• Major European indices are mostly in the red (Eurostoxx 50 -0.4%) with outperformance in Switzerland’s benchmark
• The greenback is trading cautiously ahead of today’s US mid-term elections, with the DXY hovering just above 96.200
• Looking ahead, highlights include US JOLTS, APIs, ECB’s Lautenschlaeger, de Guindos, US mid-term elections

ASIA

Asian equity markets were mixed as weakness in China clouded over the mostly positive lead from US where the DJIA and S&P 500 closed higher with the latter led by strength in energy names, although the Nasdaq declined amid continued Apple woes after reports the tech giant cancelled a production boost for the budget iPhone XR due to slowing demand. ASX 200 (+1.0%) and Nikkei 225 (+1.1%) traded higher with Australia led also by the energy sector leading as it mirrored the outperformance seen stateside, while the Japanese benchmark benefitted from recent currency weakness and rose back above the 22000 level. Elsewhere, Hang Seng (+0.7%) and Shanghai Comp. (-0.2%) were subdued amid ongoing trade uncertainty and after the PBoC skipped open market operations again, while notable weakness was seen in casino stocks which pulled back from recent gains. Finally, 10yr JGBs were lacklustre after weakness seen in T-notes and with demand subdued by the strength in Japanese stocks.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.9075 (Prev. 6.8976)

US President Trump said he believes he will make a deal with Chinese President Xi. (Newswires)

China Vice President Wang said China will remain committed to opening up and that China stands firmly against protectionism and unilateralism. Furthermore, Wang added China is ready to meet with US and hold discussions to work for solutions on trade. (Newswires)

China's Premier Li says China will step up efforts on reducing taxes, fees and market trading costs (Newswires)

He also reiterates that China will not resort to competitive currency devaluation; adding they are able to keep the CNY basically stable. Furthermore, adding that China will implement tax cuts on a larger scale (Newswires)

UK/EU

EU is reportedly to offer a compromise regarding the Irish border, according to reports which noted that EU figures suggested they are prepared to offer PM May an Independent Mechanism in which Britain could end temporary customs arrangement.  (Times)

UK PM May reportedly faces a Cabinet showdown with Brexit Secretary Raab who is said to have been undermined on the Irish backstop plan. (Telegraph) In related news, UK cabinet ministers are to tell PM May to stand firm regarding Ireland border issue or face Brexit deal collapsing with UK Brexit Minister Raab and Foreign Minister Hunt to lead as many as 12 cabinet ministers in a defiant stand at the weekly meeting in Downing Street. (The Sun)

BBC's Laura Kuenssberg tweeted that Raab says 'thumbs up' on his way out of cabinet. (Twitter)

A senior EU official said there will be no breakthrough on the backstop this week and stated If there is no agreement in the next week at technical and services level, there’s no chance of a summit in November, according to RTE Europe Editor Connelly. However, Guardian's Brussels correspondent Rankin stated that an EU source told her a November summit is still possible. (Newswires)

UK Trade Secretary Liam Fox says there are still a number of Brexit issues to deal with (Newswires)

Irish European Minister says position on the backstop has not changed, ruling out a unilateral review for the backstop; adding that the review mechanism cannot change the backstop, but it may allow negotiations to move on. (Newswires)

Northern Ireland DUP Lawmaker Donaldson says it looks like we are heading for no-deal (Newswires)

Italian economy minister states that there are some disagreements, but we are still open to dialogue with the European Commission (Newswires)

EU's Moscovici says the next steps on the Italian budget depend on the response from Italy, expects a strong and precise answer from Italy on November 13th. And that sanctions can be imposed on Italy if there is no compromise on the budget (Newswires)

EU Markit Services Final PMI (Oct) 53.7 vs. Exp. 53.3 (Prev. 53.3)
EU Markit Comp Final PMI (Oct) 53.1 vs. Exp. 52.7 (Prev. 52.7)

US

US President Trump says he thinks they will make a deal with Chinese President Xi (Newswires)

EQUITIES

Major European indices are mostly in the red (Eurostoxx 50 -0.5%) with underperformance in Spain’s IBEX as the index is dragged lower by heavyweight financial and telecom names. Meanwhile the SMI (Unch) outperforms with the index lifted by Adecco (+3.0%) post-earnings. In terms of sectors, industrials are benefitting from the lower base metal prices, while telecom names lag.  Moving onto individual equities, Zalando (-9.0%) is the worst performing stock following their earnings, with Morrisons (-6.0%) also lower on the back of their number. IWG (+7.0%) are out in front following optimistic earnings and conformation of their guidance, while FTSE heavyweight Associated British Food (+2.5%) in the green after the company said they expect an increase in retail profit after reporting their earnings.

FX

GBP/AUD/NZD - Different day, but familiar feel or trend in G10 land, as Sterling rivals the Antipodean Dollars for major honours. Cable continues ride high on a wave of Brexit deal optimism amidst more reports of an EU offer on the Irish border, and the latest proposal under the guise of an ‘Independent Mechanism’ that would allow the UK options to terminate the temporary customs arrangement. Cable has extended gains to test and briefly eclipse resistance around 1.3080, while Eur/Gbp has slipped further below 0.8750 to just a handful of pips from reported stops at 0.8720 and Gbp/Jpy breached its 200 DMA and 148.00 before losing some momentum. Meanwhile, the Aud has been boosted by relatively upbeat RBA commentary overnight following its monetary policy meeting with 2018 and 2019 growth seen stronger than previously and a tighter labour market expected to lift wages. Hence, Aud/Usd appears firmer above the 0.7200 handle that has been tough to overcome, and eyeing 0.7250 next, while Aud/Nzd has bounced from near 1.0800 to touch 1.0850, as Nzd/Usd remains capped ahead of 0.6700.

EUR/CHF/JPY/CAD - All narrowly mixed vs the Greenback, which is trading cautiously ahead of today’s US mid-term elections, with the DXY hovering just above 96.200, as the single currency runs into offers around 1.1425 and ongoing Italian-EU budget issues that are preventing a more concerted attempt on technical resistance around 1.1456-60. Meanwhile, the traditional currency safe-havens, Chf and Jpy remain rangebound between 1.0055-35 and 113.20-45 with the latter looking at a key Fib (circa 113.34) on a closing basis for technical direction. Elsewhere, the Loonie has lost some of its BoC impetus as oil prices sag again, but could derive more independent pointers from Canadian building permits later. Usd/Cad now back above 1.3100 and climbing.

EM - Some loss of momentum after Monday’s broad outperformance vs the Usd, but the Try did derive more support earlier to trade within a whisker of 5.3000 on hawkish rhetoric from the CBRT that sounded confident about hitting its inflation target via tight monetary policy, even though Turkish CPI accelerated further above in October.

COMMODITIES

WTI (-0.4%) and Brent (-0.5%) are both lower as details of the US waivers on Iranian oil emerge. So far, China is allowed to buy around 360K BPD of Iranian oil for 180 days, with source reports noting that conditions require the disclosures of counter-parties and settlement methods. Elsewhere, India is allowed to purchase of up 300k BPD of oil, while South Korea was granted a 200k BPD oil waiver. Additionally, comments from US President Trump that he wants to impose the sanctions gradually to prevent shocks to the market, may have contributed to the price decrease. Traders will be eyeing the weekly API crude inventories released later today as a fresh catalyst for prices.

Gold (+0.2%) has been gradually rising throughout the session as the yellow metal detaches itself from USD influence to act as a safe haven, meanwhile copper is lower and moving in tandem to the risk tone. Separately, aluminium associations from the US, Canada and Mexico have urged their governments to agree a deal which eliminates US aluminium tariffs from Canada and Mexico without the imposition of import quotas.

US waiver allows China to buy around 360k BPD of oil from Iran for 180 days with conditions including requiring disclosures of counter-parties and settlement methods; according to sources (Newswires). India is allowed to purchase of up 300k BPD of oil, while South Korea was granted a 200k BPD oil waiver. (Newswires)

Iranian Oil Minister Zangeneh sent a letter to OPEC Secretary General Barkindo complaining about JMMC performance and interpretation of its decisions by some OPEC members and called for its cancellation. (Shana)

Iraq has secured exemptions from US sanctions on Iran where they can keep importing Iranian gas and electricity; according to an official (Newswires).

FIXED INCOME

Bunds were already reversing more of their early Eurex losses, partly, if not mainly on the back of inverse-correlations to BTPs (back down below 122.00), but some technical buying seems to have contributed to the rebound as chart gaps were filled before a stop-chase and short-squeeze pushed the 10 year German bond through 160.00, albeit just at 160.04 (+30 ticks vs -13 ticks at one stage). The last leg-up appears to have been prompted by, or at least coincided with Brexit no deal talk from the DUP, and indeed even Gilts recovered more lost ground to trade at 121.85, +7 ticks vs -22 ticks) before fading into the DMO’s 2028 auction, which was reasonable in the current uncertain circumstances. Elsewhere, US Treasuries are a fraction firmer in outright terms and the curve essentially flat pre-10 year supply, which prefaces the mid-term results and Thursday’s FOMC.