• Major European bourses are mixed with the SMI (+0.5%) outperforming peers
• Greenback remains relatively evenly split vs G10 counterparts with its Dollar peers still outperforming and preventing the index from staging a more concerted attempt to test recent peaks
• Looking ahead, highlights include 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. (+1.0%) and Hang Seng (-0.9%) 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.

There were 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 Central Bank adviser says China should use its FX reserves to stabilise the yuan exchange rate when needed. (Newswires)

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

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)

UK Chancellor Hammond says that a no-deal Brexit could require fiscal stimulus. (Newswires)

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

Italy are not planning to alter their budget as of now, as according to Siri speaking to Corriere. (Corriere)

German state CPIs Y/Y showed an uptick from the prior with an average of around 0.2 ppts. The national CPIs due later today is expected at 2.4% from 2.3% previously, but the bias against consensus looks firmly towards 2.5%.

EU GDP Flash Prelim YY Q3 1.7% vs. Exp. 1.8% (Prev. 2.1%, Rev. 2.2%) (Newswires)
EU GDP Flash Prelim QQ Q3 0.2% vs. Exp. 0.4% (Prev. 0.4%)

Italian GDP Y/Y Q2 0.8% vs. Exp. 0.9% (Prev. 1.2%) (Newswires)
Italian GDP Q/Q Q2 0.0% vs. Exp. 0.1% (Prev. 0.2%)

CENTRAL BANKS

Norges Bank's Nicolaisen reiterates view of seeing gradual rate hikes. Also says that he sees the key policy rate is expected to be at 2%, or marginally higher by the end of 2021. (Newswires)

EQUITIES

Major European bourses are mixed with the SMI (+0.5%) out in front despite being weighed on heavily by Geberit (-9.0%) following their earnings; and the DAX (-0.7%) lagging with Lufthansa (-8.5%) dragging it down. Sectors began in the green, but have since fallen to being largely in the red with industrials lagging (-0.7%), although energy is still the outperforming sector (+0.8%).  

In terms of individual equities Ocado (+3.0%) is higher following a master services agreement with Kroger, while BP (+3.3%) rose after reporting earnings higher than their previous, notably revenue is up by USD 20bln. Elsewhere, Jyske Bank (-10.0%) are at the bottom of the Stoxx 600 after reporting a miss on earnings.

FX

DXY - The Greenback remains relatively evenly split vs G10 counterparts, with its Dollar peers still outperforming and preventing the index from staging a more concerted attempt to test recent peaks ahead of the ytd high and psychological 97.000 marker. However, the DXY is nudging closer at 96.847 vs 96.860 and 96.984 respectively as other majors succumb to more downside pressure.

AUD/NZD/CAD - As noted above, the non-US Dollars are bucking the overall trend again, and deriving support from another resilient performance across Asia-Pacific bourses overnight given Wall Street’s retreat from early recovery highs. The Aud in particular may also be gleaning encouragement from US President Trump’s talk about a decent trade agreement with China and latest Yuan stabilisation talk from a PBoC advisor that appears to be keeping the Cny and Cnh just off 7.0000 vs the Usd. However, Aud/Usd is still struggling to climb above 0.7100, while the Kiwi looks equally toppy over 0.6550 and the Loonie seems unable to breach resistance at 1.3100.

JPY/GBP/EUR/CHF - All victims of the general Buck bid into month end, and their own downfalls to an extent, as Usd/Jpy climbs through recent highs and closer to 113.00, with a 50% Fib at 112.97 just ahead of the big figure. Cable has failed to maintain recovery gains above 1.2800 and is now below 1.2750 , with tech support seen down at 1.2724, while Eur/Usd has retreated further from 1.1400 to 1.1350 amidst a stagflationary mix of Eurozone data and surveys. The Franc has extended losses beyond parity and hardly helped by a disappointing Kof indicator.

NOK - Pared data-related losses after misses on Norwegian retail sales and credit with the aid of Norges Bank rhetoric reaffirming more gradual policy tightening and the likelihood of the depo rate reaching 2% or just over by 2021. Eur/Nok now back towards the middle of a 9.5210-5525 range.  

COMMODITIES

Commodities are mostly lower with WTI and Brent retreating further from USD 67/bbl and USD 77/bbl respectively, on speculation that an escalating trade war between the world’s two largest economies will dampen global growth at a time when US crude inventories are growing. Meanwhile, IEA’s Chief Birol said he sees the oil market tightening next month, while adding that oil demand faces downward pressure in 2019. Traders will be keeping an eye on the weekly API crude inventories released later today for a sign of rising inventories.

Elsewhere, gold is softer as the yellow metal mirrors dollar action, while copper and Shanghai rebar steel dipped as market sentiment was dampened by the prospects of a fresh round of US tariffs on USD 257bln of Chinese goods.

Russian Energy Minister Novak says that prohibitive Russia oil duties are a last resort move (TASS)

US official says that the country may double gas production or export capacity (Newswires)

IEA Chief Birol says many nations' current account deficits have been impacted by higher oil prices, adds US becoming undisputed global leader of oil and gas production. (Newswires)

FIXED INCOME

Bunds and Gilts have rebounded firmly from earlier lows amidst a broad losses of momentum in EU equities and an even steeper reversal in Italian bonds in wake of GDP data showing now q/q growth in Q3 and auctions at multi-year high average yields. The 10 year benchmark has been down to 121.25 vs 122.90 at the early intraday high, with its core peers now 9 ticks up and just 2 ticks adrift compared to 39 and 27 ticks underwater on Eurex and Liffe respectively at one stage. Elsewhere, US Treasuries are largely side-lined, but making token and shallower moves in line with their mainstream equivalents, with the curve steeper and futures still nearer overnight session troughs.