• European indices are posting substantial losses, Stoxx 50 -2.5%, but off lows of some -3.5% earlier in the session; stateside, ES -1.3%
• Concern around COVID-19 has intensified with France & Germany reportedly to implement lockdown restrictions imminently
• US House Speaker Pelosi said Democrats are continuing to work on regarding COVID-19 relief legislation
• Crude is pressured on general sentiment and demand-side concerns with Zeta re-intensifying to a Hurricane unable to offset this
• FX features a resurgent USD given general sentiment deteriorating to the detriment of FX peers
• Looking ahead highlights include BoC & BCB Rate Decisions, BoC Governor Macklem & Wilkins, Fed’s Kaplan, supply from the US
• Earnings: Boeing, Mastercard, General Dynamics

CORONAVIRUS UPDATE

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)

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 (-0.3%) and KOSPI (+0.6%) 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 (-0.3%) and Shanghai Comp. (+0.5%) 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)

China's Foreign Ministry spokesperson says communication between China & India is unimpeded and negotiations are being handled in the proper way, Global Times. (Twitter)

US

US House Speaker Pelosi said Democrats are continuing to work on regarding COVID-19 relief legislation. (Newswires)

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

UK/EU

UK Chancellor Sunak says he will be delivering a spending review on November 25th. (Newswires)

BoE proposes a 1-year delay in the requirement for banks to publish their assessment of how they could be wound-up in a crisis. (Newswires)

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

GEOPOLITICAL

Turkish President Erdogan says they have the legitimate right to act if militants on its border with Syria are not cleared. (Newswires)

EQUITIES

European equities (Eurostoxx 50 -2.5%) trade with heavy losses as the prospect of further lockdown restrictions in the Europe triggers investor concern over the region’s recovery prospects. In Germany, the DAX (-2.7%) is enduring significant downside amid reports that German Chancellor Merkel is pushing for tougher restrictions which would see the closure of restaurants and bars and limit people’s movements until the end of November. Losses for the index have also been exacerbated by Beiersdorf (-6.2%) and BASF (-4.0%) post-earnings with the former unable to reassure investors despite posting an encouraging performance in Q3. Delivery Hero (+4.4%) are the only gainer in the DAX after Q3 orders reached a new record, with the Co. also likely to benefit from any restrictions that limit seated restaurant bookings. CAC 40 (-2.7%) is also lagging its peers amid reports that the French government may impose a month-long national lockdown to combat the COVID pandemic which could take effect from midnight on Thursday. From a sectoral standpoint, losses are hitting some of the more cyclically exposed sectors hardest with laggards comprising of autos, banking and oil & gas names. Of note for the banking sector, Deutsche Bank (+1.9%) have seen shallower losses than peers after posting a Q3 profit of EUR 128mln (vs. a prior Y/Y loss of EUR 942mln) amid strong performance in its investment banking division with the Co. also upgrading its FY20 revenue outlook. Elsewhere for the industry, Danske Bank (-1.1%) raised its FY20 net profit outlook alongside Q3 earnings with the Co. citing more favourable market conditions. In what has been a particularly downbeat session thus far, bucking the trend are the likes of Next (+4.4%), Carlsberg (+1.6%) and Morphosys (+0.8%) post-earnings.

Anthem Inc (ANTM) Q3 20 (USD): EPS 4.20 (exp. 4.15), Revenue 30.6bln (exp. 29.81bln)

BASF (BASF GY) – Q3 revenue EUR 13.8bln vs. Exp. EUR 13.3bln, adj. EBIT EUR 0.581bln vs. Exp. EUR 0.524bln, net income EUR -2.1bln vs. Prelim EUR -2.1bln. Confirm FY20 revenue & adj. EBIT guidance, see no material new/increased risks given the crisis; Q4 EBIT guided to a further improvement. (Newswires)

Deutsche Bank (DBK GY) – Q3: revenue EUR 5.9bln vs. Exp. EUR 5.6bln, FIC sales & trading revenue EUR 1.8bln, credit loss provision EUR 273mln. Reaffirmed FY guidance for FY credit loss provision, investment banking revenue to be significantly higher for FY20. On target to meet all aims of the transformation plan. Revenue expectation are now marginally higher vs. Prev. outlook. (Newswires)

General Electric Co (GE) Q3 20 (USD): EPS 0.06 (exp. -0.04), Revenue 19.4bln (exp. 18.73bln)

United Parcel Service Inc (UPS) Q3 20 (USD): EPS 2.28 (exp. 1.90), Revenue 21.2bln (exp. 20.18bln)

FX

DXY/JPY - The Buck has reclaimed its safe-haven mantle and is firmer vs all G10 peers, bar the Yen amidst a severe downturn in risk sentiment on heightened concerns about the exponential 2nd coming of COVID-19 that is threatening to shutdown several European economies, while forcing others to reimpose stricter measures to combat the pandemic. The index has duly rebounded above 93.000 after an agonisingly close test of Monday’s low yesterday, and has registered a fresh w-t-d peak at 93.401 to expose half round number resistance at 93.500 that is arguably only being protected by the fact that Usd/Jpy has retreated further from recent highs and further towards 104.00.

AUD - Aside from the generally deteriorating tone, fractionally firmer than forecast q/q inflation in Q3 has partly countered more dovish overtones from the RBA to keep the Aussie afloat on the 0.7100 handle, albeit some distance from 0.7150+ highs due to headwinds from weaker PBoC midpoint Cny fix without the counter-cyclical quotient (6.7195 vs 6.6989 previously).

GBP/NZD/CAD/EUR/CHF - Sterling has finally succumbed to what seemed like the inevitable as clearly substantial support and bids around the 1.3000 mark in Cable has yielded to a breach of DMAs sitting on top of 1.2990 stops that have now been triggered to a circa 1.2964 trough. Similarly, the Kiwi has relinquished 0.6700+ status vs its US counterpart, while running into offers in Aud/Nzd ahead of 1.0600 and the Loonie has lost underlying support from crude prices as the clock ticks down to the BoC, as Usd/Cad rebounds from around 1.3178 to 1.3240. Elsewhere, the Euro is sub-1.1750 as the coronavirus cases mount, but could yet be drawn back to decent option expiry interest between 1.1750-60 (1 bn) and the Franc has fallen beneath 0.9100 following a near miss on Tuesday.

SCANDI/EM – No shock that the Nok is also tracking the reversal in oil and unwinding outperformance vs the Eur from 10.8000+ at best this week so far to under 10.9000 again, but the Sek has gleaned some encouragement from relatively upbeat Swedish retail sales, in contrast to Norway’s much weaker than expected consumption, plus improvements in consumer and industrial sentiment, with Eur/Sek holding below 10.3500 and well away from very large expiries at 10.4000 (2.2 bn). Conversely, not even a rise in Turkish economic confidence to compliment an upturn in consumer morale or the CBRT flagging a V-shaped GDP rebound in Q3 have rescued the Try from more pronounced depreciation as President Erdogan sticks to a tough line on defending its border with Syria. Hence, the Lira continues to sink and is now eyeing 8.3000 vs 8.2920 at worst, so far.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1750-60 (1BLN), 1.1780-85 (700M), 1.1800-05 (1.8BLN), 1.1830 (554M), 1.1850 (319M), 1.1865-75 (800M), 1.1900 (1BLN)

-        USD/JPY: 104.25 (345M), 104.50 (822M), 104.70-80 (760M), 104.85-90 (1.4BLN), 105.00 (1.5BLN), 105.10-15 (500M), 105.25-30 (1.2BLN)

-        EUR/SEK: 10.3600 (739M), 10.4000 (2.2BLN)

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%)

CBRT Quarterly Inflation Report: Q3 economic activity recorded a v-shaped recovery. (Newswires) Link to full release

FIXED INCOME

No big surprise to see voracious appetite for DMO supply at the current extremely risk averse juncture, even though there are clear issuance implications to factor in given the sheer amount of fiscal support being rolled out to combat the effects of COVID-19. However, 2030 Bunds only enticed enough buyers to keep the b/c at 1.4 with the aid of a bigger retention and perhaps less attractive as a 15 year bond vs the UK’s 10 year tap. Nevertheless, for now it’s a case of buy now and pay later in debt futures it seems, as the 10 year benchmarks climb to fresh intraday highs at 136.31 on Liffe, 176.39 on Eurex and 139-02 in overnight electronic trade. Meanwhile, EU stock indices and equity futures are trying to lick wounds ahead of the US open and pm agenda amidst growing concerns about the worrying spread of the pandemic.

COMMODITIES

WTI and Brent front-month futures succumbed to the early pressure in sentiment around the European equity cash open (see equity section); fresh fundamental drivers were lacking but the move was seemingly driven by intensifying COVID-19 concerns with various areas considering/to implement lockdowns. Alongside having a broad sentiment effect such newsflow would have directly impacted crude prices given the demand-side implications that further lockdowns would likely entail. At present, WTI and Brent Dec’20 & Jan’21 respectively are posting losses in excess of 3% and are in proximity to session lows with Hurricane Zeta unable to offset the decline via its supply-side implications; particularly as a number of rigs have indicated they will continue operations through the storm. The most recent BSEE update showed just shy of 50% of oil production shut-in for the Gulf of Mexico, with the survey encapsulating a much more representative 38 companies compared to the 7 in the initial report for Hurricane/Strom Zeta. Data wise, the private inventories showed a build of 4.58mln last night and expectations for today’s EIA’s are for a slightly more modest build of 1.23mln. Moving to metals, spot gold is subdued this morning in-spite of the risk tone as the metal succumbs to pressure from the DXY which has continued to print highs throughout the morning; at present, spot gold is in proximity to the USD 1900/oz mark.

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

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 and is once again at a Hurricane classification that will bring a life-threatening storm surge and strong winds beginning in south-eastern Louisiana from midday on Wednesday. (Newswires)