• Major European indices are mostly higher, albeit off levels seen at the cash open. US equity futures extended losses in excess of 0.5%
• DXY is benefiting from the demise of most major rivals, as overall risk sentiment wobbles again after signs of a revival on Tuesday and overnight
• Looking ahead, highlights include US PMIs, BoC rate decisions, DoEs, a slew of central bank speakers and large cap earnings

ASIA

Asian equity markets eventually traded mostly higher on what was a turbulent session, following the dramatic rebound on Wall St where all majors finished negative albeit well off worst levels. ASX 200 (-0.2%) and Nikkei 225 (+0.4%) opened higher on early bargain hunting following their recent declines and as the aggressive recovery stateside reverberated in the region. However, both indices failed to sustain their gains as commodity-related sectors dragged on Australia with energy the underperforner after a near-5% slip in oil prices, while the Japanese benchmark was temperamental and made several attempts on the 22000 level to the downside. Elsewhere, Shanghai Comp. (+0.3%) and Hang Seng (-0.4%) conformed to the volatile tone and swung between gains and losses amid indecisiveness due to on-going trade concerns and further efforts by Chinese authorities including a respectable liquidity injection by the PBoC. Finally, 10yr JGBs were marginally higher as prices benefitted from the overnight volatility and with today’s BoJ Rinban operation heavily focused on the belly. 

PBoC injected CNY 150bln via 7-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.9357 (Prev. 6.9338)

China NDRC said it is to increase support to stabilize jobs in the region that are most affected by US-China trade dispute, while there were separate reports that some Shenzhen companies received government funds. (Newswires/China Securities Times)

EU/UK

UK PM May reportedly held a cabinet meeting that some noted as ‘impassioned’ while others described it to have been a row, in which several ministers insisted she negotiate a time limit to any Brexit backstop and reports noted increases the pressure to achieve a deal she can sell to her own party. (Guardian)

UK Cabinet papers revealed the next phase of Brexit planning in which the transition is to last for years and could be a long-running multi-year transition, while Northern Ireland is to be in a separate VAT area. (Times)

Italian Finance Minister Tria is seeking a way out of budget impasse and sees more prudence from cabinet; adding that he thinks Italy must be ready to respond to markets. Meanwhile, Deputy PM Salvini reiterated that Italy will not change its budget, and Italy will not leave the euro or the EU. (Newswires)

EU Council Head Tusk says there is no guarantee that a hard Irish border can be avoided; adding that Brexiteers are completely responsible for the border problem. (Newswires)

Italy Cabinet Undersecretary Giorgetti says IT/GE spread near 400bps would mean bank recap. (Newswires)

EU Markit Services Flash PMI (Oct) 53.3 vs. Exp. 54.5 (Prev. 54.7)

EU Markit Comp Flash PMI (Oct) 52.7 vs. Exp. 53.9 (Prev. 54.1)

EU Markit Manufacturing Flash PMI (Oct) 52.1 vs. Exp. 53.0 (Prev. 53.2)

German Markit Manufacturing Flash PMI (Oct) 52.3 vs. Exp. 53.4 (Prev. 53.7)

German Markit Services Flash PMI (Oct) 53.6 vs. Exp. 55.5 (Prev. 55.9)

Swedish Riksbank Rate -0.50% vs. Exp. -0.5% (Prev. -0.5%). The Riksbank stated that the forecast for the repo rate path is the same as in September and anticipated that the repo rate will be lifted by 25bps in either December or February. Floden and Ohlsson dissented against the decision to hold the repo rate unchanged and advocated to lift rates by 25bps.

Riksbank's Governor Ingves says that underlying inflation is a little weak, but price pressures are seen rising; he adds that sometime around year end is probably the time to hike rates. (Newswires)

US

US President Trump reportedly stepped up criticism of Fed Chairman Powell raising rates, while he also said it is too early to tell but that he maybe regrets appointing Powell. (WSJ)

US Secretary of State Pompeo said will revoke visas for those identified as responsible for killing journalist Khashoggi and that it would not be the last step but added shared strategic interests with Saudi Arabia remain, while Canadian Foreign Minister Freeland said to stay tuned regarding Canada's arms exports to Saudi Arabia. (Newswires)

EQUITIES

Major European indices are mostly higher, albeit off highs seen at the cash open as positive sentiment slowly fades away and US equity futures extended losses. The SMI (+0.5%) outperforms with Nestle (+1.0%) and Swiss Re (+0.8) lifting the index. The IT sector is under further pressure after yesterday's slump, amid uninspiring earnings from STMicroelectronics (-8.8%), which in turn is weighing on chip makers across the continent.

On the flip side, luxury names are lifted the on back of Kering (+7.5%) after reporting a beat on earnings aided significantly by Gucci sales, with other names such as LVMH (+1.3%) and Hermes (+2.0%) move in sympathy. Furthermore, Vinci (+3.5%) are higher following a 7% beat on their revenue growth, while Deutsche Bank (-3.7%) are in the red after cutting revenue guidance.

FX

EUR/GBP - Propping up the G10 pile, but for different reasons as the single currency breached technical support around 1.1430 vs the Usd and tripped stops below 1.1425 in wake of prelim Eurozone PMIs that fell short of expectations, and with the pan manufacturing survey particularly weak given sub-50 new orders. Meanwhile, Cable retreated further from 1.3000+ highs to trigger some chart-related offers around 1.2937 ahead of UK PM May’s 1922 showdown and ongoing Brexit uncertainty, which is keeping the Eur/Gbp cross above 0.8800.

SEK - Clawing back lost ground, largely due to the aforementioned Eur weakness, having weakened to circa 10.3900 and not far from heavy supply/resistance at 10.4000 following the latest Riksbank policy meeting, as guidance was maintained for a hike either in December or February next year. This, despite recent Swedish inflation data surprising to the upside and 2 hawkish dissenters calling for a 25 bp rise in the repo. However, the consensus remains for gradual normalisation and an expansionary stance to continue for an extended period even after the 1st tightening for years is delivered. Hence, Eur/Sek back down to 10.3300, or just under, and Eur/Nok following suit (sub-9.5000).

DXY - The broad Dollar and index are benefiting from the demise of most major rivals, as overall risk sentiment wobbles again after signs of a revival on Tuesday and overnight. The DXY is just off 96.341 highs, and finally breached a key level around 96.150 that has been capping rallies, with bulls now eyeing 96.402.

CAD - The Loonie continues to bounce off lows circa 1.3100 vs its US counterpart, even though oil prices have declined further, and the Cad’s relative resistance appears in large part down to overwhelming expectations that the BoC will deliver a 25 bp rate hike later today. 

AUD/NZD - The antipodean Dollars have both slipped back from overnight peaks, as the Yuans weaken and the aforementioned Chinese-led global stock market recovery wanes. Aud/Usd is back under 0.7100 and Nzd/Usd pivoting 0.6550, with the Kiwi now looking towards NZ trade data for some independent impetus.

JPY/CHF - Perversely perhaps, the 2 classic safe-havens are not performing that well, as Usd/Jpy hovers above 112.50 and the Franc trades either side of 0.9950, albeit the latter firmer vs the Eur (cross down through 1.1400).

COMMODITIES

Gold is moving sideways, off yesterday's highs as the yellow metal detaches itself from USD action to moves in lockstep with risk sentiment, as markets are focused on the Italian budget, trade tensions and concerns over US earnings. Copper prices fell slightly (-0.2%), which could be related to doubts from investors regarding China’s plans to invigorate their economy.

The oil market is mixed with WTI (Unch) little changed and Brent (-0.8%) in the red, as the upcoming Iranian sanctions move back into focus after Saudi Arabia reassured markets that oil supply will meet demand yesterday. Furthermore, the weekly API's printed a larger-than-expected build of 9.88mln barrels against an expected 3.70mln barrels, which provided further pressure to the complex. Traders will be keeping an eye on the weekly DoE crude inventory numbers released later today with focus on US oil production.

US API Weekly Crude Stocks (19 Oct) +9.88mln vs. Exp. +3.7mln (Prev. -2.13mln). (Newswires)

FIXED INCOME

Disappointing prelim Eurozone PMIs and a less hawkish than some anticipated Riksbank have given Bunds and Gilts a nudge to fresh intraday highs at 160.19 and 122.30 respectively, +40 and +39 ticks vs previous Eurex and Liffe closes, while BTPs have whittled away gains from 51 ticks to single digits, and actually lost a net 20 ticks at one stage (119.93 session low), as the Italian Government continues to stick to a rigid line on the 2019 deficit. Some additional impetus from a UK perspective via the slowdown in BBA mortgage apps, but not a lot as this release is far from top tier. Rather, it’s another stock wobble and dip in broad risk sentiment with crude prices falling further that has underpinned safe-haven debt with turnover picking up and US Treasuries now playing catch-up amidst more bull-flattening. Little sign of auction concession, so far, but that could manifest shortly before the German Bobl and US 5 year offering later.