• Asian stocks traded mostly lower with sentiment in the region subdued by trade concerns and holiday-thinned conditions
• Tory Brexiteer Iain Duncan Smith stated that the Brexit deal will be killed off by him and his Brexiteer colleagues in Parliament
• In FX markets, the major pairs traded sideways with price volatility virtually non-existent due to the holiday closures and lack of data releases
• Looking ahead, highlights include German GDP, Eurozone flash PMIs, Canadian CPI, ECB’s de Guindos. US markets early close

ASIA

Asian stocks traded mostly lower with sentiment in the region subdued by trade concerns and holiday-thinned conditions in the US, while Japan and India also observed public holidays. ASX 200 (+0.4%) was positive with the index supported by strength in its top-weighted financials sector amid gains in Australia’s largest banks after Macquarie pulled-off a rarity at the banking royal commission in which it emerged unscathed and with its reputation enhanced. Elsewhere, Shanghai Comp. (-2.5%) and Hang Seng (-0.8%) were negative amid ongoing trade uncertainty as China responded to the recent trade report by the US, in which it dismissed the accusations of unfair trade practices as groundless and totally unacceptable. In addition, the US called for its allies to stop using Huawei equipment and weak earnings results from Meituan Dianping in which the online service provider’s losses ballooned, further added to the glum.

PBoC skipped open market operations. (Newswires)
PBoC set CNY mid-point at 6.9306 (Prev. 6.9391)

US government is said to ask foreign allies to stop using Huawei equipment amid security concerns. (Newswires)

China responded to the recent US report in which it labelled the accusation by the US of China continuing with unfair trade practices as groundless and totally unacceptable, while it added that it hopes US drops rhetoric and behaviour that are damaging to relations. (Newswires)

China Vice Commerce Minister said trade protectionism and unilateralism are increasing and hopes that China and US can find ways to manage differences through discussions. There were also comments from China’s Vice Finance Minister that trade frictions spur global economic uncertainties, while China’s Assistant Foreign Minister stated that the global economy faces downward pressure. (Newswires)

UK/EU

Tory Brexiteer Iain Duncan Smith stated that the Brexit deal will be killed off by him and his Brexiteer colleagues in Parliament, while he is said to dismiss PM May’s efforts to adopt a tech solution to the Irish border problem and implied it is meaningless, according to ITV’s Peston. (Twitter)

German Finance Minister Scholz said he hopes there will be an orderly Brexit and that Berlin is also ready for an uncontrolled Brexit, while Scholz added European Commission proposals on budget spat with Italy are appropriate. (Newswires)

BoE’s Saunders reiterated that implications on monetary policy from different Brexit outcomes could go either way and that policy stance would need to return to something similar to neutral sooner than curve implies in the event of a smooth Brexit. (Newswires)

Italy's Economy Minister Tria said there will be "new elements" regarding the budget once Commission talks start. (Newswires)

ECB's Weidmann said we are at a maturing economic cycle, that stock markets are fairly high and that there could be corrections to come but added stock market corrections don't worry us from a monetary policy perspective. (Newswires)

ECB's Praet said downside risks have increased but at this stage we still think the picture remains broadly balanced, while he added that core inflation at around 1% are not enough to reach our aim in sustained manner. Praet added that he is confident that underlying inflation pressures are rising but it will take time and it requires monetary policy to remain accommodative. Praet also commented it is too soon to decide new TLTRO or adjustments in key rates. (Newswires)

FX

In FX markets, the major pairs traded sideways with price volatility virtually non-existent due to the holiday closures and lack of data releases. As such, the DXY was subdued below the 96.50 level as EUR/USD prodded above 1.1400, while GBP/USD held on to most the prior day’s gains from the news that UK and EU negotiators agreed on the text of their political declaration regarding future ties. Elsewhere, USD/JPY was lacklustre amid the absence of Tokyo participants and commodity-linked currencies were also uneventful and paid no heed to the pressure across the energy complex.

COMMODITIES

Commodities were mostly lower amid the broad risk-averse tone with the energy complex pressured as WTI crude futures slipped 2.5% and Brent crude fell to its lowest since December 2017. The weakness overnight was attributed to ongoing oversupply concerns and stops for a major order being triggered, while other sources also noted technical and algo selling. Elsewhere, gold was marginally underpinned by a softer greenback and copper weakened amid underperformance in China, as well as decline in Chinese commodity prices with Dalian iron ore futures down around 3% on worries of weak demand from steel mills. 

GEOPOLITICAL

North Korea appear to be expanding operations at its main nuclear site, according to the IAEA, while there were also reports that atomic agency inspectors are said to be demanding North Korea allow nuclear inspectors back into the country amid reactor activity concerns. (Nikkei/SCMP)