• Main European indices are in the green, continuing the trend from Asia with material names outperforming due to trade progression between the US and China
• The Greenback is weaker vs all G10 counterparts, bar the JPY, which is still bucking the trend as an even safer currency haven
• Looking ahead, highlights include US and Canadian jobs reports, Baker Hughes rig count

ASIA

Asian equity markets tracked their Wall St counterparts higher after US stocks posted a 3rd consecutive gain with sentiment underpinned by optimism regarding US-China trade after what US President Trump described as a ‘very good’ conversation between him and Chinese President Xi Jinping. Furthermore, reports that Trump asked the cabinet to draft a potential China trade deal added fuel to the rally and helped US equity futures recover from the after-market pressure triggered by declines in Apple shares after the tech giant missed on iPhone and iPad sales, provided soft Q1 revenue guidance and announced to halt product unit sales data. ASX 200 (+0.1%) and Nikkei 225 (+2.6%) were mixed throughout most the session with Australia dampened by energy names after WTI crude futures slipped 2.7% to below USD 64.00/bbl on higher OPEC production in October, while the Japanese benchmark surged on a weaker currency and the encouraging trade related news. Elsewhere, Hang Seng (+4.2%) and Shanghai Comp. (+2.7%) also rose aggressively on the positive developments between US and China, with gains led by strength in tech names as well as casino stocks post-Macau gaming revenue numbers. Finally, 10yr JGBs were eventually flat as the initial upside was wiped out as US-China trade hopes were kindled by overnight reports, while the BoJ were also in the market today and increased its purchase amounts in the 1-5yr JGBs which was unsurprising given the reduction in the number of occasions it had planned for those purchases this month.

US President Trump has asked his cabinet to draft a possible China trade deal in an attempt to signal a ceasefire in tensions, according to sources. (Newswires)

PBoC skipped open market operations for a net weekly drain of CNY 490bln vs. last week's CNY 460bln net injection. (Newswires)

PBoC set CNY mid-point at 6.9371 (Prev. 6.9670)

Australian Retail Sales MM Sep 0.2% vs. Exp. 0.3% (Prev. 0.3%). (Newswires)

Australian Retail Sales Ex. Inflation (Q3) Q/Q 0.2% vs. Exp. 0.4% (Prev. 1.2%)

Australian PPI (Q3) Y/Y 2.1% (Prev. 1.5%)

EU/UK/US

US President Trump said he will be issuing an executive order next week regarding immigration. (Newswires)

Apple Inc (AAPL) Q4 EPS USD 2.91 vs. Exp. 2.78, revenue USD 62.90bln vs. Exp. 61.57bln, Q4 iPhone unit sales 46.9mln vs. Exp. 47.5mln, Q4 iPad unit sales 9.7mln (Exp. 10.53mln). Co. announced to halt unit sales data for iPhones, iPads and Macs, while it sees Q1 revenue USD 89bln-93bln vs. Exp. USD 93bln and said Q1 outlook reflects anticipated USD 2bln impact from expected FX headwinds, EM macroeconomic weakness and some supply/demand uncertainties. (Newswires)

UK Markit/CIPS Cons PMI Jul 53.2 vs. Exp. 52.0 (Prev. 52.1)

EU Markit Manufacturing Final PMI (Oct) 52.0 vs. Exp. 52.1 (Prev. 52.1)

German Markit/BME Manufacturing PMI (Oct) 52.2 vs. Exp. 52.3 (Prev. 52.3)

French Markit Manufacturing PMI (Oct) 51.2 vs. Exp. 51.2 (Prev. 51.2)

Italian Markit/ADACI Manufacturing PMI (Oct) 49.2 vs. Exp. 49.7 (Prev. 50.0)

Spanish Manufacturing PMI Oct 51.8 vs. Exp. 50.8 (Prev. 51.4)

EQUITIES

Main European indices are in the green, continuing the trend from Asia. The FSTE MIB (+1.5%) is leading after reports in Il Sole that Banca Carige are the only Italian bank seen as fragile; while the SMI is lagging (+0.1%) after the US FDA announced that Roche’s (-1.5%) recall is Class 1. Indices are mixed with materials (+2.3%) outperforming due to trade progression between the US and China, notably President Trump said to have asked his cabinet to draft a potential trade deal.

In terms of individual equities Kering (+5%) are higher after being upgraded at RBC, which has had a knock-on impact on other luxury names such as Burberry (4.5%), Moncler (+5.5%) and LVMH (+3.8%) who are up in sympathy. Separately, BMW (+2.5%) are up as they state they are expanding their car share service into 5 more London boroughs.

FX

USD - No respite for the Dollar, as its retracement from midweek peaks continues, albeit at a more measured pace. The latest downturn comes amidst reports that US President Trump has commissioned a draft trade accord with China following his encouraging chat with Xi and plans for a dinner+ date between the 2 at the upcoming G20 summit in Argentina. The Greenback is weaker vs all G10 counterparts, bar the JPY, which is still bucking the trend as an even safer currency haven, although the headline pair has topped out just above 113.00+ again and is back below its 30 DMA at 112.85, which could be pivotal on a closing basis. On that note, the DXY looks precarious just a fraction ahead of 96.000 in advance of NFP that could determine whether the index stabilises, recoils further or rebounds.

AUD - The major outperformer and main beneficiary of constructive dialogue between China and the US, with Aud/Usd extending its marked recovery to 0.7250 before fading and essentially tracking Yuan moves after a considerably lower Usd/Cny fix overnight.

EUR/CHF/NZD/GBP/CAD - All firmer vs the Buck, with the single currency not deterred by some downbeat Eurozone manufacturing PMIs and breaching a key Fib at 1.1426 to expose 1.1450 before 1.1460. However, a cluster of hefty option expiries, and 3.1 bn at the 1.1400 strike may stall Eur/Usd, ahead of 1.6 bn between 1.1450-60. The Franc is back above parity, and perhaps belatedly taking some note of SNB commentary yesterday about the inevitability of tighter policy, while the Kiwi continues to piggy-back its Antipodean peer with gains up towards 0.6700 before waning. Elsewhere, Cable has sustained 1.3000+ status after a knee-jerk visit post-BoE super Thursday, and cleared its 10 DMA circa 1.3005-10 with the aid of more positive-sounding Brexit reports (on paper), but respecting the 100 DMA from 1.3045-50. The Loonie is holding near the upper end of 1.3050-1.3100 parameters and also has jobs data looming to provide some independent direction.

SEK - Very little deviation within a 10.3215-10.2900 range vs the Eur on the Riksbank minutes that effectively reaffirmed October policy meeting guidance for a hike in either December or February 2019, but with data between now and year end key (like the next CPI report on November 14). 

EM - Broad gains vs the Usd, with the Try through 5.5000 and Cnh breaking 6.9000, but Rub lagging against the backdrop of still soggy oil prices.

COMMODITIES

WTI (-0.1%) and Brent (+0.3%) began the session lower following increased oil supply from Russia, OPEC and the US for October, notably the highest OPEC level since December 2016; an increase which has thrust the oil market into an oversupply dragging down prices. However, this has since reverted as Iran’s Deputy Oil Minister commented that he is unsure if waivers are permanent; comments which follow reports that 8 countries have received waivers allowing them to continue to purchase Iranian oil.

Gold (+0.1%) is continuing the steady trade seen in Asia overnight, although off of yesterday’s highs of USD 1237.39/oz as market sentiment improves following Presidents Trump and Xi expressing optimism over the trade dispute. Separately, Trump has initiated an executive order preventing anyone within the US from dealing with anyone associated with gold sales from Venezuela.

US is to give 8 countries waivers on new Iran oil sanctions, according to sources; updates to follow on the breakdown but India and South Korea have been touted as two of the nations. (Newswires)

US is attempting to broker a deal between Saudi Arabia and Kuwait concerning restart of 'neutral zone' oil production and US is also attempting to persuade Iraq to permit oil exports through Kurdistan, according to sources. Furthermore, reports added that ‘neutral zone’ issues are far from resolved and may take 9 months to bring its crude output to full capacity of around 500k bpd, while US told Iraq it may get Iran sanctions waiver if it permits resumption of Kirkuk oil exports to Turkey. (WSJ)

FIXED INCOME

It may well be too premature to suggest that core debt futures have set tops and bottoms prior to the US jobs data, but the assumption is probable given no scheduled data/events between now and the big release. However, Italian BTPs are trying to nudge higher towards 123.00 (122.79 best, so far, +69 ticks vs -9 ticks at one stage) and this could see Bunds retest support ahead of the next downside chart support level at 159.42 vs their 159.52 Eurex low (-46 ticks). Meanwhile, Gilts are slipping back from a minor new Liffe intraday peak of 121.99 to revisit the 121.83 trough (-41 ticks) and US Treasuries remain rooted near worst levels seen during the overnight session with the curve slightly steeper pre-NFP.