• European bourses are subdued this morning, Stoxx 50 -0.5%, as selling pressure resumed post-cash open; stateside, ES +0.3%
• European Banks are bolstered after earnings from HSBC & Santander with oil & gas performing well post-BP and as Hurricane Zeta is set to re-strengthen
• FX features a mixed USD but the DXY is still firm above the 93.00 mark with JPY seemingly exerting pressure on the index as sentiment slips; other peers are relatively contained vs. USD
• Germany Economy Minister says that the number of new infections in the nation are rising exponentially and will likely have 20k daily new infections by the end of the week
• US Senate voted 52 vs. 48 to confirm Judge Amy Coney Barrett's nomination to the Supreme Court
• Looking ahead highlights include US Durable Goods, Consumer Confidence, BoE’s Haldane, ECB’s Centeno, supply from the US

CORONAVIRUS UPDATE

Eli Lilly (LLY) said it will end its COVID-19 antibody clinical trials for patients in a hospital setting after NIH researchers found that BAMLANIVIMAB was unlikely to help hospitalized patients recover from advanced stages of the virus, although Eli Lilly noted that all other studies related to its treatment are ongoing. (Newswires)

France’s government is reportedly mulling a full lockdown for Paris, Lyon and Marseille metro areas which includes 7pm curfew, a public transport shutdown and closing non-essential shops, while reports noted that a three-week lockdown could start from Friday evening with the details to be announced on Wednesday. (Newswires/Bild)

Germany Economy Minister says that the number of new infections in the nation are rising exponentially and will likely have 20k daily new infections by the end of the week. (Newswires)

Imperial College London/Ipsos MORI study among 365k randomly selected adults which conducted tests at home, showed that 4.4% had antibodies in September vs. 6.0% in June which suggested the antibody immunity may not last over time in some of those that were infected. (Newswires)

Russia is to impose new COVID-19 restrictions, Ria. (Ria)

ASIA

Asian equity markets resumed the weak performance seen across global peers amid the ongoing risk-averse themes including the worsening COVID-19 pandemic, tougher lockdown restrictions in Europe and the continued US stimulus stalemate which culminated in Wall St’s worst day in more than a month. ASX 200 (-1.7%) and Nikkei 225 (-0.1%) were lower with the Australian benchmark the underperformer amid losses across all sectors and the declines led by energy as the COVID-19 situation did no favours for the demand outlook, while sentiment in Tokyo was also lacklustre but with downside limited by a relatively stable currency and the KOSPI (-0.9%) briefly nursed opening losses after better than expected GDP data and stronger revenue from Kia Motors which drove shares in the automaker higher by nearly double-digits. Hang Seng (-0.9%) and Shanghai Comp. (Unch.) were both lacklustre after data showed Industrial Profit growth in September moderated to 10.1% from 19.1% and due to lingering US-China tensions after the US government approved potential USD 2.4bln in arms sale to Taiwan despite an earlier announcement by China's Foreign Ministry to impose sanctions on US entities that partake in arms sales to Taiwan, although there were some bright spots with HSBC shares rallying around 5% on return from the lunch break following better than expected Q3 results and with Tencent also buoyed after US Appeals Court rejected an attempt by the Justice Department to impose an immediate ban on WeChat. Finally, 10yr JGBs traded higher as prices conformed to the mild upside seen in T-notes and with demand also spurred by the risk aversion, although gains were capped by the 2 year auction results which were marginally weaker than prior.

PBoC injected CNY 100bln via 7-day reverse repos at a rate of 2.2% for a net injection of CNY 30bln. (Newswires) PBoC set USD/CNY mid-point at 6.6989 vs. Exp. 6.7005 (Prev. 6.6725)

Chinese Industrial Profits (Sep) Y/Y 10.1% (Prev. 19.1%) Chinese Industrial Profits YTD (Sep) Y/Y -2.4% (Prev. -4.4%)

US government approved a potential USD 2.37bln of arms sales to Taiwan. In other news, the US Appeals Court rejected the DoJ bid to impose an immediate ban on Tencent’s WeChat. (Newswires)

China's NDRC and other departments are to boost support for private enterprises including increased efforts to lower corporate costs for private enterprises, as well as strengthening support for scientific and tech innovation. (Xinhua)

China's Global Times tweeted that a merger between the main board and small- and medium-sized boards of the Shenzhen Stock Exchange has already been on the agenda, citing comments from the CSRC. (Twitter)

PBoC has asked banks to neutralise its counter-cyclical factor in its CNY midpoint fixing formula, according to sources; adjustments have been requested in order to better reflect exchange rate flexibility and ensure the currency becomes more market-driven, according sources. (Newswires)

Hong Kong Chief Executive Carrie Lam will visit Beijing next week and is seeking to conduct a 3-day visit to discuss plans to revive the economy, while she added there is no condition for major easing of social distancing. However, reports later noted Hong Kong is to permit 6 people at a table in restaurants and 4 people at a table in bars. (Newswires)

South Korea GDP (Q3 A) Q/Q 1.9% vs. Exp. 1.7% (Prev. -3.2%). (Newswires) South Korea GDP (Q3 A) Y/Y -1.3% vs. Exp. -1.9% (Prev. -2.7%)

US

US Senate voted 52 vs. 48 to confirm Judge Amy Coney Barrett's nomination to the Supreme Court and she was later sworn in at a White House ceremony, while the Senate was adjourned until November 9th. (Newswires)

UK/EU

EU Money-M3 Annual Grwth* (Sep) 10.4% vs. Exp. 9.6% (Prev. 9.5%); Loans to Non-Fin (Sep) 7.1% (Prev. 7.1%)

-        Loans to Households (Sep) 3.1% (Prev. 3.0%)

UK PM Johnson is facing a rebellion from over 50 "red wall" Conservative MPs who are demanding a clear route out of lockdown and a post-COVID economic recovery plan. (Sky News) 

EQUITIES

Ahead of the cash open, index futures indicated a positive open in Europe with the DAX Dec’20 contract at one stage showing gains of 0.7% in what was initially a paring of yesterday’s heavy losses. However, as cash products opened, indices faced a bout of selling pressure with the DAX Dec’20 contract now lower by 0.5%; Eurostoxx 50 cash is down -0.6% - notably, both are off session lows. In terms of fundamental drivers, downbeat sentiment from yesterday has been carried over into today’s session as the spread of COVID across the region saps investor risk appetite. One of the more concerning updates this morning has comes from Germany with the economy minister warning that the number of new infections in the nation are rising exponentially and will likely have 20k daily new infections by the end of the week (on October 24th it posted 14.7k new infections). From a sectoral standpoint, banking names have bucked the downbeat trend this morning with HSBC (+6.6%) one of the Stoxx 600’s best performers following Q3 earnings. HSBC exceeded expectations for revenues, net income and adj. pretax profits, whilst noting that it will reduce 2022 costs by more than the initially targeted USD 31bln. Santander (+3.6%) are also firmer on the session and providing support to peripheral banks after the Co. reported a marked improvement in Q3 earnings, compared to Q2 and noted a 14% decline in quarterly provisions. Other large cap earnings include BP (+1.6%), who trade firmer on the session after reporting an unexpected Q3 profit of USD 86mln with results underpinned by a lack of significant write-offs and a recovery in the broader oil & gas environment. Despite opening higher, Novartis (-1.3%) have drifted lower throughout the session in the wake of Q3 earnings, which saw revenues miss analyst estimates

BP (BP/ LN) – Q3: revenue USD 44.2bln vs. Exp. USD 50.9bln, adj. net USD 86mln vs. Exp. USD -116.89mln, dividend of USD 0.0525/shr vs. Prev. USD 0.0525/shr, profit attributable to shareholders USD -450mln vs. Prev. USD -749mln. USD 5bln petrochemical sale is expected to conclude by year-end. Q4 production seen slightly lower than Q3 given maintenance activities. Thus far, no significant operational impact of COVID-19 on global operations. (Newswires)

HSBC (HSBA LN) – Q3 revenue USD 12.1bln vs. Exp. USD 11.8bln, net income USD 2.0bln vs. Exp. USD 1.6bln, adj. pretax USD 4.3bln vs. Exp. USD 2.8bln. CET1 ratio 15.6% vs. prev. 14.3%. Any potential dividend for 2020 would be contingent on the economy outlook in early-2021 and the board will be considering the payment of a conservative dividend based on FY20 results and FY21 outlook. Anticipate reducing 2022 annual costs by more than the initially targeted USD 31bln. Will be looking to increase the investment rate in Asia. CFO remarks: focus is on cost savings and not job cuts, will be targeting both US & global banking markets. (Newswires)

Novartis (NOVN SW) – Q3 revenue USD 12.259bln vs. Exp. USD 12.57bln, core EPS USD 1.52 vs. Prev. USD 1.41, net result USD 1.932bln; Sandoz USD 2.4bln vs. Exp. USD 2.49bln. FY20 outlook: net sales expected to grow mid-single digit and core operating income upgraded to low double-digit to mid-teens. (Newswires)

Santander (SAN SM) – Q3 net interest income EUR 7.77bln vs. Exp. EUR 7.66bln, net profit EUR 1.75bln vs. Exp. EUR 1.0bln, revenue EUR 11.1bln vs. Prev. EUR 10.5bln. Fully-loaded core Tier 1 capital ratio 15.59%. Confident cash dividends can resume when regulator conditions allow for this; seeking shareholder approval for a EUR 0.10/shr payment in 2021 once regulators allow. Q3 provisions dropped by 14% ex-FX impact. FY21: initial revenue guided trend positive. (Newswires)

FX

USD – Although the Dollar is somewhat mixed vs major counterparts, the DXY looks firmly anchored around 93.000 and eclipsed Monday’s high amidst underlying safe-haven demand when EU stocks lost their initial/early recovery momentum due to ongoing COVID contagion, exacerbated by Germany’s Economy Minister warning of the pandemic’s exponential resurgence that may see the daily rate of new cases reach 20k by the end of this week. The index has stalled at 99.137 for now with some technical resistance in the form of a double top around 93.100 perhaps weighing, but the latest pull-back was relatively shallow, at 92.875 vs 92.784 yesterday and last week’s 92.469 base.

CAD/NZD – Both bucking the overall trend, as the Loonie rebounds from sub-1.3200 alongside a partial/mild bounce in crude prices and the clock ticks down to Wednesday’s BoC policy meeting. Meanwhile, crosswinds continue to keep the Kiwi afloat close to 0.6700 and 1.0650 vs its US and Aussie rivals in wake of broadly in line NZ trade data.

JPY/AUD/EUR/CHF/GBP – All rangebound against the Greenback and within familiar confines, with the Yen meandering between 104.90-67 and well inside decent option expiries at 104.25 (1 bn) and the 105.00 strike (1.8 bn). Back down under, the Aussie remains comfortably above 0.7100 ahead of Q3 CPI overnight and in wake of supportive comments from RBA Assistant Governor Debelle seeing signs of growth in Q3. Conversely, the Euro, Franc and Sterling seem more precarious near round numbers (1.1800, 0.9100 and 1.3000 respectively) as the coronavirus spreads and the former eyes 1.2 bn expiry interest in close proximity (1.2 bn from 1.1800 to 1.1805), while the Pound awaits Brexit developments.

SCANDI/EM – Not much sign of a positive reaction to Sweden turning a trade deficit around in September to show a wider surplus, as Eur/Sek pivots 10.3300, but the modestly firmer tone in oil is capping Eur/Nok around 10.9000 and well off recent 11.0000+ peaks. Elsewhere, the Yuan has found some support beneath 6.7100 vs the Dollar after a firmer than forecast PBoC midpoint fix and hardly responding to the request made for banks to neutralise the counter-cyclical factor in the formula, but the Lira’s travails rumble on as fresh all time lows are hit below 8.1600.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1800-05 (1.2BLN), 1.1850 (470M)

-        USD/JPY: 104.25 (1BLN), 105.00 (1.8BLN), 105.10 (380M), 105.25 (1.1BLN)

RBA Deputy Governor Debelle said unemployment goal below 6% is reasonable and that it looks like there was positive GDP growth for Q3. Furthermore, he added that the drag from Victoria was little less than feared and not enough to pull down GDP overall, while he refused to comment regarding the chance of QE at the meeting next week. (Newswires)

New Zealand Trade Balance (NZD)(Sep) -1017M vs. Exp. -1013M (Prev. -353.0M, Rev. -282M). (Newswires) New Zealand Exports (Sep) 4.01B vs. Exp. 4.00B (Prev. 4.41B) New Zealand Imports (Sep) 5.02B vs. Exp. 5.02B (Prev. 4.76B, Rev. 4.69B)

FIXED INCOME

It’s been much more measured and not without the odd hiccup, but Bunds continue to lead the recovery and just carved out a minor Eurex high at 175.56 vs 175.27 at worst for a 26 tick gain on the day, while Gilts are hovering a few ticks above par and off the 135.51 Liffe peak following a respectable 2024 auction. Meanwhile, US Treasuries are essentially flat within tight overnight session ranges awaiting durable goods that are notoriously volatile before consumer confidence and the first of this week’s supply remit comprising Usd 52 bn 2 year notes, but more importantly looking for leads from Wall Street after Monday’s rout.

COMMODITIES

WTI and Brent front month futures are holding in positive territory of around USD 0.30/bbl as the session stands in-spite of the deterioration in risk-sentiment post the European cash equity open. The current relative resilience is largely a factor of Hurricane Zeta which as of yesterday had shuttered around 16% of Gulf of Mexico oil production and 6% of gas output. The BSEE will provide another update later in the session at 18:00GMT/14:00ET which could well see further impact as the NHC believes the storm will re-strengthen as it progress to the Northern side of the Gulf prior to making landfall. Additionally, it’s worth highlighting that yesterday’s BSEE survey only focused on 7 companies in the Gulf compared to the survey’s sample contained in excess of 20 companies during Hurricane Delta earlier in the month. Elsewhere, post-earnings this morning BP noted that the Hurricane has shut down 20/30k BPD of its oil & gas production thus far. Storm updates aside, the sessions scheduled focus point explicitly for crude is the private inventory release which is expected to show a build of around 1.1mln barrels for the prior week as the effect of Delta diminishes but Zeta is yet to be included in the survey period. Moving to metals, spot gold has come under pressure this morning as while the metal isn’t currently suffering from USD strength as the DXY has dropped into negative territory it has failed to benefit from traditional safe-haven demand with silver & JPY seemingly receiving some of this allure.

NHC announced Zeta strengthened into a hurricane which is expected to bring hurricane conditions and a dangerous storm surge in parts of the Yucatan peninsula, while hurricane and storm surge watches were issued for the northern Gulf Coast. (Newswires)

BP (BP/ LN) - Hurricane Zeta has shut down ~20/30k BPD of Co's oil & gas production, according to the CFO. (Newswires)