• Asian equity markets were mostly higher as the region aggressively shrugged-off the weak lead from Wall Street.
• In FX markets, the DXY held near the prior day’s best levels despite attempts by its major counterparts to nurse recent losses.
• Looking ahead, highlights include German state, national CPIs and unemployment rate, EZ Q3 flash GDP, weekly API crude inventory stocks, ECB’s Praet and Lautenschlaeger.

ASIA

Asian equity markets were mostly higher as the region aggressively shrugged-off the weak lead from Wall Street, where stocks extended on losses due to renewed tariff concerns and in which the major US indices were momentarily all in correction territory. ASX 200 (+1.3%) and Nikkei 225 (+1.5%) both pared opening losses as a rebound in tech and resilience in Australia’s top-weighted financial sector led the advances, while the Japanese benchmark and its exporters cheered the favourable currency moves. Elsewhere, Shanghai Comp. (+1.3%) and Hang Seng (-0.1%) both initially lagged following recent reports that suggested US is planning to announce further tariffs on China if talks between US President Trump and Chinese President Xi fail, while the upcoming deluge of blue-chip earnings and continued liquidity drain by the PBoC added to the cautious tone. However, Chinese markets gradually recovered amid continued supportive intentions by China’s authorities and optimism by US President Trump who was said to predict a great deal with China on trade. Finally, 10yr JGBs were softer amid the improved risk tone but with losses stemmed by the BoJ’s presence in the market for JPY 880bln in JGBs, while the central bank also kicks off its latest 2-day policy meeting.

PBoC skipped open market operations for a net daily drain of CNY 120bln. (Newswires)
PBoC set CNY mid-point at 6.9574 (Prev. 6.9377); weakest setting since May 2008.

US is said to plan the next China tariffs if talks between US President Trump and Chinese President Xi fail, with an additional USD 257bln of trade targeted on the new US list according to sources. However, there were later unconfirmed Twitter reports that the White House was unaware of any new developments related to tariffs on China. Furthermore, US President Trump is said to predict a great deal with China on trade. (Newswires/Twitter)

China Securities Regulatory Commission said will encourage value investment in stock market and repurchases by companies, while it will also guide more long-term capital into the market. (Newswires)

Japanese Economy Minister Motegi said the TPP-11 trade pact will take effect as soon as year-end or early next year at the latest. (Newswires)
 

UK/EU

UK Chancellor Hammond said the higher rate threshold for income tax will increase to GBP 50,000 and that tax-free allowance for income will increase to GBP 12,500 in April 2020, while he also announced an increase in remote gaming duty on games of chance by 21% and will freeze short-haul air passenger duty but increase other air passenger duty in line with inflation. (Newswires)

UK DMO cut 2018/2019 gilt issuance remit by GBP 8.5bln to GBP 97.5bln vs Exp. GBP 101.0bln (Prev. GBP 106bln). Furthermore, it plans to reduce net treasury bill sales by GBP 4bln in 2018/2019 vs. Exp. no change, while projection shows 2019/20 gross financing requirement of GBP 132.7bln (March projection GBP 147.4bln). (Newswires).

UK MPs are to debate the Budget later with some Labour MPs dismissing the government’s claim to end austerity. (BBC)

EU pledged that EU groups will temporarily have access to UK derivative clearing services even if sides fail to secure a Brexit agreement, according to reports in FT citing European Commission Vice-President Dombrovskis. (Newswires)

FX

In FX markets, the DXY held near the prior day’s best levels despite attempts by its major counterparts to nurse recent losses, with EUR/USD remaining below 1.1400 and GBP/USD just about reclaiming the 1.2800 handle to the upside on a partial recovery from the post-budget indecision and lost ground against the greenback. Elsewhere, the recovery in stocks coupled with Gotobi demand spurred outflows from JPY, while antipodeans outperformed due to their high-beta status amid the improvement in risk tone and as CNY briefly recovered from the weakest reference rate setting since May 2008.

COMMODITIES

Commodities were mostly rangebound overnight and head into the European open relatively unchanged, although WTI crude futures recovered from early pressure and reclaimed the USD 67.00/bbl amid a turnaround in risk sentiment. Elsewhere, gold was subdued due to its safe-haven status and as the greenback remained firm, while copper prices were lacklustre and spent most the session nursing the prior day’s losses.

IEA Chief Birol said oil demand faces downward pressure I 2019 from trade dispute weighing on global economy and amid EM currency pressures, while Birol also commented that the US is becoming undisputed global leader of oil and gas production. (Newswires)
 

US

US President Trump said he could see a trade deal with Brazil occurring and that he probably will respond to some of Special Counsel Mueller’s questions. (Fox News)

US President Trump attorney Giuliani said Trump might answer questions from Special Counsel Mueller after the mid-term elections, if a broader deal can be reached. (Newswires)