• Asian equities traded mixed following on from the subdued Wall Street lead while geopolitical tensions continue to mount over the weekend
• USD held onto Friday’s gains where the USD-index reclaimed 101.00, meanwhile, JPY softened with USD/JPY extending further above 111.00
• Looking ahead, highlights include ECB’s Constancio and Fed’s Yellen

ASIA

Asia equity markets traded mixed following on from the subdued Wall St. close on Friday where participants digested the US strike on Syria and NFP. ASX 200 (+0.6%) rose above the 5,900 to post a 2-year high amid upside in financials and energy, with the latter buoyed after WTI broke back above USD 52/bbl, while Nikkei 225 (+0.6%) advanced after the JPY weakened against its major counterparts. Hang Seng (Unch.) and Shanghai Comp. (-0.3%) saw lacklustre trade after the PBoC continued to refrain from open market operations, while KOSPI (-0.9%) underperformed on increased geopolitical concerns after the US deployed an aircraft carrier group in the Korean peninsula as a show of force. Finally, 10yr JGBs were marginally lower amid spill-over selling from USTs and after the BoJ refrained from a Rinban announcement, while the curve steepened amid underperformance in the super-long end.

PBoC refrained from open market operations for a daily net drain of CNY 10bln. (Newswires)

PBoC set CNY mid-point at 6.9042 (Prev. 6.8949)

EUROPE/UK

ECB’s Mersch stated that extraordinary loose monetary policy cannot continue forever. (Newswires)

German Economic Minister Zypries is said to be sceptical regarding European safe bonds. (Handelsblatt)

S&P affirmed France at AA; outlook stable. (S&P). Fitch affirmed Czech Republic sovereign rating at A+; outlook stable. (Fitch) DBRS affirmed Spain at A (low) with a stable trend. (DBRS)

French Finance Minister Sapin stated that the City of London will lose Euro-denominated trading operations following Brexit and that permitting London to continue Euro trading would risk EU sovereignty over the bloc’s money. (Newswires)

FX

USD held onto Friday’s gains where the USD-index reclaimed 101.00, meanwhile, JPY softened with USD/JPY extending further above 111.00, while AUD/USD whipsawed around 0.7500 as the pair failed to hold onto early gains with disappointing Home Loans and Investment Lending figures weighing on the currency.

COMMODITIES

Copper prices remained pressured overnight following last Friday’s weakness across the materials complex in which iron ore prices declined into bear market territory having slipped 20% off February highs. Gold (-0.1%) languished as the USD-index remained firm and above the 101.00, while WTI crude futures held onto the prior week’s gains with prices rangebound above USD 52/bbl.

China is considering clamping down on its heavily polluting aluminium producers, fuelling speculation of a possible win-win trade deal with America. (Sunday Times)

GEOPOLITICAL

Fresh air strikes were conducted on the Syria town that was hit by the chemical attack last week, while it is unclear who conducted the strike. (Newswires)

The Pentagon decided to deploy an aircraft carrier group to waters near the Korean peninsula in a move a US military official told the Financial Times was designed to be a "show of force". (FT)

North Korea stated the US strike on Syria proves its decision to develop nuclear weapons is correct and that it will take measures to bolster its defensive capabilities. (Newswires)

US

Treasury market bears manged to squeeze out the post NFP pessimists, as the 10y Jun’17 future saw a 30-tick turnaround from 125.24 to 124.26 settling at 124.26, down 10 ticks, with the 10y cash yield pushing tspanough the key 2.30% level now looking towards 2.40%, with many analysts touting the 10y is likely to look far more attractive to investors at around a 2.60% yield.

Fed's Dudley (Voter, Dove) said the Fed are still working on a plan to sspanink the balance sheet and expects to begin to sspanink the balance sheet later in 2017, early 2018. (Newswires)

Fed's Bullard (Non-Voter, Dove) stated that US jobs report is consistent with 2% growth, which is what can be expected for this year. Bullard also stated he thinks the Fed may only need to do one more rate increase this year and that he doesn't see a case for going faster on rate hikes. (Newswires)

White House dismissed reports regarding an imminent reshuffle of senior officials as false news. (Newswires)