• Asian equity markets kick-started the week on the front-foot following a strong performance from Wall St., Japan was away on holiday
• US Commerce Secretary Ross said they are very far along in Phase 1 of the US-China trade deal, whilst USTR Lighthizer and WH Trade Adviser Navarro highlighted constructive talks with China
• SCMP opinion piece noted that China might make further compromises, but the Phase 1 deal does not provide any incentive for a more comprehensive agreement
• US Commerce Secretary Ross suggested the US may not need to impose auto tariffs later this month
• In FX, DXY was uneventful, EUR/USD and GBP/USD were little changed, USD/JPY was kept afloat by the positive risk tone
• Looking ahead, highlights include EZ Manufacturing PMI (Final); UK Construction PMI; US Factory Orders, ECB’s Lagarde & Fed’s Daly
• As a reminder, US Daylight Saving time ended on Sunday, hence the London to New York time gap has returned to 5 hours

TRADE

USTR Lighthizer said the US and China had a constructive call on Friday and made progress in a variety of areas, while he added discussions are to continue at deputy level and that they are in process of resolving outstanding issues. In related news, there were also comments from White House Trade Adviser Navarro that the sides had good talks, while he also suggested the trade deal with China will require 3 phases. (Newswires)

US Commerce Secretary Ross said they are very far along in Phase 1 of the US-China trade deal. Ross separately commented that they had positive conversations with Europe, Japan and South Korea, while he suggested they may not need to impose auto tariffs later this month and that talks with companies about their capital investment plans may help avert tariffs. (Newswires)

China's MOFCOM said US-China talks achieved a consensus in principle and we're constructive, while the sides discussed the next step in trade consultations. (Newswires)

An SCMP opinion piece noted that China might make further compromises, such as reducing tariffs on imports, removing some non-tariff barriers, strengthening IP protection and further opening its markets to avert a full-blown trade war. However, the article noted that the Phase 1 deal does not provide any incentive for a more comprehensive agreement. (SCMP)

US officials stated they are disappointed by the WTO decision that ruled in favour of China and approved USD 3.6bln worth of sanctions on the US, although they see no impact of the decision on ongoing trade talks. (Newswires)

US President Trump floated the idea of Iowa as the replacement location to hold the signing of the phase 1 of US-China trade agreement. (Newswires)

ASIA-PAC

Asian equity markets kick-started the week on the front-foot as the region took impetus from the record highs on Wall St. last Friday following a better than expected Non-Farm Payrolls report and constructive call between top US-China trade negotiators in which progress was said to be made in a variety of areas. ASX 200 (+0.3%) was lifted by outperformance in the mining related stocks due to the trade optimism and after the recent rally in oil prices, but with gains in the index limited by weakness in the largest weighted financials sector after Big 4 bank Westpac reported a decline in its FY profit. Hang Seng (+1.4%) and Shanghai Comp. (+0.6%) were also positive with the trade optimism turned up a notch after the recent top-level call, with even White House Trade Adviser and China-hawk Navarro noting the sides had good discussions and US President Trump also floated Iowa as a location for the signing of a phase 1 deal. Furthermore, strength in oil names contributed to the outperformance in Hong Kong, and Japanese markets remained closed today for Culture Day.

PBoC skipped open market operations for a net neutral daily position, but will conduct MLF operations tomorrow (Newswires) PBoC set CNY mid-point at 7.0382 vs. Exp. 7.0361 (Prev. 7.0437)

UK/EU

UK Brexit Party Leader Farage said he won’t stand as a PM candidate in the upcoming general election on December 12th. (BBC/FT)

UK Election Polling: - YouGov and Opinium (30th October – 1st November) – Conservatives with a 12-16 point lead over Labour vs. Prev. 8-11 point lead (29th – 31st October).

- YouGov poll notes that Labour gained 6 points in the 30th October – 1st November polling period while Conservatives gained 3; hence, their lead is narrowing. Liberal Democrats on 16% (-3) for this period. (Times/Newswires)

UK Lloyds Business Barometer (Oct) 6 (Prev. 2). (Newswires)

SNB President Jordan reiterated that he sees further room to cut rates and further monetary policy loosening may become necessary under certain circumstances. Jordan also reiterated that the CHF is still highly valued. (NZZ am Sonntag) For reference, the SNB will conduct its next monetary policy review on December 12th. 

FX

In FX markets, the DXY was uneventful which is archetypal of the post-FOMC lull and alongside a similar humdrum tone in its major counterparts with EUR/USD and GBP/USD little changed at the 1.1100 and 1.2900 handles respectively. Furthermore, the Brexit related headlines have all but died out with attention for GBP now centred on next month’s election and the power broking attempts, although UK PM Johnson has rejected Brexit Party Leader Farage's offer of forming a Leave alliance despite the latter planning to contest every seat if they cannot form a pact. Elsewhere, USD/JPY and JPY-crosses were kept afloat by the positive risk tone but with gains capped amid the lack of Japanese participants, while antipodeans also benefitted from the risk appetite coupled with a stronger CNY post-fix, although AUD lagged its trans-Tasman counterpart following a pullback in AUD/NZD from resistance around 1.0750 and after weaker than expected Retail Sales data.

Australian Retail Sales (Sep) M/M 0.2% vs. Exp. 0.5% (Prev. 0.4%). (Newswires) Australian Retail Trade (Q3) Q/Q -0.1% vs. Exp. 0.2% (Prev. 0.2%)

Moody’s affirmed South Africa at BAA3; Outlook cut to Negative from Stable. (Newswires)

COMMODITIES

Commodities were mixed in which oil prices took a breather from Friday’s rally in which the energy complex was underpinned by the stronger than expected US jobs numbers and US-China trade optimism. Furthermore, a continued decline in the latest Baker Hughes rig count added to the bullish catalyst for prices, although the rally has since lost some steam with prices marginally pulling back to below the USD 56.00/bbl level. Gold prices were flat amid a similar uneventful session for the greenback, while copper prices only mildly benefitted from the broad positive risk tone. 

Saudi Arabia have confirmed that Saudi Aramco is to be publicly floated, currently no indication on the timing, price or magnitude of the IPO. Reports note scepticism that Aramco will achieve its USD 2trl valuation, likely to be closer to USD 1.5trl. Stake offered could be between 1-3% valued at USD 15-60bln. (Times/Newswires)

Baker Hughes US rig count (Nov 1) oil rigs -5 at 691, nat gas rigs -3 at 130, total rigs -8 at 822. (Newswires)

GEOPOLITICS

Reports via China People’s Daily, the communist party’s mouthpiece noted that government employees’ careers are at stake as it flagged intervention in senior appointments. (Newswires)

Venezuela and El Salvador have expelled each other’s diplomats. (Newswires)

US

Treasuries pared gains and yields were higher across the curve by around 3bps, though major curve spreads were little changed at settlement, after the US employment situation report surprised to the upside, although action was still tentative ahead of the manufacturing ISM, which missed expectations, though rose versus the prior. Additionally, commentary around US/China trade has been constructive, giving hopes that the Phase One deal can be signed, while there was not much in the Fed-speak for the FI bulls, with officials generally encouraged by the state of the economy, while noting familiar risks. Combined, it might that pricing for December rate cuts lightened, with money markets implying around 12.5% chance of a cut, versus around 22% at the close of business on Thursday. T-note futures (Z9) settled 9 ticks lower at 130-00+.

Fed's Clarida (Voter, Neutral) said Fed policy is unlikely to change unless there is a change in outlook and suggested a shift this year has provided significant support, while he also stated that global risks still exist and that the full impact of Fed policy shift is yet to be felt. (Newswires)

Fed's Quarles (Voter, Neutral) said US economy is doing well and that he is optimistic about the outlook as well as the longer-term potential of the US economy, while he added that a particular source of strength has been the labour market. (Newswires)

US President Trump agreed to be questioned under oath by lawyers for a former Apprentice contestant who accused him of sexual assault. (SMH