• Asian equity markets traded mostly lower with the region cautious heading into an event-packed week
• This followed a lack of breakthrough in last week’s NAFTA related talks between US and Canada. Additionally, the public comment period for the proposed US tariffs on a further USD 200bln of Chinese goods is set to expire by Thursday
• GBP/USD was pressured and briefly fell below the 1.2900 handle on Brexit-related discord with EU’s Barnier said to strongly oppose UK PM May's Chequers trade proposals
• Looking ahead, highlights include EZ mfg PMIs, ECB’s Mersch, Fed’s Evans, US markets are closed for the Labor Day Holiday

ASIA

Asian equity markets traded mostly lower with the region cautious heading into an event-packed week and as trade-related concerns clouded over risk sentiment. This followed a lack of breakthrough in last week’s NAFTA related talks between US and Canada with President Trump suggesting a willingness to go ahead without Canada, while fresh tariff concerns also lingered with the public comment period for the proposed US tariffs on a further USD 200bln of Chinese goods is set to expire by Thursday. This weighed on Nikkei 225 (-0.6%), Hang Seng (-0.9%) and Shanghai Comp. (-0.9%), with underperformance seen in China following disappointing Caixin Manufacturing PMI data, while the ASX 200 (Unch.) bucked the trend and remained afloat on mixed data which showed solid growth in Company Profits and as the local currency depreciated to its weakest since January 2017. Finally, 10yr JGBs were lower in a continuation of the selling pressure in the aftermath of the BoJ’s purchasing announcement for September, in which it plans to reduce the amount of times it buys 1-3yr, 3-5yr and 5-10yr JGBs to just 5 occasions this month vs. Prev. 6.

Chinese Caixin Manufacturing PMI Final (Aug) 50.6 vs. Exp. 50.7 (Prev. 50.8). (Newswires)

China Communist Party journal stated China may experience short-term pain from trade dispute with US including negative impact to financial stability but reiterated that there will be no change to the stable growth trend. (Newswires)

PBoC skipped open market operations for a net neutral daily position. (Newswires)

PBoC sets CNY mid-point at 6.8347 (Prev. 6.8246)
 

UK/EU

EU chief Brexit negotiator Barnier stated he strongly opposes UK PM May's Chequers Brexit trade proposals, while reports noted that negotiators will re-engage again this week. In addition, Barnier also commented that EU and UK do not need more time to reach an agreement and that political decisions are required. (Guardian)

UK PM May said she will refuse compromises on her Brexit plan that are not in the national interest and that she is confident the government can broker a good deal for Britain, while she added she will not succumb to those calling for a second referendum. PM May added that progress has been made in negotiations following the Chequers agreement and that the government has also been preparing for the event of a no-deal Brexit. (Sunday Telegraph)

UK cabinet ministers reportedly have reassured Remain advocates in the Conservative Party that PM May's Chequers plan is not set in stone and could still be altered to retain the support from Remainers. (The Times) The Times also reports, that UK PM May’s Brexit plan was hanging by a thread last night as 20 Conservative MPs made a joint public commitment to scupper her proposals, some MPs have formed the Stand Up 4 Brexit group, a grassroots campaign that commits supporters to ripping up the EU negotiations to date. (Times) Furthermore, former Brexit Secretary Davis has announced his decision to vote against UK PM May’s Brexit plan, thus raising prospects of a Parliamentary defeat for May. (FT)

Former UK Foreign Minister Johnson has savaged UK PM May's Brexit plans, saying they would leave the UK with "diddly squat" after the negotiations and hand the EU "victory". (BBC)

UK International Trade Secretary Liam Fox has refused to back Chancellor Philip Hammond's warning that a "no-deal" Brexit could damage the economy. (BBC)

ECB's de Guindos said economic growth in the Euro area remains solid and broad-based, while he noted risks surrounding growth outlook are balanced but uncertainties remain. De Guindos added that underlying inflation expected to pick-up before the end of summer and that uncertainty around the path of inflation has diminished. (Newswires)

Fitch affirmed Italy at 'BBB'; Outlook revised from Stable to Negative, while Fitch affirmed Hungary at 'BBB-'; Outlook Positive. (Newswires)
 

FX

In FX markets, the greenback was quiet amid the Labor Day weekend in US and Canada which kept the DXY steady above the 95.00 level, while CAD weakened following Trump’s Twitter tirade in which he threatened to leave Canada out of the agreement and with Barclays also recommending long USD/CAD for its trade of the week. Elsewhere, GBP/USD was pressured and briefly fell below the 1.2900 handle on Brexit-related discord with EU’s Barnier said to strongly oppose UK PM May's Chequers trade proposals, while antipodeans were also softer with AUD/USD at its lowest since January 2017 in a continuation of the downtrend in the currency and after Retail Sales fell short of estimates.

Australian Retail Sales MM Jul 0.0% vs. Exp. 0.3% (Prev. 0.4%). (Newswires)
Australian Gross Company Profits Q2 2.0% vs. Exp. 1.3% (Prev. 5.9%)
Australian Company Profits Pre-Tax Q2 9.6% (Prev. -16.0%)
Australian Business Inventories Q2 0.6% vs. Exp. 0.3% (Prev. 0.7%, Rev. 0.8%)

COMMODITIES

Commodities were weaker overnight amid the risk averse tone due to ongoing trade-related concerns which saw WTI crude futures retreat further below the USD 70/bbl level, while gold prices were also softer after having failed to hold above USD 1200/oz. Elsewhere, copper extended on Friday’s losses amid the subdued tone across the complex and amid underperformance in its largest buyer China. 

Baker Hughes Rig Count (31 Aug) Oil rigs +2 to 862, Gas rigs +2 to 184, total rigs +4 to 1048. (Newswires)

US

US President Trump tweeted over the weekend that a trilateral NAFTA deal with Canada is unnecessary and warned that Canada must accept new terms or US will terminate the agreement and revert to pre-NAFTA. (Twitter)

US and Canada NAFTA talks concluded on Friday without a breakthrough and are set to resume on Wednesday, while reports also noted that President Trump will notify Congress to proceed with a Mexico-only trade deal that will replace NAFTA. There were also comments from USTR Lighthizer that President Trump will sign a deal with Mexico, and Canada if it is willing, while he added that talks with Canada were constructive and made progress. (Newswires)