• European bourses kicked the day off softer but have since drifted higher; US equity futures nursed earlier losses
• In FX, DXY is off overnight lows, USD/JPY tested 113.00 to the downside, USD/TRY extended above 9.00
• EU antitrust regulators is reportedly likely to open an investigation into Nvidia's (NVDA) USD 54bln bid from Arm
• Chip supply shortage eased in China in September; chip supply is expected to improve in Q4
• Russia not ruling out temporary shutdown of diplomatic missions in US, according to Sputnik
• Looking ahead, highlights include ECB's Knot, Lane, Elderson, Fed's Clarida, Bostic, Barkin, Brainard, Kaplan, supply from the 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 (-0.3%) 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 (-1.4%) 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 (-1.4%) and Shanghai Comp. (-1.3%) 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)

China is said to expand its Beijing head office and create departments to oversea deals and probes, according to sources. (Newswires)

Chinese Commerce Ministry has extended its anti-dumping duties on imported polyamide-66 from the US for five years as of October 13th. (Newswires)

Hong Kong issues storm signal No. 8. Hong Kong Exchange says after-hours trading will be suspended at 5.35pm local time due to the typhoon signal. (Newswires) Hong Kong Exchanges and Clearing will scrap pre-market trading if No. 8 is in force between 7:00 and 9:00HKT, according to its trading arrangements.

CENTRAL BANKS

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)

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)

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)

• UK ILO Unemployment Rate (Aug) 4.5% vs. Exp. 4.5% (Prev. 4.6%)
• UK Employment Change (Aug) 235k vs. Exp. 243k (Prev. 183k)
• UK Avg Earnings (Ex-Bonus) (Aug) 6% vs. Exp. 6.0% (Prev. 6.8%)

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)

• German ZEW Current Conditions (Oct) 21.6 vs. Exp. 28.5 (Prev. 31.9)
• German ZEW Economic Sentiment (Oct) 22.3 vs. Exp. 24.0 (Prev. 26.5)

EQUITIES

European bourses kicked the day off choppy but have since drifted higher (Euro Stoxx 50 -0.4%; Stoxx 600 Unch) as the region remains on standby for the next catalyst, and as US earnings season officially kicks off tomorrow – not to mention the US and Chinese inflation metrics and FOMC minutes. US equity futures have also nursed earlier losses and reside in relatively flat territory at the time of writing, with broad-based performance seen in the ES (Unch), NQ (+0.2%), RTY (-0.2%), YM (Unch). From a technical standpoint, some of the Dec contracts are now hovering around their respective 100 DMAs at 4,346 for the ES, 14,744 for the NQ, whilst the RTY sees its 200 DMA at 2,215, and the YM topped its 21 DMA at 34,321. Back to Europe, cash markets see broad-based downside with the SMI (-0.1%) slightly more cushioned amid gains in heavyweight Nestle (+0.6%). Sectors kicked off the day with a defensive bias but have since seen a slight reconfiguration, with Real Estate now the top performer alongside Food & Beverages, Tech and Healthcare. On the flip side, Basic Resources holds its position as the laggard following yesterday's marked outperformance and despite base metals (ex-iron) holding onto yesterday's gains. Autos also reside at the bottom of the bunch despite constructive commentary from China's Auto Industry Body CAAM, who suggested the chip supply shortage eased in China in September and expected Q4 to improve, whilst sources suggested Toyota aims to make up some lost production as supplies rebound. In terms of individual movers, GSK (+2.3%) shares spiked higher amid reports that its USD 54bln consumer unit has reportedly attracted buyout interest, according to sources, in turn lifting the FTSE 100 Dec future by 14 points in the immediacy. Elsewhere, easyJet (-1.9%) gave up its earlier gains after refraining on guidance, and despite an overall constructive trading update whereby the Co. sees positive momentum carried into FY22, with H1 bookings double those in the same period last year. Co. expects to fly up to 70% of FY19 planned capacity in FY22. In terms of commentary, the session saw the Germany ZEW release, which saw sentiment among experts deteriorate, citing the persisting supply bottlenecks for raw materials and intermediate products. The release also noted that 49.1% of expects still expect inflation to rise further in the next six months. Heading into earnings season, experts also expect profits to go down, particularly in export-tilted sectors such a car making, chemicals and pharmaceuticals. State-side, sources suggested that EU antitrust regulators are reportedly likely to open an investigation into Nvidia's (+0.6% Pre-Mkt) USD 54bln bid from Arm as concessions were not deemed sufficient.

EU antitrust regulators is reportedly likely to open an investigation into Nvidia's (NVDA) USD 54bln bid from Arm as concessions were not deemed sufficient, sources state. (Newswires)

GlaxoSmithKline's (GSK LN) USD 54bln consumer unit has reportedly attracted buyout interest, according to sources. (Newswires)

Chip supply shortage eased in China in September; expects chip supply to improve in Q4, according to Auto Industry Body CAAM. (Newswires)

Toyota Motors (7203 JT) is aiming to make up some lost production, as supplies rebound, sources said. (Newswires)

FX

DXY - The Buck has reclaimed a bit more lost ground in consolidatory trade rather than any real sign of a change in fundamentals following Monday’s semi US market holiday for Columbus Day and ahead of another fairly light data slate comprising NFIB business optimism and JOLTS. However, supply awaits the return of cash Treasuries in the form of Usd 58 bn 3 year and Usd 38 bn 10 year notes and Fed commentary picks up pace on the eve of FOMC minutes with no less than five officials scheduled to speak. Meanwhile, broad risk sentiment has taken a knock in wake of a late swoon on Wall Street to give the Greenback and underlying bid and nudge the index up to fresh post-NFP highs within a 94.226-433 band.

NZD/AUD - A slight change in fortunes down under as the Kiwi derives some comfort from the fact that the Aud/Nzd has not breached 1.0600 to the upside and Nzd/Usd maintaining 0.6950+ status irrespective of mixed NZ electric card sales data, while the Aussie takes on board contrasting NAB business conditions and confidence readings in advance of consumer sentiment, with Aud/Usd rotating either side of 0.7350.

EUR/CAD/GBP/CHF/JPY - All rangy and marginally mixed against their US counterpart, as the Euro straddles 1.1560, the Loonie meanders between 1.2499-62 with less fuel from flat-lining crude and the Pound tries to keep sight of 1.3600 amidst corrective moves in Eur/Gbp following a rebound through 0.8500 after somewhat inconclusive UK labour and earnings data, but hardly a wince from the single currency even though Germany’s ZEW survey missed consensus and the institute delivered a downbeat assessment of the outlook for the coming 6 months. Elsewhere, the Franc continues to hold within rough 0.9250-90 extremes and the Yen is striving to nurse outsize losses between 113.00-50 parameters, with some attention to 1 bn option expiries from 113.20-25 for the NY cut. Note also, decent expiry interest in Eur/Usd and Usd/Cad today, but not as close to current spot levels (at the 1.1615 strike in 1.4 bn and between 1.2490-1.2505 in 1.1 bn respectively).

SCANDI/EM - The Nok and Sek have bounced from lows vs the Eur, and the latter perhaps taking heed of a decline in Sweden’s registered jobless rate, but the Cnh and Cny remain off recent highs against the backdrop of more Chinese regulatory rigour, this time targeting state banks and financial institutions with connections to big private sector entities and the Try has thrown in the towel in terms of its fight to fend off approaches towards 9.0000 vs the Usd. The final straw for the Lira appeared to be geopolitical, as Turkish President Erdogan said they will take the necessary steps in Syria and are determined to eliminate threats, adding that Turkey has lost its patience on the attacks coming from Syrian Kurdish YPG controlled areas. 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. However, Usd/Try is off a new ATH circa 9.0370 as oil comes off the boil and ip came in above forecast.

Japanese PM Kishida says JPY weakening would help boost exports and would also raise corporate costs by lifting import prices. (Newswires)

Major FX OpEx

• EUR/USD: 1.1615 (1.4BLN)
• USD/CAD: 1.2490-1.2505 (1.1BLN)
• USD/JPY: 113.20-25 (1BLN)

FIXED INCOME

Bonds have overcome a few more wobbles and setbacks that resulted in Bunds and Gilts hitting new intraday lows on Eurex and Liffe, at 168.62 and 123.68 respectively before rebounding more firmly to extend the other end of their ranges. The 10 year German benchmark has now tested 169.00 for a 22 tick gain on the day and may have gleaned traction from the fact that Monday’s low held (168.57) not to mention deriving impetus from a gloomy ZEW survey and well received Schatz auction. Meanwhile, its UK peer is within a single of 124.00 in wake of a similarly strong DMO sale of 2051 stock and US Treasuries are hovering near best levels with the curve re-flattening awaiting the return of cash markets for a busier pm agenda.

EU debut green bond receives orders in excess of EUR 120bln with spread set at mid-swaps -8bps (vs. prev. -5bps). (Newswires)

COMMODITIES

WTI and Brent front-month futures are choppy and trade on either side of the flat mark in what is seemingly some consolidation and amid a distinct lack of catalysts to firmly dictate price action. The complex saw downticks heading into the European cash open in tandem with the overall market sentiment at the time, albeit the crude complex has since recovered off worst levels. News flow for the complex has also remained minimal as eyes now turn to any potential intervention by major economies in a bid to stem the pass-through of energy prices to consumers heading into winter. On that note, UK nat gas futures have been stable on the day but still north of GBP 2/Thm. Looking ahead, the weekly Private Inventory data has been pushed back to tomorrow on account of yesterday's Columbus Day holiday. Tomorrow will also see the release of the OPEC MOMR and EIA STEO. Focus on the former will be on any updates to its demand forecast, whilst commentary surrounding US shale could be interesting as it'll give an insight into OPEC's thinking on the threat of Shale under President Biden's "build back better" plan. Brent Dec trades on either side of USD 84/bbl (vs prev. 83.13-84.14 range) whilst WTI trades just under USD 81/bbl after earlier testing USD 80/bbl to the downside (USD 80-80.91/bbl range). Over to metals, spot gold and silver hold onto modest gains with not much to in the way of interesting price action, with the former within its overnight range above USD 1,750/oz and the latter still north of USD 22.50/oz after failing to breach the level to the downside in European hours thus far. In terms of base metals, LME copper is holding onto most of yesterday's gains, but the USD 9,500/t mark seems to be formidable resistance. Finally, Dalian and Singapore iron ore futures retreated after a four-day rally, with traders citing China's steel production regaining focus.

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

India says they are aware that some states are cutting power while selling power on exchanges at a high price. (Newswires)

EU Energy Commissioner Simson says gas costs will remain high throughout winter. (Newswires)

GEOPOLITICAL

Russia not ruling out temporary shutdown of diplomatic missions in US, according to Sputnik. (Sputnik) Russian Deputy Foreign Minister says there has been no progress in talks with the US and as such, cannot rule out the possibility of a further deterioration relations. (Newswires)

Russia's Kremlin says the Kuril islands are Russian territory and disagree with Japanese claiming sovereignty over the islands. (Newswires)