• Nikkei 225 outperforms after PM Abe wins a supermajority at Sunday’s election.
• Spanish PM Rajoy invokes article 155 to dissolve Catalan government.
• Looking ahead, highlights include UK CBI Trends and US National Activity Index.

ASIA

The major Asia-Pac indices were somewhat mixed after the momentum from last Friday’s fresh record levels in the S&P 500, DJIA and Nasdaq Comp gradually dissipated, although Japan remained buoyant after the firm win by PM Abe’s ruling bloc at the snap election. Nikkei 225 (+1.2%) led the region after the ruling coalition gained a supermajority at Sunday’s election, which keeps Abenomics firmly in place and paves the way for possible constitutional changes. Conversely, ASX 200 (-0.2%) failed to hold onto initial gains and a mixed tone was observed in Chinese markets, in which the Shanghai Comp. (Unch) ignored a significant liquidity operation by the PBoC, while the Hang Seng (-0.7%) underperformed on technical selling after it met resistance around 28,500. Finally, 10yr JGBs were flat with demand dampened amid the heightened risk appetite in Japan and an absence of a BoJ Rinban announcement.

Japanese PM Abe’s LDP led ruling coalition won a supermajority at Sunday’s election, as unofficial results showed the ruling bloc is set to win 312 of the 465 seats or over two-thirds of seats in the lower house. (Newswires)

Chinese China House Prices YY (Sep) 6.3% (Prev. 8.3%)

PBoC injected CNY 110bln via 7-day reverse repos and CNY 90bln via 28-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.6205 (Prev. 6.6092)

EU

Spanish PM Rajoy invoked article 155, in which he plans to dissolve Catalonia government and curb its authority, while he also seeking to call elections within 6-months. (Newswires)

Voters in Italy's Lombardi and Veneto regions voted for more autonomy from Rome. (Newswires)

Fitch affirmed Italy at ‘BBB’; Outlook Stable and upgraded Cyprus to ‘BB’; Outlook Positive. (Newswires)

S&P affirmed Norway at AAA; Outlook Stable. (Newswires)

UK

UK Brexit Sec Davis said on Friday that the UK doesn't want a 'no deal' outcome on Brexit, but added that the UK will be ready if it occurs. (Newswires)

FX

In FX markets, USD/JPY briefly broke above the 114.00 level as JPY weakened from the snap election results which strengthens PM Abe’s mandate and keeps expansive policy firmly in place. USD also benefitted in early trade as USD/JPY briefly reclaimed 114.00 and USD/CNH tripped stops tspanough prior resistance, although some of the moves were later pared as the greenback’s major counterparts nursed losses across the board.

COMMODITIES

Commodities were mixed with WTI crude futures steady after having reclaimed the USD 52/bbl level to the upside, while copper was also flat amid an indecisive risk tone seen in its largest consumer China. Elsewhere, gold prices lagged and extended on the prior week’s losses with precious metal pressured as the greenback firmed in early trade.

US Baker Hughes Rig Count (Total) 913 (Prev. 928). (Newswires)

GEOPOLITICAL

Twitter sources noted reports that US Air Force is preparing to put nuclear-armed bombers on 24-hour alert status for the 1st time since the Cold War. (Twitter)

US

The Treasury curve bear-steepened on Friday after Senators late Thursday cleared budget measures that pave the way for lawmakers to work on tax reform. Additionally, it was reported that Trump’s announcement on the Fed chair role will be announced “soon”. The latest batch of headlines had little sustained impact either way: In an interview to be aired with Fox News on Sunday and Monday, US President Trump is reported to have said both Jerome Powell and John Taylor are the leading candidates for Fed chair; however, he also said that Yellen was also being considered. US 10-Year T-Note Futures settled 14 ticks lower at 124-26+.

Fed Chair Yellen (Soft Dove) stated must keep unconventional tools ready for deployment due to uncomfortably high risk of short term rates dropping to lower bound again in future. (Newswires)

Fed's Mester (Non-Voter, Hawk) said she is comfortable with gradual hikes and that unemployment will stay low. (Newswires)

US President Trump noted on Friday that "most people" say the Fed chair race is down to Powell or Taylor, but added that he likes Yellen a lot and is considering all tspanee. There were also comments from White House Press Secretary that Trump will make the Fed chair announcement "soon" and confirmed the pairing of Powell and Taylor is under consideration. (Newswires)

US President Trump said that he believes there is enough votes to pass tax reform, hopefully by year-end. (Newswires)