Asian bourses traded mostly higher once again with JPY weakness boosting Japanese exporters

In politics, UK Parliament passed the Brexit Bill and Norway’s ruling centre-right government won re-election

Looking ahead, highlights include UK CPI, potential comments from ECB’s Constancio and a US 10yr Auction

ASIA

The positive momentum from the somewhat reduced North Korean concerns continued to drive stocks higher as Asia bourses traded mostly positive, which also followed a strong performance on Wall St where the S&P 500 closed at a fresh record level. ASX 200 (+0.7%) and Nikkei 225 (+1.2%) gained as financials mirrored the outperformance in their counterparts stateside where lower estimates of hurricane damages and rising yields buoyed the sector, while JPY weakness remained the driver for Japanese exporter sentiment. Conversely, Shanghai Comp. (+0.1%) and Hang Seng (Unch.) were less exuberant after the PBoC refrained from liquidity operations again and after the Hong Kong benchmark index met resistance around the 28,000 level. Finally, 10yr JGBs were lower as 10yr yields rose by the most YTD alongside increases in global yields, with demand for bonds also dampened by the positive risk tone and after a 5yr auction where the b/c declined and tail in price widened from prior.

PBoC refrained from open market operations again today. (Newswires)

PBoC set CNY mid-point at 6.5277 (Prev. 6.4997)

EUROPE

Norway’s ruling centre-right government won re-election on what was a tightly contested political race, in which PM Solberg claimed the victory and stated that that it looks like a clear majority for the centre-right. (Newswires)

UK

UK Parliament passed PM May’s Brexit bill to the next stage via 326-290 votes. (Newswires)

FX

FX markets were relatively quiet amid a lack of fresh catalysts to spur price action which kept EUR/USD and GBP/USD flat, while USD/JPY was also virtually unchanged to hold on to nearly all of yesterday’s risk-supported advances. Elsewhere, AUD/USD declined to test 0.8000 to the downside after a sharp deterioration in NAB Business Confidence, while CNH was pressured after the PBoC weakened the reference rate for the 1st time in 12 days.

Australian NAB Business Confidence (Aug) 5 (Prev. 12). (Newswires)

Australian NAB Business Conditions (Aug) 15 (Prev. 15, Rev. 14)

COMMODITIES

Commodities saw muted price action during Asia trade with safe-haven gold marginally extending on yesterday’s downside as risk sentiment in the region remained elevated. Elsewhere, WTI crude futures were sideways and consolidated around USD 48/bbl, while copper languished alongside lacklustre demand across the metals complex and as Chinese risk sentiment lagged.

OPEC Secretary General Barkindo said non-OPEC output growth is slightly decelerating and that global oil demand in H2 is about 2mln bpd more than during H1. (Newswires)

Saudi government reported to inform OPEC that August oil production fell to 9.95mln bpd. (Newswires)

GEOPOLITICAL

UN Security Council unanimously voted to increase sanctions against North Korea. (Newswires)

US Ambassador to the UN Haley said the US is willing to act alone to stop North Korea’s nuclear programme and that half-measures have not worked. There were also comments from Japan Defence Minister Onodera that the possibility of further provocation by North Korea cannot be ruled out and that they will stay on alert, while South Korea later stated that North Korea is technically ready for a nuclear test. (Newswires)

US

Bonds were lower on the day, with a soft US 3-year auction proving to be the final nail in the coffin. The auction could be deemed sloppy, with a tail, high dealer allotment and soft bid to cover all apparent. US Dec’17 10y T-note futures settled at 127-00, down 16 ticks.