• Asian equity markets traded mostly higher as the region sustained the positive momentum from Wall St.
• GBP supported by reports that UK PM May has reached a deal with Brussels on financial services
• More broadly in FX, DXY softened overnight and pulled back below the 97.00 level as its major counterparts made up for lost ground
• Looking ahead, highlights include UK mfg. PMI, BoE rate decision, minutes & QIR, CNB rate decision, US weekly jobs, US ISM mfg PMI, a slew of central bank speakers and large cap earnings

ASIA

Asian equity markets traded mostly higher as the region sustained the momentum from Wall St where stocks continued to pare back some of the losses from its worst monthly performance in 7 years, helped on the day by month-end rebalancing and with sentiment also underpinned by strong jobs data as well as a rally across FAANG stocks post-Facebook earnings beat. ASX 200 (+0.2%) was lifted by early outperformance in the mining sector as BHP shares gained on the announcement of a USD 10.4bln shareholder return program, although upside was capped by indecisiveness across financials amid less than inspiring NAB results and M&A hopes with Macquarie said to be mulling an offer for AMP Capital. Elsewhere, Nikkei 225 (-1.0%) was pressured by the recent currency strength and with much of the focus on earnings, while Shanghai Comp. (+0.6%) and Hang Seng (+1.8%) outperformed following the better than expected Chinese Caixin Manufacturing PMI data and continued supportive efforts by Chinese authorities. Finally, 10yr JGBs were initially lower with yields higher across the curve after the BoJ tweaked its monthly bond purchases in which it cut the number of occasions it will buy 1-3yr and 3-5yr JGBs to just 4 times from 5 times per month, although firmer demand at the 10yr auction helped stem losses.

PBoC skipped open market operations for a net daily drain of CNY 100bln. (Newswires)
PBoC set CNY mid-point at 6.9670 (Prev. 6.9646)

PBoC Vice Governor said will step up monetary support for rural areas and will keep RRR low for rural financial institutions, while the Vice Governor added that China will encourage rural industrial enterprises to either go public or issue bonds to raise capital. (Newswires)

Chinese Caixin Manufacturing PMI (Oct) 50.1 vs. Exp. 50.0 (Prev. 50.0). (Newswires)

UK/EU

UK PM May reached a deal with Brussels on financial services which will give UK financial services companies continued access to European markets, according to sources. (The Times)

EU Chief Negotiator Barnier was said to be under increasing pressure to agree to a fresh compromise with the UK regarding the Irish backstop, according to reports which citied senior EU officials. (Telegraph)

UK Foreign Minister Hunt commented it is entirely possible that the UK could reach a Brexit deal by November 21st. (Newswires)

UK and EU are still looking for an Irish border solution and EU sees new positive mood in talks according to an official, however there were also comments from a UK Brexit department spokesperson that there is no set date for the negotiations to conclude. (Newswires)

FX

In FX markets, the DXY softened overnight and pulled back below the 97.00 level as its major counterparts made up for lost ground, with GBP/USD the outperformer after reports that UK PM May reached a tentative agreement with Brussels which would grant UK financial companies access to European markets post-Brexit. This lifted the pair back above 1.2800 and helped EUR/USD nurse losses, while antipodeans also firmed on their high-beta status and with AUD/USD underpinned by a larger than expected trade surplus. Conversely, USD/JPY and JPY-crosses were mixed with USD/JPY reeling from the prior day’s flows into the JPY amid rising yields in Japan following an adjustment in the BoJ’s bond purchases

Australian Trade Balance G&S (A$) Sep 3017M vs. Exp. 1700.0M (Prev. 1604.0M). (Newswires)

COMMODITIES

Commodities were mixed with WTI crude futures back below the USD 65.00/bbl on the prior day’s selling pressure which was attributed to soft Chinese Official PMI data and recent flows into the greenback. Elsewhere, gold prices nursed losses as the USD pulled back overnight, while copper was lacklustre and failed to benefit from the positive risk tone.

US President Trump said there is sufficient supply of petroleum and related products from other countries to allow a significant reduction on purchases from Iran. In related news, US National Security Advisor Bolton had earlier commented that a number of countries may not be able to cut Iran oil imports to zero immediately, while he added the US wants maximum pressure through sanctions without harming friends/allies. (Newswires)

Goldman Sachs reiterated its year-end Brent price forecast of USD 80/bbl, while it stated that low positioning heading into reintroduction of Iran sanctions next week suggests a short-term increase in prices. (Newswires)

Russia is said to freeze fuel prices at June levels. (Newswires)

US

The global risk-on theme resulted in lower Treasury prices, with yields rising by between 3-4bps at settlement. The bias was towards a slightly, slightly steeper curve, though the moves were modest at best at beneath 1bps. A solid ADP report helped support the rise in yields. In its quarterly refunding announcement, the US Treasury said it will sell USD 37bln in 3yr, USD 27bln in 10yr and USD 19bln in 30yr notes, all in line with expectations, and is to offer a new 5yr TIPS in Oct. 2019. Wells Fargo suggests that there are three key takeaways from today's refunding announcement: "First, it appears Treasury is fairly comfortable with how the nominal coupon auction schedule is shaping up to meet the FY 2019 financing needs. Second, Treasury remains committed to keeping total bills outstanding on an upward trajectory. Finally, even with the smaller increases to nominal coupon auctions than we expected, there will likely still be an onslaught of net coupon issuance in CY 2019". US T-notes futures (Z8) settled 11 ticks lower at 118-14.

US President Trump said the US has a chance of making a fair deal with China, while he also commented that equity markets are waiting for the midterms which he suggested will fall if Democrats win and will rise if GOP wins. (Newswires)