• European Cash indices are a touch firmer but little changed as markets await the US Jobs report
• Chinese Caixin Manufacturing PMI beat Exp.; foreign ministry says reports of a US/China leaders meeting in Macau is speculation
• US Secretary of State Pompeo said US is to impose new sanctions and nuclear curbs on Iran
• FX complex is little changed overall vs. a slightly softer USD
• Looking ahead highlights include US Labour Market Report, Construction Spending and ISM; Fed’s Clarida, Williams, Quarles, Kaplan & Daly
• Earnings: Exxon Mobil, Berkshire Hathaway, Abbvie, Chevron

ASIA-PAC

Asian equity markets mostly staged a turnaround of the weak lead from Wall St. where sentiment was dampened after mixed trade rhetoric stoked further US-China uncertainty and with participants tentative ahead of US NFP data, although risk appetite has somewhat improved with the help of encouraging Chinese Caixin Manufacturing PMI data. ASX 200 (+0.1%) was relatively flat as resilience in commodity related stocks just about offset the continued underperformance in the largest weighted financials sector, while Nikkei 225 (-0.3%) lagged and suffered the ill effects of the currency-risk dynamic. Hang Seng (+0.7%) and Shanghai Comp. (+1.0%) were initially weighed by a substantial weekly liquidity drain and after reports suggested that China had doubts about the possibility of a long-term trade deal with US President Trump amid concerns of his impulsive nature, although Chinese bourses later recovered following better than expected Chinese Caixin PMI data which matched its highest since February 2017. Finally, 10yr JGBs extended on the prior day’s rally following recent comments from BoJ Governor Kuroda who continued to stress the possibility for lower rates, while prices were also supported amid underperformance of Japanese stocks and with the BoJ present in the market for JPY 350bln in 5yr-10yr JGBs.

PBoC skipped open market operations for a net weekly drain of CNY 590bln vs. Prev. CNY 560bln net injection W/W. (Newswires) PBoC set CNY mid-point at 7.0437 (Prev. 7.0533)

Chinese Caixin Manufacturing PMI (Oct) 51.7 vs. Exp. 51.0 (Prev. 51.4). (Newswires)

China's Foreign Ministry says the reports of a Chinese/US leaders meeting in Macau is speculation. (Newswires)

Japan and China are considering signing a ‘fifth political document’ during Chinese President Xi visit to Japan in Spring 2020., according to Nikkei citing sources. (Nikkei)

GEOPOLITICS

US Secretary of State Pompeo said US is to impose new sanctions and nuclear curbs on Iran. (Newswires)

Yemen's Houthi's have reportedly downed a US-made drone near the border with Saudi., Sputnik. (Twitter)

UK/EU

Brexit Party leader Farage refused to rule out the prospect of his party withdrawing candidates from hundreds of seats in the upcoming elections. (Sky News)

UK Markit/CIPS Manufacturing PMI (Oct) 49.6 vs. Exp. 48.1 (Prev. 48.3). (Newswires)

EQUITIES

Major European Bourses are slightly firmer (Euro Stoxx 50 +0.2%) with the region buoyed by encouraging Chinese Caixin Manufacturing PMI which helped boost sentiment during APAC hours. Trade this morning has been tentative as is usually the case ahead of the US labour market report, with some gains handed back ahead of the release with US ISM Manufacturing PMI also on the docket. Sector performance is reflective of an improved risk tone; Tech (+0.7%), Energy (+0.7%), Materials (+0.5%), Industrials (+0.7%) and Consumer Discretionary (+0.7%) are all firmer, while Utilities (-0.3%), Consumer Staple (+0.3%) and Health Care (+0.1%) lag. Financials (U/C) are also lower; yields have broadly failed to recover since yesterday’s downbeat Chicago PMI and post-FOMC, while stock specific news in the form Danske Bank’s (-3.1%) earnings could also being weighing, after the Co. narrowed its FY19 net outlook to the lower end of range with further potential downside as the Russian Central Bank revoked the Co.’s license for its Russian unit. Elsewhere, stock specifics; DSV (+7.5%) shares are bid after solid earnings. Elsewhere, better than expected results from US Steel (X) is giving a boost to ThyssenKrupp (+1.6%) and Salzgitter (+0.5%). Softer earnings also see Aker ASA (-4.2%) shares under pressure, while Fiat Chrysler (+1.6%) opened lower amid ongoing protestation from various labour unions against the Co.’s proposed merger with Peugeot (+3.3%).

Goldman Sachs (GS) estimates upper end of reasonably possible aggregate legal loss of approx USD 2.9bln in September-quarter (vs USD 2.6bln at end of June-quarter). (Newswires) Co. are 6% lower in pre-market trade.

Apple (AAPL) may invest directly in Japan Display (6740 JT), according to reports. (Newswires)

FX

USD - The DXY seems to have stabilised after its post-FOMC reversal, with the index holding above the 97.000 level in a confined 97.162-348 range and the restrained trade reflecting the overall tone that often pans out in the run up to US labour data. Indeed, Usd/major pairings and even Dollar/EMs are relatively quiet and contained bar the odd exception.

G10 - As noted above, not much deviation across the board even though data and manufacturing PMIs have thrown up some surprises, like the more encouraging Chinese Caixin survey overnight. The Kiwi continues to outperform and sits firmer on the 0.6400 handle vs its US counterpart, while the Aussie appears wary about hefty option expiries at the 0.6900 strike and with the Aud/Nzd cross capped at 1.0750. Elsewhere, Cable only got a brief/modest lift from a significant UK PMI beat as sub-components were less upbeat and Brexit stock-piling flattered the headline number. Note also, expiry interest resides close by (1.1 bn at 1.2950) and 0.8600 is still proving impenetrable in Eur/Gbp pending the looming Brexit Party pre-election conference, as Eur/Usd remains solid around 1.1150 where a massive 3.1 bn expiries reside. Meanwhile, the Loonie remains rooted to 1.3150 and Franc is pretty resilient between 0.9855-75 and around 1.1000 vs the single currency amidst very mixed Swiss macro releases (CPI back in deflation, but retail sales and manufacturing PMI recovering quite well). Conversely, Scandi PMIs diverged further to provide some respite for the Norwegian Krona vs its Swedish peer and the Euro, as Eur/Nok tests 10.2000 vs Eur/Sek sticky above 10.7000.

EM - Contrasting fortunes for the Lira and Rand, as the former felt the weight of a bleak Turkish manufacturing PMI, but the latter took comfort from a decent improvement in SA (though still sub-50) awaiting Moody’s ratings review.

Notable FX Expiries, NY Cut:

- EUR/USD: 1.1100 (1.2BLN), 1.1150 (3.1BLN), 1.1175-80 (800M), 1.1200 (5.3BLN)

- GBP/USD: 1.2900 (2.4BLN), 1.2950 (1.1BLN)

- EUR/GBP: 0.8600 (570M)

- AUD/USD: 0.6870 (370M), 0.6900 (1.4BLN), 0.6915 (400M)

FIXED INCOME

Gilts have slipped to a minor new Liffe low at 132.62 (-22 ticks and 30 ticks off best levels) in wake of the UK manufacturing survey even though premature pre-October 31 stocking inflated the headline print and may now unwind given the latest Brextension. However, UK bonds may get another pre-NFP jolt via political impulses and news about the Brexit Party’s election strategy that might see candidates pulled for tactical reasons. Elsewhere, playing ranges and keeping powder dry for the big US releases and raft of post-FOMC Fed speakers remains prevalent for Bunds and US Treasuries, albeit latter after some big block trades in futures and options during the overnight session.

COMMODITIES                                      

Crude markets are treading water with little in the way of significant price action to report after the complex benefitted from the tailwind of firmer than expected Chinese PMI data. In fitting with market’s broader tentative feel, ranges are thin ahead of key today’s US data. For now, WTI Dec’ 19 and Brent Jan’20 contracts are consolidating around the USD 54.50/bbl and USD 59.90/bbl marks respectively. US Secretary of State Pompeo stated that the US is to impose further Iranian sanctions and nuclear curbs. Metals are similarly tentative ahead of headline US data; gold is holding onto yesterday’s gains, despite a recovery in risk appetite, and is rangebound around the USD 1510/oz mark for now. Meanwhile, Copper has stabilised after yesterday’s steep declines but been unable to garner significant impetus on the back of promising Chinese data. “The more downbeat sentiment came from China’s power sector” notes ING, “which is a key area for copper consumption”. Investment in power network infrastructure over the first nine months of 2019 declined 12.5% Y/Y, according to the Chinese Electricity Council.

CME raised NatGas Henry Hub December 2019 futures margins by 11.4% to USD 2450 per contract. (Newswires)