• Asian equity markets eventually traded mostly positive but with gains limited as some cautiousness lingered from the uninspiring performance on Wall St last Friday
• GBP/USD gapped lower towards 1.2900 after reports that UK PM May cancelled an emergency cabinet meeting which severely lessens the likelihood of an EU summit later this month
• Sources suggested EU and UK negotiators had agreed it would be impossible for the UK to unilaterally exit its backstop on Northern Ireland
• Looking ahead, the calendar includes a lack of tier 1 data, BoE’s Broadbent, ECB’s de Guindos and Lautenschlaeger, Fed’s Daly. US Veteran’s Day – no market closures.

ASIA

Asian equity markets eventually traded mostly positive but with gains limited as some cautiousness lingered from the uninspiring performance on Wall St last Friday, where ongoing global growth concerns and continued declines in commodities weighed on sentiment. ASX 200 (+0.3%) and Nikkei 225 (+0.1%) both recovered from the early declines and traded marginally positive although weakness in tech and financials capped gains in Australia, while recent flows into JPY restricted upside for the Japanese benchmark. Elsewhere, Shanghai Comp. (+0.8%) and Hang Seng (+0.1%) were initially lower amid growth and trade-related uncertainty, while the PBoC also recently noted that China’s economy is under increasing downward pressure. However, Chinese markets then recovered as officials continued to pledge measures to support businesses including wider tax cuts and with China also upbeat following record-breaking Singles Day sales. Finally, 10yr JGBs were relatively flat with price action contained as pressure from the improvement in regional sentiment was counterbalanced by the BoJ presence in the market.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9476 (Prev. 6.9329)

PBoC quarterly monetary policy implementation report reiterated it will maintain prudent and neutral policy, while it added that it will change policy only as appropriate to make the financial sector better serve the real economy. (Newswires)

China's Finance Minister said China will step up tax cuts, further lower fees for companies and will lower tax burden for exporters, while the China State Administration of Taxation chief said they are to implement a greater and broader scale tax reduction to support the private sector. (Newswires)

US Secretary of State Pompeo said on Friday that the US is seeking friendly and constructive dialogue with China, while there were also comments from a Chinese Official that China has committed itself to working with the US in a non-confrontational way and that economic teams will seek mutually acceptable solution on trade. (Newswires)

UK/EU

UK PM May was forced to drop her plan for an emergency cabinet meeting on Monday to approve a Brexit deal as she faced strong opposition from both her cabinet and the EU, which lessens the likelihood for an EU summit taking place later this month. (Independent) As a reminder, Brexit negotiators said on Friday that a draft treaty is close and that both sides were aiming for political approval this week, while separate reports noted that the EU is to require more movement from the UK on Brexit backstop. (FT/Newswires)

Top Brexiteers have told UK PM May that they remain deeply opposed to her Chequers plan with sources suggesting negotiators on both sides had agreed it would be impossible for the UK to unilaterally exit its backstop on Northern Ireland. (Guardian). Furthermore, The Telegraph reported that senior Tory backbenchers and DUP figures are to insist they will vote against PM May’s proposals unless she backs down. (Telegraph) Two ministers told the BBC that they believe there is little chance that PM May’s deal would get the Parliament’s backing. (BBC)

European Commission President Juncker said on Sunday that he thinks EU and UK are edging closer to a definitive Brexit deal that will be concluded in the coming weeks. (Newswires)

UK Trade Secretary Fox said a contentious number of issues remain for a Brexit deal to be reached and that UK may not be able to reach a deal on its departure from the EU. (Newswires)

Former UK Foreign Minister Boris Johnson accused the UK government of being on the brink of total surrender in Brexit negotiations, while he stated UK PM May recommended staying in the EU customs union under backstop and abdicating power to leave the backstop. (Telegraph)

Four UK ministers who support 'Remain' are said to be near to quitting PM May's government. (Newswires)

Chartered Institute of Personnel and Development said UK employers expect to raise median base pay by 2% in the 12-months to September 2019. (Newswires)

Italy is seeking to lower its budget 2019 growth forecasts to between 1.0%-1.2% from 1.5% to get an EU budget deal. Italian Deputy PM Salvini said on Sunday that the Italian government could halt EU budget decisions. (Newswires)

FX

In FX markets, the USD held on to recent gains and reclaimed the 97.00 level to the upside as its major counterparts struggled overnight in which EUR/USD nearly gave up the 1.1300 handle and GBP/USD gapped lower towards 1.2900 after reports that UK PM May cancelled an emergency cabinet meeting which severely lessens the likelihood of an EU summit later this month. Elsewhere, commodity-linked currencies saw early support from a rebound in oil prices after Saudi announced to reduce its exports by 500k bpd next month although antipodeans the gave back most the gains in tandem with a softer CNH and firmer greenback.

Mexico President-Elect AMLO said he will not change banking laws and does not intend to make changes to legal framework in financial sector during the first period of his administration, while he will also not make any fiscal or economic changes in his first 3yrs. (Newswires)

COMMODITIES

Commodities were mixed overnight in which WTI crude futures found some respite from its 10th consecutive loss on Friday, as prices were supported by news that Saudi plans to reduce oil supply by 500k bpd next month. Elsewhere, gold prices were subdued as the greenback extended on gains, while copper nursed some of its recent losses following the mild improvement in risk tone.

At the weekend JMMC meeting, the committee decided not to take decisions on market adjustment, while Saudi Arabia Energy Minister Al-Falih said it is too premature for OPEC to discuss production cuts but stated that Saudi will reduce oil supply by 500k bpd in December amid seasonal decline in demand. (Newswires)

Russian Energy Minister Novak said December output is forecast at around the November level, while he also said they are theoretically open to output cuts if OPEC+ reach a consensus. (Newswires)

OPEC+ technical monitoring panel puts October oil cut compliance at 104% vs. 111% in September. (Newswires)

US Treasury Department extended the deadline again for Rusal customers to wind down their contracts and business with the Co.. (Newswires)

GEOPOLITICS

UK Foreign Minister Hunt is to meet the Saudi Crown Prince in regard to the killing of Journalist Khashoggi. This comes after Turkish President Erdogan said he gave Britain, US, France, Germany and Saudi access to the audio recording of the journalist’s killing. (Times/Washington Post)

US

Although the Fed’s statement on Thursday was largely considered hawkish, Treasuries resumed its role as a haven amid the stock slide and renewed concerns around the Chinese economy (PBOC sees downward pressures on China growth, in its Q3 monpol implementation report, which brought out buyers in Tsys), with yields coming in by between c.3-4bps by settlement; major curve spreads were generally biased towards flattening (of up to around 1.5bps) though the 5s30s and 10s30s part of the curve was modestly wider. US T-note futures (Z8) settled 11 ticks higher at 118-04.

US President Trump was reportedly telling people he wants to replace Commerce Secretary Wilbur Ross by the end of the year. (CNBC)

US House Democrats are to probe US President Trump’s role regarding hush payments in 2016, while there were also reports that Federal prosecutors have gathered evidence that US President Trump participated in hush money payments to Stormy Daniels and Karen McDougal which would violate campaign laws. (WSJ) in related news, US House Democrats are to probe US President Trump for targeting CNN and Washington Post, while they are also expected to probe Trump’s actions related to Amazon and AT&T. (Axios/Newswires)