• US futures are firmer but off session highs amidst relatively quiet newsflow with focus on updates from the President
• US President Trump’s condition continued to improve and he may be discharged from the hospital as early as Monday, according to his medical team
• The latest election polls showed a widening lead for former VP Biden following last week’s presidential debate
• US House Speaker Pelosi & Senate Majority Leader McConnel were positive on stimulus but no breakthrough announced yet
• UK PM Johnson set a deadline of October 15th to secure a Brexit deal with the EU and both sides agreed to 11 days of “intensified” talks to finalise an agreement
• FX features a downbeat DXY weighed on by major G10 peers ex-JPY as CHF outperforms
• Looking ahead, highlights include Final US services PMIs, ISM non-manufacturing & Fed's Evans

US PRESIDENT TRUMP/CORONAVIRUS UPDATE

US President Trump’s condition continued to improve and may be discharged from the hospital as early as Monday, according to his medical team. The medical team also noted that President Trump had a high fever on Friday morning and oxygen levels were dipping, while they recommended supplemental oxygen at that time but added that he had remained without fever since then and had completed a 2nd dose of Remdesivir, while his vital signs are stable with oxygen level at 98% and liver and kidney function was normal. (Newswires) Medical experts suggested that many of the details that President Trump’s medical team divulged would suggest that the President was suffering a more severe case of the virus than the physicians acknowledge. (New York Times)

US President Trump said in video message that he is getting great reports from the hospital, while he also conducted a motorcade drive by outside the Walter Reed Hospital to wave to supporters and the press. US President Trump earlier tweeted that he is feeling well and that the US wants and needs stimulus. (Twitter/Newswires)

US COVID-19 cases rose to a total 7.36mln from 7.32mln and deaths rose to a total 208.8k from 208.1k. (Newswires)

New York City Mayor De Blasio asked the state for permission to close around 300 schools and reimpose restrictions for non-essential businesses in some areas due to increasing infections. (Newswires)

UK COVID-19 cases +22,961 (Prev. +12,872); the government noted the jump in cases was due to a reporting delay and that numbers in the upcoming days would include additional cases. (Newswires)

UK PM Johnson said he hopes and believes that the scientific equation will change in the next few weeks and it is too early to know if local measures in parts of the country are working. UK PM Johnson also noted that progress on vaccines and testing will allow us to take a different approach and that scientists are unanimous that things will be radically different in Spring. (Newswires)

A mass roll-out of a COVID-19 vaccine in the UK could be completed in as little as three months, which raises the prospect that all adults in the country could receive the vaccine as soon as Easter, according to The Times. However, there were other reports in FT that the head of the government’s vaccine task force noted that the vaccination of everyone in the country will not happen and that they just need to vaccinate everyone at risk. (The Times/FT)

A new 3-tiered lockdown is reportedly planned for England which includes tougher measures that could be imposed locally or nationally if the increases in COVID-19 cases are not brought under control. (The Guardian)

Irish National Public Health Emergency Team recommended the country be moved to the highest level of COVID-19 restrictions. (RTE)

France COVID-19 cases +12,565 (Prev. +16,972 record increase) and deaths +32 (Prev. +49). French PM’s Office announced that the Parisian region has been placed on maximum alert level due to COVID-19 and that additional restrictive measures will be imposed, while it was reported that bars in Paris are to shut from Tuesday. (Newswires)

New Zealand PM Ardern said there is a high probability the coronavirus cluster in Auckland will be eliminated, while she announced to lift coronavirus restrictions in Auckland from Wednesday with the alert status to move to level 1. (Newswires)

ASIA

Asian equity markets and US equity futures began the week with a constructive tone as the regional bourses reopened from recent holiday closures and participants also digested the positive updates regarding President Trump’s condition, which was said to have continued to improve and he could be discharged from hospital as early as today. In addition, some also attributed the positive tone to the latest polls which showed a widening lead for former VP Biden following last week’s presidential debate. ASX 200 (+2.6%) outperformed with the broad gains led by a surge in energy and financials on the eve of the budget announcement, where Australia’s national debt ceiling is expected to be raised to above AUD 1.1tln and income tax cuts valued at billions are set to be backdated in an effort to provide immediate economic stimulus. Nikkei 225 (+1.2%) traded positively as exporters reaped the benefits of a weaker currency that was spurred by the risk tone and alongside some murmuring of Gotobi demand. Hang Seng (+1.3%) was also upbeat as participants returned following the holidays although mainland China is to remain shut for most this week and won’t reopen until Friday, while there were some weak spots including SMIC shares which have dropped over 6% after the US informed its suppliers they will be subject to additional export restrictions. Finally, 10yr JGBs were weaker amid the gains in riskier assets but with downside stemmed by support near the 152.00 level and with the BoJ present in the market for a total JPY 840bln of JGBs with 1-3yr and 5-10yr maturities.

US announced guidance on immigration laws that will make it near-impossible for members of a Communist party or similar, to be granted permanent residence or citizenship in America. (SCMP)

Chinese chipmaker Semiconductor Manufacturing International Corporation conducted "preliminary exchanges" with the US Bureau of Industry and Security regarding export restrictions. Furthermore, it noted that US export curbs may have a potential material adverse impact on its future production and operation, while it confirmed that the US issued a letter to certain suppliers regarding restriction on sale of certain raw materials. (Newswires)

China's Global Times tweeted that the Hong Kong government and China’s Office of the Commissioner of the Ministry of Foreign Affairs of PRC in HKSAR expressed strong opposition to the US defamation of Hong Kong police’s law enforcement against illegal assembly on National Day and urged the US to stop interfering in China's internal affairs. (Twitter)

China military aircraft entered the Taiwan air defence identification zone on Sunday. (Newswires)

US

Fed’s Mester (voter) stated that monetary policy will be calibrated for the economy and expect inflation to end the year below 2%, while she added that a lack of fiscal support poses a significant risk to the economic outlook. (Newswires)

US House Speaker Pelosi said that they are making progress on coronavirus relief legislation. There were also separate reports that House Speaker Pelosi and Treasury Secretary Mnuchin held a private phone call with Fed Chair Powell on Thursday to discuss state and local funding, as well municipal lending, according to Politico which added that call had not yet been reported and underscored the lengths to which they were going to try to get a deal. (CBS/Politico)

US Senate Majority Leader McConnell said we are getting closer on stimulus negotiations. (Newswires/Fox/Twitter)

US Senate cancelled legislative work until at least October 19th after at least 3 senators tested positive for COVID-19. (Newswires)

POLL: NBC/WSJ Poll showed former VP Biden ahead of US President Trump nationally among registered voters by 14 points at 53% vs. 39% (Prev. 8 point lead), conducted after Tuesday’s first presidential debate but prior to President Trump’s Covid-19 announcement. (Twitter)

UK/EU

UK PM Johnson set a deadline of October 15th to secure a Brexit deal with the EU and both sides agreed to 11 days of “intensified” talks to finalise an agreement. PM Johnson also commented that there is a deal to be done but there are some difficult issues that need to be fixed, while he added that we’re asking the EU to offer terms they offered to Canada and he does not particularly want the Brexit transition period to end without a trade deal in place but believes that Britain could live without one. However, other reports suggested negotiators will be given additional time to reach a deal and that there was no mention of a target date for a resolution in the joint statement following talks between UK PM Johnson and European Commission President Von der Leyen. (Newswires/Sunday Times/Evening Standard) UK PM Johnson’s office said the Chief Brexit Negotiator Frost has been instructed to work intensively to try and bridge the gaps in discussions with the EU. (Newswires)

There were prior reports that UK PM Johnson was to demand that French President Macron caves in regarding UK demands on fishing as the price for a trade and security deal at the meeting with European Commission President Von Der Leyen. (Guardian)

UK officials remain upbeat about breaching divides with regards to state aid and broader level-playing field, with one government official stating that "it's looking better than it has for a good while but we're not there yet." (FT)

European Commission President Von der Leyen commented about the state of play in negotiations and stated that while progress had been made, significant gaps remain. Furthermore, she added that both sides agreed it is important to find an agreement as strong basis for a strategic relationship. (Twitter)

Italian Economy Minister is confident that the EU Recovery plan will be rolled out at the beginning of 2021, with January the best case scenario. (Newswires)

S&P affirmed France at AA; Outlook Stable, affirmed Germany at AAA; Outlook Stable and affirmed Poland at A-; Outlook Stable. Fitch affirmed Belgium at AA-; Outlook Negative and affirmed Cyprus at BBB-; Outlook Stable, while Moody’s raised Slovenia sovereign rating from Baa1 to A3; Outlook Stable. (Newswires)

EU Markit Services Final PMI (Sep) 48.0 vs. Exp. 47.6 (Prev. 47.6); Composite Final PMI (Sep) 50.4 vs. Exp. 50.1 (Prev. 50.1)

UK Markit/CIPS Services PMI Final (Sep) 56.1 vs. Exp. 55.0 (Prev. 55.1); Composite PMI Final (Sep) 56.5 vs. Exp. 55.5 (Prev. 55.7)

GEOPOLITICAL

The conflict between Armenia and Azerbaijan over the disputed region of Nagorno-Karabakh reportedly escalated dramatically after Baku accused Armenian forces of firing rockets at Azerbaijan's second-largest city of Ganja, which is located outside the contested territory. It was also reported that the Nagorno-Karabakh region stated that 18 civilians were killed and over 90 were wounded in a week of fighting. (Guardian/Newswires)

Russian Foreign Minister Lavrov urged for a ceasefire and told the Armenian Foreign Minister that Moscow is ready to seek a solution through the Organization for Security and Co-operation in Europe. (Newswires)

A bus carrying Russian and Armenian journalists, as well as a US volunteer has reportedly been hit with artillery fire in Nagorno-Karabakh region, according to reports citing witnesses. (RIA)

Germany urged for the EU to impose sanctions against Russia over Navalny poisoning. (Newswires)

EQUITIES

European equities (Eurostoxx 50 +0.6%) kicked the week off on the front-foot, before staging a mild pullback, as markets continue to assess updates on US President Trump’s health, the Presidential election and stimulus discussions. In terms of President Trump, it appears that he could be discharged from hospital as soon as today with reports suggesting an improvement in his condition, albeit some in the medical community have raised doubts over the upbeat narrative presented by the administration. Polling is yet to encapsulate the news of Trump’s COVID-19 diagnosis, however, polls detailing the fallout of last week’s debate have moved in favour of former VP Biden who now holds a 14-point lead in the NBC/WSJ poll (prev. 8 point lead); desks have subsequently continued to talk up the possibility of a Democratic “blue sweep”. On the stimulus front, House Speaker Pelosi said that they are making progress on coronavirus relief legislation, whilst Senate Majority Leader McConnell said “we are getting closer” on stimulus negotiations. However, other reports noted that Republicans still give low odds on another pandemic stimulus bill. In terms of performance of European indices, the IBEX (+1.0%) is the main outlier to the upside with gains in the domestic banking sector spurred by reports that the Sabadell (+3.6%) CEO contacted his counterparts from BBVA (+3.2%) and Kutxabank in recent weeks with regards to a merger, according to sources. From a sector standpoint, aside from the banking sector, travel & leisure names lead the way higher this morning despite ongoing concerns about the pick-up in COVID-19 cases (particularly in the UK), whilst strength can also be seen in some of the other pro-cyclical sectors such as oil & gas and auto names. Support has also been seen for UK homebuilders this morning after UK PM Johnson promised to create a “Generation Buy” scheme to help young people enter the property market. The PM has reportedly asked minister to mull a scheme for long-term fixed-rate mortgages with 5% deposits. For individual movers, Cineworld (-31%) are the clear underperformer this morning after confirming it will close all of its cinemas in the UK, Ireland and US this week because of the impact of coronavirus (UK and US closures are to be temporary). K&S (+17.6%) are the best performer in the Stoxx 600 reports noted the Co. is in advanced discussions to sell their Morton Salt unit to Kissner Group for ~USD 3bln. Weir Group (+17.0%) shares have seen notable support after announcing a USD 405mln divestment of its oil & gas unit to Caterpillar for USD 405mln.

FX

DXY - A softer start to the week for the broader Dollar and Index, with the latter currently contained within a tight 93.578-832 parameter following the fallout of US President Trump’s COVID-19 diagnosis which could see the President back at the White House as soon as today. Meanwhile, State-side stimulus talks remain with Senate Republican sources giving low odds for another bill, inferring that discussions could extend to after the 2020 Election. DXY tested its 21 DMA (93.646) to the downside, with the 50 DMA seen around 93.270, whilst upside levels see Friday’s high at 94.035 followed by last week’s peak at 94.298. Looking ahead, the docket sees Markit Services/Composite finals, ISM services PMI and potential comments from Fed 2021-voter Evans.

CHF/JPY - The traditional safe-haven FX have seen an early divergence with participants attributing Swiss outperformance to some M&A flows amid reports Japan’s NEC was planning to acquire Swiss software maker Avaloq for USD 2.2bln, whilst some strength may still be garnered from speculation the US currency manipulation report may be postponed until after the US elections, with Switzerland now ticking all three boxes to be labelled as a currency manipulator. That being said, the US Treasury will then offer a period of negotiations, with more drastic measures imposed should discussions fail. USD/CHF briefly dipped below its 21 DMA (0.9163) but matched intraday lows set on Wednesday and Thursday last week (0.9160), with the pair’s 50 DMA residing around 0.9130. USD/JPY resides on the other side of the G10 spectrum with early losses coinciding with gains across APAC stock markets. USD/JPY tests Friday’s 105.66 high with eyes on the 50 DMA (105.74), with the pair failing to close above the MA for the past three consecutive sessions. USD/JPY Opex today includes USD 1.25bln rolling off at strike 105.00.

EUR/GBP - Both on a firmer footing with the aid of a receding Buck, with the currencies on watch for Brexit developments in the aftermath of the videocall between PM Johnson and EC President, which noted that progress had been made but significant gaps remain, albeit the two sides have agreed to 11 days of “intensified” talks ahead of the UK de-facto deadline. Cable saw early sellers which prompted the pair to test 1.2900 to the downside, but thereafter nursed losses to print fresh session highs of 1.2964, with Sterling somewhat supported by surprise revisions higher to Services and Composite PMIs. EUR/USD meanwhile saw little action to revisions higher to final PMIs. EUR/USD retains a 1.1700+ status as it took out several potential resistance levels at 1.1750 (Fri high), 1.1755 (Wed high) ahead of 1.1763 (21 DMA), whilst the NY cut sees EUR 761mln at strike 1.1730 and around EUR 870mln at 1.1700.

CAD, AUD, NZD - All firmer to varying degrees, with the Loonie outperforming the non-US Dollars as it coat-tails on the firmer crude prices, whilst the Aussie eyes the RBA and Aussie budget and the Kiwi eking mild gains but with gains capped on AUD/NZD dynamics. USD/CAD trickles lower below 1.3300 having had tested the level overnight, with a current base at 1.3264, with its 21 DMA at 1.3258 and 50 DMA at 1.3241. AUD/USD meanwhile inches closer towards the 0.7200 mark (vs. current low 0.7157), with its 21 and 50 DMAs residing at 0.7201 and 0.7207 respectively. Finally, NZD/USD remains contained in a narrow 0.6631-54 band as AUD/NZD reclaims 1.0800.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1700 (870M), 1.1730 (761M), 1.1745 (231M), 1.1800 (455M) 1.1815 (257M), 1.1830 (480M).

-        AUD/USD: 0.7100 (326M), 0.7160-65 (900M), 0.7230 (628M)

-        USD/JPY: 104.50 (450M), 104.70-75 (360M), 105.00 (1.25BLN), 105.50 (314M) 105.80 (600M), 105.90-106.00 (530M)

Australian NAB Business Confidence (Sep) -4 (Prev. -8). (Newswires) Australian NAB Business Conditions (Sep) 0 (Prev. -6)

FIXED INCOME

In-spite of some initial upside for the broad complex as we await updates on the US President’s health, which have been non-existent for the morning thus far as such, markets are seemingly taking no-news as good-news for now given the most recent update indicates the President could be discharged to the White House today. Continuing the US narrative, overnight volumes in USTs was seen at around 130% of typical levels with a very mild bias towards the long-end of duration. A skew which has subsided somewhat now but nonetheless the yield curve is bull-flattening; technically, assuming the downside action for Treasuries continues, then there is little of note prior to 139.00 itself for the 10-year. Moving to Europe, where the complex is little changed as we stand after the slight initial upside fizzled out amidst a stabilisation and modest extension of the cautiously positive risk sentiment more broadly; for reference the mornings final PMIs, which saw some mild revisions, passed without event. Overall, such action for Europe has been relatively rangebound and very much tentative thus far. Technically, Bunds found an overnight base just above 174.50 (current session low 174.55), in the event we see a sustained dip below this mark attention will turn to a double bottom at 174.16/17 before 174.00 itself comes into play. Continuing with core counterparts Gilts are exhibiting similar action to their German & US peers after largely shrugging off concerns regarding increasing COVID-19 cases and weekend Brexit discussions which didn’t come to a breakthrough; albeit, attention very much remains on how these factors develop in the coming days/weeks particularly for Brexit ahead of October 15th. For the session ahead the schedule is light until US data in the European afternoon prior to further central bank commentary; note, nothing pertinent has arisen from BoE’s Haldane or ECB’s de Cos thus far.

COMMODITIES

WTI and Brent futures open the week on a firmer footing, with early strength coinciding with gains across stock markets overnight after Friday’s pessimism unwound amid weekend reports that US President Trump could be at the white house as early as today. Meanwhile, the conflict between Armenia and Azerbaijan over the disputed region of Nagorno-Karabakh reportedly escalated dramatically. It was also reported that the Nagorno-Karabakh region stated that 18 civilians were killed and over 90 were wounded in a week of fighting – with traders keeping eyes on any potential targeting of oil fields/refineries/ports of the OPEC+ member. Elsewhere, Libyan oil production ticked higher to 290k BPD from last week’s 270k BPD, according to sources. In terms of where we currently stand WTI Nov (USD 37/bbl) trades on either side of USD 38/bbl whilst Brent Dec reclaimed the USD 40/bbl handle (vs. low USD 39.14/bbl). Elsewhere, spot gold and silver are choppy, with earlier weakness in the yellow metal offset by a softer Dollar, with prices now back around the USD 1900/oz mark (vs. low 1887/oz), whilst spot silver attempted a breach of USD 24/oz to the upside – with the latest CFTC data suggesting hedge funds and money managers reduced positions in COMEX gold and increased them in silver contracts in the week to Sept 29th. Finally, LME copper prices are relatively flat having had drifted off highs in tandem with price action seen in stocks.

Saudi Arabia September oil production was at 8.97mln bpd vs. Prev. 8.99mln bpd in August, while oil exports were at 6.1mln vs. Prev. 6.0mln in August. (Newswires)

Libyan oil production 290k BPD (vs. 270k BPD last week), according to a Libyan oil source. (Newswires)

Norway Oil Industry Association stated that oil workers will begin an expansion of the strike on Monday. (Newswires)

NHC says tropical depression twenty-six is getting better organised and is expected to become a tropical storm later today. (NHC)