• European bourses/US futures are contained after a predominantly firmer APAC lead ahead of earnings/Central Bank speak
• Head of China's FX regulator says the two-way Yuan fluctuations have increased
• ECB's hawk Weidmann is to step-down at year-end for personal reasons
• The DXY remains below 94.00 but is firmer with peers mixed while core debt has recuperated from overnight concession ahead of the US 20yr
• 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 Canadian CPI, Fed's Bullard, ECB's Holzmann, Villeroy and supply from the US
• Earnings: Biogen, Verizon, Tesla

CORONAVIRUS UPDATE

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)

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 (+0.5%) 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 (+0.1%) 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 (-0.5%) 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 (+1.4%) and Shanghai Comp. (-0.1%) 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%)

Head of China's FX regulator says the two-way Yuan fluctuations have increased, able to better absorb short-term disturbances; excessive tightening by financial institutions and markets for property sector is being gradually corrected. Will keep the Yuan rate basically stable. Spillover effects from developed countries' policy shifts are controllable. (Newswires)

PBoC Governor says should try avoid risks of Evergrande (3333 HK) spreading to other property firms and financial sector. Separately, China's Securities regulator chairman says China will resolutely curb excessive financing via debt issuance; will properly handle default risks in bond market. (Newswires)

US

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. (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 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)

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)

UK CPI YY (Sep) 3.1% vs. Exp. 3.2% (Prev. 3.2%); MM (Sep) 0.3% vs. Exp. 0.4% (Prev. 0.7%)

• Core CPI YY* (Sep) 2.9% vs. Exp. 3.0% (Prev. 3.1%); MM (Sep) 0.4% vs. Exp. 0.5% (Prev. 0.7%)

ECB's Weidmann (Hawk) has requested to step down from his role at the Bundesbank and the ECB at the end of the year for personal reasons. (Bundesbank)

ECB's Villeroy says the inflation spike is expected to be transitory, policy must be vigilant but can stay patient. (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)

Russia has scrambled fighter jets to escort US strategic bombers flying over the Black Sea, Ria. (Newswires)

Russia's Kremlin says a meeting between the Russian and US presidents this year is "a realistic possibility"; reiterates Putin will not go to Cop26 summit. (Newswires)

EQUITIES

It’s been a choppy start to the session for European equities (Euro Stoxx 50 flat; Stoxx 600 flat) as opening losses were quickly trimmed after the cash open. Stocks in Europe were unable to benefit from the constructive APAC handover, which itself benefitted from a strong Wall St close as stocks in the US gained for a fifth consecutive session. As it stands, US equity index futures are relatively flat as indices succumb to the choppy price action with events on Capitol Hill not providing much guidance for price action as lawmakers strive to reach a deal on spending by the end of the week. Back to Europe and sectoral performance is somewhat mixed with clear outperformance in the Food & Beverage sector as earnings from Swiss heavyweight Nestle (+3.2%) provides support and prompts upside in the SMI (+0.7%). Nestle reported a beat on 9M revenues and raised FY guidance amid performance of coffee and pet food sales, whilst noting that it increased pricing in a “responsible manner” during Q3. Elsewhere in Switzerland, Roche (-1.0%) also beat on revenues and raised guidance but was unable to benefit from a lift in its share price. To the downside, Basic Resources lag amid softness in some base metals prices as well as a production update from Antofagasta (-4.2%) and a broker downgrade for Rio Tinto (-4.0%). Retail names are also trading on a softer footing after Q3 earnings from Kering (-4.0%) saw the Co. report a decline in consolidated revenues and note that performance for Gucci was hit by a resurgence of COVID-19 cases in Asia. H&M (-2.7%) is also weighing on the sector after a broker downgrade at Morgan Stanley. Elsewhere, Deliveroo (+3%) is seeing upside today after the Co. upgraded Gross Transaction Value (GTV) growth guidance. Additionally, in what has been a tough week for the Co., IAG (-3.6%) is seeing further losses after being downgraded at Peel Hunt. Finally, updates from the likes of materials name Akzo Nobel (supply chain woes) and semiconductor ASML (revenues fell short of expectations) have sent their shares lower by 1.5% and 1.7% respectively.

Links to the Daily European Equity Opening News and Additional Equity News headlines, which include earnings updates from the likes of Nestle, Roche, ASML and others.

FX

DXY - The Index has recovered from yesterday's decline, which saw a base at 93.500 – matching the 32.8% Fib retracement of the September move, with the Index now eyeing the 21 DMA at 93.917 ahead of 94.000. The main stateside development has been on the fiscal front, where 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, whilst US progressive Democratic Rep. Jayapal said she feels even more optimistic after the White House meeting. As Republicans fully opposed Biden's plans, all Democrat votes are needed in the Senate, whilst only a few can be spared in the House. As a reminder, Congress set an Oct 31st deadline for the passage. Negotiations are expected to wrap up as soon as this week. Ahead, the stateside docket is quiet aside from several Fed regulars after the European close.

NZD, AUD, CAD - The Kiwi stands as the current outperformer in a continuation of the strength seen as bets mount for a steeper RBNZ OCR hike at the upcoming meeting in light of the CPI metrics earlier this week. The NZD/USD pair also sees some technical tailwinds after failing to convincingly breach 0.7150 to the downside overnight. AUD/USD meanwhile eyes 0.7500 to the upside from a 0.7466 base with some potential support seen as China taps into Aussie coal amid surging demand. USD/CAD dips below 1.2350 but remains within yesterday's 1.2309-76 range ahead of Canadian CPI later – with headline Y/Y expected to tick higher to 4.3% from 4.1%.

EUR, GBP - Both flat vs the Dollar and against each other. Sterling saw some mild weakness as UK CPI narrowly missed expectations at 3.1% vs exp. 3.2% for the headline Y/Y, in turn prompting market pricing to ease a touch as the dust settled – with the implied rate for the 4th Nov meeting modestly under 25bps vs 25.71bps heading into the release. That being said, the slight miss is likely not to provide enough ammunition for the BoE doves, whilst the hawks will likely continue to warn the dangers of persistently high inflation – ultimately not settling the debate on the MPC regarding how soon it should raise rates. GBP/USD fell back under its 100 DMA (1.3805) from a 1.3814 high. From a technical standpoint, aside from yesterday's 1.3833 peak, the pair sees the 200 DMA at 1.3846. EUR/USD meanwhile rebounded off its 21 DMA (1.1615) but remains under 1.1669 high, having seen little reaction to the unrevised Y/Y final EZ CPI metrics, although the M/M metrics were revised slightly higher as expected. Elsewhere, it is worth noting that ECB-hawk Weidmann has submitted his resignation to the Bundesbank and the ECB ahead of next week's Governing Council confab.

JPY - The JPY is relatively flat intraday, but overnight price action was interesting as USD/JPY drifted to a high of 114.69, with participants recently flagging barriers just ahead of 115.00. Some have also cited Gatobi demand, where accounts in Japan are generally settled on days that are multiples of 5.

EM - The Yuan has once again gained focus overnight as the offshore and onshore Dollar pairs remained sub-6.40 following yesterday's hefty declines. China's Security Times attributed the recent Yuan strengthening to the USD and improved domestic inflation outlook. Some also pointed to easing fears of a property market contagion from Evergrande, whilst the Head of China's FX regulator suggested that excessive tightening by financial institutions and markets for the property sector is being gradually corrected. Meanwhile, the PBoC maintained its LPR settings overnight, as expected.

FIXED

Core debt has recuperated from initial pressure which was seemingly a continuation of the downside seen yesterday and overnight with concession and yield dynamics the likely drivers of the original move while the recovery has been gradual and without fresh catalysts. For reference, the UST yield curve remains steeper but the magnitude is much more marginal when compared to yesterday/overnight. The sessions main focal point is the hefty supply docket, with the headline being the US 20yr outing due later today and while current action doesn’t suggest any further concession it is likely that this was a driving force behind overnight pressure. Other factors behind the decline would include upward pressure on yields in-light of the hawkish Central Bank impulses, particularly from the BoE, that have dominated the week’s newsflow. Returning to the theme of issuance, where the UK’s outing was strong but didn’t move the dial and hasn’t been an overt factor in Gilts lifting to circa 5 ticks above the unchanged mark, with little of note in the near-term on a technical perspective given the scale of recent action. Turning to EGBs, but sticking with issuance, the mornings Green Bund outing was soft with a firmer yield unable to spark a stronger b/c and thus the outing was technically uncovered. Elsewhere, the morning’s main story has been the news that ECB’s hawk Weidmann is to step-down at year end, though this is unlikely to change the outcome of next week’s meeting and for reference we enter the quiet period tomorrow. For the Bund, which is modestly firmer on the session but has been steady after an earlier jolt higher, resistance before the 169.00 handle is noted at 168.91 which represents the 50% fib of yesterday’s price action. Returning to the UK and the slightly softer than expected September inflation print is drawing focus and under even greater scrutiny in-light of Bailey’s hawkish weekend guidance. The reading, while softer, is perhaps unlikely to alter the narrative for November although market pricing for a hike did moderate slightly; however, the likes of Pantheon take the view that this does not settle the debate. As such, attention now turns to any commentary from MPC members prior to November on this latest data point; note, next week Chancellor Sunak provides the latest budget and it will be interesting to see how the Government tackles the possibility of the BoE tightening policy sooner than expected.

COMMODITIES

WTI and Brent Dec futures are marginally softer on the day in a continuation of the downward trajectory during US hours yesterday. WTI has dipped below USD 82/bbl (vs high USD 82.60/bbl) while its Brent counterpart hovers around USD 84.50/bbl (vs high USD 85.20/bbl). The subdued prices come amid a larger-than-expected build in Private inventories, although the internals were bullish, with the DoEs headline expected to print a build of some 1.8mln bbls. Elsewhere, the Iraqi energy minister has been vocal throughout the session, saying he expects oil prices to reach USD 100/bbl in Q1 and Q2 2022 – in contrast to comments he made last week which suggested that oil price is unlikely to increase further; whilst he also recently noted oil prices between USD 75-80/bbl is a fair price for producers and consumers. The Iraqi minister today said it is preferable for long-term oil prices between USD 75-85/bbl, and OPEC+ is now discussing ways to balance oil prices but no decision has yet been made to add more production above the agreed levels. Elsewhere, following India’s call on OPEC yesterday to lower prices, India’s HPCL executive says current oil prices are high for India; USD 60-70/bbl is comfortable and high oil prices may impact demand growth. Over to metals spot gold resides around its 50 DMA at USD 1,778/oz while spot silver eyes USD 24/bbl to the upside. Overnight, China’s coal intervention saw prices slump – with thermal coal futures hitting limit down and coke futures opening lower by 9%. LME copper prices are also softer, with the contract briefly dipping under USD 10k/t overnight.

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)

Iraqi oil minister expects oil prices to reach USD 100/bbl in Q1 and Q2 2022. Adding that preferable oil prices for the long-term should be between USD 75-85/bbl; OPEC+ is now discussing ways to balance oil prices no decision yet to add more production above the agreed levels(Newswires)