• Asian equity markets traded mostly positive as the region took its cue from the extended gains on Wall Street
• The PBoC maintained its benchmark Loan Prime Rates for the 18th consecutive month
• The DXY remains on a softer footing, EUR/USD hovers around 1.1650 and GBP/USD sits on a 1.38 handle
• President Biden told Democrat lawmakers he believed they could secure an agreement for a tax and spending proposal valued at USD 1.75tln-1.90tln
• Looking ahead, highlights include UK Inflation, EZ Final CPI, Canadian CPI, ECB's Elderson, Fed's Bullard, supply from the UK, Germany & US
• Earnings: Biogen, Verizon, Akzo Nobel, ASML, Atos, Carrefour, Nestle, Roche, LSE

CORONAVIRUS UPDATE

WHO-led programme to ensure poorer countries get fair access to COVID-19 vaccines, tests and treatments aims to secure antiviral drugs for patients with mild symptoms for as little as USD 10/course, according to a draft document. (Newswires)

Novavax (NVAX) is reportedly the latest vaccine maker to run into core production problems after promising to serve as a major vaccine contributor of vaccine to developing world through the COVAX initiative, with the Co. said to face significant hurdles in proving it can manufacture a shot that meets regulators’ quality standards. (Politico)

Pfizer (PFE) vaccine was shown to prevent teen hospitalisation, according to the CDC. (Newswires)

NHS Confederation chief executive Taylor warned the UK government to enforce 'Plan B' COVID-19 restrictions to avert the UK 'stumbling into a winter' crisis. (Sky News)

ASIA

Asian equity markets traded mostly positive as the region took its cue from the extended gains on Wall Street where sentiment was underpinned amid encouraging earnings results and with some hopes for a breakthrough on reconciliation as the White House and Democrats continued deliberations. ASX 200 (+0.7%) was led higher by outperformance in tech and with nearly all of its sectors in the green, while there were also gains seen in some of the blue-chip miners and across the big four banks. Nikkei 225 (+0.3%) was lifted by the weaker currency and following better than expected Exports and Imports data, although the index stalled just shy of the 29.5k level, while KOSPI (-0.3%) failed to hold on to opening gains with confirmation from North Korea that it fired a new submarine launched ballistic missile on Tuesday. Hang Seng (+1.2%) and Shanghai Comp. (Unch.) were varied whereby Hong Kong was boosted by tech and health care with Alibaba leading the advances after it recently unveiled China’s most advanced chip and with its founder Jack Ma travelling abroad for the first time in over a year who is currently on a study tour in Spain. Conversely, the mainland was subdued alongside weakness in domestic commodity prices and despite a firmer liquidity effort by the PBoC, while the central bank provided no surprises in maintaining its benchmark Loan Prime Rates unchanged for the 18th consecutive month and a PBoC-backed paper also noted that expectations for a RRR cut during Q4 have eased. Finally, 10yr JGBs were lower amid spillover selling from global peers and recent curve steepening in US which desks attributed to positioning and upcoming supply, although the downside for JGBs was limited by the presence of the BoJ in the market for nearly JPY 1.4tln of JGBs heavily concentrated in 1yr-10yr maturities.

PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.4069 vs exp. 6.4090 (prev. 6.4307)

• PBoC 1-Year Loan Prime Rate (Oct) 3.85% vs. Exp. 3.85% (Prev. 3.85%)
• PBoC 5-Year Loan Prime Rate (Oct) 4.65% vs. Exp. 4.65% (Prev. 4.65%)
• Chinese China House Prices YY* (Sep) 3.8% (Prev. 4.2%)
• Japanese Trade Balance (JPY)(Sep) -622.8B vs. Exp. -519.2B (Prev. -635.4B, Rev. -637.2B)
• Japanese Exports YY (Sep) 13.0% vs. Exp. 11.0% (Prev. 26.2%)
• Japanese Imports YY (Sep) 38.6% vs. Exp. 34.4% (Prev. 44.7%)

UK/EU

UK Chancellor Sunak will, in next week's budget, cut the surcharge on bank profits from 8% to 3% effective April 2023, according to sources, as part of measures to ensure the UK remains competitive amid higher corporation taxes. (FT)

FX

In FX markets, the DXY was lacklustre and took a breather after having recovered from yesterday’s trough of around 93.50 but with price action uneventful subdued overnight amid the mixed picture across the greenback’s major counterparts and somewhat tentative gains in stocks. There were several central bank comments including from Fed’s Waller who echoed the view that Fed should start tapering asset purchases following its November meeting and for tapering to conclude by mid-2022, while both Barkin and Bowman touched on labour market complications and the latter also suggested they are looking at a situation where inflation could persist longer than previously anticipated. Furthermore, attention was on the deliberations in Washington with President Biden more confident on spending bills after meeting with Democratic lawmakers and told them he believed they could secure an agreement for a tax and spending proposal valued USD 1.75tln-1.90tln. EUR/USD was choppy and hovers around 1.1650, with recent comments from ECB officials doing little to spur price action. GBP/USD eked marginal gains but with upside capped as the 1.3800 level and nearby 100DMA of 1.3806 provides a gravitational pull. USD/JPY rose to its highest in almost four years and CHF was also pressured as haven currencies took the brunt of the early risk momentum from US, which alongside the strength in CNY, helped keep antipodeans afloat.

COMMODITIES

Commodities were mostly subdued overnight in which WTI crude futures marginally pulled back below the USD 82/bbl level with price action hampered after the recent whipsawing and with the somewhat mixed private inventory data which showed a bearish reading for headline crude stockpiles but larger than expected draws for other products. In addition, authorities continue to devise measures to address energy prices and crunch with India wanting OPEC+ to raise output and is planning to have a group of refiners to "jointly" negotiate oil imports. Gold marginally benefitted from the uninspired mood in the greenback and copper extended on the prior day's declines amid weakness in Chinese commodity prices, as well as recent LME measures which is said to provide allowances for holders of some short positions to avoid delivery of the metal.

US Private Energy Inventories (bbls): Crude +3.3mln (exp. +1.9mln), Cushing -2.5mln, Gasoline -3.5mln (exp. -1.3mln), Distillates -3mln (exp. -0.7mln). (Newswires)

China's NDRC is to sell potash from state reserves and it was separately reported that China's energy administration requested power grid firms to purchase as much energy as possible from renewable sources. (Newswires)

LME said it is amending lending rules and implementing a backwardation limit and delivery deferral mechanism for copper in which changes are intended to be temporary and will be reviewed as appropriate by a special committee. (Newswires)

GEOPOLITICAL

White House said the US remains prepared to engage in diplomacy talks with North Korea, while North Korea confirmed that it test fired a new submarine launched ballistic missile on Tuesday and that its leader Kim did not attend the submarine missile test. (Newswires/Yonhap)

US

The treasury curve steepened Tuesday paring recent flattening due to positioning and ahead of supply. By settlement, 2s -2.8bps at 0.393%, 3s -1.9bps at 0.712%, 5s -0.3bps at 1.157%, 7s +2.8bps at 1.468%, 10s +5.7bps at 1.641%, 20s +7.2bps at 2.069%, 30s +7.3bps at 2.090%. 5yr TIPS -0.9bps at -1.627%. 10yr TIPS +5.6bps at -0.901%. 30yr TIPS +7.0bps at -0.266%. The Treasury curve was mixed today with a steeper curve, paring back some of the aggressive flattening seen recently perhaps aided by dovish commentary from the ECB with both Villeroy and Lane walking back on market pricing for rate hikes from the Central Bank, although upcoming supply (USD 24bln 20yr auction tomorrow) and positioning have also been cited by desks. Demand for China's USD 4bln dollar supply also appeared strong with books for the four-parter offering in excess of USD 26.5bln. Desks highlight the leg lower in longer end yields was supported by an algo sell programmes through block sales and options as 10yr yields rose above 1.62% and 30yr yields rose above 2.07%. Housing data (building permits and housing starts) fell short of analyst expectations but had little impact on Treasury's. Fed speak saw Governor Bowman highlight we may see inflation lasting longer than expected a few months ago while Waller also sounded rather concerned on inflation reiterating more aggressive monetary policy may be warranted in 2022 if inflation stays high through 2021 and that he will favour an earlier lift-off if inflation runs considerable above 2% well into 2022; yields remained at highs as the Governors spoke with 20yr and 30yr yields hitting one-week highs.

Federal Reserve Discount Rate Minutes noted that directors of all twelve Federal Reserve banks favoured maintaining the current primary credit rate at the existing level of 0.25% and that Federal Reserve bank directors described solid economic activity across sectors and districts. It also noted that although some economic indicators had softened recently, most directors were positive about the prospects for continued economic growth and while consumer spending generally remained strong, several directors noted a slowdown in spending or decreased spending on services, travel, and tourism-related activities. (Newswires)

Fed's Bowman (voter) said there is a risk that a lack of childcare availability will continue to hold women back from participating in the labour force which could be a drag on the US economy and many older workers who left are unlikely to return, including many women, while the loss of these workers may make it harder, or even impossible in the near term to return to pre-pandemic levels. Furthermore, she stated that they are looking at a situation where they may see inflation lasting longer than expected a few months ago. (Newswires)

Fed's Waller (voter) said the Fed should start tapering asset purchases following its November meeting and favours ending the taper by mid-2022 to allow for rate hike if needed although does not expect a lift off to occur soon after tapering is completed. Waller added that a lift off is still some time away but would favour an earlier lift off if inflation runs considerably above 2% well into 2022 and stated that a more aggressive policy response may well be warranted in 2022 if inflation stays high through 2021. Furthermore, Waller suggested that everything hinges on inflation expectations and that the minute they see any un-anchoring, there will be action from the Fed. (Newswires)

Fed's Barkin (2021, 2024 voter) said US labour shortages may outlast pandemic, while he cited parental leave policies in Canada and subsidies for older workers in Japan as examples of steps to bring more people into the workforce. Furthermore, he stated that ageing of the labour population and declining birth rate pose a risk to the long-term economic growth and need for policies. (Newswires)

US President Biden is more confident on spending bills following Tuesday's meeting with Democratic lawmakers and there was broad agreement that there is urgency in moving forward during next several days, while it was separately reported that President Biden told Democrat lawmakers he believed they could secure an agreement for tax and spending proposal valued USD 1.75tln-1.90tln. (Newswires/Washington Post)

White House and Democrats are nearing a deal on a reconciliation package and it could be announced in the coming days, although the topline number is still not agreed and affordable housing and home care for the elderly could be cut, according to people briefed on the matter. It was also reported that the White House said it is not taking carbon tax or any options off table in talks with lawmakers and noted that President Biden spoke with Moderate Democratic Senators Manchin and Sinema. (Newswires)

US Senate Majority Leader Schumer said they want a deal on social programme spending this week and are moving closer to a deal by all 50 Democratic caucus members. It was also reported that White House and Democrats are nearing a deal on a reconciliation package and it could be announced in the coming days although the topline number is still not agreed and affordable housing and home care for the elderly could be cut, according to people briefed on the matter. (Newswires)

US Senate Majority Leader Schumer said they want a deal on social programme spending this week and are moving closer to a deal by all 50 Democratic caucus members. (Newswires)

US moderate Democrat Senator Manchin is reportedly offering progressives a trade in which he will vote for their social programs if they accept a strict cap for recipients, according to sources. It was also reported that US Senators Manchin and Sanders met again on reconciliation and Manchin stated that he is still at the USD 1.5tln topline, according to journalist Erik Wasson. (Newswires/Axios/Twitter)

US progressive Democratic Rep. Jayapal is feeling good about prospects for a deal on the reconciliation bill and feels even more optimistic after the White House meeting, while she thinks President Biden is working to get everybody to USD 1.9-2.2trln for the bill. (Newswires)

White House/DOT officials are reportedly looked into whether the National Guard could help address the supply chain backlog, possibly by tapping them to drive trucks although the White House viewed it as unlikely to proceed with that option, according to sources. (Washington Post)