• Equities have continued to move lower since the European cash open as markets balance positive and negative updates on the COVID-19 front; ES & NQ -0.4%, RTY -0.7%
• AstraZeneca/Oxford COVID-19 vaccine has produced a strong immune response among elderly adults; Phase III efficacy data possible in the coming weeks
• EU Chief Brexit Negotiator Barnier has cancelled briefings to the EU on Tuesday night and Wednesday mid day; interpreted as a cautious positive by BBC’s Kuenssberg
• CBRT hiked by 475bps as expected, prompting upside in the TRY though this was relatively short-lived
• FX features a firmer DXY having eclipsed yesterday’s peak but still capped ahead of Monday’s 92.847 figure; as such, major FX peers are subdued this morning
• Looking ahead highlights include SARB Rate Decisions, Philadelphia Fed Business Index, US Existing Home Sales, Fed’s Mester, ECB’s Lagarde, Schnabel

CORONAVIRUS UPDATE

AstraZeneca (AZN LN) - COVID-19 vaccine has produced a strong immune response among elderly adults, citing data published in full in the Lancet today (partial publication in October); first efficacy data from Phase III trials possible in the coming weeks. Yet to reach the point where we can stay it stops the disease. When ready the efficacy information on a COVID-19 vaccine must be released to markets prior to their open. (Newswires)

Minnesota Governor Walz ordered restaurants and bars to stop in-person dining, as well as the closure of fitness centers for 4 weeks. (Newswires)

Tokyo raised its virus alert to highest level as expected and the city had a new record of 534 new COVID-19 infections today, which was the first time that daily cases surpassed 500. Furthermore, Japan Chief Cabinet Secretary Kato said they will monitor infection rates and capacity of medical facilities before declaring and emergency, while the Japanese and Tokyo governments held a meeting regarding the virus; Japan nationwide COVID-19 cases 2,259; new daily record (Newswires/NHK)

ASIA

Asian bourses were mixed as the region partially shrugged-off the risk-averse mood that rolled over from US where early vaccine optimism faded amid COVID-19 concerns and with selling exacerbated heading into the closing bell on Wall Street after New York City Mayor De Blasio announced to close all public schools from today after the 7-day average positive testing rate reached the 3% threshold. Furthermore, there was also recent commentary from Goldman Sachs that month-end pension rebalancing estimates were at a net USD 36bln of equities to sell and was the fourth-largest sell estimate going back 20yrs. ASX 200 (+0.3%) declined at the open in which notable weakness in healthcare and the commodity-related stocks briefly dragged the index beneath the 6500 level where it then found support to recoup its losses, while the largest-weighted financials sector kept afloat despite the mixed fortunes of its constituents with insurers IAG, Suncorp and QBE among the worst performers after the NSW Supreme Court ruled in favour of policyholders on a test case regarding business interruption policies, whereby it decided that pandemic exclusions were not valid. Nikkei 225 (+0.4%) declined as Japan’s exporters remained at the mercy of a stronger currency and with the mood clouded by the ongoing spike in COVID-19 infections, although there were some bright spots including Sharp which rallied on news it will return to the blue-chip index from December 2nd. Hang Seng (-0.7%) and Shanghai Comp. (+0.5%) conformed to the indecisive picture which was not helped by another PBoC liquidity drain and recent comments from a PBoC researcher who sees little room for a rate reduction and suggested that current rates in the market are already lower than the natural equilibrium level, while shares in one of China’s largest securities companies Haitong Securities were heavily pressured after China alleged manipulation by the Co. in an expanding probe into the recent default by a state-owned coal miner. Finally, 10yr JGBs were steady despite the negative picture in Japanese stocks with demand hampered after recent indecision in T-notes following a weak 20yr auction and the lack of BoJ purchases in the market today.

PBoC injected CNY 70bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 50bln. (Newswires) PBoC set USD/CNY mid-point at 6.5484 vs. Exp. 6.5506 (Prev. 6.5593)

Chinese President Xi said international communities should strengthen policy coordination and that China has confidence and ability to maintain stable economic operations. President Xi also stated that China will continue to deepen reforms and must rely on innovation-driven growth model, while he added China will strengthen protection of intellectual property rights, will not engage in decoupling and will further reduce tariffs. (Newswires)

US, UK and Australia released a joint statement which called on China to stop undermining rights of people in Hong Kong and that they expect China to adhere to its international commitments. (Newswires)

US

US Senate reportedly prepares to leave for recess without voting on Shelton's Fed nomination. (Newswires)

FHFA Director Calabria said Fannie Mae and Freddie Mac will have to hold USD 280bln dollars of capital to absorb possible losses amid an effort to end conservatorship. (WSJ)

US ELECTION UPDATE

Diplomatic sources stated that President Trump does not have plans to host the G7 Summit which he postponed earlier this year until after the election. (Twitter/Newswires)

Georgia state election official said that US President Trump has been misinformed about claims of fraudulent votes in the state and that the state fully anticipates certifying election results on Friday. There were also comments from the Georgia Secretary of State that he doesn't believe vote recount will alter the result that Biden won in the state. (Newswires/CNN)

UK/EU

UK PM Johnson is to unveil an additional GBP 16.5bln in defence spending, while reports stated the UK will create a new space command and artificial intelligence agency. (Sky/Twitter)

European leaders will demand today that European Commission publish their no-deal Brexit plans amid worries negotiations are dragging on with businesses unaware what to prepare for in the worst scenario. (Newswires/Telegraph/The Times)

EU leaders summit today could see a Brexit progress update from EU Commission President von der Leyen, BBC's Adler; on the recovery fund some members have proposed a solution of separating the budget and recovery fund to allow for some progress. (Newswires)

EU Chief Brexit Negotiator Barnier has cancelled briefings to the EU on Tuesday night and Wednesday mid day; BBC's Kuenssberg. - Kuenssberg interprets this as "perhaps a good sign that negotiators are churning through the obstacles to a deal, working not briefing" adds "far from clear that a deal is going to be done". (Twitter)

The UK and Canada are on the cusp of securing a new trade agreement that will replace the existing deal Britain holds via the EU. (Newswires)

European Court of Auditors report stated EU has failed to tame big tech because it has moved too slowly and lacks legal powers to stop the likes of Google (GOOG) and Facebook (FB) from wiping out rivals, while it added that antitrust probes are too lengthy and enforcement only occurs after smaller competitors have been wiped out. (FT)

German Foreign Minister says if Turkey continues its provocation in the eastern-Mediterranean he would expect sanctions to be discussed again at the December EU Summit. (Newswires)

EQUITIES

European equities (Eurostoxx 50 -1.0%) have extended on opening losses as markets continue to balance the positive tenor of vaccine updates against the fallout from near-term COVID restrictions. Sentiment ahead of the cash open was already relatively downbeat with selling in the US late doors yesterday exacerbated by news that the 7-day rolling average for the positivity rate in the NYC had met the 3% threshold, triggering the closure of public schools. Throughout the European session, selling has picked up without much in the way of fresh incremental newsflow behind the price action. All sectors trade in the red with some of the more cyclical exposed industries, namely, oil & gas, travel & leisure and banks underperforming peers. Note, stateside, losses are relatively broad-based with selling pressure in the pre-market more indiscriminate. Health care is posting slightly shallower losses than most with AstraZeneca (+0.1%) mildly firmer in the wake of an update in The Lancet which showed the Co.’s COVID-19 vaccine has produced a strong immune response among elderly adults, whilst first efficacy data from Phase III trials could be possible in the coming weeks. ThyssenKrupp (-6.7%) are a stand out underperformer in Europe after the Co. announced that it will need to lower its headcount by a further 5k alongside its FY earnings with management downbeat on the prospect for the steel sector, stating the state support alone will not be enough to solve the issues facing the industry. To the upside, Royal Mail (+6.5%) sit at the top of the Stoxx 600 after raising its FY outlook alongside H1 earnings with the Co. a beneficiary in the pick-up in online shopping amid the pandemic. 

FX

NZD/AUD/GBP – Not quite a case of zeros from heroes, but the Kiwi, Aussie and Pound have fallen to the bottom of the G10 ranks having outperformed of late, as risk aversion returns to replace relief or euphoria over latest positive anti-virus test results. Indeed, Nzd/Usd has relinquished 0.6900+ status, Aud/Usd 0.7300 even though jobs data smashed forecasts overnight and Cable looks prone to losing grip of the 1.3200 handle less than a day after probing beyond the round number above, while Eur/Gbp has rebounded firmly through 0.8950 from circa 0.8915 at one stage on Wednesday. For Sterling specifically, no deal Brexit concerns have also reared amidst reports that EU Governments are getting impatient with the ongoing stalemate and want the European Commission to draw up an emergency plan in the event that a trade deal with the UK is still not agreed by tomorrow when Barnier is scheduled to brief ambassadors on the state of play.

USD – The Dollar is back in the ascendency and more solid safe-haven ground, as sentiment sours following an all too brief boost from Pfizer, as another company in the hunt to get a vaccine approved, Astrazeneca, says it’s too premature to declare that its drug can stop coronavirus. Meanwhile, the resurgence has reached worrying levels in NY where schools will close from today as the 7-day average testing positivity rate hit the 3% threshold. Hence, the DXY has extended its recovery gains from 92.207 yesterday to 92.727 at best, so far, ahead of a busy US agenda including data and more from the Fed.

JPY/EUR/CAD/CHF – All handing back gains vs the Greenback, or losing momentum, as the Yen retreats to sub-104.00 compared a peak circa 103.65 on Wednesday, the Euro pulls back below 1.1850 following a couple of 1.1900 near misses, the Loonie retests support around 1.3100 from 1.3050+ highs in wake of, if not prompted by firmer than expected Canadian CPI, and the Franc reverses on its 0.9100 and 1.0800 pivots, latter against the Euro. Note, little reaction to a slightly wider Swiss trade surplus as key watch exports fell again, albeit at a slower pace.

SCANDI/EM – The Sek has not been able sustain any positive momentum from a marked decline in Swedish unemployment rates against the risk-off backdrop that is also weighing on crude prices and the Nok more so than Norwegian Q4 oil investment projections. However, the Try is holding up relatively well in anticipation of a big benchmark rate hike from the CBRT and on the decision itself, which was in-line with consensus, the TRY appreciated markedly but has since retraced much of this move; in contrast to the SARB that is seen standing pat later. Elsewhere, broad depreciation in line with the general deterioration in market tone and dovish Central Bank moves as the Indonesian and Philippine rates were eased 25 bp against consensus for no change.

Turkish CBT Weekly Repo Rate* (Nov) 15% vs. Exp. 15.0% (Prev. 10.25%)

-       Tightness of monpol will be decisively sustained until a permanent fall in inflation achieved

-       Says the permanent establishment of a low inflation environment will affect macroeconomic and financial stability positively through the fall in country risk premium, reversal in the dollarization trend, accumulation of foreign exchange reserves and the perpetual decline in financing costs

-       Central Bank funding will be provided through the one-week repo rate, which will be the main policy tool and the only indicator for the monetary stance.

Australian Employment (Oct) 178.8k vs. Exp. -30.0k (Prev. -29.5k). (Newswires) Australian Unemployment Rate (Oct) 7.0% vs. Exp. 7.2% (Prev. 6.9%)

South Korean Finance Minister Hong said recent gains in KRW outpace the major currencies and excessive FX moves are undesirable, while they are closely watching FX market and will firmly act to stabilize markets. Furthermore, it was later reported that the BoK was suspected to be purchasing USD to curb KRW appreciation, according to multiple FX dealers. (Newswires)

Notable FX Expiries, NY Cut:

-       AUD/NZD: 1.0650 (1.6BLN)

-       USD/JPY: 103.25 (455M), 103.50-55 (400M), 104.25-35 (1.1BLN), 104.50-60 (1.6BLN)

FIXED INCOME

Aside from any pre-positioning or front-running for month end given one prominent US bank flagging an historically large net stock sell to balance pension portfolios, core bonds have recouped more losses prompted by Pfizer’s encouraging Phase Three update, as risk appetite recedes on the ongoing spread of COVID-19 and tighter restrictions enforced to combat the disease awaiting a clinically approved vaccine. However, Bunds, Gilts and US Treasuries have not managed to emulate midweek session peaks and are losing some momentum after falling a few ticks short at 175.41 vs 175.46, 135.11 vs 135.14 and 138-13 vs 138-16+ respectively. T-notes may also be feeling a supply hangover after a tepid 20 year auction, in contrast to OATs and Bonos after warmer receptions for latest French and Spanish offerings before the spotlight switches back to the US a busy agenda comprising IJC, Philly and KC Fed surveys, existing home sales, more Fed and ECB speakers and a Usd 12 bn 10 year TIPS sale.

COMMODITIES

WTI and Brent prices have been subject to the general pull-back in risk sentiment this morning with the European session commencing in negative territory and subsequently extending on this shortly after the cash equity open. Fundamentally, newsflow explicitly for the crude complex is relatively light with focus turning back to the demand side of the equation on the back of further COVID-19 closures in New York as cases globally continue to rise – notably, Japan, which is the 4th largest global importer of oil, has seen cases increase by a record figure and cross the 500 mark in Tokyo on a daily basis for the first time. Currently, the benchmarks are posting losses in excess of 1.0% and reside in proximity to session lows; given this dynamic, the Stoxx 600 oil & gas sector is the morning laggard. Moving to metals and in-spite of the downbeat risk dynamic spot gold is subdued given USD dynamics as the DXY eclipses Tuesday’s high with just the Monday peak in the near-term; at present the yellow metal is subdued by around USD 10/oz but is off session lows at USD 1855/oz. Elsewhere, the debut of China’s bonded copper futures closed down by 1.2% this morning as participants highlight the listing price of CNY 47.68k/tonne was somewhat high.