• Asian equity markets traded mostly higher as the region continued to benefit from the recent vaccine hopes
• Wall Street saw mixed performance with a negative bias for tech stocks which suffered again from the rotation out of growth and into value
• In FX markets, the greenback was slightly softer but with price action contained amid rangebound trade in its major counterparts
• RBNZ maintained the OCR at 0.25% and LSAP at NZD 100bln as expected, whilst announcing a Funding for Lending Programme
• Looking ahead, highlights include OPEC Monthly Oil Report, ECB’s Lagarde, de Guindos, & Lane, supply from Germany

US ELECTION UPDATE

US President-elect Biden said the transition is well underway despite President Trump's refusal to accept the election results, while he stated they will build on the Affordable Health Care Act and will ease the burden of health care. Biden also stated that he supports what House Speaker Pelosi and Democratic Leader Schumer are doing on COVID relief and has not yet spoken to Senate Majority Leader McConnell but plans to do so soon. Furthermore, he plans to put forward names for at least some cabinet positions by Thanksgiving. (Newswires)

US President Trump tweeted that people will not accept this rigged election and it was also reported that the Trump campaign is filing a lawsuit in Michigan to request that election results not be certified until it can be verified that ballots were cast legally. (Twitter/Newswires)

US Secretary of State Pompeo said that votes remain to be counted in the US election and the transition will be smooth no matter who is in the White House. (Newswires)

US Senate Majority leader McConnell does not expect an interrupted transition to the next administration, while GOP Senator Portman noted that Biden is leading in enough states to win the presidency but added there are still votes being counted and President Trump has every right to insist that all legally cast ballots are counted. (Newswires)

White House Budget Office has reportedly instructed federal agencies to continue preparing the administration’s budget proposal for the next fiscal year, according to sources. (Washington Post)

US postal worker reportedly admitted to fabricating claims of ballot tampering in Pennsylvania according to Washington Post, while it was separately reported that New York Times contacted election officials in every state to ask regarding evidence of illegal voting and that officials in 45 states directly responded that there was no evidence of fraud or voting irregularities. (Washington Post/New York Times)

Democrat Cunningham conceded the Senate race in North Carolina to GOP Senator Tillis. (Newswires)

CORONAVIRUS UPDATE

US COVID-19 cases +122,910 (prev. +105,142) and deaths +694 (prev. +490). Furthermore, major newswire tally stated US cases rose by at least 136,580 to a total of 10.3mln and deaths rose by at least 1,452 to a total of 239.9k, while AFP tweeted the US COVID-19 cases increased by a new record of more than 200k in 24 hours. (Newswires)

California official said hospitalizations and ICU admissions are up at least 30% in the state as cases continue to rise, while it was also reported that San Francisco is to roll back some re-openings as COVID-19 cases increase and will stop indoor dining from Friday. Elsewhere, Nevada Governor Sisolak warned of tougher action if Nevada doesn't take next 14 days seriously regarding virus mandates. (Newswires)

US HHS Secretary Azar said distribution of the Pfizer COVID-19 may start in late November, while there were also comments from NIH’s Dr. Fauci that the Pfizer vaccine doses should be available for those of high priority in December. Fauci also stated that he expects those that want to get vaccinated for COVID-19 will be able to get it and that low risk people may get access to the vaccine by April. (Newswires/CNN)

UK COVID-19 cases +20,412 (prev. +21,350) and deaths +532 (prev. +194) which is the first-time deaths surpassed 500 since the middle of May. (Newswires)

ASIA

Asian equity markets traded mostly higher as the region continued to benefit from the recent vaccine hopes which helped bourses shrug off the mixed performance on Wall Street where there was a negative bias as tech stocks suffered again from the rotation out of growth and into value and cyclicals. ASX 200 (+1.7%) extended on recent gains with the energy sector spearheading the broad advances and financials were also boosted with shares in Australia’s largest lender CBA unfazed despite a 16% Y/Y decline in Q1 cash profit, as there were also reports that the RBNZ further delayed the start of bank capital increases until 2022 which eases the burden on the Big 4’s New Zealand operations. Nikkei 225 (+1.5%) was also lifted amid a slew of earnings and with financials underpinned after the BoJ’s introduction of a Special Deposit Facility to support regional banks and bolster the resilience of the sector. Hang Seng (+0.2%) and Shanghai Comp. (-0.2%) were indecisive amid lingering US-China tensions and a tepid liquidity injection by the PBoC, while the tech names continued to suffer after China recently drafted new antitrust regulations to rein in tech giants which pressured Tencent and Alibaba, despite the latter posting strong early numbers for Singles Day sales which reached CNY 6bln in the first minute and CNY 372bln of sales in the first 30 minutes. Finally, 10yr JGBs were softer amid similar weakness in T-notes following a soft US 10yr auction and with prices also pressured by the gains in Japanese stocks, although losses in JGBs were cushioned by the BoJ’s presence in the market for nearly JPY 1.4tln of JGBs in mostly 1yr-10yr maturities.

PBoC injected CNY 150bln via 7-day reverse repos at a rate of 2.2% for a net daily injection of CNY 30bln. (Newswires)

PBoC set USD/CNY mid-point at 6.6070 vs. Exp. 6.6070 (Prev. 6.5897)

China’s top legislative body passed a resolution to make patriotism a legal requirement for Hong Kong lawmakers which could permit the Hong Kong government to disqualify lawmakers without going through the courts. China’s top legislative body also passed a resolution that allows immediate disqualification of Hong Kong lawmakers that endanger national security, while reports later noted that 4 Hong Kong opposition lawmakers have been disqualified. (Newswires)

TikTok filed a legal petition challenging the Trump administration's executive order requiring ByteDance to divest the app, while ByteDance submitted new proposal to create an entity owned by Oracle (ORCL), Walmart (WMT) and US investors which would handle TikTok user data and content moderation. (Newswires)

UK/EU

UK PM Johnson and US President-elect Biden spoke about the importance of implementing Brexit in a way that upholds the Good Friday agreement. (FT)

UK PM Johnson has pushed back the House of Commons vote on the Internal Market Bill until the end of the month at the earliest amid concerns that controversial elements of the bill could hamper Brexit talks and relations with US President-elect Biden. (Telegraph)

UK Department of Trade is attempting to meet today's deadline to table GBP 80bln of trade agreements before Parliament in order to have the required 21-sitting days for them to be ratified this year. (Guardian)

FX

In FX markets, the greenback was slightly softer but with price action contained amid rangebound trade in its major counterparts and continued post-election conflict as the Trump administration reportedly ordered senior government leaders to rebuff cooperation with the Biden transition team and is threatening to impede the transfer of power, although there were also comments from President-elect Biden that the transition is well underway despite President Trump's refusal to accept election results and he plans to put forward names for at least some cabinet positions by Thanksgiving. EUR/USD traded sideways after reclaiming the 1.1800 level ahead of the ECB’s 2-day Forum on Central Banking which begins today, while GBP/USD took a breather but remained near 2-month highs with a firm footing on the 1.3200 handle after the prior day’s outperformance. Elsewhere, USD/JPY was marginally softer but with losses stemmed by support at 105.00 and antipodeans strengthened with outperformance in NZD/USD following the RBNZ policy announcement in which it maintained the OCR at 0.25% and LSAP at NZD 100bln as expected but announced a Funding for Lending Programme which it previously had flagged. The initial reaction in the currency on the announcement of the new measure was to the downside, although NZD/USD then recovered as the central bank stuck to its forecasts for no rate changes until at least March next year and with several banks readjusting their rate cut calls including ANZ which pushed back forecasts for negative rates to August next year from April.

RBNZ maintained the OCR at 0.25% and Large Scale Asset Purchases at NZD 100bln as expected, but announced to launch a Funding for Lending Programme in December with the size around NZD 28bln and it maintained it forecast for the OCR to remain at 0.25% in March 2021. RBNZ stated it agreed to provide additional monetary stimulus to the economy in order to reach inflation and employment remit, while it agreed that monetary policy will need to remain stimulatory for a long time and must remain prepared to provide additional support if needed. (Newswires)

RBNZ Governor Orr commented at the press conference that it is still important for credit to be widely available and that spending and employment is promoted. Governor Orr also stated it is too early to tell if the possibility of negative rates decreased following the funding for lending programme and loan-to-value ratio review, while he affirmed the OCR will remain at 0.25% until next year and that the commitment to keep OCR unchanged until March remains. (Newswires)

RBNZ had earlier announced further regulatory steps to promote cashflow confidence and stability in which it delayed the start date for increases in bank capital until 2022 to allow banks continued headroom to respond to the effects of the COVID-19 pandemic and to support the economic recovery. Furthermore, it will consult on loan-to-value ratio (LVR) restrictions and stated that bank dividend restrictions will remain in place. (Newswires)

COMMODITIES

WTI crude futures extended on gains and briefly tested USD 42.00/bbl with prices underpinned by the improved demand outlook from the recent vaccine optimism and following a larger than expected drawdown to headline crude stockpiles in the latest private sector inventory report. There were also comments from key producers including Saudi and Iraq which agreed to coordinate positions in the oil sector and fully commit to agreements. Elsewhere, gold continued to partially nurse recent losses but with upside capped by a relatively uneventful greenback and due to a lack of haven demand, amid the predominantly constructive risk which also kept copper prices afloat.

US Private Energy Inventory (w/e Nov 6th): Crude -5.1mln (exp. -0.9mln). (Newswires)

Saudi Arabia and Iraq agreed on coordinating positions in the oil sector within the scope of OPEC and OPEC+ and to fully commit to all decisions that have been agreed upon. (Newswires)

EIA Short-Term Energy Outlook raised 2020 world oil demand growth by 10k BPD to a drop of 8.61mln BPD but cuts forecast for 2021 world oil demand growth by 360k BPD to an increase of 5.89mln BPD. (Newswires)

Kuwait set December crude OSP for Asia at Oman/Dubai +USD 0.40/bbl which up USD 0.10/bbl from prior month. (Newswires)

US

Treasuries were choppy on Tuesday as the dust settled from Monday’s acute bear-steepening, with a sloppy 10-year auction adding downside pressures. By settlement, 2s +0.2bps at 18.5bps, 10s +1.2bps at 97.0bps, 30s +0.4bps at 175.5bps; Treasury futures volumes were more subdued today, although still firm. Duration had continued to sell-off throughout European trade, with desks citing participants making room for the approaching Treasury auction. However, some shakiness in stocks around the US cash equity open saw some bidders surface. That move ultimately reversed after the record size, USD 41bln 10-year note auction, which similar to Monday’s 3-year offering, stopped through the WI slightly but had disappointing internals; the pure size of the offerings, in addition to the consensus reflationary outlook, is likely usurping would-be bidders, which does not bode so well for Thursday’s 30-year bond auction (cash bond markets are closed on Wednesday in the US due to Veteran’s Day). After today’s auction, selling pressures resumed seeing yields retest Monday’s highs; a USD 12bln, duration-heavy five tranche offering from Verizon (VZ) added to the supply pressures. T-note (Z0) futures settled 4+ ticks lower at 137-14.

Fed's Kaplan (voter) said we should be careful about relaxing restrictions on banks until we are confident we have worked our way through the crisis and his concern is what happens after the pandemic and the neutral rate starts drifting up. Furthermore, he is a supportive of remaining accommodative but doesn't know if the Fed should commit to keeping rates at zero. (Newswires)

Fed's Daly (2021 voter) sees a moderate and gradual recovery going forward and commented that vaccine news is heartening but the economy is being dictated by the virus which is surging. Daly also stated that Fed is prepared to do whatever it takes to support the economy and that policies are giving people a bridge, while she added the exact same policies will be stimulative when the pandemic is past and suggested more unemployment insurance, PPP or similar will be required. (Newswires)

Fed's George (non-voter) said the time to deal with Fed's balance sheet will come, while she is encouraged and surprised by Q3 economic bounce back and noted the economy will continue to grow but will see some moderation. Fed’s George also stated that key risk to economy is the virus and policy is appropriately calibrated and commented that negative rates are off the table in her view. (Newswires)

US Senate Majority Leader McConnell said he sees no need for a multitrillion dollar COVID relief bill and that they should have targeted virus relief package, while there were separate reports that GOP Senator Kennedy is doubtful of a stimulus deal. (Newswires)

US President-elect Biden reportedly tapped proponents of tougher Wall Street regulations for his agency review teams during transition. (Washington Post)