• European bourses are contained after a subdued APAC lead, with performance dictated by the packed earnings docket; ES +0.1%
• In FX, the DXY is modestly firmer but sub-94.00, though peers are mixed across the board and relatively contained overall
• Australian bond yields spiked higher after the RBA refrained from purchasing the April 2024 yield-target bond; US yield curve is experiencing pronounced flattening
• BCB hiked its Selic Rate by 150bps (vs exp. 100bps hike); BoJ maintained policy settings and trimmed FY21 forecasts
• Taiwan's President said the threat from China is increasing 'every day,' and confirmed the presence of US troops on the island
• Looking ahead, highlights include US GDP Advance, PCE Prices Advance, IJC, ECB Policy Announcement and Press Conference, supply from the US
• Earnings: Amazon, Apple, Comcast, Mastercard, Yum!, Shopify

ASIA

APAC equities traded mostly lower following the downbeat lead from Wall Street, which saw the S&P 500, DJIA and R2K finish the session in the red, whilst the Nasdaq closed flat as Microsoft (+4.2%) and Alphabet (+4.8%) provided tailwinds alongside the broader strong bid for duration. Overnight, US equity futures drifted marginally higher as trade resumed and held onto mild gains, whilst European equity futures traded flat. The ASX 200 (-0.3%) and the Nikkei 225 (-1.0%) were both pressured by hefty losses in their energy sectors, closely followed by materials and mining. The KOSPI (-0.5%) was somewhat supported by heavyweight Samsung Electronics trimming earlier losses, with the tech giant also expecting overall consumer electronic demand to weaken in 2022, whilst suggesting that component supply issues could improve from H2 2022. The Shanghai Comp (-1.3%) was softer despite another chunky net CNY 100bln liquidity injection by the PBoC, whilst the Hang Seng (-0.3%) initially moved between modest gains and losses before conforming to the overall mood, whilst property firm Kaisa group shares sunk 15% after S&P downgraded its rating due diminishing liquidity and elevated refinancing risk. Finally, Aussie bonds once again took the limelight after the RBA refrained from April 2024 yield target bond purchases, with the yield on the April 2024 bond extending its rise to 0.50% vs the RBA's 0.10% target range.

• PBoC set USD/CNY mid-point at 6.3957 vs exp. 6.3926 (prev. 6.3856)
• PBoC injected a CNY 200bln for a net CNY 100bln via 7-day reverse repos at a rate of 2.20%

Samsung Electronics (005930 KS) reported Q3 net KRW 12.3tln vs exp. KRW 11.5tln, revenue KRW 73.98tln vs Co. exp. KRW 73tln, operating profit KRW 15.82tln vs Co. exp. KRW 15.8tln. Samsung expects overall consumer electronic demand to weaken in 2022. Co. expects client demand to be affected by supply shortage in Q4. Co. said the component supply issues may improve from H2 2022. (Newswires) Shares opened lower by around 1% before nursing all losses

CENTRAL BANKS

RBA did not offer to buy April 2024 yield-target bond; offered to buy AUD 1.60bln in government bonds in its purchase programme (matching expected amount). (Newswires)

RBA Deputy Governor Debelle said monetary policy is looking to generate higher inflation, a little more inflation welcome, a lot more inflation is not welcome. Debelle said there are signs that the economy has strong momentum domestically, what the RBA sees in the domestic economy is positive, and low rates contributed to rising house prices, but it's not the only factor. (Newswires)

The BoJ maintained policy settings as expected with rates kept at -0.10% and 10yr JGB yield target kept at around 0%. Board Member Kataoka dissented on YCC. In the Outlook Report, the BoJ lowered Core CPI and Real GDP forecasts for the current fiscal year, as telegraphed by earlier sources. The Outlook Report suggested Japan's consumer inflation is likely to gradually accelerate, whilst exports and output are weak due to supply constraints but increasing as a trend.

The BCB hiked its Selic Rate by a larger-than-expected 150bps (vs exp. 100bps) to 7.75% from 6.25%. The decision was unanimous and the central bank said it envisages a hike of the same magnitude at the next meeting. The BCB noted additional pricing pressures on items associated with core inflation. (Newswires/BCB)

US

US House Democrats have scheduled an in-person meeting at 9:00EDT/14:00BST Thursday, according to Fox's Pergram. (Twitter) Sources confirmed US President Biden will go to the House Democratic Caucus tomorrow morning to discuss the reconciliation bill and fate of bipartisan infrastructure bill, via Politico's Everett. (Twitter)

US Democrats are expected to drop paid leave from President Biden's sweeping spending plan amid Senator Manchin's opposition, sources told The Hill. (The Hill)

Chipmaker GlobalFoundries (GFS) prices 55mln common shares at USD 47/shr (vs USD 47/shr guidance). (Newswires)

UK/EU

France released a list of possible sanctions against the UK in the Brexit fishing row; could prevent British fishing boats from accessing certain ports from November 2nd. Would strengthen border and sanitary checks on British goods imports; including checks on trucks both from and going to the UK. Not ruling out a review of its power supply to the UK under the second round of measures. (Newswires)

French European Minister says that French ports will no longer be accessible to British boats, aside from a few exceptions; will now use the language of force, as this seems to be the only thing Britain can understand; Follows on from the French Maritime Ministry saying that on Wednesday a British trawler was detained and another ship was given a verbal warning, Sky News. (Newswires/Sky)

EU Consumer Confidence Final (Oct) -4.8 (Prev. -4.8, Rev. -4.0); Economic Sentiment (Oct) 118.6 (Prev. 117.8)

German North Rhine-Westphalia State CPI YY (Oct) 4.5% (Prev. 4.4%); MM (Oct) 0.4% (Prev. 0.0%)

• Mainland expectations are for 4.4% (prev. 4.1%) YY & 0.5% (prev. 0.00%) MM; thus far, readings have been directionally in-fitting with this but the magnitude of the increase is perhaps slightly larger than the expectations would have indicated.

GEOPOLITICAL

Taiwan's President said the threat from China is increasing 'every day,' and confirmed the presence of US troops on the island, according to CNN. (CNN) She said she has 'faith' US will defend the island, according to AFP. (Twitter)

Saudi air defences have destroyed 5 Houthi missiles launched towards Jazan, according to Al-Arabiya. (Twitter)

CRYPTO

US SEC has asked at least one asset manager not to go ahead with plans for leveraged Bitcoin (BTC) ETF, according to WSJ sources. "Regulator has signaled it will allow only unleveraged funds tied to the cryptocurrency, at least for now." (WSJ)

EQUITIES

European equities (Stoxx 600 +0.1%) trade with little in the way of firm direction in what has been an exceptionally busy morning of earnings reports for the region ahead of the latest ECB policy announcement. The handover from the APAC region was a predominantly downbeat one after a late souring of sentiment on Wall St. filtered through to the region despite ongoing liquidity efforts by the PBoC and earnings-inspired upside for Samsung Electronics (+1.5%). Stateside, futures are a touch firmer with some modest outperformance in the NQ (+0.3% vs. ES +0.1%) ahead of another busy pre-market slate of earnings; highlights include Merck, Caterpillar, Comcast, American Tower and Mastercard. US investors remain cognizant of events on Capitol Hill, however, the ongoing stalemate within the Democrat party has resulted in a bit of headline fatigue for market participants. Back to Europe, sectors are somewhat mixed with Food and Beverage names the notable outperformer as AB Inbev (+6.6%) sits at the top of the Stoxx 600 after Q3 earnings prompted a FY21 outlook upgrade. Tech is also on a firmer footing amid earnings-related support from Cap Gemini (+3.9%) and STMicroelectronics (+3.9%) with the former also upgrading its FY21 financial targets. To the downside, Oil & Gas names sit at the foot of the table amid yesterday’s pullback in crude prices and losses in FTSE 100 laggard Shell (-2.9%) which reported a notable miss on earnings and is facing pressure from hedge fund Third point to break up the Co. Total (-1.4%) are also seen softer post-earnings, albeit to a lesser extent after reporting a beat on expectations for net income. Auto names are also facing pressure amid losses in Volkswagen (-3.0%) after the Co. cut its FY21 delivery forecast alongside earnings. Finally, Lloyds (+1.2%) shares are seen higher post-results which saw the Co. exceed estimates for Q3 pre-tax profits. That said, the Banking sector in Europe as a whole is softer ahead of today’s ECB meeting which is set to see the Bank push back on current market pricing for rate lift-off.

Volkswagen (VOW3 GY) CFO says they see the start of a stabilisation in chip supply. (Newswires)

FX

DXY/EUR/JPY/CAD - The Dollar remains sidelined in many ways awaiting advance US Q3 GDP and the latest IJC update, or arguably next week’s FOMC and monthly jobs data for independent direction. However, month end rebalancing flows remain a drag and the index is also encountering resistance around the 94.000 mark on psychological and technical grounds following multiple failures to extend beyond the round number or even hold above. Indeed, after touching the 21 DMA yesterday (94.011), the DXY has slipped back again and into a range just under today’s chart mark that comes in at 93.988 to meander between 93.968-759. Moreover, decent option expiry interest in several major pairings are having a bearing on price action, as the Euro continues to oscillate either side of 1.1600 ahead of the ECB eyeing 1.6 bn that roll off at 1.1600-10, while the Yen is hovering near 113.50 post-BoJ amidst an array of expiries stretching from 113.00 (1.5 bn) through 113.70-75 (1.7 bn) to 113.80-85 (1.3 bn), and the Loonie straddles 1.5 bn between 1.2370-75 in wake of Wednesday’s hawkish BoC. Note, Usd/Jpy largely shrugged off the as expected BoJ policy meeting and comments from Governor Kuroda expressing no qualms about recent Yen depreciation, but Usd/Cad has rebounded further from circa 1.2300 lows when the BoC surprised with an immediate withdrawal of QE and shift to reinvestment buying mode compounded by an earlier tightening signal, as WTI crude retraces more upside. Meanwhile, Eur/Usd could well break out of its confines pending the tone of the ECB statement and President Lagarde’s press conference - see Headline Feed at 7.43BST for a preview of the event.

NZD/AUD - Tasmin tides have turned via the cross to the Kiwi’s benefit and Aussie’s detriment irrespective of more follow-through selling in AGBs after forecast topping core inflation prints and no intervention from the RBA overnight. In fact, Deputy Governor Debelle stressed that monetary policy is set to generate price pressure and a bit more is welcome to leave Aud/Usd under post-data levels and pivoting 0.7500, while Nzd/Usd has nudged back above 0.7150 and Aud/Nzd is closer to 1.0450 than 1.0500 in advance of Aussie ppi, credit and final retail sales.

GBP/CHF - It feels a bit like after the Lord Chancellor's show for Sterling that is straddling 1.3750 against the Greenback, but on a firmer footing vs the Euro regardless of rising UK-French fishing tensions due to increasingly diverging BoE/ECB outlooks and stances. Elsewhere, the Franc is keeping its head above 0.9200 against the Buck and on a more even keel with the Euro following another reminder from SNB’s Maechler that the Chf is still deemed to be highly valued.

SCANDI/EM - Notwithstanding, the ongoing bull correction in Brent, Eur/Nok retreated from almost 9.8000 after a decline in Norway’s LFS jobless rate and significantly better than anticipated retail sales data, in contrast to a steady Eur/Sek circa 9.9600 weighing somewhat mixed Swedish sentiment indicators, consumption and GDP outturns vs consensus and previous readings. Elsewhere, the Brl may derive more momentum from the BCB’s decision to go big and hilke the SELIC rate 150 bp compared to the full point most penciling in, while flagging the same for the next policy convene, but the Try is on the rack again as CBRT year-end CPI forecasts jump and the Governor states that it is not targeting a stronger Lira, while adding that the Bank is not under outside influence.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1500 (585M), 1.1550 (352M), 1.1600-10 (1.6BN), 1.1620-30 (879M), 1.1650-60 (505M), 1.1665-75 (425M), 1.1700 (308M)
• USD/CAD: 1.2360 (250M), 1.2370-75 (1.5BN), 1.2390-1.2400 (511M), 1.2435-50 (637M)
• USD/JPY: 113.00 (1.5BN), 113.70-75 (1.7BN), 113.80-85 (1.3BN)

CBRT Governor says 2021 year-end inflation view 18.4% at mid-point (prev. 14.1%); 2022 seen at 11.8% at mid-point (prev. 7.8%); 2023 seen at 7.0% at mid-point (prev. 5%); inflation expected to stabilise around 5% in medium-term. (Newswires)

FIXED

Bunds have retreated further from best levels and lost Fib support at the 50% retracement point of Wednesday’s rebound from 168.51 trough to 169.83 peak, but found underlying bids just ahead of 169.00 and also traction from underpermance at the Eurozone margins via spread divergence as BTPs, Bonos and even OATs for that matter suffer heavier losses ahead of the ECB (and post-mixed auctions in the case of Italian bonds as well). Conversely, Gilts plundered more upside with a second post-UK budget/DMO wind and briefly peered above parity at 125.73 before fading again, while US Treasuries are essentially idling midway between overnight ranges in the run up to advance GDP, initial claims and the 7 year auction that normally arouses foreign interest and could complete a run of well received offerings this week.

COMMODITIES

WTI and Brent remain pressured in a continuation of APAC action, fresh drivers have been limited though we saw mixed earnings reports from energy giants Shell and Total; currently, the benchmarks are lower by just shy of USD 1/bbl but have picked up from overnight lows. Fresh newsflow has been very minimal and the ongoing downside is perhaps still taking impetus from the week’s inventory reports. Returning to the oil giants, within their earnings Shell noted that oil product sales volumes for Q3 increased given seasonal factors and an ongoing recovery in demand. Separately, TotalEnergies notes of an increase in aviation fuel demand which is beginning to support high prices. Moving to metals, spot gold and silver are modestly firmer but haven’t managed to deviate too far from the unchanged mark in European hours with, for instance, spot gold pivoting the USD 1800/oz figure. Elsewhere, base metals are firmer but again drivers have been limited and thus such metals are, for the most part, within familiar ranges.

Chinese State Planner met with coal producers and associations yesterday to study and judge criteria for profiteering. (Newswires)

Citi forecasts Q421 WTI at USD 83/bbl and Q122 at USD 76/bbl. (Newswires)