• The electoral vote tally remains unchanged from yesterday with Biden at 264 votes (including Arizona) and President Trump at 214 votes
• The key states still to be declared include Nevada (6 votes), Georgia (16 votes), North Carolina (15 votes) and Pennsylvania (20 votes)
• FOMC left rates unchanged at 0.00%-0.25% as expected and affirmed its accommodative stance
• Asian equity markets traded mixed with the region only partially sustaining the momentum from Wall Street where the post-election rally persisted
• In FX markets, the DXY nursed some of the prior day’s weakness; EUR/USD and GBP/USD maintain 1.18 and 1.31 status respectively
• Looking ahead, highlights include US and Canadian Labour Market Reports, Baker Hughes Rig Count

US ELECTION UPDATE

The electoral vote tally remains unchanged from yesterday with Biden at 264 votes and President Trump at 214 votes, with key states still to be called including Nevada (6 electoral votes), Georgia (16 electoral votes), North Carolina (15 electoral votes) and Pennsylvania (20 electoral votes).

Edison Research reported President Trump is at 49.4% vs. Biden at 49.4% in Georgia after 99% of votes were tallied, while NBC News Decision Desk stated it may not be possible to call Georgia Presidential race for weeks. (Newswires)

Edison Research reported President Trump is ahead in Pennsylvania at 49.5% vs. Biden at 49.2% with 95% of votes tallied. Pennsylvania Secretary of State said several hundred thousands of ballots remain to be counted with an overwhelming majority to be counted by Friday and it will take time to announce a winner as the race is close, while President Trump's campaign sued the Philadelphia county election board seeking to bar ballot counting unless Republican observers are present. (Newswires)

Nevada figures showed Biden with 49.5% of the vote vs 48.5% for Trump currently and Edison Research also have these figures with 87% of votes tallied, while there were separate reports that President Trump's campaign reportedly filed a new federal lawsuit in Nevada alleging ineligible votes were cast in Clark County. (Newswires)

US President Trump said he would easily win if the legal votes were counted and noted that a lot of votes arrived late, while he claimed he is being cheated out of victory and that there had been a number of disturbing irregularities in the election across the nation. President added the goal is to defend the integrity of the election, that he will not allow his voters to be silenced and reiterated litigation over the election may end up at the Supreme Court. (Newswires)

Democrat Presidential candidate Biden reiterated that every vote must be counted and has no doubt that he will win. (Newswires)

US Office of Special Counsel has opened a probe into the Trump campaign use of the White House for campaign-related activities to determine if any federal law was broken. (Newswires)

FOMC

FOMC left rates unchanged at 0.00%-0.25% as expected through unanimous decision and affirmed its accommodative stance, while it reiterated that it is committed to using full range of tools to support US economy. FOMC stated economic activity and employment have continued to recover, although demand and earlier declines in oil prices have been holding down consumer price inflation. (Newswires)

Fed Chair Powell reiterated the economy has continued to recover but stated in recent months the pace of improvement has moderated and that economic outlook is extraordinarily uncertain. Fed Chair Powell added the FOMC discussed asset purchases at this meeting and the role they are playing, while he believes they have materially eased financial conditions, providing substantial support to economy. Fed Chair Powell announced changes to summary of economic projections in December and will release the entire package with the FOMC statement rather than some measures being released in the minutes, while he also stated asset purchases are supporting market functioning, as well as economic activity and have not looked at reducing purchases. Powell added we are turning to the question of whether they should extend emergency lending facilities and when asked about extending it past year end, he said they are turning to that question but no decision has been made. Furthermore, Powell said they have not run out of ammo and when asked about a shift to purchases in longer dated bonds, he said it is possible to shift the size, duration and composition if it is needed and reiterated today’s meeting was about analysing asset purchases.

CORONAVIRUS UPDATE

US COVID-19 cases +106,537 (prev. +107,872) and deaths +1,141 (prev. +1,616), while a major newswire tally stated cases rose by at least 120,553 to a total of 9.65mln and deaths rose by at least 1,128 to a total of 235.0k. (Newswires)

UK Transport Secretary noted arrivals in UK from Denmark will have to self-isolate effective 0400GMT today, while it was also reported that the UK is removing Sweden and Germany from its travel corridor list. (Newswires)

ASIA

Asian equity markets traded mixed with the region only partially sustaining the momentum from Wall Street where the post-election rally persisted despite no declared winner yet, although Biden does remain on the cusp with 6 electoral votes shy of victory at 264 votes vs. President Trump at 214 votes. The key states still to be declared include Nevada (6 votes), Georgia (16 votes), North Carolina (15 votes) and Pennsylvania (20 votes) with Biden leading in Nevada, while the former VP dramatically caught up with President Trump in Georgia and narrowed the gap in Pennsylvania. ASX 200 (+0.8%) was lifted by strength in mining names and as financials were kept afloat, with the largest-weighted sector and shares in Macquarie unfazed by the slump in the latter’s H1 earnings, while Nikkei 225 (+1.0%) extended on gains to breach October 2018 highs and briefly print its best levels in nearly 3 decades with slight encouragement from better than expected household spending. Conversely, Hang Seng (-0.5%) and Shanghai Comp. (-0.7%) lagged after the PBoC refrained from open market operations which resulted to a net daily drain of CNY 100bln and weekly drain of CNY 590bln, while the central bank also set the strongest currency fix in more than 2 years. Finally, 10yr JGBs were flat as prices took a breather from the mid-week surge to above the 152.00 level and with further upside capped by the gains in stocks and mixed results at the 10yr inflation-indexed JGB auction.

PBoC skipped reverse repo operations for a CNY 100bln net daily drain and CNY 590bln weekly net drain. (Newswires) PBoC set USD/CNY mid-point at 6.6290 vs. Exp. 6.6310 (Prev. 6.6895); strongest since July 2018.

PBoC Vice Governor stated that adjustments will be based on assessments of the economy and cannot make hasty moves. PBoC Vice Governor added policy adjustments need to be considered as the economy recovers and they will guide financial innovation to support real economy and safeguard bottom lines on systemic risks, while the PBoC also noted monetary policy will be more flexible and appropriate. (Newswires)

Japanese All Household Spending (Sep) M/M 3.8% vs. Exp. 2.2% (Prev. 1.7%). (Newswires) Japanese All Household Spending (Sep) Y/Y -10.2% vs. Exp. -10.7% (Prev. -6.9%)

FX

In FX markets, the DXY nursed some of the prior day’s weakness which had coincided with the heightened risk appetite and with participants continuing to await the conclusion to the dragged-out election results. Focus was also on the FOMC although this provided no major fireworks as policymakers left rates unchanged at 0.00%-0.25% as expected, affirmed an accommodative stance and reiterated that the Fed is committed to using full range of tools to support the US economy. Furthermore, Fed Chair Powell stated they are turning to the question of whether they should extend emergency lending facilities, while he added they have not run out of ammo and responded that it is possible to shift the size, duration and composition if needed when asked about a shift to purchases of longer-dated bonds. The greenback’s major counterparts were uneventful with EUR/USD holding onto the 1.1800 status after the prior day’s strength. GBP/USD took a breather following the prior day’s surge to the 1.3100 handle. Elsewhere, USD/JPY languished after its recent break below 104.00 which had led to some anticipation of potential currency jawboning, although PM Suga stated he wants to refrain from comments on FX rates and instead noted that a stable FX rate is important. Elsewhere, antipodeans remained near the prior day’s highs after the PBoC set the strongest reference rate in more than 2 years, while the RBA Statement on Monetary Policy failed to spur a reaction as it largely stuck to the script from this week’s policy meeting in which it reiterated the board is prepared to expand bond buying if needed and pushed back on the idea of negative rates.

RBA Statement on Monetary Policy noted the board is prepared to expand bond buying if required and that it is not contemplating further lowering rates with little to be gained from moving to negative rates. Furthermore, it committed to not increase rates until inflation is sustainably in 2%-3% target band, Furthermore, it sees GDP Y/Y growth at -4% in Q4 2020, +5% in Q4 2021 and +4% in Q4 2022, while it sees Trimmed Mean CPI Y/Y at 1% in Q4 2020, 1% in Q4 2021 and 1.5% in Q4 2022. (Newswires)

New Zealand Inflation Expectations (Q4) 1.6% (Prev. 1.4%)

COMMODITIES

Commodities were subdued overnight with underperformance in WTI crude futures after a breakdown of the prior day’s support of around USD 38.40/bbl before extending on declines to break below USD 38.00/bbl, as a second consecutive daily record increase in US coronavirus infections added to demand woes, while the fleeting risk momentum was also detrimental for prices. Elsewhere, gold was contained after the prior day’s surge was stalled by resistance at the USD 1950/oz level but with the pullback limited amid USD-tentativeness ahead of today’s NFP data and copper traded sideways amid the mixed picture in stocks.  

US

Treasuries were ultimately lower as the Blue Sweep fade from Wednesday came to a pause. By settlement, 2s +0.4bps at 14.9bps, 10s +0.3bps at 77.1bps, 30s -1.3bps 153.6bps; inflation breakevens were wider as TIPS yields (10s and 30s) fell by a few bps; Treasury futures volumes were decent again. It was a gradual descent off earlier highs as Europe came to the scene. The dust has far from settled in the election where there is still a possibility, although not a probability, that Dems could gain more control in Congress and also that Trump could theoretically still win the Presidential race. That remaining uncertainty is likely causing hesitation for some participants (more likely real money type accounts) to remove hedges or judge fiscal stimulus expectations ahead of a final result (note how fast money and leverage type players had reportedly led the Blue Sweep fade/bull-steepener on Wednesday). Furthermore, while the rising prospects of a renewed mixed Congress saw a bid for Treasuries, there have been some expectations that Senate Majority Leader McConnel would accommodate greater stimulus than before, especially after some recent comments from him. Elsewhere, the FOMC today saw Powell announce that the Fed had been discussing its asset purchases, as well as saying the Fed had not run out of ammo, with more purchases available as a tool. Powell said it is possible to shift the size, duration and composition of purchases if needed. With the Chairman repeatedly alluding to asset purchases, analysts now see the December meeting as "in play" for any altercations. More immediately, the market will be monitoring the NFP report on Friday as well as gearing up for next week's Treasury refunding; not to mention being on stand-by for any election turbulence. T-note (Z0) futures settled 3+ ticks lower at 138-28+.