• Asian equity markets traded mostly lower following the indecisive mood stateside where major indices gave back initial gains to finish negative
• Sentiment overnight was also hampered by tighter Beijing regulatory scrutiny and with US equity futures extending on losses
• In FX, the DXY sits firmly above 94.00, EUR/USD hovers around 1.1550 and GBP/USD maintains 1.36 status
• Looking ahead, highlights include UK Labour Market Report, German ZEW, ECB's Knot, Lane, Elderson, Fed's Clarida, Bostic, Barkin, Brainard, Kaplan, supply from the UK, Germany & US

CORONAVIRUS UPDATE

Merck (MRK) is reportedly aiming to double the supply of its antiviral pill to treat COVID-19 next year amid increased demand. (FT)

ASIA

Asian equity markets traded mostly lower following the indecisive mood stateside where the major indices gave back initial gains to finish negative amid lingering inflation and global slowdown concerns, with sentiment overnight also hampered by tighter Beijing scrutiny and with US equity futures extending on losses in which the Emini S&P retreated beneath its 100DMA. ASX 200 (-0.4%) was subdued as weakness in energy, tech and financials led the declines in Australia and with participants also digesting mixed NAB business survey data. Nikkei 225 (-0.9%) was on the backfoot after the Japan Center for Economic Research noted that GDP contracted 0.9% M/M in August and with retailers pressured after soft September sales updates from Lawson and Seven & I Holdings, while the KOSPI (-1.2%) was the laggard on return from holiday with chipmakers Samsung Electronics and SK Hynix subdued as they face new international taxation rules following the recent global minimum tax deal. Hang Seng (-1.1%) and Shanghai Comp. (-1.0%) adhered to the downbeat picture following a continued liquidity drain by the PBoC and with Beijing scrutinising Chinese financial institutions’ ties with private firms, while default concerns lingered after Evergrande missed yesterday’s payments and with Modern Land China seeking a debt extension on a USD 250mln bond to avoid any potential default. Finally, 10yr JGBs eked minimal gains amid the weakness in stocks but with demand for bonds limited after the recent subdued trade in T-note futures owing to yesterday’s cash bond market closure and following softer results across all metrics in the 30yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net drain. (Newswires) PBoC set USD/CNY mid-point at 6.4447 vs exp. 6.4455 (prev. 6.4479)

Chinese President Xi is reportedly zeroing in on links that China’s state banks and other financial stalwarts have with big private-sector players, in a widening push to curb capitalist forces in the economy, according to sources. This will focus on whether state-owned banks, investment funds, and financial regulators have become too chummy with private firms, and individuals that are suspected of having engaged in inappropriate dealings, are to be formally investigated and potentially charged, while any entities found to have gone astray would be disciplined. Furthermore, the PBoC and top banking, insurance and securities regulatory agencies are also coming under scrutiny for any signs of negligence and the Co.’s mentioned include Alibaba’s (9988 HK) affiliate Alipay, DiDi (DIDI), and Evergrande (3333 HK). (WSJ)

BoK kept the 7-Day Repo Rate unchanged at 0.75%, as expected, through a 5-2 vote with board members Lim and Suh the dissenters. BoK stated the economy will sustain growth and private consumption will improve gradually, while exports will sustain buoyancy and they are to monitor the virus spread, growth and inflation, as well as the build up of financial imbalances and policy changes abroad. Furthermore, BoK Governor Lee said they will decide whether to hike rates at the next meeting and will intervene in FX markets if needed. (Newswires)

UK/EU

UK Chancellor Sunak is reportedly planning GBP 2bln of cuts for government departments despite plans for a tax increase at this month's budget announcement, while think tank IFS warned that the Chancellor is facing difficult public finances. (The Guardian/FT)

Barclaycard UK September consumer spending rose 13.3% vs September 2019, while its survey found 90% of respondents were worried inflation could impact household finances. (Newswires)

France has been rebuffed by various European governments in its attempt to garner more EU support in its fight against Britain over fishing licenses. Just ten governments signed up to a declaration that urged "further technical work" on the matter. (Times)

Maersk is reportedly diverting large vessels away from the UK as the country's main port of Felixstowe is packed full of containers. (FT)

ECB Stournaras said those who see a rise in interest rates are "probably in a hurry" and that despite rising energy prices, the ECB does not expect a significant rise in inflation in the medium term. Furthermore, he added that those who closely monitor the energy situation do not propose a knee jerk reaction of monetary policy. (Newswires)

• UK BRC Retail Sales YY (Sep) -0.6% (Prev. 1.5%)

FX

In FX markets, the DXY traded steadily above the 94.00 level and was kept afloat by the subdued overnight risk tone, with the greenback holding on to most of yesterday’s gains that had coincided with the pullback on Wall Street and amid holiday-thinned conditions in North America, while focus for the dollar remains on the incoming inflation data and FOMC Minutes which are both due mid-week. EUR/USD was lacklustre with price action oscillating around the 1.1550 after several ECB speakers reiterated the transitory inflation view including ECB's Knot who stated that the effect of rising energy prices on inflation is temporary by nature and with both ECB’s Lane and ECB’s Stournaras suggesting the lack of expectations for a significant rise to inflation in the medium-term. There was also a note from Goldman Sachs that attributed the recent underperformance in the single currency to a combination of factors including lower real rate differentials and a relative downgrade to the bloc’s growth. GBP/USD lacked firm direction amid ongoing cross-Channel frictions due to the Northern Ireland Protocol and fishing rights, although the UK is reportedly to share a negotiating document on the protocol with the EU Commission this week. USD/JPY was little changed as it took a breather from the rally that propelled it to its highest since December 2018, while antipodeans were contained after mixed Business Survey data from Australia and due to the risk averse mood.

• Australian NAB Business Confidence (Sep) 13 (Prev. -5)
• Australian NAB Business Conditions (Sep) 5 (Prev. 14)

COMMODITIES

Commodities were mostly lacklustre in which WTI crude futures briefly continued to fade the prior day's early gains before finding a floor at the USD 80/bbl level, with the recent surge in energy prices spurring comments from officials including Qatar's Energy Minister who stated he is unhappy regarding high gas prices which are a negative for customers but also noted prices will "ease off slightly" as plants come back and with Russia pledging more supply to Europe. In addition, the White House is closely observing prices and are said to be using every tool to address anti-competitive practices in energy markets, while it was also reported that the European Commission is to study joint natgas purchases to address the surge in energy prices. Price action in gold was restricted by the steadfast greenback and tentativeness heading into this week's key events stateside, while copper was pressured amid the broad risk aversion.

White House official said they are closely monitoring the cost of oil and gas, while they are using every tool to address anti-competitive practices in the US and in global energy markets. Furthermore, they call on OPEC to do more to support the recovery and has communicated to several OPEC+ members. (Newswires)

European Commission is to study joint natural gas buying as a response to energy price spike and could collectively purchase gas to form a strategic reserve, according to draft document expected to be released on Wednesday. (Newswires)

Chevron (CVX) said it redeployed all personnel and restored full production at all Gulf of Mexico facilities that were shut-in for Storm Ida. (Newswires)

Chinese press reports noted that most coal mines in Shanxi that were shut due to floods have resumed operations. (Newswires)

GEOPOLITICAL

Russian President Putin spoke by phone with Germany's Merkel and France's Macron, where they spoke about Ukraine, according to reports citing the Kremlin. Furthermore, the German government said Zelensky, Merkel, and Macron called on Putin in their call earlier to help progress Normandy-format talks on Ukraine and all four agreed their foreign ministers should meet soon. (Newswires/RNA)

Turkish President Erdogan said they will take the necessary steps in Syria and are determined to eliminate threats, while he noted Turkey has lost its patience on the attacks coming from Syrian Kurdish YPG controlled areas towards Turkish forces. Furthermore, he stated there is a Tal Rifaat pocket controlled by YPG below Afrin and that an operation could target that area which is under Russian protection. (Newswires)

US

US President Biden will meet virtually with G20 leaders on Tuesday and is to deliver remarks regarding the global supply chain on Wednesday. (Newswires)