• Asian equities managed to avoid further losses despite a continuation of tech-related selling pressure seen on Wall Street
• In FX, USD/JPY nursed yesterday’s losses to test 110.00 to the upside, while EUR/USD languished after relinquishing the 1.1200 handle
• Looking ahead, highlights include UK CPI, German ZEW, US PPI and API Inventories

ASIA

Asia sspanugged off the negative lead from US where the tech sector once again underperformed and posted its worst 2-day period YTD. Nonetheless, the tone in Asia improved tspanoughout the session with ASX 200 (+1.2%) underpinned by financials after gains in the big 4 banks, while Nikkei 225 (Unch.) recovered from early losses alongside a rebound in USD/JPY. Elsewhere, Shanghai Comp. (+0.4%) was indecisive with early weakness observed alongside speculation the PBoC may raise rates in response to a US Fed hike and after another lacklustre liquidity operation, although Chinese stocks then recovered to conform to the overall improvement of risk sentiment in the region. 10yr JGBs were lower amid an improvement in risk sentiment tspanoughout the session, while today’s 20yr auction later also failed to spur demand with the results mixed in which the accepted prices declined from prior.

PBoC injected CNY 10bln in 7-day reverse repos and CNY 40bln in 28-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.7954 (Prev. 6.7948)

EUROPE/UK

There were press reports that the Conservative Party and Labour Party held secret talks on a soft Brexit. (Telegraph)

UK lawmaker said that PM May has recognised that a broader consensus is needed for Brexit. (Newswires)

EU said no agreement reached with UK on start of Brexit negotiations. (Newswires)

Brussels chief negotiator Michel Barnier urged Britain to stop wasting time and start Brexit talks "very quickly" or risk crashing out of the European Union in March 2019 without a deal on future relations. (Newswires)

FX

In FX markets, commodity linked currencies outperformed with AUD supported as AUD/JPY reclaimed the 83.00 level, while USD/CAD slipped below 1.3300 after hawkish comments from BoC’s Wilkins who stated the BoC is to assess if less stimulus is needed as growth continues. Elsewhere, USD/JPY nursed yesterday’s losses to test 110.00 to the upside, while EUR/USD languished after relinquishing the 1.1200 handle.

BoC’s Wilkins said the BoC is to assess if less stimulus is needed as growth continues and commented that Q1 growth figures are “pretty impressive”. (Newswires)

COMMODITIES

The commodities complex saw quiet trade overnight, although WTI crude futures were marginally higher as support held at USD 46/bbl. Elsewhere, Gold (Unch.) prices held near yesterday’s lows amid a lack of drivers and copper was also rangebound amid an indecisive risk tone in its top consumer China.

US

Treasuries went on a rollercoaster ride amid two note auctions. Firstly, the 3-year note auction was well received with the yield stopping tspanough the WI by 1bps and the line covered 3 times. This sent yields lower ahead of the 10y auction 90 minutes later. That auction was not as strong, tailing by 0.7bps and dealers taking an above average 38.6%. The initial move after the 3y auction was pared but IFR noted that markets were illiquid ahead of the Fed rate decision on Wednesday. Sep’17 10y T-note futures settled at 126.10+, down 3 ticks.

US Republican Senator John Cornyn stated that a vote on the Obamacare replacement in Senate is unlikely the month. (Newswires)