Asia equity markets traded mostly negative after North Korea launched a missile that flew tspanough Japanese airspace

This prompted Japan to issue an emergency warning for its residents and South Korea conducted its own missile test as a show of readiness

Looking ahead, highlight include the Russian rate decision, US retail sales, industrial output, Uni. of Michigan, ECB’s Mersch, BoE’s Vlieghe and ECB’s Lautenschlager

ASIA

Asia equity markets traded mostly negative after North Korea launched a missile that flew tspanough Japanese airspace and over the Hokkaido prefecture before landing in the Pacific Ocean, which prompted Japan to issue an emergency warning for its residents and South Korea also conducted its own missile firing test as a show of readiness. This triggered a risk-averse tone across asset classes with ASX 200 (-0.7%) and KOSPI (-0.2%) pressured from the open, while Nikkei 225 (+0.5%) pared early losses as USD/JPY rebounded from its lows. Shanghai Comp. (-0.3%) and Hang Seng (+0.4%) both initially conformed to the downbeat sentiment caused by the renewed geopolitical concerns, although downside in mainland China was stemmed and Hong Kong recovered amid a firm liquidity effort by the PBoC. 10yr JGBs were higher and eyed the 151.00 level amid the mostly risk-averse tone in the region and with the BoJ present in the market for JPY 880bln in JGBs of maturities across the curve.

PBoC injected CNY 120bln via 7-day reverse repos, CNY 60bln via 14-day reverse repos and CNY 20bln via 28-day reverse repos. (Newswires) PBoC set CNY mid-point at 6.5423 (Prev. 6.5465).

EUROPE/UK

(From late in EU session) BoE’s Carney said the probability of a hike has definitely increased, may need to adjust Bank Rate in the coming months. Carney says he is among the majority in the MPC regarding stimulus change. (Newswires)

ECB's Mersch said there is still considerable slack in a number of euro area countries which are burdened with high unemployment, while he added that economic and financial situation in the euro area has improved considerably in the last years. (Newswires)

ECB’s Weidmann said policy will remain accommodative even after QE and that ECB should not miss the right time to normalise policy. (Newswires)

FX

North Korea’s missile test immediately spurred safe-haven flows into JPY, which pushed USD/JPY firmly below the 110.00 handle and saw similar pressure amongst related crosses. However, moves were later faded on touted short-covering near support at 109.50 while USD/KRW also gave up an initial gap higher and then some, on slight fatigue and as participants second guessed the implications from this latest provocation. Elsewhere, the remainder of price action across currencies was relatively light amid a lack of data in which EUR/USD was virtually unchanged and GBP/USD maintained the post-BoE advances towards 1.3400.

BoC Deputy Governor Wilkins said inflation is at the lower end of target, while she added that it is not ideal to give markets full plan on rates and that every decision is live. (Newswires)

A top Brazilian federal prosecutor filed new corruption charges against Brazilian President Temer, although there were later comments from a Brazilian lawmaker who stated that the Lower House is to reject charges vs. Brazilian President Temer. (Newswires)

COMMODITIES

Trade across the commodities complex was range-bound in which gold pared the initial support from safe-haven bids after North Korea’s missile launch, while copper was also lacklustre amid an dampened risk tone. WTI also failed to provide any decent price action and consolidated overnight in proximity to retest USD 50/bbl.

GEOPOLITICAL

North Korea fired a missile which passed tspanough Japan’s airspace and over Hokkaido, before landing in the Pacific Ocean. This initially prompted Japan to issue an emergency warning for its residents to seek shelter, while there were also reports that South Korea conducted its own missile firing test as a show of readiness. (Yonhap/Newswires)

US military stated North Korean missile did not pose a tspaneat to Guam and that the launch was an intermediate range ballistic missile. (Newswires)

South Korean President Moon said will not sit idle on North Korea provocation and that South Korea has power to pulverize should North Korea provoke. (Newswires)

North Korea stated that it will take stronger actions for its self-defence if US continues to walk on current course. (Newswires)

US

The dollar was mixed and Treasury futures were little changed. US inflation data showed beats for CPI and core CPI, although the wages data continues to disappoint. As such, the Fed narrative was unaffected; markets still don’t see any chance of a hike next week, however, the probability of a hike by the end of the year rose to around 50% from around 41% at yesterday’s close. The 10-Year Future (Dec) settled 1+ ticks lower at 126-13.

US Treasury Secretary Mnuchin reiterated tax plan will be unveiled in the week of 25th September and said that high-end tax cuts will be offset with fewer deductions. Mnuchin also commented that the Trump admin is concerned about economic growth and less concerned about inflation at the moment. (Newswires)