• Asian equity markets lacked firm direction following the mixed performance of stateside peers as earnings season and the upcoming election provided a cautious setting
• US stock index futures were further pressured after-hours on European shutdown concerns after reports stated France and Germany were mulling nationwide lockdowns
• DXY strengthened and broke back above the 93.00 level as the greenback benefitted from the cautious risk tone
• Reports state that Senate Majority Leader McConnell expressed doubts on whether any progress was made on stimulus discussion
• Looking ahead, highlights include BoC & BCB Rate Decisions, BoC Governor Macklem & Wilkins, Fed’s Kaplan, supply from UK, German & US
• Earnings: BASF, Deutsche Bank, ENI, Fiat, Telefonica Deutschland; GlaxoSmithKline; Boeing, General Electric, UPS, Bunge, Mastercard, General Dynamics

CORONAVIRUS UPDATE

US COVID cases +63,589 (prev. +63,195) and deaths +483 (prev. +380), while a major newswire tally stated that US cases rose by at least 74,194 to a total of 8.81mln and deaths rose by at least 976 to a total of 226.8k. New York COVID cases +1,991 (prev. +1,059), positivity rate 1.78% (prev. 1.45%) and deaths +15 (prev. +12), while Texas cases +7,055 which is the largest daily increase in more than 2 months and deaths +81. (Newswires/Twitter) New York Governor Cuomo is said to be seeking to keep 95% of the US out of New York due to COVID-19 after he included California to the list of 39 states that would require quarantines. Elsewhere, Illinois Governor announced to suspend indoor dining in Chicago beginning on Friday. (Newswires)

France COVID cases +33,417 (prev. +26,771) and deaths +523 (prev. +258), while there separate reports that cases in Belgium rose by 13,571 and that COVID-19 hospitalizations in Belgium were expected to surpass the peak of the first wave within 24 hours. (Newswires/Twitter)

France’s Government is envisaging a month-long national lockdown to combat the COVID pandemic which could take effect from midnight on Thursday, while reports added that a new lockdown would be more flexible than prior. This follows prior reports that French President Macron is no longer excluding a total lockdown of the country to fight COVID-19 and is to give a TV address on Wednesday at 2000 local time, while a government spokesperson warned there could be the same number of people in ICU as at the peak of the first wave in 2 weeks. (Newswires/BFM/Le Figaro)

Germany was reportedly discussing a 2-week lockdown in which all venues will be shut aside from essential retail and services, as well as schools, while reports later stated that Germany is seeking to shut down restaurant, bars, pubs and clubs until from November 4th to the end of November, according to a government draft. (Twitter/DPA/Bild)

UK PM Johnson is said to be pressured for a new lockdown as the government assumes a deadlier second wave, with a lower but longer peak expected for COVID-19 deaths. (Telegraph)

UK vaccine task force chair Bingham said the first generation of COVID-19 vaccines will likely be imperfect and that people should be prepared vaccines may not prevent infection but rather lessen symptoms, while she also suggested that vaccines may not work for all people or for long period. (The Lancet)

ASIA

Asian equity markets lacked firm direction following the mixed performance of stateside peers as earnings season and the upcoming election provided a cautious setting, while US stock index futures were further pressured after-hours on European shutdown concerns after reports stated that France and Germany were both mulling nationwide lockdowns. ASX 200 (+0.1%) was indecisive with initial declines due to underperformance in the energy sector amid weaker oil prices and with financials also subdued after ANZ Bank flagged a AUD 528mln hit to earnings, although the losses in the index were eventually pared by ongoing tech resilience. Nikkei 225 (-0.2%) and KOSPI (+0.4%) were varied as participants reflected on quarterly results and with the BoJ kickstarting its 2-day policy meeting where no major fireworks are expected. Hang Seng (Unch.) and Shanghai Comp. (+0.4%) conformed to the choppy price action amid earnings and with Hong Kong resuming the underperformance against the mainland, despite the continued rally in tech heavyweight Tencent which extended on record highs and flirted with the HKD 600 level after it having recently averted a US WeChat ban. Finally, 10yr JGBs mildly extended above the psychological 152.00 level as prices benefitted from the cautious risk tone in Japan and following recent upside in T-notes, but with gains capped as the BoJ began its 2-day policy meeting where the central bank is widely expected to hold off from any policy tweaks.

PBoC injected CNY 120bln via 7-day reverse repos for a net daily injection of CNY 40bln with the rate maintained at 2.20%, while it also announced to conduct a CNY 5bln 3-month central bank bill swap operation today. (Newswires) PBoC set USD/CNY mid-point at 6.7195 vs. Exp. 6.7198 (Prev. 6.6989)

UK/EU

EU Council President Michel said that Brussels is still unsure whether a deal with the UK is possible within the next two weeks, while he also warned that Brexit talks are at the most difficult point. (Guardian/Telegraph)

Senior European Commission official Berrigan said the financial sector should not expect too much from any UK-EU free trade deal and that they are still awaiting replies from the UK before completing assessments of financial market access for the UK. Furthermore, he added that the EU is offering UK a similar model of regulatory cooperation as the EU has with the US and that the EU has assessed that the financial sector is ready for a full Brexit in January even if there is no trade deal. (Newswires)

Italy’s cabinet approved a relief package above EUR 5bln, according to an official. Furthermore, Italian PM Conte later confirmed the Cabinet approved a new stimulus package to help COVID hit businesses. (Newswires)

UK BRC Shop Price Index (Oct) Y/Y -1.2% (Prev. -1.6%). (Newswires)

FX

DXY strengthened and broke back above the 93.00 level as the greenback benefitted from the cautious risk tone and weakness in its major counterpart EUR/USD which slipped below the 1.1800 handle due to COVID-19 shutdown concerns. This follows reports that France was contemplating a month-long national lockdown to combat the pandemic which could take effect from midnight on Thursday, while other reports noted Germany was discussing a 2-week lockdown whereby everything could be shut aside from essential retail and services, as well as schools. GBP/USD hovers around 1.3050 after having reversed yesterday’s strength amid some pessimistic comments from EU Council President Michel who stated that Brussels is still unsure whether a deal with the UK is possible within the next two weeks and warned that Brexit talks are at the most difficult point. USD/JPY and JPY-crosses were pressured by the risk aversion in Japan, while antipodeans remained afloat after the latest Australian CPI figures printed either inline or firmer than expected which eventually pushed AUD/USD above 0.7150, although its outperformance was gradual given that all components of the data remained well below the RBA’s 2%-3% target and following comments from RBA board member Harper that the central bank has scope to ramp up bond purchases indefinitely and does not lack firepower. Elsewhere, the PBoC set a weaker CNY reference rate which was not much of a surprise given that it recently asked banks to neutralize the counter-cyclical factor in the CNY mid-point fixing formula, which was viewed as a signal the central bank was comfortable in allowing some depreciation of the currency.

RBA board member Harper said the RBA has scope to ramp up bond purchases indefinitely and does not lack firepower. Harper added that negative rates would result to cash hoarding, while he also noted the central bank has scope for further easing and that the economy is well placed for a strong recovery. (Newswires)

Australian CPI (Q3) Q/Q 1.6% vs. Exp. 1.5% (Prev. -1.9%). (Newswires) Australian CPI (Q3) Y/Y 0.7% vs. Exp. 0.7% (Prev. -0.3%) Australian RBA Trimmed Mean CPI (Q3) Q/Q 0.4% vs. Exp. 0.3% (Prev. -0.1%) Australian RBA Trimmed Mean CPI (Q3) Y/Y 1.2% vs. Exp. 1.1% (Prev. 1.2%)

COMMODITIES

Commodities were mostly lacklustre overnight amid the mixed risk tone with underperformance in WTI crude futures following a bearish private inventory report which showed a larger than expected build in headline crude stockpiles to push drag oil futures to below USD 39.00/bbl. Conversely, output disruptions in the Gulf of Mexico from adverse weather continues to widen with Zeta expected to strengthen again and BSEE estimating oil production shut-ins for the region have increased to 49% from 16%. Gold prices consolidated with price action contained by a slightly firmer greenback, although the precious metal has retained the psychological USD 1900/oz status, while copper prices were uninspired amid the ongoing broad cautious risk tone. 

US Private Energy Inventories (w/e October 23rd): Crude +4.58mln (exp. +1.2mln). (Newswires)

BSEE estimated Gulf of Mexico Production shut in due to Zeta at 49% of oil (prev. 16% yesterday) and 55% of NatGas (prev. 6%). (BSEE)

NHC said Zeta is expected to strengthen and bring hurricane conditions and dangerous storm surge to parts of the northern Gulf Coast on Wednesday, while it later added that Zeta is forecast to be a fast-moving hurricane that will bring a life-threatening storm surge and strong winds beginning in south-eastern Louisiana from midday on Wednesday. (Newswires) 

US

Yields continued to move lower on Tuesday amid stimulus uncertainty, mixed data, and steepener unwinding as month-end and haven flows come into the fray ahead of the election next week. By settlement, 2s unch. At 14.9bps, 10s -2.5bps at 77.8bps, and 30s -2.3bps at 157.1bps; T-Note futures volumes were below recent averages. Real money accounts were said to be behind the bid for duration today, gaining traction on the back of the disappointing Consumer Confidence reading, which triggered a wave of algo buy programmes in the T-Note as the 10-year cash yield broke beneath the 78bps resistance level. Furthermore, as we enter the last few trading sessions of the month, rebalancing/duration extension flows are likely at play; 0.1yr of UST duration extension is expected (vs 1-year avg of 0.09yr). Supply concerns were seemingly not a concern today as more corporates continue to raise debt post Q3 reports. Similarly, the 2-year note auction was rather disappointing – tailing by 0.1bps, weak cover ratio and high dealer participation – although that did not buck today’s Treasury strength, coming ahead of the 5s and 7s auctions later this week. In fact, newswires noted that post the 2-year auction there was some noticeable block buyers from hedge fund types lifting duration futures. Wider market sentiment will likely take its cues from key earnings this week, with Microsoft reporting later on Tuesday, ahead of FB, AAPL, AMZN, GOOG on Thursday. T-note (Z0) futures settled 6+ ticks higher at 138-27.

US President Trump is reportedly considering issuing an executive order mandating an economic analysis of fracking aimed at highlighting his support for the energy industry, according to reports citing senior administration officials. (WSJ)

US President Trump issued a proclamation reinstating exclusion for Canada from tariffs on aluminium imports as previously announced but will reconsider if there is a surge in imports of non-alloyed unwrought aluminium from Canada. (Newswires)

US House Speaker Pelosi said Democrats are continuing to work on regarding COVID-19 relief legislation, although there were separate reports that Senate Majority Leader McConnell expressed doubts on whether any progress was made on stimulus discussions. (Newswires/Politico)

Reuters/Ipsos Michigan poll showed Biden ahead of Trump at 52% vs. 43% (prev. 51% vs. 44%) and North Carolina poll showed Biden ahead of Trump at 49% vs. 48% (prev. 49% vs. 46%). (Newswires)

US early voting reportedly topped 70mln and is more than half of the 2016 turnout. (Newswires)