• Asian equity markets were mostly positive with sentiment underpinned by hopes of a de-escalation of the trade dispute after the US invited China for trade talks
• UK PM May is set to announce strict immigration controls as part of an olive branch to Brexiteers. Reports still suggest that her tenure remains under threat
• Looking ahead, highlights include IEA Monthly oil report, BoE, ECB & CBRT rate decisions, US CPI, weekly jobs, supply for Italy and the US

ASIA

Asian equity markets were mostly positive with sentiment underpinned by hopes of a de-escalation of the trade dispute after the US invited China for trade talks which was seen to be an effort to get negotiations back on track. This lifted most the regional bourses with Nikkei 225 (+0.9%) also euphoric on better than expected Machine Orders which grew at the fastest pace since January 2016, while ASX 200 (-0.5%) bucked the trend as financials were dampened after further unscrupulous practices were revealed at banking royal commission. Elsewhere, Hang Seng (+1.5%) and Shanghai Comp. (+0.1%) were firmer with sentiment boosted by the more encouraging trade-related headlines and after the PBoC upped its liquidity efforts, while participants also digested lending data in which New Yuan Loans missed estimates although Aggregate Financing, which is the broadest measure for China’s credit growth, topped forecasts. Finally, JGBs were flat as focus centred on the region’s riskier assets, while stronger demand at today’s 5yr auction also failed to underpin prices of the 10yr. 

PBoC injected CNY 100bln via 7-day reverse repos and CNY 20bln via 14-day reverse repos, with the injection to counter factors related to tax payments and government bond issuance, as well as maintain ample liquidity in the banking system. (Newswires)
PBoC set CNY mid-point at 6.8488 (Prev. 6.8546)

Japanese Machinery Orders (Jul) M/M 11.0% vs. Exp. 5.7% (Prev. -8.8%). (Newswires)
Japanese Machinery Orders (Jul) Y/Y 13.9% vs. Exp. 4.7% (Prev. 0.3%)

UK/EU

UK PM May reportedly wants to announce strict immigration controls at the Conservative Party conference to give reassurance to Eurosceptics in the face of increasing revolt. (Times)

EU is said to expect a UK shift on the Irish issue from the after the Tory party conference and have reportedly begun redrafting an Irish Brexit protocol in order to appease the UK. (Newswires)

Rebels in UK Conservative Party said to set a 3-week deadline for PM May to drop the Chequers plan. (Newswires)

Sealing a Brexit deal between the UK and EU will not be held up by the squabbling over the future of Gibraltar, according to the Spanish Foreign Minister. (Newswires)

UK Brexit Secretary Raab warned that the UK will not pay divorce bill without a Brexit deal. (Telegraph)

UK government is to publish no-deal Brexit papers on Thursday related to mobile roaming charges, environmental and vehicle guidelines. (Newswires)

UK RICS Housing Survey (Aug) 2.0 vs. Exp. 2.0 (Prev. 4.0). (Newswires)

Italian Finance Minister Tria threatening to quit over the budget, as according to reports. (Newswires) 

FX

FX price action mostly quietened overnight in which the DXY languished below the 95.00 level after the prior day’s soft PPI data and as its major counterparts EUR/USD and GBP/USD held steady ahead of today’s ECB and BoE policy decisions. Elsewhere, the increased risk appetite spurred some JPY outflows, while commodity-linked currencies remained firm amid the recent gains in the metals complex after the US reached out to China for discussions, with AUD/USD also briefly underpinned by better than expected jobs but with gains capped by resistance at the 0.7200 handle.

Australian Employment (Aug) 44.0k vs. Exp. 15.0k (Prev. -3.9k). (Newswires)
Australian Full Time Employment (Aug) 33.7k (Prev. 19.3k, Rev. 20.1k)
Australian Unemployment Rate (Aug) 5.3% vs. Exp. 5.3% (Prev. 5.3%)
Australian Participation Rate (Aug) 65.7% vs. Exp. 65.6% (Prev. 65.5%, Rev. 65.6%)

Turkey decided that property sales and rental agreements can only be made through TRY and not in foreign currency, while it declared that such deals in foreign currency must be converted to TRY within 30-days. (Official Gazette)
 

COMMODITIES

Commodities were mixed in which WTI crude futures continued to pullback from this week’s inventory-fuelled advances and eventually slipped back below USD 70/bbl. Elsewhere, gold was flat and held on to the prior day’s gains amidst the backdrop of a subdued greenback, while copper remained firm alongside strength in Chinese metal prices as participants reacted to trade-positive headlines.

Iran OPEC Governor said oil prices rising in favour of Russia and Saudi Arabia, while he added the US is punishing its allies and that Trump is bullying oil markets. (Platts)

NHC said hurricane Florence is now a category 2 storm vs. Prev. category 3, while it had earlier commented that although slow weakening is expected to begin by late Thursday, hurricane Florence is still forecast to be extremely dangerous when it nears the US. (Newswires)
 

US

NEC director Kudlow confirmed the US has invited China for trade talks. (Newswires)

Fed's Beige Book stated most districts noted concerns about trade tensions, particularly but not only for manufacturers. The Beige Book added that tariffs were reported to be contributing to rising input costs mainly for manufacturers and that businesses in a number of districts scaled back or postponed capital investment due to trade tensions. (Newswires)

Fed's Brainard (Voter, Dove) said further gradual interest rate increases are likely to be appropriate over the next year or two and that US economic growth is strong with the economy meeting the Fed's employment and inflation targets.  Brainard also noted that shorter-run neutral rates likely to run above the long-run in next year or two and that trade disputes are a downside risk and that trade is a source of uncertainty right now but does not see discernible impact on prices and confidence. (Newswires)

Fed's Rosengren (Non-Voter, Hawk) said a recession has inevitably followed when employment falls to as low as current levels. (Newswires)

Canadian Foreign Minister Freeland said officials will conduct NAFTA talks in Washington on Thursday although she will not be attending, while she stated officials must do more work before ministers can meet when asked when she will visit Washington next for discussions. In related news, there were prior reports that Canada is not under pressure to get a NAFTA deal done immediately and that the most optimistic scenario is to reach a deal next week according to sources. (Newswires)