• Asian equity markets began November mostly on the front-foot led by the Nikkei 225 (+1.95%) as exporters benefited from a weaker JPY
• NZD outperformed after better than expected Employment Change and decline in the Unemployment Rate
• Looking ahead, highlights include UK Manufacturing PMI, ADP employment change, ISM manufacturing, DoEs and FOMC rate decision

ASIA

Asian equity markets began November mostly on the front-foot led by the Nikkei 225 (+1.95%) as exporters benefited from a weaker JPY and with Sony at its highest in over 9 years after its H1 profit more than tripled. Elsewhere, KOSPI (+1.1%) extended on record levels and ASX 200 (+0.5%) was also higher amid strength in commodity-related stocks. Hang Seng (+0.6%) and Shanghai Comp. (+0.1%) both initially conformed to the broad positive sentiment amid continued liquidity efforts by the PBoC, although mainland indices then trimmed gains in late trade. Finally, 10yr JGBs were flat with demand subdued amid the heightened risk appetite and with a firmer 10yr auction also largely ignored.

Chinese Caixin Manufacturing PMI (Oct) 51.0 vs. Exp. 51.0 (Prev. 51.0). (Newswires)

PBoC injected CNY 140bln via 7-day reverse repos, CNY 40bln via 14-day reverse repos and CNY 60bln via 63-day reverse repos.

PBoC set CNY mid-point at 6.6300 (Prev. 6.6487)

EUROPE/UK

UK BRC Shop Price Index (Oct) Y/Y -0.1% (Prev. -0.1%). (Newswires)

NIESR said it expects the BoE will begin a sustained rate-tightening cycle at Thursday's meeting and for BoE rates to peak at 2% in 2021, while it also sees UK inflation to peak at 3.2% in Q4. (Newswires)

All 9 members of The Times shadow monetary policy committee believe that the time has come for the BoE to raise rates. Four think that the Bank should also start preparing for further rises or a gradual unwinding of the GBP 435bln quantitative easing programme, (Times)

The UK Government and the European Commission have confirmed that Brexit negotiations will be held next week; ending uncertainty over when they would resume. (FT)

FX

NZD outperformed after better than expected Employment Change and decline in the Unemployment Rate, which spurred NZD/USD attempts on the 0.6900 level to the upside and pressured AUD/NZD briefly below the 1.1100 handle. Elsewhere, the remainder of currencies were mostly quiet as focus remained on the looming risk events, with USD mildly positive on approach to today’s FOMC. Furthermore, GBP/USD held onto most of the prior day’s gains ahead of an anticipated BoE rate hike on Thursday, while a positive risk tone continued to spur outflows from safe-haven JPY.

New Zealand Employment Change (Q3) Q/Q 2.2% vs. Exp. 0.8% (Prev. -0.2%). (Newswires)

New Zealand Unemployment Rate (Q3) 4.6% vs. Exp. 4.7% (Prev. 4.8%)

COMMODITIES

Commodities were mixed on what was a relatively flat trading overnight session in which WTI extended on recent gains following a larger than expected drawdown in headline API crude inventories and as all other components of the release also showed declining stockpiles. Elsewhere, gold failed to recover from the prior day’s selling with the USD steadfast in anticipation of the FOMC while and copper gained with bids seen from the open of Shanghai metals trade.

US API weekly crude stocks (23 Oct, w/e) -5.09M (Prev. 0.52M). (Newswires)

GEOPOLITICAL

US is said to pursue direct diplomacy with North Korea, according to senior State Department official Joseph Yun. (Newswires)

China Foreign Ministry said that China and South Korea will work towards denuclearisation of the Korean peninsula. (Newswires)

GLOBAL NEWS

Reports stated that 8 people were killed from what authorities confirmed was an act of terror in New York City where a suspect drove tspanough cyclists, before being shot by police and taken into custody. (Newswires)

US

Action on the Treasury curve was mixed on Tuesday, with yields little change, and 10-year yields remaining around 2.37%, maintaining the losses seen this week. The 30s bucket, however, was outperforming, with yields lower, with traders continuing to cite comments from Treasury Secretary Mnuchin yesterday, where he said there was little demand seen for an ultra-long bond. Finally, 10-Year T-Note futures for December settled 2+ ticks lower at 124-30.

US House Tax Committee Chairman Brady said that after consultation with President Trump and leadership team, they have decided to post pone the tax plan release to Thursday. (Newswires)

There were initial reports that GOP tax plan would delay repeal of estate tax and will have corporate taxes cut to 20% during the 1st year, according to sources. (WSJ) However, there were later conflicting reports that stated some House GOP Representatives were said to consider phasing out 20% corp. tax over a number of years. (Washington Post)