• European bourses are firmer this morning (Stoxx 50 +0.70%) seemingly unphased by the Fed/Treasury updates while US futures have been recouping losses and are now mixed/flat
• 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
• US HHS's Azar expects Pfizer (PFE) to file an application for FDA vaccine on Friday and Moderna (MRNA) to follow soon
• EU Envoy says the 3-main Brexit hurdles remain unresolved and the UK has not moved on these issues, talks will continue
• FX features a tentatively firmer DXY though peers are within narrow ranges thus far while USTs have given up Fed/Treasury induced upside
• Looking ahead highlights include EZ consumer confidence, Fed's Kaplan, Barkin & George

CORONAVIRUS UPDATE

California Governor Newsom issued a 22:00-05:00 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 (-0.4%) 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 (+0.4%) and Shanghai Comp. (+0.4%) 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)

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%)

US

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)

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)

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 Retail Sales MM* (Oct) 1.2% (Prev. 1.5%, Rev. 1.4%); YY* (Oct) 5.8% vs. Exp. 4.2% (Prev. 4.7%, Rev. 4.6%)

-        Ex-Fuel MM* (Oct) 1.3% vs. Exp. 0.1% (Prev. 1.6%, Rev. 1.5%); YY* (Oct) 7.8% vs. Exp. 5.9% (Prev. 6.4%)

-        ONS: consumers have commenced Christmas shopping earlier this year, and also seeing early discounting from a range of stores

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

EU Envoy says the 3-main Brexit hurdles remain unresolved and the UK has not moved on these issues, talks will continue; Senior EU Diplomat says that EU negotiators told envoys that an agreement with the UK is very close on most issues but differences remain on the three main ones. Subsequently, EU ambassadors were told that there is a good chance of a Brexit trade agreement subject to a political will, according to one diplomatic source. (Twitter/Newswires)

Hungarian PM says EU budget talks should continue and we will have an agreement in the end, State Radio; if the debate drags out then they will still launch planned development project but will instead fund them via borrowing on international markets. (Newswires)

ECB's de Guindos says his view is that the ECB's Q4 growth projections will not be met. (Newswires)

EQUITIES

European equities (Eurostoxx 50 +0.6%) trade with modest gains in the final trading session of the week with the selling seen late yesterday in the US failing to have much bearing on today’s European session. US futures are more despondent than transatlantic peers, but ultimately mixed/flat, in the wake of yesterday’s news that US Treasury Secretary Mnuchin has requested that the Fed returns unused CARES Act funds to the Treasury and decided to shelve several programs that utilize those funds. This 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. Additionally, reports that congressional staffers are set to meet to discuss the omnibus spending package and coronavirus relief were later tempered by Fox’s Pergam who noted that talks will likely be on appropriations and not necessarily a coronavirus stimulus bill. Performance for US futures in the pre-market has seen the ES lower by 0.2%, whilst the tech-heavy e-mini NASDAQ fares better and is largely unchanged while the e-mini Russell lags with declines of 0.2%. Gains across European indices are relatively broad-based, whilst sectors trade mostly firmer, albeit modestly so. Basic resources and oil & gas names sit near the top of the leaderboard in what has been a relatively sparse morning of corporate updates for the region. Thyssenkrupp (+5.4%) is the best performer in the Stoxx 600 thus far, however, this is more a paring back of some of yesterday’s heavy declines seen in the wake of its FY earnings. BAE Systems (+3.7%) trade higher once again in the wake of yesterday’s budget announcement from the UK Department of Defence. To the downside, Sage (-13.5%) sit at the foot of the Stoxx 600 after FY results underwhelmed, whilst Royal Mail (+0.3%) pullback from recent earnings inspired gains. 

FX

USD – Well that didn’t last long in terms of a revival, as the Buck retreats from Thursday’s recovery high having posted its first firmer close for 7 trading days in DXY terms and the index now hovering below 92.500 again within a lower 92.411-201 range. A late squeeze on Wall Street following reports that congressional staffers were discussing a spending bill, including further COVID-19 fiscal support, knocked the Greenback off its perch initially, and renewed pressure continued when it emerged that the Fed rebuffed a request from US Treasury Secretary Mnuchin to hand back untapped CARES Act funds. Some subsequent respite for the Dollar amidst fragile risk sentiment and specific issues/factors keeping rival currencies in check or depressed.

NZD/AUD – As noted at the outset, Kiwi outperformance goes somewhat against the grain as major counterparts remain largely confined, but the rebound in Nzd/Usd to revisit recent highs above 0.6900 looks mainly due to favourable crosswinds as Aud/Nzd gravitates closer to 1.0500 and the Aussie fails to sustain momentum on the 0.7300 handle despite more upbeat data (retail sales much stronger than expected in line with the latest labour metrics).

GBP – The Pound is holding up relatively well, all things considered, though like Aud/Usd, Cable has not gleaned traction from another month of UK consumer excesses as the ONS noted early seasonal buying and retail discounting as mitigating reasons for the bumper activity. Instead, Sterling bulls seem to banking or betting on positive Brexit news as trade negotiations carry on remotely and intensely between UK and EU representatives. However, latest word from Brussels via an EU envoy is that fishing, state aid and a level playing field are still unresolved due to a lack of movement on the British side. Cable is pivoting 1.3275 at present and Eur/Gbp is choppy either side of 0.8950.

CAD/JPY/CHF/EUR – Completing the set, Canadian retail sales could be more compelling for the Loonie compared to new home prices, as Usd/Cad trades towards the base of a 1.3051-88 band, but for now an unusually large option expiry at the 1.3100 strike (1.1 bn) appears intact. Conversely, the Yen may yet be drawn to similar size at 104.00 (1 bn) after several thwarted attempts to extend gains through Fib resistance protecting 103.50 of late in wake of weak Japanese CPI prints, while the Euro looks boxed in given decent expiries at 1.1850 and 1.1900 (1.1 bn and 1.3 bn respectively) not to mention the ongoing EU Budget and Rescue Fund stand-off or dovish ECB vibes. Elsewhere, the Franc remains tethered to 0.9100 and 1.0800 vs the Euro following several false breaks and ever wary of SNB presence.

EM – The Lira was already consolidating after respecting resistance circa 7.5000 on the back of yesterday’s aggressive CBRT tightening move when Turkish President Erdogan repeated his controversial higher rates spur inflation view and Usd/Try retraced a bit further in response having mostly ignored another hike in swap rates and a decline in consumer sentiment. Nevertheless, the pair has pared back from around 7.6160 as he seemed to accept the hike as a bitter pill to combat above target CPI and reiterated efforts to restore investor confidence in the Lira.

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)

Notable FX Expiries, NY Cut:

-       EUR/USD: 1.1850 (1.1BLN), 1.1885 (290M), 1.1900 (1.3BLN)

-       USD/CAD: 1.3000 (488M), 1.3050 (314M), 1.3100 (1.1BLN), 1.3115-20 (500M)

-       USD/JPY: 103.25 (500M), 103.75 (626M), 104.00 (1BLN)

Turkish President Erdogan says that yesterday's interest rate hike was a "bitter pill"; Inflation will come down, then interest rates will fall. Calls on citizens to bring savings from abroad back to Turkey. (Newswires)

FIXED INCOME

It’s more than déjà vu for core debt in terms of price action, albeit with ranges changing in certain cases, as overnight and early bullish or recovery momentum fades on a combination of risk and technical factors. Indeed, Bunds have retreated a bit further from their 175.51 Eurex high to 175.25, Gilts have lost grip of the 135.00 handle again, though off the new 143.90 Liffe low vs 135.12 at one stage and the 10 year T-note has pulled back from 138-20 to 138-13+ and just 1/32 from worst levels. Conversely, EU stocks have gradually erased and reversed losses and oil prices are stabilising, while the Dollar is also trying to find its feet again after another reversal on renewed US fiscal stimulus hopes and an altercation between the Fed and White House on unused funds for various liquidity schemes. Ahead, bond, index option and WTI futures expiries, more global Central Bank speakers, Canadian data and flash Eurozone consumer sentiment all due before the start of the G20 on Saturday.

COMMODITIES

Crude futures are modestly firmer this morning and have recouped the Treasury/Fed inspired downside just after the US equity close yesterday. Currently, WTI and Brent are firmer by around 1.0% and remain in relative proximity to the day’s peaks of USD 42.28/bbl and USD 44.70/bbl respectively. Much of this upside occurred in a mid-European morning spike with gains accelerating from ~0.5% firmer to the current +1.0% performance, such upside coincided with the continued grind higher in equities and notably with US futures moving in proximity to U/C for the session. Fundamentally, once again newsflow explicitly for the complex has been sparse with the broader macro narratives continuing to dictate things; a trend which may well remain in play until the month-end OPEC+ gathering; following this week’s JTC/JMMC events. Moving to metals, spot gold is essentially unchanged on the session and has meandered within a relatively tight USD sub-10/oz range since the European equity open. Separately, the weekly BofA flow show report highlights that over the last week gold saw its largest ever outflow totalling USD 4bln amid record inflows into equities across a two-week period.