• European bourses are firmer with US futures supported following the predominantly positive APAC lead, ES +0.4%
• 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 while safe-havens lag slightly on risk
• House Democrats are seeking to pass the social spending and bipartisan infrastructure bills as soon as Tuesday
• Looking ahead, highlights include 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)

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)

US

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)

Goldman Sachs expects the Fed to begin raising rates in July 2022 (prev. Q3-2023)

UK/EU

UK Foreign Secretary Truss says they will take action on trade unless France withdraws its threats; must back down within 48-hours, if not we will be looking at legal action. (Newswires)

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. (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 Markit/CIPS Manufacturing PMI Final (Oct) 57.8 vs. Exp. 57.7 (Prev. 57.7)

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

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)

Turkish President Erdogan will now not be attending the COP26 summit due to security issues, accoridng to sources. (Newswires) Last week, there were reports that Erdogan would be speaking with US President Biden at this event on F-35s

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

EQUITIES

European equities (Stoxx 600 +0.6%) have kicked the week off on the front-foot with the Stoxx 600 printing a fresh all-time-high. The handover from the APAC session was a largely constructive one with the Nikkei 225 (+2.6%) the best in class for the region amid favourable currency flows and the fallout from the Japanese general election which saw the ruling LDP party maintain a majority in the lower house. Elsewhere, performance for the Shanghai Composite (-0.1%) and Hang Seng (-0.9%) was less impressive amid a slew of earnings releases and mixed Chinese PMI data in which the official Manufacturing and Non-Manufacturing PMIs disappointed analysts’ forecasts. US equity index futures are trading on a firmer footing (ES +0.5%) ahead of Wednesday’s FOMC announcement and Friday’s NFP data. The latest reports from Washington suggest that House Democrats are hoping to pass the social spending and bipartisan infrastructure bills as soon as Tuesday. Back to Europe, a recent note from JPM stated that Q3 European earnings “are coming in well ahead of expectations in aggregate”, adding that results are healthy when considering the “trickier operating backdrop”. Sectors in the region are higher across the board with Auto names top of the leaderboard. Renault (+3.3%) sits at the top of the CAC 40 with the name potentially gaining some reprieve from agreement to resolve the US-EU steel and aluminium trade dispute (something which the Co. has previously noted as a negative). Also following the resolution, Thyssenkrupp (+2.8%) and Salzgitter (+4.5%) are both trading notably higher. Barclays (-2.0%) shares are seen lower after news that CEO Staley is to step down with immediate effect following the investigation into his relationship with sex offender Jeffrey Epstein; Barclays' Global Head of Markets, Venkatakrishnan is to take over. UK homebuilders (Persimmon -2.1%, Taylor Wimpey -1.9%, Barratt Developments -1.9%, Berkeley Group -1.7%) are softer on the session amid concerns that the sector could fall victim to higher mortgage rates given the shape of the UK yield curve. Ryanair (+1%) shares are higher post-earnings which saw the Co. continue its recovery from the pandemic, albeit still expects a loss for the year. Furthermore, the board is considering the merits of retaining its standard listing on the LSE. Finally, BT (+4.2%) is the best performer in the Stoxx 600 ahead of earnings on Thursday with press reports suggesting that the Co. could announce that its GBP 1bln cost savings target will be met a year earlier than the guided March 2023.

FX

DXY - The Greenback is holding above 94.000 in index terms and gradually ground higher after pausing for breath and taking some time out following its rapid resurgence last Friday to eclipse the 94.302 month end best at 94.313 before waning again. Hawkish vibes going into the FOMC are underpinning the Dollar and helping to offset external factors that are less supportive, including ongoing strength in global stock markets on solid if not stellar Q3 earnings and economic recovery from COVID-19 lockdown or restricted levels. Hence, the DXY is keeping its head above the round number and outperforming most major peers within and beyond the basket, awaiting Markit’s final manufacturing PMI, the equivalent ISM and construction spending ahead of the Fed on Wednesday and NFP on Friday.

JPY/AUD - Little sign of relief for the Yen from victory by Japan’s ruling LDP part at the weekend elections as the 261 seat majority secured is down from the previous 276 and the tightest winning margin since 2012. Moreover, Security General Amari lost his constituency and new PM Kishida concedes that this reflects the public’s adverse feelings towards the Government over the last 4 years. Usd/Jpy is eyeing 114.50 as a result and the Aussie is looking precarious around 0.7500 against the backdrop of weakness in commodity prices even though perceptions for the upcoming RBA have turned markedly towards the potential for YCT to be withdrawn following firm core inflation readings and no defence of the 0.1% April 2024 bond target.

NZD/EUR/CHF/CAD/GBP - All narrowly mixed vs their US counterpart, and with the Kiwi also taking advantage of the aforementioned apprehension in the Aud via the cross, while the Euro has pared declines from just under 1.1550, but still looks top-heavy into 1.1600. Elsewhere, the Franc is pivoting 0.9160 and 1.0600 against the Euro with more attention on a rise in Swiss sight deposits at domestic banks as evidence of intervention than a fractionally softer than expected manufacturing PMI, the Loonie is keeping afloat of 1.2400 ahead of Markit’s Canadian manufacturing PMI and Sterling is striving to stay above 1.3600, but underperforming vs the Euro circa 0.8470 amidst the ongoing tiff between the UK and France over fishing rights.

SCANDI/EM - Robust Swedish and Norwegian manufacturing PMIs plus broad risk appetite is underpinning the Sek and Nok, in contrast to the Cnh and Cny following disappointing official Chinese PMIs vs a more respectable Caixin print, but the EM laggard is the Zar in knock-on reaction to Gold’s fall from grace on Friday, increasingly bearish technical impulses and SA energy supply issues compounded by Eskom’s load-shedding. Conversely, the Try has pared some declines irrespective of a slowdown in Turkey’s manufacturing PMI as the CBRT conducted a second repo op for Lira 27 bn funds maturing on November 11 at 16%.

FIXED

Gilts have retreated further from early Liffe highs just a tick over 125.00 and are now eyeing support into 124.50 in wake of a marginal upgrade to the final manufacturing PMI, but more in corrective fashion having gleaned a lot of upside momentum on the back of the DMO’s low post-Budget issuance remit and now facing the risk of a hawkish BoE policy outcome. Meanwhile, Bunds have also fallen in sympathy but contained losses under 168.00 to only 6 ticks for cumulative decline of 18 ticks on the day vs 39 ticks for their UK equivalent and US Treasuries are on a softer footing with the curve a tad steeper ahead of a busy Monday agenda pre-Fed and jobs data at the end of the week, including the manufacturing PMI and ISM alongside construction spending.

COMMODITIES

WTI and Brent are firmer this morning with gains of between USD 0.50-1.00/bbl, this upside is in-spite of a lack of fundamental newsflow explicitly for the complex and is seemingly derived from broader risk sentiment, as mentioned above. Nonetheless, Energy Ministers are beginning to give commentary ahead of Thursday’s OPEC+ event and so far Angola, Kuwait and Iraq officials have voiced their support for the planned 400k BPD hike to production in December. This reiteration of existing plans is in opposition from calls from non-OPEC members such as the US and Japan that the group should look to increase production quicker than planned, in a bid to quell rising prices. Separately, Saudi Aramco reported Q3 earnings over the weekend in which its net profit doubled given strong crude prices and sales volumes improving by 12% QQ; subsequently, some analysts have highlighted the possibility for a end-2021 special dividend. Elsewhere, base metals are mixed and fairly contained in-spite of the EU and US announcing an agreement to resolve the ongoing aluminium and steel trade dispute. While spot gold and silver are modestly firmer this morning as the yellow metal remains contained after its slip from the USD 1800/oz mark in the tail-end of last week. Currently, spot gold is pivoting its 100-DMA at USD 1786 with the 50- and 200-DMAs residing either side at USD 1780/oz and USD 1791/oz respectively.

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)

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)