• European bourses are mixed as sentiment remains tentative, although they have been grinding higher throughout the session
• EU could respond as soon as today to the UK’s Brexit extension request, France pusing to wait until Friday
• Russian Energy Minister Novak says he has no information regarding possible discussions on deeper oil production cuts at the OPEC+ December meeting
• In FX, the DXY is modestly firmer with G10 counterparts flat/slightly subdued in comparison
• Looking ahead, highlights include Canadian Wholesale Trade, Eurozone Flash Consumer Confidence, US EIA Weekly Crude Stocks, US 5yr note auction
• Earnings: Boeing, Microsoft, Eli Lily, PayPal, eBay, Ford, Tesla, Xilinx, General Dynamics, Celgene, Western Digital, Waste Management, Norfolk Scientific

ASIA-PAC

Asian equity markets traded lacklustre as the region took its cue from the losses on Wall St where sentiment was dampened by further Brexit uncertainty. ASX 200 (U/C) was negative with the index dragged by weakness in defensives as well as the largest weighted financials sector, while the NZX 50 (-2.1%) slumped heavily amid weakness in energy stocks and with local investors spooked after reports Rio Tinto was mulling a strategic review of its smelter operations as it sees continued losses for its New Zealand assets. Nikkei 225 (+0.3%) struggled to maintain the holiday cheer on return from yesterday’s closure amid flows into the JPY with underperformance in SoftBank amid its bailout of WeWork including USD 5bln of new financing, although Eisai shares were indicated to surge over 18% and hit limit up with a glut of buy orders after aducanumab partner Biogen revived hope in its Alzheimer’s treatment and is to seek FDA approval next year. Hang Seng (-0.9%) and Shanghai Comp. (-0.4%) conformed to the overall downbeat tone with the former mired by political uncertainty as Beijing was said to draw up plans to replace Hong Kong Chief Executive Lam, although mainland losses were cushioned by another substantial PBoC liquidity effort. Finally, 10yr JGBs opened back above the 154.00 level as it tracked gains in T-notes and amid the predominantly risk-averse tone, but with upside limited as Japanese stocks just about stayed afloat and with the BoJ only in the market for Treasury Discount Bills.

PBoC injected CNY 200bln via 7-day reverse repos for a daily net injection of CNY 200bln. (Newswires)

PBoC set CNY mid-point at 7.0752 vs. Exp. 7.0741 (Prev. 7.0668)

US Commerce Secretary Ross said sees a 50-50 or better chance of reaching a trade deal with China but added things can happen at the last minute, also suggested next month's expiration of licence for US companies to sell to Huawei is not a hard deadline. (FT)

Beijing is reported to draw up a plan to replace Hong Kong leader Carrie Lam by March; subsequently the Chinese Commerce Ministry have pushed back on these reports, labelling them a ‘political rumour with ulterior motives’. (FT/Newswires)

Hong Kong Legislature have formally withdrawn the Extradition Bill. (Newswires)

China's Premier Li notes that mutual benefit can be created from US-China cooperation; can enable healthy growth in bilateral relations on the basis of respect and equality. (Newswires)

US

US President Trump Special Assistant for International Trade, Investment and Development Kelly Ann Shaw is to leave the White House on Friday. (Newswires)

US Ambassador to Ukraine William Taylor testified that he was told President Trump wanted aid withheld until Ukraine said it would investigate Biden. (Newswires)

US House Ways & Means Committee Chair Neal commented on USMCA talks and said he doesn't think there will be a lot of outstanding issues, while he added we hit a bump but worked it out and are down to a handful of issues. (Newswires)

GEOPOLITICS

US President Trump tweeted that good news seems to be happening with respect to Turkey, Syria and the Middle East, while he added that further reports are to follow later. In related news, Turkey said there is no need to restart Syria offensive after deadline expires and that the US told them the withdrawal of Kurdish militants from the safe zone is complete.

Russia's defence sales agency states that Russia and Turkey are in discussions regarding further deliveries of the S-400 system., Ifax. (Ifax)

UK/EU

UK PM Johnson and Opposition Leader Corbyn are reportedly meeting to discuss a new programme motion., Times Elliott. (Twitter)

EU’s Tusk said he will recommend the EU27 accept UK request for an extension to avoid a no-deal Brexit and other reports stated multiple Brussels diplomats said the EU is expected to follow Benn Act and give (a likely flexible) extension until January 31st, while the EU is said to be frustrated with PM Johnson rather than UK Parliament for halting the legislative process and as there is an understanding that Parliament wants to scrutinize the legislation. (Newswires) France is to examine at the end of the week whether a purely technical delay of a few days is necessary and is said to rule out any further extension past this technical delay, according to a diplomatic source. (Newswires) Reports suggest that EU leaders could have to attend an emergency Brexit summit if French President Macron opposes a 3-month delay to Brexit. (Telegraph)

EU to respond to the UK's Brexit extension request as soon as tonight, although the French have been pushing to wait until the end of the week, according to BBC's Smith. (Twitter)

Luxembourg President Bettel is said to be ringing around the other 27 EU leaders for wording to be added to the EU's extension that this will be the last extension granted by the bloc, says Mail on Sunday's Cole. (Twitter)

Labour MPs are reportedly split over prospect of an general election or second referendum, many have no intention of voting for a GE just yet, sources tell ITV's Brand. (Twitter)

US Commerce Secretary Ross is looking to negotiations with EU to ease trade dispute and is said to have floated new discussions as an alternative to imposing auto tariffs next month. (FT)

EQUITIES

Major European Bourses (Euro Stoxx 50 -0.1) are mixed, as indices recover off of Brexit related overnight lows, following on from a lacklustre AsiaPac session. With Sterling off recent highs as Brexit uncertainty lingers, the FTSE 100 (+0.5) has been the marked outperformer, breaking back above the 7200 mark and 50DMA at 7216. Looking ahead, a raft of US large cap earnings, including the likes of Boeing, Caterpillar, Thermo Fisher Scientific and Eli Lilly, will set the tone. So far this earnings season, analysts have described earnings as mostly better than expected, though noting that the bar was very low going in. However, Microsoft earnings tonight, the first of the trillion-dollar companies to report, could quickly shift this narrative. European sectors are mixed, with outperformance in energy (+0.6%), materials (+1.1%) and healthcare (+0.3%). Underperformance in tech is being driven by disappointing earnings last night from Texas Instruments, which has seen the likes of STMicroelectronics (+1.3%) under pressure. In terms of other individual movers; Swedbank (-6.3%) sunk after earnings disappointed and the co. revealed multiple US authorities are investigating the money laundering allegations although this could take years to conclude. Elsewhere, decent earnings from ABB (+3.9), Neste (+6.9%), Norsk Hydro (+5.0%) and Peugeot (+2.5%) saw them move higher, while poor earnings from Fresnillo (-2.9%) and Carrefour (+2.3%) saw their respective shares under pressure.

FX

USD - Risk sentiment has been sullied somewhat by the latest UK Parliament votes on Brexit that were positive on the one hand, but then countered by subsequent rejection of the motion to push through legislation at breakneck speed for the original and still official Halloween deadline. Hence, another step forward-step back scenario, albeit with more likelihood of an election run effectively along the lines of a 2nd EU referendum, which in turn equates to greater uncertainty. The upshot, so called safe-havens, including Gold, are back in favour, with the DXY consolidating around 97.500 and supported technically after closing above a key chart level in the form of the 200 DMA (97.410).

JPY/CHF - The Yen and Franc are both benefiting from the aforementioned meek or selective risk appetite, with Usd/Jpy back below 108.50 and capped by reported CTA offers overnight, while Usd/Chf is holding just shy of 0.9900 and Eur/Chf straddles 1.1000 within very tight confines. Reports that the BoJ may downgrade growth and inflation forecasts next week are hardly surprising, but add to the general global economic slowdown vibe.

AUD/NZD/GBP - Among the major underperformers on a combination of bearish factors, as the Aussie retreats a bit further vs its US counterpart and remains heavy in cross terms against the Kiwi, with Aud/Usd under 0.6850 and Aud/Nzd unable to regain a foothold above 1.0700 even though Nzd/Usd has lost momentum on the 0.6400 handle. Note, little reaction to NZ trade data, but comments from Australia’s Treasury Secretary Kennedy kicking back against calls for more fiscal stimulus may also be weighing on the Aud. Elsewhere, Sterling is still fixated on Brexit developments for obvious reasons, with Cable retesting recent lows circa 1.2840 and Eur/Gbp back up around 0.8650 awaiting PM Johnson’s next move in response to the EU extension decision (expected as soon as tonight) and any further developments along the line of a snap poll, vote of no confidence in the Government or even a 2nd attempt to get the Programme Motion through the HoC.

CAD/EUR/SEK/NOK - All rather rangy and bereft of independent inspiration/direction, as the Loonie looks toward Canadian wholesale trade following mixed inputs on Tuesday via retail sales, the BoC’s BOS and election results handing victory to Trudeau again, but with less power. Usd/Cad continues to pivot 1.3100, while Eur/Usd sits just above 1.1100 and decent option expiry interest at the strike (1.1 bn) ahead of Thursday’s ECB policy meeting that could well be more validatory rather the revelatory given the extent of the stimulus delivered in September and the fact that President Draghi bids farewell following his eventful term at the helm. Similarly, the Scandi Crowns are largely going through the motions awaiting tomorrow’s Riksbank and Norges Bank convenes, though with potentially more to win or lose depending on guidance. Eur/Sek is meandering from 10.7565 to 10.7190 and Eur/Nok flitting either side of 10.2000 against the backdrop of soft crude prices.

EM - Contrasting fortunes for the likes of the Lira and Rand after lock-step trade of late, as Usd/Try revisits sub-5.8000 territory on the back of Turkey’s decision to hold fire in Syria despite the elapse of 120 hours inaction arranged with the US, and perhaps acknowledging an improvement in consumer sentiment rather than the consensus for more CBRT easing on Thursday. However, Usd/Zar has rebounded towards 14.6950+ highs after a knee-jerk dip in wake of softer than expected SA CPI that undermines the SARB’s on hold stance, and as investors remain cautious ahead of the end October budget that will outline aid for Eskom.

Notable FX Expirires, NY Cut:

- EUR/USD: 1.1050-70 (1BLN), 1.1100 (1.1BLN), 1.1120-30 (750M), 1.1150 (630M), 1.1185-1.1200 (1.3BLN), 1.1230-35 (600M)

BoJ are reportedly considering cutting growth and price forecasts in their quarterly outlook on October 31st, according to sources. (Newswires)

FIXED INCOME

Bonds fractionally extended the upside of intraday ranges, with Bunds up to 171.93, Gilts printing 132.48 and the 10 year T-note edging a bit further beyond 130-00 before topping out as EU equities inch higher across the board, not just the inversely-correlated to Sterling and technically charged FTSE. The Dax and Eurozone peers may also have gleaned some traction from gradual Euro depreciation, as Eur/Usd eyes 1.1100, while latest reports on the Brexit front suggest that PM Johnson and Labour leader Corbyn are discussing a new legislative timetable after the fast-track version was rejected last night. Note, the UK benchmark has subsequently reversed to a new 132.12 Liffe low, but its German peers remains firm following a solid German auction that bodes well for tonight’s 5 year US supply, especially after Tuesday’s 2 year note offering was relatively well received, albeit with FOMC easing prospects also enticing investors for the more rate sensitive short maturity.

COMMODITIES                                      

WTI and Brent prices have been subdued for much of the morning as sentiment remains dampened following yesterday’s Brexit votes and ahead of a number of notable US earnings today. Yesterday’s APIs printed a larger than expected build at 4.45mln vs. Exp. 2.2mln, adding to the pull back in both WTI and Brent yesterday. Currently, Crude prices trade with losses just shy of USD 1/bbl, although they did catch a small bid earlier in the session in-line with equity futures broadly; however, comments from Russian Energy Minister Novak that he has no information regarding discussions on deeper oil cuts at the December OPEC+ meeting halted the mild upside. The comments from Novak are in contrast to the recent source reports noting that OPEC were looking into deeper cuts due to weaker demand outlook. Elsewhere, the Turkey situation has, on the face of it, stabilised somewhat with Turkey noting there is no need to restart the Syria offensive after the ceasefire expires. Although, reports earlier in the session noted that Russian and Turkey are in discussions regarding additional S-400 deliveries, which may prompt a US backlash given their objection to the initial purchases. In terms of metals newsflow, gold is firmer on the session and currently trades toward the day’s high although this is still circa. USD 5.0/oz below the USD 1500/oz mark. Elsewhere, copper prices are just above the USD 2.60/lb on the day thus far as sentiment keeps prices subdued; in specific newsflow, Antofagasta noted Q3 copper production of 197k tonnes, -14.5% YY.

API Energy Inventories: Crude +4.51mln (exp. +2.2mln, Prev. +10.45mln)

Russian Energy Minister Novak says he has no information regarding possible discussions on deeper oil production cuts at the OPEC+ December meeting, no official proposals on changing the OPEC+ deal as of yet; though, is always possible to tweak this, adds that all OPEC+ members must entirely meet their commitments. (Newswires)

CME lowered NYMEX crude oil futures margins for December by 3.3% to USD 4350 per contract. (Newswires)