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Notes/Observations

• Positive development on Brexit and Italian budget fronts
• Italy ruling coalition appeared to have softened its budget stance to avoid a clash with the EU
• EU Leaders ratify the Brexit Withdrawal; deal still had to be voted in the UK parliament and there was a chance lawmakers will reject it
• German Nov IFO business climate index came in below market expectations and October numbers
• G20 meeting to be held in Argentina from Nov 30th to Dec 1st.

Asia:

• BoJ, PBoC and BoK held the 10th tripartite governors' meeting: Governors exchanged views on recent economic and financial developments in the 3 countries
• China PBoC Open Market Operation (OMO) skipped its open market operation for the 22nd straight session

Europe:

• EU leaders approve agreement on the UK's withdrawal and future relations - insisting it is the "best and only deal possible" (as expected)
• EU's Tusk: EU council endorsed Brexit agreement, we are determined to have as close as possible a partnership wiht the UK
• EU's Juncker: This is the best deal possible , this is the only deal possible
• Invites House of Commons to consider this is the best deal possible; the deal on Gibraltar shows solidarity with Spain
• EU Chief Negotiator Barnier: Reached a fair and balanced deal , this is the best deal possible. Agreement must now be ratified , it's time for everyone to take their responsibilities. Those who think we will get a better deal if this is rejected will be disappointed. Reiterates that if the deal is rejected by UK parliament this is the only deal possible
• Spain PM Sanchez: Brexit Withdrawal Treaty and political declaration strengthen Spain's position with Gibraltar

Deal shows solidarity with Spain

• PM May reiterated that the next weeks were crucial for country's future, would be one of the most significant votes in Parliament for many years Stressed that the best Brexit deal was achieved and in the national interest, there would be no other deal negotiated or second referendum
• Northern Ireland's DUP Leader Foster (part of coalition): if UK parliament accepts PM May's Brexit deal the DUP will review confidence & supply agreement
• UK Labour Leader Corbyn (opposition) stated that his party will oppose the Brexit deal in parliament. Favors head to head debate with PM May regarding her Brexit deal
• Italy Dep PM Salvini stated over the weekend that the gvt's budget deficit target for next year might change , if there was a budget that made the country grow it could be 2.2 or 2.6% (Note: Other reports over the weekend noted that Dep PM Salvini threatened to bring down the govt if the coalitions budget deficit target was changed ; "the 2.4% deficit target could not be changed otherwise I will bring down the govt")
• Russia seized Ukraine ships near annexed Crimea after firing on them. Ukraine President Poroshenko to asked Parliament to discuss martial law on Monday after Russia attacked Navy ships on the Black Sea

Americas:

• Mastercard projected Black Friday sales total $23B, +9% y/y; Sees Nov 1st to Dec 24th sales +5% y/y - US press
• ShopperTrak data finds 1.7% decline in shopper visits to US retail stores on Black Friday; 1% decline over Thursday-Friday two day period

Macro

• (IT) Italy: Reports that Deputy Prime Minister Salvini signaled that he may be open to changes to the much disputed deficit target for next year has seen Italian assets rally. Asked about the 2.4% target, Salvini said: "I think nobody is fixated on this, if there is a budget which makes the country grow, it could be 2.2% or 2.6%". This alone doesn't signal that there will be changes that find the approval of the European Commission, as part of the dispute centered around the unrealistic growth targets, that meant the 2.4% target would very likely be an overshoot.
• (UK) United Kingdom: The EU-27 approved a deal on the UK's exit terms and future relations - which has been left detail-light and subject to a lot of further debate in a transition period. Prime Minister May is now trying to sell it to parliament and to the public, warning that rejecting it would lead to "division and uncertainty." It remains highly unpopular, with both Eurosceptics and Europhiles alike. Both camps don't like the fact that the UK will have to abide by rules and regulations set by the EU without having a say in them. Parliament is likely to vote on it the week of December 10, and the debate during the interim period will be intense.
• (DE) Germany: German Ifo business climate for November ticked down to 102.0 from 102.9 in October. Forward looking indicators continue to suggest that the economic expansion has peaked. Yet more evidence then that global trade tensions are having a bigger impact on the German economy than was previously expected.

SPEAKERS/FIXED INCOME/FX/COMMODITIES/ERRATUM

Equities

• Indices [Stoxx600 +1.3% at 358.4, FTSE +1.2% at 7032, DAX +1.2% at 11325, CAC-40 +1.4% at 5013, IBEX-35 +1.8% at 9071, FTSE MIB +3.0% at 19265, SMI +1.3% at 8962, S&P 500 Futures +1.2%]
• Market Focal Points/Key Themes: European Indices trade higher across the board with the majority of Indices trading over 1% higher after a positive session in Asia and stronger futures in the US. The FTSE MIB outperforms following reports Italy is set to compromise on its budget targets. In Brexit developments the EU approved a deal with the UK helping add to overall sentiment. On the corporate front Logitech trade higher after terminating acquisition talks with Plantronics; Faroe Petroleum trades higher following a cash offer from DNO International; Infineon is another notable riser after Denso takes a stake; Flybe rises over 20% after British Airways expresses an interest after it emerged Virgin Atlantic expressed interest last week. Elsewhere Datagroup trades higher following preliminary results while Zalando also pushes higher on positive Black Friday statistics. Looking ahead notable earners include Diana Shipping, and Jinkosolar.
• Consumer discretionary: Zalando [ZAL.DE] +4.5% (Black Friday statistics), Aryzta [ARYN.CH] -11% (earnings; affirms outlook), Flybe Group [FLYB.UK] +23%, International Consolidated Airlines Group [IAG.UK] +2.5% (IAG reportedly also has interest to acquire company), Lufthansa [LHA.DE] +2.5% (CEO interview; analyst action)
• Consumer staples: Eurofins Scientific [EFR.FR] +5.5% (affirms outlook)
• Energy: Faroe Petroleum [FPM.UK] +20%, DNO International [DNO.NO] +4.5% (DNO announces cash offer for Faroe Petroleum)
• Financials: Eurobank Ergasias [EUROB.GA] +20%, Grivalia Properties [GRIB.GR] +12.9% (Eurobank Ergasias merger with Grivalia Properties)
• Healthcare: AstraZeneka [AZN.UK] +0.5% (announces FDA grants Fasenra ODD for EGPA), Vectura Group [VEC.UK] -8% (study did not meet primary endpoints)
• Industrials: Saint-Gobain [SGO.FR] +5% (launches transformation & growth program; appoints COO and CFO), CEVA Logistics [CEVA.CH] +1% (acquisition; raises medium-term outlook; appoints new COO)
• Technology: Logitech International [LOGN.CH] +4.5% (terminated acquisition talks with Plantronics), Infineon [IFX.DE] +3% (Denso acquires mid double-digit million euro stake in Infineon), Datagroup [D6H.DE] +7% (prelim FY18 earnings)

Speakers

• ECB's Praet (Belgium, chief Economist) reiterated stance that significant monetary stimulus was still needed; underlying strength of region's economy continued to support confidence of achieving a sustained convergence of inflation. Reiterated that recent developments point to some loss of growth momentum; protectionism and financial market volatility were creating headwinds. Reinvestments would help maintain ample liquidity - Italy PM Conte: Assessing reform impact before next step in EU talks. Had no comment on realigning the decimal points on budget deficit to GDP ratio
• Italy Dep PM Di Maio (5-Star Party): reduction in budget deficit target is not a problem as long as budget measures remain the same. Wanted to talk with EU about further investments
• Italy Northern League official: Looking at changes to 2019 deficit target; Fin Min Tria might present different numbers at the meeting;
• Italy ruling coalition said to be discussing lowering 2019 budget deficit to GDP target from 2.4% to 2.0-2.1%
• Italy official Siri (adviser to Dep PM Salvini): a little fine-tuning of budget possible
• UK PM May said to be planning Parliamentary vote on Brexit deal for Dec 12th
• UK Brexit Min Barclay stated that needed a Brexit deal to give business certainty. He conceded that it would be a tough task to get deal through Parliament
• Bank of Spain (BOS) said to want lenders to limit dividends
• German IFO Economists commented that was seeing signs that domestic economy had clearly cooled due to uncertainty in all sectors due to Brexit and trade conflicts. It did see increasing signs that there could be an economic turnaround
• BOJ Gov Kuroda testified in Parliament and reiterated that BOJ needs to continue its easing persistently' bond purchases aimed at achieving price target and not to finance govt debt
• Thailand Central Bank forecasted that 2018 GDP growth staying above 4%
• Saudi Arabia oil production said to hit 11M bpd in month (record level)

Currencies/Fixed Income

• The USD was mixed against the major pairs. The greenback likely to take its cue from the upcoming release of FOMC minutes this week. Some market participants believe the Fed minutes would lean towards the dovish side.
• The EUR/USD was higher by 0.3% as Italy appeared to be softening itsf budget stance towards the EU. Italian officials from both sides of the ruling coalition have indicated that the 2019 budget deficit to GDP ratio could be lowered from the current 2.4% ceiling. Italian bond yields were lower to test multi-month lows. The 10-year BTP was below 3.22% just ahead of EU mid-session (compared to Friday's close of 3.40%).
• GBP/USD was little fazed by fact that the EU ratified the Brexit Withdrawal Treaty. The deal still had to be voted in the UK parliament and there was a chance lawmakers will reject it

Economic Data

• (FI) Finland Oct PPI M/M: 0.3% v 0.1% prior; Y/Y: 5.8% v 5.9% prior
• (FI) Finland Oct Preliminary Retail Sales Volume Y/Y: +0.8 v -0.8% prior
• (DK) Denmark Oct Retail Sales M/M: -0.7% v -0.1%e; Y/Y: 2.5% v 0.8% prior
• (CZ) Czech Nov Consumer Confidence Index: 4.5 v 9.5 prior; Business Confidence: 17.4 v 16.8 prior; Composite: (Consumer & Business Confidence): 14.8 v 15.4 prior
• (HK) Hong Kong Oct Trade Balance (HKD): -44.5B v -48.6Be; Exports Y/Y: 14.6% v 9.4%e; Imports Y/Y: 13.1% v 10.2%e
• (DE) Germany Nov IFO Business Climate: 102.0 v 102.3e; Current Assessment: 105.4 v 105.3e; Expectations Survey: 98.7 v 99.2e
• (CH) Swiss Weekly Total Sight Deposits (CHF): 577.3B v 577.3B prior; Domestic Sight Deposits: 472.7B v 474.5B prior
• (PL) Poland Q3 Unemployment Rate: 3.8% v 3.5%e
• Oct BBA Loans for House Purchase: 39.7K v 38.2Ke
• (BR) Brazil Nov FGV Consumer Confidence: 93.2 v 86.1 prior

Fixed Income Issuance

• (NO) Norway sold NOK3.0B vs. NOK3.0B indicated in 6-month bills; Avg Yield: 0.82% v 0.79% prior; Bid-to-cover: 2.93x v 2.89x prior

Looking Ahead

• (IT) Italy Debt Agency (Tesoro) announces upcoming BTP bond auction for Thursday, Nov 29th
• 05:25 (BR) Brazil Central Bank Weekly Economists Survey
• 05:30 (DE) Germany to sell €2.0B in 3-Month BuBills
• 06:00 (RO) Romania to sell Bills
• 06:00 (RO) Romania to sell Bonds
• 06:00 (IL) Israel to sell Bonds
• 06:30 (TR) Turkey Nov Real Sector Confidence (Seasonally adj): No est v 91.1 prior; Real Sector Confidence NSA (unadj): No est v 87.6 prior
• 06:30 (TR) Turkey Nov Capacity Utilization: No est v 75.4% prior
• 06:45 (US) Daily Libor Fixing
• 07:00 (IN) India announces details of upcoming bond sale (held on Fridays)
• 07:00 (BR) Brazil Oct Total Federal Debt (BRL): No est v 3.779T prior
• 07:00 (AT) ECB's Nowotny (Austria) in Vienna
• 08:10 (UK) Baltic Dry Bulk Index
• 08:30 (US) Oct Chicago Fed National Activity Index: 0.18e v 0.17 prior
• 08:50 (FR) France Debt Agency (AFT) to sell combined €4.0-5.2B in 3-month, 6-month and 12-month BTF Bills
• 09:00 (IL) Israel Central Bank (BOI) Interest Rate Decision: Expected to leave Base Rate unchanged at 0.10%
• 09:00 (MX) Mexico Sept Retail Sales M/M: +0.1%e v -0.3% prior; Y/Y: 4.0%e v 3.9% prior
• 09:00 (EU) ECB's Draghi in EU parliament in Brussels
• 09:30 (EU) ECB announces Covered-Bond Purchases
• 10:30 (US) Nov Dallas Fed Manufacturing Activity: 24.5e v 29.4 prior
• 11:00 (EU) ECB's Draghi at ECPN meeting in Brussels
• 13:30 (UK) BOE's Gov Carney with former Fed Chairman Greenspan
• 14:00 (AR) Argentina Sept Shop Center Sales Y/Y: No est v -2.6% prior; Supermarket Sales Y/Y: No est v -4.2% prior
• 16:00 (KR) South Korea Nov Consumer Confidence: No est v 99.5 prior
• 16:00 (US) Weekly crop report
• 16:45 (NZ) New Zealand Oct Trade Balance (NZD): -0.9Be v -1.6B prior; Exports: 4.9Be v 4.3B prior; Imports: 5.7Be v 5.9B prior
• 17:30 (AU) Australiay ANZ Roy Morgan Weekly Consumer Confidence Index: No est v 117.8 prior
• 18:50 (JP) Japan Oct PPI Services Y/Y: 1.2%e v 1.2% prior
• 20:30 (CN) China Oct Industrial Profits Y/Y: No est v 4.1% prior
• 22:30 (TH) Thailand Oct manufacturing Production Index: +3.3%e v -2.6% prior; Capacity Utilization: N est v 66.4% prior
• 22:00 (TH) Thailand Central Bank to sell combined THB70B in 3-month and 6-month bills
• 22:30 (HK) Hong Kong to sell 3-month, 6-month and 12-month bills
• 22:35 (JP) Japan to sell 40-year JGB bond

GBPAUD continues to trade in the red today, with the RSI in the four-hour chart warning that further losses could follow up as the indicator has already pierced its 50 neutral threshold to the downside, while the MACD keeps losing momentum below its red signal line, providing an additional bearish signal.

A leg lower would violate the symmetrical triangle, potentially bringing more pressure to the market. In this case, traders could look for support between 1.7570 and 1.7520; a recently approached area. Beneath that, attention would shift straight down to the 1.7475 bottom, the lowest mark reached in three months. If the latter proves a weak obstacle, the 0.7400 psychological level could come under the spotlight.

Alternatively a reversal to the upside may stretch until the upper line of the triangle, around 1.7755. A break higher and above the 1.7816 peak could confirm that the uptrend off 1.7475 is still in progress. A steeper rally may also break strong support around 1.7850, opening the door for the 1.7933 barrier.

To sum up, as the triangle is nearing completion, a break below or above could be the start of a significant move, with the longer-term trend being bearish while in the short-term, price has been recovering.

The EUR/USD pair on Monday morning continued the surge, which it began on Friday. By the middle of the day's trading session the currency pair had reached the 1.1380 level.

At that level three technical levels of significance were providing resistance. Namely, the 55, 100 and 200-hour simple moving averages were located near the 1.1380 level. In addition, exactly at the 1.1380 level the new weekly pivot point was located at.

The pair has two possible future scenarios. It will either break the technical resistance and surge up to the 1.14 level, or it will bounce off of it and resume its decline. In the case of a decline there are no technical support levels as low as the 1.13 level.

The Eurozone single currency has been depreciating against the Australian Dollar since the exchange rate made a U-turn from a resistance level formed by the upper boundary of a descending channel at 1.6359.

The currency pair was trading near the lower boundary of a dominant ascending channel at 1.5667 during the Asian session on Monday.

From a technical point, a breakout through the bottom border of the dominant channel pattern is likely to occur within this session.

However, a support level formed by the weekly S1 at 1.5580 could provide support for the currency exchange rate during the following trading hours.

The common European currency has been appreciating against the Canadian Dollar in a short-term ascending channel pattern. The bullish momentum began on October 25 after the currency pair tested a swing low of 1.4750.

As apparent on the chart, the exchange rate has breached the 50-, 100-, and 200-hour SMAs. Most likely, the pair will continue to go down and could target a support cluster formed by the weekly and the monthly PPs at 1.4931 within this session.

If this support cluster holds, it is likely that the EUR/CAD currency exchange rate will aim at November swing high of 1.5148 during the following trading sessions.

Gold has advanced above the 23.6% Fibonacci retracement level of the upward movement from 1160 to 1243, near 1223, while it currently stands above the 20- and 40-simple moving averages (SMAs) in the 4-hour chart. However, the price has held in a neutral mode over the last week, after it jumps above the 1220 barrier.

Zooming to the indicators, the RSI is moving higher in the positive area as well as the stochastic oscillator is approaching the overbought zone.

The next target to watch to the upside is the 1230 resistance, taken from the highs on November 21, while even higher the area within 1236 – 1239 would be strong resistance for the bulls. Rising above this region the yellow metal could hit the three-month high of 1243.

A move to the downside would turn the attention to the immediate support level of 1220, penetrating the 23.6% Fibonacci mark. Further losses would push the price until the 38.2% Fibonacci of 1211, before meeting again the rising trend line in the short-term.

Overall, gold prices remain above the rising trend line, which has been holding since August 16.

Oil prices on Monday clawed back some losses from a nearly 8 percent plunge the previous session, with Brent jumping back above $60 per barrel, but sentiment remained weak amid a broad sell-off in financial markets in past weeks. Front-month Brent crude oil futures LCOc1 rose $1.31, or 2.2 percent, to $60.11 per barrel by 0643 GMT. U.S. West Texas Intermediate (WTI) crude futures CLc1, were up 66 cents, or 1.3 percent, at $51.08 per barrel. The gains partly made up for Friday’s selloff, which traders have already dubbed ‘Black Friday’. Reacting to Friday’s falls in Brent and WTI, China’s Shanghai crude futures on Monday ISCcv1 fell by 5 percent, hitting their daily downside-limit.

The downward pressure comes from surging supply and a slowdown in demand growth which is expected to result in an oil supply overhang by next year. “2019 will be a choppy year for the oil market as questions surrounding the prospect of a slowing global economy and a supply surplus are expected to increase,” analysts at Fitch Solutions said on Monday. Fitch said that even an expected supply cut led by the Organization of the Petroleum Exporting Countries (OPEC) following an official meeting on Dec. 6 “may not be enough to counteract the bearish forces.”

Oil markets are also being affected by a downturn in wider financial markets. Oil markets have also been weighed down by a strong U.S.-dollar .DXY, which has surged against most other currencies this year, thanks to rising interest rates that have pulled investor money out of other currencies and also assets like oil, which are seen as more risky than the greenback.

On Friday, the US dollar rose against a basket of currency majors amid a decrease in demand for risky assets and drop in oil prices. Investors are concerned about a slowdown in global economic growth. The US dollar index (#DX) closed in the positive zone (+0.25%). This week, financial market participants expect a meeting between the US President, Donald Trump, and China’s leader, Xi Jinping, at the G-20 summit, which will be held from November 30 till December 1.

Investors assess the results of the Brexit negotiations, which took place on Sunday, November 25. 27 EU leaders approved a 600-page Brexit deal. It sets out the terms for the orderly exit of the country from the European Union on March 29, 2019, and the subsequent transition period for two-three years. The EU believes that this agreement is the best option for the UK.

The "black gold" prices are rising after the collapse the day before. At the moment, futures for the WTI crude oil are testing a mark of $51.05 per barrel.

Market Indicators

On Friday, aggressive sales were observed in the US stock market: #SPY (-0.64%), #DIA (-0.75%), #QQQ (-0.72%).

The 10-year US government bonds yield has become stable. Currently, the indicator is at the level of 3.04-3.05%.

The news feed on 2018.11.26:

German IFO business climate index at 11:00 (GMT+2:00).

We also recommend paying attention to the speech by the ECB President Draghi and the Bank of England Governor Carney.

Italian stocks rally on reports of government deficit concessions

US futures are pointing to a stronger open on Monday as more traders return from the Thanksgiving break, facing a market that still looks extremely vulnerable following another sell-off in recent weeks.

Italian stocks have been the outperformer in Europe this morning on reports that the government may consider reducing its deficit target in a bid to avert a disciplinary procedure in Brussels and a backlash in the markets. While both populist coalition partners in government remain determined to deliver on election promises, there is an apparent willingness to negotiate on the deficit target.

This is providing a major boost to risk appetite this morning, lifting Italian stocks and lowering yields. The euro is also ticking a little higher, buoyed by the prospect of a less volatile confrontation between Rome and Brussels, which has hampered growth prospects and raised concerns about the growing populism and euroscepticism in the region.

Sterling higher as EU27 backs Brexit deal

The pound is also a little higher at the start of the week after Theresa May overcame the first – and smallest – hurdle to her Brexit deal getting over the line, as leaders of the EU27 gave it their backing. May now has the simple job of getting it through a parliament that has widely and publicly labelled it a bad deal, with many threatening to vote it down. It should make for an interesting few weeks.

Gold benefiting from weaker USD

Gold has been among the beneficiaries of the improved risk environment this morning. While greater risk appetite is typically associated with softer Gold prices, the weaker dollar – on the back of a rising euro and pound - is lifting the yellow metal in European trade. This could become a common theme over the coming months, although the pound may be extremely volatile in that time with more twists likely ahead.

Oil pares Friday's losses

Oil is also making decent gains at the start of the week, up around 1.5% on the day, although this pales in comparison to the losses seen on Friday as traders question whether OPEC+ will follow through on an production cut next week.

Trump has been publicly pressuring the group to let prices fall while praising Saudi Arabia for its role in the falls, something sceptics have tied to the President apparently turning a blind eye to the country's role in the Khashoggi murder. There is perhaps a belief that the Saudi's will avoid taking measures to significantly raise prices next week in a bid to appease Trump, although I remain sceptical this will happen.

The pair has bounced from 1.1320 zone and it is heading towards W H3 – 1.1388 and W H4 1.1410. If we see 1.1410 that could be a selling opportunity if the price is still range bound. Selling from 1.1410 should make a retest of 1.1370 before any move lower. However a H1 bullish close above 1.1410 will see the EUR/USD up to 1.1436 and possibly 1.1475. A drop below 1.1320 targets 1.1290 and 1.1250. So watch for rejections or breakout opportunities.