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Good morning. The U.S. election is looming, much of Europe faces new Covid-19 restrictions and oil is tumbling. Here's what's moving markets.

Countdown

It's the day before the U.S. election and Democratic nominee Joe Biden leads President Donald Trump in a series of polls released Sunday, remaining ahead nationally and in battleground states, although some state races remain extremely close. The final stretch of the race for the White House has been fraught with dramatic twists. Wall Street, meanwhile, has been warming to the idea that a Biden presidency would be bullish for the stock market, though there are strings attached.

Staying Home

Large swathes of Europe are locking down again. British Prime Minister Boris Johnson, who announced a stay at home order for England, is set to attempt to fend off a looming rebellion from members of his Conservative Party by trying to reassure them he only intends the measures to last four weeks. Elsewhere, Austria gave up on attempts to avoid a second lockdown after targeted measures failed to stem a surge in Covid-19 infections, while Switzerland is resisting a new lockdown, even as infection rates surpass those in neighboring France and Germany. France said supermarkets will be banned from selling non-essential products.

Crude's Slump

Oil sank to a five-month low as a continued increase in Libyan crude production coincided with the wave of new lockdown measures in Europe. The double hit of falling demand and growing supply pushed futures in New York down as much as 6% in early Asian trading, adding to a slump of about 10% last week amid the broad market sell off. The pace of Libya's production recovery continues to surprise traders and create a headache for the OPEC+ alliance. European stock futures are broadly flat after posting their worst monthly decline since the turmoil in March.

Fishing Hopes

U.K. and European Union officials are zeroing in on a solution to break the eight-month deadlock over one of the biggest obstacles to their planned trade deal. In a sign that an agreement could be struck by the mid-November deadline set by both sides, a compromise is emerging on the issue of what access EU boats will have to U.K. fishing waters, according to two people with knowledge of the EU side of the discussions. While fishing may make up only a tiny part of their economies, it is of political importance to the U.K. and France, whose industry has relied on the ability to catch in seas around Britain for decades.

Coming Up…

Ryanair Holdings said losses are set to worsen this winter as a new wave of coronavirus lockdowns frustrates attempts to bring back flights at Europe's biggest discount carrier. In data, manufacturing purchasing managers surveys are due from most regions, with China's Caixin PMI topping estimates earlier. London and New York are five hours apart again after a weekend clock change in the U.S. 

What We've Been Reading

This is what's caught our eye over the past weekend. 

And finally, here's what Cormac Mullen is interested in this morning

One of the consequences of the unprecedented flood of liquidity from the European Central Bank that saved the region's money markets has been the short-circuiting of some traditional gauges of funding risk. As noted by my colleague Stephen Spratt, the FRA/OIS spread -- a money-market indicator of banking risk -- barely budged last week, despite the equity-market selloff. Even the corporate bond market -- itself heavily under the influence of the ECB -- managed to signal some of the strain, with an index of financial credit default swaps hitting its widest since June. FRA/OIS is the difference between Euribor futures -- a proxy for bank borrowing costs -- and overnight index swaps, a proxy for future central bank rates. It was a closely-watched indicator during the financial crisis. But with banks now flush with cash from the ECB's generous loan packages, the deteriorating macro-economic backdrop just isn't being reflected. Still, another money market indicator of financial stress does seem to be working as before. The spread between short-dated German bonds and equivalent swaps -- which tends to rally in time of stress -- did push wider.

Cormac Mullen is a Cross-Asset reporter and editor for Bloomberg News in Tokyo. 

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