Asian equities trade mixed following a negative lead from the US with sentiment on Wall St. dampened by ongoing trade concerns and US yields

FX markets were little changed overnight with the greenback remaining in a tight range ahead of NFP

Italy's Finance Minister Tria is targeting GDP growth of 1.5% in 2019, 1.6% in 2020, 1.4% in 2021 and confirmed deficit/GDP target of 2.4% in 2019, 2.1% in 2020 and 1.8% in 2021

Looking ahead, highlights include RBI rate decision, US and Canadian jobs reports, US trade, Baker Hughes, ECB’s de Guindos, Knot, Fed’s Kaplan and Bostic

ASIA-PAC

Asia-Pac stocks are traded mixed following a negative lead from Wall St. where tech names led the sell-off amid US-China trade concerns and as the US 10-year yield hit the highest since 2011. ASX 200 (+0.3%) bucked the trend and recuperated initial losses as financial and precious metal names supported the index, while Nikkei 225 (-0.6%) was subdued due to a recovery in the currency and weakness in tech names. Elsewhere, Hang Seng (-0.5%) struggled after opening in bear-market territory as a result of US headwinds and weakness in the energy sector, while tech names also sold off following reports that U.S. tech companies’ systems had been infiltrated by malicious chips inserted by Chinese intelligence agents. Meanwhile, mainland China remained closed due to the Golden Week holiday.

US President Trump reiterated that China wants to make a deal, but he thinks they are not ready yet; he added US and China will "talk later". (Fox)

US Vice President Pence said China is more proactive than ever in exerting influence, interfering in US policy and politics, while China said US VP Pence's speech makes unwarranted accusations and urged US to stop accusing and slandering China. (Newswires)

US Pentagon-led report noted China as a significant and growing risk to the US supply of critical material and tech. (Newswires)

Hong Kong government are said to step up SME loan guarantees amid trade war. (Newswires)

Japanese Finance Minister Aso reiterated that US talks are not free trade agreement talks, while Japanese government officials said US and Japan are to hold a third round of talks in mid-November. (Newswires)

UK

Former UK Foreign Minister Boris Johnson welcomed EU Council President Tusk's offer of a Canada type deal, he added it shows there is a "superb" way forward. (Newswires)

UK Trade Secretary Fox states that he would lend his support to an imperfect Brexit deal with the EU as long as it can be revised and improved after the nation departs the Bloc. (Newswires)

EU

Italy's Finance Minister Tria is targeting GDP growth of 1.5% in 2019, 1.6% in 2020, 1.4% in 2021, said in a letter to EU Commission, while he confirmed deficit/GDP target of 2.4% in 2019, 2.1% in 2020 and 1.8% in 2021. (Newswires)

Italy sets debt to GDP targets at 130.9 in 2018, 130.0 in 2019, 128.1 in 2020 and 126.7 2021

- Cuts 2018 GDP growth forecast to 1.2% (Prev. 1.5%)

- Hikes 2018 fiscal deficit target to 1.8% (Prev. 1.6%)

- Targets 2019 "structural" deficit at 1.7% of GDP vs. 0.9% in 2018

Italy's fiscal outline was sent to parliament and the government is to allocate EUR 9bln in income support measures. (Newswires)

Italy Deputy PM Salvini said it is in the EU interest that Italy will return to growth, he added bond yields are controlled by a few big investors and speculators that "open and close the tap every morning". (Newswires)

FX

FX markets were little changed with the greenback remaining in a tight range ahead of the key US jobs data later. USD/JPY retested and breached 114.00 to the downside, while EUR/USD and GBP/USD held onto the 1.1500 and 1.3000 levels respectively. Elsewhere, AUD received a small lift following positive retail sale, however the currency was still rangebound against the greenback.

Australian Retail Sales MM Aug 0.3% vs. Exp. 0.2%. (Prev. 0.0%). (Newswires)

CENTRAL BANKS

ECB's Coeure (Neutral) said ECB is working on all Brexit scenarios, including a hard Brexit. He said more time is needed to stabilise EZ inflation around 2%. He said ECB will continue to support the stability of the euro area as a whole, sees a gradual pick-up in price pressures; Eurozone economy in the best shape it has been in years. (Newswires)

BANXICO: As expected, the Banxico held rates at 7.75%, and sees the balance of risks to growth tilted towards the downside, while inflation risks are tilted towards the upside. There was one dissenter, who voted for a 25bps rate rise. Banxico said it is paying close attention to any potential pass through from the MXN, the relative monetary policy stance with the Fed, as well as levels of economic slack. The Peso was little changed after the rate decision.

COMMODITIES

Commodities were mixed overnight as WTI and Brent nursed some of the prior session’s losses with the latter flirting around the USD 85/bbl level as supply concerns re-entered the market with US sanctions on Iran set to go into effect next month. According to CNBC, traders have accumulated long positions amounting close to 1.2bln barrels of oil, while the number of short positions in the petroleum futures and options fell to the lowest since before 2013, creating a near record imbalance between bullish and bearish positions. Elsewhere, metals were subdued as the greenback recovered, and gold remained below USD 1200/oz after testing resistance at the figure.

White House National Security Advisor Bolton said the objective is that there would be no waivers for buyers of Iranian crude and could be looking at cuts leading to zero. (Newswires)

OPEC oil shipments will fall by 450,000 bpd to 24.93mln bpd in the four weeks to Oct 20th vs. period to Sep 20th, according to tanker tracker oil movements data. (Newswires)

Venezuela's President Maduro sees oil prices reaching USD 90/bbl. (Newswires)

Goldman Sachs said its base case for Iranian oil remains at a loss of 1.5mln BPD and added that uncertainty on size of supply disruption from Iran will only starts after sanctions go into effect. Goldman assumes markets will be at a deficit of 400K BPD while expecting markets to eventually return to modest surplus in 2019, citing that fundamentals are to gradually become binding as new spare capacity comes online in 2019. (Newswires)

US

The Treasury complex drifted lower once again on Thursday with yields continuing to be underpinned by positive US economic data which saw jobless claims nearing the 200k mark and factory orders rise more than expected as well as continuing positive narrative from the Fed after Fed’s Powell stroke a hawkish tone in late comments on Wednesday. The 30yr yield posted 4-year highs and the 10yr reached new 7yr highs in the session. Most of the selling action was concentrated in the belly of the curve where yields were higher by c.3bps. 2.30s and 2s10s were wider by c.1bps at settlement. The US announced that next week it will sell USD 36bln in 3yr notes, USD 23bln in reopened 10yr note and USD 15bln in reopened 30yr bonds next week.US T-note futures (Z8) settles 8+ ticks lower at 117-27+

Republicans agreed to raise federal worker pay, rebuffing US President Trump; Washington Post reports. (Washington Post)

Source: RANsquawk