Asian equities were lifted after North Korea refrained from conducting a missile test over the weekend

The heightened risk appetite triggered outflows from safe-haven currencies JPY and CHF, in which USD/JPY rose firmly above 108.00

Looking ahead, highlights include potential comments from ECB’s Coeure

ASIA

Asia bourses began the week on the front-foot amid a relief rally after North Korea refrained from firing a missile over the weekend and instead launched a tirade of tspaneats towards the US. Although there were widespread expectations for a possible missile test to commemorate its Founding Day, North Korea abstained from any action which underpinned both ASX 200 (+0.8%) and Nikkei 225 (+1.4%), with exporters in the latter further underpinned by JPY weakness. Chinese markets ignored the PBoC's continued skip of open market operations, as Hang Seng (+1.0%) and Shanghai Comp. (+0.1%) conformed to the positive risk sentiment which was also supported higher than expected China CPI and PPI data that suggested stronger economic activity. 10yr JGBs were lower with demand weighed amid the positive risk tone across the region and a lack of Rinban announcement by the BoJ.

Chinese CPI (Aug) Y/Y 1.8% vs. Exp. 1.6% (Prev. 1.4%). (Newswires)

Chinese PPI (Aug) Y/Y 6.3% vs. Exp. 5.7% (Prev. 5.5%)

PBoC will no longer require financial institutions to set aside funds when purchasing USD on behalf of clients tspanough forwards, which reports speculated could slow the strengthening of CNY as the changes would make it easier for domestic investors to buy USD. (Newswires)

PBoC skipped open market operations again today. (Newswires)

PBoC set CNY mid-point at 6.4997 (Prev. 6.5032); 11th consecutive firmer fix which is the longest streak since 2005. (Newswires)

FX

The heightened risk appetite triggered outflows from safe-haven currencies JPY and CHF, in which USD/JPY rose firmly above 108.00 and USD/CHF tested the 95.00 level to the upside. CNH also weakened against the greenback despite the PBoC setting its longest streak of firmer fixes for the reference rate since 2005, as the central bank also relaxed restrictions for FX forwards which effectively would make it easier and cheaper for investors to buy USD and bet against its currency, while NZD suffered amid strength in AUD/NZD which reclaimed the 1.1100 handle.

COMMODITIES

Commodities remained mostly subdued after last Friday’s losses, in which gold extended on declines on safe-haven outflows after North Korea showed some restraint. Elsewhere, WTI nursed some of its weakness amid reports regarding restarts including Motiva Port Arthur refinery’s largest crude unit and copper is also off worst levels due to the positive risk tone, although the rebound in prices were relatively mild in comparison the sell-off seen late last week.

Saudi Energy Minister Al-Falih agreed with Venezuelan Oil Minister Del Pino on importance of keeping all options on the table including an extension of the output cut deal, while Saudi also agreed with Kazakhstan that an extension of the deal past Q1 2018 would dependent on market fundamentals. (Newswires)

GEOPOLITICAL

North Korea refrained from conducting a missile test over the weekend, despite some expectations for the nation to possibly fire a missile to commemorate its Founding Day. (Newswires) North Korea said that it will make sure the US will pay the due price if UN resolution is passed and that measures taken will cause the greatest pain and suffering the US has gone tspanough in its entire history. North Korea also stated that the world will witness how it tames US gangsters by taking actions tougher than ever envisaged. (KCNA)

US called for Security Council vote on additional sanctions for North Korea on Monday, in which Washington reportedly wants an asset freeze and travel ban on Kim Jong Un. (Nikkei)

UN panel stated that North Korea is suspected of working with Syria on chemical weapons and missile program, while NATO Secretary General stated that North Korea’s reckless behaviour requires a global response and its nuclear programme has to stop. (Yonhap/Newswires)

There were source comments that suggested China would support North Korea in case of a war with US – Unconfirmed. (Twitter)

Saudi’s Crown Prince received a call from the Emir of Qatar that expressed readiness for dialogue. (Newswires)

US

Fixed income operated in a narrow range in New York dealing ending well off best levels, US Dec’17 10y T-note futures settled at 127.16, down half a tick.

US President Trump signed the debt ceiling and Harvey aid bill. (Twitter)

Hurricane Irma damage estimate was reduced to USD 49bln from USD 200bln by Enki Research. (Newswires)