• Asian equity markets traded mostly lower after a similar lead from US where the Nasdaq underperformed and the tech sector saw its worst performance in over a month
• In FX markets, the DXY remained subdued and tested the 95.00 level to the downside. JPY firmed following the Hokkaido earthquake
• Looking ahead, highlights include the Riksbank rate decision, ADP Employment Change, Durables revisions, ISM non-mfg PMI, DoEs, ECB’s Lautenschlaeger and Fed’s Williams

ASIA

Asian equity markets traded mostly lower after a similar lead from US where the Nasdaq underperformed and the tech sector saw its worst performance in over a month as social media executives testified at Congress. ASX 200 (-1.2%) and Nikkei 225 (-0.4%) were negative as Australia mirrored the tech rout stateside and with sentiment in Japan was dampened after the Hokkaido region was hit by a powerful earthquake which triggered large landslides and mass power outages. Elsewhere, Hang Seng (-0.7%) and Shanghai Comp. (flat) both opened lower although the latter then found support just below the 2700 level after stock-supportive measures including a proposed regulatory revision to permit more stock repurchases and with interest income from loans to smaller firms to be VAT-exempted. Finally, 10yr JGBs were higher with prices underpinned by the predominantly risk-averse tone in the region and amid the BoJ’s presence in the market in which it upped its purchases of 5yr-10yr maturities.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.8217 (Prev. 6.8266)

China’s securities regulator proposed revision to rules to widen circumstances for listed companies to conduct stock repurchases, while China Mofcom stated that financial institutions' interest income from loans to smaller firms will be VAT-exempted. (Newswires)

USGS reported a magnitude 7 quake striking 112km SSE of Sapporo, Japan at a depth of 66km. Furthermore, reports noted that some people were trapped in collapsed buildings and that there was a power outage in all of Japan's Hokkaido following the earthquake, while Japanese Trade Minister Seko said it will take a minimum of 1 week to restore all power in Hokkaido following the earthquake. (Newswires)

BoJ Board Member Kataoka sees low chances for Japan's economy momentum to reach price target being heightened under current framework, while Kataoka added the BoJ didn't need to allow more flexibility in long-term yields when it was reducing price forecasts and that permitting long-term yields to rise could delay reaching the price target. Furthermore, Kataoka stated the BoJ's new forward guidance only states the obvious and that the BoJ should expand stimulus to achieve price target quicker instead of taking measures to prolong period of easy policy. (Newswires)

UK/EU

Jacob Rees-Mogg has accused Mark Carney of “demeaning” the BoE by extending his term as governor for a second time and insists that he should step down. (Times)

FX

In FX markets, the DXY remained subdued and tested the 95.00 level to the downside as its major counterparts initially extended on recent gains with EUR/USD briefly fuelled after it tripped through stops at the prior day’s highs around 1.1640, while GBP/USD found a base at 1.2900 and held on to the majority of the advances spurred by the recent Brexit-friendly headlines. Elsewhere, JPY firmed against the greenback with the currency spurred by safe-haven and repatriation flows following the Hokkaido earthquake, while antipodeans initially traded higher in which AUD/USD and NZD/USD briefly reclaimed the 0.7200 and 0.6600 handles respectively, but then pared the moves with AUD pressured after more of Australia’s big 4 banks hiked mortgage rates and effectively reduced pressure on the RBA to start tightening policy.

ANZ Bank announced to raise variable home loan interest rates by 16bps and Commonwealth Bank of Australia is to also hike variable mortgage rates by 15bps. (Newswires)
 

COMMODITIES

Commodities were mixed overnight with WTI crude futures subdued following the prior day’s retreat to below the USD 69.00/bbl level and after the weekly API inventory report showed a smaller than expected draw in headline crude stockpiles. Elsewhere, gold initially benefitted from a weaker greenback but then met resistance at USD 1200/oz, while copper outperformed the commodity complex amid upside in Chinese commodities.

US API Weekly Crude Stocks (27 Aug) -1200K vs. Exp. -1300K (Prev. +38K). (Newswires)
 

GEOPOLITICAL

UK naval ship carried out a freedom of navigation operation near Chinese-controlled Paracel Islands in South China Sea, while reports added the ship did not enter China’s territorial waters but the actions suggested it doesn't recognize China's excessive claims on the region. There were later comments by China Foreign Ministry that the Royal Navy ship entered its territorial waters and that the Chinese navy warned it to leave, while it added that the UK should avoid provocative actions. (Newswires)

South Korean official stated that a summit will be held with North Korea on Sept. 18th-20th in Pyongyang to discuss practical measures for denuclearization of the peninsula and that North Korea Leader Kim reaffirmed commitment to denuclearization. The official added that North Korean Leader Kim expressed intent to cooperate closely with US and expressed regret over international community's doubts of his will to denuclearize, while North Korean Leader Kim a also said that nuclear tests have become permanently impossible after the test site was dismantled and that he no longer intends to conduct long-range missile tests, while Kim's trust in US President Trump is unchanged and is said to want to realize denuclearization during Trump's first term.

Turkey reportedly replaced the prosecutor in the Pastor Brunson case. (IHA)
 

US

Treasuries were mixed, though ultimately rangebound despite volumes being relatively healthy. The complex was taking its cues from external factors on Wednesday, finding sellers after positive news on the Brexit front pressured FI; although the report was denied, T-Notes remained beneath the levels it was at before the news. Major curve spreads were modestly higher. US T-note futures (z8) settled 1 tick higher at 119-30+.

US President Trump stated "if it happens, it happens" in response after being asked about a potential government shutdown. However, Trump also stated he will talk about government funding with Majority leader McConnell and House Speaker Ryan, while there were later comments from US Senate Majority Leader McConnell that there is zero chance of a government shutdown after September 30th. (Newswires)

Canadian Foreign Minister Freeland said they are making progress in talks with US and that her focus is on getting a good deal for Canada but declined to comment on whether an agreement in a few days. In addition, there were earlier Politico reports that US and Canadian officials are aiming to wrap up NAFTA talks by the end of the month. (Newswires/Politico)

Fed's Bostic (voter, dove) said the US economy is performing quite well and at full employment with inflation at 2% goal. Bostic also reiterated the economy is standing on its own and that monetary policy should be neutral, while he added that stimulus from US tax cuts have not happened as quickly as he expected. (Newswires)

Fed's Kashkari (non-voter, dove) warned that emerging markets turmoil could lead to global contagion, while he also stated there may still be labor market slack and that wages and price data suggests the US is not yet at full employment. (Newswires)