In a rollercoaster overnight session, futures dropped as much as 1% in early trading, before paring all losses only to slide once again while Nasdaq 100 contracts swung between modest losses and gains. At last check, the Emini was down 0.4% to 3,555 as coronavirus infections surged and investors weighed the timeline of the roll-out of an effective vaccine, while technology stocks headed higher for the second straight day.

"Defensive", work-from-home stocks such as Amazon.com, Apple and Microsoft rose about 0.5% each in premarket trading, while futures for the Nasdaq 100 were up 0.4%. Meanwhile, American Airlines, United and Royal Caribbean Cruises fell between 1.0% and 2.3%.

Fears that an intensifying pandemic will curb the economic rebound threaten this month’s almost 10% surge in global equities, while the value-to-growth rotation reversed after new coronavirus cases in the United States surged above 100,000 for an eighth consecutive day, and global deaths jumping by more than 12,000 with the situation expected to worsen as winter sets in. New York became the latest state to re-introduce social distancing restrictions on Wednesday: New York City ordered bars and restaurants with liquor licenses to close at 10 p.m. as officials. New infections may be steadying or easing in some of Europe’s virus hot spots.

"In the near term, the resurgence of the virus is beginning to make new worries,” Torsten Slok, chief economist at Apollo said on Bloomberg TV. "It looks like this will end up being a W-shaped recovery."

The same dour mood echoed around the world, with global shares on course on Thursday to end their longest winning streak in over a year, one that has lifted them more than 10%, as the post-U.S. election and coronavirus vaccine bull run paused.

European stocks headed toward their first drop of the week on disappointing earnings reports tied to the pandemic. Tech shares outperformed, as some investors perceive them to be defensive. Europe's Stoxx 600 index traded down 0.7% as investors returned to safe-haven government bonds. Siemens AG fell after issuing a cautious 2021 outlook and proposed cutting its dividend.

"What we don’t really agree with is that you need to rotate out of tech into value stocks," said Willem Sels, chief market strategist  at HSBC Private Bank, referring to stocks that do well in normal circumstances when economies are open. "We don’t think either that a recovery (helped by a vaccine) would lead to a sustained sell-off in U.S. Treasuries. The Fed has signalled it is on hold," he added.

Earlier in the session, Asian stocks were little changed with communications rising and finance retreating. The MSCI Asia Pacific Index added 0.1% while Japan's Topix index closed 0.2% lower, with Toyota and Tokio Marine contributing the most to the move. The Shanghai Composite Index retreated 0.1%, driven by China Life and ICBC.

"The vaccine-related rotation has quickly faded as investors have realized that the pandemic won’t disappear as fast as it arrived,” said Hussein Sayed, chief market strategist at FXTM. “While the vaccine remains the best news received since the virus spread, life won’t return to normal in a matter of days or weeks."

In FX, the Bloomberg Dollar Spot Index swung from a gain to a loss as equities pared declines, and the dollar traded mixed versus its Group-of-10 peers. Haven currencies still led G-10 as rising global coronavirus cases spurred demand for safety, though the yen gave up most of its earlier advance. Turkey’s lira took a breather after President Tayyip Erdogan’s promise to overhaul unconventional monetary policy and the replacement of his son-in-law as finance minister caused it to rise 10%; the euro was near $1.18, in the middle of the $1.16-$1.20 range it’s been in since late July. Sterling was down 0.5% amid more Brexit uncertainty and as data showed the UK economy losing speed again. The pound fell for a second day, as market focus remains on developments in U.K.-EU trade negotiations; Sweden’s krona hovered near an almost 2-year high versus the euro after inflation came in largely in line with estimates.

Australia and New Zealand dollars gave up an Asia-session gain as U.S. stock futures slid. AUD/NZD was little changed after it earlier touched the its lowest level since April amid growing expectations that the RBNZ won’t impose a negative cash rate following comments by Assistant Governor Christian Hawkesby. The kiwi got an added boost after Reserve Bank of New Zealand Assistant Governor Christian Hawkesby said the economy required less stimulus than it did in August.

"The weakness in broad USD (dollar) and reflationary momentum in equities, which we saw on the back of the U.S. election and improvements in the vaccine situation, seem to be fading across FX and equities," said Christin Tuxen, Head of FX Research at Danske Bank.

In rates, Treasury yields dropped by more than 3bps to 0.9374% at long end after some aggressive buying during Asia session following Tuesday's Veteran's Day holiday, although they were off session highs. Yields, little changed at front end and 2bp-3bp richer further out, are flattening curve spreads that remain near YTD highs reached in anticipation of a reflationary supply surge: 2s10s by more than 3bp, 5s30s by ~1bp; 10-year yields around 0.94% outperform bunds and gilts by 1bp-2bp. Aside from October CPI, supply is the main focus ahead of $27b 30-year bond auction and an expected rebound in IG credit issuance following Wednesday’s U.S. holiday.

Oil was flat after the International Energy Agency on Thursday joined OPEC in cutting forecasts for global oil demand amid new lockdown measures and cautioned that the vaccine breakthrough won’t quickly revive markets.  WTI and Brent front-month futures traded flat intraday with WTI Dec meandering around USD 41.50/bbl and Brent Jan sub-44/oz as the complex fails to take its cue from the overall indecisive risk sentiment across markets, and as participants continue to balance supply and demand dynamics ahead of blockbuster OPEC+ meeting.

Looking at the day ahead now, attention will fall on central bankers at the ECB’s forum, where ECB President Lagarde, Fed Chair Powell and Bank of England Governor Bailey will all be appearing on a policy panel. We’ll also hear from ECB Vice President de Guindos and the Fed’s Evans, while the ECB will publish their Economic Bulletin. In terms of data releases, we’ll get the October CPI data, weekly initial jobless claims and the October monthly budget statement. Finally, earnings releases include Walt Disney and Cisco Systems.

Market Snapshot

• S&P 500 futures down 0.2% to 3,562.25
• STOXX Europe 600 down 0.5% to 386.66
• MXAP up 0.08% to 184.62
• MXAPJ down 0.01% to 609.02
• Nikkei up 0.7% to 25,520.88
• Topix down 0.2% to 1,726.23
• Hang Seng Index down 0.2% to 26,169.38
• Shanghai Composite down 0.1% to 3,338.68
• Sensex down 0.6% to 43,316.81
• Australia S&P/ASX 200 down 0.5% to 6,418.22
• Kospi down 0.4% to 2,475.62
• Brent futures down 0.4% to $43.62/bbl
• Gold spot up 0.3% to $1,870.77
• U.S. Dollar Index down 0.2% to 92.88
• German 10Y yield unchanged at -0.507%
• Euro up 0.3% to $1.1809
• Italian 10Y yield fell 2.3 bps to 0.627%
• Spanish 10Y yield fell 0.2 bps to 0.155%
• Top Overnight News from Bloomberg

Top Overnight News from Bloomberg

• New cases may be steadying or easing in some of Europe’s virus hot spots, offering glimmers of hope to some of the worst-hit countries. Meanwhile, the global death toll jumped by more than 12,000, a daily record, according to data from Johns Hopkins University
• President-elect Joe Biden has stocked his transition team with policy experts, academics and former Obama administration officials, a contrast with the industry-friendly figures President Donald Trump sent into the government upon winning office
• Brexit talks are going down to the wire, and the European Union’s chief negotiator Michel Barnier is threatening British access to the continent’s single energy market as a way of extracting concessions on fishing rights
• Talks between OPEC and its allies are zeroing in on a delay to next year’s planned oil-output increase of three to six months, according to several delegates; the International Energy Agency cut forecasts for global oil demand amid new lockdown measures and cautioned that the vaccine breakthrough won’t quickly revive markets. Fuel prices won’t experience any “significant” boost from vaccines until the second half of next year, the agency said and reduced oil-demand projections for this quarter sharply, by 1.2 million barrels a day
• Russia is locking in lower borrowing costs in the wake of Joe Biden’s U.S. election win, kicking off its first dual-tranche sale of euro-denominated bonds
• The U.K. economy expanded 15.5%, the most on record, in the third quarter, a rebound that still leaves Britain’s recovery trailing behind the world’s major industrialized nations
• Sweden’s economy has been harder hit by the Covid crisis than is reflected in the latest official forecasts, according to the governor of the Riksbank, Stefan Ingves

A quick look at global markets courtesy of NewsSquawk:

Asian equity markets traded mostly lower as sentiment gradually deteriorated from the mixed performance stateside where conditions were quieter owing to the Veterans Day quasi-holiday, although a pause in the recent growth-to-value rotation aided a tech rebound. Nonetheless, ASX 200 (-0.5%) was dragged lower by underperformance in cyclicals but with losses in the index stemmed by strength in tech and telecoms as Telstra shares were underpinned by restructuring plans and retailers kept afloat after Wesfarmers reported sales growth. Nikkei 225 (+0.7%) extended on its best levels in nearly 3 decades although the gains were briefly wiped out as risk appetite waned and amid mixed data including Machinery Orders which suffered its longest period of contraction since 2009. Elsewhere, Hang Seng (-0.2%) and Shanghai Comp. (-0.1%) were subdued after mixed lending and financing data, as well as the ongoing tensions, with the US warning of further sanctions against China for its freedom violations in Hong Kong. Finally, 10yr JGBs gained as they tracked the rebound in T-notes and as risk appetite gradually deteriorated but with upside capped by resistance at 152.00 and after mixed results at today’s 5yr auction.

Top Asian News

• Hedge Fund Alleges Vedanta Unit ‘Siphoned Off’ Funds to Parent
• RBNZ Says Negative Rate Less Likely if Banks Use Cheap Loans
• China Says Australia’s ‘Words and Deeds’ to Blame for Disputes
• Nissan Operating Losses Shrink as Restructuring Takes Hold

Major European bourses have recouped earlier lost ground and now trade mixed (Euro Stoxx 50 -0.6%) following a downbeat cash open and after a similar APAC handover, as the growth to value rotation continues to lose steam ahead of Tier 1 US data and the second central bank Sintra sitting, whilst participants continue to question the timeframe of a rollout of an effective vaccine (contingent on regulatory approval), as some doubts remain over manufacturing, storage, and swift distribution. The European sectoral breakdown reflects this as Oil & Gas, Banks and Auto remain the laggards whilst Tech and Healthcare reside at the top of the pile. The rotational pause is also indicated in the US equity futures, with NQ (+0.5%) somewhat front-running the ES (-0.1%) and RTY (-0.3%). Back to Europe, the flow into Healthcare has cushioned losses in the SMI (+0.1%) which outperforms regional peers on the back of Pharma giants Roche (+0.6%) and Novartis (+0.5%) keeps the index somewhat supported. Elsewhere, Travel & Leisure treads water around the unchanged mark ahead of an anticipated Moderna vaccine efficacy update which is expected in the coming days. Individual European movers this morning largely consist of earnings, with Deutsche Telekom (+0.5%) benefitting from better-than-expected metrics whilst noting that T-Mobile’s (+0.7% pre-market) integration of Sprint. Elsewhere, the broader tech sector also saw commentary from Taiwanese chip-maker Foxconn, who expects strong demand in consumer electronics next year, whilst adding Apple’s (+0.4%) iPhone 12 will remain in hot demand.

Top European News

• Johnson’s Senior Aide Quits Amid Tensions in U.K. Government
• Deutsche Telekom Raises Outlook on Growth After Sprint Deal
• Credit Suisse’s Pozsar Pushes Back on Year-End Funding Worries
• AstraZeneca Cancer Drug Fails to Help Patients With Covid-19

In FX, the Buck is softer against most major currency rivals, but retaining an underlying bid due to more pronounced outperformance vs high beta, cyclical and activity counterparts compared to declines relative to safer or pseudo safe-havens. Indeed, the index is straddling 93.000 within tighter confines and remains close enough to stage another attempt at breaching decent chart resistance at 93.210 after matching the Fib retracement level exactly on Wednesday. Turning to fundamentals, US CPI and claims data may provide some impetus beyond fading risk sentiment and before Fed speakers including Chair Powell.

• CHF/EUR/JPY - As noted above, renewed risk aversion, albeit not particularly pronounced, has underpinned the Franc, Euro and Yen to varying degrees as the former pivots 0.9150 vs the Dollar, single currency reclaims 1.1800+ status and latter rebounds from sub-105.50 lows irrespective of considerably weaker than forecast Eurozone ip and Japanese machinery orders. However, decent option expiry interest could cap Eur/Usd and keep Usd/Jpy propped given 1.3 bn rolling off between 1.1795-1.1805 and 1.4 bn residing at 105.40-50 respectively.
• GBP - Sterling has slipped to the bottom of the G10 ranks, with Cable back below 1.3200 and Eur/Gbp around 100 pips off yesterday’s lows amidst the ongoing Brexit trade deal impasse and UK data in the form of GDP and IP falling a little short of consensus. For the record, not much in the way of reaction to latest comments from BoE Governor Bailey sticking to a reserved view on negative rates and also downplaying the prospect of the MPC using yield curve control ala the BoJ and RBA as a policy tool.
• AUD/CAD/NZD - All consolidating off recent peaks relative to their US peer, as the Aussie pulls back from 0.7300, Kiwi 0.6900 and Loonie loses a bit more traction from oil having tested offers into 1.2900 on Monday amidst the height of anti-coronavirus optimism. Usd/Cad has pared some gains from 1.3106 towards 1.3050 awaiting remarks from BoC’s Wilkins before Friday’s Q3 Senior Loan Officer Survey, while Nzd/Usd is hovering around 0.6880 in advance of October’s manufacturing PMI and FPI that may provide independent impetus in wake of the RBNZ.
• SCANDI/EM - The Nok has also retreated alongside crude prices, but the Sek seems unfazed by mixed Swedish inflation prints or relatively downbeat/dovish rhetoric from Riksbank’s Bremen. Meanwhile, the Try has reclaimed another chink of its heavy and unprecedented losses perhaps in delayed response to Turkey’s Defence Minister declaring that he is ready to allay US concerns over Russia’s S-400 missile system and F-35s. Elsewhere, the Zar has absorbed conflicting SA data and Mxn is eyeing Banxico’s rate verdict for direction beyond gyrations in oil.

In commodities, WTI and Brent front-month futures trade flat intraday with WTI Dec meandering around USD 41.50/bbl and Brent Jan sub-44/oz as the complex fails to take its cue from the overall indecisive risk sentiment across markets, and as participants continue to balance supply and demand dynamics ahead of blockbuster OPEC+ meeting. On that note, sources overnight suggested that OPEC+ talks are reportedly to focus on delaying oil output hikes by 3-6 months. However, one delegate said the idea has not garnered widespread support so far among other producers. It’s worth bearing in mind that unanimous consent for a revised accord. Elsewhere the IEA Monthly Oil Market report downgraded its  2020 global oil demand growth forecast by 400k BPD whilst noting it is vaccine unlikely to significantly boost demand until well into 2021. No immediate move was seen on the release, but some fleeting downside was experience as Japan, the number 4 top oil importer in 2019, announced record high new COVID-19 cases whilst the Chinese Vice Foreign Minister has advised Chinese nationals not to travel overseas due to the pandemic – thus jet fuel demand prospects. Elsewhere, spot gold and silver remain somewhat contained ahead of US CPI and Sintra Day 2, whilst LME copper gleans impetus from the softer Buck.

US Event Calendar

• 8:30am: US CPI MoM, est. 0.1%, prior 0.2%; CPI YoY, est. 1.3%, prior 1.4%
• 8:30am: US CPI Ex Food and Energy MoM, est. 0.2%, prior 0.2%; CPI Ex Food and Energy YoY, est. 1.7%, prior 1.7%
• 8:30am: Real Avg Hourly Earning YoY, prior 3.3%; Real Avg Weekly Earnings YoY, prior 4.1%
• 8:30am: Initial Jobless Claims, est. 731,000, prior 751,000; Continuing Claims, est. 6.83m, prior 7.29m
• 9:45am: Bloomberg Consumer Comfort, prior 47.5
• 2pm: Monthly Budget Statement, est. $275.0b deficit, prior $124.6b deficit

DB's Jim Reid concludes the overnight wrap

48 hours after going into self-isolation and getting a test done, the twins are completely over all covid symptoms, unless trying to gouge each other’s eyes out is one. So my wife is stuck at home with them, my daughter and bored dog until we get what we hope will be a negative test result. I took an hour off work yesterday to make them lunch while my wife could get a break. The fury I had to endure when I peeled off the top of a soft boiled egg rather than let one of my three year olds do it scared me a bit. Let’s hope we’re back to relative normality tomorrow. If not I may order a takeaway for lunch and winch it through my upstairs study window to avoid having to endure the madness downstairs.

In contrast there was relative calm in markets yesterday in a quieter session due to various Remembrance Day holidays. Positive sentiment returned to US markets though with Europe continuing to march on. Futures have reversed some these gains overnight but the S&P 500 climbed +0.77% yesterday to recover from the previous day’s losses and close in on its all-time closing high again. In a reversal of the post Pfizer/BioNTech trend, technology stocks led the advance as the NASDAQ rebounded +2.01% with support from Amazon (+3.37%), Microsoft (+2.63%) and Apple (+3.04%). European equities also continued to move higher, with the STOXX 600 up +1.08% to reach a fresh post-pandemic high, as tech (+1.97%) was also one of the leading sectors In Europe. The VIX fell -1.4pts to 23.45pts, its lowest level since the end of August, having now fallen in 7 of the last 8 sessions.

There seemed to be profit-taking in the reopening vs stay-at-home trades yesterday in the US. Airlines (-4.06%) were the worst performing US industry followed by Energy Equipment (-2.21%) and Consumer Finance (-3.12%), while pandemic winners such as Semiconductors (+3.72%), Internet Retail (+3.13%) and Tech hardware (+2.85%) led the S&P. Europe saw more of a broad based rally with 17 of 20 sectors higher, led by Utilities (+2.61%) and Real Estate (+2.42%) alongside the aforementioned Tech sector.

With risk assets benefiting from the news of a potential vaccine and hopes of a return to normality, oil prices continued to advance as well yesterday, and both Brent crude (+0.44%) and WTI (+0.22%) reached a 2-month high of $43.80/bbl and $41.45/bbl respectively though both measures were up near 2% earlier in the day. Elsewhere in the commodities sphere however, safe havens have unsurprisingly struggled in recent days, and gold fell another -0.62% yesterday as the precious metal almost hit a 3-month low at $1,866/oz.

Overnight Asian markets are trading largely lower outside of the Nikkei (+0.08%) which is broadly flat. The Hang Seng (-0.16%), Shanghai Comp (-0.25%), Kospi (-0.29%) and Asx (-0.49%) are all down. Futures on the S&P 500 are also down -0.63% this morning as are European futures (DAX futures -0.79%). Meanwhile, yields on 10y USTs are down -4.4bps to 0.934% having reopened post the holiday. Elsewhere, Bloomberg reported that OPEC+ talks are zeroing in on a three to six month delay to next year’s planned oil-output increase.

Though the Pfizer vaccine news has brought relief to markets, it is unlikely to come soon enough to prevent the continued second wave of the virus in numerous countries, and we saw a further deterioration in the global picture yesterday. In Italy, the total number of virus cases since the pandemic began climbed above 1m yesterday, as the country reported a further 32,961 cases. The number of deaths in the country also stood at 623, which was the most since early April. Similarly, Germany reported its most daily fatalities since mid-April at 261. Here in the UK, a further 595 deaths were reported, which took the total number since the pandemic began above 50,000. However there are continued signs of a levelling off in case numbers in much of Europe. In New York City though, the positivity rate reached 2.52%, almost at the 3% threshold that forces the closure of in-class teaching. The State of New York has responded to the spike with an order closing bars and restaurants at 10pm. Governor Cuomo indicated that more restrictions will come if the virus is not brought under control but that he is resistant to a full lockdown.

On potential vaccines, Moderna is expected to give an early look at some point soon on the efficacy of its vaccine candidate. The initial interim analysis is supposed to be triggered after 53 volunteers of the roughly 40,000 participant study are infected. A secondary analysis will take place once this doubles to 106 infections. The company announced yesterday that it reached the threshold of 53 infected participants and likely surpassed it given a statement from the company said that there was “a significant increase in the rate of case identification across sites in the last week.” They do not know how long the analysis will take as the company is blinded to the data. Meanwhile the Phase 3 trial of Sinovac’s vaccine candidate have restarted in Brazil after the country faced criticism that the decision to stop it was political. Elsewhere, The International Olympic Committee has said that it is “more and more confident” that there will be “reasonable amount of spectators” at the Tokyo Olympics next year. The IOC president said that more virus countermeasures are being added, and the potential availability of a vaccine and rapid testing should also help the Tokyo games.

Back to yesterday and focus was also on the ECB at the start of their forum on central banking yesterday, in particular on President Lagarde’s keynote speech. A notable line from her remarks was that although “all options are on the table, the PEPP and TLTROs have proven their effectiveness in the current environment and can be dynamically adjusted to react to how the pandemic evolves. They are therefore likely to remain the main tools for adjusting our monetary policy.” Furthermore, Lagarde also said in the speech that “when thinking about favourable financing conditions, what matters is not only the level of financing conditions but the duration of policy support, too.” As our chief European economist Mark Wall writes in his blog (link here), these remarks hint at the extension of PEPP net purchases and the TLTRO3 discount beyond June 2021 as likely components of a package of easing measures in December.

Against this backdrop, European sovereign bonds made gains yesterday, with yields on 10yr bunds (-2.2bps), OATs (-2.7bps) and BTPs (-2.4bps) all moving lower. Meanwhile the spread of Spanish 10yr yields over bunds fell -0.7bps to 0.66%, their tightest level since late February. Gilts were the exception to these moves, with 10yr yields up +1.2bps to a 7-month high, and US Treasury markets were closed for a holiday.

Elsewhere in Europe, sterling lost ground (-0.38% against USD) as a Reuters report said that sources from both sides in the Brexit talks had told them that the discussions were set to go past the end of this week. The report said that the middle of next week was when EU sources now expected an agreed text, assuming that there wasn’t a breakthrough earlier than that or a collapse in the negotiations. If they reach that new deadline, that would be just in time for a scheduled video conference of EU leaders on Thursday 19, when leaders would have the chance to discuss any agreement.

Elsewhere in politics and returning to the US, yesterday there was confirmation that Republicans will have at least 50 seats in the US Senate. Democrats are now relying on flipping the two Georgia seats at the January 5th runoff, in order to have a 50-50 Senate composition with Vice President-elect Kamala Harris being the tie-breaker. Staying with Georgia, yesterday the state’s Secretary of State announced that there would be a hand audit of the election which is likely to take a couple of weeks to complete. The results of the election must be certified in the state by November 20.

To the day ahead now, and attention will be on central bankers at the ECB’s forum, where ECB President Lagarde, Fed Chair Powell and Bank of England Governor Bailey will all be appearing on a policy panel. Otherwise, we’ll also hear from ECB Vice President de Guindos and the Fed’s Evans, while the ECB will publish their Economic Bulletin. In terms of data releases, we’ll get UK GDP data for Q3, Euro Area industrial production for September, and from the US there’s the October CPI data, weekly initial jobless claims and the October monthly budget statement. Finally, earnings releases include Walt Disney and Cisco Systems.