• European equities trade mostly higher (Eurostoxx 50 +0.8%) after erasing initial losses as sentiment from Asian and Wall Street translated onto the region
• Cable dipped after a UK official said comments on the Times report on banks Brexit deal is "unsubstantiated"
• Dollar index is back down to 96.510 ahead of a busy agenda before NFP on Friday.
• Looking ahead, highlights include BoE rate decision, minutes & QIR, CNB rate decision, US weekly jobs, US ISM mfg PMI, a slew of central bank speakers and large cap earnings

ASIA

Asian equity markets traded mostly higher as the region sustained the momentum from Wall St where stocks continued to pare back some of the losses from its worst monthly performance in 7 years, helped on the day by month-end rebalancing and with sentiment also underpinned by strong jobs data as well as a rally across FAANG stocks post-Facebook earnings beat. ASX 200 (+0.2%) was lifted by early outperformance in the mining sector as BHP shares gained on the announcement of a USD 10.4bln shareholder return program, although upside was capped by indecisiveness across financials amid less than inspiring NAB results and M&A hopes with Macquarie said to be mulling an offer for AMP Capital. Elsewhere, Nikkei 225 (-1.0%) was pressured by the recent currency strength and with much of the focus on earnings, while Shanghai Comp. (+0.6%) and Hang Seng (+1.8%) outperformed following the better than expected Chinese Caixin Manufacturing PMI data and continued supportive efforts by Chinese authorities. Finally, 10yr JGBs were initially lower with yields higher across the curve after the BoJ tweaked its monthly bond purchases in which it cut the number of occasions it will buy 1-3yr and 3-5yr JGBs to just 4 times from 5 times per month, although firmer demand at the 10yr auction helped stem losses.

PBoC skipped open market operations for a net daily drain of CNY 100bln. (Newswires)
PBoC set CNY mid-point at 6.9670 (Prev. 6.9646)

PBoC Vice Governor said will step up monetary support for rural areas and will keep RRR low for rural financial institutions, while the Vice Governor added that China will encourage rural industrial enterprises to either go public or issue bonds to raise capital. (Newswires)

PBoC held a meeting with commercial banks to encourage issuance of bonds using credit risk mitigation tools (Newswires)

Chinese Caixin Manufacturing PMI (Oct) 50.1 vs. Exp. 50.0 (Prev. 50.0). (Newswires)

UK/EU

UK PM May reached a deal with Brussels on financial services which will give UK financial services companies continued access to European markets, according to sources. (The Times).  UK official says that a tentative UK-EU Brexit deal is almost done on some forms of access for UK-based financial institutions to the European market. However, a UK official said comments on the Times report on banks Brexit deal is "unsubstantiated". (Newswires)

Britain's Brexit Ministry says that they are making good progress on Financial Services Agreements, but nothing is agreed until everything is agreed, and negotiations are ongoing. (Newswires)
 

Deputy Chief EU Negotiator Sabine Weyand has poured cold water on the hopes of a Brexit deal being achieved in the next 3 weeks. (Telegraph)

EU Chief Negotiator Barnier was said to be under increasing pressure to agree to a fresh compromise with the UK regarding the Irish backstop, according to reports which citied senior EU officials. Furthermore, the EU Commission want to reach a deal with the UK on its orderly withdrawal from the EU but cannot say when UK Brexit Secretary Raab and EU Chief negotiator Barnier will meet next; according to the Commission spokesman (Telegraph/Newswires)

UK and EU are still looking for an Irish border solution and EU sees new positive mood in talks according to an official, however there were also comments from a UK Brexit department spokesperson that there is no set date for the negotiations to conclude. (Newswires)

UK Markit/CIPS Manufacturingg PMI (Oct) 51.1 vs. Exp. 53.0 (Prev. 53.8, Rev. 53.6). (Newswires)

Italian PM Conte says he does not see dialogue with the European Commission over the budget as "an exchange of concessions"; adding the weak economic data is the current government's fault and positive effects of reforms will only be seen from 2019 (Newswires)

EU has already decided the infringement procedure against Italy which will start at the end of the year. (Il Messaggero)

Italian PM Conte says that budget talks with the EU are not over concessions. (Corriere)

Italian President has signed for the budget transfer to parliament, according to Il Sole (Il Sole)

EQUITIES

European equities trade mostly higher (Eurostoxx 50 +0.7%) after erasing initial losses as sentiment from Asian and Wall Street translated onto the region.  The pan-European Stoxx 600 (+0.8%) is fuelled by earnings with the likes of BT (+10.3%), ASM (+14.9%) and Smith & Nephew (+6.6%) all near the top of the index. In terms of sectors, energy names are lagging, in-fitting with the price action in the complex, while telecom names outperform after BT raised their EBITDA guidance.  In terms of US earnings on the docket, traders will be keeping an eye on tech-giant Apple who are due to report after market.

FX

DXY - All change for the Usd and index just a day after month end when the Greenback outperformed due to multiple bullish factors and the DXY finally breached 97.000 to register a fresh ytd peak of 97.201. However, a broad upturn in risk sentiment, portfolio re-positioning and some specific impulses have prompted a marked turnaround with the index back down to 96.510 ahead of a busy agenda before NFP on Friday.

NZD/AUD/SEK/NOK - The clear G10 front-runners, or heading the widespread recovery charge vs the Usd, as the Kiwi tops 0.6600 with the aid of favourable cross-winds even though the Aud is testing stops around 0.7160 against its US counterpart and holding above 1.0800 within a 1.0820-75 range after significantly better than expected Aussie trade data overnight. Meanwhile, the Swedish Krona is outpacing its Norwegian peer amidst the aforementioned rebound in risk appetite, and both getting some additional impetus from firmer than forecast manufacturing PMIs, as Eur/Sek retreats through 10.3000 and Eur/Nok tests bids ahead of 9.5000.

GBP - A few negative/less bullish developments after Wednesday’s Brexit boost, with Nationwide UK house prices slowing to multi-year lows, the manufacturing PMI considerably below consensus and the Brexit Ministry playing down reports about a deal being done and dusted for domestic financial services firms maintaining access to EU markets post-withdrawal, though progress towards an arrangement along ‘equivalence’ lines seems certain. Hence, Cable is back under 1.2900 and through the 10 DMA (around 1.2873) having rallied over a key Fib (1.2911) to test the first line of offers seen between 1.2920-25, and with stops reputedly above 1.2930 on a break. Next up, BoE super Thursday from noon.

EUR/CHF/CAD - The single currency has staged a pretty impressive comeback from almost/virtually matching 2018 lows yesterday, and stopped just short of 1.1400 where mega option expiries lie (approx. 4 bn). In fact, options may also have aided the recovery with talk of double KO hedging at the big figure below and Eur/Usd is currently absorbing more supply in the 1.1370-80 zone. Elsewhere, the Franc has overcome a couple of obstacles in the form of benign, albeit in line with estimates Swiss CPI and a manufacturing PMI miss to join the overall revival against the Buck and is paring losses from circa 1.0090 towards 1.0030 ahead of SNB comments from Zurbrugg. The Loonie is also displaying resilience amidst another downturn in crude prices to test resistance at 1.3100 vs lows of 1.3170 or so at one stage in the run up to Canada’s manufacturing PMI and BoC speeches (Wilkins and Schembri both scheduled).    

JPY - Flat and rangy between 113.00-112.75 in contrast to other majors, but with decent expiry interest from 112.45-50 (1 bn) and better risk sentiment on balance likely to keep the headline pair underpinned.

EM - Regional currencies are all benefiting from the general Dollar pull-back, but with the Rand outperforming and testing offers/resistance ahead of 14.5000.

COMMODITIES

WTI (-0.7%) and Brent (-1.0%) are lower with the complex extending on yesterday’s losses over rising supply concerns; and subsequently comments from US President Trump that there is sufficient supply to allow for a significant reduction in purchases from Iran. Analysts from Huatai stating that oil investors are now betting on the potential for a global slowdown. Additionally, Goldman Sachs have reiterated their year-end Brent forecast at USD 80/bbl.

Gold (+0.8%) prices have rebounded after hitting a 3-week low in the previous session, largely due to marginal dollar weakness. According to the World Gold Council, the yellow metal’s Q3 global demand is slightly higher year-on-year. Elsewhere, aluminium hit a new two year low, following the weak Chinese PMIs on Wednesday and concerns over the US-Sino trade war’s potential impact on global demand.

Iraq oil exports from southern ports average 3.469mln bpd in October (3.56mlb bpd in September). (Newswires)

Goldman Sachs says reiterates year-end Brent price forecast of USD 80/bbl with low positioning heading into reintroduction of Iran sanctions next week suggesting short-term increase in prices (Newswires)

FIXED INCOME

Relative calm in core and non-core bonds after a flurry of activity and pretty pacey price action saw Bunds and Gilts lurch to fresh session lows at 159.75 and 121.97 (-51 and -44 ticks respectively), while BTPs spiked to a new intraday peak at 122.35 (+71 ticks). The 10 year German benchmark tripped stops once 160.06 gave way, but more when 160.00 and 159.96 were breached before 159.73 descending channel support held, while the Italian equivalent appeared to gather momentum on the President’s seal of budget approval and only suffered a minor set-back on reports that the EU has already decided on EDP measure that will be implemented at the end of 2018. Elsewhere, Brexit denials and counters about a financial services accord and complete deal by November 21 have combined with a disappointing UK manufacturing PMI survey to push the main Liffe debt future up to 122.30, while US Treasuries are narrowly mixed to a tad weaker for choice ahead of a busy start to November in terms of stateside releases before tomorrow’s BLP report.