• Asian equities showed a mixed performance, Hang Seng (+0.4%) outperformed as Budweiser APAC’s debut signalled favourable IPO conditions
• Chinese Caixin Manufacturing topped estimates but trade concerns weighed on the one-year outlook and new export business continued to decline
• Reports suggested that the White House is mulling limits on portfolio flows into China, however, a US Treasury official stated that there are no current plans to stop Chinese firms from listing on US exchanges
• UK Opposition Leaders will meet today to find a way to force UK PM Johnson to ask for a Brexit extension as early as this weekend
• In FX markets, the DXY re-gained traction, USD/JPY remained flat, NZD/USD fell amid a deterioration in business outlook
• Looking ahead, highlights include German Retail Sales, Unemployment Change & CPI (Prelim); EZ Unemployment Rate, UK GDP, US Chicago PMI and Fed’s Evans

ASIA-PAC

Asian equities showed a mixed performance after a negative lead from Wall Street in which major bourses fell deeper into the red amid reports which suggested that the White House is mulling limits on portfolio flows into China, albeit a US Treasury official later noted that there are no current plans regarding market access. ASX 200 (+0.1%) turned green as Nufarm shares rose in excess of 25% after the Co. reported an increase in revenue alongside the sale of its South American unit to Sumitomo. Meanwhile, Nikkei 225 (-0.5%) was subdued throughout the session as heavyweight Softbank fell over 2% amid the ongoing concerns surrounding WeWork after CEO Neumann left his position following the failed IPO. Elsewhere, Hang Seng (+0.4%) nursed the initial losses which emanated from continuing disarray in Hong Kong as protesters clash with police for yet another week, with further protests planned for China’s 70th anniversary of Communist rule tomorrow. Losses in Hong Kong later pared amid gains in large-cap energy names and as AB InBev’s Budweiser APAC soared over 5% at its debut today, which was seen as a litmus test for the IPO environment in Hong Kong. Meanwhile, Shanghai Comp (-0.4%) received a short-lived boost after the Chinese Caixin Manufacturing metric topped estimates with new orders quickening to 18-month highs and production expanding at fastest pace since August 2018, signalling a recovery in the manufacturing sector. However, the index failed to hold onto gains as trade concerns weighed on the one-year outlook and new export business continued to decline. Furthermore, the PBoC skipped open market operations today which resulted in a modest net daily drain of CNY 20bln ahead of the Mainland’s absence for the remainder of the week due to the National Week Holiday.

Reports suggested that the White House is mulling limits on portfolio flows into China, there is no timeline set for capital restrictions.  Officials also considering delisting Chinese stocks from US stock exchanges but is unclear what mechanism the US could use to enforce such a policy. However, a US Treasury official stated that there are no current plans to stop Chinese firms from listing on US exchanges. Further, China Global Times noted that the listing of Chinese companies in the US is not just beneficial to China, but also to US investors and “after all, it is US consumers and investors that will bear the costs.”

US President Trump said that patience is needed to ensure the trade deal with China is a great one. (Newswires)

Hong Kong protesters clashed with police for a 17th week with further protests planned for China’s 70th anniversary of Communist rule on Tuesday 1st October. Furthermore, Hong Kong police confirmed an officer fired a live round Sunday near Wan Chai MTR station, according to CNN International Correspondent Will Ripley (Newswires/Twitter)

PBoC set CNY mid-point at 7.0729 vs. Exp. 7.0825 (Prev. 7.0731) (Newswires) PBoC skips open market operations for a net daily drain of CNY 20bln

BoJ offered to buy JPY 420bln in 1-3yr JGBs (Prev. JPY 400bln) and JPY 340bln in 3-5yr (Prev. JPY 320bln). (Newswires)

Chinese Caixin Manufacturing PMI (Sep) 51.4 vs. Exp. 50.2 (Prev. 50.4) - Highest since February 2018, New orders quickens to 18-month highs, production expanded at fastest pace since August 2018. Optimism towards the one-year outlook for output remained relatively weak in September, with concerns over future trade conditions commonly cited by panel members. (IHS Markit)

Chinese NBS Manufacturing PMI (Sep) 49.8 vs. Exp. 49.5 (Prev. 49.5) - 5th consecutive contraction (Newswires) Chinese NBS Non-Manufacturing PMI (Sep) 53.7 (Prev. 53.8) Chinese NBS Composite PMI (Sep) 53.1 (Prev. 53.0)

Japan has approved exports of fluorinated polyimide to South Korea, Korean press states. (Newswires) Reminder: On July 1st, Japan announced it would restrict exports of three chemicals to South Korea: fluorinated polyimide, resist and hydrogen fluoride.

UK/EU

Outgoing ECB President Draghi stated that the need for higher fiscal spending is “more urgent than before” and noted that extraordinary monetary stimulus may have to last a long time if there is no support from fiscal policy. (FT)

UK Opposition Leaders will be meeting today to find a way to force UK PM Johnson to ask for a Brexit extension as early as this weekend by changing the law to bring forward the date when the PM legally has to ask Brussels for an Article 50 extension, which currently stands as October 19th. (Telegraph)

The Queen has reportedly sought advice on the circumstances in which she could sack UK PM Johnson, according to iNews citing sources. (iNews)

UK Government is reportedly planning to put out “concrete proposals” this week for reaching a Brexit deal, according to BBC, which is expected to be revealed after the Tory conference. (BBC)

Senior UK Brexit planning official Matthew Coats is set to quit. Officials said Mr. Coats is moving to a new post in government as executive chair of the government automation task force. (FT)

Greater London Authority referred PM Johnson to the Independent Office for Police Conduct for a possible investigation into whether he committed misconduct in a public office in connection to his friendship with an American businesswoman. (Sky News)

UK Lloyds Business Barometer (Sep) 2 (Prev. 1)

Austrian parliamentary elections has left Chancellor Sebastien Kurz with the option to form a government with the Far Right Freedom Party or the Greens. Kurz took 37.1% votes. (Newswires)

Italy’s new finance minister said he will pursue a “wise middle ground” between exceeding budget constraints and increasing government spending to stimulate the domestic economy. (FT) 

FX

DXY re-gained traction following its retreated back towards the 99.00 mark in US trade on Friday with participants citing month-end flows as a factor for the recent support. EUR/USD and GBP/USD remained flat under the 1.0950 and 1.2300 levels respectively, although the former sees 2.3bln in options expiring at strike 1.0900 which could limit upside in the pair, whilst the latter will be keeping a close eye on developments in Westminster today as oppositions leaders meet to find a way to bring forward the date when PM Johnson is required to ask Brussels for an Article 50 extension under the Benn Act, which currently stands as October 19th. Elsewhere, USD/JPY was uneventful under 108.00, albeit the pair remains above its 100 DMA (107.80) and failed to react to the somewhat dovish BoJ Summary of Opinions and optimistic Japanese Retail sales, although it’s worth noting today’s options at 107.50 (1.5bln) and 108.00 (950mln) ahead of the NY cut. Finally, the Kiwi fell to session lows on poor business data which showed a deterioration in business outlook, whilst its Aussie counterpart felt short-lived reprieve on the China Caixin PMI, albeit AUD/USD later pared gains and dipped into the red amid the cautious tone of the release and ahead of the RBA Monetary Policy decision tomorrow with money markets pricing in a 75% change of a 25bps cut to the Cash Rate.

BoJ Summary of Opinions state BoJ must maintain current powerful monetary easing and momentum for hitting price goal sustained, BoJ can leave policy steady for now, must mull whether additional easing is needed, putting all options on the table. When considering the outlook for the output gap, inflation expectations, and various leading indicators of prices, the inflation momentum seems to be lost, and thus it is necessary to take additional easing measures pre-emptively. Besides additional easing, the Bank should strengthen its commitment and enhance further coordination of fiscal and monetary policy. (Newswires) For reference, the next MPM will take place on October 30th.

New Zealand NBNZ Business Outlook (Sep) -53.5% (Prev. -52.3%) (Newswires) New Zealand NBNZ Own Activity (Sep) -1.8% (Prev. -0.5%) COMMODITIES

WTI and Brent futures remained flat overnight in which the former meandered around its 50 DMA near the USD 56/bbl mark whilst the latter remained afloat above USD 61/bbl. Prices were unreactive to the overnight tier 1 data release and comments from Saudi Crown Prince MBS who noted that the recent attacks on the Aramco facilities were an act of war by Iran but stated that he would rather not pursue a military response and called on US President Trump to meet with his Iranian counterpart to hash out a deal. Elsewhere, gold prices were softer overnight amid a firmer Buck as the yellow metal fell further from the USD 1500/oz level to test its 50 DMA at around USD 1490/oz, whilst copper was bolstered after the optimistic Chinese Caixin Manufacturing figure spurred demand in the red metal.

Exports of Libya's El Sharara oil to fall by 7% on the month to 210k BPD in October, according to preliminary loading data. (Argus)

S&P affirmed Saudi Arabia’s sovereign rating at “A-“; outlook “Stable”. (Newswires)

GEOPOLITICS

Saudi Crown Prince Mohammed Bin Salman said the attacks on the Saudi oil facilities were an act of war by Iran, hopes military response will not be necessary as a political solution is "much better". MBS also called on US President Trump to meet with Iranian President Rouhani to craft a new deal. (Newswires)

Turkish Foreign minister said US is considering actively re-including Turkey in its F-35 jet programme. (Newswires)

Turkey air force downed a drone on the Syrian border after it breached Turkish airspace six times. (Newswires)

Russian Government has called on NATO to refrain from deploying European missiles. (Newswires)

US

T-Notes (Z9) settled 3+ ticks higher at 130-12+. The curve steepened slightly in wake of reports suggesting Trump officials were considering a policy to restrict portfolio flows to China and are also mulling delisting Chinese stocks from US exchanges. Fed Overnight Repo operations today saw USD 22.7bln bids submitted (Fed had offered USD 100bln), and the 14-day term operation was under-subscribed, seeing USD 49bln accepted of the USD 60bln offered; while both indicate money market stress has abated, attention will be on Monday’s operations, to observe month/quarter-end effect, and the digestion of this week’s Treasury supply. In later trade, the TPLEX was supported by comments from China diplomat Wang Yi, who struck a defiant tone, suggesting China would not be bullied, contributing to a risk-off feel towards to close.

Three House committees subpoenaed US Secretary of State Pompeo to supply documents relating to administration's dealings with Ukraine. This follows comments from the US House Intel Committee Chief who noted that impeachment inquiry hearings and subpoenas could be issued as soon as this week. Further, the US envoy to Ukraine, Kurt Volcker has resigned. (Newswires)