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Market movers today

Today, we have a numbers of important data releases on both sides of the Atlantic, starting with the US job reports for November, where we estimate non-farm payrolls rose around the current trend of 190,000. More importantly, we expect that average hourly earnings rose +0.3% m/m due to a continued tighter labour market.

On the euro side, the euro area Q3 wage growth numbers are due. The numbers are of special interest, as positive numbers are likely to boost the ECB's confidence in its inflation outlook at next week's important general council meeting.

The so-called OPEC+ is scheduled to meet today. The meeting proves even more important now as the original OPEC meeting yesterday failed to deliver any final deal on production cuts (see below). A press conference is tentatively scheduled for 13:00 CET, but history shows this could well be postponed if negotiations prove difficult.

In German politics , the CDU is starting its party congress to find a replacement for Angela Merkel as party leader today. A vote come in the late afternoon (after 15:00 CET) but the agenda is not yet finalised.

In Scandi markets, industrial production data is due to be released in Norway.

Selected market news

Risk sentiment rebounded strongly in late US trading, with Nasdaq managing to end the day in the green while S&P500 limited losses to only 0.15% in a remarkable late trading comeback, see chart (source: Bloomberg). Also, the 10Y Treasury erased most of its gains with the 10Y yield rebounding from as low as 2.83% to a current 2.89%. This morning, most major Asian equity indices posted modest gains.

An important explanation for the rebound was stronger-than-expected US data and dovish comments from various FOMC members, which triggered a softer repricing of Fed monetary policy. Markets are only pricing in roughly a 70% probability of a hike in December and only one additional 25bp hike for the whole of 2019.

Trade deal developments between the US and China have been important market drivers this week, with the most noteworthy being Saturday's truce and yesterday's arrest of Huawei's CFO. The White House has said that Trump was not aware of the arrest, which took place on Saturday, ahead of the dinner with Jinping. Today, CFO Meng Wanzhou will face a bail hearing. Meanwhile, Chinese authorities demanded her release (see FT story ).

Brent crude traded in a volatile fashion in the USD58-62/bbl range yesterday as the market remained nervous during the OPEC meeting. We still expect a comprehensive deal (>1MB) including Russian cuts, due to be announced today at the OPEC+ gathering.

The US Congress has passed a so-called stop-gap bill to postpone a government shutdown until 21 December. Key to the postponement are Donald Trump's demands for the new funding bill for the fiscal year ending 30 September 2019 to include USD5bn for building a wall at the Mexican border to keep out illegal immigrants and drugs.

Daily Pivots: (S1) 1.5619; (P) 1.5704; (R1) 1.5811; More....

Intraday bias in EUR/AUD remains on the upside with focus on 1.5781 resistance. Decisive break there will suggest that corrective fall from 1.6357 has completed earlier than expected. Near term outlook will be turned bullish for retesting 1.6357 high. On the downside, below 1.5596 minor support will turn bias back to the downside for 1.5346 and then 1.5271/5313 cluster support zone.

In the bigger picture, current development argues that up trend from 1.3624 (2017 low) is possibly completed at 1.6357, ahead of 1.6587 (2015 high). Fall from 1.6357 should be corrective such up trend and would target 1.5271 cluster support (38.2% retracement of 1.3624 to 1.6357 at 1.5313). Break will extend the correction to Break will target 61.8% retracement at 1.4668. Nevertheless, firm break of 1.5781 will suggest that the pull back has already completed. And larger uptrend from 1.3624 might be ready to resume.

DAX continues to make a new low and this week broke below 11/20 low (11009) suggesting that the move lower remains in progress. Near term Elliott Wave outlook calls for the decline to 11009.25 on 11/20 as Intermediate wave (3). From there, rally to 11566.97 ended Intermediate wave (4) as a zigzag Elliott Wave structure. Minor wave A of (4) ended at 11403.72, Minor wave B of (4) ended at 11208.60 and Minor wave C of (4) ended at 11566.97.

Decline from there is unfolding as an impulse Elliott Wave structure and a marginal low still can happen before ending the 5 waves down. This move lower also ended Intermediate wave (5) and Primary wave ((3)) of a larger degree. Afterwards, expect Primary wave ((4)) rally in 3, 7, or 11 swing before the decline resumes again. We don’t like buying the proposed rally as the right side still remains lower.

DAX 1 Hour Elliott Wave Chart

General Trend:

• Japan said to be the latest government to place restriction on Huawei (Japanese press)
• Softbank declines over 3%, IPO for mobile unit in focus amid service disruption
• Hang Seng weighed down by declines in financials, oil and materials firms; Tech shares rise after declines on Thursday
• Chinese pharmaceutical shares decline for 2nd straight session, government procurement tender cited
• Australia cement firm Adelaide Brighton declined over 8%, cut guidance
• Fed's Williams noted the need to be ‘nimble' about responses to unexpected circumstances
• China PBoC said liquidity is at ‘plentiful' level, skipped open market operation for 31st straight session
• Major currencies generally quiet ahead of US payrolls report
• China Jan-Nov trade data is scheduled to be released on Dec 8th (Saturday)

Headlines/Economic Data

Australia/New Zealand

• ASX 200 opened +0.1%
• (AU) Australia Nov AiG Performance of Construction Index: 44.5 v 46.4 prior

China/Hong Kong

• Shanghai Composite opened +0.2%, Hang Seng +0.4%
• (CN) White House official: Pres Trump was unaware of Huawei extradition request before dinner with Pres Xi in Argentina – press
• (CN) China Commerce Ministry (MOFCOM): Reiterates to appropriately deal with trade frictions; will implement trade remedy measures agreed with other relevant government parties
• Huawei: Forced to meet UK 5G security demands - FT

Japan

• Nikkei 225 opened +0.7%
• Nissan [7201.JP]: Former Chairman Ghosn said to be expected to be indicted and re-arrested on Monday by prosecutors in Tokyo; Prosecutors are also expected to file charges against Nissan Motor itself - US financial press
• (JP) Bank of Japan Gov Kuroda: Overall global economy will continue to grow, reiterates overseas economies facing 'heightening' risks; So far impact of US/China trade friction 'limited'
• (JP) BoJ Maeda: BoJ holds 77.5% of Japan's total ETF market as of Sept of this year
• (JP) Japan Sept Household Spending y/y: -0.3% v 1.0%e
• (JP) Japan Oct Labor Cash Earnings Y/Y: 1.5% v 1.0%e; Real Cash Earnings Y/Y: -0.1% v -0.3%e
• (JP) Japan Nov Official Reserve Assets: $1.26T v $1.25T prior
• (JP) Japan Oct Preliminary Leading Index: 100.5 v 104.9e; Coincident: 104.5 v 117.1e
• (JP) Japan government said to plan to exclude Huawei and ZTE from government use - Japanese Press

Korea

• Kospi opened -0.3%
• (KR) South Korea Finance Ministry: To seek regular issuance of 50-year bonds in 2019 after study
• (KR) South Korea sells KRW600B v KRW600B indicated in 50-year bonds: avg yield 1.950% v 2.09% prior
• (KR) South Korea President Moon approval rating declines to 49% from 52% - Gallup Poll

Other

• Kotak Mahindra Bank [KMB.IN]: Reportedly Berkshire Hathaway may look to invest $4-6B - CNBC

North America

• (US) Fed still expected to raise rates in Dec, but now considering if it should signal a 'wait and see' stance in 2019 - WSJ
• (US) Fed Chair Powell: Reiterates economy currently performing very well overall; US Labor market is very strong by many measures; does not comment on monetary policy
• (US) Fed's Williams (moderate, voter): Need to be 'nimble' about responding to unexpected economic circumstances; So far US tariffs do not have 'big' effect on overall growth and inflation, direct impact of tariffs so far is relatively 'small', 'full-blown' trade war would be real worry
• (US) Fed's Bostic (dove, voter): Fed policy ought to be taking more neutral position; Fed is within shouting distance of neutral policy
• Tesla [TSLA]: General Counsel Todd Maron to step down, expected to be replaced by Dane Butswinkas, effective in Jan 2019 - US financial press

Levels as of 01:00ET

• Nikkei 225, +0.7%, ASX 200 +0.4%, Hang Seng flat; Shanghai Composite flat; Kospi +0.5%
• Equity Futures: S&P500 -0.2%; Nasdaq100 flat, Dax -0.2%; FTSE100 +0.1%
• EUR 1.1387-1.1369 ; JPY 112.87-112.64 ; AUD 0.7242-0.7218 ;NZD 0.6891-0.6870
• Feb Gold +0.1% at $1,245/oz; Jan Crude Oil -0.5% at $51.26/brl; Feb Copper +0.3% at $2.756/lb

Daily Pivots: (S1) 1.1279; (P) 1.1301; (R1) 1.1322; More...

EUR/CHF's break of 1.1295, minor support suggests that recovery from 1.1260 has completed. Intraday bias is turned back to the downside for 1.1260 support first. Break will resume whole decline from 1.1501 and target 1.1173 low. On the upside, break of 1.1356 resistance is needed to indicate short term bottoming. Otherwise, further decline is still in favor even in case of recovery.

In the bigger picture, price actions from 1.2004 medium term top is seen as a correction only. Downside should be contained by support zone of 1.1198 (2016 high) and 61.8% retracement of 1.0629 to 1.2004 at 1.1154 to complete it and bring rebound. A break of 1.2 key resistance is still expected in the medium term long term. However, sustained break of the mentioned support zone will mark reversal of the long term trend. In that case, 1.0629 key support will be back into focus.

Does the Fed hold the key to this year's Santa rally?

We're expecting a strong bounce back at the open in Europe following what was another brutal day on Thursday, as investors become increasingly jumpy in this period of market uncertainty.

It's been another rollercoaster week of easing - then potentially heightening - trade tensions (following the agreement at the G20 then arrest of Huawei CFO Meng Wanzhou), inverted yield curves and political humiliation, all of which has fed into the narrative of market instability and uncertainty.

Investors holding their nerve in the hope that the Santa rally will save the day are seriously suffering at the moment, with the FTSE dropping almost 4% this week so far, the Dow more than 3% and the DAX more than 6%. We've gone from trepidation over escalating trade wars to full blown fear of a recession it would seem, I wonder whether this is all a bit of an overreaction.

Goldilocks jobs report includes only modest wage growth

There may be a number of risk factors contributing to all of this but I wonder whether it will ultimately be down to the Fed to calm everything down in a couple of weeks. Already market expectations of a rate hike this month have moderated a little – now standing at 78% according to Reuters – and I think people are more and more coming around to the idea that the Fed will be much less hawkish in its assessment than it has been.

Today's US jobs report could have a big part to play in this. Usually we look at these releases and want to see the best possible numbers – for obvious reasons – but given the fragility in the markets, I wonder whether the goldilocks report for the current environment involves decent – but not great – jobs growth and only moderate wage gains. This would give the Fed and investors encouragement that the economy is ticking along nicely and allow it to take the foot off the gas a little, potentially taking some pressure of the middle part of the yield curve and easing investor concerns.

Oil recovery reliant on full Russia involvement in output cut

Oil prices are edging lower again as we await details later on today on the output cut that has been agreed between OPEC and its allies. The terms of the cut appear to hang on Russia, with Energy Minister Alexander Novak reportedly seeking sign-off on the agreement from President Putin before agreeing.

This clearly highlights the difficulty with negotiations this time around, with Libya and Nigeria also requested exemptions and Iran refusing to take part while under sanctions. This also comes after Qatar announced it will leave the cartel after 57 years of membership. The failure of Russia to be fully behind the cut could put further pressure on oil markets unless others – probably Saudi Arabia – agree to pick up the slack.

Cryptos plunge again and remain vulnerable

Bitcoin is on the decline again, with the price falling almost 10% at one stage to its lowest level since September last year. More negative news flow appears to have contributed to the latest drop although, as with the declines over the last month as a whole, I think it simply reflects a general lack of appetite for cryptocurrencies right now. The market has looked vulnerable for some time and this strikes me as just another excuse to sell. The next big test comes around $3,000, a break of which could spark another aggressive drop in bitcoin.

For the 24 hours to 23:00 GMT, the GBP rose 0.36% against the USD and closed at 1.2783.

In the Asian session, at GMT0400, the pair is trading at 1.2769, with the GBP trading 0.11% lower against the USD from yesterday’s close.

The pair is expected to find support at 1.2709, and a fall through could take it to the next support level of 1.2648. The pair is expected to find its first resistance at 1.2821, and a rise through could take it to the next resistance level of 1.2872.

Moving forward, traders would closely monitor UK’s Halifax house prices for November, slated to release in a few hours.

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

Daily Pivots: (S1) 1.1328; (P) 1.1371; (R1) 1.1420; More.....

Intraday bias in EUR/USD remains neutral as it's staying in range of 1.1267/1472. As long as 1.1472 resistance holds, deeper decline is expected in the pair. On the downside, break of 1.1267 will target 1.1215 low first. Firm break there will resume larger down trend from 1.2555 for 1.1186 fibonacci level next. However, considering bullish convergence condition in daily MACD, firm break of 1.1472 will be suggest medium term bottoming and turn outlook bullish for 1.1814 resistance instead.

In the bigger picture, as long as 1.1814 resistance holds, down trend down trend from 1.2555 medium term top is still in progress and should target 61.8% retracement of 1.0339 (2017 low) to 1.2555 at 1.1186 next. Sustained break there will pave the way to retest 1.0339. However, break of 1.1814 will confirm completion of such down trend and turn medium term outlook bullish.

Daily Pivots: (S1) 1.2718; (P) 1.2765; (R1) 1.2831; More...

Intraday bias in GBP/USD remains neutral for the moment. On the downside, sustained break of 1.2661 low will resume larger down trend from 1.4376. Next target will be 1.1946. On the upside, break of 1.2927 will extend the consolidation from 1.26661 with another rise. But even in case of strong rebound, upside should be limited by 1.3316 fibonacci level to bring down trend resumption eventually.

In the bigger picture, whole medium term rebound from 1.1946 (2016 low) should have completed at 1.4376 already, after rejection from 55 month EMA. The structure and momentum of the fall from 1.4376 argues that it's resuming long term down trend. And this will be the preferred case as long as 38.2% retracement of 1.4376 to 1.2661 at 1.3316 holds. However, firm break of 1.3316 would bring stronger rebound to 61.8% retracement at 1.3721. And, the eventual depth of the fall from 1.4376, and the chance of hitting 1.1946 low, will depend on the strength of the interim corrective rebound from 1.2661.

Daily Pivots: (S1) 0.9886; (P) 0.9938; (R1) 0.9981; More...

USD/CHF's breach of 0.9908 suggests fall resumption. Intraday bias is now on the downside for 0.9848 support. Firm break there will confirm near term reversal and target target 61.8% retracement of 0.9541 to 1.0128 at 0.9765. On the upside, though, break of 1.0008 resistance will indicate that the pull back from 1.0128 has completed. Intraday bias will be turned back to the upside for retesting 1.0128 high.

In the bigger picture, rise from 0.9541 could have topped at 1.0128. But as long as 0.9541 support holds, we'd still expect rise from 0.9186 to resume at a later stage. Break of 1.0128 will target 1.0342 key resistance. However, break of 0.9541 will pave the way back to 0.9186 low.