• European bourses/US futures have been choppy but ultimately exhibit modest gains this morning; ES +0.3%
• US House Speaker Pelosi said we remain at an impasse in COVID-19 aid talks; Mnuchin and Meadows have called for immediate use of remaining PPP funds
• President Trump states he no longer has COVID-19 and has requested his campaign places him on the road every day from now while the 15th Oct debate has been cancelled
• EU leaders are to insist on tough enforcement for any UK trade deal; UK PM Johnson said Britain is committed to exploring every avenue to reach an agreement
• EU leaders are said to be drawing up a “hit list” of up to 20 large-cap tech companies; EU has asked US to withdraw punitive tariffs or prepare for additional tariffs on exports to Europe
• FX features a firmer DXY with performance generally rangebound while the Yuan recoils after PBoC RRR cut on FX forwards
• Looking ahead, highlights include ECB’s Lagarde, de Guindos, Panetta, BoE’s Bailey, Haskel and US Columbus Day Holiday (cash Treasuries closed)

CORONAVIRUS UPDATE

US CDC reported 53,363 new COVID-19 cases on Sunday (Prev. +58,302) and 577 additional deaths (Prev. +926).

US President Trump stated he longer has COVID-19 and has stopped taking medication. (Fox) President Trump also tweeted that he has received a complete sign off from the White House Doctor, adding that he is immune and not infectious. (Twitter) White House physician said President Trump is no longer considered as a transmission risk to others. (Newswires)

UK reported 12,872 new COVID-19 cases on Sunday (Prev. +15,166) and 65 additional deaths (Prev. +81). UK PM Johnson will chair a COBRA meeting today to finalise local lockdown plans. PM will announce them to Parliament and then hold a Downing Street press conference late with Chancellor Sunak and Chief Medical Officer Whitty, according to ITV. (Twitter) PM Johnson is expected to unveil a “three tier” system which will classify regions as being at a "medium," "high" or "very high" level of alert. (BBC)

France reported 16,101 new COVID-19 cases (Prev. +26,896) and 46 additional deaths (Prev. +54). Germany reported 2,467 (Prev. +3,483) new COVID-19 cases and 6 additional deaths (Prev. +11), according to RKI. (Newswires) 

ASIA

APAC equity markets kicked the week off mixed as the region initially failed to fully capitalise on Friday’s Wall Street gains, which were further fuelled by NEC Director Kudlow emphasising US President Trump’s desire for a stimulus package, albeit the weekend brought nothing to fruition on a broader deal and talks are set to continue today. However, sentiment somewhat picked up after the Chinese cash open, ASX 200 (+0.5%) was supported by mining names as executives attend the pandemic-delayed “Diggers and Dealers Mining Forum” where the resources sector presents and showcases projects in arguably the most important event for the sectors, whilst the index was also supported by Link Administration whose shares rose some 25% after a consortium presented a bid for the Co. with a sizeable premium. Nikkei 225 (-0.3%) was hampered by the JPY strength seen on Friday, whilst PPI and Core Machinery data was overall mixed. South Korea’s KOSPI (+0.3%) shrugged off North Korea’s new ICBM unveiling and focused on easing COVID-19 restrictions in the country, while chipmakers in Seoul saw a boost after month-to-date data showed semiconductor exports +11.2% YY. Hang Seng (+2.2%) and Shanghai Comp (+2.3%) were bolstered by the PBoC announcement that it will essentially eliminate the 20% RRR on FX forwards for financial institutions, with China A50 rising 4% at one point. Finally, 10yr JGB futures trade relatively flat as it tracks the broader price action across the fixed income futures complex.

PBoC set USD/CNY mid-point at 6.7126 vs. Exp. 6.7052 (Prev. 6.7796) (Newswires) PBoC to skipped open market operations today for a net daily drain of CNY 60bln.

PBoC lowered its RRR on FX forwards for financial institutions to 0% from 20% starting today. (Newswires) PBoC Governor Yi Gang said China will maintain the normal monetary policy as long as possible. (Newswires)

China is poised to advance a new export control law that would ban Chinese suppliers from dealing with specific foreign companies on national security grounds, the new law could be enacted as early as 2021. (Nikkei) PBoC Vice Governor Fan said the deteriorating US-Sino relations present a huge risk to tech supply chain security for China's financial network. (Newswires)

Hong Kong Chief Executive Lam is travel to Beijing later this month to discuss China's support for Hong Kong's economy recovery; Lam will deliver her annual policy address by end-November after postponing it from the original Oct 14th date. (Newswires)

Japan & UK are to sign a trade agreement on October 23rd, Kyodo. (Kyodo)

US

US House Speaker Pelosi said we remain at an impasse in COVID-19 aid talks and remarked that the White House proposal is “wholly insufficient on testing and tracing”, but Pelosi remains hopeful progress can be made. (Newswires) Treasury Secretary Mnuchin and WH Chief of Staff Meadows said they would continue to work toward 'comprehensive' coronavirus relief package even if smaller bill approved and have called for immediate passage of coronavirus relief bill using leftover funds from paycheck protection program. The Trump admin has called on Congress to pass a stripped-down version of the relief bill using leftover funds from the expired small business loan programme. (Newswire) US President Trump said Republicans want to a COVID-19 relief bill, we want to help airlines, restaurants, hotels, and businesses, according to Fox's Pergram. (Twitter)

Fed’s Kashkari (Voter) said the US economic recovery has “flattened out” and is in vital need additional support from fiscal policy. (Newswires)

POLL: ABC News/Washington Post poll shows Democratic Candidate Biden with a 12ppt lead over Trump at 53% vs. 41% among registered voters and 54% vs. 42% among likely voters; survey conducted between Oct. 6-9 (vs. Prev. 10ppt Biden lead among likely voters in prior survey conducted between Sep. 21-24).  Survey entailed a random national sample of 879 registered voters, including 725 likely voters. (WaPo/ABC/Langer Research)

POLL: Baldwin Wallace University Great Lakes Poll shows Democratic Candidate Biden leading in swing states Michigan, Wisconsin, and Pennsylvania; Michigan sees Biden at 50% vs. Trump at 43%, Wisconsin sees Biden at 49% vs. Trump at 43% and Pennsylvania sees Biden at 50% vs. Trump at 45%. Survey was conducted between Sep. 30-Oct. 8. (Baldwin Wallace University)

Commission on Presidential Debates has cancelled the Oct. 15 Presidential debate. (WSJ) US President Trump’s suit over Pennsylvania mail-in voting has been dismissed. (Newswires) US President Trump's re-election campaign and the White House are pushing for an in-person presidential debate to be rescheduled. (CNN)

US President Trump has asked his campaign to put him on the road every single day from now until Nov. 3. His team is in the process of scheduling events to make that happen, according to Axios’ Treene. (Twitter)

Apple’s (AAPL) new 5G iPhone could have coverage issues in the UK as telecoms industry insiders have warned that it may not connect to the 700MHz 5G band, which could leave customers searching for 5G coverage. (Telegraph)

UK/EU

UK PM Johnson told German Chancellor Merkel that progress with the EU must be made in the coming days and the UK is prepared to end the transition period with an Australia-style terms if a deal is not possible. Meanwhile, PM Johnson told French President Macron that the UK is committed to exploring every avenue to reach an agreement and that a deal was better for both sides. (Newswires) EU leaders are to insist on tough enforcement for any UK trade deal as UK PM Johnson's move to override the Brexit treaty has sparked mistrust. EU diplomats are to call on EU's Chief Brexit Negotiator Barnier to ensure that level playing field guarantees for EU companies competing with UK firms are backed by the right for Brussels to take quick retaliatory action should UK void commitments. (FT) This comes ahead of the summit on Oct 15-16.

BoE has asked banks for information regarding their readiness to implement zero or negative interest rates; this engagement is not asking firms to begin taking steps to ensure they are operationally ready to implement a negative Bank Rate. (BoE)

ECB’s Chief Economist Lane said it is important to put exchange rate at the centre of policymaking, but it is just one issue affecting inflation. Lane added that the ECB may allow inflation to overshoot and ECB are to pursue the inflation target as aggressively as the Fed, although the inflation outlook is unsatisfactory. Lane sees uncertainty diminishing in autumn but noted that the next phase of the recovery is going to be tougher. (WSJ)

ECB’s Schnabel said the ECB gears its monetary policy to its price stability mandate, not to the indebtedness of Member States. Schabel, with regards to the ECB taking on less public debt to protect independence, remarked that the opposite is true as the interaction between monetary and fiscal policy has changed in the low interest rate environment. (ECB)

ECB’s Visco said the ECB’s inflation target must be symmetrical and that flexibility is needed to face the crisis. (Il Corriere della Sera)

ECB’s Kazimir said inflation in the Euro Zone is not likely to significantly improve this year and added that the ECB will do all it can to get inflation to target. Kazimir said the ECB has a long list of tools, including negative rates or refinancing operations, which the ECB is ready to adjust according to the situation, via Czech press. (Hospodářské noviny)

EU leaders are said to be drawing up a “hit list” of up to 20 large-cap tech companies, which will likely include Facebook (FB) and Apple (AAPL). The Co.’s on the list will reportedly have to comply with more stringent regulations compared to smaller competitors, sources stated. Some rules included will force them to share data with rivals, alongside an obligation to be more transparent on data gathering. (FT). Separately, EU Trade Commissioner Dombrovskis has told the US to withdraw punitive tariffs on over USD 7bln worth of EU products or otherwise prepare for additional tariffs on exports to Europe. Brussels is awaiting the final WTO decision set to come on Oct 15th over its right to hit US products, with officials expecting the EU to be granted retaliatory rights. (FT)

GEOPOLITCAL          

Armenia and Azerbaijan agreed to a temporary ceasefire over the weekend in the disputed Nagorno-Karabakh region. However, there have been reports of fresh fighting between Armenia and Azerbaijan, just hours after a ceasefire came into force. (BBC)

North Korea unveiled new intercontinental ballistic missiles at a military parade on Saturday. Analysts said if operational, the missile would be one of the largest road mobile ICMB. A senior US admin official called the display “disappointing” and called on the government to negotiate towards complete denuclearisation. (Newswires)

Iraqi-backed militia says the faction agreed to a “conditional ceasefire” to halt attacks on US forces. (Newswires)

Saudi-led coalition said they have intercepted an explosive-laden drone launched by Yemeni Houthis towards the Kingdom. (Newswires)

Turkey plans to send its controversial ship back to the eastern Mediterranean, according to Al Arabiya. Subsequently, Greece believes Turkey has shown a lack of credibility by sending new survey ship to the Eastern-Mediterranean and by partially opening fenced-in Varosha in Cyprus. (Twitter/Newswires)

EQUITIES

European equities (Eurostoxx 50 +0.3%) trade with modest gains in what has been a relatively choppy morning thus far. From a macro standpoint, many of the same themes (US stimulus & Presidential Election) remain at forefront of investor focus, however, little in the way of incremental developments have been seen over the weekend. As is stands, President Trump is adamant that he wants to do a deal on stimulus, although, House Speaker Pelosi and Treasury Secretary Mnuchin remain at an impasse in talks. Even if the two were able to broker an agreement, opposition in the Senate remains a key sticking point and as such, the prospects of a pre-stimulus deal remains unlikely. On the election front, polling over the weekend continues to move further in Biden’s favour with his lead extending to 12ppts (prev. 10ppts) against President Trump, according to ABC News/Washington Post. Furthermore, beyond the national headline polling, a Baldwin Wallace University Great Lakes Poll, showed Biden leading Trump by 5-7ppts in swing states such as Michigan, Wisconsin, and Pennsylvania. As such, absent a tightening of the race, increased weight will likely be placed on the prospect of a “blue wave”. From a European perspective, it has been a somewhat uneventful session thus far with performance across indices relatively contained. The main outlier, to the upside is the AEX (+0.7%) amid gains in KPN (+7.3%) with the Co. subject to potential takeover interest from EQT. Elsewhere from a sectoral standpoint, travel & leisure names lag peers as COVID-19 cases across the region continue to climb, whilst energy names are also seen lower, in-fitting with price action in the complex. Daimler (+1.3%) are providing some reprieve to the auto sectors after being upgraded to buy from sell at Goldman Sachs and reiterated overweight at JP Morgan Chase. Stateside, traders will be cognizant of reports noting that EU leaders are said to be drawing up a “hit list” of up to 20 large-cap tech companies, which will likely include Facebook (FB) and Apple (AAPL). The Co.’s on the list will reportedly have to comply with more stringent regulations compared to smaller competitors, sources stated.

FX

CNY-CNY/TRY - The Renminbi has retreated from multi-month peaks against the Dollar around 6.9000 in wake of the PBoC’s decision to slash the RRR on FX Forwards to zero from 20% with immediate effect before regaining some momentum from the latest midpoint fix that was significantly firmer, albeit below expectations at 6.1726 from 6.7796 vs 6.7052 forecast. However, the Lira has not derived any lasting traction from yet more drastic CBRT action to try and arrest its slide via a hike in the rate on reserves to 7% from 5% as Usd/Try trades near the top of a 7.9130-7.8570 band amidst the ongoing Turkish stand-off with Greece, its involvement in the Armenian-Azeri spat and looming test of Russian S-400 missile system.

USD - Notwithstanding the gains noted above, the Greenback spent much of the morning on the backfoot with the DXY initially struggling to keep its head above the 93.000 level within a tight partial-US holiday 93.168-012 range, close to last Friday’s 92.997 low ahead of US CPI data tomorrow, and with no material progress on the fiscal relief front. However, most recently the DXY has gained some traction and printed fresh session highs of 93.227.

CHF - The G10 laggard irrespective of Swiss sight deposits showing a decline in domestic balances and the latest SECO GDP updates revealing a marked upward revision to 2020 GDP, as the Franc pivots 0.9100.

CAD/GBP/NZD/EUR/AUD - All marginally softer relative to their US counterpart, or rather off recent highs with the Loonie hovering below 1.3100 in wake of last Friday’s stellar Canadian jobs report and with the nation observing Thanksgiving today, while Sterling has faded from 1.3050+ peaks amidst more zero and negative rate inferences from the BoE awaiting commentary from Haskel and Governor Bailey, but also monitoring the outcome of further UK-EU trade talks before this week’s Summit. Meanwhile, the Kiwi is straddling 0.6650, Euro holding around 1.1800 where the 50 DMA resides and Aussie retaining 0.7200+ status with support from decent option expiry interest at the strike (1 bn). Back to the Pound, but in the context of the Eur/Gbp cross that is meandering from 0.9076 to 0.9049, technical markers may be influential ahead of the aforementioned Brexit negotiations and Summit in Brussels as the 50 and 100 DMAs are in close proximity at 0.9060 and 0.9036 respectively.

JPY - The Yen has extended recovery gains from sub-106.00 through the 50 DMA (105.78) and away from 1.4 bn expiries at the round number firmer than anticipated Japanese machinery orders, but Usd/Jpy has not made a sustained break of 105.50 to expose last week’s circa 105.23 low.

SCANDI/EM - Softer crude prices are not hampering the Norwegian Crown and perhaps in recognition of the fact that the country’s labour union and oil firms reached a pay deal on Friday to end strike action. Eur/Nok is sub-10.8000 vs Eur/Sek either side of 10.4000 in the run up to Swedish CPI on Tuesday. Elsewhere, buoyant risk sentiment may offer EMs some underlying support, but the Real may miss out given a market holiday in Brazil and the Rand could get some independent impetus from SA manufacturing production.

Notable FX Expiries, NY Cut:

-        AUD/USD: 0.7140-45 (650M), 0.7200 (1BLN)

-        USD/JPY: 105.00 (241M), 105.30 (280M), 105.75 (470M), 106.00 (1.4BLN), 106.05-15 (840M)

FIXED INCOME

The core Eurozone bond has rebounded relatively firmly from a new 174.60 Eurex low to stand just below best levels of 174.83 even though peripheral debt has also recovered earlier losses, and the fade in stocks may be helping despite recent decoupling between the 2 asset classes. However, the 10 year UK benchmark is struggling to get back on an even keel having retreated further from Liffe peaks to 135.37 with hefty supply looming after tomorrow’s labour data and the ongoing uncertainty surrounding Brexit just days before the EU Summit and PM Johnson’s preferred deadline to forge a trade deal by Thursday. Elsewhere, US Treasuries are idling in listless, aimless and cashless Columbus Day holiday trade.

COMMODITIES

WTI and Brent front month futures have for the most part continued the overnight performance which saw the benchmarks under modest pressure as supply-side developments remain in focus; although, most recently crude prices have stabilised off lows a touch. WTI and Brent are softer by just shy of USD 1.0/bbl each and in proximity to session lows. Returning to those supply side factors; firstly, as Hurricane Delta has passed offshore production is being restored in the Gulf region with Shell sending units into the area to re-commence operations most recently. Secondly, El-Sharara which is Libya’s largest oil field has now restarted production according to sources, this will initially by at ~40k BPD vs. the fields 300k BPD theoretical capacity – at present, no timeline on when the field will return to full production. Finally, strike action is to conclude in Norway after unions came to a new wage agreement after 10-days of disruptions and amidst concerns that the Johan Sverdrup field, ~470k BPD, could have shut this week if the action continued/intensified. Aside from these factors easing supply constraints and thus hampering prices participants look towards both the IEA & OPEC monthly reports due later in the week and, as ever, on the COVID-19 implications for demand. Moving to metals, spot gold is softer this morning as sentiment overall remains cautiously positive but choppy and given the USD’s grinding upside in the latter half of the session. Elsewhere, reports note that Chinese state-owned energy providers/steel mills have received a verbal notice to stop imports of Australian coal with immediate effect; however, the Australian Gov’t has not been notified of any such formal action – a development to keep on the radar given the already strained relations between Australia & China at present.

Hurricane Delta petered out into a non-tropical low but heavy rain threat continues. (Newswires) BSEE said 91.01% (Prev. 91.72%) of offshore Gulf of Mexico crude oil and 62.15% (Prev. 62.43%) of natural production has been shut in. (BSEE) Shell is redeploying offshore crews and drill ships in the Gulf of Mexico. Chevron has also begun returning workers and restoring offshore oil and gas output. (Newswires)

Norwegian oil strikes are set to end after Norwegian oil firms struck a wage deal with labour union officials on Friday. (CNBC)

Sources stated Libya’s largest oil field El Sharara has reportedly resumed production and is to initially pump 40k BPD (vs. 300k BPD capacity). Total Libyan output on Monday is to reach 355k BPD (vs. 290k BPD last week) (Newswires)

Iraq sees the oil price at USD 42/bbl in Q4 2020 and USD 45/bbl in Q1 2020, according to Al-Sabah citing the energy ministry. Iraq has set USD 42/bbl as the proposed oil price in the 2021 draft budget. Kuwait set November OSP at Oman/Dubai USD -0.5/bbl, unchanged MM, according to a pricing document. Iran sets November OSP for light crude to Asia at Oman/Dubai USD -0.35/bbl, + USD 0.10/bbl MM, according to sources. (Newswires)