Asia-Pacific equities traded mixed as the region mimicked the lead from Wall St. where the S&P notched its fourth day of losses while the Nasdaq snapped its three-day losing streak

EU and the UK have made progress in Brexit talks, divorce terms could be settled by Monday, according to reports

Looking ahead, highlights include Norwegian CPI, UK GDP and production, US PPI, Wholesale Inventories, APIs, ECB’s Mersch, BoE’s Haldane, Fed’s Evans and Bostic

ASIA-PAC

Asia-Pacific equities traded mixed as the region mimicked the lead from Wall St. where the S&P notched its fourth day of losses while the Nasdaq snapped its three-day losing streak. The Dow closed in the red as the major indices swung between positive and negative territory throughout the day. ASX 200 (+0.1%) was supported by strength in the healthcare and consumer discretionary sectors, while Nikkei 225 (-0.5%) was pressured by machinery names along with Softbank after reports emerged that the company discussed investing between USD 15bln-20bln for a majority stake in WeWork, while a firmer currency only subdued the index further. Elsewhere, mixed trade in China with Hang Seng (+0.2%) supported by oil names, while Shanghai Comp. (-0.2%) gave up initial gains to trade with no firm direction for most of the session before stabilising in the red. 

PBoC set CNY mid-point at 6.9072 (Prev. 6.9019) (Newswires)
PBoC skipped open market operations and makes no fund injection or withdrawals

US Treasury Secretary Mnuchin has warned China on competitive currency devaluation and added that he wants to discuss the currency with Beijing as part of trade talks. (FT)

IMF noted near-term risks to global financial stability have increased somewhat, medium term risks remain elevated. (Newswires)

UK

EU and the UK have made progress in Brexit talks, divorce terms could be settled by Monday, according to reports. (WSJ)

ITV reported that UK PM May's negotiator Robbins has made meaningful progress in talks with EU's Chief Negotiator Barnier on the Irish border backstop. The article stated, "The most important development would be that the EU seems close to agreeing that the backstop would apply to the whole UK and not just to Northern Ireland, as it originally demanded - or at least it would apply to the whole UK for customs." (ITV) In related news, UK Brexit Minister Raab said the UK will not sign up to an indefinite customs union with the backstop and negotiations with the EU have intensified, some differences on the withdrawal agreement. (Newswires)

UK PM May is reportedly to "force" cabinet into a new Brexit compromise, while a government source said that ministers feared they could be bounced into swallowing several potential changes to the customs arrangement, and the areas of EU law that the UK must follow after Brexit. A separate article by The Times reported that around 30 Labour MPs are said to be prepared to support UK PM May's Chequers deal. (The Times)

Bank of England said up to GBP 41tln (USD 76tln) of derivatives contracts may be at risk if the EU does not urgently finalise a new post-Brexit clearing regime and added it would disrupt the market and drive up costs. (AFR)

US is reportedly threatening to block the UK’s access to the Global Procurement Pact when it applies to rejoin after losing membership post-Brexit, according to sources. (Newswires)

EU

Italy's Finance Minister Tria is to address Parliament on Wednesday at 09:00BST/04:00EDT. (Newswires)

Italian Ministry is to confirm targets after watchdog rejects plan, ANSA reports. In related news, Italy PM Conte said the Italian government will not change its budget outline. (Newswires)

Italy's EU Affairs Minister Savona said the budget outline should change if the spread is too high, would need much more than 2.4% deficit, while he added the government will have to change budget if market pressure on Italy gets out of hand. (Newswires)

FX

In FX markets, the greenback traded little changed whilst in a tight range following a pullback with lows close to 95.50. Subsequently, EUR/USD and GBP/USD were marginally higher, above 1.1500 and 1.3150 respectively, while USD/JPY straddled around the 113.00 key psychological level. Elsewhere, antipodeans outperformed amid a rise in iron ore shipments to China alongside decent data in the form of NZ electronic card retail sales (which account for almost 70% of core NZ retail sales) and an improvement in Australia’s Westpac consumer confidence.

Australia Westpac Consumer Confidence Index 101.5 (Prev. 100.5) (Newswires)
Australian Consumer Sentiment Oct 1.0% (Prev. -3.0%)

New Zealand Electronic Card Retail Sales (Sep) M/M 1.1% vs. Exp. 0.6% (Prev. 1.0%, Rev 1.1%) (Newswires)

Brazil's leftist Presidential Candidate Haddad said his Finance Minister will not come from financial markets and may be an economist or a business leader, while he added his Finance Minister will be the polar opposite of Bolsonaro's pick, Paulo Guedes. (Newswires)

COMMODITIES

Commodities traded lower with a pullback in WTI and Brent prices with the former eyeing USD 74.50/bbl to the downside. Prices have staged a mild retreat from recent highs, though prices remain underpinned by Hurricane worries as Michael is set to strengthen to a Category 4 before hitting land in Florida later today. Elsewhere, metals are mixed with gold and copper flat amid the uneventful dollar throughout the session, while Chinese iron ore futures hit 7-year highs as demand for the metal surged.

Hurricane Michael strengthened to a Category 3 hurricane and is forecast to become a Category 4 before landfall, while it is expected to weaken after landfall in Florida, US estimated producers have cut around 40% output in the Gulf of Mexico due to Hurricane Michael. Louisiana Offshore Oil Port says it has suspended operations at its Marine terminal ahead of Hurricane Michael (Newswires)

US President Trump said he does not like WTI at USD 74/bbl. (Newswires)

Mexico's Energy Minister said Mexico hopes to reverse the downward trend in crude reserves in two years. (Newswires)

Australia's Port Hedland said iron ore shipments to China rise to 37.4mln tonnes. (Newswires)

GEOPOLITICS

US President Trump said a summit with North Korean leader Kim Jung Un will be after US midterm elections on November 6th. In related news, US Secretary of State Pompeo noted real progress on his trip to North Korea and sees a full path to denuclearization. (Newswires)

US

Following bond market closure on Columbus Day, the Treasury complex drifted higher on Tuesday with longer dated yields coming off multi-year highs, with reports the higher yields were enticing real money, while there were also reports of shorts being covered. The yield curve saw some modest bull-flattening with 30yr yields lower by c.3bps at settlement. The US Treasury will auction USD 74bln in 3-year (USD 36bln of new paper, Wednesday), 10-year (USD 23bln re-opening, Wednesday) and 30-year (USD 15blnre-opening, Thursday); with approximately USD 24bln maturing at the mid-month settlement, the auctions will raise USD 50bln in new cash. * US T-note futures (Z8) settle 3+ ticks higher at 117-26.

US President Trump reiterate his dislike for what the Fed is doing, and said the Fed doesn't need to raise rates as fast and added the US does not have an inflation problem, while White House Economic Advisor Hasset says Trump respects Fed's independence, also says budget deficit is higher than anyone would like (Newswires)

Fed's Williams (Voter, Neutral) reiterated expectations for further gradual US rate hikes and sees very strong labour market with no signs of greater inflationary pressure. Furthermore, Williams said that US normalisation of monetary policy has added the benefit of reducing risks of imbalances in the financial markets. (Newswires)

Fed's Harker (Non-voter, Neutral) said there is 'very little slack left' in the US labour market. (Newswires)