• Asian equity markets were mostly higher as the region tracked the performance on Wall St.
• FX markets traded somewhat indecisively due to a lack of data points overnight and amid a choppy CNH
• Looking ahead, highlights include EZ (F) and Canadian CPI, Uni. of Michigan and Baker Hughes

ASIA

Asian equity markets were mostly higher as the region tracked the performance on Wall St where all majors gained as sentiment was buoyed by trade optimism from the announcement of upcoming US-China trade talks. ASX 200 (+0.1%) and Nikkei 225 (+0.4%) were both higher although the former somewhat lagged after having stalled at fresh highs last seen in over a decade, while gains in Japanese exporters were contained by a stable currency. Hang Seng (+0.5%) and Shanghai Comp. (-0.4%) both initially conformed to the positive risk tone amid the trade-related hopes, continued PBoC liquidity efforts and as Hong Kong-heavyweight Tencent also rebounded from post-earnings losses, although the Shanghai Comp. eventually gave back its gains and then some, as sentiment deteriorated across the mainland. Finally, 10yr JGBs saw mild gains as prices rebounded from the prior day’s weakness and with the BoJ also in the market under its bond buying programme.

PBoC injected CNY 90bln via 7-day reverse repos for a net weekly injection of CNY 130bln vs. neutral last week. (Newswires)
PBoC set CNY mid-point at 6.8894 (Prev. 6.8946)

UK/EU

UK Business Secretary Clark states the European Commission will cause significant and lasting economic harm to millions of families across the continent if it rejects Britain’s Brexit plan. (Times)

FX

FX markets traded somewhat indecisively due to a lack of data points overnight and amid a choppy CNH. The Chinese currency initially found support and briefly surpassed 6.8500 vs. USD after the PBoC strengthened its reference rate, which in turn provided a mild tailwind for China-exposed AUD/USD, and NZD/USD which attempted to reclaim the 0.6600 handle. EUR/USD and GBP/USD also recovered some lost ground against the greenback although the rebound was only modest, as the DXY remained defiant and held on to the majority of recent advances. Elsewhere, USD/JPY was relatively stable despite the increased risk appetite, with the pair contained by resistance around 111.00 and alongside the non-committal tone across currencies.

RBA Governor Lowe reiterated that he expects the next move in rates to be a hike and that the board's view was that central bank will hold steady for a while yet. Furthermore, Lowe added the economy is likely to make further gradual progress on inflation and unemployment, while he also stated that there is no strong case for near-term interest rate change and that the probability of a rate cut is low barring a major crisis in China. (Newswires)

COMMODITIES

Commodities were steady overnight with WTI crude futures range bound amid a lack of catalysts and with price action capped as the USD 65.50/bbl level acts as near-term resistance. The metals complex was also uneventful in which gold exhibited calmness after this week’s EM/USD-induced storm which dragged prices to a more than 2½-year low and with the precious metal on track for its largest weekly decline since May last year. Elsewhere, copper was similarly indecisive and failed to benefit from the mostly positive risk tone amid muted trade across commodities and underperformance in its largest consumer China.

CME raised NYMEX palladium futures margins to USD 6050 from USD 5500 per contract and raised NYMEX platinum futures margins to USD 2090 from USD 1870 per contract, while CME also raised COMEX futures margins to USD 3100 from 2800 per contract. (Newswires)

GEOPOLITICAL

US President Trump stated that Turkey has taken advantage of US for many years and are now holding US pastor, while he added the US will not pay anything for the release an innocent man but are cutting back on Turkey. (Twitter) There were also prior comments from US President Trump that Turkey has not turned out to be a great friend, while US Treasury Secretary Mnuchin commented that more sanctions are prepared for Turkey if Pastor Brunson is not released. (Newswires)

US Secretary of State Pompeo is to form an 'Iran action group', while he also commented that the US hopes to one day soon reach an agreement with Iran. (Newswires)

US administration official said President Trump and Russian President Putin agreed in principle that Iran should exit Syria, although the official added that Russia sees this as a difficult task. (Newswires)

US Pentagon report stated China has been expanding fleet of long-range bombers during last 3 years and are 'likely' training for missions which target the US. (CNN)

US

The Treasury complex took its cue from a more constructive risk backdrop, with signs that the US is moving to ease trade tensions with China. Yields didn’t move too much, however, Treasuries found some buyers after a weak Philly Fed survey. But with that said, the bias was towards modestly higher yields, although major curve spreads saw another round of modest flattening. US 10-year T-notes settled 5+ ticks lower at 120-08+.

US President Trump said he wants China to do well and that President Xi is a friend, although he also commented that China is not able to give the US a deal which is acceptable. (Newswires)

US Trade Representative Lighthizer said he is hopeful of a breakthrough in NAFTA negotiations in the next few days and that US President Trump has said it is okay if there is not a breakthrough. In related news, there were also comments from Mexico’s Economy Minister Guarjardo that Mexico is still working towards a NAFTA deal with US and that all partners must show some flexibility in talks. (Newswires)