• European bourses are firmer but off highs (Stoxx 50 +0.6%) with fundamental newsflow light and focus on Pelosi’s stimulus deadline; ES +0.7%
• 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 Q3 GDP missed Exp. but activity measures topped forecasts
• 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
• EU Chief Brexit Negotiator Barnier & UK Counterpart Frost scheduled to speak at 15:00BST today; UK Officials are reportedly preparing to dilute PM Johnson’s Brexit legislation
• FX features a downbeat DXY with GBP buoyed ahead of today’s Brexit negotiations as antipodeans outperform after a landslide NZD election
• Looking ahead, highlights include Fed’s Powell, Clarida, Williams, Bostic & Harker, ECB’s Lagarde, Lane & Mersch, BoE’s Broadbent & Cunliffe and the JMMC meeting (14:30BST/09:30ET)

CORONAVIRUS UPDATE

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

Oxford University discussing medium-term impact of COVID-19 in a new study: initial findings show a large proportion of patients discharged from hospital are still experiencing symptoms 2/3 months after contracting COVID-19. (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 (+0.9%) 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 (+1.1%) 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 (+0.6%) 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. (-0.7%) 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)

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)

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)

"We could defeat the US when we were very poor, is there any reason for us to be afraid of it today?", Global Times editor Hu Xijin. (Twitter)

CENTRAL BANKS

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)

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. Toolbox has not been exhausted, will do more if 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)

US

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)

UK/EU

EU Chief Brexit Negotiator Barnier & UK Counterpart Frost scheduled to speak at 15:00BST today, FT's Brunsden citing sources. (Twitter)

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 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)

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) 

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. Subsequently, Explosions have been heard in Stepankert, the capital of Republic of Artsakh, according to Conflict News. (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)

EQUITIES

European equities (Eurostoxx 50 +0.7%) have kicked the week off on the front-foot in an extension of last Friday’s gains. In terms of the “drivers” of the move, not a great deal has changed from a fundamental standpoint in Europe, with price action in futures seemingly exacerbated by the opening of cash trade. Looking further afield, on the stimulus front, House Speaker Pelosi set a 48-hour deadline for a deal as of Sunday, stating that negotiators must meet to be able to strike a deal on the coronavirus stimulus package ahead of the election. Markets still assume that no deal will be agreed until after the election and therefore it may require more meaningful progress beyond the ambitions of various players involved with the talks before that assumption gets revaluated. Performance across Europe is relatively broad-based with the FTSE (U/C) the main outlier to the downside amid headwinds from a firmer GBP and the energy sector lagging. Note, some trade across the region has been hampered by issues on Euronext. From a sectoral standpoint, all sectors trade firmer across the board with outperformance seen in financial names but energy closer to the U/C mark and as such the mornings slight underperformer. Julius Baer (+5.3%) are the outperformer in the sector after noting an improvement in profitability in the 9M period since the beginning of the year, whilst also highlighting a near 4% increase in net new money. Laggards, albeit still firmer on the session, include basic materials and energy with the latter hampered by downside in crude prices ahead of today’s OPEC+ JMMC meeting. Before being halted for trade (amid issues on Euronext), shares in Philips (+2.8%) were firmer post-Q3 earnings which saw the Co. exceed revenue and EBIT expectations whilst maintaining its outlook for the rest of the year. To the downside, Saab (-12.0%) are a notable laggard after Q3 results posted a decline in operating income with the Co. unable to confirm FY 20 guidance. 

FX

GBP – It may be partly technical and Brexit-related amidst reports that the UK Government may water down the IMB in an effort to revive trade talks with the EU, but Sterling has rebounded across the board after weakness in Asia overnight in wake of Moody’s downgrading the nation’s credit rating from Aa2 to Aa3. Contacts noted buying in Cable through 1.2940 following a retreat to 1.2890 that coincided with the 21 DMA and momentum has subsequently picked up pace to probe 1.3000, while Eur/Gbp has reversed from the high 0.9000 area to take out two DMAs, at 0.9061 and 0.9039 (50 and 100 respectively) as the cross eyes 0.9020 on news that chief negotiators Frost and Barnier will speak at 15.00BST.

NZD/AUD – The Kiwi remains in the ascendency down under on the back of PM Ahern’s resounding election win that is projected to give her Labour Party a 64 seat majority in parliament, while the Aussie has also regained some poise after recent underperformance due to dovish RBA guidance given a relaxation in Melbourne’s COVID-19 restrictions and the PBoC’s firmest CNY midpoint fix since April 2019 (6.7010) ahead of Chinese data (GDP mixed vs consensus, but retail sales and ip both better than expected). Nzd/Usd is sitting comfortably above 0.6600 as Aud/Nzd hovers around 1.0700 and Aud/Usd is capped on advances over 0.7100 in the run up to NZIER Q3 confidence and minutes to the RBA’s October policy meeting.

EUR/CHF/CAD/JPY – As the Buck wanes and DXY ducks under Friday’s 93.529 low having topped out ahead of the 93.883 high and lost grip of the 21 DMA (93.755), the Euro is consolidating recovery gains on the 1.1700 handle. However, 1.1750 represents half round number resistance and spreads between Bunds and US Treasuries are still widening to keep the headline pair on a downward trajectory. Elsewhere, the Franc is pivoting 0.9150 following contrasting Swiss sight deposit balances, while the Loonie retains 1.3200+ status before Canada’s BOS and the Yen is sitting tight within a 105.34-50 range following Japanese trade data showing a smaller than forecast surplus.

SCANDI/EM – The Nok has clawed back some lost ground relative to the Sek and Eur after finding support into 11.0000 against the single currency, while the beleaguered Try has also bounced off worst levels with assistance from the aforementioned Usd retracement and perhaps Turkey’s Black Sea find of natural gas.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1600 (767M), 1.1615-20 (710M), 1.1650 (1BLN), 1.1700 (550M), 1.1715 (363M), 1.1730-35 (606M), 1.1770-80 (1BLN), 1.1800 (1BLN)

FIXED INCOME

The debt complex remains top heavy, and the Eurozone periphery in particular following Italy rubber stamping more financial stimulus and only Eur15 bn of the total Eur39 bn via EU grants, however trade and direction is still rather choppy and erratic overall in keeping with equities and the risk tone in general. Indeed, Bunds and Gilts have both extended tops and bottoms of their intraday bands to 176.13-175.88 and 136.58-33 respectively, albeit well within recent extremes awaiting clearer impetus and more conviction for the next decisive move. That may yet come from a host of Central Bank speakers or breaking headline on the Brexit, US stimulus and/or geopolitical front rather than remaining data, but this week’s calendar does reach quite a climax on Friday with the fallout from the final US Presidential debate before flash PMIs on both sides of the Atlantic. Back to bonds, US Treasuries are at or very near overnight session lows ahead of Fed chair Powell at the IMF and NAHB index.

COMMODITIES

WTI and Brent are subdued this morning, but the magnitude remains minimal, after a modest bid higher around the European cash equity open in-spite of sparse fundamental updates (see Equities wrap above). Most recently, benchmarks dipped off those earlier highs and since then have largely been in proximity to the unchanged mark; albeit, with a slight negative bias – currently lower by USD 0.20/bbl. Focus for the session is on today’s OPEC+ JMMC gathering which is due to commence from 14:30BST/09:30ET. The meeting which will be closely watched for commentary around undercompliance in September, particularly from Russia; alongside the evolving demand & supply situation given COVID-19 and Libya respectively, among other factors. While participants are focused on such updates from the Committee, particularly given increasing calls for an alteration to the current easing schedule from OPEC re. production cuts, it’s worth bearing in mind the JMMC does not have the power to implement new policy only to make recommendations. As such, after today’s gathering focus will turn to the 30th November/1st December full OPEC+ meeting to see what, if any, changes are made. Returning to Libya, the countries Abu Attifel (70k BPD) facility is reportedly expected to commence a restart from October 24th bringing more of the nation’s supply back on-line ahead of the next OPEC+ gathering. However, while the increasing supply will draw the attention of OPEC, at present Libya is still someway off their production figure from late last year of 1.2mln BPD – as of Friday output was around 500k BPD. Moving to metals, spot gold is modestly firmer this morning with action once again driven by USD movements which has featured the DXY dropping throughout the session to fresh lows on multiple occasions. Currently, the precious metal is in proximity to the USD 1910/oz mark with gains just in excess of USD 10/oz.

OPEC+ JMMC meeting commences from 09:30ET/14:30BST today, Energy Intel’s Bakr. (Twitter)

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

Libya's Abu Attifel (70k BPD) facility is expected to begin restarting on October 24th, according to engineers

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