• Asian equity markets began the week lacklustre and US equity futures were pressured with risk appetite subdued by the deteriorating COVID-19 situation in Europe
• France and Italy reported record surges in daily infections, whilst Spain announced a state of emergency
• AstraZeneca’s COVID vaccine is said to have triggered protective antibodies and T-cells in the elderly
• In FX, DXY was slightly firmer and edged closer towards the 93.00 level, EUR/USD slipped below 1.1850, GBP/USD retained 1.30 status
• EU Chief Brexit negotiator Barnier and his UK counterpart Frost have extended discussions in London until Wednesday
• Looking ahead, highlights include German IFO, US New Home Sales, New Zealand Trade Balance, Chinese Communist Party Key Meeting (26th – 29th), SNB’s Jordan, SAP, Google, NXP Semiconductor, Hasbro

CORONAVIRUS UPDATE

US total coronavirus cases rose to 8.55mln vs. Prev. 8.47mln and total deaths increased to 224.2k vs. Prev. 223.4k, while a major newswire tally noted that US cases rose by at least 60,413 to a total 8.67mln on Sunday and that deaths rose by at least 333 to a total of 225.3k. (Newswires)

US VP Pence's top aides have tested positive for COVID-19 including his chief of staff, a senior political advisor and three more staff members. However, reports added that the VP and his wife both tested negative for the virus and he will continue campaigning in the week ahead. (CNN/Daily Mail)

US HHS and DoD are prepared to distribute a vaccine under multiple regulatory clearance scenarios, including expanded access to clinical trials rather than emergency authorization, according to an official. (Newswires)

NIH Dr Fauci said we will know if a vaccine is safe and effective by end of November or early December and that vaccinating a substantial portion of the population is unlikely until Q2 or Q3 next year. Dr Fauci also commented that he is hopeful at least 2 vaccines will prove to be safe by early December and that monoclonal antibodies are quite promising, while he added that the US can curb the spike in COVID-19 without closing down the country. (Newswires)

The University of Oxford COVID-19 vaccine drug being developed with AstraZeneca (AZN LN) is said to have triggered protective antibodies and T-cells in the elderly according to early results which offers hope to the most vulnerable. In related news, AstraZeneca confirmed the resumption of its COVID-19 vaccine trial in the US with results from its late stage trials expected later this year after the FDA approved the resumption, while it was separately reported that the Johnson & Johnson (JNJ) COVID vaccine trial will resume soon. (Newswires/FT/Washington Post)

UK COVID-19 cases rose by 19,790 (prev. +23,012) and there were 151 new deaths (prev. +174). (Newswires)

Italy COVID-19 cases rose by a record 21,273 and deaths rose by 128. Italy also announced tighter restrictions such as early closing for restaurants and bars which PM Conte said should allow the increasing curve of the virus to be brought under control, while he also noted that sectors affected by the latest controls will be compensated and that individual regions will be able to decide more restrictive measures. (Newswires)

Spanish PM Sanchez announced that a state of emergency in which curfews will be imposed between the hours of 23:00-06:00 with a 1 hour flexibility set by individual regions and stated that travel between regions could be banned, while he asked allies in parliament to support the state of emergency for 6 months until May. (Newswires)

France COVID-19 cases rose by a record 52,010 cases (prev. +45,222 record on Saturday) and deaths increased by 116 (prev. +137). In related news, the French Transport Minister said the government was ready for all possibilities including imposing another lockdown, while reports also noted that patients in southern France were transferred between hospitals due to ICUs being pressured. (Newswires)

Sport and cultural facilities will shut in Brussels and a longer curfew will be imposed from Monday, according to the regional government amid a continued surge in COVID-19 infections. (Newswires)

Irish Deputy PM Varadkar said he is confident businesses will be able to reopen after a 6-week lockdown and is increasingly optimistic that Ireland will be able to begin vaccinating people in Q1 or H1 next year with the optimism due to information the government receives from companies developing vaccines. (Newswires)

Australia is mulling reopening state borders in time for Christmas and is also weighing plans for alternative options to hotel quarantine with PM Morrison noting that all states & territories except for Western Australia had agreed to a framework that would end regional border closures before December 25th. It was also reported that Australia’s Victoria state Premier Andrews announced the reopening of retail, restaurants, hotels, cafes and bars in Melbourne from Wednesday. (Newswires/Sky News)

ASIA

Asian equity markets began the week lacklustre and US equity futures were pressured with risk appetite subdued by the deteriorating COVID-19 situation in Europe after France and Italy reported record surges in daily infections, which prompted Italy to announce tougher restrictions and Spain also declared a state of emergency, as well as a nationwide curfew. ASX 200 (-0.2%) was initially buoyed by M&A news including an approach by Coca-Cola European Partners to acquire Coca-Cola Amatil which saw shares in the latter surge by more than 15% and Link Administration received a revised takeover proposal, although gains in the index were eventually offset by weakness in the commodity-related sectors and with financials on edge after Westpac flagged a AUD 1.2bln hit to H2 earnings. Nikkei 225 (-0.1%) was indecisive with price action choppy around the 23,500 level amid a mixed currency and the KOSPI (-0.6%) failed to hold onto opening gains in the absence of any significant follow-through to the early nostalgic lift in Samsung Group shares after the death of its Chairman Lee Kun-hee. Shanghai Comp. (-1.1%) was the worst performer amid commodity-related weakness, with demand also subdued by the absence of Hong Kong participants due to a holiday closure and tentativeness as China begins its 4-day plenum where policymakers will hammer out details of the next 5-year plan. Finally, 10yr JGBs traded higher as they made their back towards the 152.00 focal point with support provided by the cautious mood and with the BoJ in the market for a total of JPY 920bln of JGBs.

PBoC injected CNY 50bln via 7-day reverse repos at a rate of 2.2% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.6725 vs. Exp. 6.6698 (Prev. 6.6703)

PBoC Governor Yi Gang said China will seek to improve the flexibility of its currency and will reduce restrictions on cross-border use of the CNY. (Newswires)

China's government is discussing permits for millions of tonnes of additional corn imports over the next year with Beijing considering issuing more lower-tariff quotas for buyers to ease the domestic shortage, according to sources. (Newswires)

US Secretary of State Pompeo and EU counterpart Borrell launched the first US/EU dialogue on China, which is a dedicated space to discuss the full range of the challenges Beijing poses to mutual interests and values. (Newswires)

US Judge declined to reverse its decision blocking the US government order barring US app stores from offering Tencent’s WeChat (700 HK) for download, according to a court order. (Newswires)

UK/EU

UK senior government ministers are increasingly worried that working from home is significantly impacting productivity in the economy and business leaders warned that jobs could be shifted abroad if there is a long-term shift away from the office. (Telegraph)

EU's Chief Brexit Negotiator Barnier signalled that his team was preparing to remain in the UK for 3 more days through to Wednesday, while reports later confirmed that talks have been extended to October 28th. (Telegraph)

UK government sources are hoping that German Chancellor Merkel will intervene to break the current Brexit impasse with French President Macro unwilling to soften his stance on fishing. (Telegraph)  

Senior officials and ministers in several European governments are said to believe UK PM Johnson is to hold off making a decision regarding a ‘no deal’ Brexit until there is clarity regarding the result of the US Presidential Election, as a Biden administration would likely prioritise improving ties with the EU and could prolong achieving a US-UK trade deal. (Observer)

Irish Deputy PM Varadkar stated that he believes that a Brexit deal will be reached on balance of probabilities. (Newswires)

UK regulators are reportedly mulling plans to permit banks to begin paying out dividends again next year. There were also separate reports that UK banks are turning away mortgage business by raising interest rates on many new home loans amid a struggle to cope with a surge in demand, as homebuyers look to take advantage of the temporary stamp duty holiday that offers a tax saving of up to GBP 15k which expires end-March next year. (The Times/FT)

ECB decision on bank payouts is said to complicated by the worsening pandemic, while reports added that EU regulators formerly in favour of lifting the ban are now more worried and are considering dividend caps as a compromise. (Newswires)

S&P affirmed UK at AA; Outlook Stable and affirmed Greece at BB-; Outlook Stable, while it affirmed Italy at BBB; Outlook revised to Stable from Negative. (Newswires)

FX

In FX markets, the DXY was slightly firmer and edged closer towards the 93.00 level as the currency benefited from the subdued risk appetite but with upside restricted by the continued toing and froing in COVID-19 stimulus talks where a breakthrough remains elusive, although House Speaker Pelosi noted that she is still optimistic and hopes to hear from the administration regarding a possible deal this Monday. EUR/USD retreated below the 1.1850 level with the single currency hampered by the bloc’s worsening COVID-19 situation, with participants also gearing up for this week’s ECB meeting where there are expectations policymakers could pave the way for further stimulus in December. GBP/USD was lacklustre but with downside stemmed as optimism regarding a Brexit deal was stoked after EU Chief Brexit Negotiator Barnier extended his stay in London through to Wednesday although reports noted this was partly due to the high infection rates in Belgium’s capital where discussions had been scheduled for this week. Elsewhere, USD/JPY and JPY crosses traded mixed in reflection of the cautious mood in the region, while antipodeans were pressured by the uninspired risk tone and a weaker CNY reference rate setting but with losses in NZD/USD moderated by AUD/NZD flows and amid the holiday closure in New Zealand.

COMMODITIES

WTI crude futures briefly slipped beneath the USD 39/bbl level, as the deteriorating COVID-19 situation in Europe stoked demand concerns. In addition, last week’s latest Baker Hughes rig count showed an increase in oil rigs and Libya lifted the force majeure on Ras Lanuf and Es Sider ports, although approaching tropical storm Zeta threatens a disruption in Gulf of Mexico which is expected to bring hurricane conditions in Yucatan peninsula later today and has prompted BP to evacuate offshore workers. Elsewhere, gold is marginally lower after failing to stay afloat of the USD 1900/oz level, while copper prices were mildly pressured on the risk averse tone and underperformance in mainland China.

Baker Hughes US Rig Count: Oil +6 at 211, Nat Gas -1 at 73, Total +5 at 287. (Newswires)

NHC said tropical storm Zeta is strengthening and is expected to bring hurricane conditions, as well as a storm surge in parts of the Yucatan peninsula by late Monday. Furthermore, BP (BP/ LN) is evacuating its offshore workers and securing from Gulf of Mexico platforms ahead of tropical storm Zeta. (Newswires)

Many OPEC+ ministers reportedly appeared increasingly open to keeping the current cuts in place, though no final decision has been made and not all members are convinced, according to a report citing delegates. (S&P Global Platts)

Libya lifted the force majeure on Ras Lanuf and Es Sider ports, while it expects production to reach 800,000 BPD within two weeks and surpass 1mln BPD within four weeks, according to the NOC. (Newswires)

UK armed forces conducted an operation onboard the tanker Nave Andromeda in the English Channel in which 7 seven suspects were detained after reports that a number of stowaways made verbal threats towards the crew. (Newswires)

GEOPOLITICS

US President Trump’s administration is planning a pre-election "volley of sanctions" against Iran amid plans to fortify pressure against the country in case there are any future efforts to unwind it, according to sources. (WSJ)

US State Department said the humanitarian ceasefire in Nagorno-Karabakh will take effect at 0800am local time or midnight EDT on October 26th, while OSCE Minsk Group said co-chairs and foreign ministers are to meet again in Geneva on October 29th to discuss the conflict in the Nagorno-Karabakh. However, it was later reported that Armenian army violated the cease-fire by shelling units of the Azerbaijan army in village of Lachin, according to the Azerbaijan Foreign Ministry. (Newswires/Anadolu)

US

Yields were little changed to fractionally lower on Friday, breaking a six-day streak of rising long-end yields. By settlement, 2s unch. at 15.5bps, 10s -0.5bps at 84.3bps, and 30s -0.9bps at 164.9bps; futures volumes were decent. With the weekend ahead, there was likely caution in extending the bear-steepening trend seen as of late, especially given the key differences that remain in current stimulus negotiations. The pause sees the 10-year yield find support at its 200dma (84bps), which it hasn't sat above since 2018, after the 30-year yield firmly broke out above its 200dma (152bps) last week. Looking outwards, the consensus trade in Treasuries is steepeners as the market anticipates stimulus (in one form or another) to catalyse the economic recovery. However, given the approaching election uncertainty, there could be spells of risk-off/haven flows that suppress the rising rate trend, in addition to a consciousness of implicit Fed intervention, where if yields move too far, too fast, participants could begin to expect the Fed to step in with harder QE. This is also the consideration of yields in Europe, which on a pure relative value perspective, serve as headwinds to rising US rates as more investors are likely to rotate across the pond. More immediately, T-note (Z0) futures settled 1 tick higher at 138-11+.

US House Speaker Pelosi said that she is not giving up regarding COVID-19 relief and is still optimistic, while she hopes to hear from the administration regarding a possible deal on Monday and wants an agreement ASAP but would still pursue COVID-19 relief after the election no matter the outcome. Furthermore, Pelosi stated that she will seek another term as House Speaker if Democrats retain control of the House. (Newswires)

US Treasury Secretary Mnuchin said on Friday that if we can get the right stimulus deal, we're going to do that and that there will be a COVID-19 bill if House Speaker Pelosi wants to compromise, although he added that Pelosi has "dug in" and there are still "significant differences". (Newswires)

White House Chief of Staff Meadows said on Friday that they hope to get a COVID-19 deal in a day or so and that they are all hands-on deck to get a stimulus deal. However, there were separate comments from US Republican Senator Shelby that the chances for a stimulus deal are slim. (Newswires)

US Senate voted to limit the debate on Supreme Court Nominee Amy Coney Barrett which paves that way for a confirmation vote on Monday. (Newswires)

US President Trump reportedly plans to immediately remove the heads of the FBI and CIA, as well as Defence Secretary Esper if he wins re-election. (Daily Mail)

A new Axios-SurveyMonkey poll found President Trump's last debate performance surpassed Americans' expectations, although wasn't enough to alter the dynamics which has left him trailing behind Democrat candidate Biden across most measures, while the survey had noted that over 4 in 10 viewed that President Trump did better than expected at the last debate. However, the SurveyMonkey poll also showed President Trump was leading Biden in the states of Texas at 51% vs. 48%, Ohio at 51% vs. 48% and Florida at 49% vs. 48%, while Biden was ahead in Nevada at 50% vs. 49%. (Newswires)

Facebook (FB) is reportedly preparing measures for possible election unrest. (WSJ)