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The GBP/JPY has made a nice bearish move in the wake of Brexit negotiations where each news makes a volatile move in the whole GBP basket.

The price has reached M L4 camarilla level, 1/8 MM pivot and quickly made a pinbar after profit taking. The chance is for a bearish continuation on a successful retest of the POC zone 143.00-20. Bearish order block is aligned with MM and Camarilla so we could see a rejection towards 142.10 and 141.40. Only a close below 141.40 will cause further bearish momentum targeting 140.60 zone.

Stocks rallied yesterday, with E-mini S&P500 futures turning up from 2583 quite aggressively, but when looking at this drop from 2813, I think we may see another dip down, especially if that’s going to be an ending diagonal; a perfect pattern that may cause a turn in trend later this week. Nice support remains at 2530-2570 region.

S&P500, 1h

Notes/Observations

• Italy points to French budget as reasons to get a bye on its 2019 fiscal plan
• Hard to predict the Brexit outcome, but most scenarios point to continued political infighting
• UK wage data beats expectations
• German Dec ZEW mixed with concerns on trade and Brexit fronts
• Continued dialogue between China-US on trade helps risk appetite

Asia:

• China's Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer spoke by phone Tuesday morning Beijing time; China expected to make announcement on resumption of soybean buying
• PBoC said to resume OMO operations soon, possibly this week to fill short term liquidity gaps into the end of the year (Note: PBoC has skipped its Open Market Operation (OMO for the past 33 sessions; last injected back on Oct 24th)

Europe:

• PM May to meet with German Chancellor Merkel on Tues, Dec 11th as part of effort to secure Brexit support. PM May to be in The Hague then Berlin, followed by separate bilateral meetings with Juncker and Tusk in Brussels
• EU's Tusk: EU to talk Brexit, but ‘we will not renegotiate the deal including the backstop' but ready to discuss how to facilitate UK ratification of deal. To call European Council on Brexit Article. 50 on Thurs, Dec 13th
• PM May won't set a date for a new Parliament vote, saying only it would occur before Jan 21st, the latest possible date. Backstop was creating concerns. Focus in the days ahead would be on getting additional reassurances on the Backstop from the EU
• Labour Party spokesperson: Would put down motion of no confidence when we judge it most likely to be successful; if same deal was brought back, PM May would have unquestionably lost confidence of Parliament
• France President Macron: Has asked the govt to increase wages by €100/month starting in Jan; To cancel social security tax increase on pensioners who earning under €1,000/month

Macro

• (UK) United Kingdom: UK Prime Minister May yesterday decided to postpone the parliamentary vote on the Withdrawal Agreement. Her plan is to reportedly gain a guarantee from the EU that there will be an end-date to the backstop on the Irish border, preventing the UK from becoming perpetually stuck in the EU, which has been the principal source of the deal's unpopularity. The European leaders' summit on Thursday will, according to Tusk's spokesman, be specifically discussing preparations for a no-deal Brexit scenario. It is doubtful May will win sufficient concessions on the backstop to shift parliament's opinion.
• (UK) United Kingdom: Average household income rose more than expected in the three months to October with the earnings ex-bonus figure rising 3.3% y/y. The rise in wages points to a tight labor market on pay demands. The jobless rate remained unchanged at 4.1%, while the employment rate was 75.7%, the joint highest since records began in 1971.
• (DE) Germany: ZEW current situation was worse than expected but the expectations survey improved unexpectedly. Remember, the ZEW measures investor sentiment rather than real developments as such much will have depended on when the answers came in as markets have been volatile between cautious optimism on U.S.-China trade relations and Brexit-related doom. Furthermore the negative readings suggest pessimists continue to outnumber optimists. Overall a positive sign but no reason to cheer, although with Bunds already under pressure today, the number underpinned the uptick in long rates this morning.
• (EU) Eurozone: Unsurprisingly the latest legal challenge in the EU's top court of the ECB's emergency measures confirmed that the bond buying spree was within the ECB's mandate. Still, while the ECB is likely to confirm the phasing out of net asset purchases this week, they are also likely to keep the option of a revival open and thus make it part of the ECB's regular policy response and a backing from the EU's top court clearly helps to defend the move against critics of the program.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +1.31% at 343.42, FTSE +0.87% at 6,780.09, DAX +1.36% at 10,766.61, CAC-40 +1.40% at 4,808.70, IBEX-35 +0.99% at 8,746.00, FTSE MIB +0.80% at 18,556.50, SMI +1.36% at 8,668.20, S&P 500 Futures +0.27%]
• Market Focal Points/Key Themes: Equities European Indices push higher following strength in the US and mixed session in Asia overnight. US futures trade push higher as the US Treasury Sec Mnuchin started fresh round of talks with China Vice Premier Liu. On the corporate front shares of DIA in Spain drops sharply as majority shareholder asks banks to take haircut on debt. In M&A news Ahlsell trades 30% higher following a ~SEK18B take over offer from Quimper. In the earnings front Carpetright, Compagnie des Alpes, Ashtead, Meier Tobler trade higher after earnings and guidance, while Mysale and Hornbach Holdings are among the fallers after guidance. Meanwhile WPP sees strength o follow a strategic update. Looking ahead notable earners include retailers Destination Maternity, DSW and Francesca Holdings.
• Consumer discretionary: Ashtead Group [AHT.UK] +3.5% (earnings), WPP [WPP.UK] +4% (strategy update), Hornbach Holding Group [HBH.DE] -15% (earnings; outlook cut), Carpetright [CPR.UK] +5% (earnings)
• Energy: MVV Energie [MVV1.DE] +1.5% (earnings; initial guidance)
• Financials: Danske Bank [DANSKE.DK] +0.5% (confirms unit divestment), Banco BPM [BAMI.IT] +2.5% (accepts offer for bad loan portfolio)
• Healthcare: Bayer [BAYN.DE] +2% (CEO comments), Novartis [NOVN.CH] +1% (FDA clearance)
• Industrials: Ahlsell [AHSL.SE] +30% (offered to be acquired), Ferrovial [FER.ES] +1% (said to have hired advisers for unit sell), Daimler [DAI.DE] +1% (battery cells acquisition), Aurubis [NDA.DE] +1% (earnings)
• Technology: Dassault Systems [DSY.FR] +1.5% (acquisition)
• Telecom: Telecom Italia [TIT.IT] -0.5%, Vivendi [VIV.FR] +1% (Vivendi urges to convene Telecom Italia's shareholders meeting as soon as possible)

Speakers

• EU's Juncker reiterated stance that UK withdrawal agreement would not be reopened but had room to offer clarifications
• Ireland Foreign Min Coveney: Preparing for a possible 'no-deal' Brexit but still believed that such a scenario was unlikely. Not realistic to renegotiate withdrawal agreement. To have discussion on how to reassure the UK; EU could make a political declaration
• UK House of Commons Leader Leadsom stated that PM May was determined to get a deal that parliament could vote for. PM was doing the right thing to get a legally binding reassurances from the EU
• German ZEW Economists stated that its assessment of economic situation had dramatically worsened for both Germany and the Euro Zone and saw relatively weak growth in Q4. Uncertainties remained due to trade dispute and Brexit
• German BDI Industry Association: Companies should continue to prepare for a disorderly Brexit
• German Engineering Association (VDMA) maintained 2018 and 2019 production forecasts of 5.0% and 2.0% respectively. Noted that trade disputes, sanctions and Brexit had dampened the 2019 export outlook
• France govt spokesperson Griveaux: President Macron's measures to cost approx €8-10B; will cut expenses to control deficit. Would not postpone the planned payroll tax cuts
• Italy PM Conte reiterated stance that increase in budget deficit to GDP ratio was necessary to achieve objectives that Italian citizens have urged
• Italy Cabinet Undersecretary Giorgetti: France has repeatedly breached the 3% budget deficit target
• ECB said to win European Court of Justice (ECJ) ruling over the legality of its QE bond buying program. ECB did not overstep its mandate by setting up the quantitative easing program to starve off deflation. QE did not contravene the prohibition of monetary financing
• Czech Central Bank Gov Rusnok saw room for more rate hikes if CZK currency did not appreciate
• Brazil Fin Min Guardia: Fiscal adjustment should come from spending cuts. Did not want to increase tax burden
• India Finance Ministry official: Meeting with State-run banks to discuss recapitalization issues. Planned to inject fresh capital by Dec 31st
• Russia Energy Ministry: To cut oil production between 50-60K bpd from Jan (base upon Oct levels)

Currencies/Fixed Income

• The USD was softer against the major trading pairs on Tuesday as some risk appetite tried to find some standing room. Continued dialogue between US-China on the trade front despite the recent arrest of a Chinese tech executive cited as a factor.
• GBP/USD rebounded from yesterday's soft tone in the aftermath of the pulling of the meaningful vote in the UK Parliament. Dealers noted that pressure on sterling was unlikely to fade for the time being as EU appeared not willing to renegotiate the Brexit agreement. PM May making the rounds in Europe later today to get assurances on the Irish backstop so she could bring a vote to the House of Commons. GBP/USD off its 20-month lows and at 1.2630 area just ahead of the US morning.
• EUR/USD remained within recent ranges but higher in today's session. Focus remains on Thursday ECB meeting where a formal end of QE bond buying is expected to be announced.

Economic Data

• (FR) France Q3 Total Payrolls: 0.1% v 0.2%e; Private Sector Payrolls (final reading) Q/Q: 0.1% v 0.2%e
• (RO) Romania Nov CPI M/M: -0.1% v +0.1%e; Y/Y: 3.4% v 3.7%e
• (TR) Turkey Oct Current Account Balance: $2.8B v $2.5Be
• (NO) Norway Oct GDP M/M: +0.8% v -0.5% prior; GDP Mainland M/M: +1.0% v -0.2% prior
• (FR) France Q3 Final Wages Q/Q: 0.3% v 0.3%e
• (HU) Hungary Nov CPI M/M: -0.3% v -0.1%e; Y/Y: 3.1% v 3.3%e
• (CN) China Nov New Yuan Loans (CNY): 1.250T v 1.150Te
• (CN) China Nov Aggregate Financing (CNY): 1.520T v 1.350Te
• (CN) China Nov M2 Money Supply Y/Y: 8.0% v 8.0%e
• (UK) Nov Jobless Claims Change: +21.9K v +23.2K prior; Claimant Count Rate: 2.8% v 2.7% prior
• (UK) Oct Average Weekly Earnings 3M/Y: 3.3% v 3.0%e; Weekly Earnings (ex Bonus) 3M/Y: 3.3% v 3.2%e
• (UK) Oct ILO Unemployment Rate: 4.1% v 4.1%e; Employment Change 3M/3M: +79K v +25Ke
• (ZA) South Africa Q3 Non-Farm Payrolls Q/Q: -0.2% v +0.2%e; Y/Y: 0.2% v 0.4%e
• (ZA) South Africa Oct Total Mining Production M/M: 3.3% v 0.4%e; Y/Y: +0.5% v -1.6%e; Gold Production Y/Y: -15.1% v -19.7% prior; Platinum Production Y/Y: 21.4% v 7.9% prior
• (IT) Bank of Italy (BOI) Oct Non-Performing Loans (NPLs): €120.6B v €122.5B m/m
• (DE) Germany Dec ZEW Current Situation Survey: 45.3 v 55.0e; Expectations Survey: -17.5 v -25.0e
• (EU) Euro Zone Dec ZEW Expectations Survey: -21.0 v -22.0 prior
• (BR) Brazil Dec IGP-M Inflation (1st Preview): -1.2% v -0.9%e

Fixed Income Issuance

• (ES) Spain Debt Agency (Tesoro) sold total €1.0B vs. €0.5-1.5B indicated range in 3-month and 9-month bills
• (ZA) South Africa sold total ZAR2.85B vs. ZAR2.85B indicated in 2026, 2030 and 2048 bonds
• (CH) Switzerland sold CHF396.4M in 3-month Bills; Avg Yield:-1.018% v -1.018% prior

Looking Ahead

• (PT) Bank of Portugal Reports Oct ECB financing to Portuguese Banks: No est v €18.9B prior
• (MX) Mexico Nov ANTAD Same-Store Sales Y/Y: No est v 3.7% prior
• 05.30 (UK) Weekly John Lewis LFL sales data
• 05:30 (EU) ECB allotment in 7-Day Main Refinancing Tender (MRO)
• 05:30 (HU) Hungary Debt Agency (AKK) to sell in 3-month Bills
• 05:30 (DE) Germany to sell €3.0B in 0% Sept 2020 Schatz
• 05:30 (BE) Belgium Debt Agency (BDA) to sell €0.8-1.2B in 12-month Bills
• 06:00 (US) Nov NFIB Small Business Optimism: 107.0e v 107.4 prior
• 06:00 (IE) Ireland Oct Property Prices M/M: No est v 0.7% prior; Y/Y: No est v 8.2% prior
• 06:00 (ZA) South Africa Oct Manufacturing Production M/M: No est v -1.0% prior; Y/Y: 0.8%e v 0.1% prior
• 06:00 (BR) Brazil CONAB Crop Report
• 06:00 (RO) Romania to sell €200M in bonds
• 06:30 (CL) Chile Central Bank Economists Survey
• 06:45 (US) Daily Libor Fixing - 07:45 (US) Weekly Chain Store Sales
• 08:00 (RU) Russia announces weekly OFZ bond auction (held on Wed)
• 08:10 (UK) Baltic Dry Bulk Index
• 08:30 (US) Nov PPI Final Demand M/M: 0.0%e v 0.6% prior; Y/Y: 2.5%e v 2.9% prior
• 08:30 (US) Nov PPI Ex Food and Energy M/M: 0.1%e v 0.5% prior; Y/Y: 2.5%e v 2.6% prior
• 08:30 (US) Nov PPI Ex Food, Energy, Trade M/M: 0.2%e v 0.2% prior; Y/Y: No est v 2.8% prior
• 08:55 (US) Weekly Redbook Retail Sales data
• 09:00 (EU) Weekly ECB Forex Reserves
• 10:00 (PT) Portugal PM Costa in parliament
• 10:30 (CA) Canada to sell C 3-month, 6-month and 12-month bills
• 11:00 (EU) EU's Tusk meets UK PM May in Brussels
• 11:00 (US) Treasury announcement on 4-week and 8-week bill auction
• 12:00 (US) DOE Short-Term Crude Outlook
• 12:00 (US) USDA World Agricultural Supply and Demand Estimates (WASDE)
• 13:15 (EU) EU's Juncker meets UK PM May in Brussels
• 13:00 (US) Treasury to sell 3-Year Notes
• 16:30 (US) Weekly API Oil Inventory data

Tuesday December 11: Five things the markets are talking about

The U.S dollar remains better bid on pull backs, as investors pile into the currency amid worries over global trade, Brexit and big swings in U.S stocks.

Data from the CFTC shows that the net bullish bets on the dollar in futures markets grew for the third consecutive week in the period to yesterday. Bullish bets totaled +$32.6B, compared to +$30.9B in the previous week.

Equities are mixed overnight, with European shares rallying while U.S futures ease with Asian shares as investors weighed the prospects for success in the Sino-U.S trade talks.

News that Chinese VP Liu He discussed a timetable for trade talks with U.S Treasury Secretary Mnuchin has helped boost market sentiment.

Sterling has edged a tad higher after yesterday's 20-month low slump and gilt yields have backed up as PM Theresa May delays a critical vote on Brexit. Her plan is to reportedly gain a guarantee from the E.U that there will be an end-date to the backstop on the Irish border.

On tap: The ECB is set to cap asset purchases at its final policy meeting of the year on Thursday, while China industrial production, retail sales data for November is due Friday.

1. Stocks mixed results

In Japan, the Nikkei closed atop of its nine-month lows overnight as worries about global growth pressured financial and cyclical stocks, while uncertainty over a U.S-Japan trade deal hit automakers. The Nikkei share average ended -0.3% lower, while the broader Topix fell -0.9%, the lowest closing level since May 2017.

Down-under, Aussie shares edged higher overnight as China confirmed it was moving ahead on trade talks with the U.S. The S&P/ASX 200 index rose +0.4%, after Beijing said a road map was discussed with U.S officials for the next stage of trade talks. The benchmark fell -2.3% on Monday. In S. Korea, the Kospi index ended nearly flat as sharp gains in Samsung offset losses caused by external uncertainties.

In China, stocks ended higher overnight in thin trading as Beijing confirmed that it is still in trade talks with the U.S, and as investors looked to market support from government policies aimed at countering slowing growth. At the close, the Shanghai Composite Index was +0.4% higher, while the blue-chip CSI300 index rose +0.5%.

In Hong Kong, stocks clawed back early losses to end higher on Sino-U.S trade talk confirmation, but anxiety over trade, Brexit and the arrest of a senior Huawei executive capped gains. The Hang Seng index ended +0.1% higher, while the China Enterprises Index lost -0.3%.

In Europe, regional bourses push higher following strength in U.S futures and mixed session in Asia overnight. U.S Treasury Sec Mnuchin has started fresh round of talks with China's Vice Premier Liu.

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

Indices: Stoxx600 +1.31% at 343.42, FTSE +0.87% at 6,780.09, DAX +1.36% at 10,766.61, CAC-40 +1.40% at 4,808.70, IBEX-35 +0.99% at 8,746.00, FTSE MIB +0.80% at 18,556.50, SMI +1.36% at 8,668.20, S&P 500 Futures +0.27%

2. Oil prices under pressure amid global market unease, gold higher

Oil prices are under pressure overnight amid worries over global equity markets and doubts that planned OPEC+ output cuts will be enough to combat oversupply.

But crude prices have received some support after Libya's National Oil Company (NOC) declared force majeure on exports from the El Sharara oilfield, the country's biggest, which was seized last weekend by a militia group.

Note: NOC said the shutdown would result in a production loss of -315K barrels bpd, and an additional loss of -73K bpd at the El Feel oilfield.

Brent crude oil futures are at +$60 per barrel, up +3c from Monday's close, while U.S West Texas Intermediate (WTI) crude futures are at +$50.98 per barrel, down -2c.

The OPEC-led group of oil producers last Friday announced a supply cut of -1.2M bpd in crude oil supply from January, measured against October 2018 output levels.

There are market doubts that all producers will follow through with their announced cuts.

Earlier today, Russia announced plans to cut its oil output by -50K to -60K bpd in January, much less than its target under a global production deal reached last week.

Ahead of the U.S open, gold prices edged higher, supported by hopes that the Fed could pause its rate hike cycle sooner than expected and as the dollar slipped after the previous session's rally. Spot gold is up +0.3% at +$1,247.92 per ounce. It touched it's highest in nearly five months at +$1,250.55 in Monday's session. U.S gold futures are +0.3% higher at +$1,252.6 per ounce.

3. French borrowing costs surge on Macron wage rises, tax cuts

France's 10-year borrowing costs climbed to their highest level compared with Germany in 18-months earlier this morning, as French President Macron announced spending measures in a bid to restore calm after weeks of violent protests.

Macron announced wage rises for the poorest workers and tax cuts for pensioners late on Monday, measures that are expected to increase public spending by +€8B to +€10B.

France's 10-year bond yield has backed up +5 bps. The spread over equivalent German bonds has hit +47.5 bps, its widest level since May 2017.

Elsewhere, the yield on 10-year Treasuries has increased +1 bps to +2.86%. In Germany, the 10-year Bund yield has gained +1 bps to +0.26%, while in the U.K, the 10-year Gilt yield has fallen -7 bps to +1.199%, the lowest in almost five-months.

4. Pound under pressure

The USD is a tad softer against G7 currency pairs as some risk appetite tried to find some standing room. There is continued dialogue between U.S and China on the trade front despite the recent arrest of a Chinese tech executive cited as a factor.

Sterling (£1.2635) fell to a 20-month low yesterday (£1.2513) after PM Theresa May delayed a parliamentary vote on her government's Brexit bill, throwing plans for the U.K's exit from the E.U into disarray. PM May won't set a date for a new Parliament vote, saying only it would occur before Jan 21, the latest possible date.

EUR/USD (€1.1379) remains within its recent ranges, but higher in today's session. Market focus remains on Thursday ECB meeting where a formal end of QE bond buying is expected to be announced.

India's rupee tumbled after Reserve Bank of India (RBI) chief quit yesterday. Gov. Urjit Patel said late Monday he would leave his post, citing personal reasons. The INR fell as much as -1.6% Tuesday to $72.46 outright, before retracing some ground to stand -0.7% lower. INR is now about -11% lower on the year.

5. German economic expectations rose in December

According to the ZEW economic research institute, German economic expectations rose in December, but they remained below the long-term average historical average of 22.5 points.

The measure of economic expectations rose to -17.5 points from minus-24.1 points in November – the +6.6-point increase from the previous month beat economists' forecast for a minus -24.0 point reading.

The assessment of the economic situation has worsened dramatically for both Germany and the Eurozone and this is indicative of relatively weak economic growth in Q4.

Note: The ZEW's measure of the current economic situation in Germany fell -12.9 points to +45.3 points in December.

During Monday's trading session, the rate depreciated by 92 pips or 0.80% breaking most of the technical indicators to end the trading session at 1.1353. On Tuesday, the European Single Currency was resisted by the 100-hour simple moving average.

In regards to the near-term future, most likely, the European Single Currency will be trading sideways between the weekly PP at 1.1372 and the monthly PP at 1.1346 to appreciate towards the upper boundary of the medium pattern at the 1.1380 mark.

On the other hand, today's US PPI data release at 13:30 GMT could break the predictions for the currency pair to push the rate to pass the support level of the monthly PP at 1.1346 to trade near the weekly S1 at the 1.1321 level.

During Monday's trading session, the currency exchange rate dropped by 253 pips or 1.98% due to Brexit uncertainty to end the trading session at the 1.2500 level. During Tuesday's morning hours, the British Pound was supported by the weekly S2 to keep trading the at 1.2560 level.

In regards to the near-term future, most likely, the currency exchange rate will keep depreciating towards the weekly S3 at the 1.2470 mark. Besides, the rate to could reach the monthly S2 at the 1.2435 due to a lack of any significant support levels.

On the other hand, the British Pound could appreciate against the US Dollar during today's UK Average Earnings Index 3m/y data release at 9:30 GMT to push the rate to recover itself to the 1.2600 level during the trading session on Tuesday.

During Monday's trading session, the US Dollar appreciated by 115 pips or 1.02% to end the trading session at the 113.08 mark. During Tuesday's morning hours, the rate was supported by the 200-hour SMA to trade at the 113.12 mark.

In regards to the near-term future, the US Dollar will trade sideways between the monthly PP at 113.34 and the weekly PP at 112.93 mark. In addition, the 100-hour and the 55-hour SMAs will support the rate near the weekly PP at 112.93 mark.

On the other side, the rate could appreciate against the Japanese Yen during today's US PPI data release at 13:30 GMT to push the rate to trade near the weekly R1 at the 113.62 level.

During Monday's trading session, the yellow metal was supported by the 55-hour simple moving average to end the trading session at the 1,243.85 mark. During Tuesday's morning hours, the yellow metal broke the resistance of the 38.20% Fibonacci retracement level to trade at the 1,246.67 mark.

In regards to the near-term future, most likely, the yellow metal will trade sideways above the 38.20% Fibonacci retracement level at 1,245.07 mark. In addition, the 55-hour simple moving average will support the gold during the trading session.

On the other side, the gold could depreciate against the US Dollar during today's US PPI data release at 13:30 GMT to push the rate to trade near the monthly R1

The single European currency has continued to trade in the newly formed ascending channel against the Japanese Yen. The currency pair tested the lower boundary of the channel pattern at the end of yesterday's trading session.

The 50– and 200-hour SMAs was providing support for the exchange rate at 128.55 during the first half of Tuesday's trading session.

If this support level holds, the currency exchange rate will aim at a resistance line at 129.12 today.

However, if the EUR/JPY currency pair passes the SMAs, a decline towards the 128.00 mark could be expected.

The 50-hour simple moving average has continued to guide the Australian Dollar lower against the US Dollar. The currency pair depreciated about 48 base points during the end of Monday's session.

The exchange rate is trading near the upper boundary of a descending channel pattern at 0.7196 during the first half of Tuesday's trading session and could be set for a breakout.

However, the currency exchange rate needs to surpass the 50-hour SMA at 0.7272 before any potential breakout occurs.

If the resistance line formed by the SMA hold, the price will target a swing low of 0.7165 today.