• European indices are slightly softer but overall little changed as markets await a substantial catalyst ahead of Thursday’s ECB
• US President Trump reiterated that China wants to talk, and it was also reported that China is hopeful US can create conditions for trade talks
• USD remains little changed vs. G10 counterparts though SEK & NOK remain subdued on domestic factors
• Looking ahead, highlights EIA STEO, APIs, BoE’s Carney & Riksbank’s Ingves, US 3yr supply

ASIA-PAC

Asian equity markets traded mixed as they followed suit to the indecisive tone seen on Wall St amid a sell-off in treasuries and as the region also digested ambiguous inflation figures from China. ASX 200 (-0.5%) was negative with gold miners frontrunning the declines in Australia after the precious metal slipped below the psychological key USD 1500/oz level but with further losses in the index stemmed by strength in the energy sector following the recent rally in oil prices, while Nikkei 225 (+0.4%) was kept afloat by favourable currency moves. Elsewhere, Hang Seng (Unch.) and Shanghai Comp. (-0.1%) gave back initial gains despite the liquidity efforts by the PBoC and firmer than expected Chinese inflation data, as the figures were largely influenced by a 10% increase in food prices amid the swine fever epidemic and also showed PPI at its sharpest contraction in 3 years. Finally, 10yr JGBs were lower following the bear-steepening seen in US and broad declines across global bonds, while the absence of the BoJ from the market today also added to the lacklustre demand.

PBoC injected CNY 80bln via 7-day reverse repos. (Newswires)

PBoC set CNY mid-point at 7.0846 vs. Exp. 7.0958 (Prev. 7.0851) 

Chinese CPI (Aug) Y/Y 2.8% vs. Exp. 2.6% (Prev. 2.8%), food prices rose 10% Y/Y, pork prices rose 47% Y/Y. (Newswires) Chinese PPI (Aug) Y/Y -0.8% vs. Exp. -0.9% (Prev. -0.3%); steepest decline since August 2016.

US President Trump reiterated that China wants to talk, and it was also reported that China is hopeful US can create conditions for trade talks. (Newswires/China Daily)

Huawei abandoned its lawsuit against the US government regarding seizure of its telecoms equipment, while there were separate report the Co. expects to be able to release first Google-free smartphone by Spring next year, and that the US filed criminal charges against a Chinese professor in Texas who is linked to Huawei. (Newswires/WSJ)

China is very restrained on the trade war and other issues., Chinese Global Times Editor. (Twitter)

China FX regulator has decided to remove QFII and RQFII quotas, will remove requirement on countries and regions on RQFII scheme. (Newswires)

GEOPOLITICS

North Korea launched 2 projectiles, although a Japanese Defence Ministry official later commented that the latest North Korea missiles pose no immediate threat to Japan's national security. (Newswires/Yonhap)

Pakistani Foreign Minister has told UN Human Rights council that India's "illegal Kashmir military occupation" raises spectre of "genocide". Additionally, Pakistan's Qureshi says that he sees 'no possibility of a bilateral engagement with India'. (Newswires)

UK/EU

Parliament also rejected holding an early election as 293 voted for it vs. 46 against, which is short of the 434 votes or two-thirds majority needed for a snap election. (Newswires)

UK PM Johnson said the government will press on with negotiating a Brexit deal and that he will go to the EU Summit on October 17th to strive to get an agreement, while he also reiterated the government will not delay Brexit. Elsewhere, Tory MPs confirmed they were told PM Johnson is opening the door for a return of rebels but will require a show of loyalty. (Newswires/Twitter)

UK opposition Labour Party leader Corbyn said they will not vote for an election until no-deal is off the table. In other news, Labour is reportedly considering tabling a confidence vote on PM Johnson on October 22nd after instructing its MPs to vote down the Queen's Speech a day beforehand. (Newswires/Telegraph)

German Finance Minister Scholz says Germany will have billions to use if there is an economic crisis due to strong foundations it has built for growth. (Newswires)

UK Avg Wk Earnings 3M YY Jul 4.0% vs. Exp. 3.7% (Prev. 3.7%, Rev. 3.8%)

- UK Avg Earnings (Ex-Bonus) Jul 3.8% vs. Exp. 3.8% (Prev. 3.9%)

- UK ILO Unemployment Rate Jul 3.8% vs. Exp. 3.9% (Prev. 3.9%)

EQUITIES

European equities are modestly softer [Eurostoxx 50 -0.3%] following on from a mixed Asia-Pac session as participants remain on standby ahead of Thursday’s ECB monetary policy decision. Sectors are mixed with underperformance in the IT sector, whilst energy names outperform as the oil complex holds onto its recent gains and banking names remain supported by yesterday’s surge in yields (RBS +4.4%, UBS +3.4%, Barclays +4.5%). In terms of stocks on the move, EDF (-7.5%) share fell from the open after the Co. noted deviations in technical standards governing the manufacture of nuclear-reactor components. On the flip side, Subsea 7 (+2.7%) shares opened higher after the Co. announced its current COO as the new CEO effective January 1st 2020, additionally the Co. were awarded an offshore contract in Saudi Arabia. Finally, JD Sports (+3%) shares are supported post earnings after H1 sales rose 47% Y/Y and the Co. forecasts FY results to be at the mid-point of their previously guided range.

TSMC (2330 TT) - August sales TWD 106.12bln vs. Prev. TWD 91.1bln. (Newswires)

FX

SEK/NOK - The major underperformers in wake of softer than forecast Swedish and Norwegian inflation data that calls into question hawkish guidance from the Riksbank and Norges Bank. Eur/Sek has rebounded from sub-10.7000 levels through 10.7500 and breached several technical resistance points in the process, including 10 and 21 DMAs plus a Fib retracement, while Eur/Nok is back above 9.9000 from almost 9.8500 and also taking on board the latest Norges Bank regional network survey showing that contacts envisage slightly slower growth in the coming 6 months.

USD - The Dollar is mixed to marginally firmer awaiting this week’s top-tier US data for more input ahead of the September FOMC after last Friday’s rather inconclusive BLS report and broadly upbeat comments from Fed chair Powell, on balance. However, the DXY remains rangebound between 98.260-463 and well within near term chart support and resistance not to mention recent highs and lows for the index.

CHF/NZD/AUD - The Franc has pared some losses vs the Greenback and single currency as risk appetite wanes/falters and selling abates into key technical psychological markers, like 0.9950 in Usd/Chf and 1.1000 in Eur/Chf. Meanwhile, the Aussie and Kiwi have lost some momentum, with Aud/Usd drifting back towards 0.6850 in wake of a downturn in NAB business sentiment and dip in conditions overnight, and Nzd/Usd fading ahead of 0.6450 as Aud/Nzd meanders between 1.0645-85.

GBP/CAD/JPY/EUR - Sterling staged another attempt to hunt out stops around 1.2385 vs the Buck and briefly crossed the 100 DMA against the Euro (0.8930), but failed to sustain momentum again amidst the ongoing UK political and Brexit paralysis. However, the ensuing Pound pull-back was arrested by more encouraging data as earnings beat consensus on a headline basis and the jobless rate eased to 3.8% from 3.9%. Note also, 2 bn option expiries in Cable at the 1.2300 strike have provided a buffer. Elsewhere, trade has been considerably more rangebound with the Loonie straddling 1.3175, Yen holding within 107.19-49 parameters and Euro stuck in a 1.1037-59 band awaiting Thursday’s ECB policy pronouncements for more direction.

EM - Contrasting fortunes again for the Rand and Lira, as Usd/Zar continues its deep reversal from 15.0000+ towards 14.6900 regardless of more SA ratings warnings from Moody’s, but Usd/Try elevated above 5.7500 in the run up to this week’s CBRT rate verdict and heeding even more dovish calls (-500 bp touted in a Turkish paper) alongside the persistent threat of US sanctions.

Australian NAB Business Confidence (Aug) 1 (Prev. 4). (Newswires)

Australian NAB Business Conditions (Aug) 1 (Prev. 2)

Norwegian Consumer Price Index YY Aug 1.6% vs. Exp. 1.8% (Prev. 1.9%)

- Norwegian Consumer Price Index MM Aug -0.7% vs. Exp. -0.5% (Prev. 0.7%)

Swedish CPIF YY Aug 1.3% vs. Exp. 1.5% (Prev. 1.5%)

- Swedish CPIF MM Aug -0.4% (Prev. 0.4%)

FIXED

Yet more see-saw price action and again Gilts have been in the thick of it, with a reversal from Liffe peaks in wake, albeit somewhat belatedly, of more above consensus UK data. However, amidst stellar demand for long-dated DMO supply and another emphatic rebound in Bunds that has spilled over to US Treasuries where futures have pared losses and quite severe curve steepening has been unwound, 10 year benchmarks have regrouped ahead of the US open. The question is now, is the latest move sustainable or just transitory before another retreat.

Moody's has reduced its 2019 forecast for Italian growth to 0.2% from 0.4%, see Italy's growth accelerating to 0.5% next year. (Newswires)

COMMODITIES

WTI and Brent futures are holding onto most of its recent gains with the two benchmarks around 58.00/bbl and 63/bbl respectively at the time of writing. News-flow for the complex has been light, although reports stated that Russia’s Energy Minister Novak will be meeting with newly appointed Saudi Energy Minister Abdulaziz in Jeddah later today to discuss the energy market alongside strengthening Saudi-Russia cooperation ahead of Thursday’s JMMC meeting. Meanwhile, Nigeria’s Finance Ministry notes of strong indications of an oil glut next year, and thus lowered its benchmark forecast to 55/bbl from 60/bbl. This evening will also see the release of EIA’s Short-Term Energy Outlook with focus on global demand growth forecasts. Looking further ahead, participants will also be eyeing the weekly API crude inventory data with markets expecting a headline drawdown of 2.5mln barrels. Elsewhere, gold prices are largely unchanged below the 1500/oz mark amid the undecisive risk tone in the market ahead of this week’s key events. Meanwhile, copper prices have seen a more pronounced downside compared to yesterday with the red-metal flirting with 2.60/lb to the downside at the time of writing. Finally, Dalian iron ore prices advanced as much as 4% amid expectations that China will ratify further economic stimulus that would boost steel demand.

Iraq Oil Minister sees new projects to provide additional 2mln bpd capacity in next few years. (Newswires)

Goldman Sachs continue to see Brent oil price of USD 60/bbl next year amid OPEC willingness to sacrifice market share; GS lower their 2019 oil demand growth expectation to 10mln bpd from 11mln bpd. (Newswires)

Nigeria's Oil Minister says Nigeria's oil production exceeds OPEC's target but not everyday, will comply with OPEC. (Newswires)

Nigeria oil production to average 2.3mln BPD in 2019 (August production at 1.93mln BPD), 2020 projected at 2.18mln BPD, Finance Minister states, notes of strong indications of an oil glut in 2020, lowers price forecast to USD 55/bbl (Prev. 60/bbl)