Asian equities traded with little in the way of firm direction amid upbeat Chinese data and lingering geopolitical concerns

RBA kept the Cash Rate Target unchanged as expected and noted slow income growth

Looking ahead, highlights include Eurozone and UK service PMIs, US factory orders, Fed’s Brainard, Kashkari and Kaplan

ASIA

Asia equity markets traded with a mixed tone as the region mulled over encouraging Chinese PMI data and the lingering North Korea concerns. ASX 200 (-0.1%) and Nikkei 225 (-0.7%) both failed to sustain an early rebound and traded in mild negative territory, with financials weighing on Australia alongside ongoing money laundering issues at CBA which is the largest constituent in the index. Shanghai Comp. (+0.2%) and Hang Seng (+0.2%) traded choppy and struggled to maintain the early optimism from strong Chinese Caixin Services and Composite PMI data, as geopolitical woes remained at the forefront of attention and after the PBoC refrained from open market operations for a 4th consecutive occasion. Finally, 10yr JGBs were slightly weaker despite the cautious risk tone in Japan, as today’s 10yr JGB auction results showed weaker demand with b/c lower than prior while the tail in price also widened.

Chinese Caixin Services PMI (Aug) 52.7 vs. Exp. 51.8 (Prev. 51.5). (Newswires)

Chinese Caixin Composite PMI (Aug) M/M 52.4 (Prev. 51.9)

PBOC skipped open market operations, which resulted to a net daily drain of CNY 70bln vs. Prev. 140bln drain. (Newswires)

PBoC set CNY mid-point at 6.5370 (Prev. 6.5668)

EUROPE/UK

UK BRC Retail Sales YY (Aug) 1.3% (Prev. 0.90%). (Newswires)

EU's Verhofstadt stated that an association agreement with the UK is a way forward post-Brexit and suggested that this type of agreement is flexible regarding size and coverage area. Verhofstadt added that UK PM May is set to make an ‘important intervention’ later this month and that could delay the next round of divorce negotiations. (Guardian)

FX

AUD was initially supported after the Chinese PMI data and better than expected Australian Net Exports Contribution to GDP, which precedes tomorrow’s Q2 GDP release. Furthermore, the upside in AUD coincided with strength in other commodity-linked currencies in which NZD gained in sympathy and USD/CAD tripped tspanough stops at 1.2400 to the downside. However, the moves were later pared after the RBA rate decision in which it kept the Cash Rate Target unchanged and noted slow income growth. Risk averse flows also dictated FX with safe-haven JPY bolstered after reports North Korea was seen moving an ICBM for a possible launch before Saturday, while the South Korea military commented it is seeking all available military options including US tactical nuclear weapons.

RBA kept its Cash Rate Target unchanged at the record low 1.50% as expected and reiterated that steady policy is consistent with growth and inflation targets. RBA also repeated that a rise in AUD would lead to slower economic growth than otherwise and that housing debt has outpaced slow growth in incomes. (Newswires)

Australian Current Account Balance (Q2) -9.6B vs. Exp. -7.5B (Prev. -3.1B, Rev. -4.8B)

Australian Net Exports Contribution of GDP (Q2) 0.3% vs. Exp. 0.0% (Prev. -0.7%)

COMMODITIES

Commodities were relatively quiet overnight with gold prices mild higher to remain near its highest levels in almost a year as geopolitical concerns lingered. Elsewhere, WTI crude futures were flat and RBOB returned to pre-Harvey levels as operations resumptions in Texas gather pace.

Iranian oil minister Zanganeh said that unofficial talks are underway to extend OPEC/non-OPEC production cut deal. (Newswires)

Russian Energy Minister Novak said Russia exceeded its deal obligations in August and reduced output by 345K bpd. (Newswires)

Shell announced that operations at Deer Park refinery would resume once all system checks had been completed. Elsewhere, Line 2 of the Colonial pipelines has resumed operations from Pasdena to Houston. (Newswires)

GEOPOLITICAL

North Korea was seen moving an ICBM for a potential launch before Saturday. (Asia Business Daily)

South Korea Defense Ministry said it is seeking all available military options, referring to US tactical nuclear weapons redeployed to the nation. (Twitter)

US

Florida Governor declared a state of emergency in preparation for Irma which has been upgraded to a dangerous category 4 storm. (Newswires)