• European equities are choppy, sectors are mixed, risk tone remains tentative
• UK government published the Withdrawal Agreement Bill on Monday which will see its first vote at 1900BST on Tuesday
• Canadian PM Trudeau's Liberal Party won the Canadian General Election but fell short of an outright majority
• Looking ahead, highlights include Canadian Retail Sales, US Existing Home Sales, Richmond Fed and APIs, NZ Trade, RBA Assistant Governor Kent, vote on 2nd reading of WAB, supply from UK and US
• Earnings: McDonald’s, Procter & Gamble, Restaurant Brands, UPS, United Technologies, Kimberly Clark, Lockheed Martin

ASIA-PAC

Asian equity markets traded mostly positive amid mild tailwinds from Wall St where all major indices edged higher and the S&P 500 closed back above the 3000 milestone with sentiment underpinned as officials continued to suggest optimism regarding a trade deal, although gains were capped amid a light calendar, Japanese holiday closure and ahead of a busy week of earnings stateside. ASX 200 (+0.3%) was positive with the index propped up by strength in the commodity-related sectors aside from gold miners after the precious metal trickled further below the USD 1500/oz level, while corporate updates also provided a catalyst. Hang Seng (+0.2%) and Shanghai Comp. (+0.5%) were mixed despite a firm liquidity effort by the PBoC which conducted CNY 250bln of 7-day reverse repos for its largest daily net injection in nearly 5 months, with the mainland choppy ahead of upcoming earnings and with Hong Kong anticipating the announcement of further supportive measures for companies later today.

PBoC injected CNY 250bln via 7-day reverse repos for a daily net injection of CNY 250bln. (Newswires)

PBoC set CNY mid-point at 7.0668 vs. Exp. 7.0708 (Prev. 7.0680)

Senior Chinese Diplomat Wang Yi says China must take the necessary countermeasures to protect its interests, when asked about the trade dispute with the US. (Newswires)

US-China Business Council Executive said US companies are preparing for tensions with China to last beyond current trade discussions and have begun diversifying supply-chain investments away from China. (WSJ)

China Vice Foreign Minister Le Yucheng said China and the US should be partners for cooperation and that they achieved some progress in trade discussions, while he is hopeful of reaching an agreement and commented that the world needs openness and not decoupling or a new cold war. (Newswires)

China is confident of reaching a bilateral investment treaty with the EU, said Global Times citing China Foreign Minister Wang Yi.

(Twitter)

US

Canadian PM Trudeau's Liberal Party will form a minority government after winning Canada’s general election, but the party fell short of an outright majority. (CNN)

GEOPOLITICS

Turkey President Erdogan vows to go ahead with its Syria offensive "more strongly" if the US "breaks its promises". Further, Kurdish YPG Militia are to initially withdraw from the 120km strip of border with Turkey in Northeastern Syria, according to Turkish Security Forces sources (Newswires) 

UK/EU

UK government published the Withdrawal Agreement Bill on Monday night which will see its first vote at 1900BST on Tuesday, 1930BST will see the programme motion (approving the timetable) followed by a 3 hour debate on amendments. Wednesday will see 12 hours debating and voting on amendments from 1300BST. Thursday will host 8 hours of debate and a vote on the third reading. (Sky) Click here for analysis and a timetable.

UK government is facing trouble on WAB and that whips warned the programme motion vote will be tight with up to 20 Labour MPs needed to see off Tory rebels, while a Rainbow alliance is forming to enforce customs union on the future relationship not the exit deal, according to The Sun's political editor. (Twitter/The Sun) UK rebel MPs were reportedly warned that PM Johnson is expected to abandon the Brexit legislation rather than accept a customs union or 2nd referendum. (Telegraph)

EU Council President Tusk said the EU is to react to the UK's Brexit delay request in the coming days, and the EU is ready for all scenarios. Tusk also said he is consulting with EU leaders on how to respond to the British request for an A50 extension, reiterates a no deal Brexit will never be the EU's decision (Newswires/Twitter)

UK lawmaker Boles has proposed an amendment that would require the UK government by default to seek an extension of the transition to 2022 unless MPs pass a resolution to the contrary

UK opposition Labour Party will vote against Second Reading of the Withdrawal Agreement Bill, as well as the Programme Motion, The Times reports citing sources. Earlier reports via Laobur sources said to "heavily guide away" from reports that the party could abstain on the Brexit bill 2nd reading vote, according to BBC's Smith. (Twitter)

DUP still undecided on which way to vote on tonight's Programme Motion, reports the Telegraph's Rayner. Later sources noted that DUP likely to vote against the Second Reading and the programe motion tonight, sources.(Twitter)

EU said France's 2020 Budget seems in breach of rules and have asked for clarification. (Newswires)

EQUITIES

Major European bourses are choppy (Euro Stoxx 50 +0.1%) albeit, the region drifted back into positive territory following initially losses seen at the open. Constructive reports on the EU/China trade during the early EU session ultimately did little to shift the sentiment at the time. In terms of sectors, the picture is mixed; with Consumer Staples (-0.5%) and Health Care (-0.2%) propping up and Tech (+0.4%) and Energy (+1.0%) topping the performance table. In terms of individual mover; Just Eat (+24.7%) shares spiked higher on the news that Prosus NV had made a cash offer for the Co, valuing it at GBP 4.9bln, or GBP 7.10 per share, Just Eat has since rejected the offer stating that it significantly undervalues the Co. in combination with Takeaway.com. Novartis (+0.1%) opened higher after the Co. raised net sales guidance but gave away gains in-line with the market-wide decline. UBS (+1.6%), SAAB (+5.4%), Software AG (+9.3%) and Sunrise Communications (+2.5%) were also beneficiaries of strong earnings reports. Conversely, weak earnings from AMS (+0.2%), Thales (-2.2%) and Reckitt Benckiser (-3.3%) saw their respective share prices under pressure. In terms of broker moves, a downgrade for TUI (-5.7%) at Morgan Stanley saw the Co.’s shares sell off.

FX

USD - The Greenback is on a firmer footing, almost across the G10 board, with the DXY edging higher after testing support ahead of 97.000 yesterday and the index regains momentum to probe above 97.400 within a 97.440-259 range. However, the recovery looks largely due to declines in rival currencies rather than self-generated, as the Franc retreats further from recent peaks and Pound succumbs to a bout of more pronounced pre-UK Parliament vote jitters.

NZD/AUD - The Kiwi is off best levels, but still outperforming and maintaining a bullish bias while holding above 0.6400 vs its US counterpart and having breached 1.0700 against the Aussie. Conversely, Aud/Usd continues to fade ahead of 0.6900 even though news on US-China trade has been mainly constructive of late amidst signs of the pair reaching overbought levels and a decent option expiry at 0.6850 (850 mn) may also be weighing. Back to the Nzd, trade data looms and may provide some fundamental impetus, while the Aud could be prone to comments from RBA Deputy Governor Kent also due later.

CHF/GBP - The major laggards as noted above, with Usd/Chf nudging towards 0.9900 and Cable retreating further from Monday’s 1.3000+ peaks in the run up to the WAB 2nd reading in the HoC that could set-off a chain of further votes and an extremely compressed timetable to get Brexit legislation in place for October 31. The Pound is holding above 1.2900 and managing to contain its pullback vs the Euro to circa 20 pips below 0.8600, as the single currency also fades against the Dollar.

JPY/CAD/EUR - All narrowly mixed compared to the Buck, as the Yen meanders between 108.50-75, Loonie sustains gains within 1.3100-1.3070 parameters after the Canadian election and bulk of votes indicating that PM Trudeau is heading for a return to office with his Liberal Party, but also conscious that retail sales and the Q3 BoC business/loan survey are on tap and could impact. Elsewhere, Eur/Usd remains capped ahead of 1.1200 and has tested the 100 DMA (1.1136), but not convincingly.

EM - Although the Dollar has pared some losses vs G10 peers and the Yuan has eased from recent highs, several regional currencies are staging comebacks of their own, like the Rand and even the Lira despite the impending end of the ceasefire and ahead of Turkish President Erdogan’s meeting with his Russian counterpart. 

FIXED INCOME

Eurozone bonds continue to front-run the broad recovery from Monday’s settlement levels and even deeper session lows in some cases, but a solid 2025 UK Gilt sale has underpinned the rebound on Liffe to 131.72 for the 10 year benchmark at best (+33 ticks vs -5 ticks at one stage). Bunds have pulled up just shy of yesterday’s 171.46 high, at 171.45 (+56 ticks vs -13 ticks at worst), while perhaps more interestingly French OATs and Italian BTPs have hardly flinched even though the EU has qualms over respective 2020 budget drafts, with the latter perhaps encouraged by strong demand for the latest retail offering. Elsewhere, US Treasuries are reluctantly tagging along ahead of US data and 2 year supply with the curve fractionally flatter in advance.

COMMODITIES                                      

WTI and Brent futures are choppy but ultimately in the green. Upside in prices coincided with reports that Indonesia’s Pertamina has temporarily halted fuel distribution via the pipeline in parts of West Java due to an explosion. Local media noted that the fire broke out on parts of the pipeline due to drilling activity in close proximity, although this was not confirmed by Pertamina’s spokesperson. WTI prices gained traction above the 53.50/bbl and currently eyes its 200 WMA at 53.81/bbl, while its Brent counterpart rose comfortably above the 59.00/bbl mark. In terms of demand side commentary, Goldman Sachs lowered its 2020 oil growth demand outlook to 1.3mln bpd from 1.4mln bpd and sees US oil growth expectations to be reduced, while it suggested there is room for OPEC output to increase beyond 2020. For reference, the firm’s demand forecasts are modestly higher than that of the EIA, IEA and OPEC. Looking ahead, trader will be eyeing the weekly API crude data, but before that over in the UK, the vote on the 2nd reading of the Withdrawal Agreement Bill may prompt some sentiment-driven action. Elsewhere, gold prices remain firmer sub-1500/oz despite a bounce back in Dollar as participants could be hedging ahead of upcoming risk events, and with US-China also still on the radar. Meanwhile, Copper prices are on the backfoot today, mostly due to the indecisive risk sentiment coupled with a firmer Buck with prices back below 2.65/lb ahead of its 100 DMA at 2.63/lb. Finally, Dalian iron ore futures rose in excess of 1.2% at one point as the base metal was bouyed by continued supply woes after Vale halted a tailing dam earlier this month followed by downgrades in FY iron ore and pellet sales guidance.

Russian Energy Minister Novak said US oil production is unlikely to grow at the same pace seen in previous years at current oil prices. (Newswires)