Asian equities traded mixed as the bourses attempted to mount a recovery following the downbeat lead from Wall St.

BBC's Laura Kuenssberg reported that no real progress was made at yesterday’s cabinet meeting, but discussions will continue

Turkish officials expect the court to release Pastor Brunson on Friday, after NBC reported a secret agreement has been brokered to release the Pastor

Looking ahead, highlights include German CPI (F), IEA Monthly Oil Market Report, US Import/Export Prices, Uni. of Michigan, ECB’s Lautenschlaeger, Fed’s Evans, Bostic and ECB’s Draghi

ASIA-PAC

Asian equities traded mixed as the bourses attempted to mount a recovery following the downbeat lead from Wall St. where the region was pressured by energy names, closely followed by the financial sector which entered correction territory. The Dow eroded over 500 points, bringing the two-day loss to over 1,300 points, while S&P notched a six-day losing streak and closed below its 200 DMA. ASX 200 (+0.1%) recuperated initial losses as the commodity names recovered, while Nikkei 225 (-0.2%) traded off lows as the Japanese currency showed some mild weakness. Elsewhere, China traded mixed with the Hang Seng (+0.8%) buoyed by industrial and finance names while Shanghai Comp. (-0.6%) was pressured by oil names following the recent decline in the complex.

PBoC set CNY mid-point at 6.9120 (Prev. 6.9098) (Newswires)
PBoC skipped open market operations for a net weekly drain of CNY 160bln vs. net drain CNY 230bln in the week of September 24th

China Trade Balance USD (Sep) 31.69B vs. Exp. 19.4B (Prev. 27.91B, Rev. 27.89B) (Newswires)
China Trade Surplus with US (Sep) (USD) 34.13B (Prev. 31.05B) (A record high)

US Treasury Secretary Mnuchin said US is committed to fair trading agreement with China, fair and reciprocal trade deals. (Newswires)

China customs said the impact from US trade friction is "controllable” and added that foreign trade growth may slow on year in Q4. (Newswires)

China will not be named currency manipulator in Treasury's Semi-annual Currency Report next week. (Politico)

China receives around USD 13.2bln in orders for sale of USD denominated 5, 10 and 30yr bonds. (Newswires)

Japanese Economy Minister Motegi said they will continue to watch developments in global economy including trade policy. (Newswires)

UK

UK PM May briefed her inner cabinet on Thursday evening that a historic Brexit deal is close. An official close to Brexit talks said that May never brings the cabinet together to tell them what is going on, feels like the deal is practically done. She also said Brexit backstop talks are likely to continue until November. (Newswires) BBC's Laura Kuenssberg reported that no real progress was made at the cabinet meeting and no decisions have been made but discussions will continue. (Newswires)

Further reports suggested that UK PM May is facing the threat of Cabinet resignations after she accepted EU demands that there will be no time limit on her controversial Brexit backstop plan. At least three eurosceptic Cabinet ministers are said to be considering quitting over the latest concession, which appears to contradict Mrs May’s promise earlier this year that the backstop would expire “at the very latest by the end of December 2021”. (The Telegraph)

The BBC understands UK Trade Secretary Liam Fox, Environmental Secretary Michael Gove and Brexit Secretary Dominic Raab expressed concern about potential compromises with the EU over Brexit. (BBC)

A top DUP MP told Sky News that Conservatives may have to change leader to "heal wounds" with the DUP and ensure its confidence and supply agreement "stays in place", while DUP leader said PM May could not in good conscience recommend a deal which places a trade barrier within the UK. (Newswires)

EU

ECB won't come to Italy's rescue if government and banks run out of cash unless EU bailout in place, ECB Sources. (Newswires)

Italy's Senate voted to push balanced budget goal beyond 2021, approves budget deficit target. (Newswires)

FX

In FX markets, the greenback was little changed and pivoted on either side of 95.00, while GBP/USD moved sideways below 1.3250 and EUR/USD traded just above 1.1600 as the EUR/JPY pair tested 130.40 to the upside amid safe-haven outflow, subsequently pushing USD/JPY further above the 112.00 level. Elsewhere, AUD shrugged off worse-than-expected home loans data, which was followed by a mixed RBA financial stability review.

RBA Financial Stability Review noted the Australian economy is improving but housing market has slowed and added that trade tensions and slowdown in China could trigger global economic downturn. (Newswires)

Turkish officials expect the court to release Pastor Brunson on Friday, after NBC reported a secret agreement has been brokered to release Pastor Brunson, while the US State Department said it is not aware of any deal to secure the release of US Pastor Brunson. (Newswires)

Brazilian presidential candidate Haddad wants to use 10% of Brazil's FX reserves to finance wind and solar energy projects in the North-East. (Newswires)

CENTRAL BANKS

Turkish Central Bank Governor said the central bank will continue to use all available instruments in pursuit of price stability objectives and deterioration in pricing behaviour poses upside risk on inflation outlook despite domestic demand conditions. (Newswires)

ECB's Weidmann (Hawk) said lower growth rates in worlds economy are more a normalisation than a consequence of trade friction. (Newswires)

Fed's George (Non-voter, Hawk) says gradual rate hikes needed, pace and extent of hikes are a key part of the FOMC's deliberations; risks to US economy are balanced but inflation could rise over the next couple of years. (Newswires)

GEOPOLITICS

US Treasury Department is said to have sought meetings with South Korean banks regarding North Korea's sanctions. (Newswires)

COMMODITIES

Commodities were mixed as WTI and Brent nursed some losses with the former moving north of USD 71.50/bbl while the latter reclaimed USD 81/bbl to the upside as sentiment around the market took a turn for the better. Elsewhere, metals were mostly lower as gold unwound some risk premium, albeit still near two-month highs and copper bounced off lows seen during the mass sell-off.

US Gulf of Mexico oil producers shut in 40% of oil output ahead of hurricane Michael (prev. 42%), shut in 29% natural gas output (prev. 32%). There were sperate reports of US oil firms restoring operations in Gulf of Mexico. NHC said Tropical Storm Michael is losing Tropical characteristics (Newswires)

Ecuador Oil Minister said he expects crude output of 540k BPD in 2018 and 590k BPD in 2019; he supports the crude output hike by OPEC in December meeting prices are reasonable around USD 70-80/bbl.

US

Treasuries ended Thursday session in positive territory as equities extended their rout and CPI numbers missed expectations. The yield curve bull-flattened with short dated yields lower by c.4bps and long dated yields down by c.9bps at settlement. 2s30 5s30s were narrower by c.3bps.The US Treasury sold USD 15bln of 30-year bonds, stopping through by 0.9bps at a high yield of 3.344%. Demand for the auction was strong as indicated by the bid-to-cover which stood above recent averages. Directs were awarded the biggest share since April, indirects also took the largest portion since January whilst dealers were left with the smallest share since January.  * US T-note futures (Z8) settle 20+ ticks higher at 118-12+.

US President Trump said the Fed is out of control, is far too stringent and making a mistake. (Newswires)

Mexican Government said it will take necessary actions to protect exporters in the short term, adding it will use all mechanisms available under NAFTA and WTO to be totally excluded from Canada's safeguards. There were also reports that Mexico are said to plan to review Canada steel tariffs as a potential violation of NAFTA (Newswires)

US President Trump is mulling candidates who could replace Attorney General Sessions (WSJ)

US officials were told by Turkey that they have video and audio proof that journalist Khashoggi was killed in Saudi consulate, while US Senators pushed vote to block Saudi arms sale following the journalist disappearance. (Newswires)