• Asian equity markets traded with a non-committal tone as participants reflected on the choppy price action stateside
• US Treasury Secretary Mnuchin made a request for the Fed to return unused CARES Act funds and shelved several programs that utilize those funds
• This prompted a response from the Fed which would prefer to continue with the full suite of emergency facilities to support the economy
• Staff for US House Speaker Pelosi, Senate Majority Leader McConnell, Senate Minority Leader Schumer and House Minority Leader McCarthy are to meet today to discuss the omnibus spending package
• UK and EU are reportedly aiming to strike a barebones Brexit agreement by next week, possibly as early as Monday
• In FX markets, the DXY has slipped further below 92.50, EUR/USD has firmed despite recovery fund squabbles, GBP/USD remains elevated
• Looking ahead, highlights include UK retail sales, EZ consumer confidence, ECB's Lagarde, Fed's Kaplan, Barkin, George

CORONAVIRUS UPDATE

US COVID-19 cases +165,087 (prev. + 164,382) and deaths +1,836 (prev. + 1,602), while a major newswire tally stated that US cases rose by a record of at least 187,226 to a total of 11.74mln and deaths rose by at least 2023 to a total of 252.5k. New York cases +5,310 (prev. +5,294), positivity rate 2.72% (prev. 3.43%), hospitalizations 2,276 (prev. 2,202) and deaths + 31 (prev. +35). It was also reported that California Governor Newsom issued a 2200-0500 curfew and stay at home order for purple tier counties which will last for 4 weeks and affect over 90% of the state's population from Saturday. (Newswires)

WHO advised against the use of Gilead's (GILD) Remdesivir in patients hospitalized with COVID-19 and said evidence has no meaningful effect on mortality or other important outcomes for COVID-19 patients, while the guideline panel still supports continued trials to evaluate Remdesivir to provide higher certainty of evidence for specific groups. Gilead later responded that Remdesivir is recognized as standard of care for treatment of hospitalized for COVID-19 in guidelines from many national organizations with recommendations based on robust evidence from multiple studies, while it is disappointed WHO guidelines appear to ignore this evidence at a time when cases are increasing dramatically globally. (Newswires)

US HHS's Azar expects Pfizer (PFE) to file application for FDA vaccine on Friday and Moderna (MRNA) to follow soon. There were separate comments from Johnson & Johnson’s (JNJ) Chief Scientist that they expect to know COVID-19 vaccine efficacy in January or February and that 60k people will be enrolled in the trial before 2021. (Newswires)

UK will set up dozens of mass vaccination centres once a vaccine is approved to immunise people against the virus. (Telegraph)

South Australia State Premier announced they are to lift restrictions earlier than expected which will be lifted midnight on Saturday but noted that the coronavirus cluster in the state remains dangerous. (Newswires)

ASIA

Asian equity markets traded with a non-committal tone as participants reflected on the choppy price action stateside where concerns regarding COVID-19 restrictions lingered and although reports of congressional staffers were meeting to discuss the omnibus spending package and coronavirus relief, provided tailwinds for the major indices heading into the closing bell, the advances in US futures were eventually wiped out after hours. This was following a request by US Treasury Secretary Mnuchin for the Fed to return unused CARES Act funds to the Treasury and decision to shelve several programs that utilize those funds including the Main Street Facility, Term Asset-backed Facility, Primary and Secondary Corporate Credit Facilities and the Municipal Liquidity Facility, which in turn prompted a dissenting response from the Fed which would prefer to continue with the full suite of emergency facilities to support the economy. ASX 200 (-0.1%) was kept afloat for most the session amid strength in tech and with financials also positive as CBA shares welcomed APRA’s decision to reduce the lender’s operational risk capital add-on, although IAG remained the worst performer after it flagged a post-tax provision of AUD 865mln due to the recent NSW court ruling. The index then gradually faltered and closed in the red weighed by weakness in the commodity sectors, while Nikkei 225 (-0.5%) underperformed following recent fluctuations in the currency, a spike in COVID-19 infections and with inflation data remaining in negative territory for a 3rd consecutive month. Hang Seng (+0.3%) and Shanghai Comp. (+0.3%) eked tentative gains amid broad indecision after the PBoC maintained its Loan Prime Rates as expected and continued to drain liquidity from the interbank market, while several mid-cap banking names were under pressure including China Everbright Bank and Industrial Bank Co. after reports China’s bond market regulator plans to conduct investigations on lenders involved in the bond issuance of the state-owned coal miner which recently defaulted. Finally, 10yr JGBs eked mild gains amid the underperformance in Japanese stocks and strength in T-notes after the Treasury asked for its funds back from the Fed, but with upside capped amid the enhanced liquidity auction for 2yr, 5yr, 10yr and 20yr JGBs which showed relatively inline results with the prior.

PBoC injected CNY 80bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 80bln. (Newswires)

PBoC set USD/CNY mid-point at 6.5786 vs. Exp. 6.5758 (Prev. 6.5484)

PBoC 1-Year Loan Prime Rate 3.85% vs. Exp. 3.85% (Prev. 3.85%). (Newswires) PBoC 5-Year Loan Prime Rate 4.65% vs. Exp. 4.65% (Prev. 4.65%)

US businesses in China are more optimistic and expect more stable bilateral relations under a Biden administration, according to reports citing a survey by the American Chamber of Commerce in Shanghai. (WSJ)

TikTok executives said it will be easier dealing with a Biden administration and they may not even have to do the Oracle deal, which will receive a review by the new administration over Oracle's ties to President Trump. (FBN)

Japanese National CPI (Oct) Y/Y -0.4% vs. Exp. -0.3% (Prev. 0.0%). (Newswires) Japanese National CPI Ex. Fresh Food (Oct) Y/Y -0.7% vs. Exp. -0.7% (Prev. -0.3%) Japanese National CPI Ex. Fresh Food & Energy (Oct) Y/Y -0.2% vs. Exp. -0.3% (Prev. -0.0%)

UK/EU

UK Chancellor Sunak is planning to announce a fresh squeeze on public sector pay in the government spending review next week. (The Guardian)

UK and EU are reportedly aiming to strike a barebones agreement by next week, possibly as early as Monday. There were also separate reports that UK-EU post-Brexit trade talks will continue despite the positive coronavirus test result for a member of EU negotiating team, according to BBC's Adler. (Telegraph/BBC/Twitter)

German Chancellor Merkel said Hungary and Poland made it clear that that they could not agree to the rule of law and both states cast a veto on the recovery fund which means the proposal cannot be sent to the European Parliament. Merkel stated that they will conduct discussions with the two states to see how progress can be made, while she does not want to speculate how the problem will be resolved and suggested we are just at the beginning of the matter. (Newswires)

UK GfK Consumer Confidence* (Nov) -33 vs. Exp. -34.0 (Prev. -31.0). (Newswires)

FX

In FX markets, the DXY retreated further away from the 92.50 level with pressure seen as risk appetite perked up heading into the Wall St close and although the upbeat mood somewhat dwindled, the recovery in the greenback has been minimal. Furthermore, recent mixed data releases including jobless claims numbers and the Treasury’s decision to cut off the Fed’s pandemic response tools, which prompted a rare reproach from the Fed, added to the lacklustre mood for the greenback. EUR/USD held on to yesterday’s gains despite the lack of breakthrough at the EU27 conference where Hungary and Poland stuck to their guns and continued to block the recovery fund, with support at 1.1865 providing a platform for the single currency, while GBP/USD oscillated around the 1.3250 level as it continued to hang on the Brexit negotiations with a mild boost seen after reports the UK and EU are aiming to strike a barebones agreement by next week, possibly as early as Monday. Elsewhere, USD/JPY attempted to nurse losses but remained beneath the 104.00 handle and antipodeans were rangebound with AUD/USD only marginally benefitting from the better than expected retail sales data, as upside was restricted amid the indecisive risk tone and following a weaker reference rate setting by the PBoC.

Australian Retail Sales (Oct P) M/M +1.6% vs. Exp. 0.3% (Prev. -1.5%). (Newswires)

Moody's affirmed Canada at AAA; Outlook Stable. (Newswires)

COMMODITIES

WTI crude futures were flat beneath USD 42.00/bbl as initial upside amid reports of congressional staffers meeting to discuss an omnibus spending package and COVID-19 relief, eventually lost steam. Gold prices kept to a tight range with the precious metal failing to take advantage of the lacklustre greenback and copper prices marginally outperformed and extended on the prior session’s intraday rebound from support at the USD 3.18/lb level.

US

USTs bull-flattened on Thursday amid the choppy risk tone and duration supply pressures now in the rear window. By settlement, 2s -0.6bps at 16.9bps, 10s -3.2bps at 85.1bps, and 30s -4.9bps; 10-year TIPS -2.1bps at -86.2bps and 30-year TIPS -3.6bps at -27.9bps; T-Note futures volumes were average. There wasn't any one catalyst for the upside today, instead, it appeared to be a combination of the choppy risk appetite and lacklustre data, all amid a louder chorus of US lockdown concerns which mounted overnight from the latest NYC restrictions. Block buys tied to hedge funds were reported in the wake of the higher than expected Initial Jobless Claims as well as the decline in the Philly Fed survey (albeit a smaller than expected drop). One desk noted that there was a noticeable absence of CTA bids today, which had been providing support earlier in the week in the face of the disappointing 20-year bond auction. Today's USD 12bln 10-year TIPS auction went down smoother, however, seeing yields test their lows in the aftermath and hugging those levels up into the futures settlement. Meanwhile, there has been a noticeable pick-up in talk around the Fed extending the average maturity of its asset purchases or increasing the total amount of purchases in recent sessions. These possibilities were alluded to today by Fed's Kaplan and Mester (both voters this year), although both expressed hesitancy to increased bond purchases, but did not rule out an extension of the average maturity of its asset purchases. Note, Treasury Dec-to-March futures roll has now begun - 10% of the T-Note roll now complete - which should accelerate in the sessions ahead, especially with the approaching Thanksgiving holiday causing participants to front-run the usual timeframe. T-note (Z0) futures settled 5+ ticks higher at 138-11+.

US Treasury Secretary Mnuchin asked the Fed to return unused CARES funds to the Treasury and requested that the Fed conduct a 90-day extension of the CPFF, PDCF, MMLF and PPP facility, while he stated the move would allow Congress to reappropriate approximately USD 455bln remaining from the CARES Act. This prompted a response from the Fed which stated it would prefer that the full suite of emergency facilities established during pandemic to continue to serve their important role as a backstop for the strained and vulnerable economy. Furthermore, Treasury Secretary Mnuchin also commented that the financial conditions are quite strong and hopes that USD 580bln in returned funds are used to help the economy through grant and not debt. (Newswires)

Fed's Bostic (2021 Voter) said he was a bit surprised by Treasury decision and it would be prudent to keep emergency facilities open given where the economy is,  while he added that uncertainty kept people from engaging in the economy and emergency lending tools were helpful. Furthermore, Bostic stated when households burn through their savings, it will be the tipping point requiring Fed engagement and noted there is risk of an economic contraction although it is not currently in his model. (Newswires)

Fed’s Kaplan (Voter) said he does not know if more Fed bond buying is the answer to deal with the rise in risks and that it is possible to extend maturities, but he personally would not increase the size of purchases. Kaplan added it is critical the emergency lending programs continue beyond year end and should only begin thinking about tapering those programmes into next year as long as they can see an end to the pandemic, while he also noted that 2021 will be a strong yea but reiterated the challenge will be getting through the next months. (Newswires)

Staff for US House Speaker Pelosi, Senate Majority Leader McConnell, Senate Minority Leader Schumer and House Minority Leader McCarthy are to meet today to discuss the omnibus spending package and coronavirus relief, according to a senior Democratic aide. However, a later report suggested that the new staff level talks were on appropriations and not necessarily a coronavirus stimulus bill, according to Fox's Pergram. (Newswires)

US President Trump's administration is to issue new rules aimed at reducing pharmaceutical prices on Friday. (WSJ)

US ELECTION UPDATE

US President-elect Biden said the Federal Reserve approach to USD has been in a positive direction, while he added that he has made his decision on Treasury Secretary and it will be announced either before or after thanksgiving. Furthermore, Biden stated that President Trump’s challenge to his election victory is totally irresponsible, debilitating and sends a horrible message, while he has not ruled out legal action against the Trump administration or the General Services Administration regarding the transition. (Newswires)

US President Trump tweeted in which he continued to suggest election irregularities in Michigan and noted that a day after the election, Biden received a dump of 134,886 votes at 6:31AM. (Twitter)

Georgia Secretary of State Raffensperger said the hand audit of ballots has not altered Biden's victory in the state, while it was declared that the Georgia recount confirmed that Biden won the state's Presidential contest. (Newswires)