• Asian equity markets were kept afloat with the region encouraged after the mostly positive lead from the US
• Big tech gained including Apple which, benefitted following its hardware event
• The DXY remains on a softer footing and sub-94.00, whilst antipodeans lead in the G10 space
• Looking ahead, highlights include US Building Permits & Housing Starts, ECB's Elderson, Panetta, Lane, BoE's Bailey, Fed's Harker, Daly, Bostic, Waller
• Earnings: Johnson & Johnson, Phillip Morris, P&G, Netflix, Synchrony Financial, Omnicom, Halliburton, United Airlines, Danone, Deutsche Boerse, Ericsson, Kering

CORONAVIRUS UPDATE

FDA is to permit the mixing and matching approach for vaccine booster shots, while it was separately reported that Moderna (MRNA) CEO said that their booster could receive approval this week. (Newswires/NYT)

Pfizer (PFE) and BioNTech (BNTX) made a submission to Health Canada seeking authorisation for the use of its COVID-19 vaccine in children aged 5-11 years old and Health Canada expects to receive data on the Comirnaty vaccine for review in the coming months. (Newswires)

New Zealand PM Ardern said that Auckland will be out of lockdown by Christmas, although it was also reported that there were 94 new COVID-19 cases which is New Zealand's largest daily increase on record. (Newswires)

ASIA

Asian equity markets were kept afloat with the region encouraged after the mostly positive lead from US, where equity markets shrugged off the hawkish calls on global rates and big tech gained including Apple which benefitted following its hardware event. ASX 200 (+0.1%) was marginally higher as tech mirrored the outperformance of the sector stateside and with notable gains in property stocks, although the advances in the index were capped by resistance at the 7,400 level and due to weakness in mining-related stocks following yesterday’s cooldown in commodity prices, as well as lower production results from BHP. Nikkei 225 (+0.6%) was underpinned as exporters benefitted from favourable currency flows, while the KOSPI (+0.7%) was also firmer with the index unfazed by the latest North Korean projectile launches which were said to be ballistic missiles and therefore banned under UN Security Council resolutions. Hang Seng (+1.1%) and Shanghai Comp. (+0.7%) adhered to the upbeat mood with Hong Kong the biggest gainer in the region amid strength across a broad range of sectors aside from energy due to the recent pullback in oil and with casino names also underwhelmed by weaker Q3 Macau gaming revenue compared with the prior quarter. Finally, 10yr JGBs nursed some of yesterday’s losses after global counterparts also found reprieve from the latest bout of bond selling pressure but with the recovery only marginal amid the mostly positive risk tone and following mixed results from the 20yr JGB auction.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral position. (Newswires) PBoC set USD/CNY mid-point at 6.4307 vs exp. 6.4275 (prev. 6.4300)

UK/EU

UK PM Johnson is said to have hinted at future tax reductions for businesses despite preparations for increases during the next two years, while he also stated the UK does not want to turn away Chinese investment and that he does not see the Northern Ireland problem as end of the world. (Newswires)

EU is reportedly seeking to extend looser state aid rules past year-end amid pressure to help businesses survive the pandemic, according to reports citing comments from EU's Vestager. (FT)

Polish PM Morawiecki and EU Commission chief von der Leyen will today address the plenary about the rule of law fight. (Politico)

FX

In FX markets, the DXY retreated beneath the 94.00 level after having spent most of the prior US session in limbo with the lacklustre mood in the greenback attributed to the gains in stocks and strength in its major counterparts. EUR/USD extended above 1.1600 owing to the softer USD, whilst GBP/USD was also firmer after finding support near its 50DMA of 1.3711 before steadily climbing north of 1.3750, with focus in the UK remaining on the market's anticipated rate path at the BoE. USD/JPY retained 114.00 status and JPY-crosses were lifted amid the positive sentiment, while antipodeans benefitted from their high beta characteristics with outperformance in NZD/USD after breaching the 0.7100 level and amid steeper rate hike projections including ANZ Bank which brought forward its forecast for the RBNZ to lift the OCR to a neutral rate of 2% by August 2022 from a prior forecast of a neutral rate by end-2022.

RBA October meeting minutes stated the Delta variant interrupted the recovery of the Australian economy although the central scenario is the economy will return to growth in Q4 and to the pre-Delta path in H2 next year. RBA minutes also noted that the recovery was likely to be slower than in late last year and early this year and members agreed that although less monetary policy would reduce housing prices and credit growth, it would also result in fewer jobs and lower wages growth. Furthermore, it reiterated that it remains committed to maintaining highly supportive monetary conditions and won't raise rates until CPI is stable at 2%-3%. (Newswires)

COMMODITIES

Commodities were kept afloat overnight amid the mostly constructive risk tone which provided some solace from the prior day's commodity weakness that saw WTI crude futures briefly decline beneath the USD 82/bbl. Nonetheless, oil prices are steady overnight amid measures to address the recent surge in energy situation with the White House continuing to pressure OPEC members and with China said to have ordered power plants to stockpile coal, while focus shifts to the latest stockpile data beginning with the private sector inventories. Gold rebounded overnight with the precious metal supported by a weaker greenback which also helped copper alongside the gains in risk assets.

White House said it is continuing to press OPEC members to address oil supply issue and is also addressing logistics of supply. Furthermore, the White House will use every lever at its disposal and the FTC is also looking at possible price gouging. (Newswires)

US total shale regions oil production seen up 76k BPD in November at 8.219mln BPD (prev. +68k BPD M/M), according to EIA. (Newswires)

China is reported to instruct power plants to stockpile coal to address the energy crisis. (Newswires)

GEOPOLITICAL

North Korea fired a projectile to the East Sea which was said to have been a ballistic missile, while Japanese PM Kishida later stated North Korea had fired two ballistic missiles and it was also reported that South Korea is to conduct a national security meeting following the latest launch by North Korea. (Newswires)

Ten naval vessels belonging to China and Russia passed through a narrow chokepoint in the north of Japan, according to Japan's Defense Ministry. There were also comments from Deputy Chief Cabinet Secretary Isozaki that they are monitoring with high interest China and Russian activities in waters around Japan. (Newswires)

US State Department said it does not think it is necessary to hold any meetings in Brussels for Iran Nuclear talks and that the US has been clear the destination it seeks is in Vienna, while the State Department added that the US is not optimistic nor pessimistic but "clear eyed". There were also separate comments from Iranian President Raisi who reiterated nuclear talks should have tangible results for Tehran and that US sanctions must be lifted. (Newswires)

White House said it has made clear concerns about China's military developments. (Newswires)

Turkish Foreign Ministry summoned ambassadors of 10 countries including US, Germany and France regarding the statement calling for the release of philanthropist Kavala. (Newswires)

US

Treasury flattening resumed on Monday with hawkish global central bank developments weighing on front-end and belly of the curve. By settlement, 2s +1.8bps at 0.4193%, 5s +3.3bps at 1.1552%, 7s +2.4bs at 1.4327, 10s +0.1bps at 1.5782%, 20s -2.5bps at 1.9913%, 30s -3.7bps at 2.0125%. 5yr TIPS +5.8bps at -1.624%, 10yr TIPS +1.9bps at -0.963% and 30yr TIPS -1.7bps at -0.340%. Treasury flattening resumed on Monday where hawkish global central bank developments sparked a number of large block sales. The front end and belly saw the most pronounced downside while 10s were flat by settlement. Money markets are now fully pricing in a 15bp hike from the BoE in November, while NZ CPI was rather hot and also saw a hawkish shift in RBNZ market pricing which pressured both UK and NZ bonds, with the latter becoming the cheapest since December 2018. To add to the bond downside, there were several supply updates; Goldman Sachs came to market with a USD 9bln 5part bond sale and Micron (MU) entered with a USD 2bln three-parter (10yr green note, 20yr and 30yr bonds). Note, reports in WSJ noted China is preparing to sell US dollar bonds in a test of investor appetite after soft GDP data overnight. WSJ notes "this would be the fifth year in a row that China has raised billions of dollars with a fall sale of debt in the international bond markets". Elsewhere, desks were noting of a 5yr block sale which saw c. 7k sold at 121-25.75 to send 5yr yields higher above the rest of the curve which also saw both green and blue Eurodollars fall to session lows. T-note (Z1) futures settled 6+ ticks lower at 130-24+.

US President Biden said he is "right now" going to try for a deal with Moderate Democratic Senator Manchin, while it was separately reported that Senator Manchin said he does not see how a deal on Biden's agenda will happen by October 31st. There were also reports that talks are underway for Progressive Senator Sanders and Moderate Senator Manchin to meet one-on-one after a week of escalating sparring between the two influential members of the Democratic caucus, according to Politico citing sources. (Newswires/Politico)

US Senate Majority Leader Schumer said Senate Democrats are continuing work on the economic agenda and noted that there have been productive talks lately on social spending bill although there is still work to do for a deal. (Newswires)

US Treasury Secretary Yellen said they will continue to employ extraordinary measures through December 3rd to avoid hitting the debt limit. Yellen added they will be unable to fully invest the portion of civil service retirement and disability fund not immediately required to pay beneficiaries, while they will also suspend investments in postal service retiree health benefits fund and extend suspension of sales of state and local government series securities. (Newswires)

Travel agency Kayak said travel searches into US spiked 48% on Saturday vs week before after US said it will lift restrictions for foreign travellers, while Expedia (EXPE) also said it saw an increase in trip searches after the US announced it will welcome vaccinated international travellers. (Newswires)

Apple (AAPL) held an event in which CEO Cook noted the focus was on music and the Mac, while the Co. announced the 3rd generation AirPods and the new Macbook Pro. (Newswires)