• USD/TRY below 6 but choppy awaiting Pastor Brunson’s Constitutional Court appeal verdict
• Cable also volatile ahead of next week’s key Brexit summit, with big issues still to be resolved
• European equites tentative ahead of key US bank earnings
• Looking ahead, other highlights include, US Import/Export Prices, Uni. of Michigan, Fed’s Evans, Bostic and ECB’s Draghi

ASIA

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 (+0.2%) recuperated initial losses as the commodity names recovered, while Nikkei 225 (+0.46%) traded off lows as the Japanese currency showed some mild weakness. Elsewhere, China traded mixed with the Hang Seng (+2.1%) buoyed by industrial and finance names while Shanghai Comp. (+0.9%) 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)

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 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)

EU/UK/US

German Finance Minister Scholz says Italian politicians said they will respect EU rules, adding that one should take that at face value. Italy should be "careful" given its refinancing needs. (Newswires)

ECB's Draghi reiterates that Euro area economy is experiencing a broad based expansion, with underlying inflation expected to pick up towards the year end and increase gradually. (Newswires)

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)

There were reports that UK PM May was to make a public statement saying the UK will not agree to being permanently being trapped in a customs union; this has since been reported as false by UK PM May’s office. UK PM May’s Spokesperson then  said the PM will never agree to a Brexit backstop plan that will trap Britain in a customs union permanently, the backstop must be temporary. (Newswires)

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)

UK Conservative Commons leader Andrea Leadsom is preparing to resign if Theresa May compromises any further on her Brexit plans, according to The Independent. (The Independent)

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 Treasury Secretary Mnuchin says that he instructed PBOC Governor Yi Gang that any trade discussions between the US and China must involve talks on currency. (Newswires)

EQUITIES

Major European indices are in the green, albeit off best levels (Euro Stoxx 50 +0.3%) after bouncing back from yesterday’s global downturn; the SMI is out in front up by just under 1%, spurred on by the resolution of a Novartis (+1.7%) patent dispute.

Major sectors are all up, with consumer discretionary leading by just over 1% as well as financials and IT by over 0.6% indicating that market confidence is returning; further emphasised by the dip in gold.

In terms of individual equities there is continued support for Dialog Semiconductor (+4.3%) following yesterday’s news of a deal with Apple. Man Group is up by 3% following quarterly net inflows of USD 0.4bln. An upgrade to outperform at Credit Suisse for Zalando sees them up by 3.5%. Victrex are down 3.5% after being downgraded to underweight at Morgan Stanley.

FX

DXY - Very dull and rangy trade, with Usd/major pairings mostly going through the motions approaching the end of a relatively volatile week. Consequently, the index is straddling 95.000 and anchored near the lows in wake of softer than forecast US PPI and CPI reports, a drift back from multi-year peaks in Treasury yields, and yet more Fed critique from President Trump about the pace of policy normalisation.

GBP/TRY - Not necessarily the biggest outright movers, but certainly among the most choppy as Cable rallied to marginally fresh wtd highs just shy of 1.3260 on latest positive Brexit deal vibes (ostensibly) before hitting a brick wall and reversing sharply towards 1.3200. The swift price action and retreat may also be option related given mega expiry interest between 1.3235-50 (1.5 bn) for Monday when some have speculated that an agreement between the UK and EU could be reached, although this appears to be very doubtful with a few big issues still unresolved. Similarly, the Lira rebounded further through 6.0000 vs the Usd, and all the way to circa 5.8400 at one stage on a wave of expectation that the Turkish court will grant the release of US Pastor Brunson (latest appeal hearing now underway), but then retreated abruptly to around 5.9835 alongside a broader downturn in domestic stocks and bonds awaiting the verdict.

CAD/NZD/AUD/EUR/CHF/JPY - All narrowly mixed against the Greenback, with the Loonie firming up within a 1.3000-40 range and possibly getting drawn to a hefty 1 bn option expiry at the big figure. The Kiwi and Aud are both sitting a tad more comfortably above round numbers at 0.6500 and 0.7100 respectively, but still hampered by ongoing US-China trade strains that will hardly be helped by Chinese data overnight showing a bulging surplus and fresh record vs the US. The single currency remains elevated and has pivoted 1.1600 with some impetus via the Eur/Jpy cross following reports of leverage account short covering and a squeeze through 130.00 to nearly 130.50 at one stage. However, Eur/Usd may also be feeling the gravitation pull of option expiries with 1.3 bn running off from 1.1590-1.1600, ahead of 1 bn at 1.1550. The Franc is also restrained and tethered to 0.9900, while Usd/Jpy is close to the middle of 112.00-50 parameters.

SEK/NOK - The Scandi crowns continue to strengthen and outperform on Swedish and Norwegian inflation reports that will keep both the Norges Bank and Riksbank firmly on course to hike rates well before the ECB (and in the case of the latter that means further after September’s 25 bp tightening). Eur/Sek has now breached previous October lows to trade down at 10.3625 and Eur/Nok is back under 9.5000.

COMMODITIES

Gold has dropped by 0.2% today following a reduction in the risk sentiment as markets calm and traders begin to move out of the safe havens. The yellow metal is currently at just under USD 1220/oz, although this is still close to a 10 week high. Copper prices have benefited from data showing that China has imported a near record amount last month; similarly, iron ore prices to their highest levels in 4 months from high Chinese imports. Steel prices rose, resulting in the best week since mid-August as Tangshan steel mill output is halved from October 11th-18th.

WTI and Brent are both up for the day albeit of best levels with WTI under USD 71.50/bbl and USD 80.50/bbl; With the weekly change at -4% for both WTI and Brent. In terms of energy commentary, the IEA notes that global spare oil capacity is down to 2% of global demand, additionally noting that further falls are likely. Additionally, global oil supply is rapidly increasing, with production up by 2.6mln bpd compared to a year ago. With the weekly change at -4% for both WTI and Brent.

FIXED INCOME

Bunds have pared losses and relatively recovered well from a slightly deeper dip through 158.00 to 157.95 and recently printed a new Eurex high at 158.28 (-7 ticks vs -40 ticks at worst), but remain hostage to an extent to BTPs that are still above 120.00, albeit off 120.46 peaks. Hence, the rebound in Gilts is even more impressive as the 10 year debt future erased all of its losses and almost climbed the same margin above parity to 120.21 (+17 ticks vs -1/4 point soon after Liffe resumed) before running out of steam. Elsewhere, US Treasuries are back in bear-steepening mode after acknowledging rather than really taking on board the magnitude of Wall Street’s cumulative collapse on Wednesday and Thursday, or for that matter benign inflation inputs via PPI and CPI, as Fed rhetoric does not suggest any deviation from 2018 guidance and a final hike in December, unless Q4 data is dire of course.