• European bourses are subdued in a reversal of yesterday’s action which features banking names at the bottom of the pile
• US House Speaker Pelosi announced that the Democrats unveiled an updated coronavirus relief legislation, a USD 2.2tln bill
• EU said it is prepared to begin writing a joint legal text of a trade agreement with UK, according to The Times
• FX features a downbeat USD to the benefit of G10 peers aside from the JPY which is drifting from notable expiries
• Looking ahead, highlights include German Prelim CPI, US Consumer Confidence, Fed’s Williams, Clarida, Harker, Quarles, BoE’s Bailey & ECB’s Mersch

CORONAVIRUS UPDATE

Global coronavirus death toll has surpassed 1mln, according to the Johns Hopkins University. US COVID cases +86,206 which was a record daily increase (prev. +49,871) and deaths +295 (prev. +853). New York COVID cases +834 (prev. +866) and deaths +11 (prev. +6). New York City is considering stricter COVID measures in some neighbourhoods where cases are surging, while New York Governor Cuomo extended the state moratorium on COVID-related residential evictions until January 1, 2021. Elsewhere, the Chicago Mayor loosened COVID-19 related capacity restrictions for businesses including bars, restaurants & health clubs. (Newswires/New York Post)

US State Department said it lifted the global health advisory for coronavirus, with alert advisories for countries including Honduras and Nicaragua lowered. (Newswires)

Canada's Quebec Province said Montreal bars and restaurant dining rooms will shut for 28 days beginning Thursday due to the coronavirus. (Newswires)

ASIA

Asian equity markets traded mixed as the region struggled to make the most of the firm tailwinds from Wall St where all major indices notched respectable gains led by cyclicals and amid month and quarter-end flows. ASX 200 (Unch.) and Nikkei 225 (+0.1%) were mixed throughout most of the session with Australia kept afloat by outperformance in tech after PM Morrison confirmed an AUD 800mln commitment for measures related to new digital technology but with upside capped by weakness in consumer and mining-related sectors, while the Tokyo benchmark initially lagged on a retreat from the 23,500 level before mounting a late recovery, with NTT DoCoMo in focus after news that NTT was mulling taking the Co. private. This resulted to a glut of buy orders for NTT DoCoMo which was untraded and weighed on the shares of its parent, while telecom rivals KDDI and SoftBank Corp were hit as the buyout deal could speed up the Suga government’s agenda for lower fees considering that the government is also the largest shareholder in NTT. Hang Seng (-0.9%) and Shanghai Comp. (+0.2%) diverged with indecision seen after another PBoC liquidity drain, as well as heading into tomorrow’s PMI data and the start of Golden Week holidays on Thursday, with Hong Kong lacklustre as yesterday’s HSBC-led surge petered out and amid IPO-related developments with ZTO Express debuting in the HKEX. Finally, 10yr JGBs were choppy alongside similar indecision in Japanese stocks with early gains in JGBs spurred as Japanese stocks initially lagged and with support just above the 152.00 psychological level, although the moves were later retraced as sentiment in Tokyo gradually improved and following mixed results at the 2yr JGB auction.

PBoC injected CNY 100bln via 14-day reverse repos at rate of 2.35% for a net daily drain of CNY 100bln. (Newswires) PBoC set USD/CNY mid-point at 6.8171 vs. Exp. 6.8133 (Prev. 6.8252)

HKMA says that increasing tensions between the US and China will continue to pose significant challenges to the banking sector in Hong Kong. (Newswires)

World Bank said growth in the East Asia and Pacific Region is seen at 0.9% this year which is the lowest since 1967, while it sees China growth at 2.0% and the rest of East Asia and Pacific Region to contract 3.5% this year. (Newswires)

BoJ Summary of Opinions from the September meeting stated that monetary easing measures conducted since March have had positive effects but added that the pace of recovery is moderate so they must be vigilant. BoJ noted it is appropriate for the Bank to maintain the current monetary policy for the time being and, as before, take additional measures if necessary while closely monitoring the impact of COVID-19, while it also stated that Japan's economy is likely to follow an improving trend, but the pace is expected to be only moderate while the impact of COVID-19 remains worldwide. (Newswires)

Tokyo CPI (Sep) Y/Y 0.2% vs. Exp. 0.1% (Prev. 0.3%) Tokyo CPI Ex. Fresh Food (Sep) Y/Y -0.2% vs. Exp. -0.3% (Prev. -0.3%) Tokyo CPI Ex. Fresh Food & Energy (Sep) Y/Y 0.0% vs. Exp. -0.2% (Prev. -0.1%)

US

US House Speaker Pelosi announced that the Democrats unveiled an updated coronavirus relief legislation, in which the USD 2.2tln bill includes new funding to avert catastrophe for schools, small businesses, performance spaces, airline workers and others. Furthermore, House Speaker Pelosi and Treasury Secretary Mnuchin spoke via phone call last night and agreed to speak again in the morning, according to Pelosi's Deputy Chief of Staff. (Newswires/Twitter)

US House Majority Leader Hoyer said he believes the revamped coronavirus bill is a reasonable compromise that meets the needs we identified in the Heroes Act that passed the House in May, while he added that doing nothing must not be an option, according to Fox News' Pergram. (Twitter)

UK/EU

UK PM Johnson is to unveil measures to help the unemployed retrain for work in growth sectors, which includes offering a free college place on certain vocational courses for those without A-levels or similar qualifications. (FT)

EU said it is prepared to begin writing a joint legal text of a trade agreement with UK, according to The Times. The EU has reportedly abandoned its demands for a broad agreement between the two sides on all outstanding issues before drafting an agreement if the UK engages in detailed discussions on fishing quotas and state-subsidies post-Brexit. (Times) Subsequently, reports of imminent Brexit tunnel seen as premature in Brussels, according to Guardian's Rankin and German Minister of State for Europe Roth says in a letter to the UK that the EU cannot and will not accept Britain questioning the Brexit agreement signed nine months ago, according to Der Spiegel. (Twitter/ Der Spiegel)

Institute for Fiscal Studies said UK Chancellor Sunak will struggle to deliver Tory manifesto pledges without borrowing a lot more or hiking taxes, while it recommended that government department and local authority budgets should be limited amid high uncertainty. (FT)

German Saxony State CPI YY (Sep) 0.1% (Prev. 0.1%); MM (Sep) -0.1% (Prev. -0.3%)

-        North Rhine-Westphalia State CPI YY* (Sep) -0.3% (Prev. -0.2%); MM* (Sep) -0.2%

-        Mainland reading is expected at -0.1% YY & -0.1% MM but note these expectations were generated prior to the state CPIs release.

EU Consumer Confidence Final (Sep) -13.9 vs. Exp. -13.9 (Prev. -13.9, Rev. -14.7)

-        Economic Sentiment (Sep) 91.1 vs. Exp. 89.0 (Prev. 87.7, Rev. 87.5)

GEOPOLITICAL

Nagorno-Karabakh region stated that at least 26 more troops were killed in fighting with Azeri forces on Monday. (Newswires)

EQUITIES

The European equity space mostly trades with mild losses (-0.3%) as the region unwinds some of yesterday’s gains after sentiment faded throughout the APAC hours into early European doors. US equity futures meanwhile hover just below-par but with the depth of losses relatively shallow ahead of the US Presidential debate. Broad-based losses are seen across EU bourses but UK’s FTSE (-0.5%) modestly lags on account of a firmer Sterling coupled with underperformance in the Energy and Financials sectors, with the former on the back of energy prices and the latter seemingly a reversal of yesterday’s firm gains. No real risk profile can be derived from sectors themselves, whilst the sectoral breakdown sees yesterday’s winners at the foot of the pile. In terms of individual movers, HSBC (-3.5%) resides towards the bottom of the Stoxx 600 as it reverses some of yesterday’s gains. Maersk (+2.6%) is propped up by two separate broker upgrades at Jefferies and Goldman Sachs. Finally, William Hill (+0.7%) experiences modest gains after reports that Betfred is interested in acquiring the Co’s shops in the UK, whilst reports stated that two other parties are interested in the entirety of William Hill’s non-US businesses.

FX

AUD/NZD - It’s quite tight at the top of the major ranks as Aud/Usd tests 0.7100+ levels in wake of another steady October RBA rate outlook overnight, this time from Citi, while the Kiwi hovers below 0.6600 and 1.0800 vs its US and Antipodean counterparts in advance of NZ building consents.

GBP/EUR - Also firmer against the Greenback, as Sterling consolidates around 1.2850 and above 0.9100 vs the Euro amidst more positive sounding Brexit vibes. According to latest media reports, the EU has relented on its criteria for crafting a joint trade deal text that required a broad agreement on all outstanding issues, while head of the European Commission von der Leyen has repeated that she is ‘convinced’ a pact with the UK is possible.and Euro in the high 1.1600 area, still defying relatively strong month end sell signals vs the Buck and weak Eurozone inflation data from the German states indicating a clear downward bias to the flat y/y national consensus. However, Eur/Usd remains bearish from a chart perspective while closing below a key fib retracement level just below 1.1700.

CHF/CAD - Both narrowly mixed against a rather flat, lethargic US Dollar as the DXY idles between 94.070-298 parameters, with the Franc and Loonie within confined 0.9250-34 and 1.3391-56 respective ranges ahead of the Swiss KOF indicator and Canadian PPI on Wednesday.

JPY - The G10 laggard and pivoting away from decent option expiries at 105.00 and 105.30-35 (2.6 bn and 1.5 bn) vs the Usd, but the Yen is closer to interest at 123.20 (1.8 bn) in Eur cross terms in the midst of a series of expiries spanning 122.00 through 124.00.

SCANDI/EM - Little reaction to a raft of Swedish sentiment metrics or another Riksbank reminder that the Sek is not currently a decisive factor for policy deliberations as the Crown straddles 10.5500 vs the Euro. However, ongoing geopolitical tensions and conflict are prompting further underperformance in the Turkish Lira and Russian Rouble to the extent that an improvement in economic confidence and the promise of more normalisation steps to support financial stability have not prevented Usd/Try from rallying beyond 7.8500. Meanwhile, the CBR has been forced to ramp up its daily interventions by Rub 2.9 bn from October 1 and until December on top of current operations, as it slides towards 80.0000.

Notable FX Expiries, NY Cut:

-        USD/JPY: 105.00 (2.6BLN), 105.10 (375M), 105.30-35 (1.5BLN), 106.15 (350M)

-        EUR/JPY: 122.00 (1.1BLN), 122.60 (1.5BLN), 123.20 (1.8BLN), 124.00 (1.8BLN)

Turkish Finance Minister says that normalisation steps will continue in the coming weeks and will provide support to financial stability. (Newswires)

FIXED INCOME

The 10 year UK benchmark has not really benefited from the strength of demand at today’s 2028 sale, or at least by as much as one might expect given the 3+ cover and relatively short tail, but it has posted a fresh Liffe intraday high of 136.54 alongside the grinding bid in Bunds that are just off a new 174.89 m-t-d apex and US Treasuries eyeing 139-23 or 65 bp in yield terms. Meanwhile, the pull-back in equities from Monday’s lofty peaks appears to have petered out ahead of German prelim inflation, several US data releases and a raft of Fed speakers interspersed by BoE Governor Bailey and ECB’s Mersch.

COMMODITIES

WTI and Brent front month futures see mild losses of some USD 0.30/bbl a piece, coinciding with the broad losses across European equities amid a lack of fresh fundamentals for the energy complex. Eyes remain on the demand side of the equation as the global COVID-19 death tally surpasses 1mln. Elsewhere, in terms of the of the Azeri-Armenian conflict, the Azeri State Oil Company reassured that the country’s oil infrastructures are safe, which comes amid concern that the recent clashed could impact production or pipeline facilities. The session also saw comments from Vitol’s CEO, who noted that he sees the price of oil "up a bit in the next six months", and added they have "modest expectations". Aside from that, crude-specific news flow has been scarce. WTI Nov meanders just above the USD 40/bbl mark after dipping from a high of 40.70/bbl, whilst its Brent counterpart narrowly holds onto a USD 42/bbl level having has tested the level to the downside overnight. Precious metals meanwhile remain contained within tight ranges – with spot gold just north of USD 1880/oz after taking a jab at USD 1875/oz to the downside in APAC hours, whilst spot silver holds its head above USD 23.50/oz ahead of today’s US debate showdown. LME copper prices ease in tandem with the overall risk sentiment. Separately, Dalian iron ore futures were supported overnight as Vale said it was suspending operations at a Brazilian concentration plant.

G20 energy ministers reaffirmed commitment to ensure the energy sector continues to make a full and effective contribution to overcoming the pandemic, while they emphasize importance of stimulus packages to spur inclusive economic activities, according to the statement. (Newswires)

Vitol CEO sees the price of oil "up a bit in the next six months", adding they have "modest expectations". (Newswires)

China's copper TC/RC floor was set by smelter group at USD 58/ton or 5.8cents/lb for Q4 vs. Prev. USD 53/ton or 5.3cents/lb in Q3, according to sources. (Newswires)