• US equity futures are modestly firmer, in a bounce-back from the WTO announcement; note, Germany is closed
• USTR are to impose 10% tariffs on EU aircraft and 25% on agricultural and industrial goods
• Fed’s Evans says the ISM-Manufacturing print confirmed the FOMC’s view and is open-minded for the next meeting
• ·Fixed is firmer as growth concerns grow while DXY remains around 99.0 and somewhat mixed vs. G10 counterparts
• Looking ahead highlights include US Services and Composite PMIs, US Initial Jobless Claims, Durable Goods, Factory Orders and ISM Non-mfg PMI, ECB’s de Guindos, Fed’s Quarles, Mester, Kaplan and Clarida, Riksbank’s Skingsley and Ingves, German Unity Day

ASIA-PAC

Asian equities largely tracked losses seen on Wall Street which saw the DJIA fall below its 100 DMA (~26400) and briefly dip below the 26k level as the trade landscape took a turn for the worse with the US set to impose tariffs on EU goods on October 18th. ASX 200 (-2.2%) was led lower by heavyweight financials and miners whilst the Nikkei 225 (-2.0%) was pressured by a firmer domestic currency. Meanwhile, upside in the Hang Seng (+0.3%) was hindered by losses in oil giant CNOOC following a downgrade at Daiwa Securities, whilst HSBC and other financials rested near the bottom of the index amid lower yields and against the backdrop of ongoing protests, as demonstrators staged overnight vandalism and targeted Mainland China-linked businesses, and with reports of Hong Kong studying methods to contain the protest violence. Elsewhere, Mainland China and South Korean markets are closed today due to public holidays.

Hong Kong is reportedly studying a curfew to contain protest violence, according to local press. HK Chief Executive may use a ban to direct each person to remain in the specified area for the period specified in the order, until the Chief Executive revokes the curfew. The article also stated that anyone who breaks the curfew is guilty of offence and is liable on conviction to imprisonment for two years. A person such as a police or other disciplined force is not subject to a ban on duty or on his way to and from duty, the article said. Other reports stated that the government has also considered a law banning the wearing of face masks. (Sing Tao/Newswires)

BoJ Board Member Funo said the global economy slowing, downside risks are heightening, the BoJ should keep easing persistently and possible easing measures include rate cuts, boosting asset purchases and expanding monetary base. (Newswires) N.B: The comments were in-fitting with recent BoJ rhetoric ahead of its MPM on October 30-31.

TRADE

USTR Official said the US will impose retaliatory tariffs of 10% on EU aircrafts (not applicable to aircraft parts), 25% on EU agriculture and industrial goods, effective October 18th. USTR Official declined to provide a total amount of imports that will be affected. US said it would be ready to respond if the EU invokes further than the WTO tariff authority in retaliation. US also said it is willing to negotiate with the EU to settle aircraft case, but past EU offers have not been adequate. Sources stated that the US has requested an emergency meeting of the WTO dispute body for October 14th, a signal of fast movements for tariffs on EU goods, the sources added. Some items hit include French wine, cheese and Scotch whiskey; click here for the full list of items. (Newswires)

China Global Times Chief Editor tweeted the "US economy is not as promising as the White House brags … but it still launched a trade war. More terrible consequences will come.” (Twitter)

US

US Commerce Secretary Ross says there are disproportionate trade barriers for American Co's which are conducting business in India; changes in their policy has slowed the rate of growth for Amazon (AMZN) and Walmart (WMT). Hopes there will be a US-India trade deal soon. (Newswires)

Fed’s Evans (Voter, Dove) when asked about the disappointing Manufacturing-ISM print says it is an important data point, does not see this as an overreaction, confirmed the FOMC's view; open-minded about the October meeting. Rate cuts are risk management. (Newswires)

GEOPOLITICS

North Korea said it successfully test-fired new Submarine-Launched Ballistic Missile (SLNM), the tests were to contain outside forces' threats, tests had no adverse impact on security of neighbouring counties. (Yonhap/KCNA) US and North Korea will begin working level talks on October 4th in Sweden, according to sources cited by CNN International Correspondent Will Ripley. (CNN)

Hong Kong police have reportedly relaxed guidelines regarding the use of force in protests., according to documents. (Newswires)

Shelling has been reported in residential neighbourhoods near the US embassy South of the Libyan capital. (Al-Jazeera)

UK/EU

PM Johnson will suspend Parliament from Tuesday 8th October to hold a Queen's Speech on October 14th. (Telegraph/BBC)

EU is ready to grant another Article 50 extension even if the letter making the request for Brexit beyond October 31st is not signed by PM Johnson. Senior European diplomatic sources noted that the request for an extension until January 31st could come from “the head of government or head of state” which means either the PM or a representative of the Crown. Should the PM refuse to sign or send the extension letter, a Whitehall source said the letter could be sent by Cabinet Secretary Sir Mark Sedwill or UK’s ambassador to the EU Sir Tim Barrow. Furthermore, diplomats stated that no European leader has reached the point of wanting to veto an extension. (Times)

UK Minister for the Cabinet Office Gove said that with DUP, Conservative switchers and some Labour MPs on board, UK PM Johnson's has a very good chance of getting through parliament. (Newswires/ITV)

UK Government sources said that UK PM Johnson needs to know by this weekend whether the EU regards his offer as the basis for a final deal. Officials said that if the EU rejected his offer, PM Johnson may not attend the EU summit on Oct 17th. (Telegraph) The PM will be meeting his Cabinet today to discuss the reaction from Dublin and Brussels. (Sky News) Meanwhile, UK PM Johnson's aides have sent a memo ordering Tory MPs to label the EU "crazy" if the Brexit proposals are denied in a measure to shift the blame to the EU, according to BuzzFeed. (Buzzfeed)

UK Markit/CIPS Services PMI (Sep) 49.5 vs. Exp. 50.3 (Prev. 50.6)

- UK Composite PMI (Sep) 49.3 (Prev. 50.2)

- IHS: “At current levels the surveys point to GDP falling by 0.1% in the third quarter which, coming on the heels of a decline in the second quarter, would mean the UK is facing a heightened risk of recession."

EU Markit Services Final PMI (Sep) 51.6 vs. Exp. 52.0 (Prev. 52.0)

- EU Markit Comp Final PMI (Sep) 50.1 vs. Exp. 50.4 (Prev. 50.4)

EQUITIES

Major European Bourses are mostly higher in lighter trade with the German bourses shut for a national holiday. Markets appear to have stabilised in wake of yesterday/last night’s steep declines seen across global equity markets, ahead of further crucial macro-economic data in the form of US ISM non-manufacturing today, and NFP tomorrow. After the WTO ruled yesterday that the US could hit the EU with tariffs on USD 7.5bln worth of imports, a retaliation for the bloc’s illegal subsidising of Airbus, the USTR office unveiled the details of the tariffs; EU aircraft will be hit with 10% tariffs, while other agriculture and industrial goods (including on Whisky, Wine and Cheese) will be hit with 25% tariffs, with the tariffs to take effect on October 18th. Europe will retaliate, when the WTO rules on its complaints over US subsidies for Boeing, although any decision is unlikely until the end of the year. European stocks feared to have been worst affected by possible US tariffs cheered the announcement, implying a softer response by the US than some had feared; aircraft maker Airbus (+3.5%), luxury goods makers LVMH (+1.8%) and Kering (+1.1%) and beverage makers Pernod Ricard (+3.2%) and Diageo (+1.5%) all outperform. The sectors paint a mixed picture; Industrials (+0.1%) and the consumer sectors are firmer, reflecting strength in the above-mentioned names. Energy (-0.4%) continued to underperform, amid a catch up to recent declines in oil prices and with the overhang of yesterday’s decision by Norway’s Wealth Fund to sell oil & gas stocks worth approx. USD 5.9bln still weighing. Other notable individual movers include; Ted Baker (-35.7%) sunk after the co. posted disappointing earnings and warned of very difficult trading conditions and that full-year results could fall short. Sika (+3.2%) caught a bid on the news that the Co. had announced a new strategy, where it increased its long-term EBIT margin target to 15-18% from the prior 14-18%. Finally, Ingenico Group (+2.7%) saw strength after Berenberg initiated the co. with a buy.

Tesla (TSLA) – Co’s Q3 deliveries missed on Exp., Co. are down around 4% in pre-market trade. (Newswires)

FX

NZD/AUD - Not to be outdone by the All Blacks, the Kiwi is outscoring rivals in the major currency stakes with Nzd/Usd extending its rebound to within a whisker of 0.6300 and Aud/Nzd down through 1.0700 as the Aussie continues to labour on the 0.6700 handle vs its US counterpart in wake of the latest RBA rate cut and reaffirmation of easing guidance.

GBP - The Pound is holding up relatively well given another sub-50 UK PMI reading, and this time from the key services sector. The composite index has followed suite and IHS/Markit is now predicting a 0.1% q/q GDP dip for Q3 that would be enough to tip the economy into a technical recession. However, Sterling is resisting downside pressure and potential dovish BoE implications ahead of a speech by Tenreyro, as Cable keeps tabs with 1.2300 and Eur/Gbp pivots 0.8900 amidst mixed EU assessments on the latest Brexit proposals from PM Johnson. The rationale appears to be that while there is no sign that differences over the Irish backstop have been bridged, there maybe scope for further negotiation and/or sufficient grounds to warrant another Article 50 extension even if Boris is adamant about leaving at the end of this month, deal or no deal.

CHF/CAD/SEK - The G10 laggards, with the Franc succumbing to additional negative vibes following the ECJ ruling on Polish Chf denominated mortgages, but off par-plus lows vs the Dollar that is still feeling the adverse effects of Tuesday’s downbeat US non-manufacturing PMI (DXY straddling 99.000 ahead of today’s services PMI, ISM and raft of data). Elsewhere, the Loonie has retreated further amidst ongoing weakness in crude prices, with Usd/Cad finally breaching 1.3300 and the 200 DMA (1.3295) before absorbing offers at 1.3310 on the way towards 1.3340, while Eur/NOK scales 10.0000. Nevertheless, the Norwegian Crown is faring better than its Scandinavian neighbour after Sweden’s services PMI tracked the manufacturing index into contractionary territory and propelled Eur/Sek up to almost 10.8500 and ytd peaks only a few pips above.

EUR/JPY - The single currency has also displayed resilience in the face of mostly disappointing Eurozone services PMIs and more evidence of deflation via PPI data, although again partly if not largely at the behest or bequest of the Buck, as Eur/Usd trades on the 1.0950 axis and eyeing decent option expiries at 1.0970 (1.2 bn) and 1.1000 (1.7 bn). Similarly, the Yen is confined between 107.30-106.98 parameters, albeit the headline pair in a lower band with expiry interest layered from 107.00-05 (1.2 bn) through 107.50-60 (1 bn) to 107.65-75 (1.2 bn). Note also, a big expiry in Eur/Jpy resides at the 117.00 strike (1.5 bn) and the cross is currently at the lower end of a 117.64-26 range.

EM - Usd/Try remains in retracement mode after upside resistance was respected/rejected yesterday, but off lows in wake of Turkish CPI that missed already very soft expectations and could force the CBRT to ease further, or at least up Government pressure on the CB to cut rates again.

Notable Option Expiries:

- EUR/USD: 1.0900 (800M), 1.0930 (460M), 1.0970 (1.2BLN), 1.1000 (1.7BLN)

- USD/JPY: 107.00-05 (1.2BLN), 107.50-60 (1BLN), 107.65-75 (1.2BLN)

- EUR/JPY: 117.00 (1.5BLN)

FIXED

Core debt futures have dipped from best levels, but retain a firm bid on multiple bullish factors like broadly bleak services PMIs, Brexit uncertainty, global tariff angst and geopolitical strains, not to mention the growing dovish intimations for Central Banks. Bunds are a few ticks off 174.45, Gilts just shy of 134.70 and the 10 year T-note hovering below 131-10, with the spotlight turning to the US for a data deluge and the non-manufacturing ISM amidst a raft of Fed speakers.

COMMODITIES

Following yesterday’s steep declines, a result of a global sell off in risk assets and bearish EIA data, crude markets firmly in negative territory, albeit off yesterday’s. WTI Nov’ 19 and Brent Nov’ 19 futures for now appear bound within USD 52.20/bbl – USD 52.90/bbl and USD 57.20/bbl – USD 57.90/bbl parameters respectively. Comments/updates from energy ministers did little to move the dial for the complex; the Saudi Energy Minister Abdilaziz said the country has capacity back at 11.3mln BPD, although production has stabilised at 9.9mln BDP (in line with OPEC+ production cut commitments), while Venezuela’s Energy Minister said production is currently below 1mln bpd. Russian Energy Minister Novak, speaking about global demand, said 2019 global oil demand is to grow by 1.0-1.1mln BPD and oil demand growth is to recover in 2020 following a weak 2019. He added that there is no need for an extraordinary OPEC+ meeting at the present. With Saudi production now back at pre-attack levels, and geopolitical risk premia appearing to recede, the focus of crude markets appears to have returned to the global economy; as such, todays US ISM non-manufacturing and tomorrow’s NFP are likely to be pivotal determinants of near-term direction. Following yesterday’s bid that took the precious metal back above the USD 1500/oz mark, Gold prices appear to have stabilised, awaiting further impetus in the form of the important aforementioned economic data releases over the next two days. Copper, meanwhile, slid towards yesterday’s lows around the USD 2.550/lbs mark, as a boost to the red metal from a softer buck faded.

ANZ Bank revised down its 2019 oil demand growth forecast to 1.0mln BPD (Prev. 1.2mln BPD); ANZ still expects balance to tighten in Q4 2019. (Newswires)

Russian Energy Minister Novak says 2019 global oil demand is to grow by 1.0-1.1mln BPD; no need for an extraordinary OPEC+ meeting at the present. says oil demand growth is to recover in 2020 following a weak 2019 (Newswires)

Saudi Energy Minister Abdilaziz says we are at 11.3mln BPD of capacity, although the country has stabilised production at 9.9mln BDP. (Newswires)