• Asian equity markets were mixed as weakness in China clouded over the mostly positive lead from US where the DJIA and S&P 500 closed higher
• EU is reportedly to offer a compromise regarding the Irish border in which Britain could end the temporary customs arrangement
• However, reports also suggest that UK PM May reportedly faces a Cabinet showdown with Brexit Secretary Raab who is said to have been undermined on the Irish backstop plan
• Italy Finance Minister Tria signalled to euro zone ministers he was working for compromise on the budget with the EU
• Looking ahead, highlights include EZ services PMIs, US JOLTS, APIs, ECB’s Praet, Coeure, Lautenschlaeger, de Guindos, US mid-term elections

ASIA

Asian equity markets were mixed as weakness in China clouded over the mostly positive lead from US where the DJIA and S&P 500 closed higher with the latter led by strength in energy names, although the Nasdaq declined amid continued Apple woes after reports the tech giant cancelled a production boost for the budget iPhone XR due to slowing demand. ASX 200 (+1.0%) and Nikkei 225 (+1.2%) traded higher with Australia led also by the energy sector leading as it mirrored the outperformance seen stateside, while the Japanese benchmark benefitted from recent currency weakness and rose back above the 22000 level. Elsewhere, Hang Seng (-0.1%) and Shanghai Comp. (-0.6%) were subdued amid ongoing trade uncertainty and after the PBoC skipped open market operations again, while notable weakness was seen in casino stocks which pulled back from recent gains. Finally, 10yr JGBs were lacklustre after weakness seen in T-notes and with demand subdued by the strength in Japanese stocks.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9075 (Prev. 6.8976)

US President Trump said he believes he will make a deal with Chinese President Xi. (Newswires)

China Vice President Wang said China will remain committed to opening up and that China stands firmly against protectionism and unilateralism. Furthermore, Wang added China is ready to meet with US and hold discussions to work for solutions on trade. (Newswires)

UK

EU is reportedly to offer a compromise regarding the Irish border, according to reports which noted that EU figures suggested they are prepared to offer PM May an Independent Mechanism in which Britain could end temporary customs arrangement.  (Times)

UK PM May reportedly faces a Cabinet showdown with Brexit Secretary Raab who is said to have been undermined on the Irish backstop plan. (Telegraph) In related news, UK cabinet ministers are to tell PM May to stand firm regarding Ireland border issue or face Brexit deal collapsing with UK Brexit Minister Raab and Foreign Minister Hunt to lead as many as 12 cabinet ministers in a defiant stand at the weekly meeting in Downing Street. (The Sun)

UK PM May told Austria's PM Kurz 95% of the withdrawal deal is complete and she is confident a solution can be found on the NI backstop. (Newswires)

A senior EU official said there will be no breakthrough on the backstop this week and stated If there is no agreement in the next week at technical and services level, there’s no chance of a summit in November, according to RTE Europe Editor Connelly. However, Guardian's Brussels correspondent Rankin stated that an EU source told her a November summit is still possible. (Newswires)

UK BRC Retail Sales YY Oct 1.3% vs. Exp. 0.5% (Prev. -0.2%). (Newswires)

Barclaycard said UK consumer spending for October rose 4.4% Y/Y vs. Prev. 3.9% in September but added UK consumer confidence in the economy is at the joint lowest since 2014. (Newswires)
 

EU

Euro zone finance ministers have urged Italy's Finance Minister Tria to change the budget plan in a closed-door meeting, according to EU sources. Furthermore, Euro zone finance ministers agreed with European Commission that the Italian budget breaks EU rules according to a statement. (Newswires)

Italy Finance Minister Tria signalled to euro zone ministers he was working for compromise on the budget with the EU, while Tria stated the Italian 2019 draft budget won't change but debt will fall. (Newswires)

FX

FX markets were quiet overnight amid a tentative tone heading into the upcoming key events including today’s US mid-term elections and the FOMC later this week. As such, the greenback was relatively flat but attempted to gently nurse some of the recent losses, while its counterparts held on to most the prior day’s gains with EUR/USD around 1.1400 and GBP/USD unfazed by the conflicting Brexit-related news at the 1.3000 handle. Elsewhere, antipodeans were steady with AUD only marginally supported following the RBA rate decision where it maintained the Cash Rate Target as expected but revised growth forecasts slightly higher, while USD/JPY and JPY crosses were higher on safe-haven outflows as stocks in Tokyo outperformed the region.

RBA kept the Cash Rate Target unchanged at 1.50%, as expected. RBA reiterated low rates are supporting the economy and that progress on inflation and unemployment is expected to be gradual. RBA also commented that GDP growth forecast was revised higher slightly for 2018 and 2019, while it added that business conditions and outlook for labour market remains positive. (Newswires)

COMMODITIES

Commodities were rangebound overnight amid a stable greenback and mixed risk tone in which WTI crude futures languished below the USD 63.00/bbl after having failed on Monday to sustain the initial upside in the wake of the re-imposed sanctions on Iran, amid exemptions and Trump jawboning. Gold were also flat with price action contained amid tentativeness heading into today’s mid-term elections, while copper also traded sideways amid the indecisiveness in the region.

US President Trump said he wants to go slower on Iranian sanctions and does not want to raise oil prices. (Newswires)

US

Treasuries were only marginally higher on Monday as investors were cautious ahead of the mid-term elections tomorrow and ahead of the FOMC rate decision due on Thursday. The yield curve saw some modest bull-flattening with yields on the short-end of the curve pivoting around the unchanged mark whilst longer dated yields were lower by c.2bps at settlement. 2s30s narrowed by c.3bps and 2s10s by c.2bps.The US treasury sold USD 37bln in 3yr notes tailing by 0.3bps at a high yield of 2.983%. Demand was soft as the bid-to-cover came in at 2.54x, well below recent averages and the lowest since July. Directs took the smallest portion since December 2009, indirects were awarded the biggest share since June whilst dealers were left with the largest share since July. US T-note futures (Z8) settled at 118-05+.