• APAC stocks traded mostly higher; but gains in Mainland China waned post-GDP
• House Speaker Pelosi said she is optimistic on a COVID-19 relief bill before the election. Pelosi gave a 48-hour deadline to the Trump admin
• Chinese government officials are warning the US they may detain US nationals in China in retaliation to the Justice Department’s prosecution of military-linked Chinese scholars, sources said
• UK officials are reportedly preparing to dilute PM Johnson’s Brexit legislation, in a move that could rekindle negotiations with the EU, sources said
• New Zealand PM Ardern won a landslide victory in the country's general election and is projected for a rare outright majority
• In FX, DXY was contained, Antipodeans narrowly outperformed and the Yuan was choppy
• Looking ahead, highlights include Fed’s Powell, Clarida, Williams, Bostic & Harker, ECB’s Lagarde, Lane, Mersch & de Guindos, BoE’s Broadbent & Cunliffe and the JMMC meeting

CORONAVIRUS UPDATE

US CDC reported 53,167 (Prev. 70,078) new COVID-19 cases and 593 (Prev. 1,001) additional deaths. (Newswires)

Gilead (GILD) reiterated it is aware data from WHO solidarity trial has been made public prior to peer review publication; concerned that data have not undergone rigorous review required for scientific discussion. (Newswires)

Dr. Reddy’s Laboratories (DRRD IS) and Russia’s sovereign wealth fund received approval to conduct human clinical trials of their coronavirus vaccine in India, according to an emailed statement from one of the vaccine developers. (Newswires) WHO Chief Scientist said there was "very good" dialogue with developers of the second Russian COVID-19 vaccine candidate and are awaiting data from Phase 3 trials. (Newswires) US President Trump reiterated that COVID-19 vaccines are coming out very soon. (Newswires)

France reported 29,837 (Prev. 32,427) new COVID-19 cases in the past 24 hours, positivity rate 13.2% (Prev. 13.1%). Germany reported 4,325 (Prev. 5,587) new COVID-19 cases and 12 (Prev. 10) additional deaths. Italy reported 11,705 (Prev. 10,925) new COVID-19 cases and 69 (Prev. 47) additional deaths. Italian PM Conte announced new measures to curb COVID-19 which includes the closure of gaming halls and betting shops from 2100 local time, whilst local mayors will have the power to shut public squares and streets from 2100 local time to prevent mass gatherings. Work from home for public administration is also to be increased. (Newswires) UK COVID-19 cases +16,982 (Prev. 16,171) new COVID-19 cases and 67 (150) new deaths. (Newswires)

The Swiss government held a meeting to decide on further steps to combat COVID-19. Additional measures include a mandatory mask wearing rule in all public open spaces and a ban of public gatherings of more than 15 people, alongside work-from-home recommendations. Swiss government said the sharp rise in COVID-19 cases is worrying. (Newswires

Australia’s Melbourne city's travel radius will be expanded to 25km and people will be able to leave their homes for as long as they like, under a relaxed set of coronavirus restrictions that will kicked today. (ABC) The travel bubble between Australia and New Zealand hit a problem after 17 passengers caught flights in apparent breach of rules. (Newswires)

ASIA

Asia-Pac equities traded mostly higher after a mixed Wall Street session on Friday as participants juggled the chances of a pre-election US stimulus bill, rising cases, and increasing US-Sino tensions ahead of the US election in just over a fortnight. APAC risk appetite was underpinned for a large part of the session by US stimulus hopes as House Speaker Pelosi, over the weekend, suggested she is optimistic on a deal and gave the Trump administration 48 hours to reach an accord to pass stimulus before election day, whilst US President Trump said he wants a bigger stimulus deal than Speaker Pelosi is opting for; ES, NQ and YM held onto their advances since the open. ASX 200 (+1.0%) was firmer after Melbourne city relaxed some COVID-related restrictions, with gains in the index led by strength in some cyclical names with IT outperforming, whilst its heavy-weight financial sector is also held up. However, Crown Resorts shares plumbed the depths after AUSTRAC opened a probe into the Co., which led to shares falling almost 10%. Nikkei 225 (+1.0%) conformed to the risk appetite despite less encouraging Japanese September trade data and a relatively caged USD/JPY. KOSPI (+0.2%) pulled back from best levels but remained in the green after finding support at 2,350. Elsewhere, Hang Seng (+1.2%) was propelled higher at the open with upside driven by the banking and gambling names, whilst Sun Art Retail (one of China’s largest hypermarket retailers) shares rose some 20% after Alibaba upped its stake in the group. Shanghai Comp. (+0.8%) was initially firmer amid another PBoC liquidity injection and saw little immediate reaction seen on the Chinese Q3 GDP misses as September economic activity data topped forecasts, albeit Shanghai Comp. erased gains as the session went on with US-China tensions brewing in the background. Finally, 10yr JGB futures track USTs lower amid the constructive risk tone around the market.

Chinese government officials are warning the US they may detain US nationals in China in retaliation to the Justice Department’s prosecution of military-linked Chinese scholars, sources said. Chinese officials reportedly issued warnings to the US government repeatedly via multiples channels. (WSJ)

Further moves US can take against China, according to officials, include monitoring Chinese state airlines’ employees suspected of supporting espionage in the US, going after alleged Chinese government-backed efforts to influence US politics/business and blacklisting more Chinese technology firms. According to the report, some in elite circles in Beijing are privately questioning whether President Xi pushed Washington too hard. The article also cites NEC Director Kudlow remarking that in late summer, President Trump rejected weaponizing the USD as he was persuaded the US does not want to take actions that would significantly diminish USD demand in Greater China and Asia. (WSJ)

China passed the new export control law that would restrict sensitive exports to protect national security, as touted. Under the law, China can take reciprocal measures against countries or regions that abuse their export controls in ways that hurt China’s national security and interest. (Newswires)

US Department of Commerce issued an affirmative preliminary antidumping duty determination for small vertical shaft engines from China. (Newswires)

China Treasury holdings (Sep) USD 1.068trln (Prev. USD 1.073trln); Japan Treasury holdings USD 1.278trln (Prev. USD 1.293trln). (Newswires)

China is holding off on pending M&A decisions until after the US election, Dealreporter said. (Dealreporter)

New Zealand PM Ardern won a landslide victory in the country's general election. The PM’s Labour Party won 49.1% with all votes counted, bringing a projected 64 seats and a rare outright parliamentary majority. (BBC) PM Ardern said they will form a government within 2/3 weeks and will talk with the Green Party. (Newswires)

PBoC sets USD/CNY midpoint at 6.7010 vs. Exp. 6.6957 (Prev. 6.7332); firmest fix since April 2019 (Newswires) PBoC injected a net CNY 50bln via 7-day reverse repos at the maintained rate of 2.20%.

Chinese GDP QQ SA (Q3) 2.7% vs. Exp. 3.2% (Prev. 11.5%); YY 6.9% vs. Exp. 5.8% (Prev. 5.6%) Chinese Retail Sales YY (Sep) 3.3% vs. Exp. 1.8% (Prev. 0.5%) Chinese Industrial Output YY (Sep) 6.9% vs. Exp. 5.8% (Prev. 5.6%)

Japanese Trade Balance Total Yen (Sep) 675B vs. Exp. 989.8B (Prev. 248.3B, Rev. 248.6B)

China's Stats Bureau spokeswoman said growth drivers remain relatively weak and need to consolidate growth momentum. Stats Bureau said international environment remains complex and severe and China's economy is still in process of recovery. (Newswires)

CENTRAL BANKS

PBoC Governor Yi Gang said the Central Bank predicts China GDP growth of around 2% this year. Risks to China’s economy are increasing macro leverage ratio and possible increase of banks’ non-performing loans. CNY rate is appreciating against the USD significantly in the past three months reflect interest rate differentials between China and US, and the market should decide exchange rates. (Newswires)

BoJ Governor Kuroda said the Central Bank has no intention of changing inflation targeting policy and forward guidance and reiterated the BoJ will not hesitate to take further measures to support the economy. (Newswires)

BoE Governor Bailey said targeting exchange rate does not come up in BoE policy discussions, and FX fluctuations are part of the reason why UK inflation has averaged in line with target. UK economy is likely 10% below pre-crisis level at end-Q3, with risks heavily skewed to the downside. (Newswires)

ECB President Lagarde said policy must be kept supportive for as long as needed. (Newswires)

ECB’s Panetta said ultra-easy monetary policy is all the more necessary amid the risk of a second COVID-19 wave derails the Euro Zone recovery from deep recession. (Newswires)

Fed’s Rosengren (non-voter) said the Fed lacked the tools needed to “stop firms and households” from taking on “excess leverage”, and also called for a rethink on US financial stability issues. (FT)

Fed’s Kashkari (voter) said stricter regulations are needed to stave off repeated market intervention by the Fed. “As soon as there’s a risk that hits, everybody flees and the Federal Reserve has to step in and bail out that market, and that’s crazy. And we need to take a hard look at that.” (FT)

UK/EU

UK officials are said to be preparing to water down UK PM Johnson’s Brexit legislation, in a move that could rekindle negotiations with the EU, according to sources. One minister suggested that they would be ready to add additional guarantees to dilute the most contentious parts of the bill. (Newswires)

UK Brexit Negotiator Frost suggested he will meet EU negotiator Barnier for talks this week. (Twitter) UK Cabinet Minister Gove said the chance of a trade deal with the EU is now less, and the EU side is not willing to intensify talks. Gove added the EU and UK were making progress, but EU retreated, and added the door is ajar for the EU. (Newswires) Gove also noted that leaving on Australian terms is an outcome for which the government is increasingly well prepared. (Times)

UK Department for Business, Energy and Industrial Strategy is bidding for cash from the Treasury to help businesses navigate no-deal Brexit. (Telegraph) UK PM Johnson is to warn business leaders this week that "time is running out" to prepare for the end of the Brexit transition period on Jan 1st. (FT)

Moody’s downgraded UK’s rating to “Aa3” from “Aa2”; outlook “Stable”. “The UK’s growth prospects have weakened significantly, with years of weak productivity growth and tepid business investment exacerbated by the pandemic and the likely effect of Brexit. The government’s already-high debt will increase further during the pandemic. Underlying the economic and fiscal deterioration is a weakening of the UK’s policymaking framework.” (Moody’s)

UK Rightmove House Prices (Oct) MM 1.1% (Prev. 0.2%); YY 5.5% (Prev. 5.0%). (Newswires)

The Italian government approved next year’s expansionary draft budget which will focus on the health sector and measures to support families alongside an extension of a moratorium on loans and mortgage payments. (Newswires) 

FX

In FX, DXY traded within a narrow range sub-94.000 as macro overnight news-flow remained light and as the State-side stimulus saga enter the next chapter in which House Speaker Pelosi set a Tuesday deadline for an accord to be reached, and stated that a deal must be struck ahead of November 3rd. Nonetheless, the DXY was uneventful in early hours with the index meandering below its 21 DMA (93.755) ahead of Friday’s 93.883 high, whilst downside levels include Friday’s low (93.529), Thursday’s low (93.362) and the 50 DMA (93.299). EUR/USD moved in tandem with the Buck and remained supressed by GBP, but the pair managed to retain its 1.1700+ status. Sterling saw slightly more pronounced gains vs. its Euro counterpart despite last week’s downbeat Brexit rhetoric as sources over the weekend suggested that UK officials are preparing to water down PM Johnson’s Brexit legislation in a move that could jump-start the failing negotiations with the EU. Thus, GBP/USD found an overnight base around its 21 DMA (1.2890) whilst EUR/GBP drifted lower and dipped below its 50 DMA (0.9061) ahead of 0.9050 and its 100 DMA (0.9039). Elsewhere, USD/JPY pulled back after attempting to breach 105.50 to the upside as the constructive risk appetite translated to early safe-haven outflows. Meanwhile, antipodeans were propped up by the risk sentiment after seeing little reaction to the overall mixed Chinese data, whilst NZD/USD was also unfazed after New Zealand PM Arden won a rare outright majority in its general election over the weekend. Finally, USD/CNH initially moved lower amid the firmest CNY fix since April 2019, but thereafter the pair recoiled back to session highs heading into the Chinese data which saw the GDP metrics miss estimates but Retail Sales and Industrial Output top forecasts. It is also worth keeping in mind weekend comments from the PBoC Governor who forecasted ~2% Chinese GDP growth this year whilst pinning some of the recent Yuan strength on interest rate differentials between US and China.

COMMODITIES

WTI and Brent Dec futures were choppy overnight but posted modest losses throughout the APAC session, with the former dipping below USD 41/bbl and the latter losing ground under USD 43/bbl ahead of today’s JMMC meeting. The crude complex saw some downside on the Chinese Q3 GDP miss, albeit the breadth of the losses was miniscule, whilst Chinese Stats Bureau also reported China’s Sep crude production +2.4% YY. Traders will likely fixate on the fallout from the OPEC+ JMMC confab and Saudi’s reaction to Russia’s (and other members’) undercompliance in September, although Russian President Putin spoke to the Saudi Crown Prince over the weekend and both sides stressed readiness to support stability in oil markets. Another topic on watch will be the growing calls for OPEC+ to scrap current plans to ease output cuts in January amid the resurgence of COVID-19 and its implications – however, since JMMC comprises only a handful of members, a concrete decision will likely come at the end of Nov/start of Dec when the full group meets. Credence will also fall on Libya and its rising production and how this can shape the current OPEC+ output pact as they are currently exempt – OPEC ministers previously stated that Libya will be closely watched for a sustained production recovery. Nonetheless, the usual sources reports will be eyed for any hints at the producers’ thinking on future policy as global economies reimpose targeted measures to curb the spread of COVID-19. Meanwhile, natgas futures kicked the week off down over 3% after Turkey announced the discovery of an additional 85bcm of the commodity in the Black Sea. Elsewhere, spot gold and spot silver moved in tandem with the Dollar. The former traded on either side of USD 1900/oz whilst the latter remained uneventful in the low USD 24/oz. Copper futures meanwhile gained overnight as the red metal tracked sentiment across stocks and with Chinese Sep industrial output data topping forecasts.

The Russian President and Saudi Crown Prince stressed readiness for coordination to support stability in energy markets, RIA reported. (Newswires)

Baker Hughes US Rig Count (w/e Oct. 16th): Oil +12 at 205, Nat Gas +1 at 74, Total +13 at 282. (Newswires)

Union of supervisors at BHP's (BHP LN) Escondida mine in Chile have reached an agreement on a labour deal, avoiding a strike. (Newswires)

Turkish President Erdogan said Turkey discovered an additional 85bcm of natural gas (in additional to the prior 320bm) in a field off the Black sea coast. (Newswires)

GEOPOLITICAL

A top US official reportedly had secret meetings with Syria's Assad regime earlier this year to secure the release of at least two Americans believed to be held in the country, according to sources. (WSJ)

Azerbaijan and Armenia have accused each other in violating new ceasefire agreement after announcing a ceasefire on Saturday. (Newswires)

US told Turkey the purchase of S-400 is unacceptable, warns that US has been clear on serious consequences for the security relationship. (Newswires)

UN arms embargo on Iran was lifted on Sunday morning after 13 years, meaning the country is free to purchase and sell weapons. (Guardian)

US

Treasuries were marginally steeper on Friday as investors balanced incoming stimulus, rising COVID, a mixed bag of data, and some corporate issuance, ahead of next week’s 20-year Treasury auction. By settlement, 2s +0.2bps at 14.3bps, 10s +0.5bps at 73.9bps and 30s +1.2bps at 152.1bps; futures volumes were mediocre. Treasuries reversed premarket gains after the September retail sales print of +1.9% came in well above the expected +0.7%. However, that upgrade to the growth outlook was soon overshadowed by an unexpected decline in industrial production. Furthermore, with stocks trading choppy amid new global lockdown concerns, monthly op-ex, pre-election uncertainty and Brexit woes, rates also lacked the incentive for directionality. On the flip side, continued expectations of post-election stimulus and the 20-year bond auction on the horizon likely kept aggressive bidding at bay. There was also a few chunky corporate deals pricing today from Bank of America (USD 8bln) and Morgan Stanley (USD 1bln) competing for bids, with the next few weeks likely to see a ramp-up on the corporate front as companies come out of their Q3 earnings blackout window. T-Note futures (Z0) settled 2 ticks lower at 139-02.

House Speaker Pelosi said there is no agreement yet in COVID-19 testing language in the relief bill, but she is optimistic on a COVID-19 relief bill before elections. Pelosi set a 48-hour deadline on Sunday and said negotiators must meet to be able to strike a deal on the coronavirus stimulus package ahead of the election. (ABC) House Speaker Pelosi and US Treasury Secretary Mnuchin are expected to talk again on Monday, according to Playbook. (Politico) US President Trump said he wants a bigger stimulus deal than House Speaker Pelosi's plan. (Newswires)

Senate Commerce Committee will be holding a hearing on 28th October with CEOs from Twitter (TWTR), Alphabet (GOOG), and Facebook (FB). (Newswires)