• Asian equity markets resumed last week’s stock rout as the region failed to take impetus from Friday’s rebound on Wall St
• UK and EU negotiators called for a pause in discussions until Wednesday's summit outcome after UK PM May refused to endorse a draft Brexit deal negotiated by officials
• In FX markets, the DXY was slightly firmer and continued its rebound from support at the 95.00 level while GBP/USD tested 1.3100 to the downside
• Looking ahead, highlights include US retail sales and NY Fed manufacturing, Canadian Business Outlook, NZ CPI, Italian Budget Submission Deadline

ASIA

Asian equity markets resumed last week’s stock rout as the region failed to take impetus from Friday’s rebound on Wall St where tech outperformed and all majors finished a tumultuous session in the green, albeit with losses of around 4% on the week. ASX 200 (-0.8%) slumped from the open as financials and tech led the broad losses which dragged the index briefly below the 5800 level, while Nikkei 225 (-1.5%) suffered from continued flows into the JPY. Elsewhere, Shanghai Comp. (-0.8%) and Hang Seng (-1.2%) conformed to the negative tone with sentiment not helped by President Trump’s reiteration that the US may have to impose another round of tariffs on China, with indecision seen in the mainland after the PBoC skipped open market operations and refrained from rolling over maturing MLF loans as its previously announced 100bps RRR cut took effect. Finally, 10yr JGBs were pressured at the open and tracked the recent weakness in T-notes, but then recovered as the widespread risk averse tone spurred safe-haven demand.

PBoC skipped open market operations and refrained from rolling over maturing medium-term lending facility loans. (Newswires)
PBoC set CNY mid-point at 6.9154 (Prev. 6.9120)

UK

UK and EU negotiators called for a pause in discussions until Wednesday's summit outcome. Source reports suggested that all negotiations between UK and EU are on hold with the UK government reportedly telling ministers to begin 'no deal' implementation plans after last-ditch discussions broke up. (Times/Newswires) The breakdown in talks came after UK PM May refused to endorse a draft Brexit deal negotiated by UK and EU officials on Sunday night amid concerns the Cabinet would refuse to support the plan. UK PM May labelled the draft Brexit agreement a 'non-starter' in its current form and advisers are reportedly trying to craft new language for the Brexit withdrawal agreement amid signs the Cabinet will otherwise refuse to agree to PM May’s backstop proposals. Furthermore, it was also reported that EU leaders may not call for a special summit next month amid lack of progress. (Telegraph/FT)

EU leaders are set to hold an extraordinary “no deal” Brexit summit with a date pencilled in for the weekend of 17-18 November, to deal with the potential disaster of the UK crashing out of the bloc should PM May fail to deliver decisive progress on the Irish border issue this week. (The Guardian)

Former UK Foreign Minister Johnson said UK is entering moment of crisis in Brexit discussions and that matters cannot continue how they currently are, while he added the UK must resist being pushed around by EU. (Telegraph)

Former Brexit Secretary Davis has called for a cabinet uprising against UK PM May as MPs and ministers said they are ready to oust her if she does not change course on her Brexit plan. Writing to the Sunday Times, he called UK PM May’s plan “flawed” and “unacceptable”, while he accused the PM’s aides of “incipient panic” in the face of Brussel’s demands and trying to cut out the cabinet from key decisions. (The Times/BBC/Sky News)

Multiple Labour MPs told The Independent that they are prepared to support the Brexit agreement UK PM May hopes to bring back from Brussels, while the newspaper was also told that at least 15 Labour MPs could rebel against Labour leader Corbyn and back the government, which could be enough to tip the balance in the Commons in favour of a deal. (The Independent)

Scotland’s first minister is to press the case for continued membership of the single market and customs union by unveiling a “common-sense” alternative Brexit plan on Monday. (The Guardian)

UK PM May has been told that DUP Leader Foster is “ready” to trigger a no-deal Brexit as she believes this is the most likely outcome following a “hostile and difficult” meeting with EU’s Chief Negotiator Barnier, a set of leaked government emails revealed. (The Guardian)

The EY Item Club predicts GDP growth of 1.3% this year and 1.5% in 2019, down from 1.4% and 1.6% respectively in its previous outlook three months ago. (BBC)

UK Rightmove House Prices (Oct) M/M 1.0% (Prev. 0.7%). (Newswires)
UK Rightmove House Prices (Oct) Y/Y 0.9% (Prev. 1.2%)
 

EU

ECB President Draghi said underlying inflation is hovering around 1% but is confident it will proceed towards target, while he added that the main risk is a sharp repricing of assets or sudden increase in interest rates. Elsewhere, Draghi said he does not see room for additional expenditures in Italy and stated that ECB will not intervene to help Italy. (Newswires)

Germany’s CSU lost its absolute majority in the Bavarian state election and suffered its weakest result since 1950, according to an exit poll. (Twitter)

Sweden Moderate Party leader Kristersson is said to end current attempt to form a government after failing to receive enough support for a coalition. (Newswires)
 

FX

In FX markets, the DXY was slightly firmer and continued its rebound from support at the 95.00 level as its major counterparts traded subdued with EUR/USD little changed below 1.1600, while GBP/USD underperformed and tested 1.3100 to the downside on a lack of progress in Brexit negotiations with UK and EU negotiators calling for a pause in discussions until Wednesday's summit outcome. Elsewhere, USD/JPY and JPY crosses remained pressured from safe-haven flows which saw the pair attempt a breakdown of the 112.00 handle, while antipodeans were somewhat unchanged alongside a relatively stable CNH and PBoC reference rate.

SNB Chairman Jordan said the situation in the FX market is still fragile and reiterated the willingness to intervene in FX if necessary, while Jordan also commented that it is appropriate to leave monetary policy unchanged as he sees no signs of "overheating". (Newswires)
 

COMMODITIES

Commodities were mixed with early upside in crude prices on US-Saudi friction after President Trump suggested the US will look into potential punishments if Saudi Arabia is found to have killed journalist Khashoggi, while Saudi rejected the threat of sanctions and warned it will respond to any measures against them. Conversely, gold prices were supported by safe-haven demand and copper traded sideways with price action contained within Friday’s tight range.

Baker Hughes Rig Count (12/Oct): Oil rigs +8 at 927 and gas rigs +4 at 193. (Newswires)

US President Trump said he will continue with the Saudi arms deal and look for other ways to “severely” punish the kingdom if they are found to have killed journalist Khashoggi, meanwhile Trump added that he has not yet seen the video and audio proof that Turkey claimed to have in regard to the journalist. Saudi Arabia later said it rejects any "threats" of sanctions or political pressure from the US over the disappearance of a journalist, while also warning it would respond to any steps taken against it. (Fox/SPA)

IEA's Birol said high oil prices are hurting consumers and that extra barrels will need to come to the market soon to avoid further tightening. (Twitter)

A fire on Nigerian state-owned pipeline on Osisioma Axis enar Aba has killed 16 and halted pumping. (Newswires)
 

US

Treasuries were negative on Friday amid a more constructive risk environment, where equities stabilised after the recent rout. The net result was that the T-Note traded within Thursday’s range. There were upticks after a soft Uni of Michigan sentiment survey, and the complex firmed towards the close after equities suffered a little wobble. Some desks were noting that dealers sold into the upswing. Major spreads were uneventful. US T-note futures (Z8) settled 1+ ticks lower at 118-11.

US President Trump reiterated the US might have to impose another round of tariffs on China. In other news, President Trump was reportedly unsure whether Defense Secretary Mattis will step down and suggested that Mattis was a sort of a Democrat. (Newswires)

White House Economic Adviser Kudlow said on Friday that we are in a hot market boom and that the stock market will get back on track, while he also commented that China's responses to the US are unsatisfactory and that US President Trump and Chinese President Xi will probably meet later this year. (Newswires)

US Treasury Secretary Mnuchin said that no decision has been made yet regarding a meeting between US President Trump and Chinese President Xi Jinping at the G20 in Argentina, while Mnuchin also suggested the US would like to include currency stipulations in future trade agreements with everyone. (Newswires)