Markets are trading sideways as news of a possible rollback of US tariffs varies greatly from day to day.

US-China negotiations are currently stuck two sticking points. On one hand US is demanding a detailed plan for as much as $50Bln of China agricultural annual imports; on the other China would like US to agree on tariffs rollback.

Asian markets have bounced overnight on the latest comments from White House economic adviser Kudlow said that the deal is “coming down to the short strokes”. CNY is still trading above 7.0. Separately, Kudlow said the USTR report tied to possible tariffs on European automakers went to Donald Trump Wednesday. He’s still considering it.

Interest rate sensitive sectors were broadly bid yesterday with real estate the best performer. In focus the Auto sector, down max to 150bps intraday, with Daimler sharply down-performing, around 3%, during its Capital Market Day, announcing cost reduction and decline in demand in the core markets of Europe and the USA in the short to medium term (profit warning).

In the past 5 days, interest rate spreads have been widening in Peripheral countries, respectively Portugal, Italy, Spain following increased political risk in Spain. After hovering around 130bps, BTP-Bund spread is up 18% in November, approaching 160bps. But higher yield doesn’t guarantee investors’ appetite, as demand slumped at a seven-year auction to the lowest in 14 months on Wednesday.

Scholz, Germany Finance Minister, announced that there is no need to boost the Countries fiscal spending.

One-month implied volatility in the GBP currency has surged the most since the June 2016 Brexit referendum.

Farage rejected Tory calls to support Johnson. The pound earlier gained on speculation Farage could pull out of more seats, but fell after he confirmed he would not. Farage says he won’t give Johnson any more help and will compete with Tories to win Labour-held seats (bearish for pound).

Macro-wise, along with a small positive GDP data in Germany (we remind you NO technical recession, although very weak patch as it was up just 0.08%), Q3 preliminary Euro-area GDP QoQ came at 0.2% (in line). US Producers price index still confirms that inflation weakness is going to be persistent, with depressed good prices by the deflationary effects of the strong dollar.

Interesting to note that we start to get some evidence of inflows into Europe as we extensively discussed in our newsletter.

European flows YTS in 2019

Oil price has been quite strong over the past two days despite a weak market.OPEC’s executive, Barkindo, sees potential for a big downward revision in shale output next year, while an industry report pointed to a drop in US inventories (both bullish for oil price). These are in contrast with previous OPEC+ reports that confirm surplus in early 2020, more properly output to exceed demand by 645,000 barrels a day in first half 2020. Oil price was up 1% in the last session.

A final note on another fund that is going bust, Woodford Equity Income Fund, a 4bn$ frozen flagship fund. According to an FT article, the Private Equity that is managing the liquidation has advised that investors could lose up to 43% worst case, or 32% base case scenario, after the liquidation process is completed.