• European bourses are firmer across the board with a clear cyclical bias; US futures are in the green with RTY outperforming
• US Conservatives on both sides of the Capitol are reportedly plotting to force a government shutdown Friday
• Chinese Caixin Manufacturing PMI fell short of estimates and slipped back into contraction territory
• The DXY traded on either side of 96.000 whilst TRY whipsawed on CBRT intervention and Erdogan jawboning
• Looking ahead, highlights include US Markit Final Manufacturing PMIs, US ADP National Employment and ISM Manufacturing PMI, JTC and OPEC meetings, BoE's Bailey and Fed's Powell

CORONAVIRUS UPDATE

US plans stricter COVID testing and will require tests for all travellers to the US, while administration officials are also discussing additional measures including a seven-day quarantine and retesting several days after arrival amid Omicron concerns, while the CDC later confirmed it is working to shorten the timeline for required COVID-19 testing for all international travellers to one day prior to the departure. (Newswires/Washington Post)

US FDA advisers narrowly voted (13-10) to recommend authorisation of Merck's (MRK) oral pill for treatment of mild-to-moderate COVID-19 in adults with high risk of progressing to severe diseased, while it was separately reported that Pfizer (PFE) submitted a request to expand the EUA for COVID-19 booster doses to include people aged 16-17 years old. (Newswires)

Japan expanded its travel ban to include foreigners with resident status entering from 10 countries including South Africa, while it was separately reported that South Korea is considering conducting a COVID-19 variant test on all arrivals. (Newswires)

EC President Michel abandoned idea of a video conference for EU leaders to discuss COVID, according to a Telegraph reporter. (Twitter)

ASIA

Asian equity markets traded mostly positive as regional bourses atoned for the prior day’s losses that were triggered by Omicron concerns, but with some of the momentum tempered by recent comments from Fed Chair Powell and mixed data releases including the miss on Chinese Caixin Manufacturing PMI. ASX 200 (-0.3%) was led lower by underperformance in consumer stocks and with utilities also pressured as reports noted that Shell and Telstra’s entrance in the domestic electricity market is set to ignite fierce competition and force existing players to overhaul their operations, although the losses in the index were cushioned following the latest GDP data which showed a narrower than feared quarterly contraction in Australia’s economy. Nikkei 225 (+0.4%) was on the mend after yesterday’s sell-off with the index helped by favourable currency flows and following a jump in company profits for Q3, while the KOSPI (+2.1%) was also boosted by strong trade data. Hang Seng (+0.8%) and Shanghai Comp. (+0.4%) were somewhat varied as a tech resurgence in Hong Kong overcompensated for the continued weakness in casinos stocks amid ongoing SunCity woes which closed all VIP gaming rooms in Macau after its Chairman's recent arrest, while the mood in the mainland was more reserved after a PBoC liquidity drain and disappointing Chinese Caixin Manufacturing PMI data which fell short of estimates and slipped back into contraction territory. Finally, 10yr JGBs were lower amid the gains in Japanese stocks and after the pullback in global fixed income peers in the aftermath of Fed Chair Powell’s hawkish comments, while a lack of BoJ purchases further contributed to the subdued demand for JGBs.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 90bln net daily drain.PBoC set USD/CNY mid-point at 6.3693 vs exp. 6.3706 (prev. 6.3794)

• Chinese Caixin Manufacturing PMI (Nov) 49.9 vs Exp. 50.5 (Prev. 50.6)
• Australian Real GDP QQ SA (Q3) -1.9% vs. Exp. -2.7% (Prev. 0.7%)
• Australian Real GDP YY SA (Q3) 3.9% vs. Exp. 3.0% (Prev. 9.6%)

US

US Conservatives on both sides of the Capitol are reportedly plotting to force a government shutdown Friday in an effort to defund the Biden admin’s vaccine mandate on the private sector, according to sources cited by Playbook. A group of Senate conservatives is planning to object to quick consideration of a stopgap measure to extend funding into early 2022 unless Democratic leaders agree to deny money to enforce the mandate. (Politico)

UK/EU

UK officials are set to tell Brussels that the EU's ban on British sausages must be overturned. (Telegraph)

WORLD

OECD Economic Outlook: 2021 global GDP growth forecast 5.6% (prev. 5.7%), US 5.6% (prev. 6.0%), China 8.1% (prev. 8.5%), EZ 5.2% (prev. 5.3%). (OECD)

EQUITIES

Bourses in Europe are firmer across the board (Euro Stoxx 50 +1.6%; Stoxx 600 +1.1%) as the positive APAC sentiment reverberated into European markets. US equity futures are also on the front foot with the cyclical RTY (+2.0%) outpacing its peers: ES (+1.2%), NQ (+1.5%), YM (+0.8%). COVID remains a central theme for the time being as the Omicron variant is observed for any effects of concern – which thus far have not been reported. Analysts at UBS expect market focus to shift away from the variant and more towards growth and earnings. The analysts expect Omicron to fuse into the ongoing Delta outbreak that economies have already been tackling. Under this scenario, the desk expects some of the more cyclical markets and sectors to outperform. The desk also flags two tails risks, including an evasive variant and central bank tightening – particularly after Fed chair Powell’s commentary yesterday. Meanwhile, BofA looks for an over-10% fall in European stocks next year. Sticking with macro updates, the OECD, in their latest economic outlook, cut US, China, Eurozone growth forecasts for 2021 and 2022, with Omicron cited as a factor. Back to trade, broad-based gains are seen across European cash markets. Sectors hold a clear cyclical bias which consists of Travel & Leisure, Basic Resources, Autos, Retail and Oil & Gas as the top performers – with the former bolstered by the seemingly low appetite for coordination on restrictions and measures at an EU level – Deutsche Lufthansa (+6%) and IAG (+5.1%) now reside at the top of the Stoxx 600. The other side of the spectrum sees the defensive sectors – with Healthcare, Household Goods, Food & Beverages as the straddlers. In terms of induvial movers, German-listed Adler Group (+22%) following a divestment, whilst Blue Prism (+1.7%) is firmer after SS&C raised its offer for the Co.

FX

DXY - The Dollar remains mixed against majors, but well off highs prompted by Fed chair Powell ditching transitory from the list of adjectives used to describe inflation and flagging that a faster pace of tapering will be on the agenda at December’s FOMC. However, the index is keeping tabs on the 96.000 handle and has retrenched into a tighter 95.774-96.138 range, for the time being, as trade remains very choppy and volatility elevated awaiting clearer medical data and analysis on Omicron to gauge its impact compared to the Delta strain and earlier COVID-19 variants. In the interim, US macro fundamentals might have some bearing, but the bar is high before NFP on Friday unless ADP or ISM really deviate from consensus or outside the forecast range. Instead, Fed chair Powell part II may be more pivotal if he opts to manage hawkish market expectations, while the Beige Book prepared for next month’s policy meeting could also add some additional insight.

NZD/AUD/CAD/GBP - Broad risk sentiment continues to swing from side to side, and currently back in favour of the high beta, commodity and cyclical types, so the Kiwi has bounced firmly from worst levels on Tuesday ahead of NZ terms of trade, the Aussie has pared a chunk of its declines with some assistance from a smaller than anticipated GDP contraction and the Loonie is licking wounds alongside WTI in advance of Canadian building permits and Markit’s manufacturing PMI. Similarly, Sterling has regained some poise irrespective of relatively dovish remarks from BoE’s Mann and a slender downward revision to the final UK manufacturing PMI. Nzd/Usd is firmly back above 0.6800, Aud/Usd close to 0.7150 again, Usd/Cad straddling 1.2750 and Cable hovering on the 1.3300 handle compared to circa 0.6772, 0.7063, 1.2837 and 1.3195 respectively at various fairly adjacent stages yesterday.

JPY/EUR/CHF - All undermined by the aforementioned latest upturn in risk appetite or less angst about coronavirus contagion, albeit to varying degrees, as the Yen retreats to retest support sub-113.50, Euro treads water above 1.1300 and Franc straddles 0.9200 after firmer than forecast Swiss CPI data vs a dip in the manufacturing PMI.

SCANDI/EM - Somewhat conflicting manufacturing PMIs, as Norwegian activity accelerated in contrast to a slowdown in Sweden, but the Nok is only a tad firmer than the Sek amidst the constructive market tone, a firm bounce in Brent and a healthier Norwegian current account surplus. Elsewhere, the Cnh and Cny are coping well with the disappointment of a weaker than expected and marginally contractionary Caixin manufacturing PMI following a higher than anticipated PBoC midpoint fix for the onshore unit, but the Rub is not really benefiting from the revival in crude prices amidst more Russian-US angst. Meanwhile, the Try has been pulled from pillar to post within a 12.4225-13.8720 gaping chasm against the Usd as CBRT intervention arrested an early slide only for Turkish President Erdogan to put the skids under the Lira again with an array of comments underscoring his opposition to high interest rates - see 9.45GMT post on the Headline Feed for more.

CBRT has intervened in the market amid the "unhealthy" price formations in the FX rate. Turkish President Erdogan reiterates he will never support higher interest rates; understands public concern over FX volatility. (Newswires)

FIXED INCOME

Several bearish factors keeping debt depressed, but supply not really an issue for Germany to contend with as the latest Bobl resale drew decent demand in contrast to the UK DMO’s new 10 year benchmark that tailed and struggled to float at launch. Hence, the gap between Bunds and Gilts is closing to an extent, with the former down to 171.63 at worst for a 74 tick loss on the day and the latter 61 ticks adrift at 125.67 at one stage and both currently nearer ½ point below par. Meanwhile, US Treasuries are holding close to the bottom of overnight ranges awaiting ADP, ISM and another blast from Fed chair Powell for fresh direction as the mood regarding Omicron turns less negative and oil pares some declines from around Usd 66.20/brl in WTI and under Usd 69.50 in Brent.

COMMODITIES

WTI and Brent front month futures are recovering following yesterday’s COVID and Powell-induced declines in the run-up to the OPEC meetings later today. The complex has also been underpinned by the reduced prospects of coordinated EU-wide restrictions, as per the abandonment of the COVID video conference between EU leaders. However, OPEC+ will take centre stage over the next couple of days, with a deluge of source reports likely as OPEC tests the waters. The case for OPEC+ to pause the planned monthly relaxation of output curbs by 400k BPD has been strengthening. There have been major supply and demand developments since the prior meeting. The recent emergence of the Omicron COVID variant and coordinated release of oil reserves have shifted the balance of expectations relative to earlier in the month (full Newsquawk preview available in the Research Suite). In terms of the schedule, the OPEC meeting is slated for 13:00GMT/08:00EST followed by the JTC meeting at 15:00GMT/10:00EST, whilst tomorrow sees the JMMC meeting at 12:00GMT/07:00EST; OPEC+ meeting at 13:00GMT/08:00EST. WTI Jan has reclaimed a USD 69/bbl handle (vs USD 66.20/bbl low) while Brent Feb hovers around USD 72.50/bbl (vs low USD 69.38/bbl) at the time of writing. Elsewhere, spot gold and silver trade with modest gains and largely in tandem with the Buck. Spot gold failed to sustain gains above the cluster of DMAs under USD 1,800/oz (100 DMA at USD 1,792/oz, 200 DMA at USD 1,791/oz, and 50 DMA at USD 1,790/oz) – trader should be aware of the potential for a technical Golden Cross (50 DMA > 200 DMA). Turning to base metals, copper is supported by the overall risk appetite, with the LME contract back above USD 9,500/t. Overnight, Chinese coking coal and coke futures rose over 5% apiece, with traders citing disrupted supply from Mongolia amid the COVID outbreak in the region.

US Private Inventories (bbls): Crude -0.7mln (exp. -1.2mln), Gasoline +2.2mln (exp. 0.0mln), Distillates +0.8mln (exp. +0.5mln), Cushing +1.0mln. (Newswires)

Goldman Sachs says markets have priced in around a 7mln BPD negative demand hit over the next three months, with no OPEC+ response to offset this. (Newswires)

Iraqi Energy Minister says the country's stance will be aligned with the outcome of the OPEC meeting; expects OPEC to agree on extending current production policies over the short term. (Newswires)

ADNOC board of directors have announced the addition of new oil and gas reserves estimated at 4bln barrels and 16tln standard cubic feet of natural gas. (Newswires)

GEOPOLITICAL

Russian Foreign Ministry spokesperson says Ukraine has moved half of its army or 125k troops into the conflict zone in Eastern Ukraine to face pro-Russian separatists. (Newswires) Russian Foreign Minister says Russian President Putin and Turkish President Erdogan could look at the proposal from Turkey to mediate conflict in Eastern Ukraine. Russia's Kremlin says Russia is seriously worried by the presence of so many Ukrainian troops near its borders; Russia not in a position to de-escalate when there are over 120k troops deployed near Donbass. (Newswires)

Russian Foreign Ministry says that staff in the US embassy who have been in Moscow for over three years must leave by January 31st, according to Ria. Another group of US diplomats could be made to leave Russia by July 1st 2022 if a compromise is not reached. (Newswires) US Secretary of State Blinken to meet Russian Foreign Minister Lavrov at the sidelines of an OSCE summit in Stockholm on Thursday, according to a senior US official. (Newswires)

A source says European parties have asked for ending this round of the Iranian nuclear negotiations very soon, via journalist Aslani; Iran is willing to continue discussions for as long as needed. (Twitter)

Saudi-led coalition said it destroyed an explosive-laden boat used by Houthis before carrying out an imminent attack in the southern Red Sea, while there were later reports of airstrikes that targeted an Iranian-backed Houthi drone base at Sanaa International Airport in Yemen. (Newswires)