• Asian stocks traded mostly lower as the upbeat sentiment from the USMCA deal seen on Wall St. faded away
• UK PM May is preparing to limit Britain's ability to strike free-trade deals after Brexit in a significant concession to the EU aimed at breaking the deadlock in negotiations
• The RBA stood pat on rates as expected and stated that low interest rates are supporting the economy, while business conditions and the outlook for the labour market remain positive
• Looking ahead, highlights include, US APIs and potential comments from BoE’s Haskel, Fed’s Quarles, ECB’s Villeroy, Fed’s Barkin, Powell, and BoE’s Haldane

ASIA-PAC

Asian stocks traded mostly lower as the upbeat sentiment from the USMCA deal seen on Wall St. faded away and trade concerns re-emerged after White House Economic Advisor Kudlow said a trade deal between US and China is not “imminent”.  ASX 200 (-0.8%) was dragged lower by the financial sector as Australia’s big four traded with losses in excess of a percent after the ACCC said they will examine the banks, while Nikkei 225 (+0.1%) was cushioned on the back of currency effect. Elsewhere, Hang Seng (-1.4%) underperformed as participants come back from the long weekend to downbeat trade comments from the US, meanwhile KOSPI (-0.8%) was also weighed by the sour sentiment as the index shrugged off optimistic industrial production data.

US Treasury Secretary Mnuchin said US will listen to China if they show willingness. (Fox)

China's narrowing interest rate spread with the US and declining current account surplus have led to some concerns regarding capital outflow. (FT)

China's Defense Ministry said they resolutely opposed the US "freedom of navigation" adding it's a threat to sovereignty which China will take necessary measures to defend. (Newswires)

BoJ’s September Tankan Corporate Price Expectation Survey stated Japanese firms sees Y/Y inflation at 0.8% (Prev. 0.9%); 3yr and 5yr expectations unchanged at 1.1%. (Newswires)

UK

UK PM May is preparing to limit Britain's ability to strike free-trade deals after Brexit in a significant concession to the EU aimed at breaking the deadlock in negotiations. She is to propose “Grand Bargain” to keep Britain tied to European customs rules on goods after transition period ends in December 2020. (The Times)

UK Immigration Minister Nokes believes the government seeks a post-Brexit immigration system that treats all nations equally but gives ministers the flexibility to tailor rules for countries negotiating trade deals. (Newswires)

UK lawmaker and Brexit hardliner Rees-Mogg said changing a leadership usually causes more problems than it solves, it's prudent to back PM May. (Newswires)

EU diplomats have rejected UK PM May’s conference pitch that Brussels must move first to break the deadlock over negotiations. (Guardian)

UK Chancellor Hammond said if WTO regulations are implemented we will have to have border checks, while he added we need a very very gradual process of re-balancing our trade with the EU. (Newswires)

Former UK Foreign Minister Johnson told senior conservatives that he would delay Brexit by at least six months if he became PM. (Newswires) This comes ahead of Johnson’s speech today at the Conservative Party Conference which many see as essentially his pitch to succeed PM May. (FT)

EU

EU Commission President Juncker, on Italy's 2019 budget proposal, said “we are in talks” and he added “if they want further special treatment it would end the Euro.” (Newswires)

CENTRAL BANKS

Fed's Williams (Neutral, Voter) said as we move towards a more normal conduct of policy, we shouldn't rest easy and think we won’t run into future challenges. (Newswires)

Fed's Rosengren (Hawkish, Non-voter) said FOMC should continue on its current pace of raising rates, and the further the US gets below full employment the higher the risk of inflation increasing. He said the continued growth and tighter labour markets will likely lead to imbalances including but not limited to inflation, while strong growth is expected to continue for now, though trade and emerging markets problems pose risks. (Newswires)

Fed's Kashkari (Dove, Non-voter) said so far tax cuts have not boosted business spending outside of the oil sector, we are probably not at full employment.

ECB's Villeroy (Dovish) said it is now or never to build economic union. (Newswires)

FX

Tentative trade in FX markets with the greenback little changed and major pairs trading flat. NZD initially saw some downside following a weaker Q3 business confidence, while AUD/USD was nudged higher by 10 pips as the RBA stood pat on rates as expected and stated that low interest rates are supporting the economy, while business conditions and the outlook for the labour market remain positive. Elsewhere, JPY initially attempted to crawl further from the 114.00 level against the dollar, however remained in close proximity to the figure.

RBA maintained the Cash Rate at the record low 1.50% for a 23rd straight meeting. The central bank reiterated low rates are supporting the economy and progress on unemployment and inflation is expected to be gradual, the statement added that 2018 and 2019 GDP growth is to average slightly above 3%. The RBA stated business conditions and the outlook for the labour market remains positive, however the drought has led to difficulties in the farming sector.

GEOPOLITICS

North Korean government spokesperson said US is still trying to subdue the country via sanctions, while he reiterated that North Korea is taking substantial steps to implement the joint statement. (Newswires)

COMMODITIES

Commodities traded little changed as WTI and Brent hovered around four-year highs at USD 75.50/bbl and USD 85.00/bbl respectively, while traders continue to pin the rally in prices on oil-related Iranian sanctions coming into effect in just over a month. Elsewhere, gold mirrored the miniscule dollar moves while copper underperformed as demand concerns re-surfaced amid less optimistic trade comments from the US.

US

The Treasury curve bear-steepened on Monday, falling after overnight news of a free trade deal in principle between US, Mexico and Canada. A slight easing in Italian budget tensions was also cited for the bund sell-off in early European trade, which Tsys sympathised with. 2-year yields edging up slightly, while longer-dated yields rose by as much as c.4bps at settlement. Major curve spreads also widened modestly (2s5s up 0.3bps, 2s30s wider by around 2.5bps, struggling to maintain ground above their 50DMAs, technicians observed). US T-note futures (Z8) settles 3+ ticks lower at 118-21+.

US President Trump said he expects to sign the new USMCA deal by the end of November. US White House Advisor Navarro mentioned November 30th, while Mexican Economy Minister Guajardo stated that the new USMCA could be signed by the three Presidents at the G20 on November 29th. Guajardo also said that the new US-Mexico-Canada trade deal could take effect from the second half of 2019. (Newswires)

Canadian PM Trudeau said the US has expressed willingness to discuss steel and aluminium tariffs. In related news, US President Trump said steel and aluminium tariffs will remain on Canada and Mexico unless they can do something like quotas, while USTR Ligthizer and US Commerce Secretary Ross said there is no deadline for resolving metals tariff dispute. (Newswires)