MNI EUROPEAN MARKETS ANALYSIS: Equities Bid As Dec Gets Underway

BOND SUMMARY: Narrow Ranges for Core FI Overnight

Tuesday made for another tight Asia-Pac session for T-Notes, last unch. at 138-05+, with a rally in global equity markets keeping a lid on the space during the session. The cash space saw some marginal twist steepening. Eurodollar futures sit -0.25 to +0.5 through the reds, with a ~22K lift in EDH2 providing the dominant flow during Asia-Pac hours. As a reminder, Tsy yields finished Monday either side of unchanged, with little in the way of meaningful deviation from prior settlement levels evident across the curve come the bell. Markets continued to trade around the cross currents of vaccine positives vs. short-term economic pain, with sizeable month-end extension estimates/Tsy +ve rebalancing flows also in the mix (although the traditional month-end window saw limited price action, perhaps owing the recent holiday interruptions).

• JGB futures edged higher during Tokyo trade, finishing +7, with the long end underperforming as the curve bull steepened amid supply headwinds in the form of today's 10-Year and Thursday's 30-Year JGB supply. Today's auction saw solid price metrics, with the low price coming in a touch above dealer estimates, alongside a narrow tail, although the cover ratio slipped to the lowest level seen at a 10-Year JGB auction since September (with the September level representing a multi-year low).
• There was no movement for the Aussie bond space over the release of the RBA's latest monetary policy decision. The guidance passage was a cut & paste from the previous statement, while the Bank's language surrounding its purchase scheme and impact on the AUD was very matter of fact. Elsewhere, its tone surrounding the local economy was still cautious, while it flagged the broader risk backdrop as the driver behind the bid in AUD/USD (which is of course well documented). It was also keen to stress the need for an appropriate monetary-fiscal policy mix. All in all, it was very vanilla, with little of note to go off. Now we move to the Governor's appearance in Canberra tomorrow. YM unchanged, XM -2.0 at the bell. Swaps have generally narrowed marginally vs. ACGBs across the curve.

FOREX: USD Retreats As Asia Sees Mild Risk-On Tone

• Dallas Fed President Kaplan spoke briefly during the session, he said the next 3-6 months will be difficult but expects growth in Q4 and Q1.
• In China the yuan strengthened modestly, USD/CNH last down around 0.12% at 6.5672 and matching its lowest level from yesterday. China Caixin PMI for November rose to 54.9, the highest level since 2010. Coupled with yesterday's beat in official manufacturing PMI this indicates a strong recovery from the pandemic.
• AUD/USD rose around 0.3% to 0.7365, the pair shrugged off an unchanged, vanilla RBA rate announcement. The pair has gradually moved higher during Asia hours as the greenback weakens and broader equity markets rally at the start of a new month. There was also some positive news on the local COVID front, with Western Australia set to reopen its borders to Victoria and NSW on Tuesday 8 December.
• Looking to Europe, GBP and EUR both moved higher against the dollar to the tune of approximately 0.25%, GBP is supported by positive sounding Brexit comments from Ireland's Prime Minister Martin.

FOREX OPTIONS: Expiries for Dec1 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1700-20(E1.2bln), $1.1850-60(E545mln), $1.1900(E509mln), $1.1950(E642mln), $1.2000-10(E995mln)
• USD/JPY: Y103.00($504mln), Y104.85-00($1.0bln)
• GBP/USD $1.2800(Gbp511mln), $1.3215-30(Gbp545mln)
• EUR/GBP: Gbp0.8900(E630mln)
• USD/CNY: Cny6.6275($574mln-USD puts)

EQUITIES: Comfortably Bid As December Trading Gets Underway

Tuesday represented a Asia-Pac session for equity markets as participants put money to work during the first trading session of December. The risk-positive tone was aided by a 10-Year high in the Chinese Caixin manufacturing PMI although the bid was in play well before then.

• Late Monday saw some generally positive news flow on the vaccine front:
• Moderna requested clearance for its coronavirus vaccine in the U.S.
• Elsewhere, a CNBC source report noted that the FAA said it supported the "first mass air shipment" of coronavirus vaccines last week.
• This came after Wall St.'s major indices recovered from their respective Monday troughs.
• Nikkei 225 +1.3%, Hang Seng +1.0%, CSI 300 +1.9%, ASX 200 +1.1%.
• S&P 500 futures +30, DJIA futures +238, NASDAQ 100 futures +101.

GOLD: Familiar Themes, Familiar Levels

Gold managed to bounce from previously outlined technical support on Monday ($1,763.5/oz) as U.S. real yields edged lower. This allowed bullion to overcome the DXY's correction from worst levels of the day. Elsewhere, ETF holdings of gold have continued their recent slide. Little has changed on the fundamental and technical fronts with the aforementioned drivers continuing to come under scrutiny. Spot last deals at $1,785/oz, $10/oz or so firmer on the day.

OIL: Drama

The broader risk-positive tone has allowed the major crude benchmarks to hold within their respective recent ranges, with WTI & Brent ~$0.40 lower vs. settlement levels at typing.

• Monday saw the OPEC ministerial meeting extended for 48 hours as the cartel looks to form a consensus ahead of the now delayed OPEC+ ministerial meeting. BBG reports noted that "ministers are discussing whether to increase production in January as planned or maintain the cuts that have helped create a rally in oil prices." Earlier in the day there seemed to be some gravitation towards a 3-month extension of the current production levels, although it seems that tensions were running high during Monday's discussions. Still, general market consensus points to some form of a deal being struck in the coming days.