• European bourses are US futures are upbeat continuing the constructive APAC performance; ES +0.7%
• China saw mixed inflation numbers; CPI printed below estimates but PPI topped forecasts for a record increase in factory gate prices
• DXY has been under pressure and sub-94.00 throughout the morning while core debt grinds higher but Gilts lag
• The EU is reportedly mulling a move that would restrict the European Court of Justice (ECJ) from policing the Northern Ireland Protocol
• Turkish President Erdogan dismissed three central bank monetary policy committee members and named replacements
• Looking ahead, highlights include US IJC, Fed's Bowman, Bostic, Bullard, Daly, Williams, Harker, Logan, BoE's Mann
• Earnings include Bank of America, Wells Fargo, Citigroup, Morgan Stanley, Walgreens Boots

CORONAVIRUS UPDATE

FDA analysis suggested that Johnson & Johnson (JNJ) has not presented robust evidence for booster shots. (Newswires)

ASIA

A constructive mood was seen across Asia-Pac stocks with the region building on the mild positive bias stateside where the Nasdaq outperformed as tech and growth stocks benefitted from the curve flattening, with global risk appetite unfazed by the firmer US CPI data and FOMC Minutes that suggested the start of tapering in either mid-November of mid-December. The ASX 200 (+0.5%) traded higher as tech stocks found inspiration from the outperformance of US counterparts and with the mining sector buoyed by gains in underlying commodity prices. The Nikkei 225 (+1.5%) was the biggest gainer amid currency-related tailwinds and with the latest securities flow data showing a substantial shift by foreign investors to net purchases of Japanese stocks during the prior week. The KOSPI (+1.5%) conformed to the brightening picture amid signs of a slowdown in weekly infections, while the Singapore’s Straits Times Index (+0.3%) lagged for most of the session following weaker than expected Q3 GDP data, and after the MAS surprisingly tightened its FX-based policy by slightly raising the slope of the SGD nominal effective exchange rate (NEER). The Shanghai Comp. (U/C) was initially kept afloat but with gains capped after slightly softer than expected loans and financing data from China and with participants digesting mixed inflation numbers in which CPI printed below estimates but PPI topped forecasts for a record increase in factory gate prices, while there was also an absence of Stock Connect flows with participants in Hong Kong away for holiday. Finally, 10yr JGBs were higher after the recent curve flattening stateside and rebound in T-notes with the US longer-end also helped by a solid 30yr auction, although gains for JGBs were capped amid the outperformance in Tokyo stocks and mostly weaker metrics at the 5yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net daily drain. (Newswires) PBoC set USD/CNY mid-point at 6.4414 vs exp. 6.4372 (prev. 6.4612)

Monetary Authority of Singapore slightly raised the slope of the SGD NEER policy band from previous 0% which was a surprise policy tightening, while it maintained the width and level of the policy band unchanged. MAS said the appreciation path of the policy band will ensure price stability over the medium-term, while recognising risks to the economic recovery. (Newswires)

China Evergrande (3333 HK) is yet to pay a USD 28mln payment on Changchun land purchase, according to local government. Seperately, Modern Land (1107 HK) has been downgraded to 'C' by Fitch, due to distressed debt exchange. (Newswires)

• Chinese CPI MM (Sep) 0.0% vs. Exp. 0.3% (Prev. 0.1%)
• Chinese CPI YY (Sep) 0.7% vs. Exp. 0.9% (Prev. 0.8%)
• Chinese PPI YY (Sep) 10.7% vs. Exp. 10.5% (Prev. 9.5%)
• Singapore GDP QQ (Q3 A) 0.8% vs. Exp. 1.1% (Prev. -1.8%)
• Singapore GDP YY (Q3 A) 6.5% vs. Exp. 6.6% (Prev. 14.7%)

US

Fed's Bowman (voter) said she is very comfortable with beginning tapering bond purchase this year, preferably in November, and stated that benefits from Fed's asset purchases are now likely outweighed by costs. Bowman noted she is particularly concerned asset purchases are pushing up valuations or that continued easy policy poses risks to inflation expectations, while she suggested Fed's tools are not well suited to addressing labour supply issues although expects steady progress towards Fed's inflation and employment goals in approaching months. (Newswires)

UK/EU

The EU is reportedly mulling a move that would restrict the European Court of Justice (ECJ) from policing the Northern Ireland Protocol. (Times)

The lorry driver crisis could worsen amid a strike at the UK Driving and Vehicle Licensing Agency (DVLA). (Telegraph)

US officials are said to be hopeful of reaching an agreement with EU regarding steel tariff dispute by month-end, according to a source. (Newswires)

Germany's Economic Institutes look for consumer prices to increase by 3.0% in 2021 and 2.5% in 2022; overall GDP to growth by 2.4% in 2021 and 4.8% in 2022. (Newswires)

BoE's Tenreyro says raising interest rates to counter increasing prices in areas such as energy and semiconductors would be “self-defeating” if those rises prove to be one-offs. (Newswires)

• UK RICS Housing Survey (Sep) 68 vs. Exp. 68 (Prev. 73, Rev. 72)

EQUITIES

Bourses in Europe have modestly extended on the upside seen at the European cash open (Euro Stoxx 50 +1.1%; Stoxx 600 +0.9%) in a continuation of the firm sentiment experienced overnight. US equity futures have also conformed to the broader upbeat tone, with gains seen across the ES (+0.7%), NQ (+0.8%), RTY (+0.8%) and YM (+0.7%). The upside comes despite a lack of overly pertinent newsflow, with participants looking ahead to a plethora of central bank speakers. The major indices in Europe also see a broad-based performance, but the periphery narrowly outperforms, whilst the SMI (Unch) lags amid the sectorial underperformance seen in Healthcare. Overall, the sectors portray somewhat of a cyclical tilt. The Basic Resources sector is the clear winner and is closely followed by Tech and Financial Services. Individual moves are scarce as price action is largely dictated by the macro picture, but the tech sector is led higher by gains in chip names after the world's largest contract chipmaker TSMC (+3.1% pre-market) reported strong earnings and upgraded its revenue guidance.

TSMC (2330 TW) Q3 sales TWD 414.67bln (prev. 356.4bln YY; 372.1bln QQ), gross profit 212.7bln (prev. 190.5bln YY; 186.2bln QQ), net income 156.3bln (prev. 137.3bln YY; 134.4bln QQ)

• Sees FY21 revenue +24% YY vs exp. above 20%; expect capacity to remain tight this year and next year.
• To construct a speciality factory in Japan, to start operating in late-2024; does not rule out a site in Europe or similar.
• Expects slightly more than 500mln units of 5G smartphones to be sold this year.
• TSM +3.1% in pre-market trade

UnitedHealth Group Inc (UNH) Q3 2021 (USD): Adj. EPS 4.52 (exp. 4.41/4.20 GAAP), Revenue 72.3bln (exp. 71.19bln); increases FY net earnings outlook. (Business Wire) +2.1% in pre-market trade

FX

DXY - The Dollar and index by default have retreated further from Tuesday’s 2021 peak for the latter as US Treasury yields continue to soften and the curve realign in wake of yesterday’s broadly in line CPI data and FOMC minutes that set the schedule for tapering, but maintained a clear differential between scaling down the pace of asset purchases and the timing of rate normalisation. Hence, the Buck is losing bullish momentum with the DXY now eying bids and downside technical support under 94.000 having slipped beneath an early October low (93.804 from the 5th of the month vs 93.675 a day earlier) and the 21 DMA that comes in at 93.770 today between 94.090-93.754 parameters before the next IJC update, PPI data and a heavy slate of Fed speakers.

NZD/AUD - No real surprise that the Kiwi has been given a new lease of life given that the RBNZ has already taken its first tightening step and put physical distance between the OCR and the US FFR, not to mention that the move sparked a major ‘sell fact’ after ‘buy rumour’ reaction. However, Nzd/Usd is back on the 0.7000 handle with additional impetus via favourable tailwinds down under as the Aud/Nzd cross is now nearer 1.0550 than 1.0600 even though the Aussie is also taking advantage of the Greenback’s fall from grace to reclaim 0.7400+ status. Note, Aud/Usd may be lagging somewhat on the back of a somewhat labour report overnight as the employment tally fell slightly short of expectations and participation dipped, but the jobless rate fell and full time jobs rose. Moreover, RBA Deputy Governor Debelle repeated that circumstances are different for Australia compared to countries where policy is tightening, adding that employment is positive overall, but there is not much improvement on the wage front.

CAD/GBP/CHF - The next best majors in terms of reclaiming losses vs their US counterpart, with the Loonie also encouraged by a firm bounce in oil prices and other commodities in keeping with a general recovery in risk appetite. Usd/Cad is under 1.2400, while Cable is now over 1.3700 having clearly breached Fib resistance around 1.3663 and the Franc is probing 0.9200 for a big figure-plus turnaround from recent lows irrespective of mixed Swiss import and producer prices.

EUR/JPY - Relative laggards, but the Euro has finally hurdled chart obstacles standing in the way of 1.1600 and gradually gathering impetus to pull away from decent option expiry interest at the round number and just above (1.5 bn and 1 bn 1.1610-20), and the Yen regrouping around the 113.50 axis regardless of dovish BoJ rhetoric. In short, board member Noguchi conceded that the Bank may have little choice but to extend pandemic relief support unless it becomes clear that the economy has returned to a pre-pandemic state, adding that more easing may be necessary if the jobs market does not improve from pent-up demand, though he doesn't see and immediate need to top up stimulus or big stagflation risk.

SCANDI/EM - Less frothy than expected Swedish inflation metrics have not prevented the Sek from emulating the Nok and rallying beyond 10.0000 against the Eur, but the latter is keeping pace as Brent bounces back above Usd 84/brl to give the Rub a much needed boost as well. Similarly, the Sgd is on a firmer footing following a surprise move by the MAS to tweak the NEER and allow a bit more appreciation, while the Zar continues to track Gold’s advances towards Usd 1800/oz. Conversely, the Cnh and Cny have pared some gains after contrasting Chinese inflation data via benign CPI and hot PPI, and the Try has suffered yet another hefty blow on credibility concerns as Turkey reshuffles its CBRT personal pack once again.

Turkish President Erdogan dismissed three central bank monetary policy committee members and named replacements including Taha Cakmak as the Deputy Governor. (Newswires)

• Australian Employment (Sep) -138.0k vs. Exp. -137.5k (Prev. -146.3k)
• Australian Full Time Employment (Sep) 26.7k (Prev. -68.0k)
• Australian Unemployment Rate (Sep) 4.6% vs. Exp. 4.8% (Prev. 4.5%)
• Australian Participation Rate (Sep) 64.5% vs. Exp. 64.7% (Prev. 65.2%)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1555-65 (730M), 1.1600 (1.5BLN), 1.1610-20 (1BLN)
• USD/JPY: 112.50 (680M), 113.00 (1BLN), 113.55 (255M), 113.75-90 (840M)

FIXED

Bunds have backed off from best levels after exceeding prior feats of recovery and scaling several chart hurdles on the way to setting a fresh 169.29 w-t-d best, but the omens are more promising in cash terms as the corresponding 10 year yield approaches -15 bp from above -10 bp at the new cycle highs. Meanwhile, US Treasuries remain relatively sedate and the curve profile is considerably calmer as the dust settles post-US CPI and FOMC minutes that did not rattle the long end, but gave the short end some assurance on rates as the spotlight shifts back to the labour market for claims, albeit with pipeline prices providing more evidence of inflation pressures. Conversely, Gilts are lagging having waned ahead of 125.00 and the Short Sterling strip has topped out after trading as much as 2-4.5 ticks above par when BoE’s Tenreyro said raising interest rates to counter increasing prices in energy and semiconductors would be ‘self-defeating’ if those rises prove to be one-offs. Also ahead, more global Central Bank speakers, including ECB’s Knot who is unlikely to share President Lagarde’s transitory inflation views given recent more hawkish commentary on the matter.

COMMODITIES

WTI and Brent front month futures are continuing the grind higher seen since the European close yesterday as the risk tone remains supportive and in the aftermath of an overall bullish IEA oil market report. The IEA upgraded its 2021 and 2022 oil demand forecasts by 170k and 210k BPD respectively, which contrasts the EIA STEO and the OPEC MOMR – with the former upping its 2021 but cutting 2022 forecast, whilst the OPEC MOMR saw the 2021 demand forecast cut and 2022 was maintained. The IEA report however noted that the ongoing energy crisis could boost oil demand by 500k BPD, and oil demand could exceed pre-pandemic levels in 2022. On this, China has asked Russia to double electricity supply between November-December. The morning saw commentary from various energy ministers, but perhaps the most telling from the Russian Deputy PM Novak who suggested Russia will produce 9.9mln BPD of oil in October (in-line with the quota), but that Russia has no problem in increasing oil output which can go to 11.3mln BPD (Russia’s capacity) and even more than that, but output will depend on market situation. Long story short, Russia can ramp up output but is currently caged by the OPEC+ pact. WTI Nov extended on gain about USD 81/bbl to a current high of USD 81.41/bbl (vs 80.41/bbl low) while its Brent counter topped USD 84.00/bbl to a USD 84.24/bbl high (vs 83.18/bbl low). As a reminder, the weekly DoEs will be released at 16:00BST/11:00EDT on account of the Columbus Day holiday. Gas prices have also moved higher in intraday, with the UK Nat Gas future +5.5% at the time of writing. Returning to the Russian Deputy PM Novak who noted that Nord Stream 2 will be ready for work in the next few days, still expects certification to occur and commercial supplies of gas via Nord Stream 2 could start following certification. Elsewhere, spot gold and silver have been drifting higher as the Buck wanes, with spot gold topping its 200 DMA (1,7995/oz) and in striking distance of its 100 DMA (1,799/oz) ahead of the USD 1,800/oz mark. Over to base metals, LME copper is again on a firmer footing, owing to the overall constructive tone across the market. Dalian iron ore meanwhile fell for a second straight day in a continuation of the downside seen as Beijing imposed tougher steel output controls for winter. World Steel Association also cut its global steel demand forecast to +4.5% in 2021 (prev. forecast +5.8%); +2.2% in 2022 (prev. forecast 2.7%).

US Private Energy Inventories (bbls): Crude +5.2mln (exp. +0.7mln), Cushing -2.3mln, Gasoline -4.6mln (exp. -0.1mln), Distillate -2.7mln (exp. -0.9mln). (Newswires)

UAE Energy Minister says the UAE has spare capacity; demand is peaking, especially in gas. (Newswires)

Russian Deputy PM Novak says Russia will produce 9.9mln BPD of oil in October (in-line with OPEC+ quota); Russia has no problem in increasing oil output can go to 11.3mln BPD and even more than that; output will depend on market situation. Separately, Novak says Nord Stream 2 will be ready for work in the next few days, still expects certification to occur; commercial supplies of gas via Nord Stream 2 could start following certification. (Newswires)

China has asked Russia to double electricity supply between November-December, according to Tass. (Newswires)

A second fire broke out at South Africa's Richards Bay Port, according to South Africa's Times; details remain light; Coal Terminal has not been affected by the fire. (Newswires)

World Steel Association forecasts global steel demand +4.5% in 2021 (prev. forecast +5.8%); +2.2% in 2022 (prev. forecast 2.7%). (Newswires)