• European bourses are mixed but little changed overall as sentiment remains choppy, FTSE underperforms on ongoing GBP strength
• EU’s Barnier is optimistic a deal can be reached today, but EU sources state there is now not enough time to formally sign a deal at tomorrow’s summit; DUP remain the critical voice at present
• In FX, a volatile session for GBP thus far with the remaining G10 currencies mixed vs. USD; debt complex is bid across the board
• US House passed a bill aimed at supporting the Hong Kong protests and China later responded by urging the US to stop pushing forward the bill which it strongly condemned; threatening to retaliate
• Looking ahead highlights include US Retail Sales & Business Inventories, Canadian CPI, APIs, Fed's Evans & Brainard, ECB's Lane, BoE's Carney & Haldane
• Earnings: PayPal, Netflix, IBM

ASIA-PAC

Asian equity markets traded mostly higher after taking impetus from the gains across global peers which were spurred by Brexit-related hopes on reports negotiators were closing in on a draft Brexit deal and as several large US banks kicked off a predominantly strong start to Q3 earnings season. ASX 200 (+1.3%) was led by Consumer Staples although commodity names lagged especially the gold producers due to recent losses in the complex and with Rio Tinto choppy despite strong Q3 iron ore shipment updates. Nikkei 225 (+1.2%) rose to a fresh YTD high and Chinese markets also initially conformed to the upbeat tone helped by strong loans and financing data, as well as the PBoC injection of CNY 200bln through its Medium-term Lending Facility, although the gains in Hang Seng (+0.6%) and Shanghai Comp. (-0.4%) were short-lived/trimmed as China urged US lawmakers to stop interfering and threatened to retaliate with strong measures after the US House passed a bill aimed at supporting the Hong Kong protests. Finally, 10yr JGBs were lower as they tracked the declines in T-notes with safe-haven demand subdued by the rally in stocks and with the BoJ also only in the market for T-bills. 

PBoC skipped open market operations but announced CNY 200bln of 1yr MLF loans with rates unchanged at 3.30%. (Newswires) PBoC set CNY mid-point at 7.0746 vs. Exp. 7.0708 (Prev. 7.0708)

US House passed a bill aimed at supporting the Hong Kong protests and China later responded by urging the US to stop pushing forward the bill which it strongly condemned, while it reportedly threatened to retaliate over the passage of the bill and urged US lawmakers to stop interfering. (Newswires)

Bank of Korea lowered the 7-Day Repo Rate by 25bps to 1.25% as expected and stated the South Korean economy is to grow less than 2.2% this year, with inflation to fall short of July projection. Furthermore, BoK Governor Lee said board members Lee and Lim dissented in today's rate decision and that he sees there is still room to further ease policy if required but added it is premature to talk about unconventional tools and that the BoK is to watch the effect of its recent 2 rate cuts for the time being. (Newswires)

US

Fed's Daly (non-voter, dove) said the US economy and policy accommodation is currently in a good place, while Daly added that she is watching for any changes to domestic momentum or headwinds for the economy. (Newswires)

GEOPOLITICS

Trump Administration says that China's Cosco tankers carrying Iranian oil that shut off transponders are engaging in "dangerous behaviour", according to senior US officials. (Newswires)

US Senator Graham will introduce a bill on Thursday sanctioning Turkey for Syria incursion and that US prosecutors charged Turkey's Halkbank in regards to alleged Iran sanctions violations. (Newswires)

Turkey President Erdogan says he will evaluate whether to visit the US next month, after meeting US delegation in Turkey this week. (Newswires)

UK/EU

EU Brexit Negotiator Barnier told EU Commissioners he is optimistic of clinching a deal today, could go down the wire; VAT has emerged as a last minute problem, alongside concerns over "level playing field" provisions. (Twiter)

EU source states there is now not enough time to formally sign a Brexit deal at tomorrows summit, though there can still be a political 'yes' after-which EU/UK will need to return to finalise this., Express' Barnes. (Newswires)

EU said to see a Brexit deal as impossible unless the UK moves; talks have reached an impasse amid DUP resistance according to sources adding the fate of a deal now hinges on the UK, according to sources. (Newswires)

Chances of a Brexit deal are low, DUP seem unlikely to support anything that is negotiable, according to ITV's Peston citing a government source. Additionally, UK Official says the Government are downbeat on the prospect of a Brexit deal, stating the DUP are holding up progress and currently the chances of a deal are low (Twitter/Newswires)

A large split reportedly opened up among Tory Eurosceptics whether to back PM Johnson's Brexit plan with some in the ERG supporting it, whilst others spoke out against it. (The Sun) DUP said gaps remain before it will support any fresh Brexit agreement following meeting with PM Johnson and reportedly will not back a Brexit deal if UK PM Johnson makes more concessions to the EU according to a source. However, reports later noted the DUP was said to be asking for billions for Northern Ireland for them to accept PM Johnson's deal. (Newswires/Daily Mirror/FT) UK PM Johnson is to brief his cabinet at 1600BST today, prior to a scheduled 1922 Committee meeting at approx.19:30BST. (Guardian)

UK Brexit Secretary Barclay has told the Brexit committee that PM Johnson will write a letter seeking a delay in the event a deal is not secured by Saturday; noting the PM will comply with the law and court undertakings., Telegraph's Hope. (Twitter)

Political correspondent Dave Keating tweeted people are now talking about the effective deadline of 1300BST in EU/UK negotiations. (Twitter)

Hundreds of entrepreneurs have written to PM Johnson, urging him to avoid any further delays to Brexit as “this rank uncertainty is crippling British business and it cannot continue”, according to the Telegraph. (Telegraph)

German Officials note a shift in the CDU fiscal stance: may drop the balanced budget goal in the event the downturn deepens, softening opposition towards fiscal stimulus and are preparing for this if GDP is impacted., according to sources. (Newswires)

UK CPI YY (Sep) 1.7% vs. Exp. 1.8% (Prev. 1.7%); MM (Sep) 0.1% vs. Exp. 0.2% (Prev. 0.4%)

- UK Core CPI YY (Sep) 1.7% vs. Exp. 1.7% (Prev. 1.5%); MM (Sep) 0.2% vs. Exp. 0.2% (Prev. 0.4%)

EU HICP Final YY (Sep) 0.8% vs. Exp. 0.9% (Prev. 0.9%, Rev. 1.0%)

- EU HICP-X F&E Final YY (Sep) 1.2% vs. Exp. 1.2% (Prev. 1.2%, Rev. 1.1%)

- EU HICP-X F,E,A&T Final YY (Sep) 1.0% vs. Exp. 1.0% (Prev. 1.0%, Rev. 0.9%)

EQUITIES

Major European bourses are flat (Euro Stoxx 50 +0.1%) in what has been a choppy session thus far, as global equities consolidate following yesterday’s rally, spurred by increasing hopes that a Brexit deal may soon be struck. Given the associated rally in Sterling since the start of the week, the FTSE 100 (-0.1%) modestly underperforms. Looking ahead, traders will be eyeing earnings from US heavy weights Netflix, IBM, Bank of America and PayPal, US Retail sales data and a slate of Fed, ECB and BoE speak. In terms of the sectors; Materials (-0.8%) and Financials (-0.4%) are laggards, with the former pressured by a decline in base metal prices and a fall in yields (as bonds rebound off yesterday’s lows) pressuring the former. Conversely, Health Care (+0.5%) is an outperformer, with Roche (+0.4%) providing support after solid earnings. In terms of other notable movers; Asos (+20.1%) shares shot higher at the open after strong earnings; the Co. reported pretax earnings and revenue that exceeded forecasts. Meanwhile, disappointing numbers kept shares of ASML (-0.6%), TomTom (-5.0%) and Wacker Chemie (-1.4%) on the back foot. Elsewhere, Infineon (-1.4%) shares were under pressure following a broker downgrade at SocGen.

FX

GBP - The Pound’s almost interminable and total dependence on Brexit developments continues, with only a token nod to mixed/softer elements via UK CPI and PPI metrics, before returning to headline and screen watch amidst dwindling hopes that a deal can be found in time for the looming ‘deadline’. In short, prospects of a compromise on the Irish backstop and compatible customs arrange for the border looks set to be dashed at the final hour by ongoing DUP resistance, and in stark contrast to the mood late yesterday when negotiations were said to be close to draft stage. Accordingly, Cable has reversed further from around 1.2800 to just above 1.2650 before picking up again and Eur/Gbp rebounded to circa 0.8720 vs 0.8628 or so at one stage.

NOK/NZD - The other G10 underperformers, as the Norwegian Krona plunges to fresh ytd lows under 10.1350 and not far from weakest levels on record on a mixture of bearish technical impulses, less supportive Norges Bank policy vibes and perhaps more data reflection/retrospection following September’s trade balance swinging from surplus to shortfall. Conversely, the Kiwi has pulled back from 0.6300+ recovery highs towards 0.6260 even though NZ CPI was a tad firmer than forecast, as subsequent comments from RBNZ Deputy Governor Bascand reaffirmed that there is scope for more easing as the economy is still prone to contagion from external shocks.

JPY/CHF/EUR/CAD/AUD - The safe-haven Yen and Franc (plus Gold on the commodity side) have pared some losses due to the aforementioned dampened Brexit/broader risk sentiment and have both returned to range trade mode awaiting more unfolding news on top of anything else on the US-China and geopolitical front. Usd/Jpy and Usd/Chf are meandering between 108.86-60 and 0.9990-62 parameters respectively, while the Euro and Loonie are also relatively contained after the former reclaimed 1.1000+ status and latter rebounded through 1.3200. Eur/Usd is currently just under 1.1050 and some tech levels close by (50 DMA at 1.1040 and a 1.1055 Fib), with decent option expiries also keeping the headline pair in check (1.1025 in 1.1 bn, 1.1050-60 in 1.2 bn and 1.3 bn at the 1.1075 strike), while Usd/Cad is consolidating back over the big figure in the run up to Canadian inflation data. Elsewhere, the Aussie is also on the defensive into data (labour report tomorrow) within a 0.6755-25 band, albeit holding up a bit better than its Antipodean peer on favourable crosswinds as Aud/Nzd bounces firmly (1.0750+ at present).

EM - The Rand and Lira are trying to withstand another bout of selling pressure in wake of more negative factors in the form of Eskom cutting power supply and more sanctions against Turkey from the US. Usd/Zar and Usd/Try have been up at 15.0500 and 5.9310, but the latter is now sub-5.9000 after probable state bank intervention.

New Zealand CPI (Q3) Q/Q 0.7% vs. Exp. 0.6% (Prev. 0.6%). (Newswires) New Zealand CPI (Q3) Y/Y 1.5% vs. Exp. 1.4% (Prev. 1.7%)

RBNZ Deputy Governor Bascand said we remain vulnerable to external shocks and lower rates may still be needed to achieve targets, while he added the domestic economy is in a good place and it is a reasonable prospect for rates to go lower. (Newswires)

FIXED

Some consolidation has seen debt futures drift from recovery highs of 172.29, 132.84 and 130.07+ for the 10 year German, UK and US benchmarks, but they all retain gains and varying degrees of safe-haven premium given renewed Brexit no deal risk, heightened geopolitical tensions and residual uncertainty about US-China trade pact Phase 1. Ahead, US retail sales may provide an interlude from all the above along with Central Bank speakers, but probably not for long.

COMMODITIES

WTI and Brent futures are mixed/flat with little by way of fresh catalysts for the complex as eyes remain on any US-Sino and Brexit developments alongside geopolitical news-flow. The former resides just around the 53/bbl mark after having traded on either side of the level during APAC trade, whilst its Brent counterpart trades just below the 59/bbl level as Brexit optimism spurred some gains in energy futures. In terms of production figures, TASS reported that Russian oil output in the first half of October stood at 11.23mln BPD, which is 19.7k BPD less than September levels. On the geopolitical front, the Trump Administration said that China's Cosco tankers carrying Iranian oil that shut off transponders are engaging in "dangerous behaviour", according to senior US officials. The announcement itself did little to sway prices but it’s worth keeping in mind future implications/impact it may have on trade talks. As a reminder, tonight will see the release of the weekly API crude inventory data. Looking at metals, gold is relatively flat within a tight range below the 1500/oz mark, albeit the yellow metal is supported by the latest Brexit sources which stated that the UK and EU are reportedly at an impasse. Meanwhile, copper is underperforming with the red metal back below the 2.60/lb mark despite seemingly bullish supply side developments with copper disruption and lower Rio Tinto copper output. ING highlights that MMG has halted almost 90% of mining capacity at its Peruvian Las Bambas mine (400k tpa) whilst Chilean mineworkers at its Carmen de Andacollo (60K tpa) have been on strike for the past two days. Further reports also stated that Antofagasta’s Antucoya (72k tpa) Chillean mine will see strikes amid a row.

CME raised NatGas Henry Hub futures margins by 10% to USD 2200 per contract from USD 2000. (Newswires)

Trump Administration says that China's Cosco tankers carrying Iranian oil that shut off transponders are engaging in "dangerous behaviour", according to senior US officials. (Newswires)