• Asian equity markets traded higher after sustaining the momentum from Wall St. where all major indices rallied and the S&P 500 notched a 1-month high
• UK Labour Party will seek to delay an election until November after party leader Corbyn was warned he would lose if it were to be held sooner
• DXY was relatively flat overnight below 98.50, treading water heading into today’s NFP number
• Looking ahead, highlights include German Industrial Output, EZ Employment (Final) & GDP (Revised), US & Canadian Jobs Reports, CBR Rate Decision, Moody’s Reviewing Italy, Fed’s Powell, SNB’s Jordan, ECB’s de Guindos & BoE’s Ramsden

ASIA-PAC

Asian equity markets traded higher after sustaining the momentum from Wall St. where all major indices rallied and the S&P 500 notched a 1-month high amid US-China trade hopes, while better than expected ISM Non-Manufacturing and ADP jobs data ahead of today's NFP report added to the optimism. ASX 200 (+0.6%) and Nikkei 225 (+0.4%) were higher with the gains in Australia led by tech following similar outperformance of the trade-sensitive sector stateside and with the JPY-risk dynamic at play in Tokyo. Hang Seng (+0.5%) andShanghai Comp. (+0.2%) conformed to the global optimism although gains in the region were somewhat capped ahead of the key US jobs data and after a mostly inactive PBoC this week resulted to a net weekly liquidity drain of CNY 100bln. Finally, 10yr JGBs were lower following the extended its slide below 155.00 after-hours yesterday as the heightened risk appetite triggered declines across global bonds. However, downside has since been stemmed on selling fatigue and with the BoJ present in the market for over JPY 1.2tln of JGBs heavily concentrated on 1yr-10yr maturities, while BoJ Governor Kuroda also reiterated that lowering rates further into negative territory is always an option and noted both 20yr and 30yr yields have declined a bit too far.

PBoC injected CNY 40bln via 7-day reverse repos for a weekly net drain of CNY 100bln. (Newswires) PBoC set CNY mid-point at 7.0855 vs. Exp. 7.1003 (Prev. 7.0852) Fitch downgraded Hong Kong from AA+ to AA; Outlook Negative

UK/EU

UK PM Johnson stated that whilst there was a good chance that a deal could be secured, there is also a high chance that it could not, according to BBC's Faisal Islam citing published Cabinet minutes. (Twitter)

UK Labour Party will seek to delay an election until November after party leader Corbyn was warned he would lose if it were to be held sooner, while Corbyn believes he can trap PM Johnson by refusing to an October election and force him to seek a Brexit delay. (Telegraph) However, there were later reports that suggested the Labour Party and SNP are said to discuss calling for October 29th election. (Newswires)

Chancellor of the Duchy of Lancaster Gove said he would support former PM May's Brexit deal if it returned to Parliament. (Telegraph)

At least 12 of the ejected rebel Tory MPs are seeking to run as independents if a new general election is called. (Newswires)

Irish PM Varadkar said there is a significant growing risk of a No Deal Brexit given the political situation in the UK. (Newswires)

FX

DXY was relatively flat overnight below 98.50 as it treaded water heading into today’s NFP number and after stronger than expected US ISM Non-Manufacturing helped the greenback rebound from yesterday’s initial downturn. EUR/USD also bided its time at the 1.1000 handle ahead of the key US data, while GBP/USD plateaued after its advance past a 1-month high was stalled by resistance around 1.2350 and as participants look ahead to the next Brexit developments with the House of Lords expected to push through the bill to prevent a no-deal Brexit by today, although PM Johnson remained defiant and suggested he would rather ‘die in a ditch’ than request an extension. USD/JPY flirted with 107.00 on safe haven outflows and antipodeans were uneventful amid a lack of pertinent data with mild outperformance in NZD due to cross-related flows in which AUD/NZDpulled-back from resistance at 1.0700. In addition, ANZ Bank bolstered its dovish views for both RBA and RBNZ in which it sees both central banks to lower rates to 0.25% by May next year from current 1.00%.

Bank of Canada's Schembri said the bank is paying close attention to falling commodity prices and that they could reduce rates into negative territory although that would be an extreme situation. Schembri added that the bank has other tools it can use and is currently reviewing its tool kit to address the next downturn, while he also noted the Canadian economy has a welcome degree of resilience to possible negative economic developments, that recent domestic data has surprised to the upside and current policy stimulus remains appropriate. (Newswires) 

SNB's Jordan said the bank cannot declare how long negative rates will last but they are necessary for now, while he added interest rate spreads play an important role for exchange rates. (Newswires)

COMMODITIES

Commodity prices were relatively uneventful in which WTI crude futures consolidated after the swings seen in the prior session where the initial upside, spurred by the risk on sentiment and a larger than expected draw in DoE crude inventories, was later faded heading into the settlement. Gold prices were also contained due to the lack of demand for safe-havens and an uneventful greenback as markets await the NFP jobs data, while the risk-fuelled rally in copper also stalled overnight as prices conformed to the lacklustre tone across the complex.

Saudi Crown Prince spoke to Iraqi PM and confirmed cooperation to stabilise the oil market, according to local press. (Newswires) CME raised COMEX 5000 silver futures margins by 19.5% to USD 4900/contract and raised Nat Gas Henry Hub futures margins by 9.1% to USD 1800 per contract. (Newswires)

GEOPOLITICS

US President Trump spoke to French President Macron on Thursday regarding digital sales tax, while they also discussed Iran's actions in the Gulf and Trump told Macron that Iran sanctions won’t be dropped now. (Newswires)

Iran said it lifted limitations on research and development field as part of further scaling back from the 2015 nuclear accord and will inform UN nuclear agency of the details of its nuclear steps. (Newswires) 

US

Treasuries sold-off on the improved risk appetite (face-to-face China talks and strong US ISM non-manufacturing), lending a hand to the financials sector. Most of the move came after the headline ISM printed a rebound to 56.4, easing concerns of the less rosy manufacturing figure. It was another busy day of corporate dollar issuance, with IFR noting an expectation of 14 different issuers set to price on the day, making the week one of the largest on record for issuance, with investment grade issuance pricing USD 74bln worth, and a multi-year record amount. By settlement yields were higher across the curve, with the 5-year yield and 7-year yield being most pronounced, rising approximately 12bps. US T-note (Z9) settled 31+ ticks lower at 131-09+.

US President Trump tweeted a quote which reiterated view that China needs a deal more than US and that the US economy is strong, while the quote suggested there wouldn't be a need to worry about a recession if the Fed cut rates to where the bond market says they should be. (Twitter)

Fed research suggested trade uncertainty is likely to cut US growth by more than 1% through early 2020. (WSJ)

US Treasury recommended ending conservatorship for Fannie Mae and Freddie Mac, as well as preserving government support in the housing market. (Newswires)