• Pronounced and broad based risk-off move was seen as Austria announced a hard lockdown and Germany refused to rule such measures out
• The back-to-back news pushed the DXY and Bunds above 96.00 and 172.00 respectively, Brent fell below USD 79.50/bbl; equities were pressured
• US House Democrat leaders are aiming for a vote on “Build Back Better” on Friday; CBO says the bill is not fully paid for
• Chinese Premier Li says China's economy is seeing new downward pressure; domestic and foreign situation still complex and severe
• US President Biden said he is weighing a US diplomatic boycott of the 2022 Winter Olympic games due to be held in Beijing
• Looking ahead, highlights include Canadian Retail Sales, ECB's Lagarde and Moody's/S&P on South Africa

CORONAVIRUS UPDATE

Austria is to go into a hard COVID-19 lockdown from Monday, via Heute; will be a 20-day lockdown for everyone including the vaccinated, which will then continue for just the unvaccinated. (Heute)

Austrian Chancellor says a full COVID lockdown will be imposed as of Monday for a maximum of 20 days; Austria to impose compulsory vaccination from 1st February 2022; The restrictions will be for 10 days to start, with a possible extension for another 10 days. Mandated vaccination will likely be enforced via vaccine passports and those who do not comply could face substantial fines.. (Newswires) Link to the market update as of 09:25GMT/04:25EST following this announcement and German COVID-19 commentary

German Health Minister Spahn says nothing can be ruled out regarding COVID-19, when questioned on a possible lockdown for all. Earlier in the session, Spahn said the domestic COVID situation is more serious than last week; adds "we are in a national emergency"; vaccinations won't be enough, controls are needed to stop increasing COVID cases. (Newswires)

ASIA

Asia-Pac stocks traded mostly positive after the mixed performance stateside where the S&P 500 and Nasdaq notched fresh record closes, but cyclicals lagged as comments from Senator Manchin cast some uncertainty on the Build Back Better bill. The ASX 200 (+0.2%) was rangebound with upside in healthcare and consumer stocks offset by weakness in tech and a lacklustre mining sector. Crown Resorts (CWN AT) was the stellar performer after it received an unsolicited, non-binding takeover proposal from Blackstone (BX) valued at AUD 12.50/shr which boosted its shares by around 16%, although gains in the broader market were limited as COVID-19 concerns lingered following a further jump of cases in Victoria state. The Nikkei 225 (+0.5%) benefitted from a mostly weaker currency and after PM Kishida confirmed the details of the incoming stimulus package valued at a total JPY 79tln including JPY 56tln in fiscal spending. The KOSPI (+0.8%) was also positive but with gains initially capped as South Korean wholesale inflation surged to a 13-year high and further added to the case for the BoK to hike rates for the second time this year at next week’s meeting. The Hang Seng (-1.1%) and Shanghai Comp. (+1.1%) were mixed with the mainland kept afloat amid press reports that China is considering measures to reduce taxes and fees by up to CNY 500bln, although the mainland was initially slow to start after another liquidity drain by the PBoC and with stocks in Hong Kong spooked amid substantial losses in Alibaba following a miss on its earnings and Country Garden Services suffered on reopening from the announcement of a 150mln-share placement. Finally, 10yr JGBs were rangebound with mild gains seen after the modest bull flattening stateside, but with upside restricted amid the gains in Japanese stocks and lack of BoJ purchases, as well as the incoming fiscal spending and extra budget from the Kishida government.

• PBoC injected CNY 100bln 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 6.3825 vs exp. 6.3780 (prev. 6.3803)

Chinese Premier Li says China's economy is seeing new downward pressure; domestic and foreign situation still complex and severe; will take measure to reduce commodity price pressures on downstream firms. (Newswires)

China's President Xi says they will strengthen risk prevention and controls in the belt and road initiative, setting up a pre-warning system for risks in overseas projects, via State Media. (Newswires)

China is reportedly considering measures to reduce taxes and fees by up to CNY 500bln. In other news, some Chinese cities relaxed land transaction regulations after a reluctance of some cash-strapped developers from bidding in land sales. (Newswires/China Daily)

China Beige Book CEO Miller said they are seeing large de-risking in finance and real estate but noted Evergrande (3333 HK) will be contained, while he added that possibilities in China are limited due to a lack of outside financing. (Newswires)

Japanese PM Kishida confirmed the stimulus package total is worth JPY 79tln including JPY 56tln in fiscal spending and with JPY 31.9tln to be funded by an extra budget. Subsequently, Kishida added that they are not thinking of tweaking domestic sales tax rate from current levels, will utilise various measures to fund stimulus - which will include new debt issuance(Newswires)

• Japanese National CPI YY (Oct) 0.1% vs. Exp. 0.2% (Prev. 0.2%)
• Japanese National CPI Ex. Fresh Food YY (Oct) 0.1% vs. Exp. 0.1% (Prev. 0.1%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Oct) -0.7% vs. Exp. -0.7% (Prev. -0.5%)

US

Fed's Bostic (2021, 2024 voter) said he anticipates it will be appropriate by next summer to normalise policy, according to an NPR Marketplace interview. (Newswires)

US House advanced President Biden's USD 1.75tln social spending and climate change bill to a final debate and passage, with House Democrat leaders aiming for a vote on Friday. In relevant news, the CBO said President Biden's bill is not fully paid for and would increase the budget deficit by USD 367bln over a decade with the bill to add USD 1.636tln in spending and generate USD 1.269tln in revenue over 10 years, although its estimates does not include any revenue generated by additional financing through tax enforcement.

Treasury Secretary Yellen said estimates make it clear the Build Back Better bill is fully paid for and will reduce nation's debt over time by generating more than USD 2tln through reforms, while the White House said Build Back Better would reduce the deficit by USD 112bln over the next decade in its new analysis. (Newswires)

Canadian PM Trudeau raised concerns with US President Biden regarding proposed credits for EVs and Buy American procurement plans. (Newswires)

US-CHINA

US President Biden said he is weighing a US diplomatic boycott of the 2022 Winter Olympic games due to be held in Beijing. (BBC)

UK/EU

Irish PM Martin said there is "serious intent" in the EU to solve post-Brexit difficulties over the Northern Ireland border. The Irish PM added that the mood surrounding EU-UK negotiations had improved in recent weeks. (BBC)

European Vice Commissioner Sefcovic confirms that the EU is offering 50% permanent cut in customs paperwork, according to RTE, hopes to have another constructive meeting with UK's Frost on Friday. Subsequently, UK's Brexit Minister Frost said there are still significant gaps between the UK and the EU, Article 16 remains on the table; adding, that he would not expect any breakthrough on medicines today. (Twitter/Newswires)

UK Retail Sales MM (Oct) 0.8% vs. Exp. 0.5% (Prev. -0.2%); Ex-Fuel MM (Oct) 1.6% vs. Exp. 0.6% (Prev. -0.6%)

• YY (Oct) -1.3% vs. Exp. -2.0% (Prev. -1.3%); Ex-Fuel YY (Oct) -1.9% vs. Exp. -3.1% (Prev. -2.6%)
• PSNB, GBP (Oct) 18.0B GB (Prev. 21.014B GB); PSNCR, GBP (Oct) 61.452B GB (Prev. 4.688B GB)
• UK GfK Consumer Confidence (Nov) -14 vs. Exp. -18.0 (Prev. -17.0)

German Producer Prices MM (Oct) 3.8% vs. Exp. 1.9% (Prev. 2.3%); YY (Oct) 18.4% vs. Exp. 16.2% (Prev. 14.2%)

GEOPOLITICAL

French Foreign Minister Le Drian says they will have to consider the nuclear deal empty in the event Iranian discussions on November 29th appear as a 'sham'. (Newswires)

2 Chinese, 7 Russian warplanes enter S. Korea's air defense zone without notice. (Yonhap)

EQUITIES

The earlier positive sentiment in Europe dissipated amid a string of back-to-back downbeat COVID updates – with Austria now resorting to a full-scale lockdown and Germany sounding alarms over their domestic COVID situation and not ruling out its own lockdown. European bourses flipped from the mostly positive trade at the open to a negative picture (Euro Stoxx 50 -0.5%; Stoxx 600 Unch), with headlines also flagging the European stock market volatility gauge jumping to three-week highs. It is also worth noting the monthly option expiries for stocks today, with desks pointing to the second-largest expiry day on record. US equity futures have also seen headwinds from the pullback in Europe, but US futures are mixed with the NQ (+0.4%) benefitting from the slide in yields. Back to Europe, Austria’s ATX (-1.0%) sit as the laggard after the Austrian Chancellor said a full domestic COVID lockdown will be imposed as of Monday for a maximum of 20 days with compulsory vaccination from 1st February 2022. Switzerland’s SMI (+0.2%) owes its gains to the defensive flows into healthcare propping up heavyweights Novartis (+0.5%) and Roche (+0.7%). Sectors overall are mostly negative with Healthcare the current winner, whilst Tech benefits from the yield slump and Basic Resources recover from yesterday’s slide as base metals rebound. The downside sees Banks on yield dynamics, whilst Oil & Gas lost the ranks as crude prices were spooked by the COVID headlines emanating from Europe. In terms of individual movers, Ocado (+6%) resides at the top of the FTSE 100 – with some citing a Deutsche Bank note which suggested shareholder Marks & Spencer could be mulling a buyout, although the note is seemingly speculation as opposed to chatter.

FX

DXY - It remains to be seen whether the Dollar can continue to climb having descended from the summit, and with no obvious fundamental drivers on the agenda in terms of US data that has been instrumental, if not quite wholly responsible for the recent bull run. However, external and technical factors may provide the Greenback and index with enough momentum to rebound further, as the COVID-19 situation continues to deteriorate in certain parts of Europe especially. Meanwhile, the mere fact that the DXY bounced off a shallower low and appears to have formed a base above 95.500 is encouraging from a chart perspective, and only the Yen as a safer haven is arguably capping the index ahead of the aforementioned w-t-d peak within 95.554-96.090 extremes. Ahead, more Fed rhetoric and this time via Waller and Clarida.

EUR - The Euro has been hit hardest by the Greenback revival, but also the latest pandemic waves that have forced Austria into total lockdown and are threatening to see Germany follow suit. Moreover, EGBs are front-running the latest squeeze amidst risk-off trade in stocks, oil and other commodities to widen spreads vs Treasuries and the divergence between the ECB/Fed and other more hawkishly or less dovishly positioned. Hence, Eur/Usd has reversed further from circa 1.1374 through 1.1350 and 1.1300, while Eur/Yen is eyeing 128.50 vs almost 130.00 at one stage and Eur/Chf is probing fresh multi-year lows around 1.0450.

NZD/GBP/AUD/CAD - All catching contagion due to their high beta, cyclical or activity currency stature, with the Kiwi back under 0.7000, Pound hovering fractionally above 1.3400, Aussie beneath 0.7250 and Loonie striving to contain declines beyond 1.2650 pre-Canadian retail sales against the backdrop of collapsing crude prices.

JPY/CHF - As noted above, the Yen is offering a bit more protection than its US counterpart and clearly benefiting from the weakness in global bond yields until JGBs catch up, with Usd/Jpy down from 114.50+ towards 113.80, but the Franc is showing its allure as a port in the storm via the Euro cross rather than vs the Buck as Usd/Chf holds above 0.9250.

SCANDI/EM - Like Sterling, the Norwegian Crown never really got much time to appreciate good data (GDP in the case of the latter and UK retail sales for the former), as sentiment soured and Brent plunged from Usd 82+/brl to just a few cents off Usd 79.50 to propel Eur/Nok up to nearly 10.0800, while the Swedish Krona is also sliding irrespective of Euro underperformance elsewhere through 10.1000. Similarly, EMs are feeling the heat, with the ongoing exception of the Yuan due to careful control by the Chinese authorities, and this has scuppered a decent recovery effort staged by the Lira after Thursday’s mauling pre and post-CBRT. For the Rand, SA ratings reviews loom just a day after the SARB unexpectedly hiked rates by 25 bp, with Moody’s and S&P both due to deliver assessments following the recent MTBS that went down quite well with the markets and investors.

FIXED

It took a while for the buying to gather sufficient thrust to breach near term resistance points, but once headlines broke indicating the severity of latest virus waves sweeping across Austria and Germany in particular, Bunds wasted little time and effort overcoming all technical hurdles and any psychological barriers on their way to 172.13 from 171.00 at the Eurex low. Meanwhile, the corresponding 10 year cash yield is now well under -30 bp and the safe-haven scramble has spread to lift Gilts from 126.07 to 126.96 and T-notes to 130-30 from 130-13+ or 87.6 bp and 1.55% in cash terms. Ahead, Canadian retail sales data, Fed and ECB speakers, but the unfolding Eurozone etc pandemic situation seems paramount at present.

COMMODITIES

WTI and Brent front month futures retreated with the trigger point being back-to-back COVID updates – with Austria confirming a full-scale lockdown from Monday and Germany not ruling out its own lockdown. Crude futures reacted to the prospect of a slowdown in activity translating to softer demand. That being said, COVID only represents one factor in the supply/demand equation. Oil consuming nations are ramping up rhetoric and are urging OPEC+ to release oil. The White House confirmed the US discussed a possible joint release of oil from reserves with China and other countries, while it reiterated that it has raised the need for available oil supply in the market with OPEC. Meanwhile, the Japanese Cabinet said it will urge oil-producing nations to increase output and work closely with the IEA amid risks from energy costs. Further, energy journalists have also been flagging jitters of Chinese crude demand amid the likelihood of another tax probe into independent refiners. All in all, a day of compounding bearish updates (thus far) has prompted the contracts to erase all of their APAC gains, with WTI Dec just above USD 76/bbl (76.06-79.33/bbl range) and Brent Jan back under USD 79/bbl (78.75-82.24/bbl range). Elsewhere, spot gold saw a pop higher around the flurry of European COVID updates and despite a firmer Buck – pointing to haven flows into the yellow metal – which is nonetheless struggling to convincingly sustain a breach its overnight highs around USD 1,860/oz and we are attentive to a key fib at USD 1876/oz. Base metals prices are relatively mixed but have waned off best levels amid the risk aversion that crept into the markets, but LME copper holds onto a USD 9,500+/t status.

Japanese Cabinet will urge oil-producing nations to increase output and work closely with the IEA amid risks from energy costs. (Newswires)

OPEC+ compliance with group's production cuts at 116% in Oct vs 115% in Sep, according to sources. (Newswires)