Asia markets managed to finish November on a positive note with the Nikkei225 and Hang Seng managing to post some small monthly gains after the steep falls seen in October. Nonetheless the risks still remain tilted to the downside ahead of this weekend’s G20 summit in Buenos Aires as the tensions over trade and politics between China and the US hang over sentiment like a dark cloud.

President Trump has already said he is close to a deal on trade with China, he’s just not sure that he wants to do it, which raised some optimism that some form of fudged compromise might come out of the weekend meeting between President’s Trump and Xi.

The Chinese foreign ministry has said this morning it hopes that the US can show sincerity and meet China halfway in talks. We shall see, but as the song says it takes two to tango, and it’s not immediately clear that the US wants to.

Hopes of a deal have also been tempered by the news that Peter Navarro, an arch China critic, and author of the book “Death by China” was a late addition to the attendee list. This raises concerns that any compromise arrangement that delays any escalation to the current status quo has become less likely.

We know that there are tensions between the various factions within the Trump administration with respect to Navarro’s role, after Larry Kudlow, President Trump’s main economic advisor slapped him down for recent hawkish comments, saying that his views were not representative of White House policy.

Against this backdrop it thus remains uncertain as to whose voice will win out in terms of keeping the discussions going without any further escalation. With expectations low, a positive outcome would be a pledge to delay the January increase in tariffs with a view to further discussions, a pledge to retain the current status quo, if you like. Further escalations would be unwelcome given the slowdowns we are already seeing in most global benchmark economic indicators.

This morning’s Chinese manufacturing PMI showed that economic activity stalled in November, slipping from 50.2 to 50, though services still remained firmly in expansion territory at 53.4, slightly down from 53.8.

Markets in Europe look set to end what has been a positive week thus far on a cautious note, with investors set to adopt a “wait and see” approach and what has been a fairly neutral month for European stocks.

Crude oil prices appear to be finding a little bit of floor ahead of next week’s OPEC meeting after it was reported Russia might consider some form of production cuts, though rising US production is helping to temper any expectations of a strong rebound. On an inflation basis the recent falls are welcome news and are likely to help keep a lid on inflationary pressure in the coming months.

The US dollar has stabilised after a slipping sharply yesterday as expectations about future US interest rate rises shift to the downside. Next month’s December rate pretty much remains a done deal, however expectations around 2019 have shifted markedly, and last nights Fed minutes appear to confirm that assessment, even though they pre date Fed chairman Jay Powell’s comments earlier this week.

The pound has had a disappointing week as the background noise around a “no deal” Brexit scenario continues to get louder. Divisions remain as wide as ever between the various camps and we have now got the point where the two main party leaders of Theresa May and Jeremy Corbyn can’t even agree on which TV channel to have their debate on the EU Brexit deal, such is the world we live in now. What have we done to deserve such an utter shambles?

The latest house price data from Nationwide showed that house prices edged up in November by 0.3%, and 1.9% year on year.

On the inflation front we do appear to be seeing a pickup in European inflation by way of the supply chain after German import prices jumped sharply in October, rising 1% and 4.8% year on year, which could start to filter down into the headline numbers early next year.

Latest EU CPI numbers for November are expected to soften slightly to 2% from 2.2%, though core prices are expected to remain steady at 1.1%, on the back of lower oil prices.

US markets are expected to open slightly softer heading into the weekend with little in the way of data to drive direction at the end of what is still expected to be a positive week for US stocks, gains that have been driven by expectations of a slightly more dovish outlook from the Federal Reserve.

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