• Asia-Pac bourses saw hefty selling as the stock market bloodbath rolled over from US where the S&P 500 and DJIA turned negative YTD
• UK PM May is to instigate a full-scale no-deal Brexit planning in 3 weeks with a raft of legislation to prepare the UK for a potentially chaotic departure
• Overnight FX price action was predominantly a slight pull-back of the prior day’s risk-averse driven moves in which the DXY marginally pared the recent safe-haven flows
• Looking ahead, highlights include ECB, Norges, CBRT rate decisions, US durable goods, weekly jobs, a slew of central bank speakers and large cap earnings

ASIA

Asia-Pac bourses saw hefty selling as the stock market bloodbath rolled over from US where the S&P 500 and DJIA turned negative YTD, while the Nasdaq posted its worst performance since 2011 and slipped into correction territory amid an aggressive sell-off in tech. As such, ASX 200 (-2.4%) and Nikkei 225 (-3.3%) slumped from the open amid heavy pressure in tech and with losses in Japan magnified by a firmer currency, while corporate updates failed to provide any reprieve as Sharp shares slumped following a cut in its revenue forecasts. Shanghai Comp. (-1.4%) and Hang Seng (-1.8%) also saw firm losses with Cathay Pacific shares descending on reports of a data breach that could affect around 9.4mln passengers, although losses in the mainland were to a somewhat lesser extent amid further liquidity efforts by the PBoC and continued supportive rhetoric by Chinese agencies. Finally, 10yr JGBs were higher as they tracked upside in T-notes and with demand underpinned as the stock sell-off spurred a flight to quality.

PBoC injected CNY 100bln via 7-day reverse repos. (Newswires)
PBoC set CNY mid-point at 6.9409 (Prev. 6.9357)

Chinese President Xi said China is seeking ways to support small companies, while CBIRC said it will support insurers' investment in listed companies. Furthermore, banks in multiple Chinese cities have lowered mortgage rates in what was the first coordinated move since last year, with the rates said to be mostly for first-time buyers. (Newswires)
 

UK/EU

UK PM May is to instigate a full-scale no-deal Brexit planning in 3 weeks with a raft of legislation to prepare the UK for a potentially chaotic departure. In Parliament, routine business will be essentially suspended and replaced with a rolling programme of no-deal Brexit legislation. (The Times)

UK PM May's Brexit deal with the EU will be almost impossible to get out of, the Attorney General has warned amid mounting Cabinet opposition. Geoffrey Cox has reportedly made clear that ministers will not be able to change the customs backstop once the UK is signed up to it. (Telegraph)

Several UK Conservative party members that were present at the 1922 committee meeting on Wednesday evening, said the party mood is to support PM May rather than vent private frustrations. (Newswires)

EU document sees potential financial stability risk if UK firms are barred from clearing EU business in the event of a no-deal Brexit. (Newswires)

Italy's Economy Minister Tria said the government budget is correct and sees no reason to present EU with a new one, while he commented that he was surprised by the EU rejection of the budget and some of the analysis was "superficial" but added that if tomorrow we see a repeat of 2008 crisis, the budget will be changed. Furthermore, Tria noted that cannot keep Italy/Germany spread at 320bp for long because of the impact it would have on the weakest part of the banking system. (Newswires)
 

FX

Overnight FX price action was predominantly a slight pull-back of the prior day’s risk-averse driven moves in which the DXY marginally pared the recent safe-haven flows which helped EUR/USD reclaim the 1.1400 handle, while GBP/USD sat below 1.2900 amid the continued lack of Brexit-related progress. Elsewhere, USD/JPY initially extended on its retreat to briefly below 112.00 where it found support amid touted selling fatigue and Gotobi demand, while antipodeans also attempted to partially nurse recent losses.
 

COMMODITIES

Commodities trade reflected the risk-averse tone in which WTI crude futures held near the prior day’s lows and in proximity to retest USD 66.00/bbl to the downside. Copper prices extended on losses with demand subdued by the widespread stock sell-off, while gold bucked the trend with the precious metal underpinned by safe-haven demand.
 

US

The bias was towards lower yields as equities saw another red day; although yields fell by between 2-6bps across the curve, major curve spreads were mixed, and with bull-steepening observed. The Treasury 5-year auction saw a tail of 0.6bps, with some desks noting that the lack of concession and the larger auction size was a negative. The internals were grim, with dealer participation rising sharply, and direct bidder participation collapsing – similar to Tuesday’s auction of 2-year paper. US T-note futures (Z8) settle 11+ ticks higher at 118-20.

Fed's Beige Book stated that US manufacturers reported higher prices as tariffs pushed up the costs of raw materials and that consumer spending increased at a modest pace, while inflation ranged from modest to moderate. Several Fed districts also reported that firms faced rising materials and shipping costs, as well as uncertainties over trade and difficulty finding qualified workers. Furthermore, the Beige Book noted the US economy expanded and that most districts reported modest to moderate growth. (Newswires)

Fed's Mester (Voter, Hawk) said a prolonged market downturn and build up in risks would affect US economic data and added she is not adjusting her policy stance based on the recent market drop. Furthermore, Mester said inflation expectations have been very stable and that the Fed will not overreact to temporary moves in inflation, while she also suggested Fed is getting closer to "neutral" policy and are more sensitive to incoming data. (Newswires)

Fed's Bostic (Voter, dove) said the Fed is of the mind to let the economy stand on its own and that the US economy is chugging along quite well. (Newswires)