• Asian equity markets traded indecisively following the US holiday and reports the US and China are struggling to set a meeting for trade talks this month
• UK PM Johnson warned if lawmakers vote for another Brexit delay on Tuesday, there will be a vote for a General Election on Wednesday
• RBA kept rates unchanged at the record low of 1.00% and noted the global economy remained reasonable
• Looking ahead, highlights include Swiss CPI, UK Construction PMI, EZ PPI, US Construction Spending & ISM Manufacturing PMI, UK Parliament’s return, vote on incoming ECB President Lagarde, Fed’s Rosengren, SNB’s Jordan, supply form the UK

ASIA-PAC

Asian equity markets traded indecisively following a non-existent lead from Wall St due to the Labor Day holiday and as upcoming key risk events, as well as reports US and China are struggling to set a meeting for trade talks this month, added to the non-committal tone. ASX 200 (-0.1%) and Nikkei 225 (+0.1%) were choppy with upside in Australia limited by mixed data and amid the RBA rate decision where the central bank kept rates unchanged as expected, while advances in Tokyo were restricted by a mixed currency. Hang Seng (-0.2%) and Shanghai Comp. (-0.1%) conformed to the indecisive tone after reports noted difficulty in setting up planned US-China trade talks and after MOFCOM lodged a case against the US at the WTO, with PBoC inaction and a net daily liquidity drain of CNY 80bln also contributing to the lacklustre sentiment in China. Finally, 10yr JGBs were subdued after the pullback in T-notes but then gradually recovered after mixed 10yr JGB auction results.

PBoC skipped open market operations for a net daily drain of CNY 80bln. (Newswires) PBoC set CNY mid-point at 7.0884 vs. Exp. 7.1099 (Prev. 7.0883)

US & China are reportedly struggling to agree on a schedule for this month’s planned trade talks. (Newswires)

Hong Kong Chief Executive Lam said disruption at the airport has harmed Hong Kong's international image and that the economy is seeing a downturn impacting every industry, while Lam added she believes she can still bring the city out of current trouble and has never contemplated discussing a resignation. There were separate comments from Hong Kong Deputy leader Cheung who does not rule out declaring a state of emergency in response to tens of thousands of high school and university students boycott classes, as well as increasing violence between police and protesters. (Newswires)

UK/EU

UK PM Johnson said he is encouraged by progress on Brexit and that chances of a deal are rising, while he added that the EU can see UK wants deal and has a vision for future relationship. PM Johnson also reiterated his argument that getting a deal would be made impossible if MPs vote for a Brexit delay and that the UK is to leave on 31st October as he will not ask for a delay under any circumstances but believes UK will get a deal at the October EU summit. In other news, UK PM Johnson said Chancellor Javid will announce a spending round on Wednesday. (Newswires/Sky)

UK PM Johnson warned if lawmakers vote for another Brexit delay on Tuesday, there will be a vote for a General Election on Wednesday with the view to conduct the vote on 14th October rather than accept another Brexit delay, while reports also suggested that Johnson wants an election before the EU Council meeting scheduled for 17th-18th October. (Twitter/ITV/Sun)

The text of the bill which MPs want to use to prevent a no-deal Brexit has been published which, if passed, would mandate PM Johnson to seek a Brexit extension until 31st January 2020 if the PM has not passed a Brexit agreement by 19th October 2019 (the day after the Brexit summit), unless MPs pass a motion to approve a no-deal exit. (Guardian/BBC)

UK opposition Labour party leader Corbyn will not fall for PM Johnson's no-deal snap election trick and will only support a general election if the threat of a no-deal is removed, according to shadow cabinet minister Lloyd. (Huffington Post)

UK BRC Retail Sales YY Aug -0.5% (Prev. 0.1%). (Newswires) Barclaycard said UK consumer spending increased 1.3% Y/Y. (Newswires)

As a reminder, Italy's 5-Star Movement members will take part in an online vote between 0700-1700BST today on whether the party should form a government with the Democratic Party (PD). (Newswires) Of note, the latest LA7/SWG poll suggests that 51% of 5SM voters support forming a government with the PD party, whilst 69% of PD voters are in favour of forming a government with the 5SM.

FX

DXY was firmer and extended above 99.00 as price action began to pick up following the holiday lull and amid weakness across its major counterparts including EUR/USD which recently gave up the 1.1000 handle on its retreat to fresh multi-year lows. GBP/USD also languished below 1.2050 after the prior day’s losses that were triggered by Brexit uncertainty and election risk with opposition MPs and Tory rebels planning to push through legislation to force a 3-month delay if a deal cannot be reached by 19th of October, although PM Johnson hopes to quell these efforts with the threat of a snap election which could result to a greater majority for the government. USD/JPY and JPY-crosses were mixed with the divergence driven by their base currencies, while antipodeans were pressured in which AUD/USD and NZD/USD slipped below 0.6700 and 0.6300 respectively after CNH recently hit fresh record lows and as participants digested mixed data in which Australia posted its first Current Account surplus in over 4 decades and stronger than expected net exports contribution ahead of tomorrow’s GDP, but missed on Retail Sales. Furthermore, AUD/USD was later supported and recovered most its losses after the RBA rate decision in which it kept rates unchanged at the record low 1.00% and noted the global economy remained reasonable, while its statement was mostly a reiteration and did little to support expectations for a cut at the next meeting.

RBA kept the Cash Rate unchanged at 1.00% as expected. RBA stated the outlook for global economy is reasonable and that it is to ease policy if needed to support sustainable growth, while it added rates are to remain low for an extended period. RBA reiterated that it will monitor developments in labour market closely and that signs of a turnaround in housing market but sees inflation likely to be subdued for some time and noted the outlook for consumption remains the main domestic uncertainty.

Australian Current Account Balance (Q2) 5.9B vs. Exp. 1.4B (Prev. -2.9B). (Newswires) Australian Net Exports Contribution (Q2) 0.6% vs. Exp. 0.3% (Prev. 0.2%) Australian Retail Sales (Jul) M/M -0.1% vs. Exp. 0.2% (Prev. 0.4%)

COMMODITIES

Commodities were lacklustre in which WTI crude futures remained subdued below the USD 55.00/bbl level amid the indecisive risk tone and following the US holiday lull, which also means participants will have to wait until Wednesday for the latest API inventory release. Elsewhere, gold prices were subdued as the greenback firmed overnight and copper also mirrored the weakness across the complex amid the ongoing US-China trade uncertainty.

Saudi Arabia removed Energy Minister Khalid Al-Falih from his position as Chairman of Saudi Aramco and appointed public investment fund head Yasir Al-Rumayyan as the new Chairman ahead of an IPO. (Newswires)

GEOPOLITICS

US will withdraw troops from 5 bases in Afghanistan under a proposed agreement with the Taliban, according to US envoy Khalilzad. (Al Jazeera)

US

Virginia Governor Northam declared a state of emergency ahead of hurricane Dorian's impact on south-eastern Virginia. (Newswires)