• European bourses/US futures strike a cautious tone after a mixed APAC handover with focus on Evergrande, yields and earnings; ES -0.2%
• Evergrande resumed trade suffering double-digit losses ahead of Sunday's offshore 30 day grace period expiry
• DXY is bolstered alongside safe-havens on the cautious tone though debt fails to benefit in wake of yesterday's US 20yr outing
• Tesla shares are lower in the pre-market trade despite reporting a beat on top and bottom lines
• Looking ahead, highlights include CBRT rate decision, US Initial Jobless Claims, Philadelphia Fed Business Index, Existing Home Sales, EU Council Meeting, Fed's Daly, Waller, RBA's Lowe
• Earnings: AT&T, Intel, American Airlines, Southwest Airlines

CORONAVIRUS UPDATE

Moderna (MRNA) and Johnson & Johnson (JNJ) received FDA emergency use authorisation for their COVID-19 vaccine booster doses and the FDA also permitted the mixing and matching of booster doses, while FDA official Marks said lowering the eligibility age for vaccine boosters may make sense in the future. (Newswires)

China's Beijing Daily states "citizens and friends are not required to leave the country, do not gather, do not travel or travel to overseas and domestic medium- and high-risk areas". (Beijing Daily)

ASIA

Asia-Pac indices traded somewhat mixed after the similar performance stateside where the broader market extended on gains in which the DJIA touched a fresh record high and the S&P 500 also briefly approached within 5 points of its all-time peak as attention remained on earnings, although the Nasdaq lagged with tech and duration-sensitive stocks pressured by higher longer-term yields. ASX 200 (+0.1%) was positive as Victoria state approaches the end of the lockdown at midnight and with the index led by outperformance in mining stocks and real estate. However, gains were capped amid weakness in energy as shares in Woodside Petroleum and Santos were pressured following their quarterly production results in which both posted a decline in output from a year ago, albeit with a jump in revenue due to the rampant energy prices, while Woodside also flagged a 27% drop in Wheatstone gas reserves. Nikkei 225 (-1.9%) felt the pressure from the pullback in USD/JPY and with focus shifting to upcoming elections whereby election consulting firm J.A.G Japan sees the LDP losing 40 seats but win enough to maintain a majority with a projected 236 seats at the 465-strong Lower House. Hang Seng (-0.5%) and Shanghai Comp. (+0.2%) were varied despite another respectable PBoC liquidity effort with the mood slightly clouded as Evergrande concerns persisted with Co. shares suffering double-digit percentage losses after it resumed trade for the first time in three weeks and after its deal to sell a stake in Evergrande Property Services fell through, while reports that Modern Land China cancelled its USD 250mln bond repayment plan on liquidity issues added to the ongoing default concerns although it was later reported that Evergrande secured a three-month extension on USD 260mln Jumbo Fortune bond which matured on October 3rd. Finally, 10yr JGBs traded flat with the underperformance in Japanese stocks helping government bonds overlook the pressure in global counterparts and continued losses in T-note futures following the weak 20yr auction stateside, although demand for JGBs was limited by the absence of BoJ purchases.

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 6.3890 vs exp. 6.3884 (prev. 6.4069)

Evergrande (3333 HK) secured a three-month extension on USD 260mln Jumbo Fortune bond which matured on October 3rd. (Newswires)

China's Commerce Ministry says they welcome the US' measures, in response to the USTR saying its possible to lift partial tariffs on Chinese goods. (Newswires)

South Korea October 1st-20th Trade Balance at a provisional deficit of USD 2.49bln, Exports rose 36.1% Y/Y and Imports rose 48.0% Y/Y. (Newswires)

US

Fed's Mester (2022, 2024 voter) said interest rate hikes are not coming any time soon and that as asset purchases wind down, they will have time to assess inflation and employment, while she added that a lot of inflation increase is tied to COVID, whether tied to demand or supply and she expects bottlenecks to last longer than originally expected. Furthermore, Mester stated that they have met the test for taper, while she added policy is well calibrated to the outlook and is is very comfortable where policy is right now. (Newswires)

White House advised Democratic lawmakers that the plan to raise corporate tax rate is unlikely to be included in the reconciliation bill, according to a congressional source. (Newswires)

UK/EU

UK government announced they have reached an agreement in principle with New Zealand on a free trade deal and New Zealand stated that the FTA removes all tariffs on exports to the UK over time. There were also separate reports that UK Foreign Secretary Truss is using her visit to the Gulf to discuss new partnerships to invest in infrastructure in Africa and Asia. (Newswires)

UK Chancellor Sunak is reportedly planning an extension of the COVID loan guarantee scheme in a move to help support businesses next year amid signs that the UK's economic recovery is slowing. (Times)

ECB is reportedly pushing for banks to bolster their post-Brexit operations by adding hundreds of additional staff and billions of additional capital into operations in continental Europe. (FT)

GEOPOLITICAL

Britain is in talks with Ukraine to sell the nation weapons for the first time amid fears that Russia could use the gas crisis as an opportunity to seize the country. Separately, Moscow, Russia has warned NATO that any move regarding Ukraine's membership will have consequences, RIA. (Telegraph/Newswires)

EQUITIES

Bourses in Europe have held onto the downside bias seen since the cash open, but with losses less pronounced (Euro Stoxx 50 -0.4%; Stoxx 600 -0.2%) despite a distinct lack of news flow in the EU morning, and as Chinese property woes weighed on APAC markets, but with earnings seasons picking up globally. US equity futures are also softer with modest and broad-based losses ranging from 0.2-0.3%. Back to Europe, the Netherland’s AEX (+0.3%) outperforms as Unilever (+3.3%) also lifts the Personal & Household Goods sector (current outperformer) following its earnings, whereby underlying sales growth of +2.5%, as +4.1% price growth offset a -1.5% decline in volumes, whilst the group noted: "Cost inflation remains at strongly elevated levels, and this will continue into next year". The AEX is also lifted by Randstad (+4.5%) post earnings after underlying EBITDA topped forecasts. Sectors in Europe are mixed with a slight defensive bias. On the downside, there is clear underperformance in Basic Resources as base metals pull back, whilst Oil & Gas names similarly make their way down the ranks. In terms of individual movers. ABB (-5%) resides at the foot of the SMI (+0.2%) as the group sees revenue growth hampered by supply constraints. Nonetheless, flows into Food & Beverages supports heavy-weight Nestle (+1.0%) which in turn supports the Swiss index. Other earnings-related movers include Barclays (-0.4%), SAP (+1.5%), Carrefour (+1.5%), Nordea (-1.8%), and Swedbank (+2.7%).

Links to the Daily European Equity Opening News and Additional Equity News headlines, which include earnings updates from the likes of Barclays, Unilever, SAP, Hermes and others.

Tesla Inc (TSLA) - Q3 2021 (USD): Adj. EPS 1.86 (exp. 1.58), Revenue 13.76bln (exp. 13.62bln). Ebit margin 14.6% and free cash glow USD 1.33bln. Automotive gross margin +30.5% (exp. 28.4%). Cash and cash equivalents USD 16.07 (exp. 16.88bln). Saw a continuation of global supply chain, transportation and other manufacturing challenges in Q3. Continue to ramp up Gigafactory Shanghai and build new capacity in Texas and Berlin. (businesswire) -0.9% in pre-market trade

Automotive IDMs has informed clients of a ~10-20% price hikes for their chips starting in 2022 amid a pick-up in raw materials costs, according to sources via DigiTimes; separately, Foundry quotes are expected to continue rising but at a slower pace in 2022, according to sources at Taiwan-based pure-play foundries. (DigiTimes)

FX

DXY/JPY - The Dollar has regained some composure across the board amidst a downturn in broad risk sentiment, but also further retracement in US Treasuries from bull-flattening to bear-steepening in wake of an abject 20 year auction that hardly bodes well for the announcement of next week’s 2, 5 and 7 year issuance, or Usd 19 bn 5 year TIPS supply due later today. In index terms, a firmer base and platform around 94.500 appears to be forming between 93.494-701 parameters ahead of initial claims, the Philly Fed and more housing data as the focus switches to existing home sales, while latest Fed speak comes via Daly and Waller. However, the DXY and Greenback in general may encounter technical resistance as the former eyes upside chart levels at 93.884 (23.6% Fib of September’s move) and 93.917 (21 DMA), while a major basket component is also looking in better shape than it has been of late as the Yen reclaims more lost ground from Wednesday’s near 4 year lows to retest 114.00 in the run up to Japanese CPI tomorrow.

NZD/AUD/NOK - No real surprise to see the high beta Antipodeans bear the brunt of their US rival’s revival and the Kiwi unwind some of its post-NZ CPI outperformance irrespective of the nation’s FTA accord in principle with the UK, while the Aussie has also taken a deterioration in NAB quarterly business business confidence into consideration. Nzd/Usd is back below 0.7200 and Aud/Usd has retreated through 0.7500 after stalling just shy of 0.7550 before comments from RBA Governor Lowe and the flash PMIs. Elsewhere, the Norwegian Crown has largely shrugged off the latest Norges Bank lending survey showing steady demand for credit from households and non-financial institutions, but seems somewhat aggrieved by the pullback in Brent from just above Usd 86/brl to under Usd 85 at one stage given that Eur/Nok is hovering closer to the top of a 9.7325-9.6625 range.

EUR/CHF/GBP/CAD - All softer against their US counterpart, albeit to varying degrees as the Euro retains a relatively secure grip around 1.1650, the Franc straddles 0.9200, Pound pivots 1.3800 and Loonie tries to contain declines into 1.2350 having reversed from yesterday’s post-Canadian CPI peaks alongside WTI, with the spotlight turning towards retail sales on Friday after a passing glance at new housing prices.

SEK/EM - Some traction for the Swedish Krona in a tight band mostly sub-10.0000 vs the Euro from a fall in the nsa jobless rate, but the Turkish Lira seems jittery following a drop in consumer confidence and pre-CBRT as another 100 bp rate cut is widely expected, and the SA Rand is on a weaker footing ahead of a speech by the Energy Minister along with Eskom’s CEO. Meanwhile, the Cnh and Cnh have lost a bit more momentum against the backdrop of ongoing stress in China’s property market, and regardless of calls from the Commerce Ministry for the US and China to work together to create conditions for the implementation of the Phase One trade deal, or fees on interbank transactions relating to derivatives for SMEs being halved.

BoJ is reportedly discussing phasing out the emergency COVID loan scheme if infections continue to fall; BoJ sees no consensus whether to extend the March deadline of the COVID loan scheme, sources state. (Newswires)

FIXED

Trade remains rather volatile and erratic in bonds, but after succumbing to more downside pressure and slipping to a new Liffe low at 123.92 the 10 year UK debt future has rebounded firmly to set a fresh intraday high of 124.18 for a 9 tick advance on the day vs 17 tick loss. Conversely, the Short Sterling strip has returned to the bottom end of its range, so it could be argued that Gilts are getting a belated lift from latest public sector finance updates, but equally that bonds are content with the level of investor appetite for the second Green syndication so soon after the initial issue and an extremely well sought after EU offering of the same hue. However, Bunds and US Treasuries have topped out ahead of a relatively busy pm agenda including data, surveys, physical supply, issuance details and more Central Bank rhetoric.

Books opened for the UK's syndicates sale of a new 1.50% 2053 Green Gilt, as books closed orders were in excess of GBP 74bln; price guidance set at 1bp below the 3.75% 2052 conventional Gilt. Deal size is GBP 6bln. (Newswires)

COMMODITIES

WTI and Brent Dec futures have gradually drifted from the overnight session peaks of USD 83.96/bbl and USD 86.10/bbl respectively. The downturn in prices seems to have initially been a function of risk sentiment, with APAC markets posting losses and Europe also opening on the back foot. At the time of writing, the benchmark resides around under USD 83/bbl for the former and sub-USD 85/bbl for the latter. Participants at this point are on the lookout for state interventions in a bid to keep prices from running. Over in China, it’s worth keeping an eye on the COVID situation – with China's Beijing Daily stating "citizens and friends are not required to leave the country, do not gather, do not travel or travel to overseas and domestic medium- and high-risk areas", thus translating to lower activity. That being said, yesterday’s commentary from the Saudi Energy Minister indicated how adamant OPEC is to further open the taps. UBS sees Brent at USD 90/bbl in December and March, before levelling off to USD 85/bbl for the remainder of 2022 vs prev. USD 80/bbl across all timelines. Elsewhere, spot gold and silver are relatively flat around USD 1,785 and USD 22.25 with nothing new nor interesting to report thus far, and with the precious metals moving in tandem with the Buck. Base metals meanwhile are softer across the board as global market risk remains cautious, with LME copper trading on either side of USD 10k/t.