• Asian equity markets modestly higher following the positive close on Wall Street in which the DJIA touched 23,000 for the first time
• CAD and MXN notably firmer after NAFTA ministers agreed to extend negotiations into 2018.
• Looking ahead, highlights include UK Jobs report, US Housing Starts and comments from ECB’s Draghi, Praet and Coeure.

ASIA

Asia equity markets traded with marginally positive following a similar picture in US where S&P 500, DJIA and Nasdaq 100 extended on record levels, in which the DJIA briefly surmounted the 23,000 milestone for the 1st time ever. The mild momentum from the historical feat in US carried over to Asia which saw ASX 200 (+0.1%) briefly above 5,900 and at its highest in almost 6 months, while Nikkei 225 (+0.1%) also eked minor gains. Hang Seng (Unch) and Shanghai Comp. (+0.3%) were kept afloat after a continued substantial liquidity operation by the PBoC, although upside was capped as focus remained on the 19th CPC National Congress which opened today. Finally, 10yr JGBs were flat amid a lack of drivers and with demand restricted by a mildly positive tone in Japan and a tepid BoJ Rinban announcement for JPY 400bln of JGBs.

Chinese President Xi delivered address at the opening of the 19^th CPC National Congress in which he said China will continue to reduce overcapacity and that China will deepen interest rate and FX reform. President Xi also commented that China will lower barriers of entry for foreign businesses and that GDP is to increase to CNY 80tln from CNY 54tln over the next half-decade. (Newswires)

PBoC injected CNY 160bln via 7-day reverse repos and CNY 140bln via 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.5991 (Prev. 6.5883)

EUROPE

ECB's Hansson stated that economic optimism may warrant small monetary alterations. (Newswires)

CUP Party of Catalonia said independence will be proclaimed within days. (Newswires)

Milan is to vote on Sunday whether it wants representatives to negotiate with the central government particular conditions of autonomy and on receiving a greater return on taxes, while Venice will also hold a similar vote in tandem. (Newswires)

UK

UK Trade Secretary Fox said substantial work is being done to prepare for no deal scenario and that the UK may initially be worse off in the case of no Brexit deal. (Newswires)

EU chief Brexit negotiator Barnier commented that Brexit progress is not there at this point. (Newswires)

FX

FX markets were relatively quiet amid a scarce data calendar for the Asia-Pac region, which helped the greenback retain most of the prior day’s strength where focus was on Fed speakers as well as a hawkish leaning Taylor being among the front runners for the Fed chair role. GBP/USD re-approached the 1.3200 handle as it attempted to nurse some of yesterday’s losses which were amid comments from BoE’s Ramsden that he was not among those who believed that the Bank should necessarily hike in the coming months, while Tenreyro also warned a premature hike could turn out to be a mistake. Elsewhere, CAD and MXN remained firm on NAFTA hopes after ministers reportedly agreed to extend negotiations into next year.

NAFTA Ministers reportedly agreed to extend negotiations into 2018. (Newswires)

New Zealand First Party MP Patterson said the party is at the business end of deciding on government coalition partner and that the party is 98% there on policy discussions, while there were later reports that party will make an announcement on negotiation results tomorrow afternoon. (Newswires)

US Treasury released its semi-annual FX report in which it didn't name any manipulators and removed Taiwan from the watchlist, while China, Japan, South Korea, Germany and Switzerland were kept on the watchlist. (Newswires)

COMMODITIES

Commodities were relatively rangebound in which gold languished below the USD 1300/oz level as greenback maintained recent gains, while WTI crude futures only found modest support from a larger than expected drawdown in weekly API crude inventories. Copper prices were also sideways overnight, but reclaimed the USD 3.20/lb level amid a mild positive risk tone.

US API weekly crude stocks (13 Oct, w/e) -7.130M (Prev. 3.097M). (Newswires)

Iran deputy oil minister said OPEC has a general agreement for oil output extension. (Newswires)

US

Yields on two-year Treasuries rose to the highest since 2008 on Tuesday following US import and export data; five-year yields were also higher, though yields in the belly- and long-end of the curve fell slightly. Accordingly, the 2s10s spread fell to the lowest since August 2016, while the 5s30s curve narrowed to the lowest since 2007. US 10-Year T-Note Futures settled just half a tick higher at 125-14.

Fed discount rate minutes stated that 11 banks sought no change and Kansas City sought to hike, while some directors noted inflation was somewhat below 2% goal. (Newswires)

Fed's Harker (Voter, Soft Hawk) said that there is very little slack remaining in the labour market nationally, while he also stated he sees 1 more rate hike this year and 3 next year. (Newswires)

US President Trump is reported to likely announce Fed chair pick from a pool of five candidates, with an announcement expected before Trump departs for his Asia trip on November 3rd. (Newswires)

GOP Senator Alexander said he reached a deal with Democrat Senator Murray to stabilise Obamacare which President Trump noted was a short-term deal that would last for 1 or 2 years, while US Senator McCain said he will back the Alexander-Murray health agreement. (Newswires)

US Treasury Secretary Mnuchin said infrastructure is too complicated to pair with tax plan, while he added that everything is negotiable on taxes aside from the corporate tax rate. (Newswires)