• Asian stocks were broadly negative as early attempts to nurse the prior day’s sell-off and replicate the rebound seen on Wall St, were thwarted
• Brexit talks are on hold as UK PM May's team cannot agree a way forward on how to proceed with negotiations, according to sources
• FX markets initially struggled for direction amid a lack of key data releases which kept the DXY near the prior day’s best levels
• Looking ahead, highlights include the Russian rate decisions, US GDP, PCE Prices, Baker Hughes, S&P on Italy, Fed’s Bostic, ECB’s Draghi, Coeure and a slew of speakers

ASIA

Asian stocks were broadly negative as early attempts to nurse the prior day’s sell-off and replicate the rebound seen on Wall St, were thwarted amid Amazon revenue disappointment which weighed across equity futures. ASX 200 (-0.2%) and Nikkei 225 (-0.3%) failed to hold on to opening gains as the initial tech-led bounce back in Australia was overshadowed by weakness in gold and energy-related stocks, while the Japanese benchmark gradually deteriorated with earnings dominating news flow. Elsewhere, Shanghai Comp. (-0.6%) and Hang Seng (-1.5%) both conformed to downbeat tone, although the mainland briefly outperformed after this week’s substantial liquidity injection and with China also said to be considering additional tax and fee reductions including a VAT adjustment. Finally, 10yr JGBs eventually traded higher amid the widespread risk-averse tone in the region and with BoJ’s present in the market for JPY 1.1tln in 1yr-10yr JGBs.

PBoC skipped open market operations for a net weekly injection of CNY 460bln vs. Prev. CNY 30bln injection W/W. (Newswires)
PBoC set CNY mid-point at 6.9510 (Prev. 6.9409)

Japanese Tokyo CPI (Oct) Y/Y 1.5% vs. Exp. 1.5% (Prev. 1.3%). (Newswires)
Japanese Tokyo CPI Ex. Fresh Food (Oct) Y/Y 1.0% vs. Exp. 1.0% (Prev. 1.0%)
Japanese Tokyo CPI Ex. Fresh Food & Energy (Oct) Y/Y 0.6% vs. Exp. 0.7% (Prev. 0.7%)
 

UK/EU

Brexit talks are on hold as UK PM May's team cannot agree a way forward on how to proceed with negotiations, according to sources. As such, it is almost certain that there will be no new proposals before Monday’s budget statement. (Newswires)  

UK’s NIESR states that a no deal Brexit could reduce UK growth by 1.6 points in 2019. (Newswires)

ECB's Villeroy said ECB is increasingly confident in the inflation path and that the question of TLROs will need to be considered, while there were separate source reports that the ECB is looking to distribute large PSPP reinvestments over a longer period from next year. (Newswires)

Italy's Economy Minister Tria said budget plan is not a threat to the Eurozone or to the stability of our European partners and that there is no way Italy wants to leave the euro, while Italy's EU Minister Savona commented that if Italian/German bond yields rises and nobody intervenes then banks could be put in a difficult situation. (Newswires)

FX

FX markets initially struggled for direction amid a lack of key data releases which kept the DXY near the prior day’s best levels, while its major counterparts were subdued with EUR/USD at the 1.1300 handle and in which GBP/USD languished near 1.2800 amid continued Brexit blues with talks said to be on hold due to disagreement within UK PM May's team. Elsewhere, antipodeans were pressured following a weaker reference rate by the PBoC which set the fix beyond 6.9500 for the first time since early January 2017, and with the selling in high-beta currencies exacerbated as the risk tone further deteriorated which subsequently spurred flows into the JPY.

COMMODITIES

Commodities traded subdued with WTI crude futures back below the USD 67.00/bbl, as the rebound in oil prices and risk sentiment stalled overnight. Elsewhere, the negative tone across Asia bourses also weighed on copper prices, while gold was kept range-bound with safe-haven demand for the precious metal counterbalanced as the greenback remained firm.
 

US

Treasuries remained marginally lower on Thursday, moving in opposite direction to equities which strongly rebounded from yesterday’s sell-off. The complex shrugged off solid US data including durables goods and pending home sales; most of the action was in the belly of the curve were yields were higher by just over 1bps at settlement. 2s5s were wider by c.1bps whilst 5s30s were narrower by c.2bps. The US Treasury sold USD 31bln of 7-year notes, tailing by 0.5bps; demand for the auction was soft with the bid-to-cover coming in at 2.39x, slightly below recent averages but highest since January. Directs took a portion less than half recent averages and the lowest since 2011 and indirects were awarded the biggest slice of the auction together securing ~70%; dealers were left with the remaining ~30%, slightly above recent averages. US T-note futures (Z8) settled down 3 ticks at 118-17.

Fed Vice Chair Clarida (Voter) said some further rate hikes are warranted, while he sees current policy as accommodative and higher rates will be appropriate. (Newswires)

Fed's Mester (Voter, Hawk) said US policy remains accommodative and need to raise rates into neutral territory. Mester also said she expects further gradual US rate hikes, while she added the Fed is nearing end of extraordinary policy and is close to normal. (Newswires)