• Asian equities and US futures are on the backfoot with markets spooked by new COVID variant concerns
• The new variant is said to be the most evolved strain so far, prompting fears that it could be worse than Delta
• USTs and Bunds are notably firmer and safe-havens (JPY, CHF) lead the way in the G10 FX space
• WTI crude futures declined nearly 3% to breach the USD 76.00/bbl level to the downside
• Looking ahead, highlights include Eurozone M3 Money Supply, ECB's Lagarde, Schnabel, Panetta, BoE's Pill
• In lieu of today's market closures, the desk will operate a normal service on Friday 26th November until 18:45GMT/13:45EST, upon which the desk will close

CORONAVIRUS UPDATE

WHO called for a meeting of experts later today to discuss whether to declare the new variant (expected to be named Nu) as a variant of concern. (Newswires)

UK Health Secretary Javid announced that six African countries will be added to the travel ‘red list’ in which flights will be temporarily banned and UK travellers will need to quarantine, while he added that the new vaccines may be less effective against the new COVID-19 variant known as B.1.1.529 (expected to be named Nu) and that the variant may be more transmissible. Israel also banned travel from South Africa, Lesotho, Botswana, Zimbabwe, Mozambique, Namibia, and Eswatini amid new variant, while other countries also announced tighter measures including India, Japan and Singapore. (Newswires)

France will reinforce control measures at its borders due to COVID-19 with concrete steps to take place in the next 1-2 days and it was also reported that Morocco is to suspend all flights with France from November 26th due to the COVID-19 concerns. (Newswires)

Portugal Government is to re-impose mandatory mask wearing in indoor spaces and is to reintroduce EU digital certificate for hotel stays, indoor dining, restaurant and gyms. Furthermore, people must show a vaccination certificate and a negative COVID-19 test to enter care homes, bars, nightclubs and large events, while all passengers arriving in airports must show a negative test. (Newswires)

Czech President Zeman was taken back to hospital after being released just earlier in the day after testing positive for COVID-19. (Newswires)

ASIA

Asian equity markets declined and US equity futures were also on the backfoot on reopen from the prior day’s Thanksgiving lull with markets spooked by new COVID variant concerns related to the B.1.1.529 variant in South Africa that was first detected in Botswana. The new variant showed a high number of mutations and was said to be the most evolved strain ever which spurred fears it could be worse than Delta and is prompting both the UK and Israel to halt flights from several African nations. ASX 200 (-1.7%) was negative with heavy losses in energy and broad underperformance in cyclicals leading the downturn across all sectors, while the much better than expected Australian Retail Sales data was largely ignored. Nikkei 225 (-2.5%) underperformed and gave up the 29k status as selling was exacerbated by detrimental currency inflows and with SoftBank shares among the worst hit on reports that China is said to have asked Didi to delist from US exchanges on security fears, which doesn't bode well for SoftBank given that its Vision Fund is the top shareholder in the Chinese ride hailing group with a stake of more than 20%. Hang Seng (-2.5%) and Shanghai Comp. (-0.7%) conformed to the risk aversion with the mood not helped by ongoing geopolitical concerns after a Chinese Defense Ministry spokesperson noted they are ready to crush Taiwan independence bid "at any time”, while China also said it opposes US sanctions on its companies and will take all necessary measures to firmly defend the rights of Chinese companies. Beijing interference further contributed to the headwinds amid the request by China for Didi to delist from US which reports stated regulators could backtrack on and with Tencent subdued after some Chinese state-run companies restricted the use of Tencent's messaging app. Finally, 10yr JGBs were higher as they tracked the gains in Bunds and T-note futures with the variant fears pressuring US Treasury yields which saw the US 10yr yield decline by nearly 8bps and 2yr yield lower by 6bps which was the largest drop since March last year, although upside for JGBs was relatively moderate compared to global counterparts amid the lack of BoJ purchases in the market.

PBoC injected CNY 100bln via 7-day reverse repos with the rate at 2.20% for a CNY 50bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.3936 vs exp. 6.3921 (prev. 6.3980)

China is said to have asked Didi (DIDI) to delist from US exchanges on security fears and proposals under consideration include privatization or a share float in Hong Kong followed by delisting from the US, while reports also noted that deliberations continue and it is possible that regulators could backtrack on their request. (Newswires)

• Tokyo CPI YY (Nov) 0.5% vs. Exp. 0.4% (Prev. 0.1%)
• Tokyo CPI YY Ex. Fresh Food (Nov) 0.3% vs. Exp. 0.4% (Prev. 0.1%); fastest pace of increase since July 2020
• Tokyo CPI YY Ex. Fresh Food & Energy (Nov) -0.3% vs. Exp. -0.3% (Prev. -0.4%)

UK/EU

BoE Governor Bailey said supply problems causing inflation should be temporary, while he added the risk is that inflation expectations become embedded and that they have a very tight labour market in the UK. Furthermore, he stated that guidance is more hazardous to give in times of uncertainty and the impact of guidance varies according to where markets are. Bailey also commented that it concerns him a country would use Bitcoin as its nation currency and stated that crypto could be a financial stability issue if leverage gets into it, while he also noted that Turkey is a clear example where central bank independence is an issue. (Newswires)

Spain is considering extending the period of voluntary write off on pandemic loans to companies by six months as soon as next week at a cabinet meeting and would also extend conversion of participatory loans from December to June, according to sources. (Newswires)

FX

In FX markets, the DXY was rangebound after the Thanksgiving holiday and with pressure from a decline in yields offset by haven demand. EUR/USD nursed some of this week's losses after finding support near 1.1205 although upside was limited due to the virus situation in Europe with Netherlands and Portugal planning tougher measures and France is also to reinforce control measures at its borders. ZAR is the underperformer due to the fears concerning the B.1.1.529 variant which has double the spike mutations than the current globally dominant Delta variant. GBP/USD was subdued and tested support at 1.3300 as the fishing dispute with France escalates with French fishermen planning to blockade the Channel Tunnel and ferries later today. USD/JPY and JPY-crosses retreated as the risk aversion spurred haven flows into the Japanese currency and antipodeans were pressured by their high-beta statuses and with oil prices slipping on the variant concerns. Furthermore, Westpac adjusted forecasts for AUD/USD which it sees declining to 0.7000 by June 2022 (prev. 0.7700) amid rate differentials with the US as it made significant changes to its FOMC policy forecast and now expect consecutive increases in the fed funds rate in Jun, Sept, and Dec 2022.

CBRT Governor Kavcioglu said the banking sector is very strong after a meeting with banking sector officials and that they informed the banking sector about rate cuts and other issues, while they held general evaluations on the economic development and the banking sector. Furthermore, he said that discussions were routine and nothing too different, as well as noted that it was not an extraordinary meeting and that the banking sector is able to overcome volatility in markets. (Newswires)

RBNZ Assistant Governor Hawkesby said New Zealand's economy is quite resilient and reaffirmed the need to continue removing stimulus, while he sees risk inflation expectations could increase and noted that inflation expectations will be key for the RBNZ but added that the increase in inflation has so far been as expected. Furthermore, he stated that risks to the outlook are finely balanced and that COVID is a downside risk. (Newswires)

• Australian Retail Sales MM Final (Oct) 4.9% vs. Exp. 2.5% (Prev. 1.3%)

COMMODITIES

WTI crude futures declined nearly 3% to breach the USD 76.00/bbl level to the downside amid fears regarding the new B.1.1.529 variant in South Africa which has double the spike mutations compared with the current dominant Delta variant and is prompting some countries to halt travel with several African nations. Aside from the new variant concerns, the newsflow for the energy complex was light after yesterday's Thanksgiving holiday. Gold edged marginally higher amid haven demand but with upside capped amid a rangebound dollar and with resistance ahead of the USD 1800/oz, while copper prices retreated amid broad risk aversion owing to the new variant fears.

The death toll from a Siberian coal mine disaster, where dozens were trapped as a mine filled with gas, increased to 52. (Newswires)

GEOPOLITICAL

Russian military was reportedly tracking the USS Arleigh Burke after it entered the Black Sea for work with NATO. (Tass)

British army is to base hundreds of armoured vehicles in Germany in an effort to bolster NATO amid tensions with Russia-Ukraine tensions. (FT)

US

US markets were closed for Thanksgiving holiday. (Newswires)

Mexico's Economy Minister said that they are working with the auto industry and Canada to determine when to call for an arbitration panel to resolve dispute regarding US auto content rules under the USMCA. (Newswires)