• Asian equity markets traded higher after taking the impetus from the gains across global peers
• A large split reportedly opened up among Tory Eurosceptics whether to back PM Johnson's Brexit plan with some in the ERG supporting it, whilst others spoke out against it
• Reports are now talking about an effective deadline of 1300BST for a Brexit deal to be agreed in Brussels
• China urged US lawmakers to stop interfering and threatened to retaliate with strong measures after the US House passed a bill aimed at supporting the Hong Kong protests
• Looking ahead, highlights include UK CPI, EZ CPI (Final), US Retail Sales & Business Inventories, Canadian CPI, APIs, Fed's Evans & Brainard, ECB's Lane, BoE's Carney & Haldane, GermanyEarnings: Bank of America, Abbott Laboratories, PayPal, Netflix, IBM, ASML

ASIA-PAC

Asian equity markets traded higher after taking the impetus from the gains across global peers which were spurred by Brexit-related hopes on reports negotiators were closing in on a draft Brexit deal and as several large US banks kicked off a predominantly strong start to Q3 earnings season. ASX 200 (+1.2%) was led by Consumer Staples although commodity names lagged especially the gold producers due to recent losses in the complex and with Rio Tinto choppy despite strong Q3 iron ore shipment updates. Nikkei 225 (+1.1%) rose to a fresh YTD high and Chinese markets also initially conformed to the upbeat tone helped by strong loans and financing data, as well as the PBoC injection of CNY 200bln through its Medium-term Lending Facility, although the gains in Hang Seng (+0.3%) and Shanghai Comp. (-0.3%) were short-lived/trimmed as China urged US lawmakers to stop interfering and threatened to retaliate with strong measures after the US House passed a bill aimed at supporting the Hong Kong protests. Finally, 10yr JGBs were lower as they tracked the declines in T-notes with safe-haven demand subdued by the rally in stocks and with the BoJ also only in the market for T-bills. 

PBoC skipped open market operations but announced CNY 200bln of 1yr MLF loans with rates unchanged at 3.30%. (Newswires) PBoC set CNY mid-point at 7.0746 vs. Exp. 7.0708 (Prev. 7.0708)

US House passed a bill aimed at supporting the Hong Kong protests and China later responded by urging the US to stop pushing forward the bill which it strongly condemned, while it reportedly threatened to retaliate over the passage of the bill and urged US lawmakers to stop interfering. (Newswires)

US Commerce Secretary Ross said China came to negotiations with the US due to the substantial tariffs imposed on it and that tariffs are accelerating the hollowing out of Chinese supply chains with companies moving production elsewhere. (Newswires)

China Ministry of Rural Affairs said China has not agreed to the USD 50bln of agricultural purchases figure but do plan on buying a "considerable" amount although "many things" must happen before the purchases, according to Fox's Lawrence. (Fox Business)

Bank of Korea lowered the 7-Day Repo Rate by 25bps to 1.25% as expected and stated the South Korean economy is to grow less than 2.2% this year, with inflation to fall short of July projection. Furthermore, BoK Governor Lee said board members Lee and Lim dissented in today's rate decision and that he sees there is still room to further ease policy if required but added it is premature to talk about unconventional tools and that the BoK is to watch the effect of its recent 2 rate cuts for the time being. (Newswires)

UK/EU

UK government insiders were reportedly cautioning that talk of an imminent deal is “premature” and there are still hurdles to overcome, according to ITV's Brand. (ITV)

A large split reportedly opened up among Tory Eurosceptics whether to back PM Johnson's Brexit plan with some in the ERG supporting it, whilst others spoke out against it. (The Sun) DUP said gaps remain before it will support any fresh Brexit agreement following meeting with PM Johnson and reportedly will not back a Brexit deal if UK PM Johnson makes more concessions to the EU according to a source, while it is also said to be ruling out a customs border down the Irish Sea which is precisely the compromise thought to have been made by UK PM Johnson. However, reports later noted the DUP was said to be asking for billions for Northern Ireland for them to accept PM Johnson's deal. (Newswires/Daily Mirror/FT) UK PM Johnson is to brief his cabinet at 1600BST today, prior to a scheduled 1922 Committee meeting. (Guardian)

Brexit deal text was said to be taking shape with negotiations continuing but could go on through the notional midnight deadline in order to provide it to EU27 meeting tomorrow, according to a source cited by RTE's Connelly. Political correspondent Dave Keating tweeted we're past the midnight deadline and there was no sign of white smoke from the Berlaymont, while he added talks are expected to go through the night in Brussels and people are now talking about the effective deadline of 1300BST. (Twitter) Germany warned that Brexit could need to be delayed until next year even if UK and EU negotiators agree a new deal as it could take until January 1st to finalise technical details. (The Times)

Hundreds of entrepreneurs have written to PM Johnson, urging him to avoid any further delays to Brexit as “this rank uncertainty is crippling British business and it cannot continue”, according to the Telegraph. (Telegrraph)

FX 

DXY traded relatively stable and failed to make any meaningful recovery from the prior session’s losses where safe-havens were pressured by the boisterous risk appetite and in which the greenback also took a hit from the Brexit-related optimism in its European peers that saw EUR/USD recover the 1.1000 handle and GBP/USD briefly test 1.2800 to the upside. Nonetheless, GBP/USD has slightly retreated from near 5-month highs as it remains unclear whether Johnson will have Parliamentary support for any prospective deal. USD/JPY and JPY-crosses gave back some of their risk-fuelled advances after China’s firm response to the Hong Kong interference which alongside a weaker than expected CNY fix, weighed on antipodeans and forced NZD/USD to give back the spoils from firmer than expected CPI, while RBNZ Deputy Governor Bascand also contributed to the NZD reversal as he suggested there is reasonable prospects for further rate cuts.

New Zealand CPI (Q3) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.6%). (Newswires) New Zealand CPI (Q3) Y/Y 1.5% vs. Exp. 1.4% (Prev. 1.7%)

RBNZ Deputy Governor Bascand said we remain vulnerable to external shocks and lower rates may still be needed to achieve targets, while he added the domestic economy is in a good place and it is a reasonable prospect for rates to go lower. (Newswires)

COMMODITIES

Commodities were uneventful overnight in which WTI crude futures languished just below the USD 53.00/bbl level after taking a breather from the prior day’s choppy price action in which uplift from the positive risk sentiment contended with the pressure from US-China trade concerns and IMF global growth downgrade, with focus for the complex now shifting to the holiday-delayed inventory reports including APIs due after-hours today. Elsewhere, gold attempted to nurse some of its recent losses but still has much ground to recover after its recent hefty losses where it slipped from resistance shy of the USD 1500/oz as the rally in stocks weighed on safe-havens, while copper also mirrored the lacklustre tone across the complex and underperformance in its largest purchaser China.

CME raised NatGas Henry Hub futures margins by 10% to USD 2200 per contract from USD 2000. (Newswires)

GEOPOLITICS US State Department official said the US is planning to raise sanctions on Turkey if a resolution to the crisis is not found, while it was also reported that US Senator Graham will introduce a bill on Thursday sanctioning Turkey for Syria incursion and that US prosecutors charged Turkey's Halkbank in regards to alleged Iran sanctions violations. (Newswires)

US Defense official said the US wants China to improve the enforcement of North Korea sanctions and take other measure to make North Korea more cooperative in talks. (Newswires) 

US

T-notes sold off throughout the session since the US equity cash open, as it took a leg lower on reports that the UK and EU are close to a draft deal, which saw global debt sell off. At settlement, yields were approximately 1bp higher across the curve, with the long end almost 2bp higher. On the overnight repo operations, NY Fed accepted (USD) 67.6bln out of the 75bln offered, however demand was expected to be high as today was coupon settlement day, additionally, the Fed has now begun purchasing T-Bills at an initial clip of USD 60bln a month, as it announced last week. US T-Notes (Z9) settled 14+ ticks lower at 129.24+.

Fed's Daly (non-voter, dove) said the US economy and policy accommodation is currently in a good place, while Daly added that she is watching for any changes to domestic momentum or headwinds for the economy. (Newswires)