• Asian equity markets traded mixed after the lacklustre tone rolled over from Wall St where all majors finished with marginal losses
• UK PM Johnson told the 1922 Committee that the UK will still leave deal or no deal on 31st October if a deal cannot be reached
• EU sources stated that a level playing field, customs arrangements and NI consent all have been agreed in the EU/UK talks, although VAT provisions are not done yet
• US President Trump suggested the Phase 1 of the US-China trade deal is moving along "rapidly"
• Looking ahead, highlights include Swedish Employment, UK Retail Sales, US Housing Permits & Starts, Philadelphia Fed, Industrial Production and EIA Weekly Stocks, EU Council Summit Begins, Fed’s Evans, Bowman, Williams, RBA’s Debelle, ECB’s Coeure, Riksbank’s Ingves and Jansson, supply from Spain & France
• Earnings: Morgan Stanley, Phillip Morris, Union Pacific, Ericsson, Taiwan Semiconductor

ASIA-PAC

Asian equity markets traded mixed after the lacklustre tone rolled over from Wall St where all majors finished with marginal losses as participants digested earnings and with sentiment dampened by weak US Retail Sales. ASX 200 (-0.8%) was led lower by underperformance in tech and with mining names closely behind including BHP after its quarterly updates showed iron ore output was flat Y/Y, while Nikkei 225 (+0.1%) was choppy around the 22500 level and near its YTD highs with mild JPY weakness just about keeping the index afloat. Conversely, Hang Seng (+0.8%) outperformed as property names surged and Shanghai Comp. (Unch.) failed to benefit from recent comments by China’s Cabinet that it will step up efforts to attract foreign investment and will not allow forced technology transfers, while China will also ensure lower tax for manufacturing and other sectors. Finally, 10yr JGBs declined as Japanese stocks remained afloat near 10-month highs and following mixed results at the 5yr JGB auction which showed slightly higher yields and lower accepted prices.

PBoC skipped open market operations but announced a CNY 6.0bln central bank bill swap. (Newswires)

PBoC set CNY mid-point at 7.0789 vs. Exp. 7.0720 (Prev. 7.0746)

US President Trump suggested the Phase 1 of the US-China trade deal is moving along "rapidly". (Newswires)

US Treasury Secretary Mnuchin said there is still work to so in documenting the trade agreement with China but added he is very pleased with how it concludes, he also stated there is currently no invitation from China for further trade talks in Beijing and that he and USTR Lighthizer are prepared to travel to China. Mnuchin said he has not determined how to treat China in the next Treasury currency report but had discussions with Chinese officials on currency that made the Treasury more comfortable. (Newswires)

US is to require all Chinese foreign missions to notify the State Department in advance of all meetings with state, local and municipal government, educational and research institutions, with the US goal to achieve reciprocal treatments for US diplomats in China. The reports added the requirement covers all staff at Chinese missions in US and officials traveling in the country on official business although it is not requiring diplomats to obtain permission but just to let them know, while the Chinese government alleged the latest US rules for diplomats violate the Vienna Convention. (Newswires)

US Senate Foreign Relations Chairman Risch said he wants to move the Hong Kong human rights and democracy bill quickly after it passed through the House. (Newswires)

UK/EU

UK PM Johnson told the 1922 Committee that the UK will still leave deal or no deal on 31st October if a deal cannot be reached, while the PM was also said to have told the cabinet there is a chance of securing a good deal although we are not there yet and outstanding issues still remain. (Newswires) UK Culture Minister Morgan said there is a good chance of a Brexit deal although there is no agreement yet and reports also noted a Cabinet Minister stated that the Brexit deal is "fingertip close". (Newswires/Daily Mail)

EU sources stated that a level playing field, customs arrangements and NI consent all have been agreed in the EU/UK talks, although VAT provisions are not done yet. According to reports the Northern Ireland Assembly will be allowed to hold a vote on whether to continue the border arrangements in six years and, if they agree to continue, every four years after this. (Newswires) EU ambassadors later confirmed that talks would continue through the night, while several ambassadors told EU’s Barnier they were concerned treaty text had not been finalised, making endorsement by EU leaders at the summit very difficult. (Newswires/Telegraph/BuzzFeed). ITV's Peston suggested that EU leaders can still ratify before the weekend if legal text can be agreed by 0800BST on Thursday but added if not, there will be no deal before the weekend. (ITV) French President Macron said a Brexit deal is being finalized and hopes a deal can be signed off on Thursday, while German Chancellor Merkel said based on what she has heard, there is an increased chance of a Brexit deal and that we are in the last stretch of negotiations. (Newswires) EU Council President Tusk said a deal is ready, but cautioned there are "certain doubts on the British side". (Telegraph)

UK Labour Party leader Corbyn is reportedly preparing to back a 2nd referendum on potential new Brexit deal. (The Times)

ECB's Weidmann said it is important for central banks to stick to a narrow interpretation of its mandate and that more fiscal support is not needed unless the situation worsens but some additional fiscal spending is possible in Germany. (Newswires)

ECB's Villeroy said ECB is determined to reach inflation goal and that causes of Euro area slowdown are mainly internal, while he added a review of ECB monetary policy framework will be very welcome. (Newswires)

FX 

USD remained subdued after the unexpected contraction in Retail Sales which saw the DXY briefly give up 98.00, while its major counterparts held on to recent strength in which EUR/USD consolidated near the prior day’s highs and in proximity to notable option expiries at 1.1090-92 for today’s New York cut. GBP/USD was also flat north of 1.2800 after the recent heightened Brexit-related optimism, although a deal has so far been elusive. USD/JPY and JPY-crosses marginally extended on recent gains and antipodeans were also firmer against the greenback with AUD/USD the outperformer following a surprise decline in the Unemployment Rate to 5.2% from 5.3% which saw OIS price in just a 27% chance of the RBA cutting rates next month from around 39% prior to the data release.

Australian Employment Change (Sep) 14.7k vs. Exp. 15.0k (Prev. 34.7k). (Newswires) Australian Full Time Employment Change (Sep) 26.2k (Prev. -15.5k) Australian Unemployment Rate (Sep) 5.2% vs. Exp. 5.3% (Prev. 5.3%) Australian Participation Rate (Sep) 66.1% vs. Exp. 66.2% (Prev. 66.2%) 

COMMODITIES

Commodities were lacklustre overnight in which WTI crude futures were dragged below the USD 53.00/bbl level following a much larger than expected build in API headline crude inventories with gasoline and Cushing components also on the slightly bearish side. Gold was flat but held on to most the prior day’s gains which were spurred by a softer greenback following weak US Retail Sales data, while copper languished amid continued pressure in Chinese commodity prices and indecisive overnight risk tone.

API Crude Inventories +10.5mln vs. Exp. +2.9mln (Prev. +4.1mln). (Newswires)

GEOPOLITICS US Treasury Secretary Mnuchin said US President Trump expects there will be a cease-fire regarding Turkey's actions in Syria and suggested that increased tariffs on Turkey's goods have been successful in the past. In related news, US conducted a pre-planned air strike in Syria to destroy some ammunition and abandoned vehicles as troops depart according to a US official. (Newswires)

US

The TPLEX ultimately settled firmer after a choppy session. Haven flows were price supportive as the buck weakened whilst gold firmed – participants were cautious ahead of an official Brexit deal announcement, in addition to a disappointing US retail sales report, which caused some concern on the resilient consumer segment. At settlement the curve had steepened slightly with the 30-year yield little changed, whilst the 2-year yield fell ~3.5bps. US T-note (Z9) settled 7+ ticks higher at 129-31+.

Fed's Beige Book stated the US economy expanded at a slight to modest pace since the prior report as business activity varied across the country, Furthermore, household spending was solid on balance and the housing market conditions changed little, while manufacturing activity continued to edge lower and agricultural conditions deteriorated further. (Newswires)

Fed’s Brainard (Voter, Dove) said the strong preference is to address the effective lower bound with existing tools and that negative rates are unattractive for the US. (Newswires)

Fed's Evans (Voter, Dove) said volatility in money market rates is a concern and the Fed doesn't want it to get in the way of policy, while he added declining business investment makes him nervous but economic data is positive and suggested the Fed may struggle with the reserve issues longer than it would like. (Newswires)