In overnight trading European investors appeared nervous about the recent risk rally. Shares fell and industrial commodities turned down. While commentary from Washington and Beijing remains positive, a lack of concrete progress, weaker German CPI data and month-end effects dragged risk markets lower. Pressure on safe haven assets like bonds and gold suggest an overall shift to cash.

The original target for a US/China agreement was the APEC meeting in Chile on 17-19 November. The passing of a US Congressional bill on Hong Kong, and the pre-Thanksgiving signing on Wednesday night by President Trump, are provocative moves. Beijing reiterated its objections to the bill yesterday, and its commitment to retaliate. The form of the retaliation holds the key to the near term outlook for markets.

The US dollar is steady at higher ground. Currency markets are more restrained in their responses to the ups and downs of the trade negotiations. However the repeated refusal of commodity currencies to rally with risk markets may indicate heightened cynicism on the part of forex traders.

The gains for many share indices over the month mean they are vulnerable to profit taking today. Institutional investors locking in monthly gains may mean Asia Pacific stocks ignore positive overnight futures moves. Japan’s inflation and industrial production releases could come into play, especially if they support a declining narrative.