• European bourses began the week modestly firmer, though this proved shortlived and the complex has pivoted to being mixed overall in-fitting with the APAC handover
• Stateside, futures are under more pressure, ES -0.5% as yields pickup a touch, NQ -0.7% lags slightly as such
• USD is bolstered by the general risk tone, Yuan pressure post-PMIs and the latest piece from WSJ's Timiraos; DXY to a 111.20+ peak
• Core fixed benchmarks pressured with yields extending as we enter a week dominated by Central Bank activity
• Commodities under pressure amid the USD pickup and weak Chinese PMIs alongside COVID woes
• Looking ahead, highlights include US Chicago PMI & a speech from ECB’s Lane.
• UK clocks changed from BST to GMT on Sunday, October 30th. As such, the time gap between London and New York is four hours until US clocks change on Sunday, November 6th.

As of 10:25GMT/06:25ET

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EUROPEAN TRADE

EQUITIES

• European bourses began the week modestly firmer, though this proved shortlived and the complex has pivoted to being mixed overall in-fitting with the APAC handover amid PMIs, COVID, month-end and ahead of a busy week.
• Specifically, Euro Stoxx 50 +0.10% while sectors are similarly mixed and feature some outperformance in defensives while Energy & Basic Resources lag amid COVID concerns and pressure in Glencore.
• Stateside, futures are under more pressure, ES -0.5% as yields pickup a touch, NQ -0.7% lags slightly, ahead of Wednesday's FOMC where a 75bp hike is expected and as corporate updates continue.
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FX

• USD is bolstered by the general risk tone, Yuan pressure post-PMIs and the latest piece from WSJ's Timiraos; DXY to a 111.20+ peak, though it has eased slightly and holds just above the figure.
• USD/JPY lifted beyond 148.00 amid USD strength with little impetus from its own data inputs, though upside has seemingly been capped ahead of 148.50.
• EUR is pressured given the above action, though saw little reaction to hotter-than-expected EZ CPI for October, with market pricing steady at around a 90% chance of 50bp in December; single currency between 0.9915-0.9965.
• After the JPY, GBP has borne the brunt of the USD's advances with EUR/GBP modestly bid as such with UK politics very much in focus as we count down to the BoE; currently, Cable holds around the session's 1.1550 trough.
• Petro-FX dented on softer benchmark pricing while the antipodeans are sensitivity to APAC pressure particularly in China though the Kiwi is deriving some support from domestic stress tests.
• Brazil's former President Lula has won the Brazilian presidential election run-off with 50.9% of votes vs Bolsonaro at 49.1% of votes, according to BBC.
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Notable FX Expiries, NY Cut:

• EUR/USD: 0.9750 (892M), 0.9895-00 (621M), 0.9945-50 (257M), 0.9995-00 (2.83BN)
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FIXED INCOME

• Core benchmarks are pressured as we enter a week dominated by numerous Central Bank updates.
• USTs are lower by 13 ticks with the 10yr yield surpassing Friday's 4.05% best and nearing Thursday's 4.08 peak before 4.10%; action that occurs ahead of the Wednesday FOMC and following the latest WSJ piece.
• Bunds lag amid the above factors and following better-than-expected domestic retail data before another hot EZ CPI print, though reaction to the latter was limited after last week's German release; currently, holding around 20 ticks above the 138.20 trough.
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COMMODITIES

• Commodities are under pressure as the USD picks up and following weak Chinese PMIs and ongoing COVID concerns.
• Specifically, WTI and Brent are lower by just shy of 1% amid the above factors and as focus increasingly turns to next week's US midterms and remarks from US officials, including President Biden.
• US President Biden said that oil companies who complain he is picking on them ‘ain’t seen nothing yet’, according to Reuters.
• QatarEnergy CEO said discussions are ongoing with several Asian buyers as value-added partners on the North Field expansion and that western international oil company partners have all been announced, while the CEO said several supply agreements are being discussed related to the expansion and announcement will be made in due course, according to Reuters.
• US Energy Envoy Hochstein says the US has called on oil producers to increase output, speaking at ADIPEC; need more investment in the oil and gas sector right now and tomorrow.
• Both precious and base metals are lower given the USD's upside and softer China trade; spot gold remains below the USD 1650/oz handle while LME copper has slipped beneath USD 7.5k/T.
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NOTABLE EUROPEAN HEADLINES

• UK PM Sunak is reportedly considering freezing foreign aid for two additional years to help balance UK government finances, according to The Telegraph.
• UK government quashed suggestions that it is considering a windfall tax on banks as one of the measures to plug a hole in its finances at next month’s budget, according to The Sunday Times.
• UK Home Secretary Braverman is under increasing pressure regarding security breaches after it emerged she took several hours to alert the UK’s top civil servant of an “error of judgement” regarding sensitive documents, according to FT.
• UK housing developers warned that new rules and taxes will add GBP 4.5bln to annual costs, according to FT citing a report by the Home Builders Federation.
• UK rail companies and unions are to hold talks to prevent more strikes, according to FT.
• UK's ONS has concluded the classification review of the Energy Price guarantee. Payments will be classified as subsidies on products, paid by gov't to suppliers. Reduced energy unit prices will push inflation lower than if the scheme did not exist.
• Irish PM Martin said political deadlock in Northern Ireland which led London to announce that it will call fresh elections in Northern Ireland, demonstrates that the governance system for the system is not fit for purpose and should be reformed, according to FT.
• ECB’s Knot said the ECB is not done with normalising monetary policy and that the ECB will significantly increase rates again in December which could be by 75bps but noted the next interest step will probably be between 50bps-75bps. Knot added the following interest rate steps will probably be smaller from early 2023, while he added that the ECB is not even at half-time of its fight against inflation and that the prospect of a recession in the Eurozone has become increasingly likely, according to Reuters.
• EU officials have proposed a far-reaching ban on the sale of goods made with forced labor, the plan is in early days and could take years to come into force, WSJ reports.

NOTABLE EUROPEAN DATA

• EU HICP Flash YY (Oct) 10.7% vs. Exp. 10.2% (Prev. 9.9%); X F&E Flash YY (Oct) 6.4% vs. Exp. 6.0% (Prev. 6.0%)
• EU HICP-X Food, Energy, Alcohol & Tobacco Flash YY (Oct) 5.0% vs. Exp. 4.8% (Prev. 4.8%)
• EU GDP Flash Prelim. QQ (Q3) 0.2% vs. Exp. 0.2% (Prev. 0.8%); YY (Q3) 2.1% vs. Exp. 2.1% (Prev. 4.1%)
• UK Lloyds Business Barometer (October) 15 (Prev. 16).
• UK Mortgage Approvals (Sep) 66.789k vs. Exp. 67.0k (Prev. 74.34k, Rev. 74.422k); Lending (Sep) 6.061B GB (Prev. 6.136B GB, Rev. 6.099B GB)
• German Retail Sales YY Real (Sep) -0.9% vs. Exp. -4.9% (Prev. -4.3%, Rev. -1.5%); MM Real (Sep) 0.9% vs. Exp. -0.3% (Prev. -1.3%, Rev. -1.4%)

NOTABLE US HEADLINES

• WSJ's Timiraos noted the pandemic response left household and business finances in strong shape, while cash-rich consumers are proving to be less sensitive to tighter credit which complicates the job for the Fed and could mean higher rates for longer.
• Goldman Sachs now sees Fed rates peaking at 5% in March which is 25bps higher than its prior forecasts, according to Bloomberg.
• Elon Musk is said to have ordered job cuts across Twitter (TWTR) in which the layoffs would take place before November 1st when employees were scheduled to receive stock grants as part of their compensation, according to NYT. However, it was later reported that Elon Musk denied that layoffs will be taking place at Twitter before November 1st. Most recently, Washington Post reports that Twitter intends to lay off 25% of its workforce.
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CRYPTO

• Bitcoin is pressured on the session but resides within a narrow range circa. USD 400 above the USD 20k handle and as such is well within recent parameters.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian official sources says three missiles fired from Belarus were shot down on the Volyn province, in the west of the country, via Al Jazeera.
• Russia announced it is suspending the UN-brokered grain agreement with Ukraine after accusing Ukraine of a massive drone attack on the Black Sea Fleet in Sevastopol, Crimea. Russia’s Defence Ministry stated that the drones used to attack Russia’s Black Sea Fleet were recovered and analysed, while it alleged that the drones used Canadian-made navigation modules and were launched by Ukraine near Odesa, according to Reuters.
• Ukrainian President Zelensky said Russia’s suspension of the grain export deal needs a strong international response from the UN and the G20, while he suggested that Russia doesn’t belong in the G20 as it is deliberately trying to provoke starvation. Furthermore, Zelensky separately commented that Ukrainian forces repelled a fierce offensive by Russian forces in the Donetsk region.
• Ukrainian President’s Chief of Staff accused Russia of blackmail and faking terror attacks on its own facilities in response to Russian accusations that Ukraine was behind explosions in Crimea on Saturday, according to Reuters.
• US President Biden said Russia’s decision to suspend participation in the grain deal is outrageous, according to Reuters.
• NATO called on Russia to reconsider its decision and renew the grain deal urgently, while it said that Russian President Putin must stop weaponising food and end the illegal war on Ukraine, according to Reuters.
• UN Secretary-General Guterres delayed his departure for the Arab League Summit in Algiers by a day to focus on the Black Sea grain deal and continues to engage in intense contacts aimed at ending Russia’s suspension of participation in the deal, according to a spokesperson cited by Reuters.
• UN said Ukrainian, Turkish and UN delegations agreed on Sunday for a movement plan for 16 vessels on October 31st under the Black Sea grain initiative and agreed for inspections to be provided on Monday to 40 outbound vessels, while the UN added that the Russian delegation has been informed of both plans, according to Reuters.
• Turkey’s Defence Minister is in talks with counterparts in Kyiv and Moscow to resume the grains deal and reminded the parties of the importance of continuing the grain deal for all humanity, while Turkey will continue to do its part for the restoration of peace in the region, according to the Defence Ministry cited by Reuters.
• Russian Foreign Minister Lavrov said the Russian leadership, including President Putin, remains ready to negotiate on Ukraine, according to Anadolu Agency.
• Russia will reportedly take into account the modernisation of US nuclear bombs in Europe in its military planning, according to RIA citing Deputy Foreign Minister Grushko.
• Russian Defence Ministry alleged that representatives of a UK navy unit blew up the Nord Stream gas pipelines although didn’t provide any evidence for its claims, while the UK Defence Ministry said that these were ‘false claims of an epic scale’ and that Russia is making false claims to detract from its disastrous handling of the illegal invasion of Ukraine. Furthermore, the French Foreign Ministry also stated that Russian accusations against Britain have no basis and are part of a strategy to turn attention away from Moscow’s sole responsibility for the war in Ukraine, according to Reuters.
• US government was urged to open an investigation regarding allegations of a hacking of former PM Truss's phone while she was Foreign Secretary, while The Mail on Sunday reported that agents suspected of working for Russia were responsible for the alleged hacking, citing unnamed sources.

OTHER

• Iranian President Raisi said security is the Islamic Republic’s red line and it will not allow its enemies to undermine it, while it was separately reported that the Iranian Revolutionary Guards Commander Salami warned protestors that Saturday would be the last day of riots and for protestors to not come to the streets, according to Reuters.
• US has suggested the EU consider using export controls to target China, according to Bloomberg sources. One source suggested that the EU so far isn't inclined to consider using the same approach with China as with Russia because the circumstances are different. Talks are ongoing ahead of a high-level meeting in December.

APAC TRADE

EQUITIES

• APAC stocks traded mostly positive with momentum from last Friday’s rally on Wall St although some of the gains were capped by disappointing Chinese PMI data and lingering COVID-19 woes, while participants are also bracing for a week laden with risk events including the latest FOMC meeting and NFP jobs data.
• ASX 200 traded positively with advances led by outperformance in tech but with further upside limited by weakness in the commodity-related sectors and as participants await tomorrow’s RBA policy meeting.
• Nikkei 225 was boosted after Japan’s Cabinet formally approved a JPY 71.6tln economic stimulus package on Friday and with the index shrugging off mixed Industrial Production and Retail Sales data.
• Hang Seng and Shanghai Comp were mixed with the mainland pressured after Chinese PMI data showed surprise contractions in both factory and services activity, while Hong Kong was somewhat choppy amid a plethora of earnings releases including the big 4 banks and with casino names hit after Macau imposed three days of rapid COVID testing and locked down the MGM Cotai resort.

NOTABLE APAC HEADLINES

• PBoC Governor Yi reiterated that China will continue with its prudent monetary policy to keep the value of the yuan stable and said that China has the conditions to maintain conventional monetary policy for as long as possible, while Yi also reaffirmed to step up support for the real economy, according to Caixin and Reuters.
• China's State Council reiterated support for China's digital economy and proposed an eight-pronged approach, according to SCMP.
• China named Chen Yixin, who is a long-time confidant of President Xi, as the new state security minister in the latest leadership shake-up, according to SCMP.
• US Secretary of State Blinken spoke with China's Foreign Minister Wang Yi today and discussed the need to maintain open lines of communication and responsibly manage the US-China relationship, while Blinken raised the subject of Russia's war in Ukraine and the threat it poses to global security and economic stability, according to the State Department.
• Shanghai Disney Resort suspended operations today due to COVID controls, according to Global Times.
• Macau required residents to undergo three days of rapid Covid tests and locked down MGM China’s (2282 HK) Cotai casino resort although it was also reported that residents from mainland China will be able to travel to Macau from November 1st via the smart visa process, according to Reuters.
• Macau is to commence mass COVID nucleic acid testing on November 1st, via Bloomberg.
• Foxconn's (2354 TT) Zhengzhou plant may see up to 30% of the factory's November shipments of Apple (AAPL) iPhones impacted by the COVID-19 situation and it is working to increase iPhone production at its Shenzhen factory, according to a source
• Japan is to establish a new joint command to manage operations of land, sea and air self-defence forces with the government aiming to establish the new self-defence forces joint command in 2024, according to Nikkei. It was also separately reported that Japan is mulling extending its high-speed missile range to defend the Senkaku/Diaoyu Islands, according to SCMP.
• At least 153 people died and 150 others were injured during a stampede after large crowds surged into a narrow street in Seoul’s Itaewon nightlife district, according to a fire official cited by YTN. South Korean President Yoon declared a national day of mourning and said he would come up with measures to prevent a recurrence of similar incidents, according to Yonhap.
• At least 132 people died and many are still missing after a suspension bridge collapsed in India’s Gujarat state, according to BBC.
• RBNZ said bank solvency stress test shows resilience to a stagflation scenario and although capital buffers would be reduced in a stagflation scenario, they would still remain above the regulatory minimum, according to Reuters.

DATA RECAP

• Chinese Composite PMI (Oct) 49.0 (Prev. 50.9)
• Chinese NBS Manufacturing PMI (Oct) 49.2 vs. Exp. 50.0 (Prev. 50.1); Non-Manufacturing PMI (Oct) 48.7 vs. Exp. 50.2 (Prev. 50.6)
• Japanese Industrial Production MM SA (Sep P) -1.6% vs. Exp. -1.0% (Prev. 3.4%); Retail Sales YY (Sep) 4.5% vs. Exp. 4.1% (Prev. 4.1%)
• Australian Retail Sales MM Final (Sep) 0.6% vs. Exp. 0.6% (Prev. 0.6%)