Stocks reversed earlier gains, turning lower in Europe as U.S. futures pared as many as 20 points of upside in overnight trading before turning lower on Monday, following a mixed session across most of Asia as investors weighed the outlook for equities after a roller coaster few weeks. Volumes were subdued with many banks closed for Veteran's Day in the US. Futures on the Nasdaq were flat after large-cap tech shares on Friday dragged the gauge down 1.7%.

Europe saw a sharp selloff in both the EUR and GBP this morning, with the EURUSD breaching 1.1300 to the downside, the lowest print since July 2017 as Brexit deal momentum once again faded, while the Italian budget negotiation failed to make progress ahead of another looming deadline.

For the euro, Italy was the main focus, with Rome facing a Tuesday deadline to submit a revised budget to the EU, though it has so far refused to cut the draft budget deficit, setting the stage for a collision with Brussels. Bernd Berg, strategist at Woodman Asset Management, predicted the euro would tumble below $1.10 from the current $1.126 “as renewed eurozone and Brexit angst and a diverging economic outlook with a strong U.S. economy versus a weakening eurozone economy will trigger further euro selling pressure.”

The drop in Europe's Stoxx 600 Index was led by household goods and real estate shares. Major European indices were mixed, with Germany’s DAX (-0.8%) lagging, weighed on by Infineon (-5.3%) following a projected revenue decline and SAP (-3.2%) after the company stated they are taking over Qualtrics International. UK’s FTSE 100 (+0.2%) outperformed thanks to the weaker pound and as several big names are in the green (BHP +2.8%, Shire +2.3%, Anglo American +2.0%) outweighing the significant losses for British American Tobacco (-9.1%) and Imperial Brands (-4.1%) following reports of FDA commissioner pursuing a ban on menthol cigarettes. Similarly, sectors are mixed with IT names lagging and energy names outperforming, with FTSE giant BP (+1.8%) benefiting from the rebound in oil.

Italian bonds fell ahead of supply and the government’s deadline to resubmit its 2019 budget on Tuesday where there appeared to be no progress, while Bunds follow gilts higher on a lack of progress in the Brexit talks; The 10y spread to Germany widened 4bps to 303bps while Bund gains were spurred by gilts, which outperform by 3bps as the latest Brexit impasse lowers the chances of a BOE rate hike before November 2019, even as the next 25bps BOE hike remains fully priced in for November 2019.

Markets were also spooked by reports that Banca Carige would need around 400 million euros ($451 million) to plug a hole in its capital base and Italy’s deposit protection fund could fill only part of it. CRG.IM was halted, limit down as a result.

That raises the specter of a banking crisis in the euro zone’s third-biggest economy, keeping Italy’s bond yield spread over Germany - the risk premium attached to Italian assets - around the psychologically key 300 basis-point mark. Italian bank shares fell 0.6 percent

Earlier in the session, the MSCI Asia equities index also dropped, though shares in Japan and Hong Kong finished in a tight range, while Chinese stocks - for once - bucked the trend closing 1.2% higher. While Shanghai was lifted over one percent by regulators’ promise to simplify share buybacks, MSCI’s world equity index was down 0.3% and Asian markets broadly weakened following Friday’s weak Wall Street close.

China closed in the green even as investors fretted about signs of slowing growth in China where e-commerce giant Alibaba was the latest to raise alarm bells, with the slowest ever annual sales growth during its Singles Day shopping event.

Australia's ASX 200 (+0.3%) and Nikkei 225 (+0.1%) both recovered from the early declines and traded marginally positive although weakness in tech and financials capped gains in Australia, while recent flows into JPY restricted upside for the Japanese benchmark. As noted earlier, the Shanghai Comp. (+1.2%) and Hang Seng (+0.1%) were initially lower amid growth and trade-related uncertainty, while the PBoC also recently noted that China’s economy is under increasing downward pressure. However, Chinese markets then recovered as officials continued to pledge measures to support businesses including wider tax cuts and with China also upbeat following record-breaking Singles Day sales (if slowing, as noted above).

With Asia mixed and European risk assets sliding, the Bloomberg dollar index printed fresh YTD highs: “King dollar has staged a return,” Credit Agricole's FX strategist Valentin Marinov said, adding that investors had piled back into the dollar after last week’s Fed meeting confirmed a rate-tightening path. "Euro and pound are both hurt by political risk and that is aggravating underperformance versus the dollar,” Marinov added.

Speculators’ net long dollar positions rose last week to the highest since January 2016, according to the latest Commodity Futures Trading Commission data.

The pound slumped, dropping below $1.29 for the first time in more than a week following a report that four more U.K. government ministers are on the brink of resigning over Prime Minister Theresa May’s Brexit plans, and that May was forced to abandon plans for an emergency cabinet meeting to approve a Brexit agreement, the Independent news website reported, stoking fears that the government might not be able to secure a deal that satisfied both the European Union and members of the ruling party.

The opposition Labour Party said that if May’s Brexit deal was voted down in parliament, it would push for a national election and possibly also another referendum. The latest futures data showed net short sterling positions registered their biggest weekly rise in 1-1/2 months. Deutsche Bank analysts, however, predicted more pain, telling clients: “not enough risk is priced into sterling given the parliamentary problems ahead”.

The other big move was in commodities, where Saudi Arabia’s energy minister took some pressure off last week’s oil price drop, saying on Sunday that Riyadh could reduce supply to world markets by 500,000 barrels per day in December, a global reduction of about 0.5 percent. That jolted Brent crude futures up more than 2% to a high of $71.88 per barrel. However, the supply cut may prove to be a temporary solution to falling prices as global growth slows, with two of the world’s biggest economies - Germany and Japan - expected to report a contraction in output in coming days. “Supply-side surprises appear to be the main culprit, but concern that global demand is slowing may also be creeping into markets and weighing on risk appetite,” the ANZ analysts said.

Looking ahead, Treasuries aren’t trading due to Veterans’ Day holiday. UGI Corp. and AXA Equitable are among scheduled earnings

Market Snapshot

S&P 500 futures little changed at 2,778.50

STOXX Europe 600 down 0.2% to 364.86

MXAP down 0.4% to 151.66

MXAPJ down 0.5% to 481.78

Nikkei up 0.09% to 22,269.88

Topix down 0.06% to 1,671.95

Hang Seng Index up 0.1% to 25,633.18

Shanghai Composite up 1.2% to 2,630.52

Sensex down 0.8% to 34,867.39

Australia S&P/ASX 200 up 0.3% to 5,941.30

Kospi down 0.3% to 2,080.44

German 10Y yield fell 2.0 bps to 0.387%

Euro down 0.7% to $1.1256

Brent Futures up 1.2% to $71.05/bbl

Italian 10Y yield rose 0.8 bps to 3.033%

Spanish 10Y yield fell 1.2 bps to 1.586%

Brent Futures up 1.3% to $71.06/bbl

Gold spot down 0.2% to $1,207.13

U.S. Dollar Index up 0.6% to 97.47

Top Overnight News from Bloomberg

As well as increasing domestic pressure on May to ditch her Brexit plan or face defeat in Parliament, EU ministers in Brussels on Monday didn’t fix a specific date for an extraordinary summit. There’s still a need for more clarity from the U.K. before the bloc’s leaders convene to sign off a deal, an EU official said

Saudi Arabia expressed the need for oil producers to cut 1 million barrels a day from October levels and announced fewer shipments from next month, as OPEC and its allies began laying the groundwork to reduce oil supply in 2019, reversing an almost year-long expansion

China signaled tougher management of the yuan, dropping a phrase underlining the importance of market forces from a key policy report for the first time in five years

The most destructive series of wildfires in California history have killed at least 31 people and forced tens of thousands more to evacuate, officials said, as firefighters struggled to gain control in swirling winds

President Donald Trump left World War I commemorations in France after a weekend that exposed tensions with U.S. allies in Europe over his decision to pull out of the 1987 Intermediate- range Nuclear Forces Treaty with Russia. By the time he flew home on Sunday he appeared isolated and, by some, scorned

Asian equity markets eventually traded mixed but with gains limited as some cautiousness lingered from the uninspiring performance on Wall St last Friday, where ongoing global growth concerns and continued declines in commodities weighed on sentiment. ASX 200 (+0.3%) and Nikkei 225 (+0.1%) both recovered from the early declines and traded marginally positive although weakness in tech and financials capped gains in Australia, while recent flows into JPY restricted upside for the Japanese benchmark. Elsewhere, Shanghai Comp. (+0.8%) and Hang Seng (+0.1%) were initially lower amid growth and trade-related uncertainty, while the PBoC also recently noted that China’s economy is under increasing downward pressure. However, Chinese markets then recovered as officials continued to pledge measures to support businesses including wider tax cuts and with China also upbeat following record-breaking Singles Day sales. Finally, 10yr JGBs were relatively flat with price action contained as pressure from the improvement in regional sentiment was counterbalanced by the BoJ presence in the market.

Top Asia News

SoftBank to Raise $21 Billion in Wireless IPO to Invest More

Pilot Grounded Before Delhi-London Flight for Failing Booze Test

China’s LVMH Wannabe to Slow M&A After $4 Billion Spree

Major European indices have turned lower, with Germany’s DAX (-0.8%) lagging, weighed on by Infineon (-5.3%) following a projected revenue decline and SAP (-3.2%) after the company stated they are taking over Qualtrics International. UK’s FTSE 100 (+0.2%) is outperforming amid currency effects and as several big names are in the green (BHP +2.8%, Shire +2.3%, Anglo American +2.0%) outweighing the significant losses for British American Tobacco (-9.1%) and Imperial Brands (-4.1%) following reports of FDA commissioner pursuing a ban on menthol cigarettes. Similarly, sectors are mixed with IT names lagging and energy names outperforming, with FTSE giant BP (+1.8%) benefiting from the rebound in oil. In terms of individual equities, Telecom Italia (+4.6%) are leading the Stoxx 600 after reports in Italian press that the Italian government are pushing a fibre deal with the Co. Elsewhere, Rio Tinto (+3.4%) rose to the top of the UK benchmark following the completion of a share-buyback programme.

Top European News

Merkel Bid to Make Germany Inc. World Champion Hits EU Snags

Italy’s Industry Output Drop Makes It Harder to Convince EU

Hedge Fund Wins as European Luxury Goods Hit a Wall in China

Cerberus Plans to Buy Spain’s Altamira, Solvia: Expansion

In FX, the Dollar is firmly back in the ascendency, albeit partly due to underperformance in major counterparts due to specific bearish factors. However, the DXY has extended recovery gains beyond 97.000 and through its previous ytd peak to top out just shy of 97.600 at 97.583, with bulls now eyeing relatively strong Fib resistance around 97.871 ahead of 98.000.

GBP - More Brexit-related weakness in Sterling has tipped Cable through another big figure, and just under 1.2850 at one stage, while Eur/Gbp has rebounded further from recent sub-0.8700 lows towards 0.8775 on latest threats of revolt within the UK Government and time running out fast to reach a withdrawal deal with the EU. From a technical perspective, nearest support in Cable comes in around 1.2810, which coincides with a Fib and decent option expiry interest.

- More Brexit-related weakness in Sterling has tipped Cable through another big figure, and just under 1.2850 at one stage, while Eur/Gbp has rebounded further from recent sub-0.8700 lows towards 0.8775 on latest threats of revolt within the UK Government and time running out fast to reach a withdrawal deal with the EU. From a technical perspective, nearest support in Cable comes in around 1.2810, which coincides with a Fib and decent option expiry interest. EUR - The single currency is also under considerable pressure, and after triggering stops at 1.1300 vs the Greenback, losses accumulated quickly to 1.1250 where hefty bids stalled further downside for a while. The catalyst, ongoing Italian-EU budget angst ahead of Tuesday’s deadline for the Government to resubmit a fiscal plan, and another meeting between key Roman officials later today. Note also, 1.1 bn option expiries roll off at the 1.1250 strike, with the same size capping any rebounds to 1.1300.

- The single currency is also under considerable pressure, and after triggering stops at 1.1300 vs the Greenback, losses accumulated quickly to 1.1250 where hefty bids stalled further downside for a while. The catalyst, ongoing Italian-EU budget angst ahead of Tuesday’s deadline for the Government to resubmit a fiscal plan, and another meeting between key Roman officials later today. Note also, 1.1 bn option expiries roll off at the 1.1250 strike, with the same size capping any rebounds to 1.1300. CHF/AUD - Both around 0.4-0.45% weaker vs a generally bid Usd, with the France testing 1.1000 and Aud back below 0.7200 amidst renewed weakness in the Yuan.

- Both around 0.4-0.45% weaker vs a generally bid Usd, with the France testing 1.1000 and Aud back below 0.7200 amidst renewed weakness in the Yuan. NZD - The Kiwi is holding up moderately better than its antipodean peer, as Nzd/Usd maintains 0.6700+ status (just) and the Aud/Nzd cross retests support/bids around 1.0700.

- The Kiwi is holding up moderately better than its antipodean peer, as Nzd/Usd maintains 0.6700+ status (just) and the Aud/Nzd cross retests support/bids around 1.0700. CAD/JPY - Relative outperformers, or at least keeping pace with the Usd as the Loonie pivots 1.3200 and derives underlying support from a rebound in oil prices, while the latter pares losses from circa 114.20 to just above 114.00 due to its greater safe-haven allure.

- Relative outperformers, or at least keeping pace with the Usd as the Loonie pivots 1.3200 and derives underlying support from a rebound in oil prices, while the latter pares losses from circa 114.20 to just above 114.00 due to its greater safe-haven allure. EM - Broad declines in regional currencies vs the resurgent Dollar, but with Usd/Try slipping back from 5.5000+ levels in wake of Turkish current account data revealing another y/y improvement.

In commodities, WTI (+0.4%) and Brent (+1.0%) bounced back with a vengeance as markets had the first opportunity to digest developments from the JMMC meeting during the weekend. The complex was on track for the longest losing streak since 1984, before Saudi Energy Minister Al-Falih said the kingdom plans to reduce oil supply by 500K BPD in December due to a seasonal demand decline. Meanwhile, the JMMC decided not to take decisions on market adjustments on Sunday, with UAE’s Energy Minister noting that 2019 will require a change in OPEC strategy, adding that the new strategy is definitely not going to involve hiking output. Furthermore, in early European trade, the Kuwaiti Oil Minister stated that oil exporters discussed some kind of supply cut for next year but no volume was mentioned. Note: weekly API and DoE inventory data have been pushed back by a day due to US Veterans’ day. Elsewhere, gold (-0.1%) fell to levels last seen in mid-October as the yellow metal tracked USD moves with the DXY reaching new YTD highs in early European trade. Meanwhile, copper is taking a breather from the recent sell-off and nickel extended losses to hit 11-month lows, pressured by concerns of slowing Chinese demand for steel. At the weekend JMMC meeting, the committee decided not to take decisions on market adjustment, while Saudi Arabia Energy Minister Al-Falih said it is too premature for OPEC to discuss production cuts but stated that Saudi will reduce oil supply by 500k bpd in December amid seasonal decline in demand.

US Event Calendar

Nothing major scheduled due to Veterans' Day holiday

DB's Jim Reid concludes the overnight wrap

Welcome to a new week and one where Brexit seems likely to grab a disproportional amount of the headlines. As I was scouring the weekend papers for news on this bewildering subject I stumbled across an article that innocently said that the British and the Irish are the top two countries in the EU for the percentage of the population that drink alcohol least once a week. It felt quite apt given the current situation. Also in the same Eurostat survey it suggested that the Dutch are the least likely to eat fruit and veg every day which given how tall they are perhaps dispels the myth that you need them! The Italians are one of the worst for amounts of exercise (Scandis generally the best) but they have the skinniest population. If anyone in Italy can give me the secret of that equation I’d be delighted to hear it. It must be the Mediterranean diet!

Talking of Brexit and Italy, two of the main highlights for this week are likely to be the increasingly cul-de-sac Brexit scenarios being wrestled and the deadline for Italy to respond to the EU’s budget deficit demands tomorrow. Data-wise we have CPI reports in the US and Europe as well as Q3 GDP in the latter. Also worth watching is Oil which is in the midst of what is currently a record (daily data to 1983) 10-day successive slump in price. After an OPEC get together yesterday Saudi Arabia signalled that it will reduce oil exports by as much as half a million barrels a day in December as producers increasingly worry about oversupply in 2019. It’ll be interesting if they can persuade others to join them ahead of next month’s semi-annual full gathering. Oil prices (Brent +1.68% and WTI +1.21%) are up this morning on the back of this news. Can it finally close higher today and buck the two week trend?

Brexit feels like its entering a crucial stretch and Friday was a bad day for the UK government with the weekend headlines not offering much additional joy. Pro-remain Tory MP Jo Johnson resigned and suggested he wouldn’t support the deal in its current form. The arithmetic around any deal passing through Parliament was already challenging enough without losing pro-remain Conservatives. The weekend media suggests there could be others refusing to vote in favour along those lines with the Sunday Times suggesting four such proremain Government resignations are possible. Basically the deal as it stands is being criticised by both remain and leave Conservatives and also by the DUP.

Meanwhile the Labour Party opposition is highly unlikely to vote for it. So a deal being reached with the EU still seems the easy part of the equation. Sterling is down -0.5% in Asia this morning after falling -0.67% on Friday with virtually all of it after the resignation. As a reminder the DB house view is that not enough risk is priced into sterling given the Parliamentary problems ahead.

Cabinet ministers have apparently been seeing the proposed text of the deal with the EU over the last few days (seemingly without the Irish section not yet availble) and if PM May can win their approval we could see a formal cabinet meeting early this week to formalise the deal before May makes a statement to the House of Commons. The situation is extremely fluid however especially with the increased backlash internally within the government and with the Irish border issue still outstanding. So these dates could easily (and seem likely to us to) be pushed back. How we get out of this cul-de-sac is very unclear.

Moving onto Italy, the government is due to present its new 2019 budget to the EU by tomorrow after being ask to resubmit. That said, Italy has reiterated that it won’t change its 2.4% deficit target for 2019 so it’s not clear what will change.

As for US CPI on Wednesday the consensus is for yet another +0.2% mom core reading - the 37th month in a row with such a forecast. The annual rate should however hold at +2.2% yoy – a level that the Fed should feel comfortable with and not change path. In Europe we’ll get the final October CPI revisions in Germany (Tuesday), France, Spain and UK (Wednesday), and the broader Euro Area (Friday). A first look at Q3 GDP in Europe and Germany (Wednesday) will also be worth a close watch. The rest of the week ahead is at the end.

This morning in Asia, markets have started the week with a mixed note with the Nikkei and Hang Seng both trading flat, Shanghai Comp (+0.8%) is up while the Kospi (-0.3%) is down. Elsewhere, futures on S&P 500 (+0.4%) are pointing towards a positive start. It is worth noting that today is Veterans Day in the US. The US equity market will remain open but there is a recommended full market close for the Treasury market.

Global equities were mixed last week, with US indexes mostly advancing after the US elections but emerging markets underperforming. The DOW led gains and had its best week since March, rallying +2.84% (-0.77% on Friday though), while the S&P 500 and NASDAQ gained +2.11% and +1.06% (-0.94% and -1.67% Friday) respectively. The NYFANG index fell -1.35% (-1.77% Friday) as tech continues to underperform. In Europe, the STOXX 600 advanced +0.46% (-0.37% Friday), though sectors exposed to China lagged with autos and basic resources down -4.38% and -2.21% (-1.89% and -3.41% Friday) respectively. EM equities fell -2.50% overall (-1.85% Friday) while indices in China underperformed with the Hang Seng and Shanghai Composite retreating -3.34% and -2.90% (-2.39% and -1.39% Friday) respectively. In fixed income, 10-year Treasuries touched a new 8-year high of 3.237% before retracing slightly, ending the week -2.7bps lower (-5.2bps Friday) at 3.182% while Bunds remained in their recent range and fell -2.1bps on the week (-5.0bps Friday).

The US granting of Iran sanctions waivers to eight countries was a big development last week. They will be able to continue importing limited quantities of oil from Iran without running afoul of US laws, boosting the global supply of oil. WTI crude oil prices slid -5.21% (-1.35% Friday), for their tenth consecutive daily loss, the longest such streak on record with daily data going back to 1983. Brent fell -4.30% in unison (-1.34% Friday) though the spread between the two contracts remains near recent wides around $9.85 per barrel.

With it being Veterans Day in the US (US stock market open but bond market is closed), it's a quiet start to the week. In Europe, we get France's October Bank of France industry sentiment index. There is no data of note in the US. Away from this, the Fed's Daly is due to speak on the economic outlook while the ECB's Lautenschlaeger, de Guindos and Nouy are also scheduled to speak. EU general-affairs ministers will discuss the latest on Brexit negotiations followed by a press briefing from the EU's Chief Brexit Negotiator Michel Barnier. The EC President Juncker will give opening remarks at an economic conference on “Where is Europe headed?”