• US President Trump said US-China talks went very well today ahead of his meeting with Chinese Vice Premier Liu He at 14:45EDT/19:45BST
• Asian equities took its cue from the rally on Wall Street, HK outperformed whilst Mainland remained cautious
• UK Brexit negotiators are proposing a "pared-down" free trade agreement to end the Brexit impasse, Irish PM noted that he had good discussions about a future relationship after Brexit
• DXY held onto losses, Cable kept a 1.24+ status, USD/JPY traded on either side of 108.00, AUD modestly outperformed
• Looking ahead, highlights include German CPI (Final), IEA Oil report, Canadian Employment, US Import & Export Prices, University of Michigan Sentiment and Baker Hughes Rig Count, ECB’s Draghi and de Guindos, Fed’s Kashkari, Rosengren and Kaplan, supply from Italy and US-China meeting

TRADE

US President Trump said US-China talks went very well today (yesterday), talks will continue tomorrow (today). Trump said we will see if we can make a deal with China, China has been "very nice". President Trump is to meet with Chinese Vice Premier Liu He at 14:45EDT/19:45BST, according to the WH schedule (Newswires)

US White House is reportedly mulling Public Company Accounting Oversight Board (PCAOB) dispute over access to China audits, according to reports. Officials are fixating on why Chinese companies can sell shares in the US when American regulators are prohibited from inspecting their books. (Newswires)

US-China trade talks are going very well, "probably better than expected", says a White House Official. Meanwhile, US-China Business Council believe that the US and China trade deal is going to be smaller than some people had hoped, but a deal of any kind is more than a lot of sceptics have felt, according to VOA. (VOA)

ASIA-PAC

Asian equities took their cue from the rally on Wall Street which saw the DJIA close just below 26,500 as US President Trump said he will meet with Chinese Vice Premier Liu He. ASX 200 (+0.6%) was supported by energy and mining names, whilst Nikkei 225 (+0.9%) felt tailwind for a weaker Yen. Elsewhere, Hang Seng (+1.4%) outperformed as heavyweight financials and oil-related stocks bolstered the index amid a high-yield and firmer oil price environment. Meanwhile, Shanghai Comp. (Unch) swung between gains and losses with the mainland remains on-guard as sticking points remain between the two largest economies.

Hong Kong Protesters reportedly are mulling whether to scale back on vandalism and violence as it risks alienating more moderate supported, according to reports. (Newswires)

Japanese Typhoon Hagibis is forecast to be the most powerful typhoon to hit Tokyo since 1958, according to the meteorological agency. (Newswires)

PBoC set CNY mid-point at 7.0727 vs. Exp. 7.0803 (Prev. 7.0730) (Newswires) PBoC skips open market operations for a net daily drain of CNY 30bln

UK/EU

UK Brexit negotiators are proposing a "pared-down" free trade agreement to end the Brexit impasse and to get a deal done by October-end, according to Sky News citing a source. Sky has been told that the offer to switch away from a fully formed withdrawal agreement - and instead put the focus on a more limited free trade agreement (FTA) - was part of the pitch made by Prime Minister Boris Johnson to his Irish counterpart Leo Varadkar during talks on Thursday. While an FTA will not resolve all of the issues that have dogged the existing UK proposals (customs checks), insiders have said it is a "cleaner and more straightforward" approach that could form the foundation for a more wide-ranging deal. (Sky News) One source claims indications are that Northern Ireland would leave the customs union but "follow" EU's customs rules, in the same way as region will "follow" single market regulations, as long as it has consent of people of Northern Ireland; Guardian. (Twitter)

According to a ComRes survey for the Telegraph, PM Johnson cannot get a majority in a general election unless he delivers Brexit on October 31. (Telegraph) Note, the poll was presented last week at a conference fringe event attended by Tory MPs

UK Brexit Secretary Barclay is to meet with EU's Chief Negotiator Barnier today at 0800BST, until around 930BST. Barnier is expected to receive the new proposals from Barclay, according to RTE's Tony Connelly. (Twitter)

Irish PM Varadkar said it is now possible to come to an agreement before the end of October, according to an Irish Examiner Correspondent. (Newswires) Irish PM Varadkar suggested a deal will take longer than the 6 days left before the EUCO meeting, and it might only be “by the end of October”, which leaves it no time to pass it through parliament, according to The Sun. (Sun) The Irish PM noted that he had good discussions about a future relationship after Brexit and issues around consent and customs still remain. Irish Foreign Minister Coveney said yesterday was an injection of some much-needed optimism, but added "mark my words, we are not there yet". (Newswires)

GEOPOLITICS 

US House Republicans will introduce sanctions against Turkey in response to its offensive against Kurds in Northern Syrian, according to newswires. US President Trump said "We have one of three choices: Send in thousands of troops and win Militarily, hit Turkey very hard financially and with sanctions, or mediate a deal between Turkey and the Kurds!" (Twitter)

FX 

DXY held onto a bulk of the prior day’s losses with the Index meandering around yesterday’s low (99.62) ahead of the psychological 99.50 level and its 50 DMA at 99.38. EUR/USD and GBP/USD are largely moving in tandem with the Greenback, with the former retaining its 1.1000+ status, although today’s NY cut sees over 1bln expiring at 1.1000 and around 1.5bln at 1.0950. GBP/USD remains north of 1.2400 amid hopes of a Brexit deal after the Irish PM said an arrangement is possible by Halloween. This saw Cable take out its 50 and 100 DMAs (1.2264 and 1.2407 respectively) to the upside before peaking at 1.2469 and stabilising sub-1.2450. Elsewhere, USD/JPY saw marginal upticks heading into the Tokyo fix after President Trump stated that China had been “very nice”. The pair briefly breached 108.00 to the upside before drifting back below the figure. CNH also saw some strength heading into the Tokyo fix, albeit marginal and short-lived. Finally, AUD/USD is modestly firmer amid relief that the Chinese delegation will be staying for Day 2 of talks. AUD/USD trades just below its 50 DMA (0.67778) whilst NZD/USD traded sideways as it failed to capitalise on trade optimism following disappointing September electronic card retail sales.

US President Trump tweeted that that he supports Brazil beginning the process for full OECD membership. (Twitter)

COMMODITIES WTI and Brent futures held onto a lion share of yesterday’s advances after the benchmarks climbed in excess of 2% at one point as optimism surrounding US-Sino trade talks in-turn lifted the global demand outlook. WTI futures briefly topped 54/bbl while its Brent counterpart eyed 60/bbl to the upside ahead of the IEA Monthly Oil report, which is likely to be side-lined as all eyes remain on developments in Washington. Elsewhere, gold prices remained mostly flat under 1500/oz overnight apart from a slight glitch heading into the Tokyo fix. Finally, copper surged above 2.6/lb on the risk appetite ahead of its 100 DMA at 2.63/lb.

NIOC owned Iranian tanker has been set on fire following a explosion, this is near the Saudi port of Jeddah; tanker is heavily damaged oil is spilling into the Red Sea. (ISNA)

US

* US T-NOTE FUTURES (Z9) SETTLED 18+ TICKS LOWER AT 130-22+: The debt complex sold off again on Thursday as reports suggested that both the US and Chinese delegation were working towards making progress in the trade talks and as Trump announced he will be meeting Lie He tomorrow, dismissing overnight reports, which saw flows into risk assets. The US sold USD 16bln of 30-year bonds at a record low yield of 2.17%, tailing by 0.1bps. The auction was covered at 2.25x, slightly above the six-auction average, with primary dealers taking less than their average share, too. The auction had little sway over the chunky sell-off, however, and by settlement yields were higher across the Treasury curve by around 7bps.

Fed's Mester (Non-Voter, Hawk) said US likely to avoid a serious downturn, economy continues to perform well, reiterates that she disagrees with the Sept rate cut, but content to keep "shallow" policy path now in hope for firmer inflation. (Newswires)

Fed’s Kashkari (2020 Voter, Dove) said rates are roughly around the neutral mark at the moment, believes US economy is going to grow but it does face risks. He added that the time has probably passed for the central bank to use a supersize rate cut to boost the economy, but he remains on board with the idea that cheaper borrowing costs are still warranted, will support a 25bps cut (Newswires/WSJ)

U.S. Ambassador to the EU Sondland is expected to testify next Wednesday before the House committees investigating President Trump and Ukraine, despite being blocked by State Department from appearing at closed-door deposition last week, sources. (Axios)

Senior adviser to Secretary of State Mike Pompeo, Michael McKinley, has resigned over "rising dissatisfaction inside the State Department over what is seen as Pompeo’s failure to support personnel ensnared in the Ukraine controversy", WaPo reports. (Washington Post)