• Asian bourses were mixed as trade concerns and a weakening CNH clouded over the mostly positive lead from Wall St.
• EU negotiators are reportedly considering extending Article 50 as fears mount that talks will not conclude in time for both the UK and EU to meet the 29 March 2019 deadline
• Looking ahead, highlights include, UK retail sales, Philly Fed, SARB rate decision, Fed’s Quarles, ECB’s Coeure, UK Brexit Secretary Raab meets with EU’s Barnier and supply from Spain, France and the UK

ASIA

Asian bourses were mixed as trade concerns and a weakening CNH clouded over the mostly positive lead from Wall St where earnings remained in focus and the DJIA notched a 5th consecutive gain. ASX 200 (+0.4%) and Nikkei 225 (Unch.) both opened higher with outperformance in industrials and mining related sectors, while corporate updates also spurred trade. Shanghai Comp. (-0.5%) and Hang Seng (Unch.) initially gained after further liquidity efforts by the PBoC and with the central bank mulling incentives to bolster lending. However, gains were capped amid the ongoing US-China trade friction including recent comments from NEC Director Kudlow who believes President Xi Jinping is 'holding up' progress on trade talks and is doubtful on the Chinese leader’s intention of following through on trade reforms, while concerns triggered by considerable CNH weakness pushed Chinese bourses past the tipping point and in turn pared gains in Japan. Finally, 10yr JGBs were uneventful with prices flat for most the session although some support was seen in late trade as Japanese stocks wiped out gains, while a reduction in the BoJ’s Rinban purchases of 10yr-25yr and 25yr+ bonds also failed to spur any reaction.

PBoC injected CNY 70bln via 7-day reverse repos and CNY 30bln via 14-day reverse repos, for a net daily injection of CNY 70bln, while the PBoC was also reported to gauged 1yr Medium-term Lending Facility demand for today. (Newswires)

PBoC set CNY mid-point at 6.7066 (Prev. 6.6914)

PBoC is said to mull incentives to improve liquidity in banks, as well as help expand lending and bond investments, while PBoC is also reported to be using its MLF to bolster lending activity among banks. (Newswires)

UK/EU

EU negotiators are reportedly considering extending Article 50 as fears mount that talks will not conclude in time for both the UK and EU to meet the 29 March 2019 deadline. (City AM)

UK PM May will go on a tour of Britain this summer in an attempt to convince sceptical Tory members to back her plan for Brexit. (Times)

UK International Trade Secretary Fox has warned the European Union that member states will face stark economic consequences if Britain leaves the bloc without a deal next year. (Times)

UK Tory MP Simon Clarke, who withdrew his letter of no-confidence against the PM, said now is not the time for a leadership contest and that UK PM May will face a 'moment of truth' over her Chequers' compromise when Brussels responds. (Newswires)

FX

In FX, USD traded lacklustre overnight following yesterday’s pullback, although the DXY has found a base at the 95.00 level. Trade in the greenback’s major counterparts also left much to be desired with EUR/USD and GBP/USD little changed but well off recent lows, especially for GBP/USD after reports EU negotiators are considering extending Article 50 which provided the pair with some relief from PM May’s ongoing Brexit headache and recent CPI data. Elsewhere, AUD outperformed following a stellar jobs reports in which Employment Change surpassed forecasts at 50.9k vs. Exp. 17.0k which was predominantly fuelled by Full-Time jobs, while CNH was heavily pressured following the currency fix in which the PBoC weakened the reference rate beyond the psychological 6.7000 level.

Australian Employment Change (Jun) 50.9k vs. Exp. 17.0k (Prev. 12.0k, Rev. 13.5k). (Newswires)
Australian Full Time Employment Change (Jun) 41.2k (Prev. -20.6k, Rev. -19.9k)
Australian Unemployment Rate (Jun) 5.4% vs. Exp. 5.4% (Prev. 5.4%)
Australian Participation Rate (Jun) 65.7% vs. Exp. 65.5% (Prev. 65.5%)

Swiss Finance Minister said the CHF remains overvalued against the EUR but added that they can live with this. (Newswires)
 

COMMODITIES

Commodities were quiet overnight with WTI crude flat as it took a breather from the prior day’s rebound and with resistance at USD 69.00/bbl capping further upside. Gold prices were also range-bound and failed to take advantage of the recent pullback in the greenback, while copper mirrored the lacklustre tone across most the commodities complex as trade tensions and lingered and CNH weakness clouded risk sentiment.

OPEC+ members are to hold monthly meetings to monitor the oil market, while it was also reported that OPEC and non-OPEC compliance with oil output curbs has declined to 120% in June from 147% in May according to sources. (Newswires)
 

GEOPOLITICAL

US President Trump said he holds Russian President Putin responsible for meddling and that he told Putin 'can't have meddling', while Trump also commented he accepts Director of National Intelligence's conclusion that Russia continues to meddle in election. (CBS News/Newswires)

US President Trump initially answered “no” when asked by a reporter if Russia was still targeting the US, although White House Press Secretary Sanders later stated the President was declining to answer shouted questions when he said "no," and not disputing intelligence findings. (Newswires)
 

US

Treasuries were pretty much unchanged on Wednesday as action remained contained amid shy volume in the complex. Yields were mixed across the curve but changes were close to 1bps. In early trade, Treasury yields touched session lows pushing the yield curve at its flattest point in almost 11 years with 10yr yield at 2.850 on the back of a soft Housing Starts reading, which was the lowest in 9 months. The long end of the curve underperformed heading into the close. 2s30s widened by c.3bps whilst 2s10s, 2s5s widened by c.2bps at settlement. US 10YR T-notes futures (U8) settle 2 ticks lower at 120-02.

Fed Chair Powell said hiking gradually for now is the right way to prolong expansion. (Newswires)

Fed Beige Book stated that 10 of 12 districts reported ‘modest or moderate growth’, while it added that prices increased in all districts at ‘modest to moderate pace’ and expects price pressures to pick up in some districts. Fed also stated that manufacturers across all districts expressed concerns over tariffs in which many reported higher prices and supply disruptions due to new trade policy. (Newswires)

White House said the administration is continuing to talk to China regarding trade. Elsewhere, White House is reportedly aiming for a trade deal with Mexico before AMLO's inauguration in December which it thinks will spur a deal with Canada, while there were also reports that the White House sees a lot of progress on trade talks with Mexico but is continuing both NAFTA tracks including with Canada. (Axios/Newswires)

Mexico’s Economy Minister Guajardo said it is technically possible to reach a NAFTA deal before the next Mexican government takes office on December 1st and that they are still seeking a three country NAFTA deal. Guajardo added that he hopes to be in position to sign a deal by the end of November and hopes for an agreement in principal to be announced by the end of August, while he reiterated moving from NAFTA to a bilateral trade agreement with the US would be costly and effectively be similar to starting from scratch. (Newswires)

US began section 232 investigation on uranium imports, while there had been earlier comments from Canadian Foreign Minister Freeland that Canada's Uranium is not a threat to US security. (Newswires)