MNI ASIA MARKETS ANALYSIS - Gold Drops, Copper Pops

US TSYS SUMMARY: Cash Curve Flattens In Holiday-Shortened Session

Treasuries traded within a 4-tick range for almost the entire holiday-shortened Friday session, with no macro or headline drivers. A late rally brought Tsys close to session highs as we headed into the early close.

• Bull flattening in the curve - largely reflecting catch-up from the Thursday cash holiday. This as equities continued to edge higher in orderly fashion and the dollar weakened.
• The 2-Yr yield is down 0.6bps at 0.1524%, 5-Yr is down 2.5bps at 0.3687%, 10-Yr is down 3.6bps at 0.8455%, and 30-Yr is down 4.5bps at 1.5784%.
• Dec 10-Yr futures (TY) up 7.5/32 at 138-16 (L: 138-07.5 / H: 138-17.5). Note TYH1 has taken the volume lead on actives over TYZ0, with the roll basically complete ahead of Monday's first notice.
• Data resumes on Monday with MNI Chicago PMI, though no scheduled Fed speakers or Tsy supply (there are bill auctions).

EGBs-GILTS CASH CLOSE: Curves Flat With Focus On Weekend Brexit Talks

Friday proves a fairly subdued session for European fixed income, reflecting a US market half-day and relatively limited macro/headline cues.

• Periphery EGB spreads tightened slightly, while the UK and German cash curves finished relatively flat after weakening for most of the session.
• The biggest headlines were Brexit-related and the weekend will be all about the negotiations. EU's Barnier headed to London Friday evening for further talks.
• On Monday we get flash inflation data in the Eurozone and an appearance by ECB's Lagarde. No EGB/Gilt supply though.

Closing Levels / 10-Yr Periphery EGB Spreads:

• Germany: The 2-Yr yield is up 0.1bps at -0.755%, 5-Yr is down 0.5bps at -0.77%, 10-Yr is unchanged at -0.588%, and 30-Yr is down 0.4bps at -0.182%.
  
• UK: The 2-Yr yield is down 0.3bps at -0.043%, 5-Yr is down 0.3bps at -0.011%, 10-Yr is up 0.3bps at 0.284%, and 30-Yr is down 0.4bps at 0.831%.
• Italian BTP spread down 0.7bps at 118.2bps
• Spanish bond spread up 0.7bps at 64.6bps
• Portuguese PGB spread up 0.4bps at 60.1bps
• Greek bond spread down 1.8bps at 124bps

EUROPE SUMMARY: Early 2021 Downside Bund/Schatz Theme Continues

Friday's options flow included:

• LZ0 99.875/100.00/100.125cl fly, sold at 7.5 in 6k
• LZ0 99.875/100.00/100.125 c1x3x2 sold at 7.25 in 3k
• 0LH1/2LH1 99.875 c calendar, bought the 1yr for 1.25 in 4k
• 0LM1 99.625/99.75/100.125/100.25 broken call condor bought for ~10.25 in 5k
• RXG1 175.50p vs 179.50/180.5cs, bought the put for 10 in 1.1k
• RXH1 175.00 put, bought from from 42.5 up to 43.5 in 15k
• DUF1 112.50/60 cs vs 112.30/112.20ps, bought the put spread for 1 in 8k
• DUG1 112.40/30/20 put fly bought for 2.25 in 17.5k

FOREX: Sterling Sours As Another Day Passes With No Progress

After starting the session holding its ground, GBP sank into the London close as markets looked skeptically at the odds of a near-term breakthrough in ongoing Brexit negotiations. With Barnier set to meet fishing minister earlier in the session, hopes were high that some sort of progress could be made before the weekend - but these hopes were soon dashed as reports suggested the UK had dismissed out of hand the EU's latest proposal on fisheries. GBP/USD briefly sank below the $1.33 handle, with GBP underperforming all others in G10.

Elsewhere, partial closures in the US sapped volumes and liquidity out of markets, prompting a general pullback in the USD, with antipodean currencies the main beneficiaries. AUD, NZD and EUR were the strongest on Friday, GBP, USD and CHF the weakest.

Focus in the coming week turns to MNI Chicago PMI, November job reports from the US & Canada and the RBA rate decision.

OPTIONS: Expiries for Nov30 NY cut 1000ET (Source DTCC)

EUR/USD: $1.1800(E502mln), $1.1900(E808mln), $1.1950-65(E511mln)

USD/JPY: Y103.00($882mln), Y104.00($572mln), Y105.25($576mln)

AUD/USD: $0.7400(A$777mln)

TECHS: Key Price Signal Summary

• E-Mini S&P are bullish with attention on the 3668.00, Nov 9 high. EUROSTOXX50 edges higher, the focus is on 3553.05 next, Feb 27 high.
• Gold remains heavy. $1800.0 support is still exposed, a break would open $1763.5 , 50.0% of the Mar - Aug rally. Brent (G1) is eyeing the psychological $50.00. WTI (F1) targets $48.07 next, 0.764 proj of Apr - Aug rally from Nov 2 low. Copper (H1) is up sharply and approaching a bull channel resistance at $342.13, drawn off the Oct 2 low.
• In the FX space, EURUSD targets this year's high print of 1.2011, Sep 1 high. USDJPY key support lies at 103.18, Nov 11 low. Initial support is at 103.65, Nov 18 low. The key EURGBP trendline resistance drawn off the Sep 11 high, intersects at 0.9000. The bear trigger is 0.8861, Nov 12 low. The major hurdle for bulls in Cable remains 1.3421, a multi-year trendline drawn off the Nov 2007 high.
• Key FI resistance levels: Bund fut: 175.73, Nov 20 high and 176.08, 76.4% of the Nov 4 - 11 sell-off. Gilts (H1): 134.70, 1.00 proj of the Nov 16 - 23 rally from Nov 25 low. Treasuries (Z0): 138-20, Nov 20 high.

EQUITIES: Stocks Stand Pat in Truncated Trading Day

US indices traded broadly flat Friday, with the half-session due to Thanksgiving sapping volumes and market activity. That said, the NASDAQ and tech sector in general outperformed, with the sell-tech strategy that followed recent vaccine announcements partially reversed.

Across Europe, trade was more positive, with most continental bourses closing higher. Spain's IBEX-35 outperformed while the UK's FTSE-100 lagged.

COMMODITIES: Gold Drops, Copper Pops

Copper futures cleared the 2017 highs this morning to mark the best level for the metal since 2013. Stops appear to have been triggered on the way through 2017's 332.20, with support stemming from further evidence of Chinese demand, as Shanghai stockpiles continue to deplete, falling to their lowest levels in over 5 years.

Meanwhile, sizeable sell orders amid a thin market put spot gold prices under pressure. Gold slipped through major support at the 200-dma of 1799.83 which succeeded in propping up prices earlier in the week, pressing the metal to its lowest levels since July.