• European equities are mostly higher (Eurostoxx 50 +0.2%) as auto names support the continent
• Little respite for the Lira after the Turkish holidays, USD/TRY up around 3% on the day
• Looking ahead, highlights include US National Activity Index and Dallas Fed Manufacturing Business Index. Note: Today is a UK Bank Holiday

ASIA

Asian equity markets began the week positive across the board following the record closes for the S&P 500 and Nasdaq Comp on Friday in US, where Fed Chair Powell reiterated a gradual approach at the Jackson Hole symposium and with sentiment also underpinned by hopes of a looming NAFTA-related agreement between US & Mexico. ASX 200 (+0.4%) and Nikkei 225 (+0.9%) were positive from early trade although gains in Australia were capped as financials lagged, while Tokyo stocks coat-tailed on early currency moves to reclaim the 22800 level where it eventually peaked. Elsewhere, Hang Seng (+2.2%) and Shanghai Comp. (+1.9%) led the broad heightened-risk appetite after the PBoC’s currency stability efforts and with the Hong Kong benchmark the outperformer as nearly all its constituents traded in the green. Finally. 10yr JGBs were flat with demand kept subdued amid gains in riskier assets and with a lack of Rinban operations by the BoJ.

PBoC skipped open market operations for a net daily drain of CNY 120bln. (Newswires)
PBoC set CNY mid-point at 6.8508 (Prev. 6.8710)

HKMA intervened by purchasing HKD 3.93bln as the HKD hits the weak end of the trading range. (Newswires)

Chinese Industrial Profits (Jul) Y/Y 16.2% (Prev. 20.0%). (Newswires)

Australian Foreign Minister Bishop has resigned amid a cabinet revamp. (Newswires)

US

US President Trump tweeted that a trade deal with Mexico could be reached soon, while there were separate reports which noted that US and Mexico were said to be poised for an agreement on NAFTA as soon as this Monday. In addition, there were comments from Mexico Economy Minister Guajardo that sides were practically in the final hours of negotiations. Conversely, Mexico Foreign Minister Videgaray said work on NAFTA with US has not finished and there had been source reports on Friday that Mexican President Elect Lopez Obrador’s stance on oil was said to be keeping US and Mexico from securing a NAFTA deal. (Newswires)

US GOP Senator McCain passed away over the weekend, while Arizona Governor Ducey will have to choose who will fill the vacancy from the Republican Party until a special election is conducted in 2020. (CNN)

EU/UK

Reports noted that UK and EU are to agree to push back its Brexit agreement deadline by 4 weeks to a ‘hard deadline’ in mid-November. (Telegraph)

UK PM May is heading to Africa with a number of government ministers and a delegation of UK business leaders in an effort to boost post-Brexit trade links. (Sky News)

Irish Foreign Minister Coveney stated that it is ‘very, very unlikely’ there will be a no-deal Brexit. (Newswires) 

Italian Deputy PM Salvini stated that a prosecutor in Sicily has placed him under investigation for abuse of office, kidnapping and illegal arrest. (Newswires)

German IFO Business Expectations 103.8 vs. Exp. 101.9 (Prev. 101.7)

German IFO Current Assessment M/M 106.4 vs. Exp. 105.4 (Prev. 105.3, Rev. 105.4)

German IFO Business Climate M/M 101.2 vs. Exp. 98.5 (Prev. 98.2)

GEOPOLITICAL

US President Trump asked Secretary of State Pompeo not to go to North Korea at this time as he feels they are not making significant progress on denuclearisation of the peninsula. Trump was also said to not believe China is helping with the process of denuclearisation and added that Pompeo looks forward to going to North Korea in the near future which most likely will be after US trading relationship with China 'is resolved'. (Newswires)

EQUITIES

European equities are mostly higher (Eurostoxx 50 +0.2%) with the exception of the FTSE MIB (-0.4%) weighed on by domestic financial names. UK is away on bank holiday while German and French equities are performing well with the DAX supported by German auto names. Over in France, heavyweight Kering  (+2.1%) lifts the index. All sectors are currently in the green while consumer discretionary outperforms on auto strength. Volkswagen (+1.7%) was reportedly one of the investors Tesla’s bankers had lined up in the event Tesla went private. Elsewhere, Bayer (+0.3%) shares shrugged off reports that its (and J&J’s) drug Xarelto did not meet its main goal.

FX

EUR - The single currency has rebounded from sub-1.1600/129.00 lows vs the Usd and Jpy respectively, while cementing gains above 0.9035 vs the Gbp in wake of Germany’s August Ifo survey that beat consensus on all counts and was accompanied by upbeat comments from the institute’s economist. However, the Eur still looks top heavy around chart resistance levels, like the 55DMA at 1.1615 and with big option expiry interest at 1.1625 (2.4 bn) also capping the upside.

TRY - Little respite for the Lira after the Turkish holidays as a fleeting glance above 6.0000 vs the Usd only seemed to give sellers additional psychological volition to flog the currency anew. Indeed, Usd/Try rallied to just shy of 6.2000 before the CBRT ‘intervened’ via its daily FX depo to stem the tide, as investors re-establish bearish positions on all the well documented and still prescient negative factors.

NZD/AUD - The G10 laggards even though the Yuan is holding up relatively well and outperforming other EMs that are weakening alongside the Lira, with the Kiwi back below 0.6700 and Aud only just hovering above 0.7300 amidst more political upheaval overnight (resignation of Foreign Minister Bishop).

CHF/CAD/GBP - All marginally softer vs the Greenback as the DXY regains a firmer footing on the 95.000 handle post-Powell, with the Franc ranging between 0.9820-45, Loonie meandering from 1.3005-35 and above the 100 DMA at 1.2991, while Cable pivots 1.2850 amidst latest UK press reports warning about a hard Brexit and an extension to the deadline for talks to mid-November.

JPY - Also relatively constrained, albeit back under 111.00 vs the Usd and hemmed in by the 55 DMA (circa 111.01) and offers ahead of 111.50.

MXN - The EM outperformer as NAFTA talks are said to be nearing a conclusion and deal could be announced as soon as later today, Peso just off peaks vs its US counterpart around 18.7625.

FIXED INCOME

Volumes have picked up on the more pronounced retreat from early Eurex session highs, and especially when the 10 year German debt future failed to maintain 163.00 or plus status. Stops on a a breach of the big figure were accentuated by the loss of chart supports below and the more intense selling only let up when Bunds hit 162.76, 33 ticks below last Friday’s settlement vs 27 ticks above par at the other extreme. Back to techs, 162.69-62 forms the next area of support ahead of a 50% retrace of August’s prior rally around the 162.37 mark, but BTPs are back on the rack and could offer German/core bonds some underlying support again. However, USTs are now virtually flat in outright and spread/curve terms.

COMMODITIES

Commodities are feeling the pressure from a strengthening dollar, WTI (-0.4%) and Brent (-0.4%) continue to retreat from Friday’s advances. Gold is subdued following the largest percentage gain in 15-months on Friday. Elsewhere, Shanghai base metal prices rose, while zinc rose for a sixth consecutive day as Chinese inventories languish at their lowest in a decade.

Threat of tariffs in US crude is said to have spurred some buyers in China to purchase more crude from Libya, according to sources. (Platts)