• Asian equity markets traded positive as the region sustained the momentum from Wall St where all majors finished with firms gains
• The USD took a breather from recent gains with the DXY flat around the 97.00 level after it hit the highest since June last year amid the continued rout in EUR/USD and GBP/USD
• Looking ahead, highlights include EZ CPI, US ADP, Canadian GDP, Chicago PMI, DoEs, a slew of central bank speakers and large cap earnings

 

ASIA

Asian equity markets traded positive as the region sustained the momentum from Wall St where all majors finished with firms gains and in which both S&P 500 and DJIA moved back into profit for the year. ASX 200 (+0.4%) and Nikkei 225 (+2.0%) were higher from the open with financials the early outperformer in Australia after ANZ Bank earnings and with CBA to offload its funds unit for over AUD 4.1bln, while Japanese stocks were underpinned by a weaker currency and with focus on a slew of earnings releases. Hang Seng (+1.2%) and Shanghai Comp. (+1.6%) conformed to the overall risk appetite as investors digested earnings including big 4 lenders ICBC and Agricultural Bank of China, but with early indecision seen following uninspiring Chinese PMI data in which both Official Manufacturing PMI and Non-Manufacturing PMI fell short of estimates. Finally, 10yr JGBs were lower with demand subdued by the strong performance in Japanese stocks and following an unsurprising BoJ policy announcement in which the central bank maintained all policy settings.

PBoC skipped open market operations for a net daily drain of CNY 150bln, while it announced to sell CNY 10bln in 3-month and CNY 10bln in 1yr CNY-denominated bills in Hong Kong on November 7th. (Newswires)
PBoC set CNY mid-point at 6.9646 (Prev. 6.9574)

Chinese Manufacturing PMI (Oct) 50.2 vs. Exp. 50.6 (Prev. 50.8). (Newswires)
Chinese Non-Manufacturing PMI (Oct) 53.9 vs. Exp. 54.9 (Prev. 54.9)
Chinese Composite PMI (Oct) 53.1 (Prev. 54.1)

BoJ kept monetary policy settings unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0%, while it also maintained pledge to buy JGBs in a flexible manner so holdings increase at annual pace of around JPY 80tln and reiterated forward guidance to keep rates at extremely low level for an extended period. Furthermore, the decision on YCC was made by 7-2 vote with Kataoka and Harada the dissenters again, while the BoJ cut Core CPI forecasts in its Outlook Report and stated that risks to economic outlook and prices are skewed to the downside. (Newswires)
 

UK/EU

UK GfK Consumer Confidence Oct -10 vs. Exp. -10.0 (Prev. -9.0). (Newswires)
UK BRC Shop Price Index (Oct) Y/Y -0.2% Prev. 0.2%)
UK Lloyds Business Barometer (Oct) M/M 19 (Prev. 29)

The BoE should hike interest rates at this week’s policy meeting to offset the chancellor’s inflationary budget spending spree, according The Times Shadow MPC. (Times)

Italy's Treasury said EU asked for clarification on plans to reduce debt and that they will respond to EU questions on debt reduction by November 13th. Furthermore, the EU said Italy's public debt remains a key vulnerability and a cause of concern for the whole euro zone, while EU added Italy's planned fiscal expansion is not compatible with the debt cut. (Newswires)
 

FX

The USD took a breather from recent gains with the DXY flat around the 97.00 level after it hit the highest since June last year amid the continued rout in EUR/USD and GBP/USD, with the latter testing 1.2700 to the downside. Elsewhere, USD/JPY and JPY-crosses extended on advances amid alongside the heightened risk appetite, while antipodeans were subdued with AUD/USD pressured by a softer PBoC fix, Chinese PMI disappointment and Australian CPI data which either missed or printed inline with estimates and which was below the RBA’s 2%-3% target range. INR also lagged due to a widening rift between the RBI and government with reports noting that Governor Patel may consider resigning which briefly pushed USD/INR above the 74.00 level.

Australian CPI (Q3) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.4%). (Newswires)
Australian CPI (Q3) Y/Y 1.9% vs. Exp. 1.9% (Prev. 2.1%)
Australian RBA Trimmed Mean CPI (Q3) Q/Q 0.4% vs. Exp. 0.4% (Prev. 0.5%)
Australian RBA Trimmed Mean CPI (Q3) Y/Y 1.8% vs. Exp. 1.9% (Prev. 1.9%)

BoC Governor Poloz said it is appropriate that the pace of future rate increases 'will depend on our assessment at each fixed announcement date' and reiterated that policy rate will need to rise to neutral to achieve inflation target with the neutral rate estimated between 2.5%-3.5%. However, BoC Governor Poloz also commented that if we move too quickly with rate hikes, economy will slow below potential growth rate which is not wanted. (Newswires)

BoC's Wilkins said if there is ever a time to revert back to normal interest rates, it is during this period. (Newswires)

Mexican President Elect Obrador said the MXN will recover after "slipping" due to Monday's decision to cancel the semi-built Mexico City Airport. (Newswires)

COMMODITIES

Commodities were mixed overnight with WTI crude marginally higher despite the larger than expected build in API crude inventories as gasoline and distillate stockpiles both showed wider than anticipated drawdowns, while some analysts recently suggested that OPEC+ producers were mulling a potential reduction of output in November. Elsewhere, gold remained pressured as the greenback held steady at 16-month highs, while copper failed to benefit from the positive risk tone as prices languished near 6-week lows.

US API Weekly Crude Stocks (26 Oct) +5.69mln vs. Exp. +3.7mln (Prev. +9.88mln). (Newswires)

OPEC+ is mulling the option of cutting output in November after the US elections, according to analysts at Energy Intelligence. (Newswires)

US

In European trade, the treasury complex found some buyers after Italy suggested the GDP slowdown is an additional reason for the budget expansion. Nonetheless, in US hours, a strong US consumer confidence and an improving risk-sentiment reversed those moves, with the complex ending Tuesday’s session in negative territory. Yields were higher by c.2bps across the curve at settlement. 2s5s narrowed by c.1bps whilst 5s30s were wider by c.1bps. US T-note futures (Z8) settled 5+ ticks lower at 118-25.