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 (+0.6%) 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 (+1.3%) and Japanese exporters coat-tailed on favourable currency moves, while Shanghai Comp. (-0.9 %) and Hang Seng (+0.1%) 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%)
Chinese PPI (Sep) Y/Y 3.6% vs. Exp. 3.5% (Prev. 4.1%)

EU/UK/US

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)

Austrian EU minister says that Brexit negotiation dynamics are going in the right direction, but not enough for a compromise yet. (Newswires)

French Government is confident a Brexit deal can be reached but not on Wednesday night, adding that time is running out. (Newswires)

German EU minister Roth says the EU has gone a long way towards the UK's position on Brexit; saying that we need a watertight Irish backstop. (Newswires). German government official says they see Germany as well equipped for all Brexit scenarios; also adds that a Brexit agreement is ruled out without a solution for the Irish border. (Newswires)

UK Cabinet Ministers should pressure UK PM May to abandon her Chequers plan or Tory Eurosceptic MPs will threaten a no confidence vote within days, according to the Telegraph. (Newswires)

According to a Senior EU official having a Brexit summit in November is not a given; this weeks’ summit will decide whether there is enough progress to call a summit. With the EU insisting that the economic section of PM May’s Chequers plan will not work. (Newswires)

EU's Trade Commissioner Malmstrom says if US imposes 25% tariffs, the EU must react, adding that they are making efforts not to lose time in trade talks but do not want a deadline. (Newswires)

Italian Government confirmed 2.4% deficit/GDP target for 2019 and 1.2% economic growth forecast for 2018. Parliament watchdog did not validate economic forecasts. (Newswires)

Italian Deputy DI Maio says the Italian bond yield spread is a temporary situation; it is not supposed to remain like this. (Newswires)

Italian PM Conte says that they are proud of the budget and they hope for a positive dialogue with Brussels. (Newswires)

Italian Lega Economic adviser Borghi states that Italy are open to compromise. (Newswires)

EU Commission Head Juncker states that the Eurozone would rebel if the EU approves the Italian budget. (Newswires)

EQUITIES

Most major European indices (ex-FTSE 100) are in the green, with Italy’s FTSE MIB (+1.1%) outperforming its peers amid signals the Italian government is working together after the budget was approved by Parliament. Meanwhile, the UK benchmark is pressured by a firmer currency along with heavy-weight mining names following price action in the complex. Sectors are mixed, with utilities names outperforming while energy names lag given the recent slump in oil prices.

In terms of individual stocks, Volvo shares fell over 5% after the detection of premature degradation of emission control components. On the flip side, Drax Group are up by over 4.5% after the company acquired a UK power generation portfolio with a proposed deal for GBP 702mln, while Altice share rose 5% following commentary that Co. has Mirova, Macquaries and KKR as frontrunners for a fibre JV.

FX

NZD/GBP

The Kiwi has been boosted by stronger than expected NZ CPI data overnight, and almost rallied to 0.6600 vs the Usd, while the Pound derived enough momentum from higher than forecast UK average earnings to breach 1.3200, albeit briefly amidst ongoing Brexit fall-out from the failure to clinch an agreement in time for this week’s EU summit that in turn was a prerequisite for another one in November to finalise a withdrawal deal.

CAD/EUR/AUD

All narrowly mixed vs the Greenback, as the DXY continues to pivot 95.000, with the Loonie rebounding from recent 1.3000+ lows after a somewhat mixed BoC business survey on Monday (are rather redundant given that it was conducted pre-USMCA), while the single currency stalled around 1.1600 again and hampered by downbeat ZEW investor sentiment readings. Eur/Usd is just holding above 1.1565 lows, but could be drawn towards hefty option expiries at the 1.1550 strike (1.3 bn ahead of the NY cut). Elsewhere, the Aud did not get any independent support from RBA minutes largely sticking to a neutral stance, but has been caught in the cross-fire from relative Nzd outperformance as that pairing retreats through 1.0900 and 1.0850, plus ‘strong’ technical support between 1.0860-35 along the way.

JPY/CHF   

A reversal in fortunes for the safe-havens as Asia-Pac stocks put in a relatively resilient performance after recent heavy declines and with Usd/Jpy rebounding off a Fib (111.60) to trade back over 112.00, albeit now running in to decent supply said to be layered all the way up to 112.50. Note also, some big expiry interest containing the pair, with 3.1 bn from 111.60-75 and 1.3 bn at 112.50-65. The Franc has retreated from just shy of 0.9850 to meander within a 0.9900-0.9865 range.

FIXED INCOME

A relatively downbeat ZEW survey nudged Bunds just over parity to a new 158.61 Eurex peak (+2 ticks vs -1/4 point at worst), and appears to be protecting the core Eurozone debt future from further outperformance at the margins, as Italian BTPs continue to squeeze higher. Indeed, following pretty positive comments from Eurogroup head Centeno who stated that Italy does not pose a risk, the 10 year bond has rallied over 121.00, albeit belatedly, while Portuguese paper extends its post-S&P outlook upgrade ascent. However, Gilts and US Treasuries remain close to their lows post-UK data and pre-IP respectively.

COMMODITIES

WTI and Brent are both lower by over 0.5% with the prices approaching USD 71.00/bbl and USD 81.00/bbl to the downside respectively in anticipation of an increase in U.S inventories, where the EIA noted shale oil output is expected to rise to a record 7.7mln BPD in November. Traders will be keeping an eye on the weekly API crude inventory data released later today and any developments in Saudi in regards to the missing journalist.

Gold is marginally higher in a continuation of market risk aversion as investors seek the yellow metal; with prices pivoting near two-and-a-half month highs. Elsewhere, copper slid 1.5% with the red metal facing its biggest one-day loss in over a week as escalating US-Sino trade tensions weighed on sentiment and demand outlook. Meanwhile, steel demand forecasts from WorldSteel have doubled for both 2018 and 2019, although trade tensions mean that industry risks remain. Finally, Chinese rebar futures pulled back from near-four-week highs, while analysts noted that steel prices in China will remain supported by the country’s resolve to reduce excess and outdated capacity.