• US and Canada said in an official statement that they have reached a trade deal with Mexico in an agreement dubbed the USMCA (US-Mexico-Canada Agreement)
• Asian stocks traded mixed following a rather uneventful lead from Wall St. on Friday. Hong Kong and Mainland China closed due to public holidays
• In FX, focus has been on JPY weakness and CAD strength with the latter hitting 4-month highs vs. USD
• Looking ahead, highlights include EZ, UK and US mfg PMIs, US construction spending, ISM mfg PMI, Fed’s Bostic, Kashkari, Rosengren, BoE’s Tenreyro

NAFTA

US and Canada said in an official statement that they have reached a trade deal with Mexico in an agreement dubbed the USMCA (US-Mexico-Canada Agreement). US President Trump is to sign the new trade agreement by the end of November, which will then get passed on to Congress.

Canada has agreed to eliminate the "Class 7" milk protein pricing system and increase US access to Canada's dairy market beyond Trans-Pacific partnership levels. The New trade deal does not make major changes to current Chapter 19 trade dispute settlement mechanism which gives the three countries the right to challenge each other’s anti-dumping and countervailing duty decisions in front of an expert panel with members from both countries involved in a dispute. US said the trade deal with Canada does not affect US steel and aluminium tariffs currently levied on Canada, and that these tariffs are separate to the trilateral deal. A Senior Trump Administration official said if Trump imposes auto tariffs, both Mexico and Canada will be accommodated in "side letters".

ASIA-PAC

Asian stocks traded mixed following a rather uneventful lead from Wall St. on Friday where major bourses ended the day little changed as markets wrapped up a strong quarter where the S&P showed it best quarterly gain since Q4 2013. ASX 200 (-0.6%) underperformed amid a slowdown in China’s manufacturing sector shown by the Caixin data, while Nikkei 225 (+0.6%) was buoyed on currency effect in a continued weakness of the JPY following a downbeat Tankan release and Manufacturing PMI. Elsewhere, Hong Kong and Mainland China are closed today due to public holidays.

Indonesia’s island Sulawesi was hit by a 7.5 magnitude earthquake, which triggered a 6m (20ft) tsunami that hit the cities of Palu and Donggala. Officials have confirmed the death toll rose to over 800.  (BBC/Sky News/CNN)

China's Foreign Minister Wang Yi said protectionism will only hurt one's self and unilateral moves will bring damage to all, and China won’t be blackmailed or succumbed to pressure over trade. (Newswires)

China reportedly cancelled high-level security talks with the US. (NY Times)

PBoC said the yuan exchange rate and market expectations are generally stable. (Newswires)

China Caixin Manufacturing PMI (Sep) 50.0 vs. Exp. 50.5 (Prev. 50.6) (Newswires)

China NBS Manufacturing PMI (Sep) 50.8 vs. Exp. 51.2 (Prev. 51.3)

China NBS Non-Manufacturing PMI (Sep) 54.9 (Prev. 54.2)

Japanese Tankan Big Manufacturing Index (Q3) 19.0 vs. Exp. 22.0 (Prev. 21.0) (Newswires)
Japanese Tankan All Big Industry Capex (Q3) 13.4% vs. Exp. 14.2% (Prev. 13.6%)

Japan Manufacturing PMI (Sep) 52.5 vs. Exp. 52.9 (Prev. 52.9)

UK

UK PM May said the Chequers plan is not dead, while added she is prepared to listen to EU counter-proposals but she wants to hear the details of EU’s concerns, and EU leaders want a deal just as she does. She said she believes Chequers will not destroy the single market and a Canada-style deal is not on the table for EU. In the interview, she refused to answer whether a no-deal Brexit will mean a hard border in Ireland. Note: BBC’s Andrew Marr noted a no-deal under WTO would result in a hard border. (BBC)

UK PM May, in a Sunday Times interview, told Tory rebels to “stop playing politics” and the only proposal on the table at the moment that delivers, is the Chequers plan, while she reiterated that no deal is better than a bad deal but she thought a good deal could be reached. She also challenged the EU to come forward with a counter proposal. (BBC/Times/Sun)

Former UK Foreign Secretary Boris Johnson has refused to rule out a leadership challenge to UK PM May. Furthermore, in an interview with The Sunday Times, Johnson questioned whether UK PM May believes in Brexit and branded her Chequers plan “deranged”. (BBC/Times)

EU’s Chief Negotiator Barnier told Labour leader Corbyn that they believed they might be close to finding agreement with UK PM May, but everyone is needs to act calmly and responsibly if the agreement was to get through parliament. (Guardian)

UK Labour leader Corbyn was told his stance made a no-deal Brexit more likely than not; according to sources in Brussels. Brussels is said to hope for the Tory conference to break the deal deadlock. (Newswires)

UK’s Labour party claims UK PM May’s government is the “most divided ever” as it releases a dossier of over 100 Tory MPs criticising the government or colleagues. (Independent)

UK Brexit Secretary Raab is set to warn that if the EU tries to force the UK into accepting a customs union then it will leave without a deal. (BBC)

UK Foreign Secretary Hunt has warned the EU that it will stir Britain's “Dunkirk spirit” if it tries to force a bad Brexit deal on the UK. (Telegraph)

UK Business Secretary Clark has said there are “grounds for optimism” that UK will strike a Brexit deal with the EU. (Sky News)

Former Brexit Secretary Davis said UK PM May’s advisors fail to grasp the practicalities of the negotiations and have tendencies to believe “exaggerations” from Brussels. He also said he thinks it is 80%-90% likely there will be a Brexit deal. (Telegraph/Sky News)

A Sky Poll revealed that 56% of Britons think Brexit will have a worse outcome than they expected when they voted in the EU referendum. (Sky News)

EU

EU Commissioner Dombrovskis said what emerges so far from discussions in Italy does not seem to be in line with EU fiscal rules, he added it's important to stick to responsible fiscal policy to keep interest rates low. The Dutch PM has also expressed his concerns over the Italian budget plan. (Newswires)

Italian Finance Minister Tria is attempting to head off a confrontation between the EU and Italy that by insisting that the country will reduce public debt despite its plans to increase spending. (FT)

ECB’s Rehn (Neutral) said interest rates will remain at this low at least until summer 2019. (Newswires)

FX

In FX markets, the greenback was quiet amid a lack of participants from China and Hong Kong, while EUR/USD and GBP/USD were little changed throughout the session.

Focus has been on JPY weakness and CAD strength with the latter hitting 4-month highs vs. USD as WSJ reported that US and Canada are close to reaching a deal, ahead of the midnight deadline in Washington. USD/CAD then recuperated off lows on the run-up to the release of the official statement that US, Canada and Mexico reached a trade deal now dubbed USMCA. MXN also strengthened throughout the session with USD/MXN hitting lows of near 18.5400 amid the positive developments towards a trilateral deal. Elsewhere, the JPY hit new 2017 lows against the USD as a mostly disappointing Tankan survey and a downbeat Manufacturing PMI underpinned the pair.

GEOPOLITICS

North Korea’s Foreign Minister announced that North Korea would not take the first steps towards denuclearisation without further guarantees from the US. He also warned of the increasing mistrust between Pyongyang and Washington DC. (Telegraph)

Russian Foreign Affairs Minister Lavrov said everything possible will be done to preserve Iran nuclear deal. (Newswires)

COMMODITIES

Commodities traded mixed with WTI and Brent extending on gains towards last week’s highs with traders citing growing concern over oil-related Iranian sanctions driving the prices higher. WTI flirted above USD 73.50/bbl while Brent regained the USD 83.00/bbl handle. Elsewhere, gold was little changed as the yellow metal mirrored the DXY’s miniscule moves, while copper was subdued following a disappointing Chinese Caixin PMI which showed a slowdown in the manufacturing sector.

NHC said Hurricane Rosa (located in the Eastern North Pacific) has weakened to a tropical storm but is still expected to cause flooding rains over portions of North-Western Mexico and the Western US. (Newswires)

US Crude Oil Exports fell to 2.139mln bpd in July (vs. 2.2mln bpd in June). (Newswires)

US

Once again, Bunds were dictating the price action of Treasuries through European trade, with German debt catching a bid as Italian debt was sold; Bunds were also aided by somewhat disappointing data on the inflation front. A mixed/weak set of 0830am EST data helped Treasuries find highs, though highs could not be sustained with equities firming/toying with neutral levels. Reported position squaring was also playing a role in the afternoon, with traders squaring books ahead of month/quarter end. Major curves spreads were modestly wider, except for the 2s5s, which narrowed a touch. * US T-note futures (Z8) settled 1 tick higher at 118-25

Source: RANsquawk