• Asia-Pac bourses traded mostly higher amid tailwinds from last Friday's fresh record highs in the US
• Chinese official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts
• The Japanese general election saw the ruling LDP maintain a majority in the lower house
• The DXY has held on to 94.00 status, EUR/USD and GBP/USD sit on 1.15 and 1.36 handles respectively
• House Democrats are seeking to pass the social spending and bipartisan infrastructure bills as soon as Tuesday
• Looking ahead, highlights include German Retail Sales, UK & US Manufacturing PMI, US Construction Spending, ISM Manufacturing

CORONAVIRUS UPDATE

US CDC clarified that foreign national children travelling to the US by air will not be required to quarantine. (Newswires)

White House Press Secretary Psaki stated she tested positive for COVID-19 and that the last contact she had with President Biden was on Tuesday, while reports noted that President Biden had received a negative test result during the weekend. (Newswires)

FDA confirmed that it granted EUA for the Pfizer (PFE)/BioNTech (BNTX) vaccine in children aged 5-11 years old. In relevant news, Moderna (MRNA) said additional time is required to complete assessment of its EUA request for use of its COVID-19 vaccine in adolescents aged 12-17 years old and the FDA notified it that the review may not be completed before January 2022. Furthermore, the Co. will delay filing a request for EUA of MRNA-1273 at 50mg dose level in paediatric population aged 6-11 years old and stated that the risk of myocarditis was described for COVID-19 vaccines including Moderna’s, particularly in young men following the second dose, although the CDC noted that myocarditis from MRNA vaccines has been rare and generally mild. (Newswires)

Shanghai Disneyland and Disneytown suspended entry following a suspected COVID-19 outbreak with 60k visitors reportedly in line for COVID-19 testing. (Newswires)

Australia is to permit fully vaccinated citizens to travel internationally again from Monday, while it was also reported that quarantine-free travel from New Zealand to Australia is set to resume. (Newswires)

G20

G20 leaders agreed to pursue efforts to limit global warming to 1.5 degrees Celsius above pre-industrial levels and are to back cooperation on technology to help developing nations to phase out coal power as soon as possible, while the G20 final communique called for action in the current decade to update and advance national emission plans where necessary but made no reference to specific 2050 timeline to achieve net zero carbon emissions and did not address dispute regarding vaccine patent waivers. (Newswires)

ASIA

Asia-Pac bourses traded mostly higher amid tailwinds from last Friday's fresh record highs in the US where Wall St. topped off its best monthly performance YTD, but with some of the advances in the region capped as participants digested mixed Chinese PMI data and ahead of this week’s slew of key risk events including crucial central bank policy announcements from the RBA, BOE and FOMC, as well as the latest NFP jobs data. ASX 200 (+0.8%) was led higher by the consumer-related sectors amid a reopening play after Australia permitted fully vaccinated citizens to travel internationally again and with several M&A related headlines adding to the optimism including the Brookfield-led consortium acquisition of AusNet Services and Seven West Media’s takeover of Prime Media. Conversely, the largest weighted financials sector failed to join in on the spoils with Westpac shares heavily pressured following its FY results which fell short of analyst estimates despite more than doubling on its cash earnings. Nikkei 225 (+2.5%) was the biggest gainer with the index underpinned by favourable currency flows and following the general election in which the ruling LDP maintained a majority in the lower house although won fewer seats than previously for its slimmest majority since 2012, while the KOSPI (+0.4%) was kept afloat but with upside limited by slightly softer than expected trade data. Hang Seng (-1.5%) and Shanghai Comp. (+0.1%) were subdued amid a slew of earnings releases and following mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts with the former at a second consecutive contraction, although Caixin Manufacturing PMI was more encouraging and topped market consensus. Finally, 10yr JGBs initially declined amid gains in stocks and recent pressure in T-notes due to rate hike bets with analysts at Goldman Sachs bringing forward their Fed rate hike calls to July 2022 from summer 2023 citing inflation concerns, although 10yr JGBS then recovered despite the mixed results from the 10yr JGB auction which showed a higher b/c amid lower accepted prices and wider tail in price.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 190bln daily net drain. (Newswires) PBoC set USD/CNY mid-point at 6.4192 vs exp. 6.4174 (prev. 6.3907)

US Treasury Secretary Yellen stated that the US wants China to adhere to its trade deal commitments and eyes an eventual reciprocal reduction of tariffs, while also noting that the lowering of tariffs has a disinflationary effect. (Newswires)

US Secretary of State Blinken had a candid talk with Chinese Foreign Minister Wang on the sidelines of the G20 in which he made it ‘crystal clear’ that there has been no change to the US’ One-China policy and said the US opposes actions taken by Beijing that increased tensions across the Taiwan Strait, as well as any unilateral changes to the status quo. Furthermore, Blinken stated the US wants to manage intense competition between the two countries responsibly and both sides acknowledged that opening lines of communication are paramount, while he also stated that the US remains absolutely committed to the Taiwan Relations Act and will ensure Taiwan has the means to defend itself. (Newswires)

Chinese Foreign Minister Wang stated that Taiwan is the most sensitive issue between China and US, while he added that tensions over Taiwan are caused by US support of Taiwan pro-independent forces and urged for the US to adhere to the One-China policy. Furthermore, Wang urged for the US to correct its wrong approach and return relations to a track of healthy development, while he added that China is opposed to the US forming ‘little cliques’ with other nations to oppress China. In relevant news, Taiwan reported that eight Chinese air force jets entered its air defence identification zone. (Newswires)

China is to tighten rules on data transfers abroad and review companies transferring info on 100k people and over including Tesla (TSLA), under a new proposal unveiled on Friday, while they will collect opinions through November 28th with directives to go in force after. (Newswires)

PBoC branches provided window guidance to local banks on property loans and told banks to keep total local property loan volumes stable, while it also instructed local banks to conduct cross-region adjustments to property loans. (Newswires)

Japan’s ruling LDP won an outright majority in the lower house elections with 261 seats in parliament although this was a decline from the previous 276 seats and LDP Secretary General Amari lost his constituency seat. Japanese PM Kishida stated he believes they received a mandate from the people given the majority but believed the loss of heavyweight LDP candidates reflect people’s feelings during the past four years, while he wants to swiftly pull together a stimulus package after the election and said there are no plans to change the current cabinet. (Newswires)

• Chinese Manufacturing PMI (Oct) 49.2 vs Exp. 49.7 (Prev. 49.6)
• Chinese Non-Manufacturing PMI (Oct) 52.4 vs Exp. 53.0 (Prev. 53.2)
• Chinese Composite PMI (Oct) 50.8 (Prev. 51.7)
• Chinese Caixin Manufacturing PMI (Oct) 50.6 vs. Exp. 50.0 (Prev. 50.0)

UK/EU

UK PM Johnson said he had a wide-ranging and frank discussion with French President Macron and stated that he was puzzled to read a letter from France calling for the UK to be punished for Brexit. There were also previous reports that PM Johnson called France one of UK’s best, oldest and closest allies, while he added the ties that bind UK and France are stronger than any turbulence in the current relationship and that he will do whatever is necessary to ensure UK interests. Furthermore, PM Johnson’s spokesman said the matter of fishing licences should be resolved in the post-Brexit trade agreement and that the UK has in no way sought to escalate the situation, while PM Johnson was said to have expressed hope that the French government de-escalate and withdraw threats. (Newswires)

UK Brexit Minister Frost said that they are actively contemplating launching dispute settlement proceedings and are very troubled by the letter from the French PM to the EU that called for the EU to demonstrate that there is more damage to leaving than remaining in the EU. There were prior reports that Brexit Minister Frost said UK will consider implementing rigorous enforcement processes and checks on EU fishing activity in UK territorial waters. (Newswires)

French President Macron told UK PM Johnson that he expects seriousness and respect between the two leaders, while he wants Britain to respect the rules and the leaders were said to have agreed to work towards a de-escalation concerning the fishing dispute. President Macron also told PM Johnson that his actions on AUKUS wasn’t one of an ally and Macron stated that he wants to cooperate with Britain and find a deal on the fishing row, as well as asked PM Johnson to make a proposal on how to resolve the Northern Ireland Protocol issue, while Macron also warned that Britain had 24 hours to give way over fishing rights or else France would trigger trade sanctions and that France would stop British boats from landing their catches. (Newswires/Telegraph)

EU's Sefcovic accused the UK of seeking a Brexit clash and warned it not to embark on confrontation regarding Northern Ireland. (The Telegraph)

Fitch affirmed Germany at AAA; Outlook Stable, while S&P affirmed Czech Republic at AA-; Outlook Stable. (Newswires)

• UK Lloyds Business Barometer (Oct) 43 (Prev. 46)

FX

FX markets lacked commitment heading into this week’s slew of risk events with the USD steady as participants await the FOMC meeting mid-week where the Fed is expected to announce the start of tapering and with other central bank policy announcements such as the RBA and the BoE also seen as crucial meetings. Nonetheless, the DXY held on to the 94.00 status after last Friday’s rebound while reports also noted House Democrats are hoping to pass the social spending and bipartisan infrastructure bills as soon as Tuesday, although there are doubts whether this will materialise. EUR/USD was lacklustre near 1.1550 after losing ground to the greenback with the recent firmer than expected flash GDP and HICP inflation from the block doing little to support the single currency, while an agreement to resolve the US-EU steel and aluminium trade dispute also failed to garner a reaction. GBP/USD remained subdued beneath the 1.3700 level following frank discussions between the UK and France’s leaders amid ongoing tensions and recent calls by the latter to punish the UK for its Brexit, while UK Brexit Minister Frost also stated that they are actively contemplating launching dispute settlement proceedings and French President Macron also warned that Britain has 24 hours to give way in the fishing dispute or they will enact trade sanctions. That said, it was also reported over the weekend, that leaders were said to have agreed to work towards a de-escalation concerning the fishing dispute. Furthermore, attention for the currency is fixed on Thursday’s BoE meeting with markets pricing in a 15bps hike to 0.25%. USD/JPY was higher as the LDP majority win paves the way for PM Kishida to proceed with his stimulus plans and antipodeans were flat following the mixed Chinese PMI data and ahead of tomorrow’s RBA policy announcement where some expect the central bank to abandon its April 2024 bond yield target after continuing to refrain from defending the 10bps target, with Westpac also calling for the central bank to drop its forward guidance of no rate hikes until 2024.

COMMODITIES

Commodities were rangebound with mild losses in WTI crude futures following China's announcement over the weekend to release gasoline and diesel reserves to bolster market supply and stabilise prices, while there were also prior reports that oil consumers including US, India and Japan were pressing for OPEC+ for further action and to boost output faster. Nonetheless, the downside for US oil prices was limited by support near the USD 83/bbl level and with Goldman Sachs reaffirming its bullish calls, while attention for the complex remains on this week's risk event including the latest OPEC+ meeting set for Thursday. Gold was contained, while copper eked marginal gains amid the mostly constructive risk tone but with upside capped by resistance at USD 4.40/lb and mixed Chinese PMI data.

Baker Hughes Rig Count (29/10/21): Oil +1 at 444, natgas +1 at 100, total +2 at 544. (Newswires)

Oil consuming nations are pressuring OPEC+ to raise output faster with US, India and Japan among the consumers pressing OPEC+ to do more. (Newswires)

Saudi Arabia’s King Salman stated that the kingdom will support energy market stability and balance, while he added that Saudi will support efforts to supply clean energy to the world. (Newswires)

French President Macron warned of the threat to the global economy from energy and does not think we will get lower energy prices given tensions on the demand side. (FT)

China's National Food and Strategic Reserves Administration announced on Sunday that it released reserves of gasoline and diesel to increase market supply and support price stability in some regions. In relevant news, China's Global Times reported that gas stations in many parts of China are running out of diesel amid supply constraints posed by the booming demand for coal transportation and with factories using diesel to generate electricity. (Newswires/Twitter)

Goldman Sachs said the oil bull run is continuing and it affirmed its USD 90/bbl Brent target, while it also expects demand to outstrip oil supply by 2.5mln bpd. (Newswires)

GEOPOLITICAL

US Secretary of State Blinken stated the US is absolutely in lock step with Germany, France and Britain in getting Iran back into a nuclear deal but added that they do not know yet if Iran is willing to re-join discussions for a deal. (Newswires/CNN)

Iran’s Foreign Ministry said the latest US sanctions on Tehran contradict Washington's claim to seek a return to the nuclear deal. (Newswires)

Yemeni Information Minister said 29 civilians were killed in Marib from a Houthi ballistic missile attack. (Newswires)

US

Treasuries were mixed within a couple of bps around the unchanged mark, after earlier selling recovered into month-end and ahead of FOMC/NFP; global money markets continued to price hawkish scenarios. TYZ1 volumes were average, especially compared to recent sessions. By settlement, 2s -1.8bps at 0.483%, 3s -2.9bps at 0.743%, 5s -1.5bps at 1.175%, 7s -0.3bps at 1.446%, 10s -2.0bps at 1.549%, 20s +0.8bps at 1.984%, 30s -2.7bps at 1.936%. 5yr TIPS +4.4bps at -1.692%, 10yr TIPS +8.0bps at -0.956%, 30yr TIPS +9.5bps at -0.285%. T-Notes managed to straddle the 130-16 level into the NY session despite continued selling at the front-end with additional pressure from the Euribor strip; market expectations of a hawkish ECB also led to peripheral spread widening with BTPs hit hard. The 08:30ET data release saw T-Notes break support to new session lows of 130-07+, seemingly on the big jump in Q3 the Employment Cost Index to +1.3% from +0.7%, with not too much attention on the misses in Core PCE Y/Y and Personal Income. However, the bear-steepening soon faded, with T-Notes climbing into the NY afternoon to settle little changed. There was nothing newsflow-wise to explain the rally, rather month-end factors (+0.08yr duration index extension expected) and positioning into next week given key events such as FOMC and NFP. It's worth highlighting that TIPS yields rose relatively aggressively Friday, which perhaps isn't too surprising going into a central bank meeting with potential hawkish risks, although somewhat counter-intuitively, it was the long-end of that real curve that sold the most. The Inflation breakeven curve continues to invert. T-note (Z1) futures settled 1+ ticks lower at 130-22+.

US President Biden said his build back better bill will be voted on sometime this week ‘God willing’, while other reports also noted that House Democrats are seeking to pass the social spending and bipartisan infrastructure bills as soon as Tuesday. (Newswires/The Hill)

US and EU announced an agreement to resolve steel and aluminium trade dispute in which the US is to allow a quota threshold of 3.3mln tons of EU steel to be imported and with the duty-free steel imports from the EU required to be entirely produced in the EU. Furthermore, the EU will drop its retaliatory tariffs on US products such as motorcycles and bourbon, while the deal averts an increase in EU tariffs to 50% that was set for December 1st. (Newswires)