• APAC stocks were mostly higher after a modestly firm handover from Wall Street; Mainland China underperformed
• US House Speaker Pelosi and Treasury Secretary Mnuchin are moving closer to a stimulus deal and will speak again today, according to her aide
• Senate Majority Leader McConnell reportedly told Senate on Tuesday that he has warned the White House not to make a big stimulus deal before the election
• AstraZeneca (AZN LN) COVID-19 vaccine trial in the US is expected to resume as early as this week, according to sources
• In FX, DXY fell below 93.000, EUR/USD eyed 1.1850, and USD/CNY strengthened at the open
• Looking ahead, highlights include UK & Canadian Inflation, ECB's Lagarde, Lane & de Guindos, BoE's Ramsden, Fed's Mester and supply from the US
• Earnings from Akzo Nobel, Ericsson, Iberdrola, Verizon, Abbott, Tesla, Biogen

CORONAVIRUS UPDATE

AstraZeneca (AZN LN) COVID-19 vaccine trial in US is expected to resume as early as this week, according to sources. (Newswires)

US reported 60,061 (prev. +47,035) new COVID-19 cases and 513 (prev. +475) additional deaths. New York COVID stats: Cases +1,201 (prev. +998); positivity rate 1.32% (prev. 1.21%), Hospitalisations 942 (prev. 934); deaths +12 (prev. +14). (Newswires)

France reported 20,468 (prev. +13,243) additional COVID-19 cases. Germany reported 7,595 (Prev. 6,868) new COVID-19 cases and 39 (Prev. 47) additional deaths. (Newswires)

ASIA

Asia-Pac equities were mixed for most of the session before trading mostly higher following a lukewarm handover from Wall Street, which saw the major US indices end the day nearer to session lows, but with modest gains as yesterday’s State-side stimulus talks were seemingly constructive but with a deal yet to be reached. That being said, sources citing Senate Majority Leader McConnell suggested it will logistically be difficult to get a bill done before the elections due to the legislative hurdles that need to be overcome. Nonetheless, House Speaker Pelosi signalled progress and expressed optimism as talks with Treasury Secretary Mnuchin are poised to continue later today. US equity futures also saw mild gains at the electronic reopen, and the three major index contracts modest extended on those gains throughout the night, with ES, NQ and YM higher by between 0.6-0.7% heading into the EU open. Back to APAC, ASX 200 (+0.1%) was caged in a tight range with no real standout performers or interesting sector action. Nikkei 225 (+0.4%) side-lined USD/JPY movement and was buoyed by its industrial sector, however, Softbank shares erased all gains after sources suggested Huawei and Chinese firms are said to be seeking curbs on Nvidia's acquisition of Softbank’s ARM. KOSPI (+0.3%) swung between gains and losses and traded with no clear direction for most of the session. Hang Seng (+0.5%) initially extended on its opening gains before waning off best levels, with upside led by some of the large-cap names including Alibaba, HSBC and CNOOC., whilst COVID-19 related A-shares are bolstered by China ramping up efforts to expand output for the Cos. Conversely, Shanghai Comp (-0.4%) immediately erased the mild gains seen at the open despite another liquidity injection by the PBoC as US-Sino tensions show no signs of tempering down. Finally, JGB futures remained contained despite the bear steepening seen in USTs, whilst the BoJ Rinban operation showed offerings for 1-3ys, 3-5yrs, and 5-10yrs unchanged.

Huawei and Chinese firms are said to be seeking curbs on Nvidia's (NVDA) ARM acquisition, sources. Sources noted that the Chinese tech firms are concerned Nvidia may force ARM to cut off Chinese clients. (Newswire)

Chinese President Xi advisor told Nikkei that the Chinese economy will probably continue expanding at a roughly 5% annual clip over the next 15 years, citing a rapidly developing technology sector. The advisor said 2020 GDP could be 2-3% for the full year and said China "should not close off the Chinese economy, but rather develop both internal and external circulation together.". (Nikkei) Reminder, PBoC Governor Yi Gang said the Central Bank predicts China GDP growth of around 2% this year.

US President Trump's tax records show he has pursued expansive business projects in China and maintains a Chinese bank account. (NYT) A Trump Campaign spokesman subsequently refuted these reports. (Newswires)

PBoC sets USD/CNY midpoint at 6.6781 vs. Exp. 6.6740 (Prev. 6.6930); the firmest fix since July 2018. (Newswires) PBoC injected a net CNY 80bln via 7-day reverse repos at a maintained rate of 2.20%.

CENTRAL BANKS

BoJ's Sakurai said the BoJ must take swift and appropriate action as needed if the economic recovery is delayed. (Newswires)

Fed's Evans (2021 voter) put less weight on a second/third wave of COVID-19; not a lot of scope for portfolio balance effect to lower rates further. Evans said if at some point interest rates are higher, Fed could boost bond buys or extend duration. Evans added the US economy is about 91% recovered, but there is still a way to go, the recovery is uneven. Fed could buy more assets than currently if it is needed, and Fed could eventually do more accommodation if it is needed. Evans is not bothered by 2.5%-2.75% inflation for a year (Newswires)

UK/EU

UK PM Johnson 3-year UK spending masterplan is set to be abandoned, according to FT. UK Chancellor Sunak reportedly told the PM that the plans for a comprehensive review should not go ahead due to COVID-19. The PM and Chancellor have reportedly been discussing whether any key departments could still be given a multiyear settlement. (FT)

EU auto names have called on Brussels to take a less restrictive stance on the future market access to Britain, as EU's current stance is "not in the long-term interest" of the EU auto sector. (FT)

Secretary of State for European Affairs stated the EU27 will have no new approach, responding to an explicit request from London, adding “It is up to them to tell us now, beyond tactics, if they want to continue negotiating. We are ready for it”. (AFP)

EU Trade Chief Dombrovskis is said to have rejected the US offer in the Airbus (AIR FP), Boeing (BA) dispute, according to German Press. (Newswires)

FX

In FX, DXY was softer after a convincing breach below 93.000, a move it had been threatening throughout the first part of the APAC session with multiple tests of the psychological level as overnight news-flow remained on the lighter side. Meanwhile from a technical standpoint, the 92.75-80 range proved to be support for the index during September, and to the upside resides the 50 DMA at 93.273. As such, EUR/USD and GBP/USD mirrored Dollar action, the Single Currency made headway above 1.1800 and topped yesterday’s 1.1840 high (a level which proved to be an overnight barrier) as it looked to tackle the 1.1850 psychological mark, whilst participants are on standby for any potential ECB verbal intervention. Cable drifted higher above 1.2950 as the pair sees its 50 DMA at 1.3009, and with Brexit news-flow sparse since yesterday’s European close. Elsewhere, USD/JPY found overnight resistance at 105.50 (21 DMA) and has since been drifting lower in tandem with the Dollar before encountering support around 105.35, with some flagging an hourly Ichimoku cloud around the overnight base. Furthermore, the pair sees a number of large opex for today’s NY cut, with USD 1.3bln at strike 105.50, ~USD 750mln at 105.10 and USD 1.2bln at 105.00. Antipodeans also gleaned support from the softer Dollar but news flow for the region has remained scant overnight. AUD/USD attempted to claw its way back to 0.7100 which coincides with its 100 DMA whilst its Kiwi counterpart topped its 21 DMA (0.6588) and breached 0.6600 which overlaps with its 21 DMA. Finally, the CNH was unfazed by the PBoC setting the firmest yuan fix since July 2018 – but the CNY saw immediate strength at its open. 

COMMODITIES

WTI and Brent front-month futures traded sidesways throughout the night after reopening trade with modest losses. Crude futures crept higher yesterday after the European close in what seemed to be a sentiment-driven move. Thereafter, the contracts waned off highs on stimulus woes before seeing a leg lower on the back of a surprise build in Private Inventories, with participants on the look-out for today’s DoEs for confirmation. WTI hovers USD 41.50/bbl (vs. low USD 41.12) and Brent meanders around USD 43/bbl (vs. low 42.82) heading into the EU open. Elsewhere, precious metals were beneficiaries of the softer USD, with spot gold extending its gains above the USD 1900/oz mark and spot silver briefly topping USD 25/oz. The Dollar weakness also aided copper futures to print gains, albeit the red metal remains within yesterday’s ranges.

US Private Energy Inventories (w/e October 16th): Crude +0.59mln (exp. -1mln) (Newswires) 

·       Cushing +1.12mln (exp. +1.1mln)

·       Distillates -5.98mln (exp. -1.7mln)

·       Gasoline -1.62mln (exp. -1.8mln)

GEOPOLITICS

US Department of Commerce has initiated antidumping and countervailing duty investigations on aluminium foil from Armenia, Brazil, Oman, Russia and Turkey. (Newswires)

Satellite images indicate Russia is preparing to resume testing its nuclear-powered cruise missile, according to CNN. (CNN)

US

Treasuries continued their bear-steepening trend on Tuesday amid the usual “risk bid on stimulus hopes” as well as a busy supply slate. By settlement, 2s -0.2bps at 14.5bps, 5s +0.9bps at 33.9bps, 10s +3.0bps at 79.2bps and 30s +5.2bps 160bps; futures volumes were average although there were reported block sales across the TY and US contracts; desks noted some chunky option flow too including a 55k TYZ put tree and a 31.2k TYF strangle seller. Rates had been offered out of APAC/Europe amid the positive risk tone, with little fresh catalysts and many citing US stimulus hopes as usual. However, there was a spell of risk aversion as US stocks had a bumpy cash open. That proved to be a red herring for Treasury bulls ultimately, as stocks eked out solid gains. Risk assets had been catching tailwinds from an optimistic Pelosi, who indicated her previous Tuesday deal deadline might not be as cliff-edge as she had alluded to and progress was being made. Participants await to hear from her latest call with Treasury Secretary Mncuhin. Of course, any deal achieved is likely to be a non-starter for the GOP, although McConnell did say he was open to discussing any deal that the White House and Dems agreed upon. Meanwhile, the market is likely cautious about bringing yields back in – belly-to-long-end curve spreads now sit close to their post-COVID highs - ahead of Wednesday’s 20-year bond auction from the Treasury, in addition to the expected pre-election flurry of corporate supply as issuers exit the Q3 earnings blackout period. T-note (z0) futures settled 7 ticks lower at 138-22+

US House Speaker Pelosi and Treasury Secretary Mnuchin are moving closer to a stimulus deal and will speak again today, according to her aide. (Twitter) US House Speaker Pelosi said she is optimistic on a possible COVID-19 relief deal and hopes to reach an accord by the end of the week. She thinks there can be more COVID related aid before election day. COVID-19 aid bill would need to be finished by the end of next week to get aid out by the election, but talks could continue if not. (Newswires)

Senate Majority Leader McConnell told Senate Republicans on Tuesday that he has warned the White House not to make a big stimulus deal before the election, according to two sources cited by WaPo. (Washington Post) Sources familiar with McConnell's remarks said the majority leader described how hard it would be logistically to get a bill done so quickly before the election, given all the legislative hurdles that need to be overcome, CNN's Raju tweeted. (CNN) Majority Leader McConnell said Senate would consider a larger COVID-19 deal if one is reached between the White House and House Speaker Pelosi. He said is not anticipating democratic votes for his aid measure. McConnell said GOP proposal does not include stimulus checks and if Pelosi & Mnuchin reach deal and it clears the house, he would put it on the Senate floor at some point (note, many GOP Senators have spoken out against a larger deal). McConnell also added "we''ll have to see what it is first". (Politico/WaPo) At a closed-door lunch on Tuesday, McConnell indicated that the deal was unlikely to get a vote in his chamber before Election Day, according to multiple sources. (CNN)

White House Chief of Staff Meadows said "we still have some way to go" on stimulus deal, talks were productive enough to continue. US GOP Senator Romney would oppose a Pelosi/Mnuchin deal of USD 1.8trln or more. GOP Senator Roberts would be very surprised if the two sides come to an agreement on COVID relief, GOP Senator Wicker said it looks like the parties are very far apart. GOP Senate Appropriations Chair Shelby is not optimistic about a stimulus deal. (Newswires)

POLL: NYT/Siena Nationwide poll shows Biden leading Trump by 9ppts at 50% v. 41% (Prev. +8ppts). The New York Times-Siena College poll of 987 likely voters was conducted between Oct. 15 and Oct. 18 and has a 3.4 percentage point margin of error. (The Hill) NYT/Siena Georgia poll has Trump and Biden tied at 45% (prev. tied at 45%). (Newswires)

POLL: Reuters/Ipsos Poll of likely voters in Michigan, 51% back Biden vs 47% supporting Trump. RCP average in Michigan has Biden ahead by 7.3 pts. Reuters/Ipsos poll of likely voters in North Carolina, 49% back Biden vs 46% support Trump. (Newswires) RCP average in NC has Biden ahead by 2 points

US Treasury opposes the extension of the Federal Reserve's Municipal Liquidity Facility (MLF). (Newswires)

WSJ suggests that Google (GOOG) will face further antitrust cases from state AGs; further cases could come within weeks. (Newswires)

Netflix Inc. (NFLX) Q3 2020: EPS 1.74 (exp. 2.14); Revenue 6.44bln (exp. 6.38bln). Paid Net Ads 2.2mln (exp. 3.4mln). Q4 Paid Net Adds view +6mln (exp. +6.54mln). (Newswires) Shares fell 5.7% after-market