• Asia-Pac stocks traded indecisively and were unable to benefit from the positive Wall St. handover
• Stateside, the S&P 500 notched an 8th consecutive record close
• In FX, the DXY has lost 94.00 status, JPY leads gains vs. the USD whilst EUR/USD has reclaimed 1.16
• Fed's Brainard was interviewed by President Biden for the Fed Chair role last week, according to reports
• Looking ahead, highlights include German Trade Balance, ZEW, US PPI, ECB's Panetta, Knot, Lagarde, Schnabel, Fed's Bullard, Powell, Daly, supply from Germany & the US
• Earnings: Bayer, Porsche, Munich Re, Swiss Life, ABF, Direct Line, Persimmon, BioNTech

CORONAVIRUS UPDATE

Australia's Therapeutic Goods Administration said it granted provisional determination to AstraZeneca (AZN LN) on COVID-19 treatment cocktail Evusheld on Nov. 4th with the treatment eligible to be considered to prevent COVID-19 in adults 18-years of age and above, but it is not intended to be a substitute for vaccination against COVID-19. (Newswires)

Hong Kong government adviser said Hong Kong will not open to the world until mid-next year. (Newswires)

ASIA

Asia-Pac stocks traded indecisively as focus centred on earnings and despite the positive handover from Wall St where the S&P 500 notched an 8th consecutive record close amid a lack of catalysts to derail the momentum in stocks. ASX 200 (-0.2%) began marginally higher amid strength in the tech and mining sectors but with upside eventually reversed by losses in the top-weighted financial industry as NAB shares declined despite posting a 77% jump in FY cash earnings and its FY net more than doubled to AUD 6.4bln, although this was still short of some analysts’ forecasts and the Co. also noted that competitive pressures are expected to continue in FY22. Nikkei 225 (-0.7%) was choppy amid a slew of earnings releases with outperformance in SoftBank following its H1 results in which net income declined by more than 80%, but revenue increased and it confirmed a JPY 1tln share buyback. It was also reported that PM Kishida instructed COVID measures to be compiled this week and economic measures by next Friday, while a government panel recommended tax breaks for companies that increase wages, although Tokyo stocks have failed to benefit with early momentum offset by recent flows into the JPY. Hang Seng (-0.1%) and Shanghai Comp. (+0.2%) lacked firm direction amid mixed developer related headlines with Kaisa Group said to be taking several measures to solve liquidity issues and have pleaded for more time and patience from investors, while China Evergrande reportedly scraped together more cash by offloading a 5.7% stake in HengTen Networks for USD 145mln. Furthermore, the PBoC continued with its liquidity efforts but recent source reports noted that chances of a PBoC rate cut looks slim and that the PBoC is expected to be cautious in easing monetary policy amid stagflation concerns. Finally, 10yr JGBs were flat amid the indecisive mood in stocks and was only briefly supported from the improvement across most metrics at the latest 30yr JGB auction.

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 6.3903 vs exp. 6.3948 (prev. 6.3959)

US State Department said it is deeply concerned about the deteriorating health of detained Chinese citizen journalist Zhang Zhan, while reiterated calls to China for the immediate and unconditional release of Zhan. (Newswires)

China's State Council think tank conducted a meeting with property developers and banks in Shenzhen, while they were said to discuss market risks and tax, according to sources. It was also reported that the HKMA is said to have requested banks report exposure to China’s property market. (Newswires)

China Evergrande (3333 HK) reportedly scraped together more cash through stake sales in which it sold around 5.7% stake in HengTen Networks for USD 145mln, according to WSJ. In relevant news, Kaisa Group (1638 HK) is taking several measures to solve liquidity issues in which it is accelerating asset disposals in Shanghai and Shenzhen which is to be used for repayments and is speeding up sales of properties, while it pleaded for more time and patience from investors. Furthermore, it called for banks to appropriately extend loans and said it needs external help as it seeks to pay investors, workers and suppliers. (Newswires/WSJ/Twitter)

Japanese PM Kishida is said to have instructed for COVID measures to be compiled by this Friday and economic measures by next Friday, while it was also reported that the LDP and Komeito party agreed to an early JPY 50k cash handout to under-18s and agreed to offer JPY 100k to cash payouts to support low income households. (Newswires/Jiji)

UK/EU

BoE Governor Bailey said much of the rise in inflation has to do with reopening after lockdowns and they will have to act with rates if they see evidence of higher inflation expectations feeding into wages. Bailey added that the problem now is that what is pushing up inflation is not too much demand and the risk is they are going to get more bottlenecks, especially for labour. Furthermore, what they are concerned about is once they have increases in inflation, they want to stop it becoming generalised. (Newswires)

ECB President Lagarde said that they discussed the positive economic outlook in the euro area at Monday’s Eurogroup meeting with monetary and fiscal policies supporting a strong recovery, while they are confident that the current higher inflation is transitory. (Newswires)

German Chancellor Merkel's advisers expect the German economy to grow 4.6% in 2022 and 2.7% in 2021. (FAZ)

• UK BRC Retail Sales YY (Oct) -0.2% (Prev. -0.6%), BRC October Total Sales rose 1.3% Y/Y (Prev. 0.6%)
• UK Barclaycard UK October consumer spending rose 14.2% from October 2019 level

FX

In FX markets, the DXY was lacklustre and eventually gave up the 94.00 status after losing ground to the USD’s major counterparts despite a lack of fresh data points and catalysts during yesterday's session. This was overcompensated by the abundance of central bank rhetoric including from the latest Fed Financial Stability Report which stated that measures of vulnerability for businesses and households largely returned to pre-pandemic levels, although noted that uncertainty about the economic outlook and the course of the pandemic remained high. In addition to yesterday's slew of Fed speakers during the European session, there were also comments from Fed's Evans who still sees the first rate hike in 2023 but made the case to think about a 2022 rate hike if inflation expectations increased a lot and Bowman stated inflation has remained high and some of the forces driving it are expected to last well into next year. EUR/USD held on to recent gains at the expense of the greenback and later reclaimed the 1.1600 handle, with recent comments from ECB’s Lagarde doing little to shift the dial in which she noted that they discussed the positive economic outlook in the euro area at Monday’s Eurogroup meeting with monetary and fiscal policies supporting a strong recovery, and they are confident that the current higher inflation is transitory. GBP/USD was flat with comments from BoE Governor Bailey, that they will have to act with rates if they see evidence of higher inflation expectations feeding into wages, not providing much weight to spur price action. USD/JPY and JPY crosses deteriorated throughout the session after breaching key levels with the former eventually giving up the 113.00 handle, while antipodeans were lacklustre with early underperformance in AUD/USD amid cross-related pressure and despite the improved NAB business survey data.

CBRT raised reserve requirement ratio for FX deposits, while reports later noted that the CBRT said TRY-denominated required reserves are expected to increase by around TRY 7.4bln and foreign currency required reserves are expected to increase by an equivalent of around USD 3.8bln. (Newswires)

COMMODITIES

Commodities traded rangebound with prices constrained by the indecisive overnight mood which saw WTI crude futures contained near the USD 82.00/bbl level and following on from the choppy price action in oil prices during yesterday's session, whereby the energy complex briefly wobbled on reports that President Biden could make an announcement on gasoline and oil this week amid the backdrop of increased SPR chatter. Nonetheless, prices have since stabled amid a lack of pertinent catalysts and with mixed reports concerning Iran with their top negotiator stating they will spare no effort in advancing national interests and removal of sanctions, although it was separately noted that hardliners had voiced doubts regarding a material outcome from talks which are set to resume in Vienna later this month, while focus shifts to the upcoming EIA STEO and the latest inventory reports beginning with the private sector data later today. Elsewhere, gold prices traded flat but remained at two-month highs amid a subdued greenback and copper was mildly pressured as a function of the lacklustre risk appetite.

White House Deputy Press Secretary that the White House is continuing to monitor energy prices and the Army is preparing assessment of replacing the Line 5 oil and gas pipeline. (Newswires)

GEOPOLITICAL

Iran’s top nuclear negotiator Kani said he will meet several European counterparts in the upcoming days and said they shall spare no effort in advancing our national interests including the removal of illegal sanctions. There were also separate reports that Iran's hardliners are said to be cautious regarding nuclear talks with officials voicing doubts in recent days that negotiations would deliver much. (Newswires/FT)

US President Biden vowed to use every tool to protect against cyber threats and it was earlier reported that US prosecutors filed criminal charges against a Russian national for participation in international ransomware scheme. Furthermore, the US Treasury sanctioned two ransomware operators and Chatex virtual currency exchange network in relation to the Kaseya hacking, with a Ukrainian and Russian national sanctioned for hacking US companies with ransomware. (Newswires)

US

Treasuries bear-flattened through Monday with the long-end little changed amid the passing of the infrastructure bill, pre-refunding concession and some reversion after Friday's positioning-related rally post-NFP; 3s weakest after the poor auction. TYZ1 volumes were below average. By settlement, 2s +5.2bps at 0.451%, 3s +7.0bps at 0.722%, 5s +6.6bps at 1.120%, 7s +6.2bps at 1.377%, 10s +4.4bps at 1.497%, 20s +1.6bps at 1.908%, 30s +0.2bps at 1.888%. 5yr TIPS +1.2bps at -1.823%, 10yr TIPS -1.2bps at -1.111%, 30yr TIPS -5.8bps at -0.493%. Treasuries saw offers build into the European open, with stocks catching a bid. Support was found at 131-16 ahead of Clarida and other Fed speaks, although bidders emerged in wake of Clarida's comments, which failed to lean into the weeds of any hawkish themes, seeing T-Notes hit interim highs for the NY morning at 131-23, before sellers soon re-emerged as cyclicals bounced, with infrastructure-levered stocks prospering; contracts hit session lows soon after Europe left at 131-08+. It's also worth highlighting the thinner trading conditions and positioning related price action. Where Friday's post-strong NFP rally had been attributed to short-covering in less liquid conditions, amplified by the front-end vol after the BoE shock, it's possible we are just seeing some natural mean reversion on Monday, again in light trade conditions. On the cash curve, 3s were ultimately weakest after the disappointing auction, although there was pressure out into the belly further, with cash 5s reversing their whole post-NFP rally. Traders now look to Tuesday's 10yr refunding auction (cut-size) ahead of Wednesday's CPI and 30yr bond amid Thursday's cash bond closure due to Veteran's Day. T-note (Z1) futures settled 17 ticks lower at 131-09+.

Fed semi-annual Financial Stability Report finds measures of vulnerability for businesses and households largely returned to pre-pandemic levels and noted that potential worsening of US public health poses biggest near-term risk to the financial system. Fed stated that across most asset classes, valuation measures are high relative to historical norms, while it stated that fiscal and monetary policy accommodation, along with continued progress on vaccinations, continued to support a strong economic recovery. Nevertheless, uncertainty about the economic outlook and the course of the pandemic remained high. (Newswires)

Fed's Brainard was interviewed by President Biden for the Fed Chair role and sources described Brainard as a contender for the top Fed position. (Newswires)

Fed’s Bowman (voter) said inflation has remained high and some of the forces driving it are expected to last well into next year, while she added there is a risk that food and energy prices can have a larger than thought impact on inflation expectations and is watching for signs the labour market might become too hot. Furthermore, she noted that the main concern is the outlook for inflation - driven by supply chain disruptions and labour market shortages. Bowman had also commented that they are likely to see higher inflation from housing for a while and that fundamentals are driving house prices but house prices do decline from time to time. (Newswires)

Fed's Evans (2021,2023 voter) said they still have a way to go until inclusive full employment and that uncertainties on the outlook could lead the Fed to move up or delay rate increases, while he sees greater upside risk to inflation outlook than had seen last summer. Evans noted that the big question is how much of a mark current price pressures will leave on underlying inflation and that the economy is still very much tied to COVID with the path forward highly uncertain. Furthermore, Evans still sees the first rate hike in 2023 and stated that if inflation expectations increase a lot, it would make sense to think about a 2022 rate hike, while he noted that they have time to be patient and said the bar is 'reasonably high' for changing pace of Fed's taper. (Newswires)

Fed's Harker (2023 voter) said he does not expect that the Federal Funds Rate will rise before the Fed's bond tapering is complete, while he added that Fed officials are monitoring inflation very closely and are prepared to take action should the situation need it. Harker added that he expects inflation to moderate next year as supply chains return online and bottlenecks ease. Furthermore, he said the US economy should see another growth spurt to more than 4% next year if another major COVID wave can be avoided and expects economic growth to return to between 2-3% in 2023. (Newswires)

Fed Loan Officer Survey said banks generally eased credit standards for firms and families in Q3 citing an improved outlook and increased tolerance for risk as a reason for looser credit. Furthermore, the demand for business loans and consumer credit cards also increased, while consumers expected to boost credit demand on basis of improved income prospects. (Newswires)

US Regulators published a progress report on review of Treasury market liquidity and structure, while it is examining a range of policy steps to improve market, including improving data quality, as well as introducing central clearing and increasing trading venue oversight. (Treasury)