• Asian equity markets mostly staged a turnaround from the weak Wall St. lead, China outperformed whilst Nikkei 225 lagged
• In FX, USD held onto recent losses, JPY was marginally firmer, antipodeans welcomed above-forecast China Caixin Manufacturing PMI
• US Secretary of State Pompeo said US is to impose new sanctions and nuclear curbs on Iran
• Looking ahead, highlights include Swiss CPI, UK Manufacturing PMI, US Labour Market Report, Construction Spending and ISM Manufacturing PMI, Moody's on South Africa, Fed's Williams, Clarida, Quarles, Daly and Kaplan
• Earnings include Exxon Mobil, Berkshire Hathaway, Abbvie, Chevron, Danske Bank

ASIA-PAC

Asian equity markets mostly staged a turnaround of the weak lead from Wall St. where sentiment was dampened after mixed trade rhetoric stoked further US-China uncertainty and with participants tentative ahead of US NFP data, although risk appetite has somewhat improved with the help of encouraging Chinese Caixin Manufacturing PMI data. ASX 200 (+0.1%) was relatively flat as resilience in commodity related stocks just about offset the continued underperformance in the largest weighted financials sector, while Nikkei 225 (-0.4%) lagged and suffered the ill effects of the currency-risk dynamic. Hang Seng (+0.7%) and Shanghai Comp. (+1.0%) were initially weighed by a substantial weekly liquidity drain and after reports suggested that China had doubts about the possibility of a long-term trade deal with US President Trump amid concerns of his impulsive nature, although Chinese bourses later recovered following better than expected Chinese Caixin PMI data which matched its highest since February 2017. Finally, 10yr JGBs extended on the prior day’s rally following recent comments from BoJ Governor Kuroda who continued to stress the possibility for lower rates, while prices were also supported amid underperformance of Japanese stocks and with the BoJ present in the market for JPY 350bln in 5yr-10yr JGBs.

PBoC skipped open market operations for a net weekly drain of CNY 590bln vs. Prev. CNY 560bln net injection W/W. (Newswires) PBoC set CNY mid-point at 7.0437 (Prev. 7.0533)

Chinese Caixin Manufacturing PMI (Oct) 51.7 vs. Exp. 51.0 (Prev. 51.4). (Newswires)

UK/EU

Brexit Party leader Farage refused to rule out the prospect of his party withdrawing candidates from hundreds of seats in the upcoming elections. (Sky News)

US President Trump said under some Brexit circumstances, the US would be precluded from doing a trade deal with the UK and would not involve the UK national health service in a potential trade deal, while he added trade between the UK and US could be four to five times higher than it currently is under a trade deal. (Newswires)

Former BoE Deputy Governor Shafik is the current UK government's preferred candidate for BoE Governor, according to a BBC reporter. (BBC/Twitter)

FX

In FX markets, the USD remained near post-FOMC lows as the latest data provided the currency no favours in which Chicago PMI slipped to its weakest since December 2015, while the looming US NFP jobs data also kept price action in limbo. The greenback’s major counterparts eked mild gains with EUR/USD back above 1.1150 and GBP/USD breached 1.2950 but with upside limited amid substantial option expiries of EUR 3.4bln and GBP 1.1bln at the aforementioned levels respectively. Elsewhere, USD/JPY and JPY-crosses were initially pressured alongside the trade uncertainty although have partially nursed losses in the aftermath of the Chinese PMI data, and antipodeans also welcomed the strong Chinese data coupled with a firmer CNY reference rate setting.

COMMODITIES

Commodities were mixed with oil prices driven by risk sentiment in which WTI crude futures recouped some of the prior day’s heftier losses with the overnight rebound spurred after better than expected Chinese PMI data, while on the geopolitical front, US Secretary of State Pompeo also announced the US is to impose further Iran sanctions. Elsewhere, gold held on to the prior session’s gains on the back of a weaker USD although prices have plateaued overnight heading into the key US jobs data, while the gradual improvement in risk tone spurred some short covering for copper. CME raised NatGas Henry Hub December 2019 futures margins by 11.4% to USD 2450 per contract. (Newswires) 

GEOPOLITICS

US Secretary of State Pompeo said US is to impose new sanctions and nuclear curbs on Iran. (Newswires)

US

The TPLEX sang to the tune of risk appetite, making gains throughout the day as equity bourses moved lower on revived US-China trade deal caution. Sellers found little reprieve as data also supported the haven bid, with a surprise multi-year low in the Chicago PMI and the Core PCE Price Index showed downward pricing pressures. Positioning was also likely to be supportive for the debt complex, with month end factors and an expected volatile NFP report on Friday. By settlement the entire yield curve was lower by approximately 10bps. T-note futures (Z9) settled 26 ticks higher at 130-09+.

White House officials have reportedly ramped up their push for a new tax cut plan led by NEC Director Kudlow to try set up a sharper contrast with 2020 Democrats. (Washington Post)

White House named Thomas Storch as new Senior Trade Adviser on the National Economic Council and it was also reported that US President Trump is to nominate US envoy to North Korea Biegun as Deputy Secretary of State. (Newswires)