• European bourses are firmer with performance improving after a cautious open post-APAC given Intel & Snap tech headwinds; ES U/C, NQ -0.4%
• Intel and Snap slumped post-earnings on soft guidance and Snap CEO comments on iOS advertising tracking; impacting tech names and the broader NQ
• Evergrande has reportedly paid the USD bond interest; however, its Hengda unit said Evergrande cannot guarantee it will meet financial obligations under contracts
• DXY is subdued with antipodeans the best-performers while Cable briefly reclaimed 1.38 on strong flash PMIs after a mixed EZ release
• BoE Chief Economist Pill warned UK inflation is likely to hit 5% and stated that the November meeting will be a live decision
• Looking ahead, highlights include US Flash PMIs, EU Council Meeting, Fed's Williams, Daly, Powell
• Earnings: American Express, Honeywell

CORONAVIRUS UPDATE

US CDC advisers voted to recommend Moderna's (MRNA) COVID-19 vaccine booster for older adults and some high-risk individuals, while CDC advisers also unanimously recommended Johnson and Johnson (JNJ) COVID-19 vaccine as booster for all eligible individuals that received any of the authorised COVID-19 vaccines. Furthermore, Moderna estimated the authorisation of a booster dose of MRNA-1273 at 50mg dose level and subsequent approval could increase doses available next year by 1bln doses. (Newswires)

ASIA

Asian equity markets traded with a positive bias but with gains capped following the temperamental mood on Wall St amid mixed earnings results and although a late tailwind heading into the close lifted the S&P 500 to a record high and contributed to the outperformance of the NDX, futures were then pressured after hours as shares in Intel and Snap slumped post-earnings with the latter down as much as 25% on soft guidance which subsequently weighed on tech heavyweights including social media stocks such as Facebook and Twitter. ASX 200 (Unch.) was subdued amid weakness in mining names and financials but with downside cushioned after the recent reopening in Melbourne and with the RBA also conducting unscheduled purchases to defend the yield target for the first time since February. Nikkei 225 (+0.3%) recovered from opening losses with risk appetite at the whim of a choppy currency and with some encouragement heading into the easing of restrictions in Tokyo and Osaka from Monday. News headlines also provided a catalyst for individual stocks including Nissan which was subdued after it cut planned output by 30% through to November and with Toshiba pressured as merger talks between affiliate Kioxia and Western Digital stalled, while SoftBank enjoyed mild gains after a 13.5% increase in WeWork shares on its debut following a SPAC merger. Hang Seng (+0.4%) and Shanghai Comp. (-0.3%) traded, initially, with tentative gains after another respectable liquidity injection by the PBoC and news of Evergrande making the USD-bond interest payment to avert a default ahead of tomorrow’s grace period deadline. This lifted shares in Evergrande with attention now turning to another grace period deadline for next Friday, although regulatory concerns lingered after the PBoC stated that China will continue separating operations of banking, securities and insurance businesses, as well as signed an MOU with the HKMA on fintech supervision and cooperation in the Greater Bay area. Finally, 10yr JGBs were lower on spillover selling following a resumption a resumption of the curve flattening stateside where T-note futures tested the 130.00 level to the downside amid inflationary concerns and large supply from AerCap which launched the second largest IG dollar bond issuance so far this year. In addition, the gains in Japanese stocks and absence of BoJ purchases in the market today added to the lacklustre demand for JGBs, while today also saw the RBA announce unscheduled purchases valued at AUD 1bln to defend the yield target for the first time since February, although the impact on yields was only brief.

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 6.4032 vs exp. 6.4030 (prev. 6.3890)

Evergrande (3333 HK) reportedly pays USD 83.5mln bond interest payment that was due on September 23rd. Subsequently, Evergrande's main unit Hengda says it has not made substantial progress in disposing Evergrande assets, according to a statement adding that Evergrande cannot guarantee it will be able to continue to meet financial obligations under contracts. In the event Evergrande cannot reach obligations/reach alternative creditor plans, will have a significant negative impact on Evergrande. (Newswires)

US is reportedly seeking a virtual summit between US President Biden and Chinese President Xi in November and is aiming to show responsible handling of China ties. (Newswires)

US President Biden said the US would come to Taiwan's defense and has a commitment to that, while the White House later commented that President Biden was not announcing any change to US policy on Taiwan and that there hasn't been any change in US policy. Subsequently, the Chinese Foreign Ministry said it has no room for concession on its core interests. (Newswires)

• Japanese National CPI YY (Sep) 0.2% vs. Exp. 0.2% (Prev. -0.4%)
• Japanese National CPI Ex. Fresh Food YY (Sep) 0.1% vs. Exp. 0.1% (Prev. 0.0%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Sep) -0.5% vs. Exp. -0.2% (Prev. -0.5%)

US

Fed's Williams (voter) said longer run inflation expectations are in line with the Fed's 2% goal and stated that if inflation expectations are anchored at a level that is too low, then that will then bring down actual inflation over time. Furthermore, he added that there is a great deal of uncertainty regarding the economy today. (Newswires)

Fed banned top officials from buying individual stocks and bonds, while it also announced a broad set of restrictions to limit active trading. In relevant news, reports also noted that a Fed ethics memo from March 2020 stated officials were encouraged to observe a trading blackout for several months as the Fed contemplated emergency measures. (Newswires)

US President Biden said he is considering using National Guard to help with the trucking shortage and assist with the supply chain situation, while he added that he does not believe inflation will last and sees gasoline prices declining in 2022. There were later comments from the White House that the request of the National Guard at the state level is under purview of Governors and that they are not actively pursuing the use of the National Guard on a federal level. (Newswires)

US President Biden said he thinks he is close to a deal and that he would not support a work requirement for child tax credit, while it would be a reach for reconciliation bill to include hearing aids, dental and vision care together. President Biden added that he doesn't need a broad corporate tax hike to pay for the reconciliation bill and does not expect a broad corporate tax increase to be included in the bill, but noted that a minimum corporate tax proposal could help pay for the bill. Furthermore, he stated that Democrat Senator Sinema is very supportive of his environmental agenda and they are down to four or five issues in negotiations. (Newswires)

US White House has been pressing the Democratic congressional leadership for a House floor vote on the reconciliation package and bipartisan infrastructure bill next week, via Punchbowl who add that while possible are sceptical on whether it will work. (Punchbowl)

US Moderate Democrat Senator Sinema "has agreed to provisions in each of President Biden's four proposed revenue categories -- international, domestic corporate, high net worth individuals, and tax enforcement" to pay for reconciliation bill, according to Politico citing sources. It was also separately reported that Democrats are considering taxing mark to market gains. (Politico)

UK/EU

BoE Chief Economist Pill warned UK inflation is likely to hit 5% and stated that the November meeting will be a live decision, while he declined to disclose how he would vote at that meeting and said “it is finely balanced”. Pill also commented that maybe there is a bit too much excitement in the focus on rates right now and he advised traders not to get too engrossed in the exact timing of any rate rise. (FT)

UK PM Johnson would be willing to accept a limited role for the ECJ in an attempt to unlock a deal with the EU over the Northern Ireland protocol, according to government figures. (Times)

USTR Tai is optimistic of resolving disputes with EU over steel/aluminium tariffs and said negotiations with EU on steel go beyond tariffs and include the joint effort to fight overcapacity. (Newswires)

EU Markit Composite Flash PMI (Oct) 54.3 vs. Exp. 55.2 (Prev. 56.2); Manufacturing Flash PMI (Oct) 58.5 vs. Exp. 57.0 (Prev. 58.6)

• Services Flash PMI (Oct) 54.7 vs. Exp. 55.5 (Prev. 56.4)

UK Flash Services PMI (Oct) 58.0 vs. Exp. 54.5 (Prev. 55.4); Composite PMI (Oct) 56.8 vs. Exp. 54.0 (Prev. 54.9)

- Manufacturing PMI (Oct) 57.7 vs. Exp. 55.8 (Prev. 57.1)

UK GFK Consumer Confidence (Oct) -17 vs. Exp. -16 (Prev. -13)

EQUITIES

A choppy start to the session has seen European equities extend on opening gains (Stoxx 600 +0.8%) with the Stoxx 600 on course to see the week out relatively unchanged. After a marginally positive lead from Asia, European stocks picked up after the cash open with little in the way of clear catalysts for the surge. Macro focus for the region has fallen on flash PMI readings for October which painted a mixed picture for the Eurozone economy as the EZ-wide services metric fell short of expectations whilst manufacturing exceeded forecasts. Despite printing north of the 50-mark, commentary from IHS Markit was relatively downbeat, noting that "After strong second and third quarter expansions, GDP growth is looking much weaker by comparison in the fourth quarter.” Stateside, futures are mixed with the ES relatively flat whilst the NQ (-0.3%) lags after shares in Intel and Snap slumped post-earnings with the latter down as much as 25% on soft guidance which subsequently weighed on tech heavyweights including social media stocks such as Facebook (-4% pre-market) and Twitter (-4.5% pre-market). Elsewhere in the US, traders are awaiting further updates in Capitol Hill, however, moderate Democrat Senator Manchin has already tempered expectations for a deal being reached by today’s goal set by Senate Majority Leader Schumer. Back to Europe, sectors are mostly firmer with outperformance in Personal & Household Goods following earnings from L’Oreal (+6.2%) who sit at the stop of the Stoxx 600 after Q3 earnings saw revenues exceed expectations. To the downside, Telecom names are lagging amid losses in Ericsson (-3.1%) after the DoJ stated that the Co. breached obligations under a Deferred Prosecution Agreement. Elsewhere, Vivendi (+3.1%) is another notable gainer in the region as Q3 earnings exceeded analyst estimates. LSE (-3.3%) sits at the foot of the FTSE 100 post-Q3 results, whilst IHG (-3.5%) is another laggard in the index post-earnings as the Co.’s fragile recovery continues.

Intel Corp (INTC) Q3 2021 (USD): Adj. EPS 1.71 (exp. 1.11), Revenue 18.09bln (exp. 18.24bln). -9.8% in the pre-market

Snap Inc (SNAP) Q3 2021 (USD): Adj. EPS 0.17 (exp. 0.08), Revenue 1.07bln (exp. 1.1bln); missed the lower end of guidance due to changes to advertising tracking on iOS that did not scale as expected, making it more difficult for ad partners to measure and manage campaigns. -20.7% in the pre-market

FX

DXY - The Greenback has topped out yet again, and partly in tandem with US Treasury yields following their latest ramp up, but also against the backdrop of improved risk appetite that emerged during APAC hours when reports that China’s Evergrande made an overdue interest payment helped to lift sentiment after a late tech-led downturn on Wall Street. The index may also have lost momentum on technical grounds following a minor extension to 93.792, but still not enough impetus to reach 94.000 or test a couple of resistance levels standing in the way of the nearest round number (Fib resistance at 93.884 and 21 DMA that comes in at 93.948 today compared to 93.917 on Thursday), and a fade just shy of yesterday’s best before the aforementioned drift back down to meander between a narrow 93.789-598 corridor. Ahead, Markit’s flash PMIs and a trio of Fed speakers including Williams, Daly and chair Powell feature on Friday’s agenda alongside today’s batch of earnings.

AUD/NZD/CAD - Honours remain pretty even down under as the Aussie and Kiwi both take advantage of the constructive market tone that is weighing on their US counterpart, while assessing specifics such as RBA Governor Lowe reiterating no target rate for Aud/Usd, but the Bank having to intervene in defence of the 0.1% 3 year yield target for the first time in 8 months overnight in wake of upbeat preliminary PMIs. Meanwhile, NZ suffered another record number of new COVID-19 cases to justify PM Adern’s resolve to keep restrictions tight until 90% of the population have been vaccinated and keep Nzd/Usd capped under 0.7200 in mild contrast to Aud/Usd hovering just above 0.7500. Elsewhere, some traction for the Loonie in the run up to Canadian retail sales from a rebound in WTI to retest Usd 83/brl from recent sub-Usd 81 lows, as Usd/Cad retreats towards the bottom of a 1.2375-30 range.

EUR/CHF/GBP/JPY - All marginally firmer or flat against the Dollar, but the Euro easing back into a lower band beneath 1.1650 and not really helped by conflicting flash PMIs or decent option expiry interest from 1.1610-00 (1.4 bn) that could exert a gravitational pull into the NY cut. The Franc is keeping afloat of 0.9300, but under 0.9250, the Pound has bounced to probe 1.3800 on the back of considerably stronger than expected UK prelim PMIs that have offset poor retail sales data and could persuade more of the BoE’s MPC to tilt hawkishly in November, especially after the new chief economist said the upcoming meeting is live and policy verdict finely balanced. Conversely, the BoJ is widely tipped to maintain accommodation next week and as forecast Japanese inflation readings will do little to change perceptions, putting greater emphasis on the Outlook Report for updated growth and core CPI projections and leaving the Yen tethered around 114.00 in the meantime.

SCANDI/EM - The Sek and Nok are on a firm footing circa 9.9800 and 9.7000 against the Eur respectively, and the former may be acknowledging an upbeat Riksbank business survey, while the latter piggy-backs Brent’s recovery that is also underpinning the Rub in the run up to the CBR and anticipated 25 bp hike. The Cnh and Cny are back in the ascendency with extra PBoC liquidity and Evergrande evading a grace period deadline by one day to compensate for ongoing default risk at its main Hengda unit, but the Try is still trying in vain to stop the rot following Thursday’s shock 200 bp CBRT blanket rate cuts and has been down to almost 9.6600 vs the Usd.

FIXED

The overall pattern and trend remains the same in bond land as sellers continue to sell on upticks irrespective of the degree, length and conviction behind bouts of consolidation it seems, but Gilts are still holding an element of their post-data gains and treading water (just) within 123.85-58 extremes compared to yesterday’s 123.54 Liffe settlement even though flash PMIs lived up to their name and BoE chief economist Pill added his name to the growing list of hawkish leaning MPC members. Moreover, Bunds are retesting worst levels between 168.43-167.84 parameters, regardless of rather mixed Eurozone preliminary PMIs, with the 10 year German yield now eyeing -7 bp having rebounded firmly through -10 bp, and US Treasuries are hovering near overnight session lows in advance of the Markit surveys and a trio of Fed speakers including chair Powell.

COMMODITIES

WTI and Brent are marginally firmer this morning though reside within overnight ranges and have been grinding higher for the duration of the European session in-spite of the lack of newsflow generally and for the complex. Currently, the benchmarks are firmer by circa USD 0.40/bbl respectively and reside just off best levels which saw a brief recapture of the USD 83/bbl and USD 85/bbl handles. Given the lack of updates, the complex remains attentive to COVID-19 concerns where officials out of China reiterated language issues yesterday about curbing unnecessary travel around Beijing following cases being reported in the region. Elsewhere, yesterday’s remarks from Putin continue to draw focus around OPEC+ increasing output more than agreed and once again reiterating that Russia can lift gas supplies to Europe; but, as of yet, there is no update on the situation. Finally, the morning’s European earnings were devoid of energy names, but updated Renault guidance is noteworthy on the fuel-demand front as the Co. cut its market forecast to Europe and anticipates a FY21 global vehicle loss of circa 500k units due to component shortages. Moving to metals, spot gold and silver are firmer but have been fairly steady throughout the session perhaps aided by the softer dollar while elevated yields are perhaps capping any upside. Base metals remain buoyed though LME copper continues to wane off the closely watched 10k mark.