• European bourses/US futures are firmer though the upside is marginal amid minimal fresh macro impulses; ES +0.4%
• The DXY remains subdued and sub-94.00, whilst antipodeans lead in the G10 space
• Core debt is contained and the US yield curve is slightly steeper ahead of Central Bank speak and Wednesday's issuance
• Looking ahead, highlights include US Building Permits & Housing Starts, ECB's Elderson, Panetta, Lane, BoE's Bailey, Mann, Pill, Fed's Harker, Daly, Bostic, Waller
• Earnings: Johnson & Johnson, Phillip Morris, P&G, Netflix, Omnicom, Halliburton, United Airlines; Deutsche Boerse, 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)

Beijing, China reports one new confirmed locally transmitted COVID-19 case, according to the Beijing government. (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 initially 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 and upside faded ahead of 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 (+0.7%) 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 (+1.5%) 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)

China's Ministry of Industry and Information Technology (MIIT) warns of downward pressure in the industrial economy; China is to step up inspection of the app market; expects chip shortage to ease in Q4

US

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)

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)

EU Commission President von der Leyen says they are assessing the most recent Polish court ruling, are deeply concerned. Commission will act, infringements are the first option and financial tools are another. In response, the Polish PM says primacy of EU law does not extend to the Polish constitutional system (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)

China is adjusting its nuclear weapons stockpile to maintain its deterrence level, according to Chinese observers. (SCMP)

Japan's Deputy Chief Cabinet Secretary Isozaki that they are monitoring with high interest China and Russian activities in waters around Japan. (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)

EQUITIES

European equities (Euro Stoxx 50 +0.1%; Stoxx 600 +0.2%) trade with an upside in an attempt to claw back some of yesterday’s losses with fresh macro impulses relatively light since Monday’s close. The Asia-Pac session was predominantly firmer with indices kept afloat by the mostly positive lead from the US and performance in the tech sector. As it stands, US equity index futures are marginally firmer with performance across the majors relatively even (ES +0.4%) as markets await a slew of large-cap earnings. In terms of market commentary, JP Morgan notes that global EPS revisions remain plentiful as sell-side analysts’ global EPS upgrades continue to outnumber EPS downgrades. That said, JPM is of the view that the trend is slowing. In terms of the sector breakdown, analysts note that Defensive Sectors show improving EPS revisions, whilst Global Cyclicals sectors such as Technology, Financials, Energy, Industrials and Discretionary dominate the largest upgrades. Back to Europe, sectors are mostly firmer with outperformance in Basic Resources amid upside in underlying commodity prices. Elsewhere, Retail names also outperform peers with some of the French luxury names such as Kering, LVMH and Hermes trying to claw back some of yesterday’s post-Chinese GDP losses with the former set to release earnings after-hours. To the downside, the Telecoms sector sits in modest negative as Ericsson (-0.3%) acts as a drag post-Q3 results. In terms of individual movers, Pearson (+3.6%) stands at the top of the Stoxx 600 after being upgraded at Credit Suisse, whilst Iberdrola (+3.2%) is also a notable gainer amid news that it is to invest USD 8.3bln into a North Sea wind farm complex – its largest global investment. Laggards include Teamviewer (-4.8%) following a broker downgrade at Exane, whilst broker action has also hampered IAG (-3.5%). In terms of large cap earnings, Danone (-1%) shares are seen lower after flagging rising costs and a slowdown in sales growth.

UK CMA is planning a probe into the music streaming market, to carry out work to consider and develop the scope of such a market study before formally commencing it as soon as possible. (Newswires) Potentially of note for the likes of Apple (AAPL), Amazon (AMZN) and Spotify (SPOT)

Synchrony Financial (SYF) Q3 2021 (USD): Diluted EPS 2.00 (exp. 1.50) (includes 0.33 benefit from a reserve release), Revenue 3.90bln (exp. 3.57bln)

FX

DXY - A downbeat session for the Dollar thus far as the index retreats further from the 94.000 mark to extend the lower bound of a two-week range. There has been little in terms of fundamental catalysts to trigger the selloff as yields remain elevated (albeit off recent highs), and market sentiment remains tentative. State-side, there is a lack of developments Capitol Hill, with US President Biden stating that 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. The DXY is more interesting from a technical standpoint after falling just short of the 100 WMA (94.213) during yesterday's session to a high of 94.174 and losses exacerbated overnight by a breach of support at the 21 DMA (98.879) – with the line acting as firm support over the past three consecutive trading sessions. The next levels to the downside naturally reside at the 93.500 mark – with clean air seen until the psychological mark. Below that, the September 28th low resides at 93.360, followed by the 50 DMA at 93.242 and the 27th Sept base at 93.206. Ahead, the data docket remains light, but Fed speak is abundant, although from regulars.

AUD, NZD, CAD - The antipodeans top the G10 chart, with the NZD the marked outperformer as participants mull stepper RBNZ rate hikes following yesterday's hot Kiwi CPI metrics. ANZ Bank 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 the end of 2022. NZD/USD surpassed its 200 DMA - which matches the 0.7100 psychological level (vs low 0.7079). The pair now probes 0.7150 with some potential resistance seen at 0.7156 (September 10th high), 0.7167 (September 6th high), and 0.7170 (September 3rd high). The Aussie meanwhile saw a relatively mundane RBA minutes release, but the AUD optimism is likely spurred by the rebound in base metals. AUD/USD found support at its 100 DMA (0.7406) and inches closer towards 0.7450. Gains in the CAD are still somewhat hampered by the slide in crude prices yesterday; nonetheless, USD/CAD re-eyes levels last seen in July.

EUR, GBP, JPY - All benefit from the softer Dollar, although the Sterling fares slightly better as BoE market pricing provides further tailwinds; markets are currently assigning a 78% probability of a 25bps hike at the November 4th confab. HBSC weighed in this morning and suggested the economic fundamentals do not appear to have changed sufficiently to warrant the recent market move, with market pricing looking too aggressive given the balance of supply and demand in their view. This followed GS and JPM reeling in their BoE hike forecasts yesterday. GBP/USD extends upside above 1.3800 and topped its 100 DMA situated at 1.3809. On the UK docket, BoE’s Mann and Chief Economic Pill could provide some more meat on the bones following Governor Bailey’s weekend remarks. EUR/USD was bolstered above its 21 DMA (1.1620) and posts gains north of 1.1650 at the time of writing, with the pair also eyeing chunky OpEx with EUR 1.3bln between 1.1600-15 and EUR 581mln between 1.1670-75. EUR/GBP meanwhile tests 0.8450 to the downside from a current 0.8463 high. USD/JPY has pulled back after failing to breach resistance just ahead of the 114.50 mark, with the softer Buck bringing the pair back towards the 114.00 ahead – with Friday's base at 113.63.

RBA October 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)

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1600-15 (1.3BLN), 1.1670-75 (581M)
• USD/CHF: 0.9270-80 (1BLN)

FIXED

Core debt commenced the European session with rangebound performance and the benchmarks within reach of the unchanged mark, fresh drivers are slim and the morning’s schedule is sparse ahead of numerous Central Bank speakers. Thus far, USTs remain comfortably within a circa 10-tick range while the yield curve is modestly steeper in contrast to yesterday’s flattening after initially somewhat mixed performance. Currently, the benchmark has a mild positive bias and if we do see further strength in debt then there is very little in terms of technical resistance until the 131.00 mark; current session high is 130.31. Focus for the session is on substantial Central Bank speak with Fed’s Bostic, Daly and Waller all due and the latter expected to speak on the economic outlook; albeit, it remains to be seen what fresh insight such officials can provide following the recent minutes ahead of November’s policy announcement. In the EZ, the Bund is marginally softer but, as above, price action has been rangebound this morning. Fresh drivers have been minimal with no Tier 1 data of note and ECB speak not altering the known stance of the Bank though we do still await commentary from Chief Economist Lane, however a text release is not expected. Technically, a more pronounced drop below the 169.00 handle, session low 168.95, opens up an area of thin-air prior to potential support at the October 12th low of 168.21. On the flip side, technical resistance is touted just above 169.50. Finally, Gilts are the marginal laggards with the 10yr yield firmer but still shy of yesterday’s 1.173% peak given the enhanced focus on BoE rate hike expectations/pricing in-light of remarks from Governor Bailey who is also due to speak today on climate change alongside recent MPC additions Mann and Pill. More broadly, today’s docket does not feature any EGB/US supply but tomorrow there is a substantial amount scheduled including US 20yr, UK 10yr and a Green Bund outing which will be in consideration today, particularly if we begin to see any pronounced concessionary action as the session progresses.

UK sale of 2053 green Gilt via syndication will likely happen later in the week and not today as planned, according to the bookrunner; wants to allow market players the opportunity to review the UK's Net Zero plans. (Newswires)

COMMODITIES

WTI and Brent front-month futures are nursing yesterday’s wounds and prices remain elevated despite a lack of fresh catalysts and with the macro landscape little changed as of late. The themes remain a) OPEC+ supply, b) supply crunch in the natural gas, LNG, electricity, and coal markets and c) winter demand. Elsewhere, the White House said it is continuing to press OPEC members to address the 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. WTI Nov extends gains above USD 83/bbl (vs 82.05/bbl low) while Brent Dec aims at USD 85/bbl (vs low 83.83/bbl). Elsewhere, metals have been spurred by the retreat in the Dollar, with spot gold topping its 50 DMA (1,778/oz) after testing its 21 DMA (1,760/oz) overnight, with the yellow metal also seeing its 200 and 100 DMAs at 1,793/oz and 1,794/oz respectively. Over to base metals, Dalian iron ore futures snapped a four-day losing streak, with iron ore shipments departing from Australia and Brazil lower W/W according to Mysteel data. Copper prices meanwhile are buoyed with the LME future holding onto comfortable gains north of USD 10k/t.

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)

Russia has reportedly signalled no extra gas supplies to Europe without Nord Stream 2. (Newswires)