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The British pound has recovered the 1.3100 handle against the U.S dollar, hitting 1.3126, as the new trading week gets underway. The British pound is attracting early buying interest, ahead of speech from UK Prime Minister Theresa May, who is scheduled to address the conference of the Confederation of British Industries later today. The GBPUSD pair currently trades around the 1.3110 level, as traders await May's speech and the next directional move in the U.S dollar index.

The GBPUSD pair remains bearish while trading beneath the 1.3130 technical level. Further declines should be expected towards the 1.3070 and 1.3048 levels.

Should price action move above the 1.3130 level for a sustained period, further upside towards 1.3160 and 1.3259 remains possible.

The Reserve Bank of Australia is due to announce its latest policy decision on Tuesday amid a mixed outlook for the economy. Australia's central bank is almost certain to hold rates unchanged at 1.5% following disappointing inflation and retail sales numbers for the third quarter.

Rising household debt has been holding back consumer spending, with anaemic wage growth further restraining households' spending power. Like in most other advanced economies, a tightening labour market in Australia has done little in lifting wages, despite impressive increases in full-time jobs in recent months. Inflation meanwhile fell further below the RBA's 2-3% target band in the third quarter after briefly hitting the target during the first three months of the year.

The subdued inflation outlook has kept rate cut hopes alive, though the majority view is that the RBA will stay on hold until late 2018, when the first rate hike is expected to come. Given the improving global growth outlook and steady Chinese demand for raw materials, the RBA is unlikely to make an impulse response to any weak data releases, especially as construction activity and exports performance remain strong.

The RBA's latest quarterly outlook report - the November Statement on Monetary Policy - might prove more insightful about future policy than Tuesday's policy announcement. The report, due on Friday, will likely show broadly unchanged forecasts for growth and inflation. But the Australian dollar could be susceptible to any notable changes to the inflation picture, especially if it points to a possible delay to the timing of the first rate hike.

The aussie has turned bearish in the medium term after retreating sharply (about 6%) from its September two-year high of $0.8124, and falling below its moving averages. The downtrend stalled after finding support around the $0.7630 area. If the aussie manages to avoid a breach of this key support after next week's events, the currency might start to see a shift in sentiment to a more neutral one.

US futures are trading relatively flat ahead of the open on Monday, struggling to gather any real momentum after having recorded all-time high closes again on Friday on the back of decent jobs data.

The jobs data wrapped up a very busy week for financial markets that included a Federal Reserve meeting, new Fed Chair announcement, tax reform and a large batch of earnings reports. With the week ahead looking much quieter, investors will be left to reflect on the events of the last week and determine what it means for markets over the coming months, with a rate hike in December still the base case scenario in most people’s view.

The third quarter earnings season has given investors plenty of reason for optimism and with the global economy as a whole looking more healthy than it has in years, there’s little reason to be pessimistic right now. Of course there is still plenty of risks bubbling away underneath the surface which is likely to leave markets vulnerable at times, but investors seem more than willing to shrug this off for now.

The highlight of the European session so far has been the services and composite PMI surveys, which were broadly mixed compared to expectations but continue to show progress being made. The recovery has been very slow compared to elsewhere but we’re finally seeing it gather momentum which is allowing the ECB to take its foot off the gas.

We did see a significant improvement in euro area investor sentiment in November, more so than was expected, with confidence rising to its highest since July 2007. Overall, the market reaction to the data has been rather muted this morning, with equity markets still trading in the red and the euro pretty much unchanged against the dollar, albeit with a small bump higher around the Sentix release.

From a US perspective, the week is looking rather quiet both in terms of economic data and earnings, with the reporting season now drawing to a close. The most notable events this week will likely be Donald Trumps Asia visit and appearances from a number of Federal Reserve officials. The first of these today will be William Dudley who is believed to be preparing to announce his retirement, if speculation is to be believed. This will create another spot on the board of Governors, enabling Trump to further put his mark on the central bank.

Monday November 6: Five things the markets are talking about

Ahead of a light week for economic data releases, investor focus has turned to Asia and the U.S. president's visit to the region.

Trump has already brought up trade grievances about both China and Japan and has warned the region nations against challenging the U.S. After Japan, Trump flies to South Korea and China later in the week.

Two more central banks are meeting this coming week – the Reserve Bank of Australia (Nov. 6 10:30 pm EDT) and Reserve Bank of New Zealand (Nov. 8 3 pm EDT). Neither is expected to change policy.

In Europe, composite PMI's will be posted in Europe, beginning with today's German September manufacturing orders and industrial production. Industrial production for France, Italy and the U.K are also expected this week.

In Asia, China begins to release its latest monthly data for merchandise trade and consumer and producer price indexes for October.

Elsewhere, Brexit talks will resume amid a lack of progress in talks over the U.K.'s exit from the E.U.

1. Equities mixed results

In Japan, the Nikkei share average ended flat overnight as weakness in financials was offset by gains in retailing. The index ended almost unchanged after printing its highest intraday level in 21-years. Last week, the Nikkei rallied +2.4%, its eighth consecutive weekly gain. That was its longest winning streak since PM Abe's Abenomics reforms started five years ago. The broader Topix edged down -0.1%.

Down-under, Australia's S&P/ASX 200 Index dipped -0.2% and South Korea's Kospi index lost -0.9%.

In Hong Kong, stocks pared sharp losses overnight, as mainland investors sought bargains in blue chip stocks. The benchmark Hang Seng index tumbled as much as -1.6%, but recouped most of its losses by market close, ending down -0.6%. The China Enterprises Index lost -0.7%.

Note: The weakness was the result of profit taking triggered by negative news flows over the weekend – including a corruption crackdown in Saudi Arabia and a call for tougher regulation in China.

In China, stocks ended higher, supported by gains in consumer and healthcare firms. The blue-chip CSI300 index rose +0.7%, while the Shanghai Composite Index closed up +0.5%.

In Europe, regional bourses trade slightly lower across the board consolidating recent gains, as the Spanish Ibex once again under performs.

U.S stocks are set to open in the black (+0.2%).

Indices: Stoxx600 flat at 395.9 FTSE -0.1% at 7549, DAX -0.2 at 13453, CAC-40 -0.2 at 5507, IBEX-35 -0.3% at 10324, FTSE MIB -0.2% at 22963, SMI +0.1% at 9291, S&P 500 Futures +0.1%

2. Oil hits highest levels in two-years, amid tightening markets, gold lower

Oil prices hit their highest levels since July 2015 overnight as markets tightened, while Saudi Arabia's crown prince tightened his power over the weekend through an anti-corruption crackdown that included high-profile arrests.

This morning, Brent futures traded as high as +$62.90 per barrel, that is over +40% higher from last June's 2017 lows. U.S West Texas Intermediate (WTI) crude has rallied above +$56 per barrel. It's one-third higher than its 2017 lows.

Saudi Crown Prince Mohammed bin Salman has tightened his grip on power through an anti-corruption purge by arresting royals, ministers and investors. In the short term, no immediate change is expected in the oil policy of Saudi Arabia, which is the world's biggest exporter of crude oil. The Prince seems strongly committed to anchoring the OPEC agreement deep into 2018.

Elsewhere, there are ongoing signs of tightening market conditions. In the U.S, energy companies cut eight oilrigs last week, to 729, in the biggest reduction since May 2016. While there seems to be growing consensus amongst OPEC members to extend their pledge to hold back about -1.8m bpd beyond next March's deadline.

Ahead of the U.S open, gold prices trade atop of their one-week low hit in last Friday's session, as the dollar firmed after largely upbeat U.S economic data reinforced the prospects of another rate hike by the Fed in December. Spot gold is down -0.1% at +$1,268.61 per ounce.

3. Sovereign yields fall

It's rumoured that Federal Reserve Bank of New York President William Dudley is close to announcing his retirement. If so, his early departure would mean the top three positions at the Fed changing over within a relatively short period.

President Trump announced last week that Fed Governor Jerome Powell would be nominated to replace Janet Yellen when her term expires in February.

Note: Vice-Chairman Stanley Fischer retired in mid-October.

Spreads for Saudi Arabia's international bonds widened slightly in early trade in response to the government's anti-corruption crackdown, which has detained dozens of people from the kingdom's political and business elites.

The yield on U.S 10-years has fallen-1 bps to +2.32%, the lowest in more than two weeks. In Germany, the 10-year Bund yield fell -2 bps to +0.34%, the lowest in eight weeks, while in the U.K, the 10-year Gilt yield declined – 2bps to +1.245%, the lowest in more than seven weeks.

4. Tight FX ranges on rate differentials

The USD is holding onto its recent gains against the major pairs as the markets believe, that despite the softer-than-expected jobs data on Friday, there is little change in market expectations for the Fed to raise interest rates next month for a third time this year.

The EUR (€1.1607) is trading flat after having dropped to a one-week low at €1.1596, and against the pound at €0.8875. USD/JPY (¥114.02) managed to print an eight-month high just under ¥114.75 on news of Saudi Arabia anti-corruption crackdown.

Elsewhere this morning, Turkey's central bank (CBRT) took steps to support price and financial stability, after TRY's ($3.8561 -0.53%) recent slump. In a statement on its website, the CBRT, said it has tweaked its reserve option mechanism, lowering the upper limit for the FX maintenance facility to +55% from +60% – their aim is to draw liquidity from the market and support the currency.

5. German Manufacturing Orders Rose in September

German data this morning points to a resilient growth pace in their economy. Manufacturing new orders increased by +1.0% on the month in September, beating market expectations of a -1.3% decline.

Digging deeper, orders in August were also revised upward to show growth of +4.1% after an originally reported +3.6% rise. Foreign orders rose +1.7%, while domestic orders slid +0.1%. Foreign orders from within the eurozone grew by +6.3%.

Other Euro data showed that PMI services data mostly came in below expectations – miss: Italy, France, Germany and the beat were the Eurozone.

Spot Gold price bounced on Monday after downside attempts stalled ahead of last Friday's low at $1265.

Strong supports lay at $1260/$1263 zone (06 Oct low/200SMA/27 Oct n/t congestion low) which keep the downside protected for now, however, overall bearish structure keeps the downside at risk.

The notion is supported by bearish sentiment as recent strong economic data from the US maintain expectations for Fed's rate hike in December, which keeps the yellow metal price under pressure.

Recovery rally faces solid barriers from daily Tenkan-sen ($1273) and Kijun-sen ($1283) which should ideally limit upside attempts.

However, daily cloud is twisting this week and may attract for further recovery.

Extended corrective rallies are expected to stay under psychological $1300 barrier to keep bears in play, for renewed attempt at $1260 pivot, loss of which would trigger fresh bearish extension towards $1240 (50% of $1122/$1357 rally).

Res: 1273, 1280, 1283, 1289
Sup: 1265, 1263, 1260, 1251

Market movers today

We have no global tier-1 data set for release today. The euro area is due to release Sentix confidence, where we look for a small rise from an already high level.

Some central bank speakers will be out though. Tonight, the Fed's Vice Chairman Bill Dudley (voter, neut ral) is due to speak. There has been speculation he might announce his own retirement , which would add to the turnover of FOMC officials coming up and make the future Fed policy stance more uncertain. Also, the ECB's Peter Praet is due to speak today.

Overnight Japanese wage data and the rate decision from the Reserve Bank of Austral ia are due, but it will generally be a quiet week with no market movers in the euro area or the US. China is due to publish CPI/PPI and FX reserves and Brexit negotiations resume on Thursday.

In the Scandi region today, Swedish data for industrial production and orders will be released. For the rest of the week in Scandi, focus turns to the Riksbank minutes and Norwegian inflation. See more on Scandie markets on page 2.

Selected market news

Equities sold off and Asia-Pacific currencies generally weakened vis-à-vis USD after decent US data on Friday and as US President Trump on the first stop of his Asia trip in Tokyo complained regarding the US-Japanese trade relation, calling not least for greater Japanese investment in the US. Asian stock markets were also weighed upon by the Chinese central bank issuing concerns over excessive financial leverage in the country. USD/JPY rose to March highs following comments by the Bank of Japan's Haruhiko Kuroda, stressing the need to overshoot the inflation target. Trump's 11-day trip of Asia, visiting five nations, will take him to South Korea on Tuesday-Wednesday, which is most likely going to put tense relations with North-Korea at the top of the agenda.

Friday's US data releases on th e wh ole came out on the strong side. The US job report showed some payback in October after the (at least partly) hurricane-related drop in job growth in September with non-farm payrolls rising by some 260,000. Average hourly earnings were weak at 0.0% m/m, but a key reason for this was that low-paid Americans, deterred from working due to hurricanes, returned to their jobs last month. Separately, the US ISM nonmanufacturing came in at 60.1, the highest level since 2005. The US e conomic data surprise index has notably seen a turn for the better recently and we expect this to continue into 2018, as our quantitative business -cycle framework continues to point to a US cyclical rebound over the next 3-6M. Overall, this supports the Fed's case for a rate hike in December, and market pricing for a 25bp hike at that meeting was little changed, running just above 90%.

A further drop in the US rigcount and a consolidation of the powers of the Saudi Crown Prince Mohammed bin Salman over the weekend – and hence his call for OPEC output curbs to be extended at the upcoming meeting of the cartel – sent Brent crude to levels not seen since mid-2015, now trading above USD62/bbl.

Notes/Observations

PMI Services data mostly comes in below expectations (Miss: Italy, France, Germany; Beat: Euro Zone)

Euro Zone Sentix Confidence Index at fresh decade high

Overnight

Asia:

Bank of Japan (BOJ) Gov Kuroda reiterated BOJ to continue with powerful easing; Price moves weak compared with improvement in the economy. Corporate price setting stance was key to BOJ outlook. Expected companies' stance on prices and wages to become more bullish

Bank of Japan (BOJ) Sept 20-21st Policy Meeting Minutes (2 meetings ago) noted that momentum towards price goal was being maintained. Discussed market participants concerns about YCC; most members shared view that BoJ should stick with current policy

During President Trump's visit to the country, Japan to tell US it will strengthen sanctions against North Korea

Europe:

ECB's Coeure (France) reiterated General Council view that exchange rate is not an ECB policy targe

Eurogroup Chief Dijsselbloem (outgoing): Will select the next head at the Dec meeting

ECB’s Smets (Belgium): To take some time until accelerating growth leads to wage pressure and inflation (in-line with general Council view)

BOE Gov Carney reiterated view that recent BoE rate hike is a modest adjustment. Possible that in the event of a bad Brexit deal, the BOE would not be able to cut interest rates in future because of that inflationary pressures

Italy President Mattarella could dissolve Parliament before end of 2017 in order to prepare for possible elections next March

Former Catalan President Puigdemont said to be released from custody with conditions. Puigdemont and four of his ministers were released by a judge in Belgium and the individuals are said to have been ordered to remain in Belgium at their given addresses. extradition is expected in 15 days

Americas:

NY Fed President Dudley (FOMC voter) to retire before term expires in Jan 2019; could leave as soon as the Spring of 2018

Treasury Sec Mnuchin reiterated goal to get tax bill to President Trump in 2017

Energy:

Saudi Arabia’s Crown Prince ordered the arrest of individuals including members of the royal family, ministers and investors. Eleven princes and four ministers were said to have been among those who were detained, along with businessman Alwaleed bin Talal.

Economic Data

(DE) Germany Sept Factory Orders M/M: +1.0% v -1.1%e; Y/Y: 9.5% v 7.1%e

(BR) Brazil Oct FIPE CPI (Sao Paulo) M/M: 0.3% v 0.3%e

(ES) Spain Oct Services PMI: 54.6 v 55.6e (48th month of expansion), Composite PMI: 55.1 v 54.6e

(CH) Swiss Oct CPI M/M: 0.1% v 0.1%e; Y/Y: 0.7% v 0.7%e

(CH) Swiss Oct CPI EU Harmonized M/M: 0.1% v 0.2% prior; Y/Y: 0.8% v 0.8% prior

(SE) Sweden Sept Industrial Production M/M: 2.2% v 2.0%e; Y/Y:4.5 % v 4.0%e

(IT) Italy Oct Services PMI: 52.1 v 52.9e (17th month of expansion but lowest since Oct 2016), Composite PMI:52.9 v 54.3e

(FR) France Oct Final Services PMI: 57.3 v 57.4e (confirmed 16th month of expansion and highest since March), Composite PMI: 57,4 v 57.5e

(DE) Germany Oct Final Services PMI: 54.7 v 55.2e (confirmed 52nd month of expansion and highest since Feb), Composite PMI: 56.6 v 56.9e

(EU) Euro Zone Oct Final Services PMI: 55.0 v 54.9e (confirmed 52nd month of expansion), Composite PMI: 56.0 v 55.9e

(EU) Euro Zone Sept PPI M/M: 0.6% v 0.4%e; Y/Y: 2.9% v 2.7%e

Fixed Income Issuance:

(NO) Norway sold NOK3.0B vs. NOK3.0B in 3-month Bills; Avg Yield: 0.43% v 0.38% prior; Bid-to-cover: 2.43x v 3.13x prior

Equities

Indices [Stoxx600 flat at 395.9 FTSE -0.1% at 7549, DAX -0.2 at 13453, CAC-40 -0.2 at 5507, IBEX-35 -0.3% at 10324, FTSE MIB -0.2% at 22963, SMI +0.1% at 9291, S&P 500 Futures +0.1%]

Market Focal Points/Key Themes:

European Indices trade slightly lower across the board consolidating recent gains, as the Spanish Ibex once again under performs.

Deutsche Telekom trades over 3% lower after majority owned T-Mobile ended merger talks with Sprint, while on the earnings front Vopak in the Netherlands reported weak results, while Post NL shares trade higher after Q3 results and affirmed outlook. Elsewhere Aldermore trades higher after the board approved the takeover approach from FirstRand, while in the healthcare space UCB trades higher after the FDA approves label extension for brivaracetam.

Looking ahead notable earners include Cardinal Health and Sysco.

Consumer discretionary [WIZZ.UK] +1.3% (Oct metric)]

Industrials: [Post NL [PNL.NL] +4.6% (Earnings)]

Financials: [Aldermore [ALD.DE] +2.4% (Board approves takeover by FirstRand for 313p/shr), Carillion [CLLN.UK] +2.2% (Contract win)]

Telecom: [Deutsche Telekom [DTE.DE] -3.1% (T-Mobile and Sprint end merger talks)]

Healthcare: [UCB [UCB.BE] +1.8% (FDA approves label extension for UCB's brivaracetam for the treatment of partial onset seizures in pediatric epileptic patients)]

Real Estate: [Vopak [VPK.NL] -5.1% (Earnings)]

Speakers

ECB's Praet (Belgium, chief economist) reiterated that substantial amount of accommodation is needed (in-line with General Council). Extension of QE program was justified by the continuing need for substantial monetary policy support

PM May: Pleased there has been progress on post-Brexit citizens right

Portugal Econ Min Cabral: Growth at 3.0% was sustainable

Japan Dep Chief Cabinet Sec Nishimura: Trump and Abe did not discuss any bilateral Free tared Agreement (FTA)

Currencies

USD was holding onto recent gains against the major pairs as markets believed that despite the softer-0than-expoecte jobs data on Friday there was little change in market expectations for the Fed to raise interest rates in December for a third time this year

USD/JPY pair hit 8-month highs just under 114.75

Fixed Income

Bund futures trade at 163.11 up 32 ticks, as the ECB expected to continue to front-load purchases, with focus on the latest monthly PSPP release which will include redemption data. Support lies at 162.00, followed by 161.50. Resistance stands initially at 163.51, followed by 164.25.

Gilt futures trade at 125.25 up 18 ticks and still near the October high. Continued upside eyeing 125.75 then 126.47. Downside targets include 124.90 then 124.24.

Monday’s liquidity report showed Friday’s excess liquidity rose to €1.860T from €1.849T and use of the marginal lending facility fell to €168M from €188M

Corporate issuance saw $26.8B sold last week in the primary market

Looking Ahead

05:25 (BR) Brazil Central Bank Weekly Economists Survey

05:30 (NL) Netherlands Debt Agency (DSTA) to sell €1.0-2.0B in 3-month bills

06:00 (IE) Ireland Sept Industrial Production M/M: No est v 1.4% prior; Y/Y: No est v 1.5% prior

06:00 (IN) India announces details of upcoming bond sale (held on Fridays)

06:30 (CL) Chile Sept Economic Activity M/M: -0.1%e v +0.3% prior; Y/Y: 1.6%e v 2.4% prior

06:30 (TR) Turkey Oct Effective Exchange Rate(REER): No est v 90.3 prior

06:45 (US) Daily Libor Fixing

07:00 (BR) Brazil Oct PMI Services: No est v 50.7 prior; PMI Composite: No est v 51.1 prior

08:05 (UK) Baltic Dry Bulk Index

08:50 (FR) France Debt Agency (AFT) to sell combined €4.2-5.4B in 3-month, 6-month and 12-month Bills

09:00 (MX) Mexico Oct Consumer Confidence: 88.6e v 89.2 prior

09:30 (EU) ECB announces Covered-Bond Purchases

09:35 (EU) ECB calls for bids in 7-Day Main Refinancing Tender

10:00 (CA) Canada Oct Ivey Purchasing Managers Index (Seasonally Adj): No est v 59.6 prior

11:30 (US) Treasuries to sell 3-Month and 6-Month Bills

12:00 (US) Fed's Dudley (dove, FOMC voter) speaks to The Economic Club of New York

16:00 (US) Weekly Crop Progress Report

Crude oil has surged and set up a new resistance at 56.28 (06/11/2017 high). The commodity is trading at 1-year high. Expected to show further shot-term bearish consolidation. Indeed the technical structure has a history of decent consolidation phase.

In the long-term, crude oil has recovered after its sharp decline last year. However, we consider that further weakness are very likely. For the time being the pair lies in an upside momentum. Strong support lies at 35.24 (05/04/2016) while resistance can now be found at 55.24 (03/01/2017 high).

Silver is back below 17. Hourly support can be found at 16.60 (27/10/2017 low). Hourly resistance is given at 17.46 (13/10/2017 high). Additional support can be found at 16.13 (06/10/2017 low).

In the long-term, the trend is rater negative. Further downsides are very likely. Resistance is located at 25.11 (28/08/2013 high). Strong support can be found at 11.75 (20/04/2009).

Gold remains weak. The technical structure confirms a longer consolidation phase. Support lies at a distance at 1251 (08/08/2017 high). Resistance is now located at 1288 (20/10/2017).

In the long-term, the technical structure suggests that there is a growing upside momentum. A break of 1392 (17/03/2014) is necessary ton confirm it, A major support can be found at 1045 (05/02/2010 low).