• Major European indices are little changed as markets await further US-China updates
• China is reportedly narrowing the scope for a trade deal with the US, officials expected to present an offer which omits industrial policy or subsidies
• North Korea has terminated working talks with the US and US forces are to pull out of Northern Syria, and not stand in the way of Turkey’s long-standing plan
• USD is firmer vs. G10 counterparts excluding safe havens
• Looking ahead highlights include US Consumer Credit, Fed’s Powell & Kashkari

TRADE

China is narrowing scope for a trade deal with the US ahead of principle-level talks in Washington this week, reports stated. Chinese officials this week are expected to come with an offer that doesn’t include anything on industrial policy or subsidies. (Newswires) Note: US equity futures gapped lower at the open amid the reports. China is said to see itself having a stronger hand amid the impeachment crisis, although people close to the Trump administration have suggested a potential impeachment inquiry is not impacting trade talks. (RANsquawk/Newswires)

US President Trump tweeted that China devalued its currency and "therefore paying the cost!", adds "we are helping the great farmers of the USA to the tune of USD 28bln, for the last two years, paid for out of tariffs paid to the US by China"

EU antitrust enforcer Vestager will signal a further clampdown on US tech giants by imposing an interim order on Broadcom (AVGO), according to FT (FT)

EU to ease restrictions on Japanese food imports, according to NHK World. (NHK)

Japan's Motegi says the US and Japan are to sign a trade agreement today in Washington. (Newswires)

ASIA-PAC

Asian equities traded mixed after initially opening higher following the US jobs report, which was robust enough to temper recession fears but lacklustre enough to keep the Fed on track to cut rates again in October, albeit upside in the region is capped amid reports that China is narrowing scope for a trade deal with the US ahead of talks in Washington this week. ASX 200 (+0.7%) was kept afloat by mining names after base metals posted gains late Friday, meanwhile Nikkei 225 (-0.2%) traded lower throughout the session as exporters were pressured by an unfavourable currency. Elsewhere KOSPI (U/C) shrugged off the breakdown of North Korea/US denuclearisation dialogue on Sunday as South Korea focused on the upcoming large-cap earnings, with heavyweight Samsung Electronics expected to announce its Q3 guidance tomorrow. As a reminder, Hong Kong and Mainland China were closed due to public holidays.

In Hong Kong a second teenager has been shot in the leg by police and is in a serious condition, according to Sky News citing sources. It is not clear if the teenager was shot by a rubber bullet or a live round. (Newswires/Sky News)

Australian PM Morrison is reportedly rejecting calls to add new fiscal stimulus. (Newswires)

China Foreign Reserves (Sep) 3.092tln vs. Exp. 3.105tln – first decline in four months. (Newswires)

US

Fed's George (Voter, Dissenter, Hawk) said leaving US rates unchanged would have been appropriate, citing moderate growth, record-low unemployment and benign inflation outlook. If US consumer is losing confidence, the Fed might need to rethink position on rates, George says each meeting is a meeting to rethink views on rates. George added that it would be realistic to accept fluctuations by as much as 100 bps around the Fed's 2% target and currently, concerns about low inflation seems necessary, muted inflation would not warrant policy response unless downside risks materialise (Newswires)

A second whistle-blower has come forward in the impeachment inquiry against US President Trump, according to lawyers representing the first one. (BBC) Meanwhile, US President Trump allies reportedly pressed Ukraine over its state gas company, according to sources cited by AP. (AP) US President Trump accused House Speaker Pelosi of being as guilty of treason as House Intelligence Committee Chairman for his characterisation of the call with the Ukrainian President. (Newswires)

* CANADA ELECTION DEBATE: Ahead of 21st October General Elections, leaders will hold a debate tonight in English, and on Thursday in French. Current Polling has PM Trudeau's Liberal Party (34.2%) slightly ahead of the Conservatives (33.7%). CBS said that, alhough the gap remains insignificant, the Liberals have moved ahead of the Conservatives in the national polling average for the first time since February; they are also ahead in the seat projection, though it is a toss-up whether they could secure a majority of seats. (RANsquawk)

GEOPOLITICS

North Korea has terminated working level nuclear talks with the US. North Korea’s Chief Nuclear Negotiator said it was “totally due to the fact that US would not give up its old viewpoints and attitude”. (Newswires)

Turkish President Erdogan and US President Trump discussed in a telephone conversation the plan to establish a safe area east of the Euphrates in Syria. Erdogan expressed unease with the US military and added that security bureaucracies are not doing what is necessitated by the agreement between US and Turkey. President Trump agreed to meet with Erdogan in Washington next month, upon Trump’s invitation. US White House confirmed the call between the two Presidents and notes that US will not be involved or stand in the way of Turkey's long planned operation into Northern Syria. Turkey will now be responsible for all ISIS fighters captured in Northern Syria. (Newswires)

Turkish Senior Official states that it is highly likely Turkey will wait until US soldiers have withdrawn from Northern Syria, could take one-week, before beginning offensive operations. (Newswires)

Japanese Government patrol boat is said to have collided with a North Korean fishing boat in the Japan North Sea, according to NHK, about 20 NK crew members are adrift in the Sea of Japan following the collision. (NHK) Japanese Fisheries Agency said the North Korean fishing boat was operating illegally. (Kyodo)

US President Trump is said to have ordered a substantial reduction in National Security Council Staff. (Newswires)

Iranian Oil Minister assured his Saudi counterpart that Iran did not start the dispute and that the enemies of the region abroad feed on the conflict between the two countries. (Al-Jezeera)

UK/EU

UK PM Johnson is reportedly willing to go to the Supreme Court to avoid having to write a letter asking for a delay to Brexit, as set out in the Benn Act, according to sources. (Telegraph). Senior UK Government figures are reportedly considering a series of proposals to “sabotage” EU’s structure if Brussels does not agree to a new deal or lets UK PM Johnson leave the bloc without one, according to sources. Plans under consideration include blocking the EU’s 2021-27 budget which is due to be agreed early 2020. (Telegraph)

French President Macron said the EU will decide at the end of the week whether a Brexit deal is possible. (BBC) UK PM Johnson told French President Macron that he will not delay Brexit, spokesperson said the Britain will consider publishing a full legal text on proposals if deemed helpful. (Newswires)

A court will rule by noon today whether or not to issue an order that makes UK PM Johnson liable for "frustrating" the Benn Act, according to The Times' Swinford. (Twitter)

Portugal’s incumbent Prime Minister Costa’s Socialists won a general election on Sunday but fell short of an outright majority. The Socialist Party (PS) took 37% of the vote, followed by the centre-right Social Democrats (PSD) with 28%, with 98% of constituencies counted, according to the interior ministry. (Newswires)

Italy's Confindustria confirms 2019 GDP forecast of 0% and 0.4% in 2020 (assuming no increase in VAT), sees 2019 deficit gdp/ratio at 1.8% and 2020 at 2.8% (assuming no increase in VAT): subsequently, Italy's Economy Minister Gualtieri states that GDP growth forecast of +0.6% is a balanced and possibly even a cautious estimate for Italy. (Newswires)

EQUITIES

Major European indices (Euro Stoxx 50 +0.2%) are little changed, after a weekend report alleged that China is narrowing scope for a trade deal with the US ahead of principle-level talks in Washington this week, with Chinese officials this week expected to offer a deal that doesn’t include anything on industrial policy or subsidies. Some desks tried to frame the reports as a positive, arguing that such concessions from China at this stage were very unlikely anyway, and adding that the article also talked about the possibility of the US and China making progress on a “mini deal” (where China could agree to making large-scale agricultural/energy purchases from the US and alter some IP practices in exchange for the US rolling back a partial amount of the existing tariffs). Such a mini deal, as hinted by the report, would likely exceed expectations for the talks, as most investors look for something more akin to a truce rather than any meaningful de-escalation. However, US President Trump has repeatedly shot down the prospect of any mini-deal, saying he would rather a full and comprehensive deal. As such, China’s refusal to engage with key US demands is likely to be seen as a negative for the long-term prospects of a comprehensive trade deal between the two sides. The sector layout is reflective of fragile risk sentiment; the defensive Utilities (0.3%), Consumer Staples (+0.4%) and Health Care (+0.6%) sectors are well supported while Consumer Discretionary (-0.1%), Tech (U/C) and Industrials (-0.1%) are underperforming. In terms of individual movers; Osram Licht (-4.3%) shares sunk after ASM (-3.3%) failed in its takeover bid for the Co., but said it would explore further strategic options to pursue the acquisition, with ASM shares pressured over investor concerns about the companies continued pursuit of the German lighting company. HSBC (-0.4%) shares were under pressure on the news that the Co. is to undertake a cost-cutting programme, which may affect 10k jobs. Bayer (2.5%) shares moved higher on the news that its October 15th trial date for the its US glyphosate case had been delayed until February 2020 (indicatively February 10th). Finally, LSE (U/C) opened higher after the Co. set a Wednesday deadline for the Hong Kong Exchange to place a revised takeover offer.

General Electric (GE) plans to reduce its pension deficit by roughly USD 5-8bln and freeze its US pension plan for about 20,000 employees with salaried benefits. (Newswires)

FX

AUD/NZD - The Aussie and Kiwi are bearing the brunt of renewed trade and geopolitical tensions having benefited from initial/brief Greenback weakness in the aftermath of last Friday’s ‘Goldilocks’ US jobs report. China is reportedly setting a limited agenda for talks in Washington this week, while discussions between the US and North Korea about denuclearisation were cut short over the weekend as an envoy from Pyongyang called for the Trump administration to withdraw hostile policy. Moreover, Turkey is back in the headlines with a resumption of drilling off Cyprus and operations in Northern Syria, while efforts to quell protests in Hong Kong have failed to prevent more violence and clashes. Aud/Usd is back below 0.6750 and Nzd/Usd has lost grip of the 0.6300 handle even though the Aud/Nzd cross is straddling 1.0700 amidst a bearish call from ANZ for the Kiwi to hit 0.5900 vs the Buck by Q1 next year.

SEK/GBP - The other major underperformers as the Swedish Krona continues to lament last week’s contractionary manufacturing and services PMIs alongside relatively downbeat Riksbank rhetoric via Jansson, while Sterling is suffering from fresh UK political and Brexit jitters following a lukewarm reception to PM Johnson’s proposals for the Irish border and ultimatum from the EU to alter the alternative plan by the end of the week. Eur/Sek just notched a new 2019 peak over 10.8700 and Cable has slipped back below 1.2300 with Eur/Gbp nestling above 0.8900.

CHF/JPY - In contrast to other G10 currencies, and despite the Dollar’s overall recovery from post-NFP lows (DXY nudging 99.000 again vs 98.720 at one stage on Friday), the Franc and Yen are both holding firm with Usd/Chf pivoting 0.9950, Eur/Chf hovering above 1.0900 and Usd/Jpy meandering between 107.02-106.58. Safe-haven positioning is impacting to an extent, while the Franc is also consolidating after recent quite hefty losses and the Yen is contained by decent option expiries in close proximity (1.5 bn at 106.70, 1.2 bn from 107.00-10 and 1.1 bn from 107.40-50).

EUR/CAD - The single currency is still hugging a tight line just under 1.1000 against the Greenback, and not too perturbed by yet more evidence of Eurozone economic woes in the form of German factory orders and Sentix sentiment, but the headline pair may constrained by expiry interest like Usd/Jpy given 1.4 bn sitting at 1.0950-60 and 1.1 bn at 1.0990-1.1000 into the NY cut. Elsewhere, the Loonie is trying to cap losses south of 1.3300 following Friday’s collapse in both measures of the Canadian Ivey PMI.

EM - Broad losses vs the Usd, with the Try undermined by the aforementioned Turkish factors and not deriving much in the way of support from President Erdogan lauding the CBRT for its policy actions, albeit anticipating more easing ahead. The Lira has been sub-5.7550, but now paring back.

ANZ forecasts NZD/USD to 0.5900 by end of March 2020 and 0.6100 by end of June next year, citing RBNZ lower cash rate and uncertainty surrounding capital decision, ANZ sees the OCR at 0.75% in May 2020 (currently 1.00%)

Notable Expiries, NY Cut:

- EUR/USD: 1.0900 (1BLN), 1.0925 (350M), 1.0950-60 (1.4BLN), 1.0975 (311M), 1.0990-1.1000 (1.1BLN), 1.1050 (370M)

- USD/JPY: 106.50-60 (600M), 106.70 (1.5BLN), 106.80-85 (700M), 107.00-10 (1.2BLN), 107.40-50 (1.1BLN)

FIXED

Far from an FTQ, but the 10 year German benchmark is edging higher and marginally extended the Eurex session peak at 174.72 (+23 ticks vs -4 ticks) in wake of yet more worrying Eurozone data and survey releases, with Gilts up in the slipstream to 134.95 (+5 ticks vs -17 ticks at worst) amidst the ongoing Brexit stalemate and pressure on PM Johnson to come up with a deal or go back to Brussels and ask for more time. However, US Treasuries remain reticent and the curve is marginally steeper ahead of more jobs data and Fed speak.

COMMODITIES

Crude markets advanced on Monday, erasing losses seen at the futures open on Sunday night, where prices had initially been pressured by seemingly negative US/China trade headlines over the weekend; WTI Nov’ 19 and Brent Nov’ 19 futures have reclaimed the USD 53.00/bbl and USD 58.50/bbl levels to the upside respectively. Supply side factors could be providing some support; Chinese State Oil Company pulled out of a USD 5bln deal to develop a portion of Iran’s offshore natural gas field amid the country’s escalating tensions with the US. Moreover, on Friday, reports emerged that the Buzzard oilfield in the North Sea has been shut temporarily for pipework repairs, with no timeline on how quickly operations will return to normal. The Buzzard field is the key contributor to the Forties blend, says Platts, and output at the field has been running at around 120k bpd. ING conclude that “an extended outage would likely provide some relative support to Brent”. Elsewhere, Russian Energy Minister Novack said Russia should lower oil industry taxes and put into production some 10bln tonnes of oil reserves, before adding that Russia's oil output will decline in the coming years if it does not change taxation laws. Novak also said he considers a mid-term oil price in the USD 50s are fair. In terms of metals, Copper and Gold prices moved lower on Monday but are cautious within recent ranges ahead of this week’s key risk events, which include US/China trade talks, FOMC and ECB Minutes, US CPI and a slew of Fed speak including a triple appearance from Fed Chair Powell. ING observe that the PBOC added 0.19mln/oz of gold to its reserves in the month of September, taking total reserves to 62.64mln/oz, a tenth consecutive month of gold purchases by China, which the bank says reflects the diversification drive away from the US dollar at a time of trade friction with the US. “Gold demand from Central Banks and ETFs has been stronger this year on economic and geopolitical concerns” the bank adds, “however higher prices have started to weigh on retail demand”, which recently is most evident in the large fall in demand by its usual largest buyer, India.

Chinese State Oil Company has pulled out of a USD 5bln deal to develop a portion of Iran’s offshore natural gas field amid escalating tensions with the US. (SCMP)

OPEC's Secretary General Barkindo says they are relying on Russia to assist in smoothing tensions between Iran and Saudi Arabia, and it is premature for OPEC to discuss additional oil output cuts, in-spite of the recent drop in prices., Tass. (Newswires)

Russian Energy Minister Novak says Russia should lower oil industry taxes and put into production some 10bln tonnes of oil reserves, says Russia's oil output will decline in the coming years if it does not change taxation; mid-term oil price of USD 50/bbl seen as fair. (Newswires)