• European equities have drifted lower following a mixed cash open; Euro Stoxx 50 -1.2%
• US equity futures see less pronounced losses of around 0.4% in the ES, NQ and YM Dec contracts
• EU Commission is to appeal the quashing of Apple’s order to repay USD 14.3bln in tax advantages
• UK & EU Brexit negotiators were reportedly able to lay the foundation for next week’s negotiations; but, subsequent reports have been more downbeat
• In FX, DXY has reclaimed 94.50+ status, GBP/USD eyes 1.2700 to the downside and EUR/USD trades sub-1.1650
• Looking ahead, highlights include US Durable Goods & Fed’s Williams

CORONAVIRUS UPDATE

UK COVID cases +6,634 (prev. +6,178) and deaths +40 (prev. +37), which was the highest cases print yet, although testing has more than doubled since the initial break out. (Newswires)

Novavax (NVAX) initiated Phase 3 COVID-19 vaccine trial in UK with 10,000 volunteers and expects to start 30k patient study in US in mid-October. (Newswires)

Madrid, Spain Regional Deputy Health Chief says ~1mln in the region are to be placed in lockdown; increasing number of lockdown areas to 45 from 37; Spain recommends extending restrictions to all of Madrid. (Newswires)

Bosses of pharmaceutical companies are reviewing whether they can be more transparent about COVID-19 vaccine trials amid intense public and pollical interest and the recent pausing of AstraZeneca (AZN LN) and Oxford University’s trial. (Times)

Only minor and acceptable side effects arising from Phase 1 & 2 trials of China's COVID-19 vaccine, according to the Global Times. (Twitter)

Chief of European Aviation Safety Regulator says the risk of COVID-19 infection on airplanes are "very marginal". (Newswires)

Iran and Russia are reportedly holding talks on the manufacturing of COVID-19 vaccines, according to Tass. (Tass)

ASIA

Asian equity markets were mostly higher amid tailwinds from Wall St where stocks finished a choppy session in the green as the tech sector rebounded, but with the gains in the US major indices only marginal amid mixed data which showed higher than expected jobless claimants. Nonetheless, the regional bourses were positive with ASX 200 (+1.5%) outperformance spurred by the largest weighted financials sector as the government seeks to repeal the responsible lending obligations legislation in an effort to spur more lending, while Nikkei 225 (+0.5%) was helped by a softer currency and after reports that Japan is mulling a corporate tax cut for SME’s to encourage M&A. Hang Seng (-0.3%) and Shanghai Comp. (-0.1%) swung between gains and losses despite the recent announcement by FTSE Russell to include China in the World Government Bond Index effective October 2021 and pending confirmation in March, which Morgan Stanley sees to likely spur inflows of as much as USD 90bln from September next year. However, the initial advances in Chinese markets were reversed amid ongoing uncertainty regarding the TikTok deal ahead of looming deadlines with the Trump administration given until 14:30EDT/19:30BST later today to notify the court whether it will postpone the ban set for midnight on Sunday, or file a motion of opposition to the preliminary injunction, which the court would then have to consider on Sunday. There were also jitters caused by China’s second largest developer Evergrande after it warned of a cash crunch that could result to systemic risks if its restructuring/listing plan doesn’t get government approval by January 31st, which saw its shares whipsaw and pressured bond prices to trigger a trading halt of its 5-year bonds in Shanghai due to abnormal fluctuations. Finally, 10yr JGBs were lower amid similar uninspired trade in T-notes with demand sapped by the gains in equities and the lack of BoJ’s presence in the market today.

PBoC injected CNY 90bln through 14-day reverse repos at rate of 2.35% for a net daily drain of CNY 20bln. (Newswires) PBoC set USD/CNY mid-point at 6.8121 vs. Exp. 6.8087 (Prev. 6.8028)

FTSE Russell announced that China will be included in the Global Bond Index effective October 2021, which Morgan Stanley sees to likely spur inflows of as much as USD 90bln from September next year, while it kept Malaysia on watch for bond index exclusion. (Newswires/SCMP)

If the Trump administration decides not to extend the deadline, regarding TikTok, the court will conduct another hearing this week to rule on whether to issue a preliminary injunction to block the government from implementing the ban. (Nikkei)

China’s Ministry of Commerce is to launch an anti-dumping investigation on imports of some chloride products from US beginning today. (Newswires)

US

US President Trump signed executive orders on healthcare and announced plans for the healthcare system in which he noted 3 pillars of his plan which were choice, lower costs and better care. Furthermore, President Trump stated there will be health plans that are much cheaper than Obamacare and that he will work to make healthcare premiums fully tax-deductible, while he suggested he is taking on big pharma like never before. (Newswires)

The Senate will conduct the final vote on Tuesday at 17:30EDT/22:30BST, according to C-SPAN’s Caplan; regarding the stop-gap funding bill. (Newswires/Twitter)

UK/EU

UK Brexit Negotiator Frost and his EU counterpart Barnier were reportedly able to lay the foundation for a round of negotiations next week, according to an official. The official added that EU will still likely start legal action but will continue discussions with the UK. Several officials warned that negotiations could now stretch into November or December vs. the de facto deadline of October 15th. (Newswires) Subsequently, Guardian's Rankin on Brexit notes that she is not hearing the recently reported optimism within Brussels, saying EU negotiators are 'gloomy'. (Twitter)

UK GfK Consumer Confidence (Sep) -25.0 vs. Exp. -27.0 (Prev. -27.0); highest reading since lockdown began in March. (Newswires)

France rejected UK warnings of post-Brexit transport delays in the English Channel as tactical posturing and warned the Brussels will not succumb to intimidation to reach a deal, according to FT. (FT)

Germany's EU ambassador is calling on MEPs to speed up the agreement surrounding the legal text of the EU recovery fund and budget from July, "He is "very concerned" negotiations going too slowly and says he has offered MEPs weekend talks.". (Twitter)

EQUITIES

A tentative session thus far in Europe, major Euro-bourses drift lower in early hours (Euro Stoxx 50 -1.2%) with the overall picture in Europe now lower and bourses remain at session lows, following on from a mixed APAC handover. News-flow in early hours has been light with no real catalysts to spur or influence price action. Nonetheless, the FTSE 100 (-0.2%), AEX (-0.3%) and IBEX (-0.5%) are somewhat cushioned on the back of Consumer Staples, Utilities, and Telecoms– the only sectors in the green. Meanwhile, the DAX (-1.2%) and CAC (-1.1%) are pressured by losses in some large-cap cyclical names such as SAP (-1.8%) and Airbus (-2.3%) as the IT and Industrial sectors post losses. That being said, no real risk profile can be derived from either the broader sectors nor the breakdown, with the latter also seeing Travel & Leisure at the bottom of the pile on COVID-19 fears for the sector as UK and France reported a fresh record number of new cases and further Madrid lockdowns are announced. The sector also sees additional downside from the likes of easyJet (-2.5%) and Ryanair (-5.2%) after the Italian Antitrust regulators opened up a probe into the Cos, among other names, regarding the provision of vouchers and no refunds for consumers with flights cancelled owed to the pandemic. In terms of other movers and shakers, Bayer (-0.5%) shares were initially supported by reports that the Co. is continuing to resolve thousands of cases regarding its Roundup weedkiller, and therefore the prospects for the USD 11bln deal to end litigation is seen to be improving. Meanwhile, Suez (+4.6%) is among the top gainers in the Stoxx 600 after Veolia (+0.7%) CEO said the Co. will present a better offer to Engie (+0.3%) for its Suez stake. Finally, Lagardere (+31%) tops the charts as investor Bernard Arnault revealed he has built up a direct stake in the group.

EU Commission is to appeal against court decision which quashed order for Apple (AAPL) to repay EUR 14.3bln in tax advantages; subsequently confirmed by the EU Commission (FT/EU Commission)

Boeing (BA) - EU Aviation safety chief says 737 Max test flights went well and end of work on this craft is in sight; agreed to install a 'synthetic' 3rd flight angle sensor on the next 737 Max. Will be following developments on the 777x more closely following the grounding of the 737 Max. (Newswires)

FX

NZD/AUD/USD - It makes some sense that the Kiwi and Aussie are front-running major currency recovery gains vs the Greenback having been amongst the biggest losers when their US counterpart was in the ascendency and DXY reached its 94.601 peak. Nzd/Usd has bounced firmly from yesterday’s low not far from 0.6500 towards the round number above and Aud/Usd is back in the high 0.7000s after shaving the level by a similar margin on Thursday, with some impetus from CBA’s counter view on the RBA holding fire at October’s policy meeting after 2 forecasts for a 15 bp cut. Meanwhile, the US Dollar has regrouped from initial consolidation and resides at the top-end of a current 94.186-94.558 band. Such movement comes ahead of the notoriously erratic durable goods data and 2 scheduled speeches from Fed’s Williams, but still monitoring the broad risk tone for direction, particularly as US participants arrive, after further progress on the stopgap spending bill as the Senate approved the proposal overwhelmingly.

GBP - The Pound continues to hold off worst levels with some hope that latest fiscal support will cushion the UK economy against further COVID-19 collateral damage. Cable is hovering just above 1.2700 after failing to sustain a 1.2800+ push, while Eur/Gbp has rebounded from a breach of 0.9150 amidst conflicting Brexit reports, as Britain’s chief negotiator Frost and EU peer Barnier are said to have laid foundations for formal negotiations next week. but some in the UK press suggest that Brussels is still not optimistic and indeed gloomy after latest informal talks.

CHF/CAD/JPY/EUR - All narrowly mixed vs the Greenback in fairly subdued, aimless trade compared to the whippy sessions to date this week, as the Franc pivots 0.9260 (and 1.0800 against the Euro) following little fresh inspiration from the SNB, the Loonie straddles 1.3350 and Yen flirts with a key Fib retracement at 105.53 that looks more inclined to keep it compressed than more decent option expiry interest at the 105.00 strike (1.3 bn rolling off at Friday’s NY cut). Elsewhere, the Euro has regained some poise around the 1.1650 mark, but remains technically weak under 1.1700, a Fib and the 50 HMA at 1.1691 and 1.1670 respectively.

SCANDI/EM - Some calm for the underperforming Swedish Krona, but the Norwegian Crown is struggling to stop the rot after the Norges Bank pushed back rate hike intentions in stark contrast to the CBRT that has backed up its monetary policy aggression with a 50 bp hike in swap rates, while increasing limits between local and foreign banks. Hence, Usd/Try has tested support into 7.5000 from record highs circa 7.7160 pre-2 full percent blanket tightening. Conversely, Usd/Mxn is hovering above 22.1500 after Banxico eased 25 bp and noted ample slack in the economy.

Turkish Banking Watchdog says they have increased TRY swap limits of local banks with foreign entities. Additionally, CBRT increase TRY swap market rates to 10.25% vs. Prev. 9.75%. (Newswires)

FIXED INCOME

It was gradual initially amidst a gentle erosion of equity gains and an apparent loss of momentum, but the more recent bout of stock selling and bond buying has been more pronounced, sudden and coordinated, or at least correlated. Bunds have now been up to 174.63, Gilts to 136.43 and the 10 year T-note 139-20+ for gains of 19 ticks, 22 ticks and 2/32 on the day respectively vs -28, -9 and -3.5/32 at one stage. Ahead, BoE quarterly bulletin at midday, US durable goods at the normal early data slot and then the first of two appearances from Fed’s Williams, but for risk assets/currencies and safe-havens the pre-weekend moves are likely to depend on whether Wall Street picks up where it left off or retreats from latest recovery highs.

COMMODITIES

WTI and Brent front month futures are essentially unchanged at present, in what looks to be a continuation of APAC price action, but with complex-specific newsflow rather scarce; most recently, price action has deteriorated in-line with the broader market sentiment. In terms of where we stand, the demand side of the equation continues to be clouded by the COVID-19 resurgence in Europe and elsewhere, with eyes remaining on fuel demand as air travel falters. Meanwhile on the supply-side, eyes remain on any OPEC+ commentary in relation to the COVID-19 case rises alongside the situation in Libya and production ramp ups and exports are underway, with the country expected to output some 260k BPD by next week. OPEC earlier this week noted that the situation will be monitored for continuity, in which the OPEC member will then likely be issued am output quota as it is currently exempt. WTI resides around the 40.30/bbl mark (vs. low 40.13/bbl), while its Brent counterpart resides north of USD 42/bbl (vs. low 47.75/bbl). Precious metals meanwhile are uneventful and largely trade in tandem with a caged USD, with spot gold around the 1865/oz mark and spot silver just above USD 22/oz. In terms of base metals, LME copper gave up earlier gains in sympathy of downside seen in European stocks, whilst Dalian iron ore futures ended the day lower amid a lacklustre performance in China.