• Asian equity markets traded mostly negative with sentiment clouded by uncertainty; Hang Seng underperformed amid further unrest in Hong Kong with reports of police using live rounds
• Results from the Spanish election showed no party attained a majority as expected, Spain’s Socialists won the most seats
• In FX markets, the DXY was flat, EUR/USD and GBP/USD were uneventful, USD/JPY was slightly pressured, NZD modestly outperformed
• Looking ahead, highlights include UK GDP (Prelim), Chinese Money Supply, US Veteran’s Day holiday (Non-market holiday, US cash Treasuries closed)

ASIA-PAC

Asian equity markets traded mostly negative with sentiment clouded by uncertainty brought on by the temperamental trade headlines including comments from US President Trump who was optimistic on trade talks but clarified that he has not yet agreed to rollback tariffs on China. ASX 200 (+0.7%) and Nikkei 225 (-0.2%) were mixed in which strength in defensive stocks and resilience in the financials sector underpinned Australia, while the mood in Tokyo deteriorated on flows into its currency and as participants digested weaker than expected Machine Orders, as well as a slew of corporate earnings. Hang Seng (-2.5%) and Shanghai Comp. (-1.2%) were the laggards amid the ongoing US-China trade uncertainty, continued PBoC liquidity inaction and mixed Chinese inflation data. Hong Kong markets also took the brunt of further unrest in the city in which police were reported to have fired live rounds at protesters, which overshadowed the euphoria from a potential record-breaking Singles’ Day where sales in the first 90 minutes alone already reached halfway of the USD 31bln record set for the whole day last year. Finally, 10yr JGBs were lifted and reclaimed the 153.00 level with prices supported by the predominantly negative performance across stocks and with the BoJ in the market for a respectable JPY 1.16tln of JGBs in up to 10yr maturities.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.9933 vs. Exp. 6.9943 (Prev. 6.9945)

Chinese CPI (Oct) Y/Y 3.8% vs. Exp. 3.3% (Prev. 3.0%). (Newswires) Chinese PPI (Oct) Y/Y -1.6% vs. Exp. -1.5% (Prev. -1.2%)

US President Trump said he thinks trade talks are moving along very nicely, while he suggested that the accord with China has to be the right deal and that reports on the level of tariffs being lifted were incorrect. In related news, White House Trade Adviser Navarro stated that there is no agreement to rollback any existing tariffs as part of the Phase One deal and US Chief of Staff to the Vice President said he is very confident a phase one trade deal with China will be signed before the end of the year. (Newswires)

Hong Kong violence continued on what was the 24th weekend of unrest for Hong Kong and which persisted through to Monday, while police were reported to have used live fire rounds in which at least 1 protester was shot and is in critical condition. (Newswires)

BoJ Summary of Opinions from October meeting stated Japan's economy is likely to continue on an expanding trend as the impact of the slowdown in overseas economies on domestic demand is expected to be limited. BoJ added the rate of change in CPI Y/Y is likely to increase gradually toward 2% but added it is expected to take time for the inflation rate to accelerate, while it noted there has been no further increase in the possibility that momentum towards achieving the price stability target will be lost. (Newswires)

UK/EU

UK Election Polling: - Panelbase poll estimates support for the Conservatives at 40% (unch.), Labour at 30% (+1), Liberal Democrats (+1), Brexit Party (-1). (Newswires) - Opinium poll (6-8 Nov) show support for the Conservatives at 41% (-1), Labour 29% (+3), Liberal Democrats 15% (-1), Brexit Party 6% (-3)

Results from the Spanish election showed no party with a majority as expected, although Spain’s socialists won the most seats with 120 (-3) out of the 350 seats and the conservatives Peoples’ Party with 87 (+21) seats, while far-right VOX won 52 seats (+28) and UP has 35 seats (-7). There were also comments from Spanish PM Sanchez that his socialist party will call on other parties on Monday to tackle the political stalemate. (Newswires)

ECB President Lagarde is reportedly facing a push by ECB council to overhaul policymaking. Four national Central Banks represented on the ECB Governing Council said they would make proposals from holding regular votes on monetary policy to requests that the President does not pre-announce policy plans, according to sources cited by the FT. (FT)

Moody’s affirmed UK at Aa2; Outlook cut to Negative from Stable. (Newswires)

Fitch affirmed Slovakia at A+; Outlook Stable and affirmed Romania at BBB-; Outlook Stable. (Newswires)

FX

In FX markets, the DXY was flat but remained above the 98.00 level following last week’s rally and amid weakness in its major counterparts with EUR/USD languishing near the bottom end of the 1.1000 handle following a stalemate in the Spanish elections. The results showed PM Sanchez’s socialists won the most seats (120 out of 350), but fell short of the majority needed to break the deadlock and was actually down 3 seats from prior, while ING have also weighed in on EUR’s depreciation in which it suggested the single currency was emerging as a preferred funding currency amid expectations rates will remain at rock bottom throughout next year. GBP/USD was off worse levels and attempted to claw back some its recent lost ground, although its efforts have been hampered by resistance around 1.2800 and after Moody’s downgraded UK’s outlook to Negative from Stable. Elsewhere, USD/JPY and JPY-crosses were slightly pressured by the mostly risk-averse tone and antipodeans traded relatively stable with mild outperformance in NZD as AUD/NZD tested 1.0800 to the downside and with some continuing to push back against the consensus for a cut by the RBNZ this week including the NZIER ‘RBNZ Shadow Board’ which expects the RBNZ to remain on hold and suggested there has been an increased skew in the range of views towards a higher OCR.

NZIER Shadow Board on average expect the RBNZ to remain on hold at this week’s meeting but the range of views has widened since the last meeting with an increased skew towards a higher OCR, while it noted that the recent data has been mixed. (Newswires)

COMMODITIES

Commodities were lacklustre with prices restricted by the mostly downbeat risk appetite in the region which pressured WTI crude futures below the USD 57.00/bbl level, while supply side factors including the resumption of the Keystone pipeline and a mammoth oil field discovery in Iran which would increase its proven reserves by a third, added to the pressures for the energy complex. Conversely, gold attempted to nurse some losses but remained near multi-month lows with the rebound restricted by a steady greenback, while copper was subdued amid the mostly risk averse tone and underperformance across the greater China region.

Baker Hughes US rig count: Oil rigs -7 at 684, nat gas rigs unchanged at 130, total rigs -5 at 817. (Newswires) Iran said it discovered an oilfield with 53bln barrels in southwest Iran. (Newswires)

TC Energy announced the Keystone pipeline has returned to service following approval of repair and restart plan by US PHMSA. (Newswires)

Saudi Aramco will sell up to 0.5% of its shares, will be restrictions on the issuance of additional shares for one year after the IPO; offering to begin on November 17th. (Newswires)

GEOPOLITICS

US National Security Advisor O’Brien said the US is ready to economically punish Turkey unless it gives up its Russian-made S-400 defence missile systems. (CBS)

US President Trump tweeted it would be a very positive step if Iran is able to turn over kidnapped former FBI Agent Robert Levinson to the US, but also suggested Iran is enriching uranium which would be a very bad step. (Twitter)

Bolivia President Morales resigned after the country’s armed forces chief called on him to quit. (Newswires)

US

A lack of conviction in risk appetite was evident in the TPLEX which settled little changed. The T-Note was offered through the European session before reversing course in the latter end of the day, triggered by US President Trump saying he had not yet decided whether to roll back China tariffs. More broadly, looking at the week, the TPLEX has seen significant amount of selling, with yields at levels not seen since July, off their lows in late-August/early-September. Given the reported progress in US-China trade, Treasury refunding, ramped up corporate issuance and a Fed now (presumably) on pause, the selling pressure on the TPLEX is of little surprise in this first week of November. T-note futures (Z9) settled unchanged at 128-12+.

Fed’s Williams (Voter, Neutral) said he expects interest rates will be very low for the foreseeable future and that global growth will be modest, while he added that monetary policy is moderately accommodative and that he was concerned about persistently low inflation. (Newswires)