• Risk sentiment is contained with fresh catalysts slim after a mixed APAC handover and ahead of numerous Central Bank speakers, ES U/C
• DXY remains near-96.00 after briefly surging above the mark with peers mixed but contained and NZD outperforming on domestic lockdown updates
• TRY has been knocked to fresh record lows against the USD amid familiar commentary from Erdogan on interest rates ahead of tomorrow's CBRT announcement
• US asks China to release oil reserves as part of talks on economic cooperation, according to SCMP citing a source
• Looking ahead, highlights include US Building Permits, Housing Starts, Canadian CPI, DoEs, ECB's Lagarde, Schnabel, Fed's Evans, Mester, Bostic, BoE's Mann & supply from the US

CORONAVIRUS UPDATE

Pfizer (PFE) is expected to receive a 10mln COVID-19 pill purchase from the US government, while it was also reported that FDA is planning to authorise booster shots of the Pfizer COVID-19 vaccine for all adults in US as soon as Thursday. (Newswires/NYT)

New Zealand PM Ardern said the entire country is expected to end the lockdown and move to the new traffic light system after November 29th, while Auckland domestic borders will reopen from December 15th for the fully vaccinated and those with negative COVID-19 tests. (Newswires)

ASIA

Asian equity markets traded mixed and struggled to sustain the positive lead from the US where better than expected Industrial Production and Retail Sales data spurred the major indices, in which the S&P 500 reclaimed the 4,700 level and briefly approached to within four points of its all-time high. ASX 200 (-0.7%) was led lower by underperformance in the top-weighted financials sector amid weakness in the largest lender CBA despite a 20% jump in quarterly cash profit, as operating income was steady and it noted that loan margins were significantly lower. Mining related stocks also lagged in Australia due to the recent declines in global commodity prices amid the stronger USD and higher US yields. Nikkei 225 (-0.4%) retraced its opening gains after disappointing Machinery Orders and miss on Exports which grew at the slowest pace in eight months, while the KOSPI (-1.2%) suffered due to virus concerns with daily infections at the second highest on record for South Korea. Hang Seng (-0.3%) and Shanghai Comp. (+0.4%) were varied with Hong Kong dragged lower by tech stocks including NetEase post-earnings, while the mainland was choppy as markets continued to digest the recent Biden-Xi meeting that was described by President Biden as a 'good meeting' and in which they discussed the need for nuclear “strategic stability” talks. US and China also agreed to provide access to each other’s journalists, although there were also comments from Commerce Secretary Raimondo that China is not living up to phase 1 trade commitments and it was reported that China is to speed up plans to replace US and foreign tech. Finally, 10yr JGBs were flat with demand hampered following the declines in T-notes, although downside was stemmed amid the flimsy sentiment across Asia-Pac trade and with the BoJ also in the market for JPY 925bln of JGBs mostly concentrated in 1-3yr and 5-10yr maturities.

PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 50bln net daily drain. (Newswires) PBoC set USD/CNY mid-point at 6.3935 vs exp. 6.3919 (prev. 6.3924)

US Commerce Secretary Raimondo said China is not living up to phase 1 trade commitments, while she also stated that the US has options for expanding its Asia trade outside of the CPTPP and that supply chains must be strengthened beyond just in time. (Newswires)

Chinese Vice President Wang said the foundation of global economic recovery is not solid and suggested countries need to join hands on building the global economy and that they need to promote trade. (Newswires)

China is said to have relaxed funding restrictions in the asset backed securities market and some developers will be able to apply for funding as soon as this month. In other news, China is reportedly speeding up plans to replace US and foreign tech. (Newswires)

Japan's government and ruling party will consider debating revisions to capital gains tax in 2022 as part of effort to address income disparity. There were also reports that Japan is to earmark JPY 100bln for battery factory subsidies and the government is said to have proposed paying oil refiners to curb gasoline prices. (Newswires/Nikkei/Jiji)

Japanese Machinery Orders MM (Sep) 0.0% vs. Exp. 1.8% (Prev. -2.4%)

• Japanese Machinery Orders YY (Sep) 12.5% vs. Exp. 17.4% (Prev. 17.0%)
• Japanese Trade Balance Total Yen (Oct) -67.4B vs. Exp. -310.0B (Prev. -622.8B, Rev. -624.1B)
• Japanese Exports YY (Oct) 9.4% vs. Exp. 9.9% (Prev. 13.0%)
• Japanese Imports YY (Oct) 26.7% vs. Exp. 31.9% (Prev. 38.6%)

US

US Treasury Secretary Yellen expects extraordinary measures to run out on December 15th which is the new deadline for the debt ceiling and with the revised date based on the latest information, while she added that it is critical that Congress raise or suspend the debt limit ASAP. (Newswires)

Fitch and Moody's said the President Biden's infrastructure and social spending legislation will not contribute to inflationary pressures, while Fitch also stated the US deficit will continue to shrink in FY22 and that the Build Back Better legislation does not sustainably fund all initiatives. (Newswires)

UK/EU

UK CPI YY (Oct) 4.2% vs. Exp. 3.9% (Prev. 3.1%); MM (Oct) 1.1% vs. Exp. 0.8% (Prev. 0.3%)

• Core CPI YY (Oct) 3.4% vs. Exp. 3.1% (Prev. 2.9%); MM (Oct) 0.7% vs. Exp. 0.4% (Prev. 0.4%)

ECB's Rehn says that inflation is accelerating on energy prices and the supply crunch but sees inflation easing in 2022. (Newswires)

ECB's de Guindos says inflation expectations are well anchored. (Newswires)

ECB Financial Stability Review: improved economic conditions have lowered near-term tail risks to financial stability. (ECB)

GEOPOLITICAL

UN Nuclear Agency Chief Grossi is to visit Iran on Monday, via Iranian media. (Newswires)

EQUITIES

European equities (Stoxx 600 +0.1%) trade with little in the way of firm direction as the Stoxx 600 lingers around its ATH printed during yesterday’s session. The handover from the APAC session was mostly a softer one after the region failed to sustain the positive lead from the US which saw the S&P 500 approach within four points of its all-time high. Stateside, US futures are just as uninspiring as their European counterparts (ES flat) ahead of another busy day of Fed speak and pre-market earnings from retail names Target (TGT) and TJX Companies (TJK) with Cisco (CSCO) and NVIDIA (NVDA) due to report after-hours. Markets still await a decision on the next Fed Chair which President Biden said will come in around four days yesterday; as it stands, PredictIt assigns a circa 65% chance of Powell winning the renomination. Sectors in Europe have a marginal positive tilt with Media names outperforming peers alongside gains in Vivendi (+1.0%) after Italian prosecutors asked a judge to drop a case against Vivendi's owner and CEO for alleged market manipulation. Travel & Leisure names are the notable underperformer amid losses in sector heavyweight Evolution Gaming (-9.6%) who account for 14% of the sector with the Co. accused of taking illegal wagers. In terms of individual movers, Siemens Healthineers (+4.6%) is one of the best performers in the region after the Co. noted that revenues are on track to grow 6-8% between 2023 and 2025. UK Banking names such as Lloyds (+1.3%) and Natwest (+1.1%) have benefitted from the favourable rate environment in the UK with today’s inflation data further cementing expectations for a move in rates by the BoE next month. Conversely, this acted as a drag on the UK homebuilder sector at the open before moves were eventually scaled back. SSE (-4.5%) underperforms after announcing a GBP 12.5bln investment to accelerate its net zero ambitions.

Amazon (AMZN) is set to stop accepting payments from Visa (V) credit cards in the UK amid high fees, according to reports; this will be effective as of January 19th. Amazon customers can still use Visa debit cards, as well as MasterCard (MA) and Amex (AXP) credit cards, as well as Visa credit cards issued outside of the UK, Bloomberg said. (Newswires)

Lowe's Companies Inc (LOW) Q1 2022 (USD): EPS 2.73 (exp. 2.36), Revenue 22.90bln (exp. 22.06bln). (PR Newswire) +1.35% in the pre-market

FX

DXY - The Greenback extended Tuesday’s post-US retail sales and ip gains to set new 2021/multi-year highs overnight when the index hit 96.266 and several Dollar pairs probed or crossed psychological round numbers. However, the latest bull run has abated somewhat amidst some recovery gains in certain rival currencies and a general bout of consolidation ahead of housing data, another raft of Fed speakers and Usd 23 bn 20 year supply that will be of note after a bad debut for new long londs last week, not to mention tepid receptions for 3 and 10 year offerings prior to that.

NZD/AUD - A marked change in the tide down under as the Aud/Nzd cross reverses sharply from around 1.0450 to sub-1.0400 and gives the Kiwi enough impetus to regain 0.7000+ status vs its US peer with extra incentive provided by NZ PM Ardern announcing that the entire country is expected to end lockdown and move to a new traffic light system after November 29, while Auckland’s domestic borders will reopen from December 15 for the fully vaccinated and those with negative COVID-19 tests. Conversely, the Aussie is struggling to stay within sight of 0.7300 against its US counterpart in wake of broadly in line Q3 wage prices that leaves the y/y rate still some way short of the 3% pace deemed necessary to lift overall inflation by the RBA.

GBP/CAD - Sterling is striving to buck the overall trend with help from more forecast-topping UK data that should give the BoE a green light for lifting the Bank Rate in December, as headline CPI came in at 4.2% y/y, core at 3.4% and PPI prints indicate more price pressure building in the pipeline. Cable printed a minor new w-t-d peak circa 1.3474 in response before waning and Eur/Gbp fell below the prior y-t-d low and 0.8400, but is now back above awaiting more news on the Brexit front and a speech from one of the less hawkish MPC members, Mann. Elsewhere, the Loonie is hovering around 1.2550 vs the Greenback and looking toward Canadian inflation for some fundamental direction as oil prices continue to fluctuate near recent lows, but Usd/Cad may also be attracted to decent option expiry interest between 1.2540-55 in 1.12 bn.

CHF/EUR/JPY - All straddling or adjacent to round numbers against the Dollar, but the Franc lagging below 0.9300 on yield differentials, while the Euro has recovered from a fresh 2021 trough under 1.1300 and Fib support at 1.1290 to fill a gap if nothing else, and the Yen just defended 115.00 irrespective of disappointing Japanese machinery orders and internals within the latest trade balance.

SCANDI/EM - No lasting adverse reaction to Sweden’s fiscal watchdog trimming its 2021 GDP forecast as the Sek pares declines beneath 10.0000 vs the Eur, but the Try continues to tumble and has now been almost as low as 10.5600 against the Usd awaiting further easing from the CBRT tomorrow. On that very note, Turkish President Erdogan has applied more pressure on the eve of this month’s policy meeting by reiterating that interest rates are the reason for high inflation and pledging to lift the burden from households in a battle to the end. Conversely, the Cnh and Cny are still holding up relatively well following more positive reports about the virtual meeting between Chinese President Xi and his US equivalent.

Australian Wage Price Index QQ (Q3) 0.6% vs. Exp. 0.5% (Prev. 0.4%); Index YY (Q3) 2.2% vs. Exp. 2.2% (Prev. 1.7%)

Turkish President Erdogan says interest rates are the reason and inflation is the result, will lift the interest rate burden from people. To continue the battle with interest rates and inflation until the end. (Newswires)

Notable FX Option Expiries, NY Cut:

• EUR/USD: 1.1300 (295M), 1.1360 (440M), 1.1390 (964M), 1.1465-70 (510M), 1.1495-1.1505 (2.55BLN)
• USD/CAD: 1.2500 (551M), 1.2525 (810M), 1.2540-55 (1.12BLN)

FIXED

Bunds have faded into 171.00, at 170.95 to be precise (+18 ticks on the day vs -17 ticks at the Eurex low), but have not fallen out of bed even though Germany’s relatively small 2052 debt sale was pretty bad on all traditional terms used to gauge the success of a conventional auction. However, Gilts are still lagging a bit behind after probing parity at 125.84 (+3 ticks vs -41 ticks at worst) in wake of strong UK inflation data and are now sharply underperforming Short Sterling futures that have rebounded more firmly on the basis that a BoE rate hike has already been well and truly priced in. Meanwhile, US Treasuries are essentially flat, as is the curve awaiting housing data, a Usd 23 bn 20 year note offering and another packed line-up of Fed speakers.

Italy has tightened guidance on its USD bond tap by ~5bps to circa 185bps over Libor mid-swaps with orders in excess of USD 1bln. (Newswires)

COMMODITIES

WTI and Brent benchmarks are pressured this morning but the magnitude of the action, circa USD 0.70/bbl at the time of writing, is less pronounced when compared to the range of the week thus far and particularly against last week’s moves. Newsflow has been slim and the downside action has arisen without fresh catalysts or drivers; note, participants are cognisant of influence perhaps being exerted by today’s WTI Dec’21 option expiry. To briefly surmise the morning’s action, Vitol executives provided bullish commentary citing limited capacity to deal with shocks and on that theme, there were reports of an explosion at an oil pipeline in Southern Iran, said to be due to aging equipment. This, alongside reports that Belarus is restricting oil flows to Poland for three-days for maintenance purposes, have not steadied the benchmarks. Elsewhere, last night’s private inventories were mixed but bullish overall, with the headline a smaller than expected build and gasoline a larger than expected draw. On gasoline, some desks posit that this draw may serve to increase pressure for a US SPR release, and as such look to today’s EIA release which is expected to print a gasoline draw of 0.575M. Moving to metals, spot gold and silver are firmer this morning but, in a similar vein to crude, remain well within familiar ranges as specific catalysts have been light and initial USD action has largely fizzled out to the index pivoting the U/C mark. More broadly, base metals are pressured as inventories of iron ore are at their highest for almost three years in China as demand drops, with this having a knock-on impact on coking coal, for instance.

US Private Energy Inventories (bbls): Crude +0.7mln (exp. +1.4mln), Cushing -0.5mln, Gasoline -2.8mln (exp. -0.6mln), Distillate +0.1mln (exp. -1.2mln). (Newswires)

US asks China to release oil reserves as part of talks on economic cooperation, according to SCMP citing a source. (SCMP)

US House Majority Leader Hoyer said he is not in agreement with Senate Majority Leader Schumer's call for the Biden administration to tap the strategic oil reserve to lower gas prices. (Newswires)

Qatar reportedly sold January-loading Al-Shaheen crude at an average USD 3.45/bbl above Dubai quoted which was the highest premium in almost two years, according to sources. (Newswires)