• Major European bourses are modestly firmer, FTSE lags amid a firmer pound, SAP shares rose after earnings and announcing a deal with Microsoft
• UK Parliament vote on the Brexit deal was postponed on Saturday after lawmakers voted (322-306) in favour of passing the Letwin amendment
• In FX, GBP/USD briefly topped 1.3000, DXY fell further towards 97.00, risk currencies outperform
• Looking ahead highlights include BoE’s Haldane, Fed’s Bowman, ECB VP de Guindos, Canadian Elections

ASIA-PAC

Asian equity markets began the week with a cautious tone following last Friday’s lacklustre close on Wall St and amid continued Brexit uncertainty. ASX 200 (Unch) and Nikkei 225 (+0.3%) were mixed with Australia dragged by underperformance in the tech sector. However, resilience in the property and mining sectors has limited the losses in Sydney, while Tokyo sentiment was kept afloat by mild JPY weakness as a larger than expected contraction in exports ata added to the pressure for the BoJ to act. Hang Seng (Unch) and Shanghai Comp. (+0.1%) conformed to the indecision after the PBoC injected liquidity via open market operations but refrained from anticipated cuts to its Loan Prime Rates, with Hong Kong also mildly underpinned after China revised rules to permit mainland investors to trade Hong Kong-listed dual class shares through the Stock Connect. Finally, 10yr JGBs are lower in which prices retested prior support around the 154.00 level and with demand subdued as Japanese stocks remained afloat, although downside was stemmed amid the BoJ presence in the market for JPY 1.16tln of JGBs in up to 10yr maturities.

PBoC injected CNY 50bln via 7-day reverse repos. (Newswires) PBoC set CNY mid-point at 7.0680 vs. Exp. 7.0681 (Prev. 7.0690)

PBoC 1yr Loan Prime Rate 4.20% vs. Exp. 4.15% (Prev. 4.20%). (Newswires) PBoC 5yr Loan Prime Rate 4.85% vs. Exp. 4.83% (Prev. 4.85%)

Chinese House Prices (Sep) Y/Y 8.4% (Prev. 8.8%). (Newswires)

Japanese Trade Balance Total (JPY)(Sep) -123.0B vs. Exp. 54.0B (Prev. -143.5B). (Newswires) Japanese Exports (Sep) Y/Y -5.2% vs. Exp. -4.0% (Prev. -8.2%) Japanese Imports (Sep) Y/Y -1.5% vs. Exp. -2.8% (Prev. -11.9%)

US

China is seeking USD 2.4bln in retaliatory sanctions against the US for non-compliance with WTO ruling in tariffs case dating to Obama era, according to document. (Newswires)

US President Trump’s allies are reportedly compiling a list of potential candidates to replace Acting White House Chief of Staff Mulvaney. (Newswires)

UK/EU

Parliament vote on the Brexit deal was postponed on Saturday after lawmakers voted (322-306) in favour of passing the Letwin amendment which withholds approval of the Brexit deal until legislation to ratify it is passed and which effectively forced PM Johnson to request a Brexit extension to January 31st under the Benn Act. Following this, PM Johnson stated that the legislation will be tabled in the upcoming week and sent a letter to the EU requesting a Brexit extension which he did not sign, while he sent 2 other letters where he stated that the extension request was from Parliament and urged the EU not to grant the extension. (Newswires) UK PM Johnson could be held in contempt by Scottish Court for urging EU leaders to ignore a letter asking for an extension to Brexit. Scotland's most senior judge, Carloway, alongside two other judges will hear the allegations today. (Guardian) UK de facto Deputy Gove has triggered official contingency plans for a no-deal Brexit in an attempt to pressure MPs into backing PM Johnson's Brexit deal. (Guardian) Elsewhere, the UK Government are reportedly drawing up plans for an election as soon as November 28th. (Telegraph)

UK Government spokesperson says talks with the DUP are ongoing; meaningful vote will go ahead if allowed by House Speaker Bercow and no amendments are selected. (Newswires)

UK Foreign Secretary Raab suggested that the government has the numbers to pass the deal in Commons and is confident the UK will leave on October 31st. Cabinet Minister Gove also stated that the UK will still leave on October 31st and that Parliament cannot change the government’s policy or determination, while there were separate comments from MPs Amber Rudd and Sir Oliver Letwin that suggested they will back PM Johnson’s Brexit deal. (Newswires)

Daily Telegraph’s Political Correspondent Yorke tweeted that a senior DUP figure said the party could back a customs union amendment to the WAB in order to ensure whole of the UK leaves EU under the same customs arrangements and that the party will discuss issue over next 24-48 hours, while he added that another DUP figure said they’ll unleash guerrilla warfare in Parliament to block the Brexit deal unless Boris Johnson goes back to Brussels and addresses their concerns with the party said to be looking at multiple options this week. (Twitter/Daily Telegraph)

EU leaders held a brief meeting on Sunday regarding the Brexit in which they said they will play for time rather than rush to decide on PM Johnson’s “extension request”, while other reports suggested the EU is poised to grant the extension in which diplomatic sources stated the UK could leave sooner if the deal is ratified prior to the end of the extension. (Newswires/Sunday Times) France’s European Affairs Minister Amelie de Montchalin urged UK MPs to deliver a "yes or no" verdict so that EU leaders can gather to discuss whether to grant a delay. (Telegraph) German Foreign Minister says a short technical Brexit extension would not be ruled out. (Newswires)

Incoming ECB Chief Lagarde said everybody will be a little bit less well-off due to Brexit and that US-China trade war will certainly give a big haircut to the global economy. (Newswires)

EQUITIES

Major European Bourses (Euro Stoxx 50 +0.4%) are modestly firmer after risk sentiment turned more constructive following AsiaPac indecisiveness, during which the latest developments (or lack thereof) on the Brexit front and the PBoC’s decision not to cut Loan Prime Rates contributed to the cautious tone. The FTSE 100 (+0.1%) lags amid a stronger Pound on hopes that the worst possible Brexit outcomes are off the table and that PM Johnson may have enough backing for his Brexit deal. Sectors are mostly in the green, apart from defensives, with Consumer Staples (-0.6%), Health Care (-0.5%) and Utilities (-0.2%) all lagging on improved risk appetite. In terms of individual movers; Wirecard (+8.2%) shares spiked higher on the news that the Co. had decided to commission an independent audit relating to the recent allegations made by the FT. Smith and Nephew (-8.0%) sunk after the Co.’s CEO stepped down. Micro Focus (-5.6%) fell on after Open Text confirmed that it is not considering a potential acquisition. Meanwhile, strong earnings saw SAP (+1.7%) move higher, while weak earnings saw Just Eat (-6.5%) head lower. Prudential (-8.2%) shares took a dive on the news that the Co. is to split its UK business (M&G Business) from its Asia operations today. Finally, Osram (-0.4%) shares were initially supported by an upgrade to buy at Commerzbank and after AMS (+4.9%) confirmed its offer for the Co. whilst lowering its minimum accepted threshold, whilst Pearsons (+0.1%) was upgraded to hold from sell at Deutsche Bank.

Microsoft (MSFT) - Prelim results of EU investigations into Co's contracts with EU institutions reveal serious concerns over compliance with data protection rules. (Newswires)

FX

GBP - Sterling has staged a strong comeback from post-super Saturday lows amidst increasingly bullish calls for the Pound and more bouts of short covering on the premise that the risk of a hard Brexit is declining with every move by UK Parliament to assume control of proceedings and/or force another Article 50 extension. Cable snuffed out stops around 1.3000 after eclipsing last week’s 1.2990 peak, but topped out around 1.3012 and Eur/Gbp retreated through 0.8600, though the cross held above last Thursday’s 0.8575 base as the single currency climbed alongside its UK counterpart.

NZD/AUD - Although Sterling’s resilience awaiting PM Johnson’s next move and attempt to put his WA to the HoC is noteworthy, the Antipodean Dollars are outperforming and extending their recovery gains vs the Greenback as the Kiwi climbs above 0.6400 and Aussie nudged over 0.6875. The improvement in US-China trade relations and less dovish on balance near term RBNZ and RBA policy outlooks have underpinned the Nzd and Aud, while the YUAN is also maintaining momentum with the aid of steady PBoC mid-point fixes.

CAD/EUR/CHF/JPY - The Loonie is benefiting from broad Buck weakness, as Usd/Cad eyes 1.3100 and support residing just ahead of the big figure, while the DXY has declined through 97.280 Fib support to fresh sub-97.200 lows and closer to the next downside chart target before 97.000 even (97.033 lows from August). Not much sign of Canadian election jitters or pressure via the ongoing retracement in crude prices, with Tuesday’s retail sales data expected to reveal stronger consumption. Elsewhere, Eur/Usd has been tracking Cable as noted above, but also buoyed by higher Eurozone debt yields on its way up towards 1.1180 and conscious of decent layered option expiry interest from 1.1120-30 (1 bn) through 1.1150-60 (1 bn) to 1.1200 (1.1 bn), while the 200 DMA is also in close proximity (1.1209). Conversely, the Franc and Yen are lagging on mild risk-on trade and safe-haven unwinding, as Usd/Jpy and Usd/Chf pivot 108.50 and 0.9850 respectively after weaker than forecast Japanese trade data overnight and a decline in weekly Swiss sight deposits.

NOK/SEK/TRY - The Scandi Crowns are both clawing back losses amidst the aforementioned risk positive tone, and also consolidating ahead of Thursday’s Riksbank and Norges Bank meetings that preface the ECB convene and could see the former retain guidance for tightening around the turn of the year. Eur/Nok has retreated from new record highs around 10.2440 to sub-10.1900 and Eur/Sek has pulled back further from peaks over 10.9300 to just under 10.7300 at one stage. However, geopolitical jitters have resurfaced to blight Turkey’s Lira after initial relief in wake of the 5-day ceasefire in Syria, with Usd/Try back above 5.8200 in advance of this week’s CBRT rate decision (also on Thursday and contributing to a Central Bank fest) and weighing up whether 1-week repo will be cut again, and if so by how much.

Switzerland conducted its federal election over the weekend in which the anti-immigrant right-wing Swiss People’s Party is set to remain the biggest party with 25.6% of the votes, while the Green Party made historic gains with 13.2% of the votes which saw them overtake the Christian Democrats and become the 4th strongest party. (Guardian/Irish Times) 

FIXED INCOME

Bunds got to within 5 ticks of last week’s lows at 170.78 vs 170.73 before paring some losses and perhaps taking note of the latest Buba monthly report conceding that Q3 GDP could well be contractionary as deteriorating German exports permeate the domestic side of the economy. However, the ensuing bounce has been relatively mild and the 10 year bond remains under 171.00 unlike Gilts that have reclaimed 131.00+ status after picking up underlying bids just shy of the 131.00 handle and some distance from last Thursday’s 130.80 contract base. Meanwhile, US Treasuries remain depressed but off worst levels and the curve is still steeper in to a barren Monday agenda (Fed’s Bowman slated, but into the pre-FOMC blackout period and the event not really suited to anything on policy or the economy in any case).

COMMODITIES                                      

Crude markets are lower, but choppy, after risk sentiment seemingly took a turn for the better in early trade, although some downside was seen later in the session with no immediate fundamental catalysts of note. The recent downside took WTI Dec’ 19 futures back below the 54/bbl mark whilst its Brent counterpart lost the 59/bbl handle after initially consolidating around USD 59.50/bbl region during APAC/early EU trade. In terms of supply news, media reports alleged that Saudi Arabia and Kuwait are expected to sign an agreement within 45 days which would see oil production resumed at the neutral zone; and see production at the jointly run fields of Khafji and Wafra reopen following four years of closure amid an ongoing dispute between the two countries. Around 500mln BPD could be brought back online, however, ING note that given that both Iraq and Kuwait are part of the OPEC+ production cut deal, it should not have an impact on overall oil supply for the time being. On the geopolitical front, US Defence Secretary Esper noted that US troops in Syria are with SDF to deny access of oilfields to ISIS and others, but no decision has yet been made about keeping the troops there. Moving on to metals; Gold is slightly lower, but sits well within recent ranges, after the precious metal failed an early bid to get substantially above its 10DMA at 1493/oz. Copper, meanwhile, remains a beneficiary of the mostly weaker buck, despite a lack of decisive PBoC action overnight.

China Iron and Steel Association said iron ore oversupply trend will dominate and prices will keep declining amid increase in imported iron ore and steel scrap supply. (Newswires)

GEOPOLITICS

US President Trump said he spoke to Turkish President Erdogan who very much wants the ceasefire or pause to work and so do the Kurds, while he later commented that the US is in a very powerful position to put sanctions on Turkey and other nations if needed. US President Trump was reportedly mulling leaving a small number of US troops in Syria. (Newswires/WSJ)

US Defense Secretary Esper travelled to Afghanistan on Sunday to help get talks with the Taliban back on track. (Newswires)

NK Vice Defence Minister Ryong said North Korea has exerted endless efforts to build lasting peace and that the US has anachronistic policy against US, adding those that pursue hostile policy will bring about serious consequences. (Newswires)