• European bourses are bolstered this morning, shrugging off initial COVID-19 tentativeness
• Additionally, Chinese official manufacturing & non-manufacturing and Caixin manufacturing PMIs all exceeded expectations
• Reports noted that UK & EU Brexit negotiators were zeroing in on a solution to break the deadlock on fishing access
• UK PM Johnson announced a 1-month lockdown across England from November 5th through to December 2nd
• Monmouth poll shows Biden's lead in Pennsylvania narrows to +7ppts from +11ppts while a Fox national poll saw Biden’s lead decline to 8pp vs. Prev. 10pp
• FX features a modestly downbeat USD as sentiment continues to grind higher with peers mixed/rangebound; UST yield curve is steepening
• Looking ahead highlights include US ISM Manufacturing, ECB’s Rehn & Mersch

CORONAVIRUS UPDATE

US COVID-19 cases +80,392 (prev. +86,900) and deaths +823 (prev. +909), while a major newswire tally stated US cases rose by at least 68,708 to a total of 9.24mln and deaths rose by at least 377 to a total of 231.1k. (Newswires)

New York Governor Cuomo said New York is setting protocols to permit children in virus hot zones to attend school in which the protocol for cluster schools would require testing and children would need to test negative to return to school, while it was separately reported that San Francisco is to temporarily pause reopening amid a rise in cases. (Newswires)

UK COVID-19 cases +23,254 (prev. +21,915) and deaths +162 (prev. +326), while France COVID-19 cases +46,290 (prev. +35,641) and deaths +231 (prev. +224). (Newswires)

UK PM Johnson announced a 1-month lockdown across England from November 5th through to December 2nd which will include people staying at home, closing pubs, restaurants and non-essential shops, as well as restricting household visits, although schools and universities are expected to stay open. The plans are to be set out in Parliament on Monday with a debate and vote on Wednesday, while PM Johnson also stated the furlough will be extended during the national measures and that we will revert to the existing 3-tier system after lockdown. Furthermore, PM Johnson stated there is no alternative to a lockdown in England with science showing deaths could be double the first wave if no action is taken and he added they will seek to ease restrictions after December 2nd. (Newswires)

UK lockdown is set to face fierce opposition from a potential Tory rebellion, although there were separate reports that the opposition Labour party will support the government’s lockdown. In related news, Cabinet Minister Gove suggested that the national lockdown could be extended if necessary and some ministers also warned the lockdown in England could last until next year, while other reports noted there was a strong feeling that Gove’s comments overstepped what the Cabinet had agreed on Saturday. (Newswires/The Times/Sky News)

Austria Chancellor Kurz announced to impose a 2nd lockdown beginning November 3rd which includes an evening curfew and closing restaurants aside from takeaway service, while hotels will be closed to all apart from business travellers. Furthermore, shops and industry will stay open and businesses that shut will get support equivalent to 80% of their turnover. (Newswires)

Portugal announced new lockdown restrictions from November 4th for most of the country, with people told to stay at home except for going to work, school or shopping and it ordered companies to switch to remote working. (Newswires)

Italy PM Conte said they have not yet decided whether to impose further restrictions to tackle the renewed spread of the virus, while he added that expecting distribution of a vaccine before spring is unrealistic. This followed reports Italy’s government may move to impose measures over the weekend on cities suffering the most from the pandemic. (BBG)

Greece PM announced new measures to curb the spread of the virus with masks to be compulsory nationwide everywhere and EUR 1.5bln in support measures. (Newswires)

A fully-at-home rapid COVID-19 test is to move forward following encouraging data from Cellex and Gauss. (Axios)

ASIA

Asian equity markets traded with cautious gains and US stock index futures were choppy amid tentativeness moving into a risk-packed week with the US election, major central bank meetings & NFP data all scheduled, while participants also digested new lockdown announcements and stronger than expected Chinese PMI data. ASX 200 (+0.4%) was kept afloat amid expectations of further policy easing by the RBA at tomorrow’s meeting but with gains capped by oil sector losses and indecision in financials, as a continued surge in AMP shares after it confirmed the value of the Ares proposal, was partially counterbalanced by losses in Westpac due to a 62% decline in full-year profit. Nikkei 225 (+1.4%) was underpinned as focus centred on earnings and with the index benefitting from the tailwinds provided by the constructive Chinese data. Elsewhere, Hang Seng (+1.5%) and Shanghai Comp. (U/C) were varied after the recent blue-chip earnings including mostly weaker results from China’s big 4 banks although the PMI data was more encouraging in which the official Manufacturing and Non-Manufacturing PMI data topped estimates, while Chinese Caixin Manufacturing PMI also exceeded expectations to print its highest since January 2011. Finally, 10yr JGBs were steady to provide some reprieve from Friday’s selling pressure and breakdown of the 152.00 support level, although the rebound was limited by the tentative gains in stocks and somewhat inconclusive purchase intentions by the BoJ for November in which it raised the amounts of 1yr-3yr and 3yr-5yr purchases but also reduced the frequency of those purchases to 5 from 6 occasions during the month.

PBoC injected CNY 50bln via 7-day reverse repos at a rate of 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.7050 vs. Exp. 6.7086 (Prev. 6.7232)

Chinese Manufacturing PMI (Oct) 51.4 vs. Exp. 51.3 (Prev. 51.5) Chinese Non-Manufacturing PMI (Oct) 56.2 vs. Exp. 56.0 (Prev. 55.9) Chinese Composite PMI (Oct) 55.3 (Prev. 55.1) Chinese Caixin Manufacturing PMI (Oct) 53.6 vs. Exp. 53.0 (Prev. 53.0); highest since January 2011.

China’s yuan-denominated assets reportedly receives a fresh catalyst this month from some policy measures to give foreign stock and bond managers increased access to China’s capital markets, with the PBoC streamlining procedure for inbound investment and allowing access to a wider range of assets including OTC stocks, financial and commodity futures, as well as hedge funds. (SCMP)

China is making it a priority to avoid confrontation and military conflict with Washington amid increasing turbulence expected between now and the US Presidential Election winner’s inauguration on January 20th. (SCMP)

Huawei is developing plans to set up a dedicated chip facility in Shanghai that will not use US technology and would enable it to secure supplies for its core telecom infrastructure business. (FT)

US federal judge blocked the US Commerce Department order that would have barred key transactions with TikTok set to take effect on November 12th, while the Commerce Department released a statement that it will vigorously defend executive order seeking to ban the transactions with TikTok. (Newswires)

China’s customs is reportedly delaying imports of certain lobster from Australia with officials increasing their inspections on Australian lobster, while it was separately reported that China was said to have rejected the appeal from Australia to remove the tariffs on barley. Additionally, China is likely to ban Australian copper ore, copper concentrates as well as sugar later this week, according to multiple Chinese sources cited by SCMP (Newswires/SCMP)

US

US President Trump reportedly plans to declare victory on Tuesday night if it looks like he's "ahead" even if the Electoral College result still hinges on a large number of uncounted votes, according to sources. (Axios) These reports were later refuted by President Trump

US Democrat Presidential candidate Biden's policy director Feldman, said that if elected, Biden would provide two relief packages with a short term package before inauguration that delivers "relief to working families" and a long-term one to build back the economy. (Axios)

Fox News national poll showed Democrat Presidential candidate Biden was ahead of President Trump by 8 points at 52% vs. 44% (Prev. 10-point lead at 53% vs. 43%). In related news, WSJ/NBC poll found that Biden was ahead of President Trump at 52% vs. 42% among voters nationally, while it showed President Trump faces substantial public anxiety over the coronavirus pandemic but has broad approval of his management of the economy. (Fox News/WSJ)

Monmouth poll shows Biden's lead in Pennsylvania narrows to +7ppts from +11ppts; the poll of 502 registered voters in Pennsylvania was conducted between Oct. 28 and Nov. 1 and has a 4.4ppts margin of error. (Twitter)

UK/EU

UK and EU negotiators are to continue discussions in Brussels from Monday until mid-week as both sides are pushing to avert a no-deal Brexit, while other reports noted that negotiators were zeroing on a solution to break the deadlock regarding fishing access. (Newswires)

EU officials reportedly still fear that UK PM Johnson’s Chief Adviser and ‘Vote Leave’ campaign architect Dominic Cummings could thwart Brexit negotiations after sources noted he was pushing PM Johnson to leave talks without an agreement 2 weeks ago. (Newswires)

UK Trade Secretary Truss has committed to not allowing chlorinated chicken or hormone-fed beef in UK supermarkets, in defiance of demands from the US as part of any possible trade deal. Subsequently, UK Trade Secretary Truss says almost all chapter areas are now in advanced stages of talks and a significant proportion of legal text has been agreed. (Guardian)

UK Chancellor Sunak has reportedly warned colleagues that a second lockdown has put the government’s efforts to maintain current levels of spending on public services into doubt. (Telegraph)

Nigel Farage is to relaunch the Brexit Party as Reform UK which is a new anti-lockdown platform. (Telegraph)

ECB's Panetta said European authorities could “do anything” to help boost the economy, while he added that he doesn’t know what they will and that he wouldn’t say if he did know. (Newswires)

EU Markit Manufacturing Final PMI (Oct) 54.8 vs. Exp. 54.4 (Prev. 54.4)

-        German Markit/BME Manufacturing PMI (Oct) 58.2 vs. Exp. 58.0 (Prev. 58.0)

-        French Markit Manufacturing PMI (Oct) 51.3 vs. Exp. 51.0 (Prev. 51.0)

UK Markit/CIPS Manufacturing PMI Final (Oct) 53.7 vs. Exp. 53.3 (Prev. 53.3)

S&P affirmed Czech Republic at AA-; Outlook Stable and Fitch affirmed Finland at AA+; Outlook Stable. (Newswires)

GEOPOLITICAL

Armenia formally asked Russian President Putin to discuss defence assistance to the country if the conflict with Azerbaijan spills over into Armenian territory, according to the Armenian Foreign Ministry. (Newswires)

Nagorno-Karabakh claims its forces have eliminated 'twenty Turkish special service troops' , Sputnik reports. (Twitter)

Pakistan PM Khan said on Sunday his government will give provisional provincial status to part of Kashmir, spurring condemnation from India which has long objected to any such changes by Islamabad. (Nikkei)

EQUITIES

European cash equities kicked off the week mostly higher and have since extended on opening gains (Euro Stoxx 50 +1.8%) following a similar APAC lead as markets look ahead to a risk-abundant week with the US election (full guide available on the Research Suite) and the FOMC meeting in the forefront ahead of the US labour market report. Back to Europe, upside across cash and futures coincided with the release of above-forecast manufacturing PMI figures suggesting October optimism in the sectors; albeit, as a caveat, the data was collected between October 12th and 23rd and does not take into account the most recently announced lockdown measures in Germany, France, Belgium, UK and Austria. Nonetheless, regional bourses trade with gains across the board, whilst the FTSE 100 (+1.0%) erased earlier lockdown-related losses and conformed to the broader gains across the equity-space. Sectors are now all in positive territory vs. a mixed open which saw energy lagging and IT outpacing following ON Semiconductor’s upbeat sector outlook. However, since then, the oil & gas sector has overtaken regional peers to become the outperformer as the crude complex trims losses. Financials follow as a close second amid tailwinds from higher yields. Unsurprisingly, on the other side of the spectrum resides the Travel & Leisure sector as the reimposition of nationwide lockdowns takes its toll. That being said, most airliners have nursed earlier losses, but easyJet (-1.4%) remains under pressure as the CEO is seeking ways to bolster finances, with state-aid not ruled out, whilst Ryanair (+2.3%) is lifted after a less-dire-than-expected earnings report. Carnival (+6.5%) shares extend gains in early hours as the US CDC’s ban on cruises expired on Saturday without renewal. In terms of other individual movers, Ocado (+9.8%) trades at the top of the Stoxx 600 after a guidance upgrade, with the new UK lockdown also providing some tailwinds for the food delivery space. AstraZeneca (+0.7%) is supported after the Co. said the UK Health regulator had started an accelerated review of its potential coronavirus vaccine. Elsewhere, earnings-related movers include Siemens Healthineers (-0.1%) and Umicore (-6.9%).

ON Semiconductor (ON) reported Q3 EPS USD 0.38 vs. Exp. USD 0.20 and Revenue USD 1.32bln vs. Exp. USD 1.27bln. Co. said margins in the third quarter expanded significantly QQ due to normalization of operations following the initial impact of the COVID-19 pandemic and growth in our revenue. CEO said "Fundamentals of our business remain strong with accelerating momentum in automotive, industrial, and cloud-power end-markets and strong operating leverage from revenue growth. We expect to see above seasonal demand trends across most end-markets in the near term, as global business activity continues to normalize.” (Newswires/Investor Relations)

FX

GBP/AUD – The Pound unwound all and more of its earlier recovery gains made amidst reports that the UK and EU will resume trade talks this week and could be getting closer to agreeing terms on the issue of fishing that has been so hotly disputed. However, bears pounced on the bounce as the country heads back into lockdown on November 5 when the outcome of the latest BoE policy meeting will be revealed, with Cable around 100 pips down from best levels circa 1.2952 and through the 100 DMA (1.2878) before finding some underlying bids ahead of 1.2850, while Eur/Gbp tested 0.9050 from circa 0.9000 where 1.5 bn option expiries reside. Similarly, Aussie ducked under 0.7000 and is still struggling to retain 1.0600+ status vs its US and Kiwi counterparts respectively even though building approvals blitzed consensus overnight, as expectations are elevated for conventional and non-standard easing from the RBA on Tuesday, while China has upped the import ban ante yet again to offset any positives from above forecast Chinese PMIs.

USD – An upturn in broad risk sentiment, perhaps more on post-month end positioning rather than any real bullish factor, has dampened some Dollar demand, but the DXY remains firm above the 94.000 handle within a 94.035-285 range ahead of this week’s major events, kicking off with the US Presidential Election tomorrow, then the FOMC on Wednesday and NFP 2 days later. Note, further bear-steepening along the Treasury curve may also be Buck supportive and in recognition of Biden still holding a lead over incumbent Trump.

JPY – The Yen has also lost safe-haven status amidst renewed risk appetite, as prior support at 104.50 and a key Fib level becomes resistance and Usd/Jpy eyes 105.00 ahead of rather stale BoJ minutes and the aforementioned US vote.

NZD/CAD/EUR/CHF – All narrowly mixed against the Greenback, with the Kiwi holding above 0.6600 in advance of NZ jobs data and as PM Adern forms her new cabinet, while the Loonie has rebounded towards 1.3300 alongside crude prices awaiting Canada’s manufacturing PMI. Elsewhere, better than anticipated or flash Eurozone manufacturing PMIs could be keeping the Euro afloat between 1.1623-56 parameters following an extension of the post-ECB decline and the Franc is pivoting 0.9170 after another rise in Swiss sight deposits and a slowdown in the manufacturing PMI, albeit still over 50.0.

SCANDI/EM – Relatively upbeat manufacturing PMIs appear to be underpinning the Swedish and Norwegian Crowns even though the latter will be wary of ongoing weakness in oil in the run up to Thursday’s Norges Bank policy meeting, but the Turkish Lira has derived little or nothing from cheaper crude, a firmer manufacturing PMI or the CBRT cutting interbank lending limits to zero as Usd/Try sits just shy of yet another ATH (8.4111). Conversely, the SA Rand has gleaned some traction from a strong 60.0+ manufacturing PMI and Brazil’s Real will likely get some respite due to the All Saint’s Day holiday.

Notable FX Expiries, NY Cut:

-       GBP/USD: 1.2960 (239M), 1.3000 (223M), 1.3100 (1.2BLN), 1.3150 (961M)

-       EUR/GBP: 0.8900 (2.1BLN), 0.9000 (1.5BLN)

Turkey President Erdogan said the country is waging war against a “devil’s triangle” of interest rates, inflation and exchange rates. Separately, the CBRT says borrowing limits at the CBRT interbank money market will be reduced to 0 (Newswires)

FIXED INCOME

It’s been a slow grind through some obstacles, like an unexpected final UK manufacturing PMI upgrade and mild FTSE recovery, but the 10 year UK benchmark has gradually overcome wobbles to breach recent peaks and clear a path to 136.00 vs 135.96 at best so far (+28 ticks on the day), in contrast to Bunds and US Treasuries that remain depressed sub or at par (former having been down to 175.90 at one stage, -1/4 point). It looks like lockdown is underpinning Gilts on the premise that a return to higher COVID-19 restrictions for at least a month will offset any good news emanating from Brexit talks this week and undermine the BoE’s best or central scenario for the economic outlook to the extent that more policy stimulus is needed. On that note, QE and other forms of providing cheaper funding remain the preferred option as the MPC continues to study the pros and cons of NIRP, though could explore zero rates in the interim. More immediately for bonds, ECB speakers, US Markit manufacturing PMI and ISM before attention turns to the Presidential Election almost entirely.

COMMODITIES

WTI and Brent front month futures started the trading week on the backfoot amid a continuation of the downside price action seen last week as demand recovery prospects dwindle amid the reimposition of nationwide pandemic-related lockdowns, whilst supply side also sees bearish developments. The crude contracts however are trimming earlier losses in tandem with broader gains across stock market heading into a plethora of risk events later in the week. Back to fundamentals, recently announced restrictions from significant oil consumers UK, Belgium, France and Germany keeps gains in the complex somewhat capped – with ING noting that these four countries contribute to a little over 6% ( or ~6mln BPD) of global consumption. Moving onto the supply side – Hurricane Zeta’s passing sees the resumption of operations in the Gulf of Mexico (GoM), with the latest update from the BSEE suggesting 46% (Prev. 59%) of oil and 20% (Prev. 32%) of natgas production still shut-in, whilst NHC stated that Eta has evolved into a hurricane, but the projected path shows that it will steer clear from the GoM. Sticking with supply, Libya’s oil output has reportedly been ramped up to 800k BPD (vs. 690k BPD on 26th Oct), with the country’s rising output also proving a headache for OPEC+ against the backdrop of the pandemic – suggesting an increasing likelihood that the oil producers will roll over current cuts into next year as opposed to a wind-down. Desks also note of the US election risk, ING suggests that a Biden win could translate into a less hawkish stance on Iran and “raising the possibility that we see oil sanctions against Iran removed.” WTI Dec tested USD 35/bbl to the upside (vs. low 33.64/bbl) whilst Brent Jan regains a footing over USD 37/bbl (vs. low 35.74/bbl). Elsewhere, spot gold and spot silver were unfazed by the early USD-strength but have seen tailwinds as the Dollar Index wanes off highs heading into this risk-abundant week – with the yellow metal still sub-1900/oz at around USD 1890/oz (vs. low 1873/oz) whilst spot silver test USD 24/oz to the upside (vs. low 23.39/oz). Finally, LME copper opened somewhat lacklustre but now ekes mild gains in line with stock market action.

Iraq’s total oil exports averaged 2.876mln in October according to the Iraq Oil Minister, while there were separate reports that Libya oil production reportedly increased to 800k bpd. (Newswires)

Chevron said the Fouchon and Empire terminals, as well as related pipeline systems are back to operational status following hurricane Zeta. (Newswires)

Goldman Sachs said virus uncertainty, lockdowns and aftermath of US election points to volatility in oil prices through this month and near-term pressure, while it added that OPEC+ are likely to postpone its 2mln bpd output increase. (Newswires)

Russian Energy Minister Novak is to discuss the OPEC+ deal with the heads of Russian oil Co's on Monday, Interfax