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General Trend:

• Japanese equities shake-off early catch-up selling after recent holiday
• Electric Appliance index leads gains in Japan
• Tech shares rise in China and Hong Kong
• Australia’s energy index outperforms
• Pound (GBP) gains ahead of expected Brexit vote; PM May said to consider holding second vote if first fails
• Oil Futures and Commodity Currencies track gains in the equity markets
• China PBoC, MoF and NDRC all affirms commitment to boost domestic economy in 2019, affirms policy and monetary stance but hints at willingness to change if needed
• US and North Korea may hold high level talks this week
• US government shutdown continues; Trump said to seek to win over moderate Democrats from red districts
• Taiwan chipmaker Nanya Technology expected to report results later today

Headlines/Economic Data

Japan

• Nikkei 225 opened -0.5%
• 7201.JP CEO Saikawa: choosing a new chairman is not urgent, will wait until the necessary conditions are in place for a consensus on the board; alliance with Renault is crucial if not important, and that the alliance will continue, will discuss once things have calmed down - French press
• 7270.JP Expected to lower Japan production in 2019 by 2% to 650K units, raise overseas production by 6% to 380K units; total output seen +1% in 2019 - financial press
• (JP) Japan Dec Bankruptcies y/y: -10.6% v +6.1% prior

Korea

• Kospi opened +0.2%
• (KR) South Korea Dec Export Price Index M/M: -2.0% 2.7% prior; Y/Y: -0.6% v 0.0% prior; Import Price Index M/M: -3.4% v -4.5% prior; Y/Y: 3.2% v 6.1% prior (8-month low)
• 005930.KR Exec Lee: See chip demand rising in 2019 - Korean press
• (KR) US Sec of State Pompeo may hold talks this week with North Korea - South Korean Press
• 042670.KR According to industry experts in 2018 sold 15,630 excavators to China, +44% y/y - Yonhap
• (KR) US President Trump said to have sent letter to North Korea leader Kim, expected to be hand delivered to Kim over the weekend - CNN

China/Hong Kong

• Hang Seng opened +0.8%, Shanghai Composite +0.1%
• (CN) China National Development and Reform Commission (NDRC): China to strengthen counter cyclical adjustments in macroeconomic policy, to keep economic operations within reasonable range; Affirms to implement proactive fiscal policy and prudent monetary policy
• (CN) China PBoC Vice Gov Zhu: PBOC should improve existing monetary policy measures (when asked if China should cut benchmark rates)
• (CN) China Premier Li: Facing increasing downward pressure for economic growth in 2019; will not resort to 'flood-like' stimulus - State TV (overnight)
• (CN) PBoC Deputy Gov Zhu: Reiterates to continue to stabilize macro-leverage ratio, to further lower financial risks; having prudent monetary policy doesn't mean can't tweak monetary policy, prudent policies should stay in line with economic conditions
• 83.HK Said to be offering to sell homes in Hong Kong at prices below its peers - HK Press
• (CN) China PBoC Open Market (OMO): Injects CNY180B combined in 7-day and 28-day reverse repos v CNY100B injection of 7-day and 28-day prior; Net: CNY180B injection v CNY20B drain prior
• (CN) China PBOC sets Yuan Reference Rate: 6.7542 v 6.7560 prior
• (CN) China Dec vehicle sales y/y: -13% v -13.9% prior; 2018 vehicle sales -2.8% y/y (1st annual drop since 1990) - Industry Association CAAM
• (CN) China PBoC: To keep reasonable and plentiful liquidity; RRR cut effective today; will make monetary policy neither too tight nor too loose, will make policy more forward looking and flexible; affirms prudent monetary policy and strengthen counter cyclical adjustments
• (CN) China Finance Ministry: To implement larger tax and fee cuts, which will emphasize reducing burdens for small firms and manufactures ; will step up fiscal expenditure in 2019
• (CN) CHINA 2018 NEW YUAN LOANS (CNY): 16.17T V 13.53T Y/Y
• (CN) Supertankers transporting 6M barrels of crude said to have left the Texas coast, speculated to be headed to China - financial press

Australia/New Zealand

• ASX 200 opened +0.1%
• (NZ) New Zealand Dec Food Prices m/m: -0.2% v -0.6% prior
• NVT.AU Receives revised non-binding proposal from the BGH Consortium at $5.825/shr [+9.5% in early trade]

North America

• (US) White House: Certain lawmakers to attend lunch with US President Trump on Tuesday at the White House (unclear on who)
• (US) White House said to seek meeting with House Democrats this week on border, Trump said to seek to win over moderate Democrats from red districts - US press
• (US) Bipartisan group of senators reportedly intend to hold talks on how to end govt shutdown - Wash Post
• (US) Fed Vice Chair Clarida (moderate, voter): Sees good momentum in economy; Fed can be 'very patient' this year - Fox Business interview
• (VE) US said to consider tougher sanctions on Venezuela oil and military, no final decision has been made - US financial press

Europe

• (UK) MP Benn to pull 'no to no Brexit' amendment in the morning as part of effort by Labour to table vote of no confidence tomorrow evening - Daily Telegraph
• (UK) If parliament defeats PM May Brexit deal, she is expected to tell them German Chancellor Markel has suggested that EU could gives extra concessions - UK's Sun
• (DE) Germany's CDU party said to be preparing for possible election in 2019 - financial press
• (IE) S&P warns it may downgrade Ireland sovereign credit rating if the Govt’s budgetary position deteriorates as a result of increased tax competition internationally or from greater pressure on public spending - Irish Times

Levels as of 12:50ET

• Hang Seng +1.7%; Shanghai Composite +0.8%; Kospi +1.4%; Nikkei225 +0.9%; ASX 200 +0.7%
• Equity Futures: S&P500 +0.6%; Nasdaq100 +0.7%, Dax +0.6%; FTSE100 +0.4%
• EUR 1.1465-1.1491; JPY 108.14-108.75; AUD 0.7192-0.7223; NZD 0.6815-0.6843
• Feb Gold -0.1% at $1,290/oz; Feb Crude Oil +1.4% at $51.20/brl; Mar Copper +0.8% at $2.65/lb

Market movers today

The day of the long-awaited Brexit vote in the House of Commons has finally arrived (voting starts at 20:00 CET). A defeat of PM Theresa May's Brexit deal is widely expected, so markets will probably not react to the defeat itself but to the size of the defeat. A narrow defeat means that May might be able to get it through at a later stage, but a big defeat means we are in uncharted territory (and we cannot rule out that Theresa May will resign). For more details, see Brexit Monitor - May is losing control over the Brexit process but no credible alternative has emerged yet , 11 January.

In the US Empire PMI manufacturing for January is due. Regional PMIs are usually no major market movers, but this time they will receive some attention for indications where ISM manufacturing is heading after the large fall in December.

Fed's Kashkari, George and Kaplan are also scheduled to speak later today kicking off a busy week of Fed speakers, while ECB President Draghi is due to speak at the European Parliament in the afternoon.

In Sweden the November consumption indicator is on the agenda. Furthermore, the market will continue to monitor the progress towards forming a new government in Sweden which could be settled later this week.

Selected market news

Asian equity markets rose along with the oil price overnight, but overall risk sentiment remains fragile amid a slowdown in the global manufacturing sector, which was further confirmed in euro area industrial production figures published yesterday. Furthermore, unfinished political business is keeping markets anxious.

Regarding the unfinished political business, rumours and speculation before the vote on UK Prime Minister May's Brexit deal suggests that she is facing an uphill battle. Market and politicians are already turning attention to the road after an expected loss today, e.g. there is speculation about a potential extension of article 50 to give the UK more time to pass through the Brexit deal.

In Sweden, Stefan Löfven will use a couple of more days to try to convince the Left party to vote for his government. The previous vote in parliament on the government deal scheduled for Wednesday has been postponed until Friday to allow for further debate in parliament.

OPEC's recently agreed production cut deal will already undergo review on 17-18 March at a meeting in Azerbaijan before OPEC ministers will make potential decisions on policy in Vienna on 17-18 April. OPEC is facing headwinds as the deal from last December has been unable to lift oil prices.

Daily Pivots: (S1) 0.8875; (P) 0.8914; (R1) 0.8954; More...

EUR/GBP's fall from 0.9101 extends to as low as 0.8875 so far. The break of 0.8927 support indicates near term reversal. Intraday bias remains on the downside for 61.8% retracement of 0.8655 to 0.9101 at 0.8825. Sustained break there will pave the way back to 0.8655 support. On the upside, above 0.8952 minor resistance will turn intraday bias neutral first. But risks will stay on the downside as long as 0.9101 resistance holds.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). The medium term range is set between 0.8620 and 0.9101. Downside break out of 0.8620 will pave the way back to 0.8302/12 support zone. Break of 0.9101 will bring retest of 0.9304/5 resistance.

Risk appetite stages a come back in Asian session today as China pledged to "strive for a good start" in 2019. With Asian markets having broad based gains, New Zealand Dollar is leading commodity currencies higher. On the other hand, Yen is back under pressure, followed by Swiss Franc. Dollar is also weak while record US government shut down extends, after Trump rejected fellow Republican's proposal of stopgap reopen. But overall, Sterling is the strongest one for the week as markets await the highly anticipated Brexit meaningful vote.

Technically, GBP/USD's rebound from 1.2391 is extending towards 1.3174 resistance. EUR/GBP took out 0.8927 support firmly yesterday and is now heading to 0.8825 fibonacci support. GBP/JPY breaches 139.88 resistance and sustained trading above the level could carry larger bearish implications. Talking about Yen crosses, both USD/JPY and EUR/JPY are displaying some strength and might try to recent recent rebound through last week's highs.

In other markets, Nikkei is back from holiday and closed up 0.96%. At the time of writing, Hong Kong HSI is up 1.88%. China Shanghai SSE is up 1.25%. Singapore Strait Times is up 1.51%. Japan 10 year JGB yield is down -0.0012 at 0.013, staying positive. Overnight, DOW dropped -0.36%, S&P 500 dropped -0.53% and NASDAQ dropped -0.94%. Treasury yields displayed strength at the long end. 30-year yield rose 0.023 to 3.060. 10-year yield rose 0.009 to 2.710. But US yield curve remains inverted from 1-year (2.596) to 2-year (2.537) to 3-year (2.508) and 5-year (2.522).

May could force a second vote with EU concessions, if the Brexit deal is defeated today

The highly anticipated meaningful Brexit vote in the UK Commons will take place today. There is no exact time set, but it's believed to be somewhere between 1900-2100 GMT.

Facing a lot of criticisms, Prime Minister Theresa May urged "all sides" to give her Brexit deal a "second look" in the Commons yesterday. She added that "No it is not perfect. And yes it is a compromise." But "I say we should deliver for the British people and get on with building a brighter future for our country by backing this deal tomorrow."

Separately, it's reported that May told Tories in a private meeting to focus on two things, "we have to deliver Brexit ... and two that we've got to keep Jeremy Corbyn as far away from Number 10 as possible."

While the deal is widely expected to be voted down, May could force a second vote after the defeat. It's reported that German Chancellor Angela Merkel is offering last-minute help to push for more EU concessions if the current deal is rejected. The concessions could include convincing Irish Prime Minister Leo Varadkar to agree to an end date to the so-called Irish backstop.

Fed Clarida: Fed to decide on interest rate on meeting by meeting basis

Fed Vice Chair Richard Clarida reiterated Fed should take a "patient" stance in 2019 and decide on interest rates on a "meeting by meeting" basis.

He added that "a lot has really happened since the first week of December." And, "we will look in particular at global developments and some of the global data that has been softening."

Though, he didn't see the the global slowdown as "severe" for now. And he doesn't see a recession "on the horizon".

China pledges to strive for good start in Q1

Stocks in Asia surge on hope that China would launch more stimulus measures to support the slowing economy. Chinese Premier Li Keqiang pledged to work to give the economy a strong start to achieve 2019 economic targets. There is no detail on the plan so far.

Li was quoted by State TV saying "we should strive for a good start in the first quarter to create conditions for completing the key full-year development targets and tasks." And, "our country's development environment is becoming more complex this year, there are more difficulties and challenges and the downward pressure on the economy is increasing,"

It's reported that the Chinese government is planning to lower growth target to 6-6.5%, down from expected 6.6% in 2018.

On the data front

Japan M2 rose 2.4% yoy in December. Eurozone trade balance will be featured in European session. Later in the day, US will release PPI and Empire State manufacturing index.

EUR/GBP Daily Outlook

Daily Pivots: (S1) 0.8875; (P) 0.8914; (R1) 0.8954; More...

EUR/GBP's fall from 0.9101 extends to as low as 0.8875 so far. The break of 0.8927 support indicates near term reversal. Intraday bias remains on the downside for 61.8% retracement of 0.8655 to 0.9101 at 0.8825. Sustained break there will pave the way back to 0.8655 support. On the upside, above 0.8952 minor resistance will turn intraday bias neutral first. But risks will stay on the downside as long as 0.9101 resistance holds.

In the bigger picture, EUR/GBP is seen as staying in long term range pattern started at 0.9304 (2016 high). The medium term range is set between 0.8620 and 0.9101. Downside break out of 0.8620 will pave the way back to 0.8302/12 support zone. Break of 0.9101 will bring retest of 0.9304/5 resistance.

Economic Indicators Update

For the 24 hours to 23:00 GMT, the EUR slightly rose against the USD and closed at 1.1469.

Data indicated that the Euro-zone's seasonally adjusted industrial production fell by 1.7% on a monthly basis in November, registering its largest decline in three-years and compared to a revised rise of 0.1% in the previous month. Market participants had anticipated the industrial production to drop by 1.5%.

In the Asian session, at GMT0400, the pair is trading at 1.1483, with the EUR trading 0.12% higher against the USD from yesterday's close.

The pair is expected to find support at 1.1459, and a fall through could take it to the next support level of 1.1436. The pair is expected to find its first resistance at 1.1498, and a rise through could take it to the next resistance level of 1.1514.

Going ahead, traders would closely monitor the Euro-zone's gross domestic product followed by trade balance data for November, scheduled to release in a few hours. Later in the day, the US Empire State manufacturing index for January and the producer price index for December, will be on investors radar.

The currency pair is trading above its 20 Hr moving average and showing convergence with its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the GBP rose 0.05% against the USD and closed at 1.2869, ahead of the crucial UK parliamentary vote on Brexit deal.

In the Asian session, at GMT0400, the pair is trading at 1.2899, with the GBP trading 0.23% higher against the USD from yesterday’s close.

The pair is expected to find support at 1.2835, and a fall through could take it to the next support level of 1.2772. The pair is expected to find its first resistance at 1.2946, and a rise through could take it to the next resistance level of 1.2994.

Amid lack of economic releases in UK today, traders would focus on global macroeconomic events for further direction.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.31% against the JPY and closed at 108.15.

In the Asian session, at GMT0400, the pair is trading at 108.56, with the USD trading 0.38% higher against the JPY from yesterday’s close.

The pair is expected to find support at 108.17, and a fall through could take it to the next support level of 107.79. The pair is expected to find its first resistance at 108.76, and a rise through could take it to the next resistance level of 108.97.

Trading trend in the Japanese Yen today is expected to be determined by Japan’s machine tool orders for December, set to release in a while.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD declined 0.28% against the CHF and closed at 0.9810.

In economic news, Switzerland’s total sight deposits rose to a level of CHF575.2 billion in the week ended 11 January, from CHF574.0 billion in the previous week.

In the Asian session, at GMT0400, the pair is trading at 0.9808, with the USD trading marginally lower against the CHF from yesterday’s close.

The pair is expected to find support at 0.9790, and a fall through could take it to the next support level of 0.9773. The pair is expected to find its first resistance at 0.9835, and a rise through could take it to the next resistance level of 0.9863.

The currency pair is trading below its 20 Hr and 50 Hr moving averages.

For the 24 hours to 23:00 GMT, the USD rose 0.14% against the CAD and closed at 1.3279.

In the Asian session, at GMT0400, the pair is trading at 1.3268, with the USD trading 0.08% lower against the CAD from yesterday’s close.

The pair is expected to find support at 1.3248, and a fall through could take it to the next support level of 1.3228. The pair is expected to find its first resistance at 1.3293, and a rise through could take it to the next resistance level of 1.3318.

Moving forward, investors would await Canada’s existing home sales data for December, slated to release later in the day.

The currency pair is showing convergence with its 20 Hr moving average and trading above its 50 Hr moving average.

For the 24 hours to 23:00 GMT, the AUD declined 0.18% against the USD and closed at 0.7197.

LME Copper prices declined 1.1% or $65.5/MT to $5861.0/MT. Aluminium prices declined 2.2% or $40.5/MT to $1775.5/MT.

In the Asian session, at GMT0400, the pair is trading at 0.7213, with the AUD trading 0.22% higher against the USD from yesterday’s close.

The pair is expected to find support at 0.7185, and a fall through could take it to the next support level of 0.7158. The pair is expected to find its first resistance at 0.7231, and a rise through could take it to the next resistance level of 0.7250.

Looking ahead, investors would keep an eye on Australia’s Westpac consumer confidence index for January, scheduled to release overnight.

The currency pair is trading above its 20 Hr and 50 Hr moving averages.