• APAC stocks traded negatively as the region followed suit to the losses stateside which were prompted by crypto concerns and a stronger USD.
• European equity futures were subdued with Eurostoxx 50 futures lower by 0.6% after the cash market closed down 0.3% yesterday.
• DXY is softer but on a 110 handle, EUR/USD trades above parity, Cable lingers around 1.14.
• Binance walked away from the FTX deal due to diligence and reports on the mishandling of FTX customer funds.
• Looking ahead, highlights include US CPI, IJC, Speeches from Fed's Waller, Harker, Logan, Daly, Mester, George & Williams, BoE's Tenreyro, ECB's de Cos, Schnabel, SNB's Maechler, Supply from UK & US.

US TRADE

• US stocks declined throughout the session amid broad risk aversion and a firmer dollar with contagion from a further sell-off in the crypto space as Binance pulled out of the FTX buyout deal after "looking at the books". Meanwhile, the fate of midterm elections remains undecided with the Georgia Senate race going to a run-off in December. Focus now shifts to Thursday's inflation data.
• SPX -2.08% at 3,748, NDX -2.37% at 10,797, DJIA -1.95% at 32,513, RUT -2.68% at 1,760.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Kashkari (2023 voter) said inflation is not being driven by wages and is being caused by supply chain challenges, stimulus and Russia's invasion of Ukraine, while he added that they will do what is needed to bring inflation back down and once it is done, he would expect interest rates to normalise. Kashkari said any talk of a pivot is premature and he doesn't know what the Fed will do at the December meeting but thinks they are on a good path now.
• Fed's Barkin (2024 voter) said whether Fed actions lead to a recession depends on how malleable inflation is to things like improvement in supply and other factors, while his hypothesis is that the US is on the back end of inflation and that it is coming down.
• Fed's Evans (departing) said he is worried that much higher rates risk the Fed's jobs mandate and sees benefits to adjusting the pace of Fed moves soon, while he is hopeful inflation will start slowing soon and commented that it's time to slow the pace of rate hikes.
• US President Biden said he cannot guarantee that they are going to be able to get rid of inflation but thinks that they can, while he also thinks the economy will have a soft landing.
• Edison Research projected that Republicans have picked up a net 12 US House seats previously held by Democrats with 39 of 435 races not yet called.
• Edison Research projected no candidate will receive 50% of first choice votes for the Senate seat race in Alaska, and the winner between Republican incumbent Murkowski and Trump-backed Republican Tshibaka will be decided by ranked-choice voting on November 23rd.

APAC TRADE

EQUITIES

• APAC stocks traded negatively as the region followed suit to the losses stateside where the major indices were pressured amid a firmer dollar and contagion from further crypto turmoil as Binance pulled out of the FTX buyout deal.
• ASX 200 was subdued by underperformance in the tech and commodity-related sectors although losses in the index were cushioned by M&A-related news with Origin Energy shares up by more than 30% following a buyout offer from a Brookfield consortium and with Perpetual underpinned after it rejected a revised non-binding indicative proposal.
• Nikkei 225 declined as participants digested a slew of earnings releases and with Honda amongst the worst performers after its H1 net fell and cut its vehicle sales forecast due to the chip shortage.
• Hang Seng and Shanghai Comp retreated amid ongoing COVID woes in China after Guangzhou locked down another district on Wednesday, while two districts in Chongqing also raised COVID restrictions and halted schools.
• US equity futures were off yesterday's lows but with the rebound kept minimal (ES +0.2%) ahead of US CPI data.
• European equity futures were subdued with Eurostoxx 50 futures lower by 0.6% after the cash market closed down 0.3% yesterday.

FX

• DXY was choppy above the 110.00 level but held on to most of the prior day’s gains after it benefitted from the broad risk aversion.
• EUR/USD edged mild gains overnight after rebounding from near parity but with the upside contained.
• GBP/USD nursed some of yesterday’s heavy losses and reclaimed the 1.1400 handle, while pertinent newsflow was light although reports noted Chancellor Hunt is looking to cut the surcharge on UK bank profits to 3% from 8% which would shield UK banks from the bulk of a corporate tax hike.
• USD/JPY was marginally softer and largely ignored the slew of rhetoric from BoJ Governor Kuroda who continued to drum the dovish message.
• Antipodeans were contained alongside a light overnight calendar and risk-averse mood.
• PBoC set USD/CNY mid-point at 7.2422 vs exp. 7.2456 (prev. 7.2189)

FIXED INCOME

• 10yr UST futures extended on gains following yesterday’s curve steepening which was due to the risk aversion and duration pressure in the aftermath of a dismal 10yr auction stateside.
• Bund futures remained firmer above the 138.00 level after its recent haven-driven surge.
• 10yr JGB futures followed suit to gains in their global counterparts but were off today’s highs amid the lack of additional BoJ buying with the central bank only in the market under its fixed-rate operations.

COMMODITIES

• Crude languished at the prior day's lows after the energy complex was pressured by the risk-off mood and recent dollar strength, with prices also not helped by the overhang from China's COVID woes, bearish inventory data and recent comments from IEA's Birol who suggested that OPEC+ might need to rethink its output cut decision.
• Spot gold traded sideways as participants await the incoming US CPI data due later.
• Copper was lacklustre alongside the risk-averse mood and China's COVID woes.

CRYPTO

• Bitcoin found mild reprieve overnight and nursed some of the losses from the recent crypto turmoil that had briefly dragged Bitcoin below USD 16,000 as FTX Token plunged after reports of Binance walking away from the FTX deal.
• Binance walked away from the FTX deal due to diligence and reports on the mishandling of FTX customer funds, while Binance said issues are beyond their control or ability to help, according to WSJ.
• FTX's downfall was rooted in poorly performing investments made during the crypto rout and the FTX owner used customer deposits to partially finance his trading firm earlier this year, according to Reuters sources. It was also separately reported that FTX is seeking emergency funding to meet withdrawal requests and without funding would result in bankruptcy, according to Bloomberg.

NOTABLE ASIA-PAC HEADLINES

• US President Biden said he is not willing to make any fundamental concessions when he meets with Chinese President Xi and he wants them to lay out what each of their red lines are when they meet. Biden added that they will discuss Taiwan and will discuss fair trade with Xi, as well as relationships with other countries, according to Reuters.
• Two districts in China's Chongqing were said to have raised COVID restrictions and halted schools.
• BoJ Governor Kuroda said they are not at the stage where they can debate an exit and that raising interest rates now would hurt the economy still in the midst of recovering from the pandemic's impact, so is undesirable. BoJ Governor Kuroda said they will maintain easy monetary policy to sustainably and stably achieve 2% inflation accompanied by wage growth, while he also stated that deepening the negative rate is among the policy options if needed, according to Reuters.
• RBA Deputy Governor Bullock said they are seeing more broad-based CPI pressure in the economy and need to raise interest rates to influence demand, although she separately commented that they are getting closer to the point where they might be able to pause and take a look, while she is hoping demand in the economy is slowing but needs more evidence, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• US President Biden said Russia's evacuation of Kherson shows that they have real problems and he hopes that Russian President Putin will discuss more seriously a prisoner exchange for Brittney Griner.
• US will not give advanced drones to Ukraine to avoid escalation with Russia, according to WSJ.
• Top US general sees a relatively static front line in Ukraine during the winter and said opportunities to negotiate must be seized, according to Reuters.
• UN officials are to discuss the grain deal with a Russian delegation on November 11th, according to Reuters.
• Indonesian government confirmed that Russian President Putin will not attend the G20 summit in Bali but said he is scheduled to participate in one session at the G20 summit virtually, while Russia is to send Foreign Minister Lavrov instead, according to Reuters.

EU/UK

NOTABLE EU/UK HEADLINES

• UK Chancellor Hunt is reportedly looking to cut the surcharge on UK bank profits to 3% from 8% which would effectively shield UK banks from the bulk of a corporate tax rise, according to Bloomberg.
• Polish NBP Base Rate (Nov) 6.75% vs. Exp. 7.00% (Prev. 6.75%). NBP reiterated it could intervene in the FX market and upcoming decisions of the MPC will depend on inflation and economic activity.

DATA RECAP

• UK RICS Housing Survey* (Oct) -2 vs. Exp. 20.0 (Prev. 32.0, Rev. 30)