Equities Are Heavy And The Dollar Softer To Start New Week

Overview: Month-end profit-taking saw Asia Pacific shares tumble earlier today. Most markets are off 1-2.5% today after the MSCI Asia Pacific Index rose 2.25% last week. European shares are mixed, but little changed.US shares are also trading lower. The energy sector is being dragged lower by the failure of OPEC+ to signal an agreement to extend cuts, but the formal meeting continues into tomorrow as well. After testing $46.25 last week, WTI for January delivery is Benchmark yields are slightly firmer, leaving the US 10-year near 0.84%, and the peripheral European yields hovering above record lows. The dollar is mostly softer against the majors, led by the Scandis. The euro extended last week's gains and edges closer to the $1.20 level. Ahead of the RBA meeting, the Australian dollar struggles near $0.7400.Among the emerging market currencies, the ones from the Asia Pacific regions are lower, and the pullback in oil prices has the Russian ruble and Mexican peso joining them. Central and Eastern European currencies are doing better. Meanwhile, gold's slide was extended to nearly $1764, which is roughly the halfway mark of this year's range.  

Asia Pacific

China's November PMI was stronger than expected. The manufacturing component rose to 52.1 from 51.4. The non-manufacturing component edged up to 56.4 from 56.2. An extra working day and a rush to complete projects ahead of year-end, which some cite in explanation for the overshoot, were "known unknowns."The Caixin version, which covers smaller companies, will be reported first thing tomorrow. For the record, the composite is at 55.7, the fourth consecutive increase. A year ago, it was at 53.7.  

Japan's manufacturing sector continues to rebound as well.  Industrial production rose 3.8% in October, well above the Bloomberg survey's median forecast for a 2.4% gain. Output rose 3.9% in September. Japanese shoppers also returned in October. Retail sales rose by 0.4%, a little less than expected, but better than September's 0.1% decline.  

The Reserve Bank of Australia meets tomorrow. No one expects it to change policy after last month's decision to cut rates and buy longer-term bonds. Instead, the focus is on Governor Lowe's comments on Wednesday and the first estimate for Q3 GDP (Bloomberg survey median forecast is for a 2.4% quarter-over-quarter expansion after a 7% contraction in Q2). Separately, Australia-China trade tensions remain elevated, and wine became the last front.  

The largest economies in the region, including China, Japan, India, and South Korea, have a strong oil demand. OPEC+ meets today and tomorrow. The issue is whether it will postpone the increase in quotas that had previously been agreed upon for January. A pre-meeting agreement was not struck over the weekend. With the return of more than a million barrels a day of Libyan output, there may be an abundance of light sweet crude, but the supply of heavy sour appears tighter. Prices appeared to have risen in anticipation that the production restraint would be extended.  

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Read more by Marc on his site Marc to Market.

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