DAILY EUROPEAN OPENING NEWS: Asian equities faced selling pressure overnight amid tspaneats of further hydrogen bomb tests from North Korea

Asian equities faced selling pressure overnight amid tspaneats of further hydrogen bomb tests from North Korea

The risk-off sentiment spurred flows into JPY. Focus for GBP remains on today’s speech by UK PM May

Looking ahead, highlights include Eurozone services and manufacturing PMIs, Canadian retail sales & CPI, UK PM May and a slew of central bank speak

ASIA

Asia equity markets traded mostly negative following the losses on Wall St. where the DJIA snapped a 9-day win streak, and with sentiment dampened after North Korean verbal provocation in which its Foreign Minister suggested its counter-measures could mean testing a hydrogen bomb in the Pacific. This followed defiant comments from North Korean leader Kim who labelled Trump a dotard and pressured Nikkei 225 (-0.3%) as well as most indices in the region, although ASX 200 (+0.3%) was kept afloat by strength in its largest weighted financials sector. Hang Seng (-0.9%) and Shanghai Comp. (-0.5%) conformed to the subdued tone in the region with sentiment reeling from a downgrade to China and Hong Kong’s sovereign ratings by S&P. Finally, 10yr JGBs and T-notes gained on the safe-haven flows, although upside was capped following an enhanced liquidity auction for longer dated Japanese bonds which showed a weaker b/c than prior.

S&P downgraded Hong Kong’s sovereign rating to AA+; outlook stable from AAA; outlook negative. (Newswires)

PBoC injected CNY 100bln via 7-day reverse repos and CNY 20bln via 28-day reverse repos, for a net weekly injection of CNY 450bln vs. last week's CNY 260bln net injection. (Newswires)

PBoC set CNY mid-point at 6.5861 (Prev. 6.5867)

EUROPE/UK

RANsquawk source says UK PM May speech on Brexit will take place around 14:15 BST (15:15 CEST/ 09:15 EDT) on 22 Sep 2017. There has also been chatter of “around” 14:30 BST.

FX

Alarming North Korean rhetoric spurred safe-haven flows into JPY which pressured USD/JPY to below 112.00 and weighed on JPY crosses. Elsewhere, HKD and antipodean currencies were subdued after the China ratings downgrade and recent weakness in commodities, with NZD also hampered by election risks ahead of tomorrow’s polling day.

COMMODITIES

Chinese metal prices continued to extend on losses with Dalian Iron Ore prices slipping around 4%, as such, this saw prices fall to multi week lows given expectations of slower winter demand amid steel output curbs while S&P downgrading China’s credit rating also added to woes. Elsewhere, gold prices rose over 0.5% on flight-to-quality flow after reports that’s North Korea were willing to conduct a H-Bomb test in the pacific.

GEOPOLITICAL

US President Trump announced new executive order to target individuals & companies that trade with North Korea, while there were also reports that EU agrees on new sanctions against North Korea. (Newswires/AFP)

North Korea counter-measure may mean testing a hydrogen bomb in the Pacific, according to reports citing North Korea's Foreign Minister. (Yonhap)

North Korea leader Kim said North Korea will consider 'corresponding, highest level of hard-line measure in history' against US, while he also stated that President Trump's UN speech was rude nonsense and demonstrated insanity and inhumanity which confirmed North Korea's nuclear and missile advances are on right path and will continue to the end. (KCNA)

US

Treasury trade was fairly lacklustre despite some early morning New York buyside flow. The Treasury curve continued to flatten, with the 5s30s spread narrowing by circa 1.5bps as CME Fed Fund futures price around a 75% chance of a Fed hike by year end. US Dec’17 10y T-note futures settled at 125.20, unchanged on the day.