• Asian equity markets eventually traded mostly higher amid a similar performance in the US
• In FX, EUR/USD was quiet but managed to reclaim the 1.1600 handle nonetheless and GBP/USD remained firm above 1.3000
• UK Conservative Party Brexiteers are said to have failed to reach an agreement on an alternate Brexit plan
• Looking ahead, highlights include, UK jobs data, German ZEW, US Wholesale Inventories, APIs, OPEC meeting, supply from the UK, US and Netherlands

ASIA

Asian equity markets eventually traded mostly higher amid a similar performance in US where most majors finished positively as tariff concerns took a back seat with sentiment supported by news of the GOP releasing plans for a fresh round of tax cuts and as participants also focused on Brexit-related optimism. ASX 200 (+0.6%) was lifted by broad strength across telecoms, tech, energy and financials, while Nikkei 225 (+1.1%) outperformed amid currency moves and M&A news with Renesas to purchase US chipmaker IDT for over USD 6.7bln. Elsewhere, Shanghai Comp. (+0.3%) and Hang Seng (Unch.) were choppy in which the latter flirted with bear market territory amid ongoing trade uncertainty and continued liquidity inaction by the PBoC. Finally, 10yr JGBs were relatively flat as focus centred on outperformance of riskier assets in Japan and as a mixed 30yr auction also failed to drive price action.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.8488 (Prev. 6.8389)

UK/EU

UK Conservative Party Brexiteers are said to have failed to reach an agreement on an alternate Brexit plan with one Eurosceptic close to the matter stating that the group was not a homogenous one. (FT) An earlier story in the Times had reported that Jacob Rees-Mogg believes that a no-deal Brexit would lift the UK economy by GBP 1.1trl over 15 years and that such a plan is preferable to PM May’s Chequers plan. (Times)

Former UK Foreign Minister Johnson will continue to “throw rocks” at PM May’s Chequers plan ahead of the Tory conference but has no plans to launch an immediate leadership bid amid the fallout from his personal life, his close allies have claimed. (Guardian)

UK government may lose out on GBP 7bln of corporate VAT receipts post-Brexit, according to Treasury officials. (Times)

FX

In FX markets, the DXY attempted to nurse some of the prior day’s losses although the recovery was only briefly as the greenback slightly softened against its major counterparts. As such, EUR/USD was quiet but managed to reclaim the 1.1600 handle nonetheless and GBP/USD remained firm above 1.3000 after the recent comments by EU's Chief Brexit Negotiator Barnier that getting a Brexit deal is realistic in 6 to 8 weeks. AUD/USD initially tested 0.7100 to the downside following recent softness in commodities and after CNH declined to its weakest in over 2 weeks, but later rebounded, while USD/JPY and JPY-crosses were higher on safe-haven outflows and with upside in the pair gaining traction on M&A news as well as a break though the prior day’s highs around 111.25.
 

COMMODITIES

Commodities were uneventful overnight in which WTI crude futures traded sideways in a very tight range around the USD 67.50/bbl level with participants looking ahead to this week’s inventory reports for a catalyst beginning with the APIs later after-hours in US. Elsewhere, gold was lacklustre and marginally extended on its losses, while copper found mild support amid a recovery in China.

Russia Energy Minister Novak said OPEC and allies are to discuss cooperation after 2018 in Algeria, while he added that OPEC+ cooperation could continue without output quotas beyond 2018. (Newswires)

NHC said Hurricane Florence has become a category four hurricane which is up from a category three, while NHC later commented that further strengthening is anticipated and that Florence is forecast to be an extremely dangerous major hurricane through Thursday. In related news, US President Trump approved emergency declarations for North Carolina and South Carolina due to approaching Hurricane Florence. (Newswires)

GEOPOLITICAL

US is said to have conducted discussions with UK and France regarding potential Syria strikes. (WSJ)

North Korean Leader Kim offered to dismantle nuclear weapons program within 2 years, according to reports citing US National Security Adviser Bolton. (Yonhap)

US

The curve was mixed, with traders eyeing this week’s supply, which will generate USD 49bln in new cash. The front end of the curve saw modest selling, pushing 2-year yields to fresh decade highs; the long-end continues to find haven buyers with continuing concerns lingering regarding trade wars. Treasuries also moved lower in sympathy with the bund as the Italian economy minister made the right noises regarding the upcoming budget. But other than that, the T-Note was largely rangebound, with little by way of news to shake it out of its slumber. US T-note futures (Z8) settled half-a-tick higher at 120-21.

Fed's Bostic (voter, dove) said the Fed is designed to be independent from short-term politics and that once we get to neutral, the Fed should wait and see. Bostic added that trade disputes have caused uncertainties among businesses which have been pausing investment plans until the trade landscape had more clarity, while he also suggested that inflation may begin to tick up due to the impact from tariffs. (Newswires)

US House GOP released plan for the 2nd round of tax cuts which included making lower individual rates permanent. (Newswires)

Mexico is prepared to sign a bilateral trade deal with US if a US and Canada cannot reach an agreement, according to Finance Minister Anaya. (FT)