• US futures are firmer given overnight stimulus comments and deriving further strength as US participants approach
• Speaker Pelosi & Treasury Secretary Mnuchin spoke again while Trump is reportedly open to more than a skinny bill
• President was concerned by the market reaction to him walking away from stimulus discussions
• UK Chancellor Sunak to announce a new job-support scheme; separately, EU diplomats believe Brexit talks are yet to make enough progress
• FX features a downbeat DXY at fresh weekly lows to the benefit of most peers with antipodeans outperforming
• AMD is reportedly in advanced discussions to purchase Xilinx for more than USD 30bln, WSj
• Looking ahead, highlights include Canadian labour market report & BoE's Haldane

CORONAVIRUS UPDATE

US President Trump said he is doing really good and may do public events sooner than Saturday, while he added he may try to do a rally on Saturday night, probably in Florida and will likely take a test on Friday. There were also comments from the White House physician that President Trump has completed the course of therapy for coronavirus and that his physical exam has remained stable since returning to the White House, while he fully anticipates President Trump's return to public engagements on Saturday and noted that President Trump is devoid of any indications to suggest progress of the virus. (Newswires)

US President Trump and White House Chief of Staff Meadows are urging for the FDA to accelerate its review of Regeneron (REGN) antibody drug for COVID-19. (Washington Post)

Gilead (GILD) announced that the latest data showed its remdesivir drug reduced the recovery time from COVID-19 by one day more than previously reported. (Newswires)

Takeda Pharmaceutical (4502 JT) confirmed the first patient enrolment in Phase 3 trials to evaluate potential COVID-19 hyperimmune medicine, with trials to take place in 18 countries including US and Mexico. (Newswires)

Fujifilm Holdings (4901 JT) unit announced it is to manufacture Eli Lilly’s (LLY) COVID-19 antibodies for low- and middle-income countries. (Newswires)

China joined the WHO COVAX program and said it will prioritize vaccine supply to developing countries when vaccines are ready. (Newswires)

Russia COVID-19: daily record cases 12,126 (Prev. 11,493); deaths 201 (Prev. 191). Separately, Russia expects to register its second COVID-19 vaccine candidate on Oct 15th, developed by Vector Virology Institute, according to Ifax. (Newswires/Ifax)

ASIA

Asian equity markets traded mixed as US equity futures extended on the prior day’s gains amid stimulus hopes after House Speaker Pelosi and US Treasury Secretary Mnuchin continued their relief discussions, while President Trump also suggested optimism that talks are beginning to work and was said to be open to something larger than a skinny bill. Nonetheless, ASX 200 (U/C) was rangebound and took a breather following the outperformance seen for most the week and after the RBA Financial Stability Review noted that domestic banks were well placed to continue lending and supporting the economic recovery, as well as the financial system but added that business failures will increase substantially as loan repayment deferrals and income support end. Nikkei 225 (-0.1%) initially began on the front-foot but then stalled in tandem with a mild pullback in USD/JPY which gave up the 106.00 status and after weaker than expected Household Spending. Hang Seng (-0.3%) and Shanghai Comp. (+1.6%) were varied with outperformance in the mainland as participants returned from the holidays where spending rose by 6.3% Y/Y amid a bout of ‘revenge travel’ which saw Golden Week air passenger numbers recover to 91% of last year’s volume. Participants also welcomed private sector PMI data in which Caixin Services PMI topped estimates at 54.8 vs. Exp. 54.3 and Caixin Composite PMI was lower than previous at 54.5 (Prev. 55.1) but remained at a firm expansion. Finally, 10yr JGBs were steady amid the indecisive risk sentiment seen in Tokyo and as prices continued to eye the psychological 152.00 level, while the BoJ’s presence in the market for nearly JPY 1tln of JGBs has also provided a floor for government bonds.

PBoC skipped reverse repo operations for a net drain of CNY 560bln. (Newswires) PBoC set USD/CNY mid-point at 6.7796 vs. Exp. 6.7905 (Prev. 6.8101)

Chinese Caixin Services PMI (Sep) 54.8 vs. Exp. 54.3 (Prev. 54.0) Chinese Caixin Composite PMI (Sep) 54.5 (Prev. 55.1)

Japanese All Household Spending (Aug) M/M 1.7% vs. Exp. 3.2% (Prev. -6.5%) Japanese All Household Spending (Aug) Y/Y -6.9% vs. Exp. -6.9% (Prev. -7.6%)

RBI maintained the Repurchase Rate at 4.00% and Reverse Repo Rate at 3.35%, as expected. RBI reiterated its accommodative monetary stance and that it stands ready to take further measures as necessary. Governor Das stated that financial conditions remain benign but noted that investment in retrenchment, consumption and exports have begun to improve, while he added that the deep Q1 contraction is behind us and silver linings are visible. Furthermore, Das stated that GDP growth may turn positive by Q4 and that inflation would ease closer to target by Q4 2021. (Newswires)

US

Fed's Kaplan (voter) says his guess is we will get additional stimulus at some point but noted that we could go on for a while without additional stimulus and that he doesn't see Fed needing to buy more bonds now. Kaplan also stated that the Fed is already buying a significant amount of bonds and he would be sceptical of doing more, while the Fed’s bond buying should be pared when the crisis ends. (Newswires)

US President Trump told US House Minority Leader McCarthy he wanted a big deal with House Speaker Pelosi and President Trump was said to be worried about the stock market reaction from decision to walk away from stimulus, while there were also comments from White House Communications Director Farah that President Trump is open to something larger than a skinny bill. (Newswires/Axios)

US House Speaker Pelosi and Treasury Secretary Mnuchin spoke again regarding stimulus yesterday for 40 minutes, while other reports noted that Pelosi spoke with Mnuchin and Committee Chairs about improving access to capital for restaurants and other small businesses. (Newswires)

US Small Business Administration and US Treasury announced simpler PPP forgiveness for loans of USD 50k or less which SBA stated streamlines PPP forgiveness to provide financial and administrative relief to the smallest businesses. (Newswires)

US President Trump's campaign called for the October 15th debate to go ahead in person and stated there is no medical reason for a virtual second debate, although the Presidential Debate Commission Chair stated they will not reconsider shifting the second debate from virtual back to an in-person debate despite a request from President Trump's campaign team. (Newswires)

US House Democrats reportedly want a panel to investigate President Trump’s capacity to govern. (Newswires)

POLL: Biden 52% vs. Trump 42%; Pew Research national poll of registered voters conducted September 30th to October 5th. (Pew Research)

UK/EU

UK Chancellor Sunak is reportedly expected to announce a local furlough scheme which will see employees in businesses forced to close to receive two-thirds of their wages. There were also reports that Chancellor Sunak is considering proposals for a carbon tax to help rebuild the economy and that officials are examining proposals to extend the tax to areas such as gas and agriculture in the longer term. Treasury has confirmed the Chancellor will be announcing the next phase of support on Friday. (The Times/Treasury)

Brexit talks have not made sufficient progress yet, according to an EU diplomat. (Newswires)

EU Chief Brexit Negotiator Barnier, in a confidential note told European leaders to repeat the need for further concessions from the UK and to not turn next week's summit into a negotiating deadline as requested by UK PM Johnson. Other reports noted that Brussels is reportedly exploring ways to compensate EU fishermen that will be impacted by Brexit by handing them parts of UK's old fishing rights in EU waters. Diplomats noted the plans under discussion would be a way of partially offsetting reduced opportunities in British waters. (Times/FT) 

UK banks are reportedly shunning government calls to rush back quickly into riskier low-deposit mortgages. (FT)

UK GDP Estimate YY (Aug) -9.3% vs. Exp. -7.5% (Prev. -11.7%); MM (Aug) 2.1% vs. Exp. 4.6% (Prev. 6.6%)

-        Est 3M/3M (Aug) 8.0% vs. Exp. 8.2% (Prev. -7.6%)

GEOPOLITCAL          

Armenia and Azerbaijan Foreign Ministers have been invited to Moscow for talks on Friday, according to the Kremlin. Subsequently, French Presidency expects a truce to be declared in the Nagorno-Karabakh region by this evening or tomorrow, according to Sky News Arabia. (Newswires/CNN/Sky)

EQUITIES

Mixed trade in Europe as regional bourses diverged after opening with mild broad-based gains (Euro Stoxx 50 +0.2%) following on from a similar lead from the APAC region after Mainland China returned to the market following its Golden Week holiday. Meanwhile, US equity futures eke mild gains as hopes for resolution on some stimulus keeps State-side sentiment supported. Back to Europe, varying performance seen across the indices, with UK’s FTSE (+0.7%) outpacing peers on a favourable Sterling action, whilst the peripheries see underperformance after EU Budget talks between the European Parliament and EU ambassadors have been suspended after just an hour, after a German attempt to get a breakthrough failed, with the issue threatening a delay to the swift implementation of the Recovery Fund. Sectors are mostly firmer with Energy outperforming amid yesterday’s rise in the complex, with no risk profiled to be derived from the broader sectors. The breakdown sees Autos and Construction towards the bottom of the pile, whilst Basic Resources coat-tail on the broader gains across base metal markets. In terms of individual movers, Danish-listed Pandora (+14%) resides near the top of the Stoxx 600 after raising its guidance, with Novo Nordisk (+4.0%) also higher amid a forecast upgrade. British Land (+4.0%) is higher on the back of dividend resumption. LSE (+0.5%) is firmer after it announced the sale of Borsa Italian to Euronext (-3.7%) for EUR 4.325bln vs. Exp. ~EUR 4bln.

AMD (AMD) is reportedly in advanced discussions to purchase Xilinx (XLNX) in a deal which could be valued at more than USD 30bln. (WSJ)

Roche (ROG SW) & Regeneron (REGN) are to work on an antibody cocktail, according to Regeneron’s co-president cited by Greek press. (Newswires)

FX

NZD - No obvious catalyst, but the Kiwi has derived more than fellow G10 currencies from the Greenback’s deeper pull-back from 93.500+ levels in DXY terms to fresh w-t-d lows of 93.309, as Nzd/Usd breaches resistance at the psychological 0.6600 level that has been capping rebounds since the headline pair retreated from early October highs.

CHF/EUR/AUD/CAD/JPY - Also taking advantage of their US counterpart’s demise, with the Franc above 0.9150, Euro probing 1.1800 and Aussie eyeing 0.7200 again having cleared the 20 DMA (0.7176) following an encouraging FSR from the RBA. Meanwhile, the Loonie has extended recovery gains from midweek lows around 1.3340 towards 1.3160 ahead of Canadian jobs data and the Yen has rebounded from sub-106.00 levels after mixed Japanese household spending metrics, but may run into option expiry related offers given decent interest at 105.90-80 (1 bn) and then from 105.50 to 105.40 (1.2 bn). On that note, Eur/Usd expiries are well spread either side of 1.1800 and full details are available via the headline feed at 7.08BST.

GBP - Sterling was relatively resilient in the face of weaker than forecast UK data, and a particularly big miss in monthly GDP, but unable to weather the latest Brexit headlines suggesting insufficient progress in latest talks on trade before EU chief negotiator Barnier returns to Brussels. Cable has reversed through 1.2950 and Eur/Gbp is back over 0.9100 as the Pound awaits further fiscal support for the labour market from Chancellor Sunak and a speech by BoE’s Haldane.

SCANDI/EM - Only a modest loss of momentum for the Nok beyond 10.9000 vs the Eur in wake of softer than expected Norwegian CPI, while the Sek seems content between 10.4500-10.4100 parameters and unusually large option expiries in the Eur cross either side, especially at the 10.3000 strike where 4.1 bn rolls off vs 1.2 bn at 10.7500. Elsewhere, the Yuan has returned from China’s Golden Week break refreshed and raring to go as Usd/Cnh scales 6.7000 with the aid of a strong PBoC Cny midpoint fix (at 6.7796 vs 6.7905 projected and 6.8101 pre-market closure). Conversely, Lira losses accelerated to 7.9550+ before the CBRT stepped in with another aggressive move to arrest the slide via a 150 bp hike in Try swap rates, but 7.9000 as contained comeback efforts thus far. Ahead, Brazil’s Real in focus given inflation updates and services sector growth.

RBA Financial Stability Review stated that Australian banks are well placed to continue lending and supporting the economic recovery, as well as the financial system but added that although the financial system is in a strong position, risks are elevated. Furthermore, it stated that overall household income has increased during H1 2020 but the number of households experiencing financial stress has increased and will increase further, while it noted that business failures will increase substantially as loan repayment deferrals and income support end. (Newswires)

CBRT increase interest rate in TRY swap markets to 11.75% vs. Prev. 10.25%. (Newswires)

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1700 (329M), 1.1725-30 (1BLN), 1.1740 (1.3BLN), 1.1750-60 (600M), 1.1770-80 (1BLN), 1.1785-90 (600M), 1.1795-1.1800 (1.6BLN), 1.1810-20 (1.2BLN), 1.1825-35 (900M), 1.1845-50 (670M)

-        USD/JPY: 105.40-50 (1.2BLN), 105.80-90 (1BLN), 106.00-10 (2BLN), 106.20-25 (1BLN)

-        EUR/SEK: 10.30 (4.1BLN), 10.75 (1.2BLN)

FIXED INCOME

It’s been a stealthy assault rather than all guns blazing, but Bunds and Gilts have both forged healthy recovery gains from recent lows to peak at 174.86 and 135.71 respectively, in contrast to US Treasuries that remain muted just below overnight session highs. Meanwhile, Eurozone periphery debt has extended outperformance irrespective of the budget impasse and potential delay to fiscal relief as US stimulus remains elusive following no breakthrough in talks between House Speaker Pelosi and Treasury Secretary Mnuchin yesterday. However, bonds appear to be benefiting from a combination of corrective trade and short covering ahead of the weekend as stocks and other risk assets stall and consolidate awaiting further direction.

COMMODITIES

WTI and Brent front-month futures ebb lower after the holding pattern seen overnight following yesterday’s gains which were fueled by some supply side developments. 1) Hurricane Delta is poised to make landfall along the Gulf Coast later today as a major hurricane, with BSEE’s latest estimate showing 91.5% of oil production and 61.8% of natgas production shuttered ahead of the hurricane. 2) Reports yesterday, citing a senior Saudi oil adviser, noted that the Kingdom is mulling cancelling an output hike next year amidst the rising cases coupled by Libyan oil output slowly coming back online. JP Morgan analysts see potential for Saudi to drive incremental oil cuts at the upcoming November 30th meeting, with the upside scenario a deeper cut whereby the Kingdom reduces output below quota against the backdrop of weakening demand. Meanwhile more recently on the geopolitical front, Armenia and Azerbaijan are in Moscow in a bid to ease tensions  - the French Presidency expects a truce to be declared in the Nagorno-Karabakh region by this evening or tomorrow, according to Sky News Arabia. WTI Nov and Brent Dec reside around session lows within a tight range after declining from USD 41.47/bbl and ~43.50/bbl respectively. Elsewhere, spot gold continues to grind higher above USD 1900/oz (vs. low USD 1893/oz) on Dollar-dynamics, with similar action seen in spot silver which remains north of USD 24/oz. In terms of base metals, Shanghai Copper futures ended the day with gains of some 1% with LME copper also trading with gains amid expected strikes at Chile’s mines. Meanwhile, Chinese steel and raw material prices rose after the Golden Week holiday amid touted supply woes alongside forecasts for higher demand in Q4.

NHC said Delta regained major hurricane strength over western Gulf of Mexico and was a level 3 hurricane, while it later updated that maximum sustained winds for Hurricane Delta rose to 120mph from 115mph and that hurricane conditions, as well as a life-threatening storm surge is expected for parts of the Northern Gulf coast on Friday. (Newswires)