• European bourses are firmer but off best levels; US equity futures see broad-based gains
• In FX, the DXY is subdued below 94.00, with JPY lagging and USD/JPY firmly above 114.00
• PBoC says risks to the financial system from Evergrande are controllable and separately that China's inflation is under control
• US State Department spokesperson said they are "engaged in diplomacy" with OPEC+ members regarding output
• Bitcoin (BTC) Futures ETF was reported to not face opposition from the SEC, according to sources
• Looking ahead, highlights include NY Fed Manufacturing, Retail Sales, University of Michigan, Fed's Williams, Bullard
• Earnings from Goldman Sachs, Prologis, Schwab, PNC Financial Services

CORONAVIRUS UPDATE

Moderna announced that the FDA advisory committee unanimously voted to approve emergency use of a booster does of its COVID-19 vaccine and it estimates that a booster of up to 50mg dose level could result in as many as 1bln additional doses, while it was also reported that the US FDA will send Merck’s (MRK) COVID-19 pill to an advisory committee for review and is using a public forum to discuss any safety concerns ahead of a potential authorization. (Newswires)

ASIA

Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.8%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+1.5%) and Shanghai Comp. (+0.4%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today.

PBoC injected CNY 500bln in 1-year MLFs vs. CNY 500bln maturing with the rate maintained at 2.95%, while the central bank also injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires)

• PBoC set the USD/CNY mid-point at 6.4386 vs exp. 6.4402 (prev. 6.4414)

PBoC says China's PPI surge is to slow around end-2021 to 2022; adds that China's inflation is under control; CPI may maintain upward trend but within reasonable range. Will keep the CNY basically stable and increase CNY flexibility; will stick to normal monetary policy. (Newswires)

China is said to relax banks' mortgage limits through the rest of 2021. This follows earlier press reports citing experts that China is expected to further leverage its monetary policy in the remainder of 2021 by reducing the cash that banks must hold in reserve to bolster the economy. (Newswires/China Economic Net)

US GOP Senators Rubio, Cornyn and Scott call on the Biden administration to blacklist Huawei's former unit Honor. In relevant news, GOP Senator Cotton delayed the vote on a key Commerce Department nominee over China export control policy questions. (Newswires)

Japanese PM Kishida reportedly pledges to steer Japan away from Abenomics and Finance Minister Suzuki separately commented that PM Kishida instructed him to work on additional tax system for jobs. (Newswires/FT)

BoJ is likely to cut growth forecast as supply constraints hit output, sources say. (Newswires)

EVERGRANDE

PBoC says Evergrande's (3333 HK) risks to financial system controllable; China has asked banks to keep stable and orderly loans to real estate; PBoC has urged developers and shareholders to fulfill debt obligations. PBoC says authorities urge Evergrande to step up asset disposal and resumption of projects. Spillover effects are controllable. Most China property developers are in sound financial situation. (Newswires)

Hong Kong's Financial Reporting Council is probing Evergrande's (3333 HK) 2020 annual accounts and 2021 interim accounts amid concerns surrounding its financial statements. Separately, China's state-owned Yuexi Property (123 HK) has reportedly dropped its USD 1.7bln plan to buy Evergrande's (3333 HK) Hong Kong HQ building amid worries over Evergrande's financial health, sources state. Additionally, S&P downgrades Chinese property developer Aoyuan (3883 HK) to "B"; outlook negative, due to elevated leverage and tightened liquidity. (Newswires)

Chinese President Xi says China is to coordinate the development of the property sector with the economy; to speed up reforms in monopoly industries. (Newswires)

US

Fed's Barkin (2021, 2024 voter) said FOMC September guidance that tapering may soon be warranted was advance warning the Fed had promised and noted there is still a lot to learn on whether recent inflation levels will be sustained and how further is maximum employment. Barkin also said it was very clear in early summer that COVID-19 was driving inflation and that inflation today looks broad based, while he added it is a sensible time to talk about taper as that gives time to figure out what's happening with inflation. Barkin also said he is willing to be patient on allowing time for Americans who left the labour force to come back to it and hopes that tapering will be a positive move in the expectations-setting process for inflation. (Newswires)

Fed's Harker (2023 voter) said it will soon be time to begin tapering monthly purchases and that he wouldn't expect a rate hike until late 2022 or early 2023 unless the inflation picture shifts dramatically. Furthermore, Harker sees GDP growth of around 5.5% this year and 3.5% next year, while he forecasts inflation at 4% this year and a bit over 2% next year, but noted that there is upside risk inflation will run higher than his forecast. (Newswires)

NY Fed's Logan said the standing repo facility and FIMA repo facility should support smooth functioning of treasury markets. Logan added the reverse repo facility has not led to large flights to safety nor affected the structure of money markets and expects its usage to come down over time, while there is progress in transition away from Libor needs to accelerate. (Newswires)

US President Biden signed the legislation to raise the US debt limit, as expected. (Newswires)

Bitcoin Futures ETF was reported to not face opposition from the SEC. (Newswires)

UK/EU

Sources suggested that UK ministers were pleasantly surprised by how far the EU had moved in their proposals. (Times) On the subject, UK Brexit Minister Frost says the EU's proposals, as they stand, are ultimately unacceptable and the governance issue needs to be addressed seriously, Politico

EU nations want the European Commission to prepare a contingency plan for a trade war with the UK in case the latter suspends parts of the Brexit agreement. (FT)

Germany's SPD, Greens and FDP plan a statement following negotiations; set for 12:00BST/07:00EDT timing via der Spiegel. (Newswires/der Spiegel)

GEOPOLITICAL

US Secretary of State Blinken met with Saudi Foreign Minister bin Farhan Al Saud in which they exchanged views on the Iranian nuclear program and international talks regarding this, according to the Saudi Foreign Ministry. In related news, Saudi Arabia is reportedly serious about talks with Iran and was mulling permitting Iran to reopen its Jeddah consulate, although talks have not made sufficient progress to restore full diplomatic relations. The report added that Saudi's Foreign Minister described talks with Iran as cordial and that negotiations were exploratory. (Newswires/FT)

Iran says it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman; discussion at end-October will be EU-Iran only. However, another source described these discussions as being 'talks for talks'. (Twitter)

EQUITIES

Bourses in Europe have held onto the modest gains seen at the cash open (Euro Stoxx 50 +0.4%; Stoxx 600 +0.3%), but the region is off its best levels with the upside momentum somewhat faded heading into the US open, and amidst a lack of fresh newsflow. US equity futures have remained in positive territory, although the latest leg lower in bonds has further capped the tech-laden NQ (+0.2%), which underperforms vs the ES (+0.3%), YM (+0.3%) and RTY (+0.7%), with traders on the lookout for another set of earnings, headlined by Goldman Sachs at 12:25BST/07:25EDT. Back to Europe, bourses see broad-based gains, whilst sectors are mostly in the green with clear underperformance experienced in defensives, with Telecoms, Utilities, Healthcare and Staples at the foot of the bunch. On the flipside, Banks reap rewards from the uptick in yields, closely followed by Travel & Leisure, Autos & Parts and Retail. Renault (+4%) drives the gains in Autos after unveiling a prototype version of the Renault Master van that will go on sale next year. Travel & Leisure is bolstered by the ongoing reopening trade with potential tailwinds heading into the Christmas period. Retail meanwhile is boosted by Hugo Boss (+1.8%) topping forecasts and upgrading its guidance.

Toyota (7203 JT) is to cut global vehicle production by 100-150k vehicles for November according to the latest plan. (Newswires) In-fitting with earlier source reports via Nikkei

"A chip shortage may cause drop in production by 2mln vehicles in China this year, an official from China's machinery industry association said on Fri. Further damage may occur if other offshore supply chains encounter similar bottlenecks", GT reports. (Twitter)

FX

DXY - The Greenback was already losing momentum after a relatively tame bounce on the back of Thursday’s upbeat US initial claims data, and the index failed to sustain its recovery to retest intraday highs or remain above 94.000 on a closing basis. However, the Buck did reclaim some significant and psychological levels against G10, EM currencies and Gold that was relishing the benign yield environment and the last DXY price was marginally better than the 21 DMA from an encouraging technical standpoint. Nevertheless, the Dollar remains weaker vs most majors and in need of further impetus that may come via retail sales, NY Fed manufacturing and/or preliminary Michigan Sentiment before the spotlight switches to today’s Fed speakers featuring arch hawk Bullard and the more neutral Williams.

GBP/NZD/NOK - Sterling has refuelled and recharged regardless of the ongoing UK-EU rift over NI Protocol, though perhaps in part due to the fact that concessions from Brussels are believed to have been greeted with welcome surprise by some UK Ministers. Cable has reclaimed 1.3700+ status, breached the 50 DMA (at 1.3716 today) and yesterday’s best to set a marginal new w-t-d peak around 1.3739, while Eur/Gbp is edging closer to 0.8450 having clearly overcome resistance at 1.1800 in the reciprocal cross. Similarly, the Kiwi continues to derive impetus from the softer Greenback and Aud/Nzd flows as Nzd/Usd extends beyond 0.7050 and the Antipodean cross inches nearer 1.0500 from 1.0600+ highs. Elsewhere, the Norwegian Crown is aiming to add 9.7500 to its list of achievements relative to the Euro with a boost from Brent topping Usd 85/brl at one stage and a wider trade surplus.

CAD - The Loonie is also profiting from oil as WTI crude rebounds through Usd 82 and pulling further away from 1.5 bn option expiry interest between 1.2415-00 in the process, with Usd/Cad towards the base of 1.2337-82 parameters.

EUR/AUD/CHF/SEK - All narrowly mixed and rangy vs the Greenback, or Euro in the case of the latter, as Eur/Usd continues to straddle 1.1600, Aud/Usd churn on the 0.7400 handle, the Franc meander from 0.9219 to 0.9246 and Eur/Sek skirt 10.0000 having dipped below the round number briefly on Thursday.

JPY/TRY - The Yen and Lira are still sharply underperforming and simply cannot seem to catch a break, as Usd/Jpy knocks down barrier defences at 114.00 to set yet another 3 year pinnacle circa 114.41, while Usd/Try only paused for breath into 9.2500 following the latest CBRT survey showing a rise in inflation expectations for year end (CPI at 17.63% from 16.74%), a weaker Lira forecast (at 9.2195 vs 8.9184), stronger growth (8.9% GDP from 8.2%) and more easing (repo rate down to 14.34% compared to 14.73%). Back to the Yen, some support or a stay of execution may be derived around 114.50 as a long term Fib resides at 114.53.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1550 (1.1-BLN), 1.1565-70 (371M), 1.1600 (825M), 1.1650 (751M)
• USD/CAD: 1.2360-75 (740M), 1.2400-15 (1.5BLN)

FIXED

Debt futures remain ‘comfortably’ off recent/cycle lows and cash yields vice-versa, but bears are prowling again and the US Treasury curve is tipping back into steeper trajectory against the backdrop of rebounding crude/energy prices to refuel the reflationary trade, not to mention undermine the transitory theory. However, Bunds have bounced bang on the 50% Fib retracement of yesterday’s revival from base to top at 169.28 to ensure that at least half their hard earned spoils are retained, Gilts have pared some losses from a deeper 124.64 Liffe low and the 10 year T-note is off worst levels within a 131-17-08 range ahead of busy line-up to end the week, with retail sales probably the pick of the bunch.

COMMODITIES

WTI and Brent front month futures remain on a firmer footing, aided up the overall constructive risk appetite coupled with some bullish technical developments, as WTI Nov surpassed USD 82/bbl (vs 81.39/bbl low) and Brent Dec briefly topped USD 85/bbl (vs 84.16/bbl low). There has been little in terms of fresh fundamental catalysts to drive the price action, although Russia's Gazprom Neft CEO hit the wires earlier and suggested that reserve production capacity could meet the increase in oil demand, whilst a seasonal decline in oil consumption is possible and the oil market will stabilise in the nearest future. On the Iranian JCPOA front, Iran said it is finalising steps to completing its negotiating team but they are absolutely decided to go back to Vienna discussions and conclude the negotiations, WSJ's Norman. The crude complex seems to have (for now) overlooked reports that the White House is engaged in diplomacy" with OPEC+ members regarding output. UK nat gas prices were higher as European players entered the fray, but prices have since waned off best levels after Russian Deputy PM Novak suggested that gas production in Russia is running at maximum capacity. Elsewhere, spot gold has been trundling amid yield-play despite lower despite the Buck being on the softer side of today’s range. Spot gold failed to hold onto USD 1,800/oz status yesterday and has subsequently retreated below its 200 DMA (1,794/oz) and makes its way towards the 50 DMA (1,776/oz). LME copper prices are on a firmer footing with prices back above USD 10,000/t – supported by technicals and the overall risk tone, although participants are cognizant of potential Chinese state reserves releases. Conversely, Dalian iron ore futures fell for a third straight session, with Rio Tinto also cutting its 2021 iron ore shipment forecasts due to dampened Chinese demand.

White House said it is looking at options on how to improve logistics of moving energy supply around the country, while a State Department spokesperson said they are "engaged in diplomacy" with OPEC+ members regarding output. (Newswires)