With the USDJPY repeatedly touching 116.00 as a result of the same pair of headlines hitting either Reuters, the Nikkei or Sankei every 6 or so hours for the past 3 days, namely that Japan will delay its sales tax hike by almost two years, and that Abe is preparing early elections, perhaps the algos realized they were pricing in the same event about 4 times in one day, and unable to break the 7-year-high resistance level, slid dropping nearly 100 pips to just over 115 at least check, which may well be today's "tractor" level, which in turn has also dragged down both European stocks and US futures. But the thing that made the vacuum tubes really spark is that at a press conference yesterday in Beijing, Abe was quoted as saying that he "has never made any reference to the dissolution of parliament", this came after the chief cabinet secretary Suga saying that the decision on whether or not to go to the polls would be Abe’s only.

In other words, all those headlines were merely trial balloons by Japan to gauge market reaction, and Abe is certainly unsure what he will do at this point. In any event prepare for USDJPY algos to be shocked again when the same FX headlines are blasted for the 4th day in a row.

And speaking of FX, 5 banks earlier announced they had settled FX-rigging charges with US, UK and Swiss regulators for a total of about $3.3 billion, although Barclays was excluded from the grand settlement due to what some say are fears it may finally lose its New York banking license. Considering it has proven time and again it is a criminal organization through and through, perhaps as a Plan B Barclays should apply to join NY's Russian mafia instead. More on that shortly.

Quickly skimming through the markets, European shares fall with the autos and utilities sectors underperforming and basic resources, telco outperforming. The Italian and Spanish markets are the worst- performing larger bourses, the Dutch the best. Regulators in the U.S., Britain and Switzerland ordered five banks to pay ~$3.3b in first FX-rigging settlements. U.K. unemployment stays at 6- year low, Brent crude nears 4-year low. The euro is weaker against the dollar. Japanese 10yr bond yields rise; Greek yields decline. Commodities decline, with natural gas, Brent crude underperforming and soybeans outperforming. U.S. mortgage applications, wholesale inventories due later.

Some further details about Europe where despite opening in relatively neutral territory, European equities have drifted into the red throughout the session, with financial names dragging stocks lower amid an absence of any greater macro trend. The banking sector has come under close scrutiny today after the FCA and CFTC came to an agreement over fines with JP Morgan Citi, RBS, HSBC and UBS. However, talks are still ongoing between regulators and Barclays over a figure for such a fine and thus Barclays (-2%) shares are dragging the financial sector as should talks extend further then they may miss out on a potential discount for an early settlement. Elsewhere, Sainsbury’s (-5.5%) shares are continuing to exert pressure on the UK retail sector after they reduced their dividend and remain cautious on their outlook for H2. Further to the downward momentum seen in stocks, this was also allied with the late performance in Japanese equities after a Japanese government spokesman denied the recent reports of a delay to the sales tax hike and thus erased some of the overnight gains for the Nikkei 225.

Regional Asian equities are mixed this morning. The Shanghai Composite and ASX 200 are +0.19% and -0.98% respectively whilst the Hang Seng is broadly flat but the KOSPI is up 0.31%. Asian credit markets are broadly stable with spread products mostly unchanged to marginally tighter on the day. Supply will be the key driver in the coming weeks with the window narrowing fast as we approach Thanksgiving in about 2 weeks time.

The main event for Europe this morning was that of the BoE’s QIR, whereby the central bank revealed that they see inflation likely to fall below 1% within 6 months, thus presenting a more dovish than expected tone. As such, short sterling futures pushed back rate hike expectations to Sep 2015 vs. Jun 2015 pre report release, with fixed income products subsequently supported across the board following the likelihood of lower rates for longer.

Looking ahead at US data, there is only wholesale inventories and MBA mortgage applications on the docket. Expect more good cop, idiot cop from the Fed, with the Fed speakers lined up today. Fed’s Plosser will be speaking on the US economic outlook and Kocherlakota will be touching on monetary policy.

Market Wrap

• S&P 500 futures down 0.2% to 2031.8
• Stoxx 600 down 0.5% to 337.4
• US 10Yr yield down 3bps to 2.34%
• German 10Yr yield down 2bps to 0.81%
• MSCI Asia Pacific up 0.2% to 141.3
• Gold spot down 0.1% to $1163.7/oz

FX

FX markets traded in a relatively tentative manner in the early stages of trade. However, GBP gained broad-based strength following the release of the latest UK jobs numbers which revealed a better than expected wage growth component. This also provided EUR/GBP with a bout of downside, with the release amplifying policy divergence between the BoE and ECB, while the short-sterling strip was seen lower by around 3 ticks. In terms of the QIR release, GBP/USD pared the post-data gains, although the bid in UK fixed income products was more pronounced than the fall in GBP, largely because fixed income had seen some selling ahead of the QIR in response to better than expected wage growth seen this morning, and hence FI products have greater scope for upside in the short-term.

COMMODITIES

In the commodities complex, energy markets continue to be supressed by USD strength, while the glut of US supply continues to outweigh fears over supply disruptions in Libya. However, it is worth keeping an eye on the situation in Ukraine as Ukraine’s military has said the separatists battling government troops are regrouping and mobilizing forces on the outskirts of the port city of Mariupol and massing armoured vehicles in other parts of the Donetsk region. In precious metals markets, both spot gold and silver trade relatively unchanged in line with the broader movements seen in the USD-index.

Overnight Bulletin Highlights from RanSquawk and Bloomberg

• European equities enter the North American crossover in the red with financial names the underperformers with the banking sector under close scrutiny following settlements with UK and US regulators over the FX probe.
• The BoE’s QIR led participants to push back their expectations of a rate hike by the central bank as the MPC revealed that they see inflation likely to fall below 1% within 6 months.
• Looking ahead, attention turns towards the release of US wholesale & API inventories and any comments from Fed’s Kocherlakota.

DB's Jim Reid Concludes the overnight recap

Markets seem to be more or less in a holding pattern for now and Veterans’ Day in the US yesterday probably did little to break that. Indeed US bond markets were closed and the S&P 500 (+0.07%) was virtually unchanged although on paper the index is now up for the 5th consecutive day which is the longest streak since mid-June. In the absence of main market movers, the weakness in Oil was perhaps one of the more notable themes yesterday. Brent (-0.8%) fell below US$82/bbl to a new four year low and is further extending the fall into the Asian session overnight. Interestingly a softer day for the Dollar yesterday didn’t quite give Oil the boost that one would normally expect but given the US holiday it is hard to read too much into it.

The weakness in Oil comes ahead of the OPEC meeting later this month (27th Nov). The meeting should be a source of headlines given market’s concerns around current production levels amid global supply pressure. As credit analysts we were intrigued by a FT story which highlighted that the fall in oil price has also coincided in a period where we’ve also witnessed a notable amount of debt issuance from energy companies. According to the FT almost $17bn of energy debt has been issued in the US this month alone with proceeds going towards refinancing existing debt in the face of a further decline in oil prices rather than any sort of capital expansion. In reality it is probably difficult to justify further investments here given where oil prices are and any cash saving exercise should be welcomed in an environment where breakeven oil is increasingly being scrutinized.

Whilst it was a quiet day for the US markets, there was no down time for China’s online retailers. Indeed Single’s Day in China (which is oft-compared against Cyber Monday in the US) has now turned into the largest shopping day in the world. This is also benefitting leading e-commerce players in the country. Yesterday alone saw a total of US$9.3bn worth of goods transacted through China’s largest online shopping site, an amount which is around 62% higher than last year. Away from China, we’ve had various press reports mentioning that momentum is building for a snap election in Japan as Prime Minister Abe looks to seek a popular mandate and push back on the proposed second consumption tax. Reports are suggesting that a decision could be made as early as Tuesday next week with a possible lower-house election on the 14th or 21st of December (FT). At a press conference yesterday in Beijing, Abe was quoted as saying that he ‘has never made any reference to the dissolution of parliament’, this came after the chief cabinet secretary Suga saying that the decision on whether or not to go to the polls would be Abe’s only.

Our Japanese colleagues yesterday noted that they were under the impression that the government is trying to speed up policy implementation and therefore this could be seen as sign that a general election could be planned sooner than expected. They do however note that if the consumption tax was to be postponed, then the social security sector will likely have to take more of the burden which means a radical restructuring of such system could be deemed necessary. Given the recent monetary easing by the BoJ, a delay in the consumption tax could cause something of a change in the cooperative relationship between the government and the BoJ following the joint declaration in January 2013 which mentioned that the government would ‘promote measures aimed at establishing a sustainable fiscal structure with a view to ensuring the credibility of fiscal management’. At first glance the market seemed to welcome these developments. The Nikkei closed +2.05% yesterday and is up another 1.3% this morning to a new 7 year high. The JPY however hit a low of 116.20 against the Dollar (a seven year low) but is now off those lows at around 115.6 as we type.

Away from Japanese markets, regional Asian equities are mixed this morning. The Shanghai Composite and ASX 200 are +0.19% and -0.98% respectively whilst the Hang Seng is broadly flat but the KOSPI is up 0.31%. Asian credit markets are broadly stable with spread products mostly unchanged to marginally tighter on the day. Supply will be the key driver in the coming weeks with the window narrowing fast as we approach Thanksgiving in about 2 weeks time.

Recapping some of the European moves yesterday, the Stoxx 600 added +0.4% buoyed by some solid corporate earnings whilst Credit was also modestly firmer with the Xover tightening by 2.75bps. The notable data release yesterday was in Sweden where October CPI came in stronger than expected at 0.1% mom with the Riskbank’s policy meeting minutes appearing less dovish than the market was expecting. The Treasury market was closed however in other fixed income markets JGB’s were notably weaker across the curve following the headlines, the 10yr 4bps wider to 0.48% whilst back in Europe Bunds were mostly unchanged. Peripheral bond yields did well yesterday following comments from ECB member Mersch that the central bank will expand debt purchases. Benchmark 10yr yields in Spain, Portugal and Italy rallied 3bps, 4bps and 2bps respectively as the board member mentioned that the central bank will likely start purchasing asset-backed securities next week and that buying government bonds was a ‘theoretical option’.

Quick update on EM, we note that Russia and Iran announced a nuclear deal yesterday with plans to build eight new reactors. The deal comes at a time when talks between Iranian negotiators and members of the UN Security Council come close to the proposed deadline with the talks focused on easing international sanctions on the country in exchange for permanent limits to its uranium enrichment activities.

Looking ahead the data hiatus in the US is set to stay before the more interesting JOLTs and jobless claims tomorrow. Wholesale inventories and MBA mortgage applications are the only highlights today. Given the recent trend, we probably get more interesting snippets from the Fed speakers lined up today. Fed’s Plosser will be speaking on the US economic outlook and Kocherlakota will be touching on monetary policy.

On the other side of the pond, we’ve got employment data and inflation report due out of the UK. We will also be keeping an eye on any hints from Carney in his conference post the release. In Europe we will have the wholesale price index in Germany followed by the industrial production print for the Eurozone.