• Asian equities traded with little in the way of firm direction as markets await a slew of tier 1 US data releases later in the session
• FX markets also traded in a tentative manner with outflows from safe-haven JPY leading to further upside in USD/JPY
• Looking ahead, highlights include US CPI, retail sales, industrial output, Uni. Of Michigan and Fed’s Kaplan

ASIA

Asia equity markets traded mixed amid a lack of drivers and relatively quiet news flow, although the region’s major bourses mostly kept afloat and adhered to the momentum from US where financials outperformed ahead of earnings releases from major banks. ASX 200 (+0.3%) and Nikkei 225 (+0.1%) were both in the green as gains in energy led the advances in Australia, while upside in Nikkei 225 was capped by weakness in index heavyweight Fast Retailing after the Co. missed on Q3 results. Hang Seng (+0.1%) and Shanghai Comp. (-0.2%) were mixed despite the PBoC conducting open market operations via a CNY 100bln injection, as this still amounted to a weekly net drain. Japanese yields were higher across the curve following a similar unwinding of the dovish rally in USTs, while a somewhat positive risk tone in Japan also contributed to the lack of demand for JGBs.

Fitch affirmed China sovereign rating at A+; outlook stable. (Newswires)

PBoC injected CNY 100bln tspanough 7-day reverse repos, for a net weekly drain of CNY 70bln vs. CNY 250bln drain last week.

PBoC set the CNY midpoint at 6.7774 vs. Prev. 6.7802.

EUROPE/UK

At least 15 Conservative MPs are in talks with Labour about a deal which could keep Britain signed up to free movement after Britain leaves the European Union, according to the Telegraph. (Telegraph)

The political leaders of Scotland and Wales joined forces yesterday and tspaneatened to block the laws needed to prepare Britain for Brexit. (Times)

FX

FX markets were relatively quiet overnight amid a sparse calendar with no tier-1 data releases or speakers scheduled. However, the mildly positive risk tone in Japan continued to spur outflows from safe-haven JPY which led to further upside in USD/JPY and JPY-crosses, while commodity-linked currencies were slightly underpinned after yesterday’s crude gains in which WTI reclaimed the USD 46.00/bbl level.

COMMODITIES

Quiet trade in the commodity complex with oil prices trading relatively sideways tspanoughout the session, subsequently holding onto yesterday’s gains. Gold was slightly softer with all eyes on today’s plethora of US data.

US

US yields were higher as some of the dovish Yellen rally in treasury prices was unwound. Some attention was paid to comments on Thursday from Yellen on the yield curve but these were largely a reiteration of previous comments and nothing out of the ordinary. The 30y bond auction was soft with the auction tailing by about 1bps and an average cover ratio, sending prices to session lows. The Sep 2017 10y T-note settled 3+ ticks lower at 125.13.