• Asian equity markets traded mostly higher as the region took impetus from the US where the S&P 500 notched a 4th consecutive gain
• Chinese data saw Industrial Production print in-line with expectations and Retail Sales beat, while Fixed Assets Investments growth declined to a fresh multi-year low
• BoE Governor Carney said MPC cannot cut rates to offset a no deal Brexit and that house prices would plummet in a no-deal scenario
• Looking ahead, highlights include the Russian rate decision, US retail sales, industrial production, Uni. of Michigan, Baker Hughes, ECB’s Smets & Nowotny, BoE’s Carney

ASIA

Asian equity markets traded mostly higher as the region took impetus from the US where the S&P 500 notched a 4th consecutive gain and the Nasdaq outperformed as tech rebounded with a vengeance. ASX 200 (+0.6%) and Nikkei 225 (+0.9%) were higher in which miners led the broad gains in Australia, while Japanese exporters benefitted from a weaker currency which lifted the benchmark index to above the 23,000 level. Elsewhere, Hang Seng (+0.8%) and Shanghai Comp. (-0.1%) were both initially positive after continued liquidity efforts by the PBoC, although sentiment in the mainland eventually waned as amid weakness in Shenzhen and as participants digested mixed data in which Industrial Production printed in-line with expectations and Retail Sales beat, while Fixed Assets Investments growth declined to a fresh multi-year low. In addition, recent Trump comments also spurred some apprehension after he commented the US are under no pressure to make a deal with China and that it is China which is pressured to reach an agreement. Finally, 10yr JGBs are uneventful with demand for safe-havens dampened by the positive risk appetite in Japan, but with downside also capped amid the BoJ’s presence in the market for JPY 700bln of maturities in the short-end to belly.

PBoC injected CNY 110bln via 7-day reverse repos and CNY 40bln via 14-day reverse repos for a weekly net injection of CNY 330bln vs. Prev. neutral position last week. (Newswires)
PBoC set CNY mid-point at 6.8362 (Prev. 6.8488)

Chinese Industrial Production (Aug) Y/Y 6.1% vs. Exp. 6.1% (Prev. 6.0%). (Newswires)
Chinese Retail Sales (Aug) Y/Y 9.0% vs. Exp. 8.8% (Prev. 8.8%)
Chinese Urban Investment YTD (Aug) 5.3% vs. Exp. 5.5% (Prev. 5.5%)

UK/EU

BoE Governor Carney said MPC cannot cut rates to offset a no deal Brexit and that house prices would plummet in a no-deal scenario, while he also stated that a no-deal Brexit could be as bad as the 2008 financial crisis. (Times/Newswires)

UK Brexit Minister Raab said there has to be a shift across the board for the EU's approach to Northern Ireland and in the event of a no deal Britain would pay not a penny more than its legal obligations, although he also commented that EU and UK is making progress every time they meet for negotiations. (Newswires)

UK PM May’s former policy adviser, Freeman, states that May should stand down after a Brexit deal has been secured. (Times)

Italian Deputy Finance Minister Castelli states that the nation’s citizen’s income will commence on Jan 1st 2019 and will be a minimum of EUR 7880mln. (Newswires)

FX

In FX markets, the DXY remained subdued near the 94.50 level after the CPI-triggered losses which benefitted its counterparts across the pond with EUR/USD eyeing 1.1700 to the upside and with GBP/USD at the 1.3100 handle. Elsewhere, AUD/USD was indecisive following the mixed Chinese data and Trump’s comments, while USD/JPY and JPY-crosses were higher on safe-haven outflows which lifted the pair briefly above the 112.00 level. Elsewhere, TRY held on to recent strength which inspired a relatively calm tone in EM currencies after the CBRT defied President Erdogan’s wishes for lower rates and hiked by 625bps the prior day.
 

COMMODITIES

Commodities were uneventful with mild gains seen overnight, although WTI crude remained below USD 69.00/bbl following the prior day’s 2.6% decline which analyst attributed to concerns emerging market tensions and trade wars could weigh on demand. Elsewhere, gold marginally higher amid a subdued greenback while copper also mirrored the modest upside seen across the complex but with price action capped by underperformance in mainland China.

US Energy Secretary Perry said Saudi Arabia, OPEC and Russia 'would be admired' if no oil price rises are seen following Iran sanctions, while he also said that Nord Stream 2 sanctions are possible but is optimistic on future talks with Russia. (Newswires)

Russia Energy Minister Novak said we have discussed all energy related topics with US Energy Secretary Perry and can find things in common, while he also stated they agreed to restore dialogue with Perry but is concerned over possible sanctions on Nord Stream 2. (Newswires)

Iran has begun storing between 15mln-17mln unsold barrels on tankers as crude exports are expected to slump. (Platts)

NHC said that tropical-storm-force winds continue to spread across the outer banks and coastal South Eastern and North Carolina, while it added that tornado threat is increasing as Florence approaches. Furthermore, NHC later stated that Florence has been downgraded to a category 1 storm. (Newswires)
 

GEOPOLITICAL

North Korea said US sanctions over cyber-attack is a smear campaign against North Korea and that the US is misleading as if North Korea were behind the Sony hack, while it warned that sanctions could impact implementation of US agreement. (Newswires)
 

US

The Treasury curve modestly flattened on Thursday, after a weak CPI report (which followed a soft PPI report earlier in the week). Yields on 2s and 3s hit fresh decade highs in the session. At settlement, most curve spreads were under 1bps lower. The US sold $15bln of 30-year bonds at 3.088%, coming in on the screws, though the yield was 0.2bps lower than the previous auction cycle. Cover was above the previous auction, but in line with recent averages. Indirect takedown was encouraging, as was dealer participation was notably lower than recent averages. US T-note futures (Z8) settled half-a-tick lower at 119-13+.

Fed's Bostic (Voter, Dove) said rate increases can continue for a handful of quarters and is still worried that trade risks will mar investment plans although noted that the effect has been limited so far. Bostic added will evaluate data before deciding on fourth hike and that there is uncertainty whether US is at full employment, while he also commented the Fed can be patient with hikes if there is no risk of the economy overheating and that it is possible that neutral rate has moved higher. (Newswires)

Fed's Kaplan (Non-voter. Dove) reiterated the Fed should be proceed to neutral rate which is seen between 2.50%-2.75%. (Newswires)

US President Trump told donors he plans to re-brand NAFTA as USMC agreement but may drop C if Canada doesn't agree to his changes. (WSJ) In related news, Mexico NAFTA negotiator Smith Ramos said it is ideal to keep NAFTA trilateral, but they remain prepared to proceed with a bilateral deal with US. (Newswires)

US House and Senate reportedly reached a tentative agreement to fund government through December 7th. (Newswires)

Former Trump campaign manager Manafort was reported to have agreed a plea deal with Special Counsel Mueller although reports noted it was unclear if he is agreeing to cooperate with prosecutors or is conceding to a guilty plea, while sources later stated that a Manafort plea deal with Special Counsel Mueller is close but not there yet. (Newswires)