• European equities pay no heed to poor EZ PMIs; set for over 2% weekly gain as trade war fear dissipate
• Sterling sliding on subpar statements after Salzburg summit
• Looking ahead, highlights include, US PMIs, Canadian CPI and retail sales, Baker Hughes Rig Count and quad witching

ASIA

Asian equity markets traded higher as the region took impetus from the rally in US where the Nasdaq outperformed on a rebound in tech, while the S&P 500 and DJIA notched all-time highs. ASX 200 (+0.4%) and Nikkei 225 (+0.8%) were positive with Australia led by strength in miners following the recent upside in the metals complex, while the Japanese benchmark remained underpinned by a weaker currency and approached closer towards this year’s highs. Hang Seng (+1.7%) and Shanghai Comp. (+2.5%) both conformed to the heightened global risk appetite and markedly outperformed their peers, despite a flimsy start for mainland China after the PBoC refrained from liquidity operations and dramatically slowed its net liquidity efforts for the week. Finally, 10yr JGBs declined amid gains in stocks and after a reduction of the BoJ’s Rinban purchases of 25yr+ JGBs to JPY 50bln from JPY 60bln, which pushed the 20yr yield and 30yr yield to their highest since July 2017 and October 2017 respectively.

PBoC skipped open market operations for a net weekly injection of CNY 60bln vs. CNY 330bln net injection last week. (Newswires)
PBoC set CNY mid-point at 6.8357 (Prev. 6.8530)

Japanese Economy Minister Motegi said they will hold a 2nd round of bilateral trade discussions with US in New York on Monday, while he added he wants a win-win outcome and doesn't expect it to lead to FTA negotiations. Furthermore, Japanese Chief Cabinet Secretary Suga said PM Abe and US President Trump will meet for dinner on September 23rd and will hold a summit on September 26th. (Newswires)

Japanese National CPI (Aug) Y/Y 1.3% vs. Exp. 1.1% (Prev. 0.9%) (Newswires)
Japanese National CPI Ex. Fresh Food (Aug) Y/Y 0.9% vs. Exp. 0.9% (Prev. 0.8%)

EU/UK/US

Former UK Brexit Secretary Davis warned as many as 40 MPs could vote against PM May's Chequers plan but added that Brexiteers are "reasonably terrified" of a Labour general election victory and that Downing Street is "banking on" this fear. (Independent) As a heads up, Davis is due to publish his alternate Brexit plan before the Tory Party conference (30th September). (Times)

UK PM May today will review the fallout of the Salzburg summit with her closest aides with suggestions from a senior minister that she could have to re-write her Chequers Brexit plan (FT). However, BBC’s Kuenssberg tweeted that no announcement is to be made today by PM May, despite suggestions there would be. (Newswires)

UK Cabinet minister Chris Grayling has warned there will be no deal with the EU on Brexit if it does not soften its position on the Irish border. (BBC)

Italy's Deputy PM and Five Star Leader Di Maio said he never wanted to bring down the government and reiterated being committed to keep election promises, while Italy's League said it will govern with Five Star Movement for five years and will respect all the points in the government programme. Di Maio later said new pension rules, flat tax and universal income will be part of the 2019 budget (Newswires)

German Markit Services Flash PMI (Sep) 56.5 vs. Exp. 55 (Prev. 55)

German Markit Comp Flash PMI (Sep) 55.3 vs. Exp. 55.4 (Prev. 55.6)

German Markit Manufacturing Flash PMI (Sep) 53.7 vs. Exp. 55.7 (Prev. 55.9)

French Composite PMI at 53.6 vs. Exp. 54.7 (Prev. 54.9)

French Services PMI at 54.3 vs. Exp 55.2 (Prev. 55.4)

French Manufacturing PMI at 52.5 vs. Exp 53.3 (Prev. 53.5)

EU Markit Comp Flash PMI (Sep) 54.2 vs. Exp. 54.4 (Prev. 54.5)

EU Markit Services Flash PMI (Sep) 54.7 vs. Exp. 54.4 (Prev. 54.4)

EU Markit Manufacturing Flash PMI (Sep) 53.3 vs. Exp. 54.4 (Prev. 54.6)

EQUITIES

European equities have started the day on the front foot, with the Eurostoxx 50+0.8% on the day, and setting the index up for a 2.7% climb this week, as trade concerns continue to ease. The FTSE MIB is todays outperformer, driven by Atlantia, who have reportedly not had the Hochteif-Abertis acquisition next week quashed, despite suggestions it may be delayed by the Italian bridge disaster.

Mining names are leading gains in the FTSE 100, with Rio Tinto, Glencore and Anglo American benefitting from higher metals prices. Just Eat are at the foot of the index on competition concerns after source reports suggested Uber is looking to take over Deliveroo.

FX

EUR - Extended and widespread gains for the single currency with early tests of 1.1800 vs the Greenback and 0.8925 vs the Pound before weaker than expected Eurozone preliminary PMIs (German manufacturing in particular) stymied the Eur’s advance. 

CHF/NZD/AUD - All firmer vs the Usd, as the DXY attempts to keep its head above key chart support (93.713 and 93.640) and in touch with the 94.000 handle, with the Franc now eyeing 0.9550, Kiwi hovering just below 0.6700 and Aud re-testing 0.7300 in wake of Moody’s reaffirming NZ’s AAA rating and maintaining a stable outlook after S&P’s upgraded its outlook for Australia overnight.

CAD/JPY/GBP - The Loonie remains unable to break resistance vs its US counterpart circa 1.2900 amidst ongoing NAFTA stalemate, but may glean some fundamental impetus from upcoming Canadian data in the form of CPI and/or retail sales. Conversely, the Jpy has extended losses vs the Dollar towards 113.00 having breached support at 112.50, while Cable has retreated further from near 1.3300 peaks on Thursday amidst more bad press reviews of the Salzburg Brexit summit, and with downside stops below 1.3210 tripped to a low just under 1.3200.

EM - The Rand continues to outperform or carry the recovery baton across the region after yesterday’s hawkish hold from the SARB, and the Zar is now eyeing the 14.2000 level flagged by the Central Bank vs the Usd with extra momentum derived from SA President Ramaphosa’s economic stimulus plan based on reallocating budget expenditure rather than ramping up spending.

FIXED INCOME

Core EU debt futures have eased off best levels to sit back under big figure levels, albeit still firm and within range, but Italian bonds have extended to the topside and stopped just short of 127.00 for the 10 year benchmark as latest budget talks are said to have been constructive and cordial, according to Salvini. Note also, Gilts may have lost some impetus following the latest UK data release that broke a run of better than consensus macro reports from Wednesday, as PSNB balances were adversely impacted by several factors, and perhaps most topical EU budget contributions. Elsewhere, marginally more flattening along the Short Sterling strip as post-Salzburg recriminations rumble on (and no doubt to continue over the weekend), and a similar profile for US Treasuries after this week’s pronounced bear curve steepening.

COMMODITIES

Oil is in the green heading into the weekend, with Brent and WTI set to end the week positive by over 1% ahead of the OPEC meeting in Algeria this weekend. In energy newsflow JP Morgan raised their Q4 Brent forecast by USD 22/bbl to USD 63/bbl.

Metals are generally higher, with the market benefitting from a marginally softer dollar and further dissipation of trade tensions. Gold is set for a 1.5% weekly rise in prices, its first weekly rise in four, and is up on the day. This comes despite Goldman Sachs revising down their gold price forecast to USD 1325/oz from USD 1450/oz. Copper is the largest benefactor of reduced trade tensions, with the industrial material up 2% on the day, and hitting a 6 week high, despite Barclays expecting copper prices to fall from USD 6,603/T in 2018 to USD 6,263/T in 2019