• Asian equity markets were lower across the board after the region failed to sustain the early momentum from US
• Around 50 Conservative MPs opposed to PM May's Brexit plan have met to discuss how and when they could force her to stand down
• CAD was boosted by source reports Canada is prepared to allow US dairy access in NAFTA talks
• Looking ahead, highlights include US PPI, DoEs, Fed’s Brainard & Bullard, supply from Germany and the US

ASIA

Asian equity markets were lower across the board after the region failed to sustain the early momentum from US, where the Nasdaq outperformed as Apple shares were lifted ahead of its special event and with energy names boosted by a rally in oil prices. ASX 200 (-0.1%) was subdued as losses in telecoms and financials overshadowed the upside in energy stocks and with Myer shares hit after it reported a full-year loss, while Nikkei 225 (-0.4%) slipped amid a pullback in USD/JPY. Elsewhere, Hang Seng (-0.4%) delved deeper into bear market territory and Shanghai Comp. (-0.3%) also conformed to the downbeat tone despite the PBoC’s first open market operation after a 15-session hiatus, as trade uncertainty lingered and amid Chinese commodity losses. Finally, 10yr JGBs were flat with trade kept in a very tight range as prices failed to benefit despite the risk averse tone and BoJ’s presence in the market in the belly to super-long end. 

PBoC injected CNY 60bln via 7-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.8546(Prev. 6.8488)

UK/EU

A source report noted that Brexit deal summit said to be likely by mid-November, with UK and EU preparing for meeting with leaders to sign deal and that a plan will likely be announced at September 19th-20th meeting in Austria. (Newswires)

Downing Street is reportedly drawing up secret plans and has 2 escape options if the EU rejects PM May's Chequers proposal. The first option would see Chequers parked until talks resume after Brexit day for a loosely-worded fudge on the future relationship instead. The second, is to abandon it altogether and return to a more basic Canada style free trade agreement - but only if the EU gives way on its Irish border hardline. (The Sun)

Around 50 Conservative MPs opposed to PM May's Brexit plan have met to discuss how and when they could force her to stand down. At least 48 letters of no confidence need to be submitted to 1922 Committee chairman Sir Graham Brady to trigger a vote on her premiership, and Sky sources suggest it could arrive within just a few weeks. (BBC/Sky)

EU official said UK is to definitely exit the EU in March but will never be an ordinary third country for the EU, while the official added that EU’s Juncker is to say the bloc will remain firm on its divorce demands but wants a close partnership with UK post-Brexit. (Newswires)

BoE Governor Carney warned against complacency in the 10th anniversary of the GFC, while he outlined risks to the UK economy including high levels of household debt, no-deal Brexit, high debt for China's economy and a catastrophic cyber-attack. (BBC)

The Times shadow MPC believes the BoE should begin paving the way for more monetary tightening this week but leave interest rates unchanged to let August’s rate increase bed in. (Times)

FX

In FX markets, the greenback was mixed against its major counterparts with EUR/USD back below 1.1600 and as GBP/USD approached 1.3000 to the downside after the recent fluctuations triggered by a deluge of Brexit-related headlines. Elsewhere, USD/JPY pulled-back amid the risk averse tone and AUD/USD gave up the 0.7100 handle after weakness in metals prices and disappointing Consumer Confidence data, while CAD was boosted by source reports Canada is prepared to allow US dairy access in NAFTA talks.

Australian Westpac Consumer Confidence Index (Sep) 100.5 (Prev. 103.6). (Newswires)
Australian Westpac Consumer Confidence (Sep) M/M -3.0% (Prev. -2.3%)
 

COMMODITIES

Commodities were mixed with WTI crude futures firmer after prices gained 3.5% the prior day and briefly broke above USD 70.00/bbl amid US hurricane and Iran related uncertainty, with upside further exacerbated by a significantly larger than expected draw in headline API crude inventories. Elsewhere, the metals complex was less inspiring as gold retreated and copper traded subdued amid weakness in Chinese commodity prices.

US API Weekly Crude Stocks (7 Sep) -8.636M vs. Exp. -0.800M (Prev. -1.200M). (Newswires)

Russia Energy Minister Novak said the oil market remains fragile on output decline in some countries including Venezuela and that he sees oil market impacted by geopolitics such as Iran-related uncertainty. Furthermore, Novak commented that they will discuss oil markets with OPEC this month in Algeria and will make decision on what more to do, while he also stated countries have potential to raise oil output. (Newswires)

EIA cut 2018 world oil demand growth forecast by 80k BPD and now sees 1.58mln BPD YY rise, while it reduced 2018 crude output estimate to 10.66mln BPD (prev. 10.68mln BPD) and lowered 2019 world oil demand growth view by 100k BPD to 1.47mln BPD YY rise. (Newswires)

NHC said Florence is forecast to be an extremely dangerous major hurricane through landfall which is expected to bring a life-threatening storm surge and rainfall to the Carolinas and mid-Atlantic states. (Newswires)
 

GEOPOLITICAL

US, North Korea and South Korea mull October for the 2nd summit between US President Trump and North Korean Leader Kim. (Nikkei)
 

US

The short end was sold seeing yields on 2s and 3s rise to fresh decade highs. There was some talk of short covering cited, as well as concession heading into this week’s supply. In early trade, there were reports of a large 5s30s flattener going through, but by settlement, the spread was unchanged, while other curve spreads were biased towards extremely modest widening. US T-note futures (Z8) settled 9+ ticks lower at 119-10+.

US President Trump commented that trade talks are going well and Canada wants to make a deal with both sides operating in good faith. Trump also stated it would be good if US makes a deal with Canada but would be ok if it doesn't, and that the US is taking a very tough stance with China on trade. (Newswires)

Canada is ready to allow US dairy access in NAFTA talks and is reportedly to offer the US limited access to the Canadian dairy market in order to try and reach an agreement, according to sources. (Newswires)

Canada PM Trudeau said there is a good NAFTA deal to be had but reiterated no deal is better than a bad deal and stated US auto tariffs would also impact the US. (Newswires)