With the Trumpflation euphoria easing back slightly overnight, leading to a modest paring in the USD index and US Treasury yields, Asian and European stocks rose, while US equity futures rebounded to just shy of new all time highs, as crude jumped on renewed optimism that OPEC will agree to cut output; Italian equities underperformed ahead of the Italian referendum; metals rebounded from last week’s losses as yields dropped and the dollar halted its longest winning streak versus the euro.

Bloomberg’s commodities index was set for its first back-to-back gains in almost a month. With an OPEC meeting next week in Vienna, Iran’s Oil Minister said it’s “highly probable” members will reach a consensus, according to comments published by the country’s Shana news service. Nickel, copper and zinc joined the rally, although rising miners and energy producers failed to lift European equities. The dollar’s decline versus the euro was its first in 11 days. Treasuries rose, narrowing the yield premium over European sovereign bonds.

“The run-up to the OPEC meeting should be a major driver of crude oil pricing near term,” Citigroup Inc. analysts including Ed Morse and Daoyuan Zhou said in an e-mailed note. “In the months after the meeting, member countries may yet deviate from the agreement, which could add downward pressure on prices.”

Oil has rebounded since hitting the lowest in almost two months last week as OPEC members began making renewed diplomatic efforts before their meeting Nov. 30 to finalize the output deal informally agreed to in September. The group is seeking to trim output for the first time in eight years, a plan that’s been complicated by Iran’s commitment to boost production and Iraq’s request for an exemption to help fund its war with Islamic militants.

With just over a week until the OPEC meeting, and U.S. President-elect Donald Trump’s spending plans stoking the outlook for construction, commodity prices are attracting investor attention. Money managers, producers and consumers made the biggest bets on West Texas Intermediate crude prices in nine years, while net-long position in copper jumped to a record high.

The frenzy spilled into other metals, enhanced by buying from Asian traders. “Market players are positioning themselves for higher prices, and oil will be in the $50-$55 range if there is a deal,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich. “OPEC members are building a lot of expectations and taking too much exposure to let a deal fail.”

The Bloomberg Dollar Spot Index fell for the first time in four days, slipping 0.2 percent, helping the euro advance 0.3% to $1.0620, halting a near record 10-day drop that saw Europe’s single currency weaken 5%. The yen was little changed at 110.83 per dollar, after sliding 1.7 percent in the previous two trading days

The Stoxx Europe 600 Index was little changed as investors turned their focus to ECB stimulus, political risks ahead for the region and the recent increase in government-bond yields, which is making equities less attractive, according to Peter Dixon, an economist at Commerzbank AG in London. “Equities look pricey when you consider the risks ahead,” he said cited by Bloomberg. “The Italian referendum in two weeks’ time and concern about the future of ECB policy are starting to rise in people’s agenda. I don’t see investors taking on much more risk before the year-end.”

European stocks have been trading in a tight range most of the year and remain below their level from before the U.K. Brexit referendum. They’ve been particularly volatile in recent days, alternating between intraday gains and losses for 10 straight sessions, the longest streak since May 2013. The volume of Stoxx 600 shares changing hands was 16 percent lower than the 30-day average and commodity and energy producers were the biggest gainers, rising more than 1.2 percent.

S&P 500 futures gained 0.2 percent after the gauge rose for a second week, closing 0.4% away from the record hit in August. Campbell Soup Co., HP Inc. and Deere & Co. are among companies reporting on Monday. 

In rates, 10Y Treasuries advanced for the first time in four days days, narrowing the yield spread with benchmark German bonds, which had reached the widest levels since 1989 after the U.S. presidential election earlier this month. Yields slipped three basis points to 2.33%, after surging 21 basis points last week. Two-year note yields were little changed at 1.07 percent before an auction of the securities Monday. The U.S. bond market has trailed behind its peers in Europe since the U.S. election as Trump’s ambitious spending plans prompted traders to ratchet up their expectations for inflation and growth. Traders see a 98 percent likelihood of the Fed raising interest rates at next month’s meeting, fed funds futures show.

Bonds slipped in Europe after being whipsawed by politics and the outlook for monetary policy. ECB President Mario Draghi, who suggested Friday that the euro region’s recovery still depends on monetary support, is scheduled to address European lawmakers in Strasbourg, France. Germany’s 10-year bond yield rose two basis points to 0.29 percent and France’s was at 0.77 percent.

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Bulletin headline summary from RanSquawk

• WTI and Brent crude futures are at elevated levels amid rising speculation that OPEC will come to an agreement.
• Italian stocks trade at 2-months lows with the banking sector gripped by political uncertainty ahead of the Italian referendum.
• Looking ahead, today sees the release of no tier 1 macroeconomic releases

Markets Snapshot

• S&P 500 futures up 0.2% to 2186
• Stoxx 600 up 0.2%
• FTSE 100 up 0.5% to 6810
• DAX up 0.4% to 10706
• German 10Yr yield up 1bp to 0.29%
• Italian 10Yr yield up 2bps to 2.11%
• Spanish 10Yr yield up 1bp to 1.61%
• S&P GSCI Index up 1.1% to 363.6
• MSCI Asia Pacific up 0.3% to 134
• Nikkei 225 up 0.8% to 18106
• Hang Seng up less than 0.1% to 22358
• Shanghai Composite up 0.8% to 3218
• S&P/ASX 200 down 0.2% to 5351
• US 10-yr yield down 4bps to 2.32%
• Dollar Index down 0.16% to 101.05
• WTI Crude futures up 1% to $46.15
• Brent Futures up 1.2% to $47.41
• Gold spot up 0.6% to $1,216
• Silver spot up 0.8% to $16.70

Top Headline News

• Symantec to Buy LifeLock for $2.3 Billion to Add ID Security: Cybersecurity company said to outbid Permira, TPG, Elliott
• Facebook to Buy Back Shares for the First Time: Social media giant will repurchase up to $6 Billion in stock
• Japan Shares Rally for Eighth Day as Topix Enters Bull Market: Oil explorers lead gains amid increase in crude prices
• Trump Brings in Wall Street Veterans to Talk Top Treasury Post: Mattis may get defense post, Romney State Dept
• Putin Sees ‘Great Chance’ of OPEC Deal as Moscow Ready to Freeze: Putin says he can wait for Trump to form his cabinet
• Oil Climbs as Iran, Iraq Signal Deal Hope Before Vienna Meeting: Zanganeh says ‘highly probable’ OPEC will cut output
• Crude Gains With Industrial Metals, Euro; Dollar Pares Advance: Japan’s Topix index caps longest rally since Aug. 2015
• U.S. Proposes Pension-Fund Clearance for Citi, UBS, Others: Barclays, Deutsche Bank, JPMorgan also in line for waivers

Looking at regional markets, Asia stocks shrugged off Friday's negative close on Wall St to trade mostly positive with Nikkei 225 (+0.8%) once again benefiting from the continued JPY weakness after USD/JPY broke above 111.00. ASX 200 (-0.2%) finished lower, although off its worse levels as commodity gains provided support after Iraq stated it is to offer 3 proposals consistent with OPEC policy to implement output cuts. Shanghai Comp (+0.8%) and Hang Seng (+0.1%) traded higher amid a firm CNY 185b1n liquidity injection by the PBoC and as participants also anticipate the imminent launch of the Shenzhen-Hong Kong Stock Connect. However, the Hang Seng trimmed gains after running into resistance at 22,500, while Indian markets underperformed due to a cash crunch amid ongoing demonetization. 10yr JGBs traded flat as participants focused on riskier assets, while the BoJ were also in the market for a relatively reduced amount under its bond buying operations.

Top Asia News

• Japan Looks to Increase Role of Fiscal Policy in Next Budget: Document calls for more use of spending with monetary policy
• China Seen Pulling Coal U-Turn to Cool Self-Inflicted Rally: Benchmark Qinhuangdao coal prices fell for a second week
• North China City Halts Pharma, Steel Plants to Curb Pollution: At least 3 listed drugmakers halt trading of shares on Monday
• China Securities Said to Start Gauging Demand for $1 Billion IPO: Government-backed company aims to start trading in early December
• Boral Buys Headwaters For $1.8 Billion in Infrastructure Bet: Boral plans A$2.05 billion share sale to help fund deal
• Alibaba Buys a Third of Discount Chinese Grocery Chain Sanjiang: E-commerce giant makes its latest foray into physical retail

In Europe, equities have failed to find any firm direction (EUROSTOXX +0.2%) as borses initially opened in the green before retracing much of the move to the upside to dip slightly in the red. WTI and Brent crude futures have continued to gain traction after the Iraq Oil Minister is looking to put forward three new proposals regarding OPEC production cut at next week's Vienna meeting. This has led the energy sector to outperform. Elsewhere in equity markets the Italian banking sector has been in decline amid the near term political risk in regards to the Italian referendum in turn BMPS hit limit down in the first 7 minutes of trade, subsequently the FTSE MIB (-0.6%) has been the underperformer in today's session. Gilts are outperforming their counterparts and will be focus this week following suggestions that Chancellor Hammond will not announce as much fiscal stimulus as expected following the EU referendum. Bunds gapped higher but failed to sustain the momentum retracing some of those gains currently trading flat for the session.

Top European News

• Merkel Confronts Uncertain Times to Run as German Chancellor: Chancellor says she weighed her decision ‘endlessly’
• Aberdeen Drops Pioneer Bid Saying $3.7 Billion Price Too High: Interested in more deals, cites lack of opportunities
• Fosun International to Pay $185 Million for 16.7% Stake in BCP: Fosun unit will subscribe to ~157.4m BCP shares
• World’s Best-Funded Pension Market Has a $650 Billion Warning: Danish regulator warns of new fundamental risk
• Deutsche Bank’s Achleitner Nominated for Second Term: Internal Libor investigation cleared Achleitner of wrongdoing
• EU to Create Senior Bank Debt Class Designed to Absorb Losses: Creditors should know where they stand, Dombrovskis says
• Poland’s President Wants EU Leaders to Cool Down Over Brexit: Duda says some EU politicians want to punish U.K. for leaving
• Credit Suisse’s Swiss Unit Kicks Off Operations Ahead of IPO: Share sale planned for 2017 central to Thiam’s turnaround plan

In currencies, the euro advanced 0.3 percent to $1.0620, halting the 10-day drop that saw Europe’s single currency weaken 5 percent. The yen was little changed at 110.83 per dollar, after sliding 1.7 percent in the previous two trading days. The Bloomberg Dollar Spot Index fell for the first time in four days, slipping 0.2 percent. South Africa’s rand led gains among major currencies, jumping 1.1 percent, and was followed by a 0.9 percent gain in the Mexican peso. The South Korean won fell the most among major currencies versus the greenback, slipping 0.3 percent. In emerging markets, Russia’s ruble advanced 0.7 percent as oil gained. The MSCI Emerging Markets Currency Index advanced 0.2 percent, following a fourth weekly decline.

In commodities, the Bloomberg Commodity Index advanced 1.2% at 10:33 a.m. in London, set for its first two-day gain since Oct. 24. West Texas Intermediate crude rose 1.5 percent to $46.36 a barrel after climbing 0.6 percent on Friday. Brent gained 1.5 percent to $47.57 a barrel. Oil has rebounded since hitting the lowest in almost two months last week as OPEC members began making renewed diplomatic efforts before their meeting Nov. 30 to finalize the output deal informally agreed to in September. The group is seeking to trim output for the first time in eight years, a plan that’s been complicated by Iran’s commitment to boost production and Iraq’s request for an exemption to help fund its war with Islamic militants. “The run-up to the OPEC meeting should be a major driver of crude oil pricing near term,” Citigroup Inc. analysts including Ed Morse and Daoyuan Zhou said in an e-mailed note. “In the months after the meeting, member countries may yet deviate from the agreement, which could add downward pressure on prices.” Nickel rallied from a two-week low as industrial metals renewed their advance amid optimism over demand in China and the U.S. The metal used in stainless steel added 2.9 percent on the London Metal Exchange after prices slumped 3.6 percent on Friday to close at the lowest since Nov. 4. Copper jumped 2.7 percent and gold rose 0.6 percent.

On the pre-Thanksgiving calendar in the US the only data of note comes in the form of the Chicago Fed national activity index.

Economic Event Calendar

• 8am: Fed’s Fischer speaks in New York
• 8:30pm: Chicago Fed Nat Activity Index, Oct., est. 0.00 (prior -0.14)
• 11am: ECB’s Draghi speaks in Strasbourg, France

DB's Jim Reid concludes the overnight wrap

On the matter of stamina one has to admire Angela Merkel who last night confirmed the recent speculation that she's planning to run for a 4th term as chancellor next year. In a world of high political volatility, markets will be reassured that she's standing in the German election. The French election was always going to be the more interesting of the two though and last night we got the results of the first round centre-right primary. The big winner is former Prime Minister Francois Fillon who scored 44% of the votes (with 90% counted for) and topped the voting, with the more centrist former premier Alain Juppe coming in second place at 28% and ex-President Nicholas Sarkozy (with 21% of the votes) falling at the first hurdle after conceding defeat. Sarkozy has since said that he will now endorse Francois Fillon in next Sunday’s second run-off where Fillon will be up against Juppe. As a reminder, the winner will go on to compete in next year’s presidential election, likely ending up in the second round run-off with the National Front’s Marine Le Pen given recent polling.

Despite gathering decent momentum in recent weeks, the strong support for Fillon yesterday appears to have come as a slight surprise with our economists noting in their report on Friday that Juppe had been the clear favourite for many months in the centre-right. The result however sets up for an interesting path ahead. Our economists had noted that if Juppe wins the primary, as the most popular politician in France, he is likely to end up President next Spring. If Juppe loses, the centre-right candidate – in this case now being Fillon – would likely be the runner-up in the Presidential election first round. They highlight that based on polls, very few left-wing voters would switch to Le Pen in the second-round of the presidential election. But, depending on whom Le Pen would face in the second-round, they could abstain from voting. Even if three-quarters of left-wing voters were to abstain, Le Pen should still ultimately be defeated in the eyes of our colleagues. Still, as a Reuters report this morning suggested, polls had consistently shown that Juppe would easily beat Le Pen but there had been no recent surveys on how Fillon would fare. So a bit of uncertainty now. All eyes on next Sunday.

There’s not a huge amount more to report from the weekend. Unsurprisingly most of the other headlines are focused on further developments related to the US President-elect Donald Trump’s White House appointments with the latest news being that Mitt Romney – previously a vocal critic of Trump - is under ‘active consideration’ to be secretary of state. There’s also some suggestion that retired General James Mattis is being considered for the secretary of defence role.

Looking ahead then, there's quite a few interesting events this week. Today we have the OPEC meeting in Austria where OPEC’s technical committee is due to discuss the implementation of the Algiers oil-supply deal at the end of September. The focus is still on OPEC’s meeting on November 30th but the ongoing talks in the meantime will likely be closely scrutinized for any signs that the cartel is closer to some sort of consensus. We then have the long awaited post-Brexit Autumn statement on Wednesday and we'll see how much the new administration embrace the shift towards fiscal loosening. Thursday is Thanksgiving and as is increasingly the case around the globe be prepared to be swamped with "Black Friday" marketing. Sales data will then be scrutinised over the holiday weekend. Elsewhere in data land look out for the flash PMIs around the world from the middle of the week. The full week ahead is at the end as usual.

To markets now and refreshing our screens this morning it’s been a broadly positive start across most of Asia with bourses buoyed by an early +1.16% rise for WTI Oil on renewed hopes that we are one step closer to a deal following comments from Iran’s Oil Minister. The Nikkei (+0.69%), Hang Seng (+0.26%) and Shanghai Comp (+0.86%) have all edged higher while the ASX is currently little changed. Sovereign bond markets are bit more mixed however with credit indices, particularly in Asia, continuing to trade with a softer tone.

Moving on. Our European equity strategists have launched a new monthly report this morning which is worth highlighting as they are becoming more and more away from the consensus that’s forming in DB research. The note focuses on key trends in the global macro picture as well as their likely impact on European equities. In the US, they highlight that indicators point to softening consumption and export growth, suggesting some pay-back after a strong Q3. They also argue that much has to go right for the proposed US fiscal stimulus to translate into the 3% GDP growth projected by our economists. In China, they see a weakening credit impulse and increased capital outflows as risks for growth momentum, but note that these are partly offset by a rebound in real estate and private sector investment growth. Looking at the global picture, they argue that macro surprises suggest global PMIs will drop slightly after strong advances in October. Overall, they maintain their 2017 Stoxx 600 target of 345 (2% upside from current levels), highlighting that the recent growth upgrades by our US economists mean only slight upside risk to their below-consensus EPS growth projection of 6%.

A quick recap now of how we closed out last week in markets on Friday. As has been the theme post election, much of the focus was on the Treasury market where we saw 10y yields (+5.2bps) reach a fresh new high for the year at 2.355%. It means yields rose +21bps alone last week and takes the two-week move now to just shy of +58bps. The highest closing yield in 2015 was 2.484% so we’re now within earshot of that high mark too. The other recurring theme is the strong US Dollar and on Friday we saw the Dollar index close +0.32% and in the process close higher for the tenth consecutive session. On the other side of that trade the Euro (-0.36%) declined for the tenth day in a row while emerging market currencies had a rough day generally. Credit had another soft session. CDX IG was just shy of 2bps wider while in Europe the iTraxx Main finished 3bps wider. The real pain has been in EM however and while CDS spreads where only 3bps wider on Friday, they are still some 46bps wide than the tights earlier this month and pre-election.

Meanwhile DM equity markets continue to be a bit of a resilient side-show The S&P 500 closed -0.24% on Friday as healthcare stocks took a bit of a knock but the index still turned in a +0.81% return for the week. In Europe the Stoxx 600 ended -0.36% but was also positive for the week (+0.56%). In commodity land WTI Oil (+0.59%) consolidated in the $45-46/bbl range for the fourth day in succession while Gold (-0.70%) extended its post-election slide.

The most interesting newsflow on Friday probably came from ECB President Draghi’s notably dovish comments. He told a Frankfurt audience that ‘we do not yet see a consistent strengthening of underlying price dynamics’ and that ‘even if there are many encouraging trends in the euro area economy, the recovery remains highly reliant on a constellation of financing conditions that, in turn, depend on continued monetary support’. ECB Chief Economist Peter Praet also warned that ‘although the euro area recovery is showing signs of resilience, material downside risks remain’.

Over at the Fed, with the probability of a Fed rate hike now at 98% for next month (according to Bloomberg data) and highly likely, especially following Yellen’s comments last week, some of the more interesting Fedspeak is centred on comments around President-elect Trump’s fiscal policies. NY Fed President Dudley warned on Friday that it’s important not to jump to any early conclusions ‘before the policy actually gets set’. He did however take some aim at Trump’s protectionist policies saying in particular that ‘most economists, almost all economists, think that having relatively open trade is beneficial to economic growth and economic performance over time’. Dudley also said with regards to financial regulation that ‘it would be a big mistake to go to the pre-financial crisis set of regulation that we had in place’ but that ‘if there are aspects of Dodd-Frank that could be improved, that’s completely reasonable for Congress to take on board’.

Before we look at this week’s diary, a quick wrap up of the small amount of data released on Friday. In the US the Conference Board’s leading index for October edged up +0.1% mom as expected, although the six-month annual change slipped to +1.5% from +2.3%. The other data released was the volatile Kansas City Fed’s manufacturing activity index which fell to +1 in November from +6 the month prior with both production and new orders weakening. The only data in Europe on Friday came from Germany where PPI rose a bumper +0.7% mom in October (vs. +0.2% expected).

Turning now to the week ahead. The diary is fairly bare to start the week today with nothing of note in Europe this morning and just some second tier data in the US this afternoon in the form of the Chicago Fed national activity index. It’s not much busier tomorrow either. The only data due out in the morning will be in the UK where we’ll get the October public sector net borrowing data along with CBI total orders and selling prices data for November, while in the US we’ll get existing home sales for October and also this month’s Richmond Fed manufacturing survey. Euro area consumer confidence will also be released on Tuesday afternoon. Kicking off Wednesday will be China where the MNI business indicator is due out in the morning. Over in Europe it’s PMI day with flash November services, manufacturing and composite prints due for the Euro area, Germany and France. The calendar really picks up in the US on Wednesday. The most significant data is perhaps the durable and capital goods orders data for October, while initial jobless claims, FHFA house price index, flash manufacturing PMI, new home sales and the final University of Michigan consumer sentiment revision for October are due out. Later on Wednesday evening we’ll also get the FOMC minutes from the meeting earlier this month. Turning to Thursday, early in the morning Japan’s flash manufacturing PMI is due out. The focus is then on Germany where the final Q3 GDP revision will be made before we then get France confidence indicators and then the November IFO survey from Germany again. With it being Thanksgiving in the US on Thursday markets will be shut. Turning to Friday, the overnight data comes from Japan with the October CPI data. In the morning session we’ll then get the preliminary Q3 GDP from the UK before we finish the week in the US with the advance goods trade balance for October, wholesale inventories and the remaining flash November PMI’s (services and composite).

Away from the data there’s little in the way of Fedspeak this week aside from when Vice-Chair Fischer speaks this afternoon (1pm GMT) on the topic of ‘Longer-Term Challenges for the US Economy’. Meanwhile the ECB’s Draghi also speaks today at European Parliament while Coeure and Nouy are also scheduled today. Away from that the BoE’s Haldane and Forbes speak today and tomorrow, respectively. Other key things to look out for this include today’s OPEC meeting in Vienna, UK Chancellor Hammond’s Autumn Statement on Wednesday and finally any early retail sales indicators in the US on Black Friday.