• Asian equity markets partially shrugged-off the tech-led losses on Wall St and traded mostly higher as focus shifted on earnings updates
• In FX markets, most major pairs were quiet as the DXY consolidated following yesterday’s pressure in which it just about held above 95.00
• European Council President Tusk said Brexit is more complicated than expected and that EU must prepare for no-deal scenario
• Looking ahead, highlights include UK labour market report, German ZEW, US industrial production, supply from Germany and a slew of large cap earnings

ASIA

Asian equity markets partially shrugged-off the tech-led losses on Wall St and traded mostly higher as focus shifted on earnings updates. ASX 200 (+0.5%) was led by mining names after the recent strength in gold prices and with Rio Tinto shares supported following its Q3 production update in which iron ore shipments declined Y/Y but the Co. affirmed FY18 shipments at the upper end of its guidance range. Elsewhere, Nikkei 225 (+0.6%) and Japanese exporters coat-tailed on favourable currency moves, while Shanghai Comp. (-0.2%) and Hang Seng (-0.4%) initially conformed to the upbeat tone as participants brushed aside continued PBoC liquidity inaction and took encouragement from the numerous corporate positive profit alerts, although Chinese bourses then failed to sustain the gains and gradually slipped into negative territory. Finally, 10yr JGBs were lower as they tracked weakness in T-notes, with prices also subdued by the improved risk tone in Japan and reduced demand at the 5yr JGB auction.

PBoC skipped open market operations again for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9119 (Prev. 6.9154)

Chinese CPI (Sep) Y/Y 2.5% vs. Exp. 2.5% (Prev. 2.3%). (Newswires)
Chinese PPI (Sep) Y/Y 3.6% vs. Exp. 3.5% (Prev. 4.1%)
 

UK/EU

European Council President Tusk said Brexit is more complicated than expected and that EU must prepare for no-deal scenario. Tusk added that a no-deal Brexit more likely than it was before and stated the fact that we are preparing for a no-deal scenario must not, under any circumstances, lead us away from making every effort to reach the best agreement possible, for all sides. Furthermore, Tusk also noted that he invited UK PM May to address remaining EU 27 member states on Wednesday night. (Newswires)

UK Leader of the Commons, Andrea Leadsom hosted a meeting in her office last night with 8 ministers who share concerns over PM May’s Brexit plans. The Telegraph suggests that the scale and the seniority of the meeting is likely to be of concern for Downing Street. (Telegraph)

UK Chancellor Hammond will need GBP 19bln from higher taxes, extra borrowing or faster-than-expected growth if this month’s budget is to fulfil the prime minister’s promises to end austerity and boost NHS spending, according to the IFS. (Guardian)

ECB Vice President de Guindos said Eurozone should continue to grow at an above-trend rate and noted that core inflation is moderate but should rise. Furthermore, he commented that risks include oil prices and the uncertainty from populism, while he added that Spain's economic recovery may have peaked. (Newswires)

Italy's PM Conte said Italy's cabinet approved 2019 budget and that the budget draft is to be sent to the Commission, while he added that the budget keeps the government's promises and keeps public accounts in order. Elsewhere, Italy's Economy Minister Tria said the budget measures are all fully covered and budget allows early retirement as well as basic income tools, while the League said there are no tax hikes in budget except on banks and insurers. (Newswires)

The Dutch government will lower corporation tax to 20.5% from 25%. (Newswires)
 

FX

In FX markets, most major pairs were quiet as the DXY consolidated following yesterday’s pressure in which it just about held above 95.00, while major counterparts EUR/USD and GBP/USD traded rangebound at the 1.1500 and 1.3100 handles respectively. As such, the Asia-Pac currencies took much of the attention overnight in which USD/JPY briefly reclaimed the 112.00 level on safe-haven outflows, while antipodeans were mixed with AUD unmoved after an unsurprising RBA minutes which mostly kept to reiterations and with NZD/USD struggling to hold on to the gains seen in the aftermath of firmer than expected CPI data from New Zealand which edged closer towards the 2% inflation target mid-point.

RBA minutes from October 2nd meeting reiterated that the board agreed there was no strong case for near-term rate move and that the next move is likely to be upwards. RBA minutes also noted the board agreed keeping rates steady is a source of stability and confidence, while the board was noted to be uncertain regarding consumption due to subdued income growth and decline in home prices. (Newswires)

New Zealand CPI (Q2) Q/Q 0.9% vs. Exp. 0.7% (Prev. 0.4%). (Newswires)
New Zealand CPI (Q2) Y/Y 1.9% vs. Exp. 1.7% (Prev. 1.5%)
RBNZ Sectoral Factor Model Inflation Gauge (Q3) 1.7% (Prev. 1.7%)

COMMODITIES

Commodities were mixed in which WTI crude futures traded flat as resistance at USD 72.00/bbl capped upside. Elsewhere, gold was also contained as the greenback consolidated overnight, while copper underperformed after the deterioration of sentiment in late US trade and as China failed to sustain the early positive momentum.

Goldman Sachs revised 3-month gold forecasts tp USD 1250/ounce (Prev. USD 1350), 6-month revised to USD 1300/ounce (Prev. USD 1375) and 12-month revised to USD 1325/ounce (Prev. 1450). (Newswires)

World Steel Association sees global steel demand to increase 3.9% to around 1.66bln tons in 2018 and global steel demand to increase 1.4% to around 1.68bln tons in 2019, while it forecasts China 2018 steel demand to increase 6% to 781mln tons in 2018 and China steel demand to be flat in 2019. (Newswires)

GEOPOLITICAL

Saudi Arabia are to say journalist Khashoggi died from a botched interrogation and that the intent was to abduct him from Turkey. (CNN) In related news, a source stated that Turkish prosecutors found evidence of killing at the Saudi consulate. (Al Jazeera)
 

US

Treasuries were lower on Monday though action remained in a tight range, with mixed retail sales only giving the complex a temporary boost. Less volatility also contributed to yields moving upwards; yields across the curve were higher by c.2bps across the curve at settlement. 10s30s and 5s30s were wider by c.1bps. US T-note futures (Z8) settled 6 ticks.

US President Trump lawyer said the judge dismissed Stormy Daniels lawsuit, while the judge reportedly stated Trump is entitled to legal fees from Stormy Daniels following the case dismissal. (Newswires)