US equity futures rebounded and European stocks were mixed as shares of Disney and Cisco jumped after both reported solid earnings, but investors remained cautious as many U.S. states imposed restrictions to curb the relentless surge in coronavirus cases. Treasury yields reversed an earlier rise and the dollar slipped.

S&P futures rose 0.8%, or 27 points to 3,560 while Europe's Stoxx 600 Index erased an earlier decline, with tech and banks among the winning sectors after Joe Biden was projected to win the battleground state of Arizona, cementing his win for the office. The projection by Edison Research dealt another blow to President Trump’s effort to overturn the results of the Nov. 3 presidential election.

Today's gains come a day after US markets fell 1% as the US braced for more lockdowns with New York preparing for the possibility of school closures and Chicago urged residents to shelter at home, fueling fears about the recovery, with investors also weighing how fast an effective vaccine would be rolled out.

Cisco Systems and Walt Disney were the top gainers among the Dow components trading before the bell. Futures tracking the blue-chip index were 0.9% higher. The network gear maker jumped 7.7% premarket as it gained from a work-from-home driven surge in demand, while Disney rose 4.3% as its rapidly growing streaming video business and a partial recovery at its theme parks limited its quarterly loss.

Today's gains which followed a surge to an all-time high on Monday following positive vaccine news from Pfizer which unleashed a record growth-to-value rotation put S&P 500 and Dow on track for weekly gains. However, the tech-heavy Nasdaq is headed for a weekly loss as investors booked profits in market-leading tech stocks, which have benefited from a stay-at-home environment.

Investors took in stride warnings from three of the world’s top central bankers on Thursday that the prospect of a vaccine isn’t enough to put an end to the economic challenges created by the pandemic. Fed Chair Jerome Powell said on Thursday during a discussion with other central bankers that progress in developing a coronavirus vaccine was welcome news but that near-term economic risks remain as infections accelerate, underscoring the likely need for additional government stimulus.

To be sure, investor focus remained on covid as more than a dozen U.S. states reported a doubling of new COVID-19 cases in the last two weeks with Chicago’s mayor issuing a month-long stay-at-home advisory on Thursday.  The U.K. also reported record infections despite a tightened lockdown, and hospitalization rates set a new high in France.

In Europe, the Stoxx 600 Index erases earlier declines of as much as 0.4% and traded little changed as technology and banks lead gains among sectors while miners, energy, and food & beverage slipped. Among the biggest individual advancers: Rolls-Royce +4.2%, Banco de Sabadell +3.9%, Nork Hydro +3.8%, Engie +3.7%, while the biggest drops included LPP -6.8% and  Salmar -3.2%.
Earlier in the session, Asian shares eked out gains on Friday and U.S. stock futures turned higher

Earlier in the session, MSCI’s broadest index of Asian shares outside Japan edged up 0.1%, reversing earlier losses. For the week it rose about 0.7%. But apart from a 0.71% gain in Seoul’s Kospi, most major regional indexes were lower on Friday: Japan's Topix and China's Shanghai Composite both fell. Japan’s Nikkei 225 fell 0.57% and the Topix lost 1.3%, with Toyota and Keyence contributing the most to the move. The Shanghai Composite Index retreated 0.9%, driven by Kweichow Moutai and China Life. Australian shares lost 0.2%, the Hang Seng was 0.48% lower and Chinese blue-chips slumped 1.57%, dragged lower by the Trump administration’s decision to ban U.S. investments in firms linked to the Chinese military, and by a series of high-profile bond defaults by state-owned enterprises.

Some investors saw a buying opportunity in the market weakness: "My view is this is the dark just before dawn,” said Michael Frazis, portfolio manager at Frazis Capital Partners in Sydney. "You’ve got the second wave of coronavirus, new sets of shutdowns, clear problems around the world, travel dropping off again... But at the same time, we have the strongest possible evidence that we do have a vaccine..."

“We think this is all actually very positive and it’s actually a good time to be investing in markets,” he said. adding that many risks nevertheless remained for short-term traders amid ongoing uncertainty over issues such as fresh U.S. stimulus. On Thursday, top Democrats in the U.S. Congress urged renewed negotiations over a multitrillion-dollar coronavirus aid proposal, but the top Republican immediately rejected their approach as too expensive, continuing a months-long impasse.

In rates, Treasury yields are back within a basis point of Thursday’s closing levels after erasing Asia-session declines as U.S. stock futures climbed.  10-year yields hovered around 0.88%, near middle of the 0.80%-0.97% weekly range and ~6bp higher on the week; curve spreads were little changed. Bunds, gilts outperformed with U.K. stocks lower. U.S. yields remain higher on the week after Monday’s surge sparked by positive vaccine trial results. Italian bonds led light euro-area gains ahead of an expected pricing of a 5-year dollar BTP

"Bond yields, which had been flirting with the 1.0% level in terms of the U.S. 10Y Treasury, have ... snapped back sharply in terms of yield,” Rob Carnell, Asia Pacific head of research at ING said in a note. “That move most likely got a further nudge from the softer-than-expected U.S. inflation data for October which were released yesterday, and which tally with a weaker economic reality."

In FX, the Bloomberg Dollar Spot Index extended losses in European hours as U.S. equity futures and most European stock markets reversed earlier losses. The dollar weakened against most Group- of-10 peers and the euro advanced after a brief dip to 1.1799 in the Asian session. On the other side, the pound led gains amid hopes for a Brexit trade deal while the yen came off highs as haven bids waned.

In commodities, an unexpected rise in U.S. crude stockpiles exacerbated virus-linked economic fears in commodity markets, pushing U.S. crude 1.85% lower to $40.36 per barrel. Brent crude dropped 1.47% to $42.89.

Looking at the day ahead, there’s the October PPI reading and the preliminary November reading of the University of Michigan’s consumer sentiment index. From central banks, we’ll hear from BoE Governor Bailey, as well as the BoE’s Cunliffe and Tenreyro. From the ECB, we’ll hear from Weidmann and Rehn, while Fed speakers include Williams and Bullard.

Market Snapshot

• S&P 500 futures up 0.8% to 3,561.25
• STOXX Europe 600 up 0.1% to 385.65
• MXAP down 0.2% to 184.68
• MXAPJ up 0.4% to 612.70
• Nikkei down 0.5% to 25,385.87
• Topix down 1.3% to 1,703.22
• Hang Seng Index down 0.05% to 26,156.86
• Shanghai Composite down 0.9% to 3,310.10
• Sensex up 0.3% to 43,478.75
• Australia S&P/ASX 200 down 0.2% to 6,405.22
• Kospi up 0.7% to 2,493.87
• Brent Futures down 0.8% to $43.17/bbl
• Gold spot up 0.06% to $1,877.96
• German 10Y yield fell 0.2 bps to -0.538%
• Euro up 0.04% to $1.1811
• Brent Futures down 0.9% to $43.16/bbl
• Italian 10Y yield fell 5.4 bps to 0.573%
• Spanish 10Y yield fell 0.6 bps to 0.126%
• U.S. Dollar Index down 0.04% to 92.93

Top Overnight News from Bloomberg

• State and federal election officials, along with experts in the private sector, said they had “utmost confidence in the security and integrity” of the Nov. 3 vote, as President Donald Trump continues to make unfounded claims of fraud and key security officials involved in protecting elections leave the administration or expect to be fired
• China congratulated Joe Biden and Kamala Harris on winning the U.S. presidential election, ending days of speculation about when Beijing would formally acknowledge the victory
• The ECB should put ultra-cheap loans at the core of its next stimulus package being prepared for December, Governing Council member Madis Muller said; Governing Council member Olli Rehn said the next ECB decision is about deciding which instruments, in which scale and duration, will best serve the purpose of supporting the European economy
• Another week of Brexit negotiations -- one that was supposed to be decisive -- will end Friday with little progress made in the main areas of disagreement, according to three EU officials familiar with the situation. While both sides can see what a final agreement would look like, Brussels officials insist that reaching one will require the U.K. prime minister to move first, a stance their British counterparts reject
• Joe Biden’s election is serving up a rude reality check for U.K. Prime Minister Boris Johnson’s desire to quickly close a trade deal with the U.S., a project that has until now depended heavily on the whims of President Donald Trump
• Italy, which is Europe’s second most indebted nation, is aiming to sell securities maturing in 2026, following a global investor call for its first dollar issue in over a year. While it’s a chance for Italy to diversify an investor base still dominated by domestic buyers, the nation will pay considerably more to raise cash

A quick look at global markets courtesy of NewsSquawk

Asian equity markets weakened on spill-over selling from Wall Street, where all major indices declined as participants continued to fade the reflation trade and with increases in virus cases denting the recent vaccine optimism, which saw the DJIA lead the downturn and briefly give up the 29k level. ASX 200 (-0.2%) was dragged lower by notable losses in the energy sector following similar underperformance stateside as rising infections and restrictions weighed on the demand outlook, while Nikkei 225 (-0.5%) was pressured as exporters felt the brunt of currency inflows and with earnings in focus as Rakuten shares slumped after its 9-month net loss widened five-fold. Conversely, Nissan shares were in top gear despite posting a H1 net loss of JPY 330bln as the Co. reduced its annual operating loss forecast by 28% and Sony was also among the notable gainers after it began PlayStation 5 sales in several major markets. KOSPI (+0.7%) rebounded from early losses with the index helped by resilience in tech stocks and with Asiana Airlines soaring on potential M&A reports after Korean Air Lines was said to be in discussions to acquire the airliner. Hang Seng (U/C) and Shanghai Comp. (-0.9%) conformed to the broad downbeat tone despite a firm liquidity effort by the PBoC, as sentiment remained subdued after China’s further clampdown on Hong Kong freedoms which triggered an uproar globally, with the UK said to be considering sanctions, while tensions remained a headwind after the White House confirmed an executive order prohibiting US investments in Chinese firms owned or controlled by the Chinese military. Finally, 10yr JGBs marginally extended above the 152.00 level following the bull flattening in USTs and with upside helped by the glum picture across risk assets, although the upside was capped amid the absence of the BoJ from the market today and ahead of key data beginning with Q3 GDP early next week.

Top Asian News

• Hong Kong Sees GDP Contraction Near Low End of Forecast Band
• World’s Biggest Cork Maker Eyes Next Step in the Spirits Market
• Trump’s Taiwan, Hong Kong Support Poses Early Test for Biden
• China’s Oil Giant Eyes New Supertankers to Shrink Fuel Glut

Major European bourses have largely nursed the mild losses seen at the cash open (Euro Stoxx 50 +0.4%) following on from a mostly downbeat APAC handover. The European day kicked off with a continuation of the growth to value rotational pause, reflected by sectors at the open alongside US equity futures performances at the time. However, despite a distinct lack of fresh fundamental news-flow, sentiment picked up pace whilst the rotational dynamics somewhat decoupling. European sectors at the open saw Oil & Gas, Autos, and Banking names at the foot of the index whilst Tech and Healthcare fared better, whilst US equity futures at the time saw NQ outpacing the ES and RTY. However, as things stand, Tech retains top spot whilst Banks and Autos also reside towards to top of the pile. Oil & Gas has trimmed losses towards the unchanged mark whilst Healthcare tumbled, and Travel & Leisure ebbed lower towards the bottom of the pack. This decoupling is also reflected in US equity futures’ performance as NQ, ES and RTY are all posting gains in proximity to 0.8%. Back to Europe, UK’s FTSE 100 (-0.3%) underperforms regional peers as a firmer Sterling weighs on exporters, whilst gains in the SMI (Unch) are capped by a lackluster performance in pharma-giants.

Top European News

• U.K. Prime Minister’s Top Aide Quits, Will Leave By End of 2020
• U.K. Fund Liquidity Rule Breaches Soared in Covid Early Days
• East Europe’s Fleeting GDP Bump Bracketed by Virus Lockdowns
• Rosneft’s Return to Net Loss Undermines Dividend Prospects

In FX, little sign of Sterling succumbing to any Friday 13 phobias, thus far, and some observers are suggesting that the latest rebound in Cable from the low 1.3100 area may be due to the impending departure of UK PM Johnson’s SPAD Cummings. However, Eur/Gbp has also retreated from a double top just above 0.9000 and the Pound’s bounce could be more technical and consolidative given no positive developments on the Brexit front. Conversely, the Lira’s impressive revival can be put squarely if not solely down to Turkish President Erdogan’s economic epiphany in terms of pursuing more orthodox monetary and fiscal policies after sacking another CBRT President, with Usd/Try extending its sharp reversal from record peaks to test support below 7.6200 ahead of next week’s rate meeting.

• NZD/AUD - The Kiwi has fallen further from post-RBNZ highs above 0.6900 towards 0.6800 vs its US counterpart and 1.0700+ against the Aussie to sub-1.0600 at one stage in wake of rather downbeat remarks from RBNZ Governor Orr overnight, caveating forecasts for the economic recovery to continue with a big ‘IF’, and backed up somewhat by a slowdown in October’s NZ manufacturing PMI. Meanwhile, Aud/Usd is hovering around 0.7260 as the Foreign Ministry’s Deputy Secretary states a readiness to engage with China on trade relations that have been strained of late.
• DXY/EUR/CAD/JPY/CHF - Aside from all the deviations noted above, G10 currencies remain relatively rangebound and pretty much epitomised by the Dollar index holding within a narrow 93.007-92.767 band within wtd extremes (93.210-92.129), albeit easing amidst an upturn in broad risk sentiment. Indeed, the Euro and Loonie are gradually firming up as the Greenback slips to retest offers/resistance into 1.1850 and 1.3100 respectively. No obvious reaction to Eurozone data, but another decent option expiry interest may keep Eur/Usd contained between 1.1840-50 and 1.1795-1.1800 given 1.4 bn on either side and the BoC’s Senior Loan Officer Survey may offer the Cad some independent impetus in advance of Canadian CPI and retail sales next week. Elsewhere, the Yen and Franc are both meandering from 105.15 to 104.87 and 0.9158 to 0.9137, with the latter largely ignoring slightly less deflationary Swiss import and producer prices.
• SCANDI/EM - Not quite all change, but the Swedish Krona has slipped after holding up better than its Norwegian peer on Thursday and it looks like 10.2000 is proving sticky for the Eur/Sek cross, but the Mexican Peso is deriving some protection from softer crude prices on the back of Banxico’s unexpected decision to stand pat on rates with only one dissenter chiming with consensus for a 25 bp ease, as Usd/Mxn probes 20.5000.

In commodities, WTI and Brent front-month futures trade remain pressured but have been drifting off worst levels during early European hours in lockstep with price action across equity markets. News flow for the complex has been light on Friday morning and thus the cue is taken from overall market sentiment. In terms of the fundamental environment, rising COVID-19 cases across the globe continues to weigh on the demand side of the equation, with an effective vaccine unlikely to see a mass rollout in the near-term, whilst supply side is still uncertain as OPEC+ producers gear up to for its non-policy confab next week. On that note, profit-taking in the crude complex cannot be ruled out ahead of the weekend given the respectable gains in the benchmarks this week. WTI Dec trades just under USD 41/bbl (vs. low 40.16/bbl) whilst Brent Jan edges higher above USD 43/bbl (vs. low 42.67/bbl). Elsewhere, spot gold and silver eke mild gains as the precious metals coat-tail on the recent USD softness, albeit remain contained within recent ranges. Finally, LME copper gleans support for the softer Buck and recovery in stocks.

US Event Calendar

• 8:30am: PPI Final Demand MoM, est. 0.2%, prior 0.4%; PPI Final Demand YoY, est. 0.4%, prior 0.4%
• 8:30am: PPI Ex Food and Energy MoM, est. 0.2%, prior 0.4%; PPI Ex Food, Energy, Trade MoM, est. 0.2%, prior 0.4%
• 9am: Bloomberg Nov. United States Economic Survey
• 10am: U. of Mich. Sentiment, est. 82, prior 81.8; Current Conditions, est. 88.3, prior 85.9; Expectations, est. 79.1, prior 79.2

DB's Jim Reid concludes the overnight wrap

It’s strange to wake up to see that my school golf partner of two years and in countless pairs competitions is currently leading the US Masters. So good luck to Paul Casey this weekend although I suspect he’s not reading this unless he was keen to hear what the super committee of central bankers thought about the world economy last night.

On this, in the latter half of yesterday’s US session, we heard from Fed Chair Powell, ECB President Lagarde, and BoE Governor Bailey at a panel hosted by the European Central Bank. They all shared similar concerns that a potential Covid-19 vaccine would not end the economic challenges of the pandemic. Powell highlighted near-term risks saying that “the main risk we see to (the economy continuing on a solid path of recovery) is clearly the further spread of the disease here in the United States.” Lagarde cautioned that she didn’t want to be “exuberant” in light of the vaccine possibilities, while Bailey called the news “encouraging.” On the need for further accommodation in light of the near term risks, Powell expects that the Fed “will need to do more, and Congress may need to do more as well on fiscal policy.”

So no major surprises from this important trio, and even before they’d started speaking, yesterday saw a notable decline in sovereign bond yields on both sides of the Atlantic, with US Treasuries ending the session -9.4bps at 0.882% as they reopened following the previous day’s holiday. There was also a notable flattening in yield curves across numerous countries, with the 2s10s Treasury curve flattening -8.8bps as it came off a near 3-year high. Over in Europe, 10yr gilt yields (-6.5bps) saw the largest declines, though yields on 10yr bunds (-2.9bps), OATs (-2.6bps), and BTPs (-5.4bps) also lost ground. 2yr Greek yields went negative for the first time on Wednesday and fell slightly further yesterday.

With investors moving out of risk assets, global equity markets fell back from their recent highs amidst further negative news on the coronavirus. There were also reports that the Trump administration would be stepping away from stimulus negotiations and leaving that to Congress, something the market took negatively given that Senate Majority Leader McConnell was looking to pass a far smaller package than the White House. By the close, the S&P 500 was down -1.00%, with nearly 90% of the index moving lower. Energy (-3.39%) and Autos (-2.59%) stocks led the declines, but Bank stocks (-2.08%) were not far behind thanks to the notable fall in sovereign bond yields. Tech stocks outperformed their cyclical counterparts slightly with the NASDAQ falling a smaller -0.65%. Europe also suffered, with the STOXX 600 down -0.88% in its worst day for over two weeks, as other indices across the continent similarly moved lower. The selling was also widespread in Europe as 19 of 20 STOXX 600 sectors fell, led by Euro Bank stocks (-1.93%) and Consumer Products (-1.85%) as Technology (+0.79%) was the only sector to rise.

Asian markets have followed the US lower overnight, with the Nikkei (-0.99%), the Hang Seng (-0.55%), and the Shanghai Comp (-0.75%) all moving lower. The moves came as President Trump signed an executive order that would prohibit US investments in Chinese firms linked to the country’s military. The one exception to this downward move was the KOSPI however, which has moved +0.60% higher. Meanwhile, in the US, S&P 500 futures are down a marginal -0.04%, and yields on 10yr Treasuries this morning have moved a further -1.3bps lower .

On the negative coronavirus developments, yesterday saw the number of new cases here in the UK reach a record 33,470 after a good two to three weeks of stability in the 20-30k range, while Italy reported a further 37,978. Covid-19 hospitalizations in France are now above the highs reached in mid-April as French Prime Minister Castex acknowledged that the country may tighten lockdown restrictions further. And in the US, infections recorded another record high with fatalities rising to their highest daily level since May. Nevertheless, Dr. Fauci struck an optimistic tone on a potential vaccine, saying that “it’s not going to be a pandemic for a lot longer, because I believe the vaccines are going to turn that around”.

Sterling weakened further yesterday, falling -0.79% against the US dollar, as there were more negative noises on the state of the trade negotiations between the EU and the UK. We’re now in the crunch point of the talks, which have already been pushed beyond a number of previous informal deadlines, and comes with just weeks left before the transition period concludes at the end of this year. There wasn’t much of substance out yesterday, but the BBC’s Europe editor Katya Adler tweeted that “EU diplomats sounding pessimistic about EU-UK negotiations.” We then got another tweet from the EU’s Michel Barnier which said he “Went looking for level playing fields…” with a picture of a football field in the backdrop, so not the most positive tweet regarding what has proven one of the most contentious points in the negotiations. A key moment next week will be the EU leaders’ meeting on Thursday, which is taking place via videoconference, though given the lack of concrete progress so far, it’s not obvious there’ll necessarily be a deal on the table ready for them to actually discuss.

On the data front, there were some positive figures from the US, where the weekly initial jobless claims for the week through November 7 fell to a post-pandemic low of 709k (vs. 731k expected). Incidentally, that brings them to just 14k above the pre-Covid record of 695k back in 1982. Meanwhile, the continuing claims for the week through October 31 also reached a post-pandemic low of 6.786m (vs. 6.825m expected). Nevertheless, there were some soft CPI readings from the US for October, with the month-on-month figures for both CPI and core CPI unchanged, and the year-on-year CPI figure fell back to 1.2%, which is the first time the reading has declined since May. Finally in Europe, the UK GDP reading for Q3 showed a record +15.5% expansion (vs. +15.8% expected), which follows a record -19.8% contraction in Q2. Nevertheless, with many restrictions having been reimposed again, our UK economist expects there to be another contraction in Q4.

To the day ahead now, and data highlights include the second release of the Euro Area’s Q3 GDP, while from the US there’s the October PPI reading and the preliminary November reading of the University of Michigan’s consumer sentiment index. From central banks, we’ll hear from BoE Governor Bailey, as well as the BoE’s Cunliffe and Tenreyro. From the ECB, we’ll hear from Weidmann and Rehn, while Fed speakers include Williams and Bullard.