• European bourses are downbeat following a mixed-lower APAC session dominated by the US debate; Stateside, futures are similarly subdued
• The Presidential debate descended into chaos and snap-polls/implied odds marginally extended the Democratic lead
• China is preparing to launch an antitrust probe into Alphabet's (GOOG) Google, according to sources, in relation to market dominance
• Seven EU member states have opposed the draft rule of law reports; Council has opened the mandate for its debate in Parliament
• FX features a firmer DXY comfortably above 94.00 to the detriment of major peers; fixed income is relatively rangebound featuring a steeper UST curve
• Looking ahead, highlights include US ADP & GDP (F), Chicago PMI, DoEs, ECB's Lane, Fed's Kashkari, Kaplan

CORONAVIRUS UPDATE

Moderna (MRNA) coronavirus vaccine reportedly appears to work for older adults in a small study. according to researchers. (Newswires)

Regeneron Pharmaceuticals (REGN) said its experimental two-antibody cocktail reduced viral levels and improved symptoms in non-hospitalized patients with mild-to-moderate COVID-19. (Newswires)

World Bank President Malpass said he is seeking board approval for USD 12bln of vaccine financing and distribution initiative for developing countries. (Newswires)

Novartis CEO stated that vaccines alone will not be enough to combat COVID-19, adding that significant supplies of highly effective vaccines will likely not be available until the end of 2021. (Newswires)

Russia has completed the clinical trials of a second potential COVID-19 vaccine produced by the Vector Institute, according to Ria. (Newswires)

ASIA

Asian equity markets were mixed with participants indecisive as focus centred on the US Presidential Debate where US President Trump faced off with former VP Biden on a range of topics including COVID-19, the economy, taxes and foreign dealings of former VP Biden’s son. The debate featured plenty of bickering and highlighted no love lost between the candidates with President Trump criticizing Biden’s son and with Biden referring to Trump as a clown on several occasions, while marginal upside was seen in US equity futures early in the debate as the widely viewed front-runner Biden showed a more composed tone with President Trump seemingly disruptive and interrupting Biden and the moderator a few times, which favoured the notion of a Blue Sweep. However, all the gains were later pared at the end of the debate which descended into chaos with plenty of disruptions and President Trump also suggested the idea of a contested election which could last for months. As such, ASX 200 (-2.3%) and Nikkei 225 (-1.5%) were negative with Australia dragged lower by losses in the energy sector and with financials also underperforming, while Tokyo sentiment was lacklustre following Industrial Production data which despite beating expectations, still showed a double-digit percentage contraction Y/Y. Hang Seng (+0.7%) and Shanghai Comp. (-0.2%) were initially both positive on the eve of Golden Week as participants digested better than expected Chinese Official PMI data and although Caixin Manufacturing PMI slightly missed, the data showed new export orders rose by the most in 3 years and the employment gauge returned to growth; however, gains in Shanghai were pared back. Finally, 10yr JGBs traded lacklustre as prices reversed some of yesterday’s gains but with downside stemmed amid the BoJ’s presence in the market today and after the central bank also kept its purchase intentions for October unchanged.

PBoC injected CNY 50bln via 14-day reverse repos at rate of 2.35% for a net weekly drain of CNY 210bln. (Newswires) PBoC set USD/CNY mid-point at 6.8101 vs. Exp. 6.8098 (Prev. 6.8171)

Chinese Manufacturing PMI (Sep) 51.5 vs. Exp. 51.2 (Prev. 51.0). (Newswires) Chinese Non-Manufacturing PMI (Sep) 55.9 vs. Exp. 54.7 (Prev. 55.2) Chinese Composite PMI (Sep) 55.1 (Prev. 54.5) Chinese Caixin Manufacturing PMI (Sep) 53.0 vs. Exp. 53.1 (Prev. 53.1)

Japanese Industrial Production (Aug) M/M 1.7% vs. Exp. 1.5% (Prev. 8.7%). (Newswires) Japanese Industrial Production (Aug P) Y/Y -13.3% vs. Exp. -13.4% (Prev. -15.5%)

US

US President Trump and former VP Biden squared off in the first Presidential Debate in which Biden criticized US President Trump for the coronavirus citing over 200k deaths and over 7mln cases, while US President Trump pointed the blame for coronavirus again on China. During the debate, President Trump said that he has paid millions in taxes, while former VP Biden called on him to show his tax returns and Biden suggested he will remove the tax loop holes if he is President, as well as raise corporate taxes to 28%. US President Trump criticized former VP Biden regarding China and also Hunter Biden's foreign dealings in which he stated that Biden's son received USD 3.5mln from Moscow, while he stated that Hunter was thrown out of the military and noted drug issues. Furthermore, President Trump said we may not know for months regarding the election results and that mail-in ballots are going to be a fraud. (Newswires)

CBS News poll showed 48% viewed Biden had won the debate and 40% thought President Trump won the debate. Post-debate betting odds moved in favour of Democratic candidate Biden, with implied odds from the Betfair Exchange rising to 59% from 56% pre-debate. (Twitter) 

Democratic Presidential Candidate Biden released his tax returns for 2019 which showed his income of nearly USD 985k for both he and his wife, while he called on President Trump to release his tax returns. Furthermore, the Biden couple paid more than USD 346k in federal taxes in 2019 and sought nearly USD 47k refund. (Newswires)

China is preparing to launch an antitrust probe into Alphabet's (GOOG) Google, according to sources, in relation to market dominance; probe proposed by Huawei. A decision on this could come next month and may be impacted by China-US relations. (Newswires)

Fed's Williams (voter) said the economic recovery has been more robust than many were expecting and he is optimistic we will be able to continue to see a pretty strong economic recovery for the rest of this year and next. (Newswires)

Fed's Rosengren (Non-Voter) says his outlook for the US economy is more pessimistic than some of his Fed colleagues given concerns around the persistency of COVID-19 on activity levels. (WSJ)

US Senate voted 82-6 to pass the procedural hurdle for the stopgap funding bill which paves the way for a final vote on Wednesday. (Newswires)

US Treasury concluded loans to 7 major airlines and supports additional relief for workers in the industry, while there were separate reported that CDC Director Redfield was said to have pushed to extend the ban on passenger cruises to next year but was overruled during discussions at the White House Situation Room. (Newswires)

UK/EU

Regarding the UK’s state aid paper, EU sources state this does not provide appropriate governance measures to ensure the EU could hold the UK to its commitments; additionally, such regulation would need agreement at ‘the highest level’. (Guardian)

EU first report on rule of law deficiencies across all 27 member states says COVID is "stress test for rule of law resilience"; Hungary has raised "serious concern"; Poland raises "particular concerns". Subsequently, seven EU member states including Poland, Hungary, Finland and the Frugal Four have rejected the council draft text on the rule of law. Council goes ahead with mandate to open negotiations with the Parliament. (Newswires) On this matter, A German EU Presidency spokesperson, on the EU Recovery Fund noted “we observe with concern that the number of different blockades in the budget negotiations seems to be increasing rather than decreasing”, subsequently “a delay of the EU budget and the recovery fund is becoming increasingly likely”. (Newswires)

EU is preparing to force big tech Co's to share their customer data with rival, according to a draft document via FT. (FT)

German Chancellor Merkel wants fair trade with China but have not got very far with investment agreement with them; attempt to make more reciprocity progress by year-end; will be raising the issue of Hong Kong and minority treatment in China. (Newswires)

Italy Treasury is to lower 2020 Deficit-to-GDP target to 10.8% from 11.9% and is to raise 2021 target to 7.0% of GDP from 5.7%, while it is to set target at 4.7% and 3.0% of GDP in 2022 and 2023, respectively. (Newswires)

UK GDP YY (Q2) -21.5% vs. Exp. -21.7% (Prev. -21.7%); QQ (Q2) -19.8% vs. Exp. -20.4% (Prev. -20.4%)

UK BRC Shop Price Index (Sep) Y/Y -1.6% vs. Exp. -1.4% (Prev. -1.6%). (Newswires) UK Lloyds Business Barometer (Sep) -11 (Prev. -14)

German Retail Sales YY Real* (Aug) 3.7% vs. Exp. 4.2% (Prev. 4.2%, Rev. 5.0%)

-        MM Real* (Aug) 3.1% vs. Exp. 0.5% (Prev. -0.9%)

German Unemployment Change SA (Sep) -8k vs. Exp. -8.0k (Prev. -9.0k)

-        Unemployment Rate SA (Sep) 6.3% vs. Exp. 6.4% (Prev. 6.4%)

-        Unemployment Total SA (Sep) 2.907M (Prev. 2.915M)

GEOPOLITICAL

North Korean Ambassador to the UN said North Korea needs external environment favourable to economic construction but cannot sell off its dignity, while the Ambassador added that absolute strength to prevent war can safeguard peace. (Newswires/Yonhap)

Turkish Foreign Minister says the nation will do "what is necessary" if Azerbaijan requests military support. (Newswires)

EQUITIES

A relatively choppy session thus far for European stocks, albeit with losses somewhat contained (Euro Stoxx 50 -0.6%), as sentiment was dampened overnight amid the fallout from the US Presidential debate, whilst fresh catalysts during European hours remain scarce. That being said, the EU released their report on rule of law deficiencies which singles out Hungary and Poland – a move which could threaten the swift implantation of the EU Recovery Fund as unanimity is needed to roll out the package. Meanwhile, China opened an antitrust probe into Google (-1.8% pre-market) over market dominance. European bourses see varying degrees of losses, with FTSE 100 (-0.1%) cushioned by a softer Sterling, and Spain’s IBEX (-0.1%) supported by gains in large-cap stocks including Telefonica (+0.6%) after reports said it is mulling the sale of an additional stake in its mobile telephone mast unit Telxius. Thus the telecom sector outperforms, with added tailwinds from gains in Orange (+0.7%), Bouygues (+0.9%) after the French Telecom Regulator said prices for the 5G spectrum are up by EUR 220mln following the first round of auctions, with the latter also buoyed by its disposal of Alstom (-2.2%) shares. IT meanwhile resides on the other side of the spectrum following earnings from Micron (-4.7% pre-mkt) despite beating on both top and bottom line is afflicted more-so on sub-par guidance. As such, Infineon (-1.2%), SAP (-1.2%) and STMicroelectronics (-1.2%) are subdued. Travel and Leisure also resides towards the bottom of the pile amid the ongoing woes for the sector with regards to rising COVID-19 infections. In terms of individual movers, Suez (+6.5%) is a top gainer in the Stoxx 600 after Veolia (+1.8%) upped its offer for the Co. to EUR 18/shr from EUR 15.50/shr. Shell (+0.5%) sees modest gains despite a rather gloomy Q3 update, but with upside potentially on further cost-cutting measures including global job losses of up to 9,000 employees by end-2022.

WTO authorized the EU to impose tariffs on USD 4bln of US goods in response to Boeing (BA) subsidies, according to sources. (Newswires)

Dow (DOW) is outlining actions to deliver structural cost improvements and further enhance competitiveness, implementing a restructuring program to reduce global workforce costs by 6%; expected to sale USD 300mln by end-2021 on EBITDA. (Newswires)

US Democratic lawmakers are expected to call on Congress to curb the powers of large tech companies, potentially through a forced separation of its online platforms, according to WSJ. (WSJ)

FX

DXY - The Dollar and index by design seem to have found their footing after extending declines amidst all the bickering between incumbent US President Trump and rival Biden overnight. The DXY has revisited 94.000, albeit just within a 94.180-93.789 range and could be seeing late if not last minute rebalancing demand for the end of September and Q3 alongside a touch of safe-haven buying as broad risk sentiment wavers. Ahead, a busy US data schedule including ADP before Friday’s BLS report and more Fed speak via current FOMC voters Kashkari, Bowman and Kaplan.

CHF/GBP - Lagging fellow G10 currencies, and perhaps surprisingly given the Swiss KOF indicator easily beating consensus and advancing further above the 100.0 mark, while revised UK GDP was not quite as abject as the initial estimates and a degree of Brexit positivity persists following reports that chief EU negotiator Barnier sees an improvement in the atmosphere, more engagement from the UK side and a fresh ’buzz’ in talks. However, the Franc is back under 0.9200 and Cable has tested support ahead of 1.2800, as Eur/Gbp consolidates above 0.9100. For the record, nothing new whatsoever from BoE’s Haldane – see headline feed at 9.30BST for bullets and a link to the full speech.

NZD/AUD - In contrast to the above, recoveries in NZ business sentiment and the outlook for activity, not as weak as forecast Aussie building approvals and better than expected Chinese PMIs that are helping the YUAN claw back losses vs the Greenback towards 6.8100, are all keeping the Antipodes afloat. Nzd/Usd has been over 0.6600 and Aud/Usd up to 0.7150, albeit off peaks as their US counterpart continues to regain poise.

JPY/CAD/EUR - The Yen remains rangebound vs the Buck and flanked by decent option expiry interest from 105.60-70 (1.1 bn) to 105.15-00 (1.3 bn) following moderately firmer than anticipated Japanese ip data, while the Loonie is still attempting to contain losses around 1.3400 ahead of Canadian monthly GDP and the Euro is striving to maintain 1.1700+ status in the face of stronger sell signals vs the US Dollar.

SCANDI/EM - Little reaction to Sweden’s NIER upgrading its 2020 jobless rate projection or a reduction in Norges Bank daily FX purchases for October, as Eur/Sek straddles 10.5400 and Eur/Nok holds off 11.1100+ highs on the aforementioned single currency retracement. Elsewhere, EMs are correcting higher after recent heavy depreciation vs the Usd, and even the tormented Rub and Try as trouble across the Armenian-Azeri border rumbles on.

Notable FX Expiries, NY Cut:

-        USD/JPY: 105.00-15 (1.3BLN), 105.45-50 (500M), 105.60-70 (1.1BLN), 105.95-106.00 (750M)

New Zealand ANZ Business Confidence (Sep) -28.5% (Prev. -41.8%). (Newswires) New Zealand ANZ Activity Outlook (Sep) -5.4% (Prev. -17.5%)

Fonterra New Zealand milk collection in September rose 3.2% from the prior season to 100.7mln kgms. (Newswires)

Turkey lowered withholding tax on bank deposits to year-end and cuts tax on FX transaction to 0.2% from 1.0%. (Newswires)

FIXED INCOME

Typical pre-month end tinkering and no doubt a tad more prominent as the last trading day of September is also the final one of the current quarter and risk sentiment remains fragile overall. Hence, pull-backs in core debt are shallow and contained, while demand for Germany’s latest Bobl offering was solid at a more negative yield with the sale just over twice oversubscribed. Bunds are just shy of parity, Gilts recovering from a retreat to 136.34 (-22 ticks on the day) and the 10 year T-note holding near their 139-25+ overnight session best as the corresponding yield hovers a fraction under 65 bp ahead of ADP, GDP, Chicago PMI and housing data before a trio of Fed speakers.

COMMODITIES

Crude futures remain softer in early European hours as the rising COVID-19 cases continue to weigh on demand prospects for the complex, with some added pressure for the lackluster sentiment across markets following the US debate. Price saw another leg lower on reports that Beijing is said to be preparing an antitrust investigation into Google, in a sign that US-Sino relations are getting no better. Elsewhere, Norway's Industri Energi and Safe Labour unions said its workers will not go on strike after agreeing on a wage deal, but Lederne Labour union said its workers will go ahead with strikes and will potentially escalate the situations at today’s meeting. This could cut the country's oil output by some 470k BPD, according to the Norwegian Oil and Gas Association. WTI Nov resides just sub-39/bbl whilst Brent Dec sees itself marginally above USD 41/bbl. Precious metals meanwhile succumb to the firmer Buck, with spot gold around the USD 1880/oz mark having had drifted from a high of USD 1899/oz; spot silver underperforms but remains north of USD 23.50/oz (vs. high USD 24.32/oz). LME copper prices edge lower in tandem with losses across the stock markets coupled with a firmer Dollar, whilst Dalian iron ore futures rose some 5% amid rekindled fears of supply disruptions.

US Private Inventory Crude Stocks (w/e 25th August) -0.83mln (exp. +1.6mln, prev. -1.6mln). (Newswires)

Marathon (MPC) Galveston Bay, Texas refinery (585k BPD) is laying off salaried staff due to COVID-19 demand loss and Marathon is also reducing salaried staff at its Los Angeles refinery, according to sources. (Newswires)

Norway's Industri Energi and Safe Labour unions said its workers will not go on strike after agreeing on a wage deal, but Lederne Labour union said its workers will go ahead with strikes. This could cut the country's oil output by some 470k BPD, according to the Nowegian Oil and Gas Association. (Newswires)