• European bourses are pressured this morning in-spite of limited fundamental updates, Stoxx 50 -0.9%; stateside, futures are off lows, ES +0.1%
• House Speaker Pelosi & Treasury Secretary Mnuchin are moving closer to a deal and will speak later today; however, McConnel sees a vote on a deal prior to the election as unlikely
• Netflix, -5.1%, beat on EPS but missed revenue and subscriber addition expectations for the quarter
• FX features a desolate USD moving further below the 93.00 mark in DXY terms; to the benefit of major peers with USD/JPY below 105.00 and GBP supported ahead of a Brexit negotiator call
• Looking ahead UK & Canadian Inflation, ECB's Lane & de Guindos, BoE's Ramsden, Fed's Mester and supply from the US
• Earnings: Tesla, Abbott, Verizon

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 (+0.3%) 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 (+0.5%) swung between gains and losses and traded with no clear direction for most of the session. Hang Seng (+0.8%) 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 (U/C) 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)

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)

US

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)

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). 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. (Newswires)

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

UK/EU

UK Treasury says the spending review will be concluded in late-November; to conduct a one-year spending review. Multi-year schools and NHS resource settlement's will be fully funded. Follows, and largely confirms, overnight reports that: UK PM Johnson’s 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 Chief Brexit Negotiator Barnier says that the EU wants a deal but not at any cost; an agreement is within reach. Reports indicate that Chief Negotiators are to speak again today. Separately, Dutch MEP is demanding the ability to strike bilateral fishing deals if there is a no-deal Brexit, Telegraph's Crisp(Newswires/Twitter)

UK CPI YY* (Sep) 0.5% vs. Exp. 0.5% (Prev. 0.2%); MM* (Sep) 0.4% vs. Exp. 0.5% (Prev. -0.4%)

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)

GEOPOLITICAL        

Libyan sides have agreed to steps towards restructuring of petroleum facilities guard to ensure continued flow of oil, according to UN envoy Williams. (Newswires)

EQUITIES

European equities (Eurostoxx 50 -0.8%) have sold off throughout the session despite a mildly firmer cash open. In terms of drivers of the move, European futures overnight appeared to be following some of the gains seen in US futures as markets continue to assess the likelihood of an eventual stimulus bill; however, sentiment deteriorated in quick order as European cash markets opened with little in the way of fresh macro newsflow accompanying the move. Losses across European equities are relatively broad-based with some mild underperformance in the FTSE 100 (-1.3%) as the index contends with a firmer GBP. The construction & materials sector is the region’s laggard amid losses in Vinci (-1.8%) post-earnings, in which the Co. announced a decline in revenues and cautioned that earnings are expected to fall significantly. Also, of note for the sector, Assa Abloy (-2.5%) have endured losses after Q3 results were poorly received by the market. Health care names are also faring poorly this morning with AstraZeneca (-1.6%) shares unable to benefit from source reports suggesting that the Co.’s COVID-19 vaccine trial could resume as early as this week. Additionally, for the sector, Novozymes (-3.5%) are lower on the session following Q3 earnings. To the upside, telecom names are bucking the trend with modest gains in the wake of earnings from Ericsson (+7.3%) after Q3 earnings exceeded expectations and the Co. expressed confidence in its 2020 targets. Other large cap earnings today have included Nestle (-0.3%) who exceeded expectations for 9M organic revenue growth and Iberdrola (-0.7%) who announced that its North American arm is to acquire PNM for around EUR 3.66bln alongside posting 9M results. Looking ahead, today sees a slew of large cap US earnings including the likes of Verizon, Abbott, Tesla & Biogen.

Ericsson (ERICB SS) - Q3 revenue SEK 57.5bln vs. Exp. SEK 57.36bln. Adj. Operating profit SEK 9bln vs. Exp. SEK 6.44bln. Adj. gross margin 43.2% vs. Exp. 39.2%. YTD earnings reaffirm confidence regarding 2020 targets. COVID-19 has thus far had a limited impact on group business. 5G contracts in Mainland China have contributed positively to profits in Q3 and are expected to further improve. (Newswires)

Interactive Brokers Group (IBKR) Q3 20 (USD): Adj. EPS 0.53 (exp. 0.55), Revenue 548mln (exp. 510mln). -2.6% in pre-market trade

Nestle (NESN SW) - net sales CHF 61.91bln vs. Prev. CHF 68.36bln. 9M organic revenue growth +3.5% (vs. Exp. +2.8%). Pricing +0.2% vs. Exp. +0.5%. 9M. Co. raises FY20 guidance; sees FY organic revenue +3% vs. Exp. +2.9%. Underlying earnings per share in constant currency and capital efficiency are expected to increase. The effects of COVID-19 on organic growth continued to vary. (Newswires/Nestle)

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). Guidance: Q4: EPS 1.35 (exp. 0.95); Revenue 6.57bln (exp. 6.59bln). FY20: EPS N/A (exp. 6.23); Revenue N/A (exp. 24.92bln). -5.1% in pre-market trade

Snap Inc (SNAP) Q3 20 (USD): Adj. EPS +0.01 (exp. -0.05), Revenue 679mln (exp. 550mln). DAUs 249mln (exp. 244mln); ARPU 2.73 (exp. 2.28). Not providing guidance. +24% in pre-market trade

Texas Instruments Inc (TXN) Q3 20 (USD): EPS 1.45 (exp. 1.28), Revenue 3.82bln (exp. 3.45bln). +0.8% in pre-market trade

Thermo Fisher Scientific Inc (TMO) Q3 20 (USD): EPS 5.63 (exp. 4.31), Revenue 8.52bln (exp. 7.65bln)

FX

GBP – Sterling is leading the latest broad G10 assault against the Dollar and perhaps front-running or prematurely factoring in positive news on the eve of EU-UK trade talks amidst comments from Barnier, Sefcovic and Michel ranging from the usual ‘we want a deal, but not at any price’ to the slightly more hopeful ‘an agreement is within reach’. Cable encountered some resistance just above 1.3000 and ahead of the 50 DMA (1.3009) initially, but breezed through at the next attempt before topping out close to near mid-month twin peaks between 1.3064-68. Meanwhile, Eur/Gbp has retreated further from Tuesday’s high just shy of 0.9150 to sub-0.9090 even though the single currency is also appreciating vs an increasingly weak Greenback as the DXY slides to 92.685 and fresh multi-week lows.

NZD/AUD/JPY/EUR/CHF/CAD – All up against the Buck, as the Kiwi claws back RBNZ Orr induced losses and reclaims 0.6600 status in the run up to NZ CPI data for Q3 on Thursday and in spite of the recurrence of COVID-19 reaching 25 cases at last count, while the Aussie is hovering below 0.7100 in advance of a speech from RBA’s Debelle tonight and October PMIs tomorrow. Elsewhere, the Yen has rallied beyond the 21 DMA at 105.50 where 1.3 bn option expiries reside and bigger expiry interest between 105.10-00 (1.9 bn) to post a marginal new m-t-d best circa 104.89 and the Euro has absorbed offers around 1.1850 that kept the headline pair capped overnight before breaching a Fib at 1.1861 on the way to 1.1870 and almost matching September 18/21 peaks. The Franc is pivoting 0.9050 and Loonie straddling 1.3100 awaiting Canadian CPI and retail sales for some independent/additional impetus.

SCANDI/EM -  Somewhat strangely given a significantly less pessimistic 2020 GDP forecast from Sweden’s Debt Ofiice (-3.5% compared to the prior -6.5% expected contraction) and soft oil prices, the Norwegian Krona is outperforming its Swedish neighbour in Euro cross and Dollar terms as Eur/Nok trades at the lower end of a 10.9960-9000 band in contrast to Eur/Sek nudging the top of 10.3750-3200 parameters. However, it’s one way traffic for the Yuan as Usd/Cnh and Usd/Cny continue their descent to fresh 2 year-plus highs, albeit in keeping with other EM currencies that are taking advantage of the Greenback’s more pronounced pull-back.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1760-65 (510M), 1.1780 (301M), 1.1800 (1BLN), 1.1850-60  (600M)

-        USD/JPY: 105.00-10 (1.9BLN), 105.50 (1.3BLN), 105.90-106.00 (2.3BLN)

FIXED INCOME

It’s been a bit more measured compared to Tuesday’s collapse, but core debt remains in reflux and a downward spiral with sellers maintaining the upper hand awaiting US fiscal stimulus developments, the next chapters of Brexit and 20 year issuance. However, Bunds have recovered some poise after piercing a Fib level at 175.39, but not succumbing to much follow-through beyond 175.34 and the next chart support seen at 175.31. Similarly, Gilts have found underlying bids around 136.00 after dipping to 135.99 and the 10 year T-note is off its 138-13 overnight session low, albeit with the curve still steepening before weekly MBAs, Fed’s Mester and the aforementioned Treasury auction that might have seen sufficient concession to draw decent investor demand.

COMMODITIES

The crude complex has once again been relatively devoid of specific fundamental updates and as such price action has largely followed broader equity performance this morning; directionally, benchmarks are continuing the downside post-yesterday’s private inventories report. The report displayed a surprise, but relatively modest, build of 0.59mln compared to expectations for a draw of 1mln; attention turns to today’s EIA report for confirmation of this build but similarly to yesterday expectation are for a 1.02mln draw. Note, the build last night did take some desks by surprise given the BSEE were still reporting that some of the offshore Gulf production was shut-in following Hurricane Delta for the survey period. Inventories aside, WTI and Brent have largely been at the whim of downside in the equity space (see above) posting losses of circa USD 0.60/bbl at present; albeit, the benchmarks are off lows by around USD 0.30/bbl. Moving to metals, spot gold hasn’t been able to derive much in the way of further upside post-APAC hours as the DXY continues to drop further below the 93.00 mark. Currently, the precious metal is firmer by ~USD 10/oz. Separately, this morning saw a number of mining updates including Fresnillo cutting their FY20 gold production expectation to 745-775k/oz from the prior forecast of 785-815k/oz but did maintain their guidance around silver. While Antofagasta reiterated their view of copper production for 2020 coming in at the lower end of their original guidance for the year.

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)

Libyan sides have agreed to steps towards restructuring of petroleum facilities guard to ensure continued flow of oil, according to UN envoy Williams. (Newswires)