• Italian Economy Minister tries to tame budget excesses ahead of key meeting
• BTPs firm but off peaks as Di Maio maintains citizens income demands
• Looking ahead, highlight include, US services PMI, US ADP, ISM non-mfg, Fed’s Barkin, Harker, Bullard, Brainard and Mester

ASIA

Asian stocks traded choppy following a mixed lead from Wall St. where the Dow hit all-time highs aided by gains in Intel shares, while Nasdaq was pressured by large-cap tech names tumbling over a percent. ASX 200 (+0.3%) outperformed as miners boosted the index, while Nikkei 225 (-0.7%) was weighed on by auto names with Honda and Toyota falling 3% and 2% respectively, while the index was also mirroring currency fluctuations throughout the session. Elsewhere, Hang Seng (-0.6%) traded lower amid weakness in financial names and as the tech sector failed to support the index following Tencent’s plans to IPO it’s music arm in the US, in what could be one the biggest IPOs to date. Meanwhile, mainland China and South Korea were shut due to public holidays.

NEC Director Kudlow said US and China keep talking about trade, while the White House Advisory said China has not made a serious enough effort at appeasing the US. (Newswires)

Tokyo Financial Exchange plans to expand trading to Hong Kong and Taiwan. (Newswires)

Japan Nikkei Services PMI (Sep) 50.2 vs. Exp. 51.8 (Prev. 51.5) – 2 year low. (Newswires)
Japan Nikkei Composite PMI (Sep) 50.7 (Prev. 52.0)

EU/UK/US

UK PM May is reportedly under pressure to set out a timetable for her departure after Cabinet ministers said it was now a question of “when, not if” she stands down as Prime Minister. Sources suggest that if she refuses to step down, plans will be drawn up to force her departure before the next general election. (Telegraph)

UK PM May said in the event of a no-deal Brexit, WTO tariffs would come into effect. (Newswires)

UK Brexit Minister Raab said we can expect to have a deal in time for Christmas and the UK must get a deal in November otherwise it’s too short on time for legislative time-frame. (Newswires)

British Cabinet Office Minister Lidington states that the government will present more thorough proposals on the Irish backstop very soon. (Newswires)

Conservative MP James Duddridge submitted a letter to 1922 committee calling on Theresa May to resign, claiming he has “not met a single MP who thinks she will lead us into another election” (Sky)

The Italian Government confirmed the 2019 deficit at 2.4% of GDP, and said they may reduce 2020, 2021 to under 2.2% and sub 2% respectively. The Deputy PM also said that EUR 10bln is minimum figure for citizen income, and added there is no plan to cut the deficit more if GDP growth disappoints. Italian Economy Minister Tria later said that the Govt. will ensure that debt falls by more in 2019 than recent years adding that the deficit will fall gradually in the years after 2019 (Newswires)

EU Commission says it will assess Italy's budget once it is submitted; they will be taking into account Commission's economic forecasts. (Newswires)

Turkish CPI YY Jul 24.52% (Prev. 17.9%)

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

EU Markit Comp Final PMI (Sep) 54.1 vs. Exp. 54.2 (Prev. 54.2)

German Markit Comp Final PMI (Sep) 55.0 vs. Exp. 55.3 (Prev. 55.3)

German Markit Services PMI (Sep) 55.9 vs. Exp. 56.5 (Prev. 56.5)

French Markit Comp PMI (Sep) 54.0 vs. Exp. 53.6 (Prev. 53.6)

French Markit Services PMI (Sep) 54.8 vs. Exp. 54.3 (Prev. 54.3)

UK Markit/CIPS Services PMI (Sep) 53.9 vs. Exp. 54.0 (Prev. 54.3)

CENTRAL BANKS

Fed's Evans says he is comfortable with the expected path for the expectations of a rate hike, is comfortable with a December rate hike. (Newswires)

GEOPOLITICS

US Secretary of State Pompeo is to meet with North Korean leader Kim Jung Un on Sunday. (Newswires)

EQUITIES

European equities started the day on the front foot after the early morning risk tone benefited from Italy confirming the debt/GDP target from 2020 at 2.2% vs. the originally quoted 2.4%. This, however, reversed course after the details from their budget proposal said a “minimum” of EUR 10bln is to be set aside for citizens income and that there are no plans to alter the deficit if GDP growth disappoints.

This has led to investors repeating concerns over fiscal irresponsibility and the possibility of debt/GDP rising over 3% should GDP growth forecasts not come in line. This hit market sentiment, with equities now flat after having been in positive territory in the early morning.

Note, that the DAX is closed for trading on this session for German Unity day.

Norsk Hydro and Tesco are leading the losses in Wednesday’s session. The Scandinavian company is being hit by the ceasing of operations at their Alunorte site in Brazil. Tesco is struggling after reporting earnings wherein profit missed expectations.

FX

EUR/GBP - Clear G10 outperformers, or at least bucking the overall trend of losses vs the USD, with the single currency bouncing firmly from near 1.1500 lows towards the big figure above following reports that the Italian Government is aiming to cut 2020 and 2021 deficits from an initial 2.4%, which still stands for next year, and perhaps even below 2.2% and 2% respectively. However, Eur/Usd has eased back awaiting confirmation of the more compliant budget plan, as Deputy PM Di Maio undermines some of the good will/relief by stating that the minimum amount for citizens income should be set at Eur10 bn. Attention now turns to another coalition party convene in Rome, and from a technical standpoint the headline pair faces resistance just above 1.1600, if that level is breached, such as the 50 DMA (1.1607) and a 38.2% Fib (1.1624). Meanwhile, Cable is retesting the 1.3000 handle awaiting UK PM May’s keynote address to close the Tory Party conference amidst reports from the DUP that a more detailed Irish back-stop proposal will be unveiled soon, and not that deterred by a marginal services PMI miss.

AUD/NZD - The major losers and retreating further from Tuesday’s recovery highs, with the Aud hit by significantly weaker than expected Aussie building approvals overnight and only just holding above 0.7150 ahead of a speech from RBA’s Ellis and with heavy option expiry interest at the 0.7190 strike (1.2 bn) also in the mix. The Kiwi has fallen in sympathy, but also in wake of yet another sharp decline in GDT auction prices to circa 0.6560.

CAD/JPY/CHF - All down against the Greenback, but within recent ranges as the Loonie keeps its head above 1.2850 and Jpy over 114.00 and large offers said to be sitting between 114.20-60 and Franc continues to meander within a 0.9835-70 band.

EM - Inflation vibes have impacted the Lira and Rand, with Turkish CPI far exceeding forecasts and catapulting to 24%+ y/y and Usd/Try rallying to almost 6.1000 in response from just under 6.0000 pre-data, while Usd/Zar has rebounded from sub-14.2900 to 14.3500+ in wake of an SARB warning about inflation overshooting the 6% target. However, the Lira may yet regain traction if measures to combat inflation are deemed credible/successful and the courts decide to release US Pastor Brunson after the latest appeal.

COMMODITIES

The source report story suggesting Russia and Saudi Arabia are to boost oil output in December hit the oil market, which started in the green off the back of yesterday’s smaller than expected build in API crude stocks. The crude complex is now flat as suggestions of increased supply halted Brent’s advance over the USD 85/BBL with the benchmark now hovering just below the big figure.

The Iraqi Energy Minister said that they will assess increased OPEC output in November.

In the metals scope, gold is unchanged after having risen by over 1% in the previous session. The biggest mover in the commodities scope can be found in aluminium, which has rallied to over 5 week highs after Norsk Hydro announced the cessation of operations at their Alunorte site in Brazil, stoking the flames of supply concerns for the industrial metal.