• US futures are mixed with ES flat as NQ outperforms +0.5% with the RTY lagging -0.3% in a continuation of yesterday’s pause in rotation dynamics; also evidenced via European sectors
• US, UK & EU have condemned China for the legislation taken against Hong Kong calling for it to be immediately removed; UK is considering sanctions in response
• BoE Governor Bailey says we have talked about yield curve control & does not have a date in mind for the negative rate review
• 165 critics of Google have urged EU officials to take swift antitrust action
• FX features a subdued USD with GBP hindered via EUR/GBP action and EUR/USD as such lifted above 1.1800; Yuan unreactive to Hong Kong comments while TRY continues to strengthen
• Fixed is off highs but with the yield curve flattening as cash participants return
• Looking ahead highlights include US CPI & Initial/Continued Jobless Claims, Banxico Rate Decision, ECB's Lagarde, de Guindos, Mersch & Schnabel; Fed's Powell, Williams & Evans, BoE's Bailey, Supply from the US

US ELECTION UPDATE

US President Trump tweeted that nobody wants to report that Pennsylvania and Michigan didn’t allow our poll watchers or vote observers which is responsible for hundreds of thousands of votes that should not be allowed to count, while he claimed that he easily wins both states. (Twitter)

CORONAVIRUS UPDATE

India's medical research body and the Serum Institute completed the enrollment for phase 3 trial of the Oxford University AstraZeneca COVID-19 vaccine, while the Serum Institute has produced 40mln doses of the vaccine and the medical research body stated that it was the most advanced vaccine in human testing in India. Furthermore, it was also reported that the Serum Institute received bulk COVID-19 vaccine from Novavax which it will soon fill and finish them in vials, while it is to test the Novavax vaccine in a phase 3 trial in India. (Newswires)

Germany's RKI expects uncontrollable spread of COVID-19 infections in some parts of Germany; country's COVID-19 measures will stay for a long time since vaccinations take time; number of undetected cases has likely grown. (Newswires)

Curevac (5CV GY) CEO plans to produce 300-400mln of doses of its vaccine in 2021. (Newswires)

ASIA

Asian equity markets traded mostly lower as sentiment gradually deteriorated from the mixed performance stateside where conditions were quieter owing to the Veterans Day quasi-holiday, although a pause in the recent growth-to-value rotation aided a tech rebound. Nonetheless, ASX 200 (-0.5%) was dragged lower by underperformance in cyclicals but with losses in the index stemmed by strength in tech and telecoms as Telstra shares were underpinned by restructuring plans and retailers kept afloat after Wesfarmers reported sales growth. Nikkei 225 (+0.7%) extended on its best levels in nearly 3 decades although the gains were briefly wiped out as risk appetite waned and amid mixed data including Machinery Orders which suffered its longest period of contraction since 2009. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (-0.1%) were subdued after mixed lending and financing data, as well as the ongoing tensions, with the US warning of further sanctions against China for its freedom violations in Hong Kong. Finally, 10yr JGBs gained as they tracked the rebound in T-notes and as risk appetite gradually deteriorated but with upside capped by resistance at 152.00 and after mixed results at today’s 5yr auction.

PBoC injected CNY 120bln via 7-day reverse repos at a rate of 2.2% for a net daily injection of CNY 90bln. (Newswires) PBoC set USD/CNY mid-point at 6.6236 vs. Exp. 6.6225 (Prev. 6.6070)

US National Security Adviser O'Brien said the US will sanction those responsible for Hong Kong freedom violations, while other reports also noted the White House warned of more sanctions on China related to its actions in Hong Kong. Subsequently, the UK has declared a breach of the China-UK joint declaration; Foreign Minister Raab says UK will hold China to the obligation it freely assumed under the international law  - Junior Minister states they will be considering sanctions. Similarly, the EU have condemned and called for an immediate reversal of the new legislation. (Newswires/AFP)

Japanese Machinery Orders (Sep) M/M -4.4% vs. Exp. -0.7% (Prev. 0.2%). (Newswires) Japanese Machinery Orders (Sep) Y/Y -11.5% vs. Exp. -11.6% (Prev. -15.2%)

US

US President-elect Biden picked long-time aide Ron Klain for the position of Chief of Staff. (New York Times)

US President-elect Biden said US security guarantees apply to Japan’s administration of the dispute Senkaku islands, in the first foreign policy move related to China. (Newswires)

UK/EU

On Brexit negotiations, a UK government source said one of the most difficult issues was state aid. (Times) Separately, UK ministers will be holding weekly meetings with five of the largest industries to discuss Brexit preparations. (Newswires) Elsewhere, the EU is reportedly not intending to grant regulatory equivalence before the Brexit transition period end, with a source stating that the EU does not yet have the legal mechanism to provide equivalence. (City AM)

A review commissioned by UK Chancellor Sunak has determined that circa GBP 14bln could be raised by reducing exemptions and doubling the rate of capital gains tax. (BBC)

UK PM Johnson’s director of communications announced his resignation after senior No 10 advisers opposed plans to appoint him as chief of staff. His departure sparked speculation that senior advisor Cummings could also leave. However, reports noted that Cummings will stay on despite the departure of a close colleague, according to the BBC Editor. (Times/Newswires)

UK Chancellor is considering new measures to kickstart the economy next year: “We want to get the economy going strongly coming out of this… to get consumers spending again. So we'll look at a range of things to see what the right interventions are.”. (Newswires) Cabinet Minister Gove says the Chancellor will later be updating the House of Commons on fiscal measures.

BoE Governor Bailey says we have talked about yield curve control; isn't a great call for doing this in the UK - does not believe it is of great need at present. Does not have a date in mind for the negative rate review outcome; is a great deal of work to be done with banks, prior to deciding if negative rates are do-able. (Newswires)

UK GDP Estimate (Sep): MM 1.1% vs. Exp. 1.5% (Prev. 2.1%), YY -8.4% vs. Exp. 8.4% (Prev. -9.3%), 3M/3M 15.5% vs. Exp. 15.8% (Prev. 8.0%)

-        GDP Prelim YY (Q3) -9.6% vs. Exp. -9.4% (Prev. -21.5%)

-        GDP Prelim QQ (Q3) 15.5% vs. Exp. 15.8% (Prev. -19.8%)

-        BoE Governor Bailey said the data was in-line with their expectations

UK RICS Housing Survey (Oct) 68 vs. Exp. 55 (Prev. 61, Rev. 62). (Newswires)

Link to ECB Sintra schedule highlights

ECB's de Guindos on fiscal support says it is important that this support is maintained and, in some areas, even scaled up in the coming months. (Newswires)

GEOPOLITICAL

US President-elect Biden told South Korean President Moon he will closely cooperate with them to resolve North Korea nuclear issues and they agreed to hold an early summit, while Biden reaffirmed US commitment to defend South Korea. (Newswires)

Russian Foreign Minister Lavrov, speaking on the New START arms treaty, says we should wait until the US political situation has settled. (Newswires)

Armenia has declared a no-fly zone over Armenia and the Nagorno-Karabakh region, according to Ifax. (IFX)

Turkish Defense Minister says he is ready to allay Washington's concerns about S-400 missile system and F-35s, AJA Breaking. (Twitter)

EQUITIES

Major European bourses have recouped earlier lost ground and now trade mixed (Euro Stoxx 50 -0.6%) following a downbeat cash open and after a similar APAC handover, as the growth to value rotation continues to lose steam ahead of Tier 1 US data and the second central bank Sintra sitting, whilst participants continue to question the timeframe of a rollout of an effective vaccine (contingent on regulatory approval), as some doubts remain over manufacturing, storage, and swift distribution. The European sectoral breakdown reflects this as Oil & Gas, Banks and Auto remain the laggards whilst Tech and Healthcare reside at the top of the pile. The rotational pause is also indicated in the US equity futures, with NQ (+0.5%) somewhat front-running the ES (-0.1%) and RTY (-0.3%). Back to Europe, the flow into Healthcare has cushioned losses in the SMI (+0.1%) which outperforms regional peers on the back of Pharma giants Roche (+0.6%) and Novartis (+0.5%) keeps the index somewhat supported. Elsewhere, Travel & Leisure treads water around the unchanged mark ahead of an anticipated Moderna vaccine efficacy update which is expected in the coming days. Individual European movers this morning largely consist of earnings, with Deutsche Telekom (+0.5%) benefitting from better-than-expected metrics whilst noting that T-Mobile’s (+0.7% pre-market) integration of Sprint. Elsewhere, the broader tech sector also saw commentary from Taiwanese chip-maker Foxconn, who expects strong demand in consumer electronics next year, whilst adding Apple’s (+0.4%) iPhone 12 will remain in hot demand.

Apple (AAPL) - Foxconn (2317 TT) says iPhone 12 will continue to be in hot demand. (Newswires)

Google (GOOG) - 165 critics of the Co. have urged EU officials to take swift antitrust action as the company favours its own services in its search results, according to a letter sent to EU Competition Commissioner Vestager. (Newswires)

Google (GOOG)/ Facebook (FB)/Tencent (700 HK) - German cartel office has commenced sector investigations for messenger services; Cartel office would like to clarify issues around personal data protection and provide information on possible violations of consumer rights. (Newswires)

Tencent (700 HK) - Q3 net CNY 38.5bln vs. Prev. CNY 20.4bln. Revenue CNY 125.5bln vs. Prev. CNY 97.2bln. (Newswires)

FX

DXY - The Buck is softer against most major currency rivals, but retaining an underlying bid due to more pronounced outperformance vs high beta, cyclical and activity counterparts compared to declines relative to safer or pseudo safe-havens. Indeed, the index is straddling 93.000 within tighter confines and remains close enough to stage another attempt at breaching decent chart resistance at 93.210 after matching the Fib retracement level exactly on Wednesday. Turning to fundamentals, US CPI and claims data may provide some impetus beyond fading risk sentiment and before Fed speakers including Chair Powell.

CHF/EUR/JPY - As noted above, renewed risk aversion, albeit not particularly pronounced, has underpinned the Franc, Euro and Yen to varying degrees as the former pivots 0.9150 vs the Dollar, single currency reclaims 1.1800+ status and latter rebounds from sub-105.50 lows irrespective of considerably weaker than forecast Eurozone ip and Japanese machinery orders. However, decent option expiry interest could cap Eur/Usd and keep Usd/Jpy propped given 1.3 bn rolling off between 1.1795-1.1805 and 1.4 bn residing at 105.40-50 respectively.

GBP - Sterling has slipped to the bottom of the G10 ranks, with Cable back below 1.3200 and Eur/Gbp around 100 pips off yesterday’s lows amidst the ongoing Brexit trade deal impasse and UK data in the form of GDP and IP falling a little short of consensus. For the record, not much in the way of reaction to latest comments from BoE Governor Bailey sticking to a reserved view on negative rates and also downplaying the prospect of the MPC using yield curve control ala the BoJ and RBA as a policy tool.

AUD/CAD/NZD - All consolidating off recent peaks relative to their US peer, as the Aussie pulls back from 0.7300, Kiwi 0.6900 and Loonie loses a bit more traction from oil having tested offers into 1.2900 on Monday amidst the height of anti-coronavirus optimism. Usd/Cad has pared some gains from 1.3106 towards 1.3050 awaiting remarks from BoC’s Wilkins before Friday’s Q3 Senior Loan Officer Survey, while Nzd/Usd is hovering around 0.6880 in advance of October’s manufacturing PMI and FPI that may provide independent impetus in wake of the RBNZ.

SCANDI/EM - The Nok has also retreated alongside crude prices, but the Sek seems unfazed by mixed Swedish inflation prints or relatively downbeat/dovish rhetoric from Riksbank’s Bremen. Meanwhile, the Try has reclaimed another chink of its heavy and unprecedented losses perhaps in delayed response to Turkey’s Defence Minister declaring that he is ready to allay US concerns over Russia’s S-400 missile system and F-35s. Elsewhere, the Zar has absorbed conflicting SA data and Mxn is eyeing Banxico’s rate verdict for direction beyond gyrations in oil.

RBNZ Assistant Governor Hawkesby said less stimulus is now required than thought in August and that the economy was more resilient than expected although uncertainty is wide and there are still large downside risks. Hawkesby also stated that they can still use negative rates and will respond if funding for lending programme doesn't deliver enough stimulus, while he reiterated that the RBNZ has not changed its guidance on keeping OCR at 0.25% until March next year and is working to have negative OCR operationally ready by year-end if required. Furthermore, he stated that the market reaction yesterday was to economists adjusting calls on negative rates and not the monetary policy statement. (Newswires)

Riksbank's Bremen says we have ample room to do more if it is deemed to be necessary, Riksbank is prepared to act again in case things turn even worse; on corporate bond purchases, there is nothing to say we couldn't go beyond investment grade but at present this is a proportionate response. (Newswires)

FIXED INCOME

Risk appetite remains deficient, but the tables have turned somewhat in the fixed complex where Bunds, Gilts and US Treasuries are all off best levels in contrast to BTPs, Bonos and OATs that have resumed their upward trajectory following latest ECB guidance on PEPP and TLTRO recalibrations via President Lagarde. Eurozone bonds also have supportive RF vibes to lean on, while UK debt will be wary about the implications of more financial aid to be unveiled by Chancellor Sunak. The 10 year benchmarks have recovered some poise after retreating to lows of 174.26, 133.97 and 137-19+ respectively awaiting the return of US cash markets after Veteran’s Day, CPI and IJC ahead of another blast from Central Bank speakers at Sintra or from other venues.

COMMODITIES

WTI and Brent front-month futures trade flat intraday with WTI Dec meandering around USD 41.50/bbl and Brent Jan sub-44/oz as the complex fails to take its cue from the overall indecisive risk sentiment across markets, and as participants continue to balance supply and demand dynamics ahead of blockbuster OPEC+ meeting. On that note, sources overnight suggested that OPEC+ talks are reportedly to focus on delaying oil output hikes by 3-6 months. However, one delegate said the idea has not garnered widespread support so far among other producers. It’s worth bearing in mind that unanimous consent for a revised accord. Elsewhere the IEA Monthly Oil Market report downgraded its  2020 global oil demand growth forecast by 400k BPD whilst noting it is vaccine unlikely to significantly boost demand until well into 2021. No immediate move was seen on the release, but some fleeting downside was experience as Japan, the number 4 top oil importer in 2019, announced record high new COVID-19 cases whilst the Chinese Vice Foreign Minister has advised Chinese nationals not to travel overseas due to the pandemic – thus jet fuel demand prospects. Elsewhere, spot gold and silver remain somewhat contained ahead of US CPI and Sintra Day 2, whilst LME copper gleans impetus from the softer Buck.

Saudi Arabia's King Salman said the Kingdom has and is still working to guarantee the stability of oil supplies to the world in a way that equally serves producers and consumers despite market impact from COVID-19. Furthermore, he stated the kingdom supports efforts to bring peace to the Middle East through negotiations between Palestinians and Israelis to reach a fair and permanent agreement. (Newswires)