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The first time oil tumbled two weeks ago when it crashed by 7%, Goldman – which has been telling its clients to keep buying crude all the way down from $80 – blamed it on “negative convexity” and other arcane reasons because the far simpler explanation, more supply, less demand, would be just too obvious for its brilliant strategists not to notice.

There was no “negative convexity” – Wall Street’s catch phrase to “”explain anything that can not be otherwise explained -overnight, when oil resumed its plunge, sliding to the lowest in a year and dropping below $51 after Saudi Arabia signaled its output reached a record high, while growing U.S. inventories stoked fresh concerns over a global supply glut.

WTI futures dropped as much as 5.4% from the Wednesday settlement (there was no Thanksgiving settlement price) and were set for a seventh weekly decline, dropping as low as $51.62/barrel the lowest price in one year. Brent dropped below $60/barrel for the first time since October 2017.

And with Iranian export restrictions lifted after Trump provided most of its clients oil import waivers, traders are now focused on growing risks of a new glut of crude: Saudi Arabia’s oil minister said Thursday production from the world’s largest exporter climbed further this month after a surge in October, and U.S. stockpiles have risen for nine straight weeks.

Saudi Arabia is producing oil in excess of 10.7 million barrels a day, more than in recent years, Energy Minister Khalid Al-Falih said, giving the strongest indication yet that the kingdom has boosted output to record levels.

“We were at 10.7-something in October, and we are above that. We will know exactly when the month is over,” Al-Falih said. “We will not flood the market. We will not send oil that customers don’t need. And we’ve started doing that in December,and I expect  we’ll continue doing that into the new year.”

At the same time, the world’s biggest exporter said it would respond to demand for oil and won’t oversupply the market, he told reporters on Thursday at the mining complex of Wa’ad Al Shamal in northwestern Saudi Arabia. Why the hedge? Because demand for Saudi crude may be lower in January than in December, he said.

Saudi Arabia set an oil production record of 10.72 million barrels a day in November 2016, just before the kingdom led a group of OPEC and non-OPEC countries in cutting output. The surge in output this month will come into the spotlight when  producers meet on Dec. 6 in Vienna to discuss their 2019 output strategy. Riyadh has already indicated it supports a deep  production cut and as a first step will reduce its shipments by 500,000 barrels a day in December from November levels. “As the year comes to an end, customers tend to cut their liftings,” Al-Falih said. “And of course we’ve seen the waivers on the Iranian sanctions. So, for all we know, January demand from Saudi Arabia will be even lower.”

For now, however, the Saudis are clearly no longer complying with the terms of the 2016 Vienna output cuts, as the nation seeks to grab market share at the lower price points. While Riyadh has signaled it would throttle back production in December, unless OPEC and Russia can reach a new deal to constrain supply at their meeting next month, analysts see the prospect of sustained oversupply in 2019 in a repeat of what happened after the Thanksgiving massacre of 2014, undoing the group’s success over the last two years to drain global inventories.

Earlier this month, OPEC+ warned that markets will probably be oversupplied in 2019 and it would likely have to trim production by roughly 1 million barrels. U.S. stockpiles expanded to the highest level since December 2017 last week and oil producers there are producing at the highest rate since at least March 1983, according to government data.

Quoted by Bloomberg, Hong Sungki, a Seoul-based commodities trader at NH Investment said that “prices have taken a dive as Trump continues to put pressure on OPEC and Saudi Arabia to create a low-price environment, and that has coupled with increasing American stockpiles. A potential game-changer will be what OPEC+ agrees to do in terms of supply.”

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In a tentative indication that superpower influence in Asia is shifting away from the US and to China, two police officers were killed and a security guard wounded after three suicide attackers stormed the Chinese consulate in the diplomatic quarter of downtown Karachi in southern Pakistan amid a series of gunshots and an explosion on Friday, but were killed before they could get into the building in a car packed with explosives, Reuters reported citing police.

Brazen terror pic.twitter.com/Dlqn7V5F6Z

— Syed Talat Hussain (@TalatHussain12) November 23, 2018

All Chinese staff at the consulate were safe, Pakistani Foreign Minister Shah Mahmood Qureshi and China’s foreign ministry said. Notably, this was one of the first times a Chinese offshore mission was the target of local insurgents, not the traditionaly “imperialistic bogeyman”, the United States.

#KarachiAttack pic.twitter.com/aQ245vhPGr

— Syed Talat Hussain (@TalatHussain12) November 23, 2018

As the attack unfolded, an explosion and gunshots rang out in Karachi’s affluent Clifton neighborhood, where the consulate is located, and a plume of smoke rose over the area. Karachi police chief Amir Shaikh said the three attackers came in a car filled with explosives but failed to get inside the heavily fortified compound. It was not clear if the car had exploded.

“They tried to get inside, but the Rangers and police killed one of the terrorists,” Shaikh said.

At that point a gun battle broke out with the two other attackers trying to enter the consulate’s visa section, but they were also killed, he said. At least three cars parked near the embassy were destroyed in a blast. A helicopter hovered over the area for hours after the attack.

pic.twitter.com/Ct9BrT8dEa

— Syed Talat Hussain (@TalatHussain12) November 23, 2018

The attack was claimed by the Baloch Liberation Army (BLA), a separatist insurgent group that opposes Chinese projects in the resource-rich southwestern province of Baluchistan. At least one of the assailants was wearing a suicide vest, police said.

The assault was the most prominent attack in Pakistan against China, a neighbor and close ally which is pouring billions of dollars into Pakistan as part of its Belt and Road initiative. It was also the highest-profile operation in years by the BLA, which mostly wages a low-level insurgency in Baluchistan. The group also calls itself the Balochistan Liberation Army.

Prime Minister Imran Khan ordered an inquiry, with his office calling the attack “part of conspiracy against Pak and China economic and strategic cooperation”.

A spokesman for the BLA confirmed there were three attackers: “They stormed the Chinese embassy in Karachi. China is exploiting our resources,” spokesman Jiand Baloch told Reuters by telephone.

The insurgents are based in Baluchistan, where China has funded development of a deep-water port in the town of Gwadar, and is also funding other projects on a China Pakistan Economic Corridor (CPEC). Baluchistan, which is on the borders of Afghanistan and Iran, has rich mineral and natural gas reserves but is Pakistan’s poorest province.

Separatists have for decades campaigned against the central government and what they see as the unfair exploitation of the province’s resources, in particular natural gas and minerals. The BLA says the state is also taking over land belonging to indigenous people and have targeted Chinese-funded projects.

Neighboring India was quick to condemn the attack, saying there was no justification for such violence.

India and Pakistan regularly blame each other for violence in each other’s countries and Pakistan has long accused India of supporting the Baluchistan insurgents. India denies that. India has for decades accused Pakistan of supporting Islamist separatist militants fighting Indian security forces in the Indian part of the Himalayan region of Kashmir.

“The perpetrators of this heinous attack should be brought to justice expeditiously,” the Indian Foreign Ministry said in a statement.

Raffaello Pantucci, director of international security studies at the London-based Royal United Services Institute for Defense and Security Studies, said the attack was “reflective of a growing China focus by the BLA”. In August, a BLA suicide bomber attacked a bus carrying Chinese mining workers in Baluchistan, wounding five people.

China has in recent years become one of Pakistan’s most important investors and supporters with some $60 billion poured into projects as part of China’s continent-bridging Belt and Road.

The Chinese government’s top diplomat, Wang Yi, said he was “shocked” by the attack and urged Pakistan to prevent any more such incidents. Still, China’s foreign ministry spokesman Geng Shuang, asked if the attack would affect Chinese investment in Pakistan, said China would “continue unswervingly” to work with Pakistan to develop CPEC projects.

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Negotiations over the post-Brexit political statement had appeared to show some progress on Thursday ahead of this weekend’s make-or-break summit of EU leaders, sparking a jump in the pound even as more sign of opposition to May’s draft Brexit deal emerged. Though some might have sensed that there could be trouble ahead when media reports about the statement indicated that it included no references to Gibraltar despite Spain’s threats to blow up the talks if the issue wasn’t addressed.

As it turned out, this read turned out to be correct, as the pound has now reversed nearly all of those gains, and then some, as the EU Sherpas hammering out the ‘political statement’ that will accompany the Brexit withdrawal treaty have apparently reached an impasse over the issue of the post-Brexit treatment of Gibraltar. According to Bloomberg, the sherpas have failed to reach a deal over Gibraltar, jeopardizing the entire statement, and possibly May’s draft Brexit deal itself, which Spain has vowed to oppose unless it receives assurances that it will have the opportunity to bilaterally negotiate with the UK over the issue during the transition period. 

EU sources confirmed that the issue of the post-Brexit treatment of Gibraltar – or rather, the framework for post-Brexit negotiations over the treatment of Gibraltar – remain the only significant issue preventing the statement from being finalized.

Chief EU negotiator Michel Barnier told reporters that both the UK and EU are “working hard” on the compromise over Gibraltar after negotiators failed to finalize a deal during a Friday morning meeting in Brussels. Unlike virtually all of the Brexit-related contretemps until now, the UK isn’t the problem here: the Gibraltar issue must be worked out between Spain and other EU members, after Spain accused the bloc of ‘treachery’ over Gibraltar and threatened to blow up the last stage of talks before this weekend’s summit.

European Commission spokesman Alexander Winterstein emphasized that finding a solution to this issue rests with EU governments.

“Work on this issue, which is one of the issues that is still outstanding, is ongoing,” Winterstein tells reporters in the Brussels headquarters of the commission, the 28-nation European Union’s executive arm.

BuzzFeed reported earlier that Spain has been asking if Article 132 – extending the Brexit transition period – could be changed, then why couldn’t Article 184, which says the EU and UK must do their best to negotiate a future trade deal during the transition.

For everybody who is still confused about why the post-Brexit status of Gibraltar is suddenly such a major sticking point in the negotiations to establish what is merely a non-binding framework for post-Brexit trade talks, the BBC’s Katya Adler offers a thorough explanation in the thread below:

1) How much of a threat is the Spain/Gibraltar question to the #Brexit summit on Sunday? This issue has the potential to be either a) huge or b) to disappear in to a puff of smoke

— katya adler (@BBCkatyaadler) November 23, 2018

2) Spain feels hoodwinked. Gibraltar is of huge national interest (and hurt pride) for many Spaniards. Many at the very least saw an opportunity with #Brexit to gain considerable influence over the Rock

— katya adler (@BBCkatyaadler) November 23, 2018

3) At the beginning of #Brexit negotiations Spain was promised that no decisions could be taken over the future of Gibraltar without consultation with Spain which is why throughout the negotiations process, there have been bilateral Spain-U.K. talks in parallel

— katya adler (@BBCkatyaadler) November 23, 2018

3) At the beginning of #Brexit negotiations Spain was promised that no decisions could be taken over the future of Gibraltar without consultation with Spain which is why throughout the negotiations process, there have been bilateral Spain-U.K. talks in parallel

— katya adler (@BBCkatyaadler) November 23, 2018

4) BUT when EU-U.K. talks reached an impasse over the Irish border backstop, Barnier and his team proposed going into a ‘tunnel’ – blocking out political and media noise to maximise chances of sealing a deal. It is in that tunnel time that Spain feels it was ‘betrayed’

— katya adler (@BBCkatyaadler) November 23, 2018

5) Suddenly the Irish backstop became a U.K.-wide customs area – meaning it was potentially straying in to post-#Brexit trade deal territory. Neither there in that text, nor in the draft of the political declaration on EU-UK future relations was there mention of Gibraltar

— katya adler (@BBCkatyaadler) November 23, 2018

6) Spain feels its positive attitude in the EU-U.K. bilateral talks was now being taken for granted and that their concerns over Gibraltar were being ‘sacrificed’ to give an extra something to the U.K. in negotiations. The European Commission denies this

— katya adler (@BBCkatyaadler) November 23, 2018

7) But Spain is not alone in feeling that their national interests were ignored during ‘tunnel’ negotiations. France, Denmark and the Netherlands feel let down by their EU negotiators over pinning down ongoing fishing rights in U.K. waters after #Brexit for example

— katya adler (@BBCkatyaadler) November 23, 2018

8) Spanish PM Sanchez is hugely pro-European. Sees himself as a bit of a Macron #2. It’s not in his nature to scupper EU plans or an EU summit. Remember when Italy’s Salvini refusedto taken in migrant boats, Sanchez was the first to volunteer help BUT

— katya adler (@BBCkatyaadler) November 23, 2018

9) He’s under a lot of domestic pressure over Gibraltar and he heads a minority government. It’s just possible he’s learned from Salvini – if you dig in your heels in the EU, you can get results. Remember the EU thought it possible to hold the #Brexit summit in December instead..

— katya adler (@BBCkatyaadler) November 23, 2018

10) The Commission thinks this can be solved without reopening the #Brexit texts by noting Spain’s insistence on continuing U.K.-Madrid bilateral talks regarding post-Brexit relations in a declaration added to the texts or other EU formulas

— katya adler (@BBCkatyaadler) November 23, 2018

11) It’s certainly important to know the issue will be solved ahead of Sunday. Spain doesn’t have an actual veto over the divorce deal in the sense that EU leaders don’t vote on issues as such BUT

— katya adler (@BBCkatyaadler) November 23, 2018

12) EU leaders make decisions by consensus. There is no way they can sign off this Sunday on a text designed for a leaving member (UK) when an existing member (Spain) is so strongly opposed

— katya adler (@BBCkatyaadler) November 23, 2018

13) There is less EU solidarity with Spain over Gibraltar than there is with Ireland over the border BUT the EU has been so proud about unity amongst its member over #Brexit They wont want to give that up at this late stage in the divorce process

— katya adler (@BBCkatyaadler) November 23, 2018

14) The veto Spain has on Sunday is moral/political and therefore effective if it gets that far. Also remember – bitterness over Gibraltar, fishing rights etc are obstacles the U.K. will face after #Brexit in negotiating a trade deal with EU which ALL member states need to ratify

— katya adler (@BBCkatyaadler) November 23, 2018

Meanwhile Tory Brexiteer Iain Duncan Smith threatened on Friday that he and his fellow eurosceptic Torys would kill May’s Brexit plan regardless of promises to adopt a “tech solution” to the Irish border problem and implied it is meaningless.

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Returning from Thanksgiving holiday, US traders who braved record cold temperatures on their office commute are in a sour mood, with S&P futures sharply lower, following the latest sharp drop in Chinese stocks, where as noted earlier the Shanghai composite lost the 2,600 level, tumbling 2.5% to one month lows after the WSJ reported Trump asked allies to boycott China’s telecom giant Huawei.

The news dragged Asian shares lower, while Europe was mixed after the latest disappointing PMI which saw German Manufacturing and Services miss expectations, dragging the Eurozone Manufacturing PMI to 51.5, missing expectations of a 52.0 print, a 30 month low and the weakest since print since May 2016, while the composite index tumbled to the lowest level in 4 years in November.

Contracts on the Dow, S&P and Nasdaq all pointed lower, after Chinese equities led regional declines in Asia, with the technology sector weak on concern the U.S. is ratcheting up a campaign against Huawei Technologies. The result was a sharp drop in the Shanghai Composite, which slumped to levels last seen in late October, wiping out the recent rally.

In European trading, the preliminary PMI data dented hopes of an economic rebound into year end, sparking a rally in bunds and gilts, while 10Y TSY yields dropped to session lows of 3.04% after Thursday’s Thanksgiving holiday. Euribor contracts pushed higher after officials flagged downside risks and data added to nerves ahead of the ECB’s December meeting. Meanwhile in Italy, BTPs printed fresh highs for the week on signs of a budget compromise. European equities were mixed, printing small gains after a steady open, largely ignoring trade war concerns, which weighed on Chinese stocks. Italy’s FTSE MIB outperformed peers on renewed deficit discussion optimism and helping local banks rise over 1.5%. Technology and telecommunications stocks pared initial gains as equity gains are tempered by oil oversupply concerns, acting as a drag on energy/basic resources sectors

The dollar climbed and the euro reversed earlier gains as data showed German’s growth outlook weakened; the Euro slumped on renewed fears the slowing economy may delay any ECB balance sheet normalization while the pound handed back most of Thursday’s gains. In the latest Brexit news, Tory Brexiteer Iain Duncan Smith stated that the Brexit deal will be killed off by him and his Brexiteer colleagues in Parliament, while he is said to dismiss PM May’s efforts to adopt a tech solution to the Irish border problem and implied it is meaningless, according to ITV’s Peston.

Elsewhere, emerging market currencies and shares fell on renewed China trade concerns. Bitcoin declined and is on course to lose more than 20% this week.

Meanwhile, in commodities, WTI saw another sharp decline through $53, after energy minister Khalid Al-Falih said Saudi Arabia is producing oil in excess of 10.7 million barrels a day, more than in recent years, giving the strongest indication yet that the kingdom has boosted output to record levels. “We were at 10.7-something in October, and we are above that. We will know exactly when the month is over,” Al-Falih said. That said, he added that “we will not flood the market. We will not send oil that customers don’t need. And we’ve started doing that in December, and I expect we’ll continue doing that into the new year.”

The Organization of Petroleum Exporting Countries and allied producers warned earlier this month that oil markets will probably be oversupplied in 2019. Concerns that slower economic growth and a trade war could erode demand for oil are outweighing fears of potential shortages caused by U.S. sanctions on Iranian exports and supply disruptions elsewhere.

As a result, WTI has wiped out all modest gains observed in recent days, and was trading back at 1 year lows headed for its 7th weekly drop.

Falling energy prices are just one of several indicators that concern investors about the strength of global economic growth. Meanwhile, political turmoil in Europe, lingering uncertainty over a Brexit agreement and a trade war that’s engulfed the world’s biggest economies add to nervousness according to Bloomberg. Slowing growth is one of several prospects in the U.S. that may lead Federal Reserve to more caution in 2019 should they raise rates next month.

Elsewhere, base metals decline with LME copper 1% lower. EUR offered after PMIs to trade weakest levels this week, cable declines on broad USD strength.

In overnight geopolitical news, North Korea appeared to be expanding operations at its main nuclear site, according to the IAEA, while there were also reports that atomic agency inspectors are said to be demanding North Korea allow nuclear inspectors back into the country amid reactor activity concerns. China is to reportedly resume the purchase of Iranian oil in November after their waiver.

Expected data include PMIs. No major companies are scheduled to report earnings.

Market Snapshot

•  
• S&P 500 futures down 0.5% to 2,636.75
• STOXX Europe 600 up 0.4% to 353.88
• MXAP down 0.05% to 150.61
• MXAPJ down 0.2% to 481.05
• Nikkei up 0.7% to 21,646.55
• Topix up 0.8% to 1,628.96
• Hang Seng Index down 0.4% to 25,927.68
• Shanghai Composite down 2.5% to 2,579.48
• Sensex down 0.6% to 34,981.02
• Australia S&P/ASX 200 up 0.4% to 5,716.21
• Kospi down 0.6% to 2,057.48
• German 10Y yield fell 1.6 bps to 0.354%
• Euro down 0.2% to $1.1376
• Italian 10Y yield fell 1.6 bps to 3.082%
• Spanish 10Y yield fell 1.6 bps to 1.621%
• Brent futures down 1.2% to $61.84/bbl
• Gold spot down 0.5% to $1,223.00
• U.S. Dollar Index down 0.04% to 96.67

Top Overnight News from Bloomberg

• Following the weak German PMI figures, the euro-area composite index fell to the lowest in four years in November, denting expectations for an economic pickup after a summer slowdown. Adding to worries, the data also showed that employment and orders growth slowed and companies’ expectations dropped
• A Spanish official criticized the inclusion of an article in the Brexit text that his government believes has unacceptably blurred the issue of future talks over Gibraltar
• Some countries are frustrated that PM Theresa May is coming to Brussels on Saturday to see European Commission President Jean-Claude Juncker. The last pre-summit meeting of member-state officials is Friday — and they don’t want anything to change after that
• U.S. President Donald Trump and Chinese leader Xi Jinping have indicated they’re both ready for a highly anticipated meeting at the Group-of-20 summit next week. Trump told reporters that China wants to make a deal “very badly” after his administration placed tariffs on on about $200 billion worth of Chinese goods
• The Bank of England may need to increase interest rates at a quicker pace than currently envisaged by markets, according to policy maker Michael Saunders. Spare capacity in the economy has been used up, and, assuming Brexit reaches a smooth conclusion, inflationary pressures will probably build somewhat faster than officials predicted in their latest projections, Saunders said Thursday
• The Chinese consulate in Karachi was assaulted by militants on Friday in an attack that killed at least seven people in Pakistan’s largest city and financial hub. The incident is the second major attack this year on Chinese officials in Karachi, in a country that is one of the key partners in China’s Belt and Road initiative
• With Brexit in sight, Paris should become the next center for the clearing of interest-rate derivatives, said Bank of France Governor Francois Villeroy de Galhau
• Shoppers across the U.S. poured into stores for Black Friday at the traditional kickoff of the holiday gift-giving season
• A way out of Sweden’s political crisis is closing for the speaker of parliament. After his third pick to form a government threw in the towel on Thursday, speaker Andreas Norlen will need to get creative to break the gridlock caused by Sweden’s inconclusive election more than two months ago. He will hold a press conference at 10 a.m. in Stockholm on Friday
• It may take until February or even later for some of Iran’s biggest oil buyers to resume purchases after winning waivers from the U.S. as they seek to resolve complications over insurance, shipping and payments.

Asian stocks traded mostly lower with sentiment in the region subdued by trade concerns and holiday-thinned conditions in the US, while Japan and India also observed public holidays. ASX 200 (+0.4%) was positive with the index supported by strength in its top-weighted financials sector amid gains in Australia’s largest banks after Macquarie pulled-off a rarity at the banking royal commission in which it emerged unscathed and with its reputation enhanced. Elsewhere, Shanghai Comp. (-2.5%) and Hang Seng (-0.4%) were negative amid ongoing trade uncertainty as China responded to the recent trade report by the US, in which it dismissed the accusations of unfair trade practices as groundless and totally unacceptable. In addition, the US called for its allies to stop using Huawei equipment and weak earnings results from Meituan Dianping in which the online service provider’s losses ballooned, further added to the glum. China responded to the recent US report in which it labelled the accusation by the US of  China continuing with unfair trade practices as groundless and totally unacceptable, while it added that it hopes US drops rhetoric and behaviour that are damaging to relations.

Top Asian News

• China’s Capital Controls Keep a Bad Year From Getting Worse
• The World’s Best and Worst Markets Are Both in China This Year
• China Railway Unit Said to Be Planning 30 Billion Yuan IPO
• Apple to Offer Japan Carriers Subsidy to Up iPhone XR Sales: WSJ

After opening with little in the way of firm direction amid holiday thinned markets (US, Japan and India), European equities have posted modest gains with the EuroStoxx 50 higher by 0.2%. Leading the charge in Europe is the FTSE MIB  (+0.6%) with Italian assets underpinned by optimism that the populist government could reign in some of their budgetary demands with reports suggesting that the EU Affairs Minister Savona could step down from his position (later denied) due to dissent over  Italy’s intentions to violate EU budget laws. This also comes amidst a backdrop of increasing pressure from President Mattarella who wants the technocratic PM Conte to get a deal done with the EC, whilst other Italian press report highlight the need for Italy to increase the sincerity of Italy’s concessions to Europe. In terms of sector specifics, upside in Italian banking names has helped spur gains in European financials with the telecoms sector outperforming. To the downside, energy names lag, in-fitting with price action in the complex with crude seemingly unable to stem recent losses. Individual movers include Renault (+4.2%), who have been granted some reprieve from recent losses following a broker upgrade at Jefferies and as Nissan continue to reorganise their corporate leadership. Elsewhere, GEA Group (-14.3%) are lower after cutting guidance whilst Altice (-9.8%) continue to face selling pressure following yesterday’s disappointing market update

Top European News

• EU, U.K. See Free-Trade Area, Deep Regulatory Cooperation:Draft
• German Growth Slows More Than Expected to Four- Year Low
• Denmark Wants Danske Whistle-Blower to Explain His Testimony
• Ericsson Rises as Goldman Sees ‘Strong Competitive Position’

In currencies,  the Dollar has benefited from the aforementioned relative weakness elsewhere, and the index is holding nearer the upper end of 96.394-751 parameters as a result, and on course to end the holiday-shortened week with a net gain, albeit modest having traded up to 96.898 and down to 96.037 at the other extreme. the Euro was not the most discounted major currency on offer, but cut price in wake of considerably weaker than forecast preliminary PMIs from France, Germany and the Eurozone overall. The single currency is now under 1.1400 vs the Usd and has broken the 10DMA to the downside at 1.1356, with fibs now being eyed ahead of 1.1300, while pivoting 0.8850 against the Gbp even though Sterling is also suffering in sympathy and jittery on Brexit issues following initial euphoria due to the UK-EU Political Declaration. CAD/NZD/AUD – Also going relatively cheap and underperforming against their US peer, with the Loonie back below 1.3200 amidst an even steeper slide in crude prices ahead of Canadian CPI and retail sales data. Meanwhile, the Aud has retreated through 0.7250 again and hardly helped by overnight developments as ANZ revised its RBA outlook to unchanged until August 2020, and the ASIC launched a probe of CBA for the alleged mis-selling of insurance products. Similarly, the Kiwi has lost grip of 0.6800 amidst speculation that the RBNZ could loosen mortgage restrictions as part of its FSR due next week. GBP – As noted above, the Pound has lost a bit more positivity after Thursday’s rally on the draft PD reached by Brexit negotiators given a mixed reaction to the details in UK political circles and ongoing doubt about approval by EU leaders. Cable is back below 1.2850 vs circa 1.2900 at best yesterday, albeit ‘comfortably’ above the recent 1.2785 low with decent bids noted at 1.2800. EM – Some consolidation at the end of a solid week for the likes of the Zar and Try that have both made potentially significant breaks of key levels at 14.0000 and 5.3000 vs the Usd respectively due to a combination of bullish technical and fundamental factors, ie the SARB ¼ point hike yesterday.

In commodities, WTI (-4.3%) and Brent (-2.6%) are on track for their seventh weekly loss with WTI prices briefly breaching the USD 52.00/bbl level to the downside while Brent lingers just above USD 61/bbl. Some traders are citing the recent decline to technical factors, while Saudi Arabia signalled that its output may have reached a record high of above 10.7mln BPD, and the kingdom’s Energy Minister Al-Falih noted that demand for oil will be lower in January 2019 compared to December 2018. This comes amidst the backdrop of this week’s EIA data which showed that US production remained at a record high of 11.7mln barrels, the most since at least 1983; according to government data. Therefore, the complex is suffering from a double whammy with supply glut concerns and weaker demand concerns weighing on traders’ minds. Oil fell into bear market territory this month after the US granted temporary waivers to eight countries in regard to Iranian oil, in turn pouring cold water on some supply concerns, while sources emerged this morning noting that China are to resume the purchase of Iranian oil in November after their waiver. Some analysts highlighted that due to complications over insurance, shipping and payments, it may take until February or later until some of Iran’s largest buyers such as South Korean and Japan resume purchases.

Elsewhere, gold (-0.4%) prices saw some downside after the yellow metal felt pressure from the firmer USD and copper weakened amid underperformance in China alongside a decline in Chinese commodity prices. Furthermore, China’s Dalian Exchange are to relax their risk management restrictions on some futures in an attempt to attract more investors to boost liquidity given the recent slump in iron ore prices.

US Event Calendar

• 9:45am: Markit US Manufacturing PMI, est. 55.7, prior 55.7
• 9:45am: Markit US Services PMI, est. 55, prior 54.8
• 9:45am: Markit US Composite PMI, prior 54.9

 

 

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After blaming everyone but herself for her embarrassing upset loss to Donald Trump in the 2016 US presidential election, Hillary Clinton has finally admitted what millions of Americans have known for years now: Maybe Trump made some good points.

In an interview with the Guardian that has infuriated the “new face” of the Democratic Party that Clinton once purported to lead – ie, those “Democratic Socialist” millennials who celebrated the rise of Alexandria Ocasio-Cortez – the former secretary of state and senator from New York said Western Europe needed to do something to lessen the flow of migrants from the Middle East and North Africa if it wants to stop the surging support experienced by anti-establishment and eurosceptic populist parties that have seized power in Hungary, Poland, Austria, Italy and elsewhere.

Clinton praised Angela Merkel for her “generosity” (Merkel recently walked back her earlier “open door” policy for migrants and many believe her handling of the crisis led to the drop in popularity for her party that inspired her not to seek a fifth term) before adding that the governments of Germany and others need to signal that they are “not going to be able to continue to provide refuge and support.”

“I think Europe needs to get a handle on migration because that is what lit the flame,” Clinton said, speaking as part of a series of interviews with senior centrist political figures about the rise of populists, particularly on the right, in Europe and the Americas.

“I admire the very generous and compassionate approaches that were taken particularly by leaders like Angela Merkel, but I think it is fair to say Europe has done its part, and must send a very clear message – ‘we are not going to be able to continue provide refuge and support’ – because if we don’t deal with the migration issue it will continue to roil the body politic.”

As a reminder, Europe has struggled with the arrival of more than 1 million migrants since 2015, prompting an anti-establishment backlash and straining social services at a time when stagnant economic growth and simmering debt crises were already contributing to record youth unemployment and stagnant growth throughout much of the Continent.

The greatest irony in Clinton telling Europe to get a handle on migration is the fact that, as secretary of state, the interventionist policies she advocated – which only helped aggravate civil wars in Syria and Libya – it was Clinton who was one of the causes of the refugee wave that started with the Arab spring several years ago and has only gotten worse since.

Clinton also urged other center-left figures in the West not to ignore the issues of identity and populist anger that she says helped contribute to her loss to Trump. The former first lady urged forces opposed to rightwing populism in Europe and the US not to neglect the concerns about race and identity issues that she says were behind her losing key votes in 2016. She accused Trump of exploiting the issue in the election contest – and in office.

“The use of immigrants as a political device and as a symbol of government gone wrong, of attacks on one’s heritage, one’s identity, one’s national unity has been very much exploited by the current administration here,” she said.

“There are solutions to migration that do not require clamping down on the press, on your political opponents and trying to suborn the judiciary, or seeking financial and political help from Russia to support your political parties and movements.”

Clinton’s remarks elicited accusations of hypocrisy from those on the left, some of whom also pointed out that, once upon a time, Clinton and her husband advocated many of the same strong-border policies that President Trump is pushing today.

It’s almost as if this is a consistent pattern pic.twitter.com/174o5hxXrw

— David Sirota (@davidsirota) November 22, 2018

via RSS https://ift.tt/2PLwOQ5 Tyler Durden

An explosive report published early last month detailing how Chinese intelligence managed to infiltrate hardware used by dozens of US companies and government agencies, from Apple to the Department of Defense, made clear one simple, if disturbing, fact: The US is losing the race to contain China’s sprawling intelligence apparatus as it becomes increasingly embedded in the global tech and telecommunications infrastructure.

But the Trump Administration is doing everything in its power to change that. And after threatening the future of one Chinese telecoms supplier (ZTE), the US has been pushing its allies around the world to stop using equipment from another mainland firm with an even larger global reach: Chinese consumer tech and telecoms giant Huawei.

The news sent Asian markets reeling on what was expected to be a quiet day, given the US Thanksgiving holiday: Chinese stocks fell, with the Shanghai Composite tumbling 2.7%, sending it to the lowest level since the end of October, while the ChiNext index plunged over 3.3%.

According to the Wall Street Journal, the US government has launched an “extraordinary outreach campaign” aimed at international telecom companies and friendly foreign governments to try and convince them to drop Huawei as a supplier over concerns that equipment produced by the company could be vulnerable to Chinese spies. But beyond the warnings, the US is even said to be considering financial incentives for telecoms firms that abandon Huawei and switch to a US-based or Western-based supplier. The purpose of the push is to stop Huawei components from being used in commercial and government networks over fears that the Chinese government would easily be able to tap into communications flowing through those channels.

American officials have briefed their government counterparts and telecom executives in friendly countries where Huawei equipment is already in wide use, including Germany, Italy and Japan, about what they see as cybersecurity risks, these people said. The U.S. is also considering increasing financial aid for telecommunications development in countries that shun Chinese-made equipment, some of these people say.

One U.S. concern centers on the use of Chinese telecom equipment in countries that host American military bases, according to people familiar with the matter. The Defense Department has its own satellites and telecom network for sensitive communications, but most traffic at many military installations travels through commercial networks.

To justify the campaign, officials who spoke with WSJ said the US feared that the presence of Huawei components could make it easier for China to intercept communications headed to and from US military bases, as not all of these flow through private DoD networks.

One U.S. concern centers on the use of Chinese telecom equipment in countries that host American military bases, according to people familiar with the matter. The Defense Department has its own satellites and telecom network for sensitive communications, but most traffic at many military installations travels through commercial networks.

Some see the campaign as an effort to establish a buffer zone for Huawei products as the US has sought to keep them out of its domestic market. According to WSJ’s sources, efforts to combat the growing influence of Chinese telecom firms predate the Trump era.

The international effort pushes out the battle lines of a U.S. campaign to keep Huawei electronics out of the U.S. Some officials see the initiative as part of a broader technological Cold War between U.S.-led allies and China for control of a world that is increasingly digitally connected—and thus increasingly vulnerable to surveillance and malfeasance. They fear the rise of technological giants that could benefit authoritarian governments, including irritants or outright foes of the U.S.

But the timing of this push is key: While US telecoms firms struggle to catch up, Huawei is already preparing to roll out its first batch of 5G technology.

The overseas push comes as wireless and internet providers around the world prepare to buy new hardware for 5G, the coming generation of mobile technology. 5G promises superfast connections that enable self-driving cars and the “Internet of Things,” in which factories and such everyday objects as heart monitors and sneakers are internet-connected.

U.S. officials say they worry about the prospect of Chinese telecom-equipment makers spying on or disabling connections to an exponentially growing universe of things, including components of manufacturing plants.

“We engage with countries around the world about our concerns regarding cyberthreats in telecommunications infrastructure,” a U.S. official said. “As they’re looking to move to 5G, we remind them of those concerns. There are additional complexities to 5G networks that make them more vulnerable to cyberattacks.”

Setting aside fears about the cybersecurity threat, the US has at least one clear ulterior motive to stymie Huawei’s growing global presence: Huawei has already become the dominant global player in 5G – a position that the US covets.

“There is only one true 5G supplier right now, and that is Huawei,” said Neil McRae, chief network architect for large British carrier BT Group PLC, at a Huawei event in London earlier this week. “The others need to catch up.”

And even after US officials interceded, warning European telecoms about the dangers of using Huawei’s equipment, some – including one unnamed Italian company – said they simply couldn’t find a suitable replacement for Huawei’s equipment.

Though government officials in China and the US have signaled that the meeting between President Trump and President Xi in Buenos Aires is definitely happening, these latest reports support what has become the ‘base case’ view of most Wall Street banks: Expect little to no progress from the meeting, as even a commitment from the US to delay its planned end-of-year tariff escalation now appears be much of an ask.

Still, President Trump remained upbeat about the prospects for a deal when he told reporters on Thursday that China wanted to do a deal on trade “very badly” and added that the US side is “very happy with that,” meanwhile, China’s Vice Minister of Commerce Wang Shouwen said China hoped to meet the US half way on addressing trade issues.

Despite the pleasant words, there’s still a not-insignificant risk that the talks lead to a further deterioration in ties between the two countries. If that happens, sectors that have been the hardest hit by the trade war (miners, automakers, chip makers) could take another leg lower.

at this rate Trump and Xi will have duel to the death in Argentina https://t.co/vVfVdZ3DgB

— zerohedge (@zerohedge) November 23, 2018

via RSS https://ift.tt/2KvQyBy Tyler Durden