• Asian equity markets traded mixed; Chinese Caixin Services PMI topped expectations
• US equity futures traded flat overnight in the run-up to the FOMC announcement
• China's most recent COVID-19 outbreak is reportedly the most widespread since Wuhan
• The UK reportedly seeks new legal advice to back possible changes to Northern Ireland protocol
• US President Biden suggested that elevated gas and oil prices are due to a refusal of OPEC nations to pump more oil
• Senate Democrat Leader Schumer hopes to vote on the USD 1.75tln economic bill on November 15th
• Looking ahead, highlights include UK Composite/Services PMI (Final), US ADP, Composite/Services PMI (Final), ISM Services, FOMC Policy Announcement, ECB's Lagarde, Elderson, Villeroy; supply from the UK, Germany & US Quarterly Refunding
• Earnings: BMW, Lufthansa, Intesa Sanpaolo, Next, Qualcomm

CORONAVIRUS UPDATE

US CDC advisers voted to recommend Pfizer (PFE) / BioNTech (BNTX) COVID-19 vaccine for children aged 5-11 years old, while the CDC director also signed off on COVID-19 vaccines for children aged 5-11 years old. (Newswires)

Dutch PM Rutte said the Netherlands will impose new COVID-19 restrictions with the use of face masks to be mandatory in public spaces again and they have asked people to work from home half of the time. (Newswires)

China's most recent COVID-19 outbreak is reportedly the most widespread since Wuhan with infection in 19 of 31 provinces, according to a major newswires article. (Newswires) About half the flights to and from Beijing city’s two airports were cancelled Tuesday, according to aviation industry data site VariFlight. (CNBC)

ASIA

Asian equity markets traded mixed despite another encouraging handover from Wall Street where all major indices notched fresh record closing highs for the third consecutive day, and the DJIA breached the 36k level amid a slew of earnings and absence of any significant catalysts to derail the recent uptrend. Gains in APAC were also capped by holiday-thinned conditions with Japan away for Culture Day and as the FOMC announcement draws closer (full Newsquawk preview available in the Research Suite). The ASX 200 (+0.9%) outperformed amid a resurgence in the top-weighted financials sector as AMP shares were boosted after it announced to divest a 19.1% stake in Resolution Life Australasia for AUD 524mln and with CBA also higher as Australia’s largest bank is to offer customers the ability to conduct crypto transactions via its app. Conversely, the KOSPI (-1.1%) lagged after its automakers posted weak October sales stateside and following comments from South Korean PM Lee that they cannot afford additional cash handouts right now, while there was also attention on Kakao Pay which more than doubled from the IPO price on its debut. The Hang Seng (-1.0%) and Shanghai Comp. (-0.4%) were lacklustre and failed to benefit from the improvement in Chinese Caixin Services and Composite PMI data, amid ongoing concerns related to the energy crunch and with tech subdued after Yahoo pulled out of China due to a challenging business and legal environment. Furthermore, reports also noted that the Chinese version of Fortnite will close in mid-November, while a slightly firmer PBoC liquidity operation failed to spur Chinese markets as its efforts still resulted in a substantial net drain. Aussie yields continued to soften after the RBA affirmed its dovish tone at yesterday’s meeting and with the central bank also present in the market today for AUD 800mln in semi-government bonds which is in line with its regular weekly purchases, while a softer b/c at the 10yr Australian bond auction failed to unnerve domestic bonds and T-notes futures were steady overnight amid the looming FOMC.

• PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 150bln net daily drain. (Newswires)
• PBoC set USD/CNY mid-point at 6.4079 vs exp. 6.4041 (prev. 6.4009)

US President Biden said it was a big mistake for China not to show up to COP26 and that he is not worried about an armed conflict accidentally occurring with China, while he stated that he made it clear to Chinese President Xi that the US has competition with China but there does not have to be conflict. Furthermore, he is not looking for and does not anticipate a need for physical conflict, while an exact date has not been set for a virtual meeting with Xi. (Newswires)

USTR Tai said the US will directly engage with China on its industrial policies, but will take steps to protect US workers from unfair competition. In other news, China's MIIT China urged the US to withdraw its decision regarding revoking China Telecom's (728 HK) licence to operate in the US and treat Chinese telecom firms with a fair, non-discriminatory attitude. (Newswires/Global Times)

PBoC Governor Yi said China attaches great importance to data protection legislation and that they will improve the legal framework for personal data protection in the financial sector, while he added that countries should join hands to set standards for personal data protection. (Newswires)

• Chinese Caixin Services PMI (Oct) 53.8 vs Exp. 53.1 (Prev. 53.4)
• Chinese Caixin Composite PMI (Oct) 51.5 (Prev. 51.4)

Jiangsu Hengshung (600305 CH) and Haixin Foods (002702 CH) will be hiking prices by 5-15% and 3-10% respectively. (Newswires)

• Australian Building Approvals (Sep) -4.3% vs. Exp. -2.0% (Prev. 6.8%, Rev. 7.6%)
• New Zealand HLFS Job Growth QQ* (Q3) 2.0% vs. Exp. 0.4% (Prev. 1.0%)
• New Zealand HLFS Unemployment Rate* (Q3) 3.4% vs. Exp. 3.9% (Prev. 4.0%)
• New Zealand HLFS Participation Rate* (Q3) 71.2% vs. Exp. 70.6% (Prev. 70.5%)

UK/EU

The UK reportedly seeks new legal advice to back possible changes to Northern Ireland protocol, according to a report in the FT which highlighted that the move will fuel expectations ministers are preparing to use the Article 16 safeguard mechanism to try and fundamentally re-write the deal between the EU and UK. Furthermore, sources said the move to find fresh legal advice suggests the UK are planning to use the measure to secure a broad suspension of the Protocol, including key sections of the deal that leave the region subject to EU jurisdiction on goods trade. (FT)

USTR Tai said the US and EU will analyse annual EU steel and aluminium exports to the US under the new metals trade pact to keep out products from non-market economies. (Newswires)

FX

In FX, the DXY was steady and held onto the recently reclaimed 94.00 level as the focus remained on the approaching FOMC meeting - where the Fed is expected to announce the start of tapering. There were encouraging comments from Washington where Senate Democrat Leader Schumer said an agreement has been reached to lower prescription drug prices, and that they hope to vote on the USD 1.75tln economic bill on November 15th, although House Speaker Pelosi noted climate and immigration still to be agreed on. EUR/USD remained despondent beneath 1.1600 after it recently gave way to the greenback’s advances. GBP/USD attempted to nurse recent losses after support held at a floor of 1.3605 but with the recovery limited by Article 16 fears as the UK is reportedly seeking new legal advice to back a possible change to the Northern Ireland protocol, while multiple EU figures were also said to be bracing themselves for UK PM Johnson to trigger Article 16 this month once COP26 is out of the way. USD/JPY and JPY-crosses lacked direction amid the absence of Japanese participants, and antipodeans were subdued with AUD/USD sitting on its post-RBA losses which were not helped by recent commodity weakness, while NZD/USD was only briefly underpinned by strong jobs data from New Zealand with RBNZ Governor Orr noting that the labour market data is highly volatile for the time being and that GDP figures are becoming increasingly difficult to understand given COVID-19 volatility.

RBNZ said the financial system is well placed to support economic recovery despite uncertainty and risks, while the more recent Delta outbreak is creating stress for some industries and regions, particularly in Auckland. RBNZ also noted that with the risk of global inflation heightened, already stretched asset prices are facing headwinds from rising global interest rates and that supply chain bottlenecks and inflation are adding to stresses in some sectors. Furthermore, they intend to increase the minimum CFR requirement to its previous level of 75% on 1st January 2022, subject to no significant worsening in economic condition, while capital requirements for banks are to progressively increase from 1st July 2022 and it is encouraging to see them increasing ahead of these requirements. (Newswires)

RBNZ Governor Orr said the financial system is resilient to the effects of the COVID-19 pandemic and that financial institutions are in a strong position to help New Zealanders. Governor Orr added that the labour market data is highly volatile for the time being and GDP figures are becoming increasingly difficult to understand given COVID-19 volatility, while he added that supply of space and land are the main drivers for house price volatility. (Newswires)

COMMODITIES

Oil prices were pressured overnight in the aftermath of the latest private sector inventory data which showed a larger than expected build in headline crude inventories and dragged WTI crude futures to beneath the USD 83/bbl level. The US continued its pressure on producers for further action in which President Biden suggested that gas and oil prices are due to a refusal of OPEC nations to pump more oil and the State Department also called for a further increase in production until energy markets and broader economic conditions normalize from the pandemic. Gold prices remained constrained beneath USD 1,800/oz after the recent advances in the greenback and pre-positioning ahead of the FOMC, while copper saw found some reprieve from Tuesday's declines despite the flimsy risk tone in Asia and reports that the community will suspend the blockade on the Antamina copper mine in Peru.

US Private Energy Inventories (bbls): Crude +3.6mln (exp. +2.2mln), Cushing -0.9mln, Gasoline -0.6mln (exp. -1.3mln), Distillate +0.6mln (exp. -1.4mln). (Newswires)

US President Biden suggested that gas and oil prices are due to a refusal of OPEC nations to pump more oil. There were also comments from a US State Department spokesperson that the US is calling upon key energy producers, including the UAE, to further increase production until energy markets and broader economic conditions normalize amid the COVID-19 pandemic. (Newswires)

Peru community will suspend its blockade against Glencore (GLEN LN) and BHP's (BHP LN) Antamina copper mine on Wednesday. (Newswires)

GEOPOLITICAL

Syrian Ministry of Defence announced that Israel conducted a missile attack on the outskirts of Damascus, although no casualties were reported so far. (Newswires)

US

Treasuries bull-steepened Tuesday as front-end rate vol suppressed globally post-RBA with shorts getting squeezed into FOMC. TYZ1 volumes were below average. By settlement, 2s -6.3bps at 0.452%, 3s -6.4bps at 0.719%, 5s -4.8bps at 1.148%, 7s -4.3bps at 1.417%, 10s -2.6bps at 1.547%, 20s -3.0bps at 1.972%, 30s -0.9bps at 1.959%. 5yr TIPS +3.6bps at -1.700%, 10yr TIPS +6.6bps at -0.970%, 30yr TIPS -1.7bps. T-Notes rallied in line with other govvies in APAC trade Tuesday, with tailwinds from the RBA meeting reverberating worldwide. Contracts found resistance at 130-30 area for most of European trade despite EGBs and particularly periphery bonds extending gains. However, as the NY session got underway buyers won out to take T-Notes to session highs of 131-04+, before paring slightly into the latter session as stocks rallied and traders positioned in light trade ahead of FOMC Wednesday and the Quarterly Refunding announcement. T-note (Z1) futures settled 10 ticks higher at 130-31.

US President Biden said he will be making his announcements about Fed nominations fairly quickly and will have plenty of time to have them cleared before terms expire, while he has given a lot of thought to his Federal Reserve nominations. It was also noted that President Biden believes moderate Democrat Senator Manchin will be there with regards to the Build Back Better bill. (Newswires)

US Senate Democratic Leader Schumer said an agreement has been reached to lower prescription drug prices in which the agreement will allow Medicare part D and part B to negotiate prices, while Senator Sinema supports agreement on drug pricing and the agreement will cap out-of-pocket spending. Schumer also commented that they hope to vote on the USD 1.75tln economic bill on November 15th and stated that they have to have a CBO score to go to the floor. (Newswires)

US House Speaker Pelosi said the drug-pricing deal is "just about finished" and had hoped that a text of the tax and spending bill would available last night. There were also comments from US moderate Democrat Senator Manchin that he sees a social spending deal possible by Thanksgiving. (Newswires)

NBC projects that Republican Youngkin won the Virginia governor race where the incumbent was a Democrat, while the New Jersey governor race is said to be too close to call with Republican Ciattarelli at 50% vs Democrat incumbent Murphy at 49% with 95% of votes reported. (Newswires)