• European bourses are subdued after a mixed APAC handover with newsflow minimal and focused on the SPR, COVID and Biden's speech
• US futures are modestly lower, ES -0.2%, but performance has been comparably more contained following yesterday's late-doors selling pressure
• US President Biden to speak at 19:00GMT/14:00EST, via Politico; will be speaking on the economy and lowering prices
• The DXY has dipped from YTD highs but remains in proximity to 96.50 with peers mixed, core debt remains hampered with yields modestly elevated across the board
• A source report noted that the US Energy Department will announce a loan of oil from the SPR on Tuesday
• US President Biden's administration is reportedly mulling sending military advisers and new weapons to Ukraine; Russia has spoken against this
• Looking ahead, highlights include US flash PMIs, BoE's Bailey, ECB's de Guindos, US 7yr supply

CORONAVIRUS UPDATE

White House COVID-19 response coordinator Zients said the US is administering 1mln booster shots per day and the federal government has achieved 95% compliance with vaccine mandate, while he added that they are not headed in that direction regarding a lockdown. (Newswires)

French PM Castex tested positive for COVID-19. (AFP)

ASIA

Asia-Pac stocks traded mixed following a similar performance in the US where participants digested President Biden’s decision to nominate Fed Chair Powell for a second term and Fed’s Brainard for the Vice Chair role. This resulted in bear flattening for the US curve and underpinned the greenback, while the major indices were choppy but with late selling heading into the close in which the S&P 500 slipped beneath the 4,700 level and the Nasdaq underperformed as tech suffered the brunt of the higher yields. ASX 200 (+0.8%) was positive with sentiment encouraged after stronger PMI data and M&A developments including BHP’s signing of a binding agreement to merge its oil and gas portfolio with Woodside Petroleum to create a global top 10 independent energy company and the largest listed energy company in Australia, which spurred outperformance for the mining and energy related sectors. KOSPI (-0.5%) was lacklustre and retreated below the 3k level amid broad weakness in tech which was not helped by concerns that South Korea could take another aim at large tech through a platform bill and with the government said to be mulling strengthening social distancing measures. Hang Seng (-1.2%) and Shanghai Comp. (+0.2%) continued to diverge amid a neutral liquidity effort by the PBoC and with the Hong Kong benchmark conforming to the tech woes, while the mainland was kept afloat after the State Council pledged to strengthen assistance to smaller firms and with Global Times noting that China will likely adopt another RRR cut before year-end to cope with an economic slowdown. Finally, Japanese participants were absent from the market as they observed Labor Thanksgiving Day, while yields in Australia were higher as they tracked global counterparts and following a Treasury Indexed bond offering in the long-end.

PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.3929 vs exp. 6.3860 (prev. 6.3952)

Chinese press reports noted that the PBoC is less likely to reduce MLF rate this year. (Newswires)

US

US President Biden to speak at 19:00GMT/14:00EST, via Politico; will be speaking on the economy and lowering prices. (Politico)

Fed's Bostic (2021, 2024 voter) said Fed Chair Powell's nomination takes uncertainty out of the Fed which is helpful and that President Biden made a fine choice in Powell and Brainard. Bostic stated that the Fed should consider how fast to execute the taper and that a faster taper would provide more optionality, while he also noted there are good arguments to be made to consider a faster taper. Furthermore, he expects the inflation number to continue coming in strong and could be open to bringing forward another rate hike in his dot plot for next year if appropriate, but is also open to pushing them back depending on how the pandemic plays out. (Newswires)

US Treasury Secretary Yellen said both Powell and Brainard should have broad support in the US Senate, while she suggested that the US must be concerned about inflation and that over the longer-run, the Fed needs to play an important role to ensure inflation does not become an "endemic". Furthermore, Yellen sees the US economy on a strong growth spurt at the moment and reiterated that she expects inflation pressures to diminish in H2 next year with monthly inflation seen at 0.2% and 0.3% in H2 next year. (Newswires)

White House is to raise federal contractor pay to USD 15/hr as cemented by a new Department of Labor rule. (Newswires)

UK/EU

ECB's Knot said there is no indication inflation will keep exceeding expectations. Subsequently, said that the chance of the conditions for a rate hike being met in 2022 is very unlikely; sees rate lift-off after 2022. Additionally, he would argue that the supply shocks are perhaps not entirely short-lived, but agrees they are transitory. (Newswires)

Brexit Minister Frost has called for Britain to lower taxes and reduce regulation or Brexit will fail. (Telegraph)

UK Flash Services PMI (Nov) 58.6 vs. Exp. 58.5 (Prev. 59.1); Composite PMI (Nov) 57.7 vs. Exp. 57.5 (Prev. 57.8)

• Manufacturing PMI (Nov) 58.2 vs. Exp. 57.3 (Prev. 57.8)

EU Markit Composite Flash PMI (Nov) 55.8 vs. Exp. 53.2 (Prev. 54.2); Manufacturing Flash PMI (Nov) 58.6 vs. Exp. 57.3 (Prev. 58.3)

• Services Flash PMI (Nov) 56.6 vs. Exp. 53.5 (Prev. 54.6)

German Markit Composite Flash PMI (Nov) 52.8 vs. Exp. 51 (Prev. 52); Manufacturing Flash PMI (Nov) 57.6 vs. Exp. 56.9 (Prev. 57.8)

• Services Flash PMI (Nov) 53.4 vs. Exp. 51.5 (Prev. 52.4)
• Note, The survey period was November 12th - 19th; on November 19th, the German Health Minister Spahn said nothing can be ruled out regarding COVID-19, when questioned on a possible lockdown for all and that the the domestic COVID situation is more serious than last week, adding "we are in a national emergency"

GEOPOLITICAL

US President Biden's administration is reportedly mulling sending military advisers and new weapons to Ukraine as Russia builds up forces near the border and US officials are preparing allies for the possibility of another Russian invasion, according to CNN. Furthermore, the US is concerned the Belarus migrant situation is diverting attention away from the Russian military build-up on the border of Ukraine and it was also reported that a key Democrat is urging US President Biden to work with allies to address Russia. Most recently, Ukraine's Defence Ministry says that forces under the command of Russia are raising combat readiness in Eastern Ukraine. (Newswires/CNN)

US said Russia is 'close' to using energy as weapon in Europe, while it imposed further sanctions related to Nord Stream 2 with sanctions imposed on a Russian-linked entity and its vessel, according to the State Department. (Newswires)

Saudi-led coalition announced to conduct airstrikes on military targets in Yemen's Sanaa and asked civilians to not gather or approach the target sites. (Newswires)

EQUITIES

Major bourses in Europe are lower across the board, but off worst levels (Euro Stoxx 50 -1.1%; Stoxx 600 -1.3%) following on from the mixed APAC performance, but with pandemic restrictions casting a shower over the region. US equity futures are mostly lower but to a lesser extent than European peers, with the YM (+0.1%) the relative outperformer vs the ES (-0.1%), NQ (-0.3%) and RTY (-0.8%). Back to Europe, the morning saw the release of Flash PMIs which failed to spur much action across market given the somewhat stale nature against the backdrop of a worsening COVID situation in Europe. Losses in the UK’s FTSE 100 (-0.1%) are more cushioned vs European counterparts, with heavyweight miners doing the heavy lifting, and as the basic resources sector outpaces and resides as the only sector in the green at the time of writing amid a surge in iron ore prices overnight. Sticking with sectors, there is no clear or overarching theme/bias. Tech resides at the foot of the pile, unaided by the intraday rise in yields. Travel and Leisure also reside towards the bottom of the bunch, but more a function of the “leisure” sub-sector as opposed to the “travel” component, with Evolution Gaming (-3.7%) and Flutter (-3.5%) on the back foot. In terms of individual movers, Thyssenkrupp (-7.0%) tumbles after the Co. announced a secondary offer by Cevian of 43mln shares. Meanwhile, Telecom Italia (-3%) is softer following yesterday’s run, whilst Vivendi (-0.5%) said the current KKR (KKR) offer does not reflect Telecom Italia's value and it has no intention of offloading its 24% stake.

FX

EUR/JPY/CHF/DXY - The Buck had already eased off best levels to relieve some pressure from its rivals, but the Euro also derived encouragement from the fact that a key long term Fib held (just) at 1.1225 before getting a rather unexpected fundamental fillip in the form of stronger than forecast flash Eurozone PMIs plus hawkish-sounding comments from ECB’s Schnabel. Eur/Usd duly rebounded to 1.1275 and the Dollar index retreated to 96.308 from a fresh y-t-d peak of 96.603, while the Yen and Franc also took advantage to varying degrees against the backdrop of deteriorating risk sentiment and in thinner trading volumes for the former due to Japan’s Labor Day Thanksgiving holiday. Usd/Jpy recoiled from 115.15 to 114.49 at one stage and Usd/Chf to 0.9301 from 0.9335 before both pairs bounced with the Greenback and a rebound in US Treasury yields ahead of Markit’s preliminary PMIs and Usd 59 bn 7 year note supply.

TRY - Simply no respite for the Lira via another marked pull-back in oil prices on heightened prospects of SPR taps, the aforementioned Buck breather or even a decent correction as Usd/Try extended its meteoric rise beyond 11.5000 and 12.0000 towards 12.5000 irrespective of an ally of Turkish President Erdogan urging a debate on CBRT independence. Instead, the run and capital flight continues as talks with the IMF make no progress and an EU court condemns the country for detaining 400+ judges after the coup, while the President rules out a snap election after recent calls for an earlier vote than the scheduled one in 2023 by the main opposition party.

NZD/CAD/GBP/AUD - It remains to be seen whether the RBNZ maintains a 25 bp pace of OCR normalisation overnight, but weak NZ retail activity in Q3 may be a telling factor and is applying more downside pressure on the Kiwi across the board, as Nzd/Usd hovers under 0.6950 and the Aud/Nzd cross tests 1.0425 on relative Aussie strength or resilience gleaned from another spike in iron ore that is helping to keep Aud/Usd above 0.7200. Conversely, the latest downturn in crude is undermining the Loonie and the Pound hardly derived any traction from better than anticipated UK PMIs even though they should provide the BoE more justification to hike rates next month. Usd/Cad has now breached 1.2700 and only stopped a few pips short of 1.2750 before fading ahead of comments from BoC’s Beaudry, while Cable topped out just over 1.3400 awaiting BoE Governor Bailey, whilst Haskel reaffirmed his stance in the transitory inflation camp, although suggested that if the labour market remains tight the Bank Rate will have to rise.

SCANDI/EM - Hardly a shock that Brent’s reversal has hit the Nok alongside broader risk-aversion that is also keeping the Sek defensive in advance of the Riksbank, but the Zar is coping well considering Gold’s loss of Usd 1800+/oz status and test of chart support at the 100 DMA only a couple of Bucks off the 200. Similarly, the Cnh and Cny are still resisting general Usd strength and other negatives, with help from China’s State Council pledging to strengthen assistance to smaller firms perhaps.

New Zealand Retail Sales QQ (Q3) -8.1% (Prev. 3.3%); YY (Q3) -5.2% (Prev. 33.3%)

Turkish President Erdogan says there will be no early elections, the date is set for June 2023. (Newswires)

FIXED

Downward revisions to Germany’s PMIs in the final reckoning cannot be ruled out given recent debilitating pandemic developments in the Eurozone’s biggest member state, but for now the consensus-beating preliminary prints are being taken at face value in context of a general shift in global Central Bank policy towards a more hawkish stance. Hence, Bunds have now been nearer 171.00 at 171.03 to be precise and closer to completing a full round trip from last Friday’s low to yesterday’s high (171.00 and 172.57 respectively), while Gilts are only holding up better between 126.24-125.95 parameters by virtue of the fact that they are already back around recent lows and UK PMIs were not quite as strong. For the record, remarks from BoE’s Haskel suggest he is not in a rush to raise rates, but not averse if the labour market remains tight. Elsewhere, US Treasuries are somewhat mixed and the curve relatively stable after yesterday’s post-Powell reappointment fallout as attention turns to Markit’s PMIs and 7 year supply.

COMMODITIES

WTI and Brent Jan'22 futures remain under pressure with the former back under USD 76/bbl (vs USD 76.59/bbl high) and the latter around USD 79/bbl (vs USD 79.63/bbl high). The WTI contract is also narrowly lagging Brent by some USD 0.30/bbl at the time of writing. Participants are keeping their eyes peeled for reserve releases from the US, potentially in coordination with other nations including China, Japan, and India – with inflation concerns being the common denominator. The move also comes in reaction to OPEC+ flouting calls by large oil consumers, particularly the US, to further open the taps beyond the group’s planned 400k BPD/m hikes. A source cited by Politico caveated that a final decision is yet to be made, and US officials are hoping that the threat of an SPR release would persuade OPEC+ to double their quotas at the Dec 2nd meeting. As it stands, Energy Intel journalist Bakr noted that she has not heard anything from OPEC+ officials about changing production plans, but delegates yesterday suggested that plans may be tweaked. Click here for the full Newsquawk analysis piece. Aside from this, US President Biden is also poised to give a speech on the economy, whilst the weekly Private Inventories will also be released today. Elsewhere, spot gold and have been drifting lower in what is seemingly a function of technical, with the yellow metal dipping under USD 1,800/oz from a USD 1,812/oz current high, with a cluster of DMAs present to the downside including the 100 DMA (around USD 1,793/oz), 200 DMA (around USD 1,791/oz) and 50 DMA (around USD 1,789/oz). Turning to base metals, LME copper holds a positive bias with prices on either side of USD 9,750/t, whilst Dalian iron ore surged overnight - with reports suggesting that steel de-stockpiling accelerated last week, and analysts suggesting that the market is betting on steelmakers in December.

White House Press Secretary Psaki stated the US is still considering oil options and will continue pressing OPEC and oil companies on supply and prices of oil. US Energy Department will announce a loan of oil from the SPR on Tuesday and that the SPR release is to be coordinated with several countries, via a source report. (Newswires)

"China could offer help to the US by releasing its own crude oil reserves to a certain extent, but should take a cautious approach, considering its own crude reserves are not sufficient, experts say.", according to Global Times. (Twitter)

UAE Minister says OPEC+ meeting will go ahead as planned; technical data suggests a surplus in Q1 and there is no logic in increasing its contribution. (Newswires)

Kazakhstan output in October was at 1.599mln bpd which exceeds its OPEC+ quota of 1.524mln, according to the Energy Ministry. (Newswires)