• BoJ maintained QQE with Yield Curve Control and kept NIRP unchanged at -0.1% as expected
• A cautious tone persisted in Asia as the region digested softer than expected Chinese PMI data and a dampened lead from the US
• Looking ahead, highlights include Eurozone GDP, APIs. German equities closed for Reformation Day

ASIA

A cautious tone persisted in Asia as the region digested softer than expected Chinese PMI data and a dampened lead from the US where reports suggested corporate tax cuts could be gradual. ASX 200 (-0.2%) was indecisive and failed to maintain early energy-led gains, while Nikkei 225 (-0.1%) was dampened by a firmer JPY and with SoftBank among the worst performers on reports it plans to abandon merger talks between its unit Sprint and T-Mobile US. KOSPI (+0.8%)gained after reports China and South Korea agree to resolve THAAD-related dispute and with Samsung shares buoyed by record quarterly profits, while Shanghai Comp (-0.3%) and Hang Seng (-0.3%) weakened following the miss on Chinese Manufacturing PMI and with some of the big 4 banks pressured post-earnings. Finally, 10yr JGBs were relatively flat with only minimal gains seen amid a risk averse tone in Japan and after an unsurprising BoJ policy announcement where dovish dissenter Kataoka suggested more easing.

Chinese Official Manufacturing PMI (Oct) 51.6 vs. Exp. 52.0 (Prev. 52.4). (Newswires)

Chinese Non-Manufacturing PMI (Oct) 54.3 (Prev. 55.4)

PBoC injected CNY 140bln in 7-day reverse repos, CNY 60bln in 14-day reverse repos and CNY 100bln in 63-day reverse repos.

PBoC set CNY mid-point at 6.6397 (Prev. 6.6487). (Newswires)

BoJ maintained QQE with Yield Curve Control and kept NIRP unchanged at -0.1% as expected. The decision to keep QQE with YCC was made by 8-1 vote, with Kataoka as the dissenter again who suggested the BoJ needs to buy JGBs so that 15yr yield stays below 0.2%, while Kataoka also commented that the BoJ should ease if domestic factors lead to delays in reaching the inflation target. In terms of changes to its outlook forecasts, the BoJ raised FY 17/18 Real GDP growth forecast to 1.9% from 1.8%, while it cut Core CPI forecasts to 0.8% from 1.1% for FY 17/18 and to 1.4% from 1.5% for FY 18/19. (Newswires)

EUROPE/UK

UK Chancellor Hammond has informed his cabinet colleagues he will not break his fiscal rules to increase public spending in next month’s Budget. (FT)

Britain is pressing for “continuous” Brexit negotiations in an attempt to unpick the continuing deadlock between the two sides over the so-called Brexit bill, the Telegraph can disclose. (Telegraph)

A Brexit deal with the EU would need to be ensspanined in law and be subject to scrutiny and a vote by MPs and peers, ministers have conceded. (Times)

UK GfK Consumer Confidence (Oct) -10 vs. Exp. -10 (Prev. -9). (Newswires)

UK Lloyds Business Barometer (Oct) 26 (Prev. 23)

FX

FX markets were relatively quiet as focus remained on this week’s looming key risk events. This kept the greenback flat despite mild pressure in its major counterparts including a pullback in EUR/USD, while GBP/USD briefly broke below the 1.3200 handle. Elsewhere, NZD wobbled on poor Business survey data and USD/JPY languished near the 113.00 level as the BoJ policy decision failed to provide any major surprises, although board member Kataoka proved to be too dovish for the BoJ again and dissented for a 2^nd consecutive meeting.

New Zealand ANZ Business Confidence (Oct) -10.1% (Prev. 0.0%). (Newswires)

New Zealand ANZ Activity Outlook (Oct) 22.2% (Prev. 29.6%)

COMMODITIES

Commodities traded lacklustre overnight in which WTI crude futures consolidated around USD 54/bbl. Elsewhere, the metals complex was equally drab with a non-committal tone in gold ahead of this week’s FOMC and NFP, while copper lacked impetus amid a cautious risk tone and after weaker than expected PMI data from its largest consumer China.

US

The US Treasury curve bull-flattened on Monday, with yields lower by between 2-5bps. Among the focus was the decline in 10-year yields, which have again fallen beneath the psychological 2.40% mark.  The initial decline in yields was attributed to (yet another) story suggesting that Governor “Jay” Powell is favourite for the Fed chair gig. The long-end also caught a bid after US Treasury Secretary Mnuchin said there was low demand for an ultra-long bond, though he would continue to monitor the situation. Furthermore, the apparent difficulties on tax reform were also said to have contributed to buying and US T-Note Futures Settled 13+ ticks higher at 125-00+.

Sources suggest that the US House of Representatives is said to be discussing phase-in of corporate tax cut, plan would cut corporate rate gradually, reaching 20% in 2022. (Newswires)