as the DXY drifts down from a 97.421 high to just shy of 97.250, with Cable able to reclaim 1.3100+ status even though UK retail sales fell far short of consensus and the single currency pivots 1.1125 amidst firmer Eurozone bond yields alongside another rise in market-based inflation expectations. Back to the Pound, perhaps some underlying impetus from reports that the EU already has a trade proposal in hand for the UK to consider a day after Brexit on January 31 next year, but more immediately CBI trades loom before the BoE at high noon with the focus on any further dovish dissent or a more united MPC in wake of the election.

JPY/CAD/CHF/NZD - All narrowly mixed vs the Greenback, as Usd/Jpy continues meander above 109.50 and the Yen gleans little fresh direction from the BoJ keeping policy unchanged and an easing bias, while Usd/Cad hovers in a tight band on the 1.3100 handle ahead of Canadian AWE and wholesale trade data. Elsewhere, Usd/Chf is still straddling 0.9800 with the Franc not really responding to a wider Swiss trade surplus as key watch exports fell, and similarly Nzd/Usd failed to get any lasting or clear impetus from NZ GDP data for Q3 as firmer than forecast q/q growth was offset by a y/y miss sharp downgrade to the former for the previous quarter.

SEK - The Swedish Crown has been choppy between 10.4450-10.4805 parameters in wake of the Riksbank’s last hurrah for the year as a clearly signalled 25 bp repo rate hike was duly delivered, but not without 2 Board members voting against the move and with the accompanying statement caveated by the pledge to ease if the economy does not meet target.

EM - Yet more pain for the Turkish Lira, as Usd/Try extended further to the upside through mid-October peaks and the high for that month overall before fading a fraction below Fib resistance awaiting CBRT minutes and unfolding Turkish-US developments on the diplomatic front.

Australian Employment Change (Nov) 39.9k vs. Exp. 14.0k (Prev. -19.0k, Rev. -24.8k). (Newswires) Australian Unemployment Rate (Nov) 5.2% vs. Exp. 5.3% (Prev. 5.3%) Australian Full Time Employment Change (Nov) 4.2k (Prev. -10.3k, Rev. -10.5k) Australian Part Time Employment Change (Nov) 35.7k (Prev. -8.7k, Rev. -14.3k)

New Zealand GDP (Q3) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.5%, Rev. 0.1%). (Newswires) New Zealand GDP (Q3) Y/Y 2.3% vs. Exp. 2.4% (Prev. 2.1%)

FIXED INCOME

Bunds, Gilts and US Treasuries have all extended losses and are still under pressure as the former dangles just above 171.00, UK equivalent sits within a few ticks of 131.30 and latter crosses 128-00.  Seasonal trading conditions are exacerbating price action, though that applies both ways and the current tone/trend is bearish with deeper and potentially more pivotal downside chart targets in close proximity. Hence, the path of least resistance could literally be lower barring something major on the fundamental side that may change the technical landscape, like Thursday’s run of US data or ECB’s Lane.

COMMODITIES 

WTI and Brent futures remain flat within relatively narrow intraday parameters following the EIA-led upside seen across the complex yesterday. The former resides just under the USD 61/bbl mark, having traded on either side of its 100 WMA (USD 60.77/bbl) throughout APAC hours, while its Brent counterpart remains afloat above the USD 66/bbl mark after testing, but failing to breach support at the round figure overnight. Crude markets have seen little by way of fresh fundamental catalysts in recent days heading into the holiday period, albeit traders will be on the lookout for more “meat on the bones” regarding the China Phase One deal, given the lack of details post-announcement. That said, the thinned market conditions may prompt volatility in energy prices even with a lack of news-flow. Elsewhere, spot gold trades with mild losses and currently resides below the USD 1475/oz mark having dipping below its 50 DMA USD 1477.20/oz with technicians eyeing USD 1470-71/oz for potential support ahead if the 21 DMA at USD 1467.20/oz. Copper prices remain unchanged intraday below the USD 2.8/lb level given the tentative tone around the marketplace. Finally, Shanghai aluminium prices rose to their highest level in over three months and notched a third straight session of gains amid depleting stocks of the metal in Chinese warehouses.