• European bourses are firmer pushing past a mixed APAC performance and taking the lead from Wall St.
• US House passed the stopgap funding bill to avert a government shutdown as expected
• UK Chancellor Sunak is reportedly mulling German-style wage subsidies to replace the furlough scheme
• EZ/UK Manufacturing Flash PMIs beat but EZ services only just reside in expansionary territory
• FX sees the USD essentially unchanged having resided after side of the mark with peers, antipodeans aside, little changed at present
• Nike are ~13% firmer in pre-market trade after beating on top & bottom lines in after-market earnings
• Looking ahead, highlights include US Flash PMIs, Fed's Powell, Kashkari, Mester, Quarles, Evans, Rosengren, Bostic & Daly, and supply from the US

CORONAVIRUS UPDATE

US COVID Cases +39,345 (prev. +37,417) and deaths +438 (prev. +270), while California cases +2,630 (prev. +3,294) and deaths +53 (prev. +31). It was also reported that the New York City Health Department identified a new cluster of COVID-19 cases in Brooklyn which it stated was a cause for significant concern. (Newswires)

UK Foreign Minister Raab says we cannot rule out a full second lockdown; adds, restrictions are not going far enough but will not speculate as to what further could be done. (Newswires)

Fujifilm Holdings (4901 JT) said its Avigan drug met the primary endpoint in Phase 3 trials for coronavirus. (Newswires)

ASIA

Asian equity markets traded mixed and failed to take full impetus from the rebound across their global peers, with the region tentative amid ongoing US-China tensions and with Japan suffering post-holiday blues on return from the extended weekend. Nonetheless, ASX 200 (+2.4%) outperformed and is on track for its best day in seven weeks as tech names led the broad advances after they found inspiration from the resurgence of the sector stateside, with sentiment also buoyed by increasing calls for the RBA to cut rates at next month’s meeting after RBA Deputy Governor Debelle recently outlined policy options. Nikkei 225 (U/C) was subdued as it played catch up to the recent days’ weakness and with Panasonic shares pressured alongside fellow Tesla supplier LG Chem after the EV-maker’s Battery Day Event fell flat where Elon Musk announced plans for a reduction in costs and to manufacture its own batteries, while he also showcased the Model S Plaid which is to be available next year. Conversely, Fujifilm Holdings was at the other side of the spectrum after announcing its Avigan drug met the primary endpoint in Phase 3 COVID trials. Hang Seng (+0.1%) and Shanghai Comp. (+0.2%) were indecisive as the continued PBoC liquidity efforts were offset by ongoing US-China tensions after US President Trump put China on blast for the spread of the coronavirus at the virtual UN meeting, while Beijing later criticized President Trump of spreading “political virus”. In addition, the uncertainty regarding the TikTok deal persists and the US House also overwhelmingly passed the forced labour bill which would ban imports from China’s Xinjiang region that were produced using forced labour. Finally, 10yr JGBs were higher amid the risk averse tone in Japan and with the BoJ also in the market for nearly JPY 1.3tln of JGBs in up to 10yr maturities, while it also offered to purchase 3yr-5yr corporate bonds.

PBoC injected CNY 100bln via 7-day reverse repos and CNY 100bln in 14-day reverse repos for a net daily injection of CNY 80bln, with the rate for the 7-day & 14-day reverse repos kept at 2.20% and 2.35%, respectively. (Newswires) PBoC set USD/CNY mid-point at 6.7986 vs. Exp. 6.7982 (Prev. 6.7872)

US House voted to pass the forced labour bill which would ban imports from Xinjiang made using forced labour. (SCMP)

China's Global Times tweeted China is to protect its interests to send a clear message that no country could seize Chinese asset by force, even if that means TikTok could face a complete ban in the US, citing experts.

US

US House passed the stopgap funding bill to avert a government shutdown as expected through votes of 359 vs. 57, which followed an announcement by House Speaker Pelosi's office that an agreement was reached on a Continuing Resolution with the GOP and US Treasury Secretary Mnuchin. (Newswires)

US President Trump said the announcement regarding pick for Supreme Court nomination is likely at 1700EDT on Saturday, while he stated that he has a pretty good idea regarding his choice for Supreme Court nominee but has not made a final decision. (Newswires)

UK/EU

UK Chancellor Sunak is reportedly mulling German-style wage subsidies to replace the furlough scheme as part of a wider package to support businesses through the second wave of the pandemic. (Telegraph)

ECB's Mersch said the pandemic programme flexibility must not apply to QE. Mersch also reiterated that the ECB does not target the exchange rate but will closely monitor it. (ECB)

ECB is calling on Brussels to make the EU Recovery Fund a permanent measure, FT reports. (FT)

EU Markit Composite Flash PMI (Sep) 50.1 vs. Exp. 51.7 (Prev. 51.9); Manufacturing PMI 53.7 vs. Exp. 51.9 (Prev. 51.7)

-        Services Flash PMI (Sep) 47.6 vs. Exp. 50.5 (Prev. 50.5)

-        German Markit Manufacturing Flash PMI (Sep) 56.6 vs. Exp. 52.5 (Prev. 52.2)

-        German Markit Services Flash PMI (Sep) 49.1 vs. Exp. 53.0 (Prev. 52.5)

-        German Markit Comp Flash PMI (Sep) 53.7 vs. Exp. 54.1 (Prev. 54.4)

UK Flash Services PMI (Sep) 55.1 vs. Exp. 56.0 (Prev. 58.8); Manufacturing PMI 54.3 vs. Exp. 54.1 (Prev. 55.2)

-        Composite PMI (Sep) 55.7 vs. Exp. 56.3 (Prev. 59.1)

EQUITIES

European equities are back on the grind higher (Euro Stoxx 50 +1.7%) after experience a fleeting blip lower on the back of French Services PMI dipping back into contractionary territory on second wave woes. The region picked up the baton from a mixed APAC handover, with reports also noting that the ECB as called upon Brussels to make the EU Recovery Fund a permanent measure. Bourses in the EU are seeing broad-based gains, whilst UK’s FTSE (+2.2%) ploughs ahead initially with the aid of a softer Sterling. Meanwhile UBS Wealth Management sees UK domestic banks falling 15-20% and insurance stocks decline by 7-10% in a no-deal Brexit scenario, but expects double digit positive returns from UK equities over the next 9-12 months in the event of a deal. Sectors in Europe are higher across the board with a slight cyclical/value bias, although material names do not fare so well amid the USD-induced declines across the metals complex. Consumer Discretionary meanwhile tops the charts with the aid of Nike (+13% pre-mkt) post-earnings, who beat on both top and bottom lines whilst reporting digital sales +82% YY – thus bolstering the likes of Adidas (+5.7%), Puma (+4.6%) and JD Sports (+5.1%). In terms of the breakdown, Travel & Leisure leads the gains, closely followed by Autos and Banks. Turning to individual movers, Osram Licht (+14.6%) is the top Stoxx 600 gainer after ASM (+1.4%) has signed a denomination and profit and loss transfer agreement with Osram as part of the takeover process.

Boeing (BA) – UK is reportedly in discussions to cut their contract with the Co. to acquire early-warning radar jets. (Telegraph)

Nike (NKE) Q1 2021 (USD): EPS 0.95 (exp. 0.47), revenue 10.6bln (exp. 9.15bln); Digital Sales +82% (prev. +75% in Q4). Q4: total Nike & Brand USD 10bln vs. Exp. USD 8.58bln

FX

USD - The Dollar has extended its impressive recovery rally, partly in relief that the House finally passed the stopgap spending bill to avert a Government shutdown, but mainly as the Greenback continues to regain its global safe-haven and reserve status amidst the ongoing resurgence in COVID-19 that is accelerating outside the US and notably across Europe again. As a result, the index breached 94.000 and topped out just above 94.250, with several Buck/major pairings looking very vulnerable near or through psychological/round number levels.

AUD/NZD - Dovish RBA calls via Westpac and NAB both looking for 15 bp cuts at the October meeting, plus a dovish RBNZ hold overnight, leaving the door wide open for more easing and in the offing or in the pipeline, an FLP by the end of 2020, according to the accompanying statement, have all added further pressure on the Aussie and Kiwi, with the former struggling to stay above 0.7100 and latter even less assured around 0.6600 ahead of NZ trade data.

CAD - Some solace for the Loonie from relative stability in oil prices, but not enough momentum to convincingly reclaim 1.3300+ status within a 1.3345-1.3294 range awaiting the reopening of Canadian Parliament by PM Trudeau.

CHF/EUR/GBP/JPY - All narrowly mixed vs the Dollar, but not before losing grip of 0.9200, 1.1700, 1.2700 and 105.00 handles respectively in advance of Thursday’s quarterly SNB policy review and following mixed Eurozone/UK prelim PMIs where services sector weakness outweighed manufacturing strength to keep the composite readings compressed. However, Sterling was undermined by domestic factors related to the coronavirus and warnings from Foreign Minister Raab about latest restrictions not going far enough to rule out the risk of reverting to full lockdown. Cable plumbed fresh lows around 1.2677 and Eur/Gbp retested recent peaks circa 0.9220 in response, but the Pound has subsequently received a reprieve from EU’s Barnier expressing determination to strike a Brexit trade deal. Elsewhere, pretty standard commentary from BoJ Governor Kuroda has marked the return of Japanese markets from their 4-day break, but not really the Yen between 104.91-105.19 parameters eyeing mega option expiries for tomorrow that span 105.00 in an even tighter band (104.90-105.10).

SCANDI/EM - The Norwegian Crown continues to slip closer towards the sentimental if not technically significant 11.0000 level vs the Euro regardless of crude finding a base as noted above, but the Swedish Krona is still benefiting from Riksbank rigidity on the repo staying at the zero lower bound until this time in 2023. On that note, the Turkish Lira will be looking for continuity and some much needed support from the CBRT on Thursday via a form of indirect tightening as it plumbs almost daily record lows, and more immediately the Czech Koruna has the CNB to provide direction, albeit with no change in rates expected.

RBNZ kept OCR unchanged at 0.25% and maintained LSAP at NZD 100bln as expected, while it noted progress is being made on the Bank's ability to deploy additional instruments which include Funding for Lending Programme, negative OCR and purchases of foreign assets. Members also agreed that alternative instruments can be deployed independently and stated that the Funding for Lending Programme will be ready before year-end. Furthermore, it stated that commodity prices for exports remain robust but has partly been offset by the NZD exchange rate and reiterated that a lower OCR would be complementary to other policy tools. (Newswires)

FIXED INCOME

In keeping with Tuesday’s price action, albeit without the drama for Gilts and Short Sterling contracts that played out after NIRP toing and froing from BoE Governor Bailey, the early recovery theme in bonds or outperformance in the case of BTPs and supporting Eurozone periphery cast has petered out. The retreat in Bunds from 174.64 to revisit/fractionally eclipse yesterday’s Eurex low at 174.23 vs 174.24 has come in wake of another poor German auction by all counts aside from the cheaper funding cost, while Gilts may have taken note of relative strength/resilience in UK flash PMIs alongside reversing in sympathy from 136.64 to 136.24 and US Treasuries are treading cautiously into the next batch of issuance and a host of Fed speakers. Note also, EU stocks are extending their rebound from Monday’s extreme lows.

German Cabinet has approved the draft 2021 budget, sees net new debt of EUR 96.2bln. (Newswires)

COMMODITIES

WTI and Brent front month futures have nursed the losses seen in APAC hours, as sentiment in Europe picks back up after the EZ Services PMI fell back contraction but manufacturing topped estimates across the board. The initial weakness in the crude markets stemmed from a surprise build in the Private Inventory data (+0.7mln vs. Exp. -2.3mln), whilst concern remains over the demand implications from the reimposition of lockdowns and quarantine travel rules, with the Gazprom CEO also noting that we are seeing global oil demand recovery slowing down due to pandemic, and expects global oil consumption to return to pre-crisis level in H2 2021. In terms of the reopening supply from Libya, reports yesterday noted that next week could see output of some 260k BPD (vs. 1mln BPD pre-blockade), although analysts at ING downplay the relevance, noting that “In the current environment, where there are clear concerns over demand, additional supply will do little to help rebalance the market.” Something else to be aware of: reports noted that Chinese refiners are requesting additional import quotas for the fourth quota, having had taken advantage of the lower oil prices earlier this year. Desks note that further quota allocation could support the physical market. Aside from that, news-flow has remained relatively light for the complex thus far, WTI Nov meanders around USD 39.85/bbl (vs. low USD 39.26/bbl), while its Brent counterpart resides around 41.85/bbl (vs. low 41.21/bbl), awaiting the weekly EIA inventory data – with headline crude stocks seen drawing 2.325mln barrels. Elsewhere, precious metals initially succumb to the firmer Dollar and broader gains in stocks. Spot gold moves further below the USD 1900/oz mark to find support at USD 1875/oz, and has picked up given the most recent slip in the USD, whilst spot silver found a current base around the USD 23/oz level. Base metals are also mostly lower – with LME copper weighed on by the firmer Buck and lackluster China performance, whilst Dalian iron ore futures fell for a third straight days as higher shipments from mainstream miners weighed on prices.

US Private Energy Inventories (w/e Sept. 18th): Crude +0.7mln vs. Exp. -2.3mln. (Newswires)

GEOPOLITICAL

Chinese military reportedly stepped up its anti-mine drills as Taiwan bolsters its sea defences to protect against an invasion. (SCMP)