• Price action has been choppy amid a lack of fresh fundamentals ahead of a quiet US schedule
• European bourses are lower but remain within session ranges with US futures posting similar performance but erring closer to the U/C mark at present
• California and Texas reported record daily COVID-19 cases, according to reports
• President Trump’s aides were said to propose undermining the USD/HKD peg; the idea had not been put forward to the President
• FX sees the USD is rangebound either side of the 97.0 handle with major peers little changed; spot gold has eclipsed the USD 1800/oz mark
• Looking ahead, highlights include UK Chancellor Sunak providing a Fiscal Statement, ECB's de Guindos, European Council & Commission Presidents speaking; supply from the US

CORONAVIRUS UPDATE

AFP tweeted that US coronavirus cases rose by a new daily record of 60,209, citing the Johns Hopkins tracker. (Newswires)

California coronavirus cases increased by at least 10,201 which was a record daily increase, according to a major newswire tally and Texas cases also reportedly rose by a record 10,028 (Prev. +5,318). (Newswires)

WHO has acknowledged there is emerging evidence that coronavirus can be spread by particles suspended in the air. (BBC)

EU has come to an agreement with Roche (ROG SW) & Merck (MRK GY) to supply experimental COVID-19 drugs Roactemra & Rebif, according to sources. (Newswires)

WHO said it received reports US submitted formal notification to the UN Secretary General that it is withdrawing from WHO from July 6th next year, while there were comments from former VP Biden that he will keep the US in the WHO if he becomes the next US President. (Newswires/AFP)

ASIA

Asian equity markets were mixed as attempts to shrug off the weak handover from global peers were somewhat hindered by the record infection rates stateside and a slew of punchy US-China related headlines. ASX 200 (-1.5%) was subdued as Australia’s 2nd largest city heads into a 6-week lockdown and with the declines in the index led by notable losses in consumer stocks and financials, while Nikkei 225 (-0.8%) was pressured by the ongoing virus flare up in Tokyo where more than 100 new cases were reported for a 6th consecutive day, but with downside stemmed after data showed the largest increase in bank lending on record. Hang Seng (+0.6%) and Shanghai Comp. (+0.7%) were supported as the latest coronavirus updates from Beijing showed zero new cases for a 2nd consecutive day although caution was also observed on the inauguration day of China’s national security office in Hong Kong and as reports continued to suggest increasing tensions between the world’s largest economies. This includes confirmation by US President Trump that he is looking at banning TikTok in the US and his administration also warned the Railroad Retirement Fund against Chinese investments due to risks of additional sanctions, while the White House is considering executive actions which involve targeting Chinese businesses operating in the US and aides were also said to propose undermining the USD/HKD peg although this was not put forward to President Trump and certain officials have opposed the idea. Finally, 10yr JGBs were initially copy as they conformed to the unsettled overnight tone across asset classes, but eventually edged only marginal gains amid a subdued risk tone in Tokyo and the BoJ’s presence in the market for JPY 870bln of government bonds with up to 5yr maturities.

PBoC skipped reverse repo operations for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 7.0207 vs. Exp. 7.0186 (Prev. 7.0310)

US President Trump confirmed he is looking at banning TikTok in the US, while his administration reportedly warned the Railroad Retirement Fund against Chinese investments due to risks of additional sanctions. (Newswires/NYT)

US Secretary of State Pompeo announced the US has set visa restrictions on China officials for policy on Tibet, while there were separate reports that President Trump’s aides were said to propose undermining the USD/HKD peg, although the idea had not been put forward to President Trump and certain officials opposed the idea. (Newswires)

China and the US have made positive progress on phase one trade deal implementation but there are certain “lags” on purchase targets due to technical and supply issues on the US side, according to China’s Global Times. (Twitter)

China’s Global Times Editor tweeted “President Trump withdrew from WHO because the organization is of no help to his re-election. The whole world can see it through, but this ugly act can be done with a sense of justice in the US. It’s true that the political function of the US has fallen into a state of dementia”. (Twitter)

Japanese Govt's long term policy roadmap hopes the BoJ to continue with monetary easing to meet 2% inflation target in stable manner; calls for gradual reopening of economy does not mention FY2025 target year for budget surplus. (Newswires)

UK/EU

UK PM Johnson underlined the UK's commitment to find an early agreement out of the intensified talks progress and noted the UK would be equally ready to leave the transition period on Australia terms if no agreement during a call with German Chancellor Merkel. (Newswires)

UK Chancellor Sunak is to announce GBP 2bln funding on hundreds of thousands of work placements in today’s emergency economic update. (Sky News)

UK Ministers are to press ahead with relaxation in alcohol licensing laws as the economic need outweighs concerns, sources state. (Telegraph)

UK unemployment rate could reach 15% if the country is hit with a second wave, OECD has warned. (Times)

ECB’s President Lagarde said she wishes to explore every available avenue to combat climate change, in the context of using the APP to pursue green objectives and will examine all of their operations to see where changes can be made as part of the ongoing strategic review. (FT)

GEOPOLITICAL

US Deputy Secretary of State Biegun said the US strongly supports inter-Korean cooperation and is willing to be flexible in North Korea talks, while he noted the US did not request a meeting with North Korea and reiterated that President Trump is focused on eliminating nukes from the Korean peninsula. (Newswires)

A senior Chinese diplomat said if US reduces its nuclear arsenal to the same level as China, then China will participate in an arms control treaty with US. (Newswires)

China and Russia vetoed an extension of cross-border aid delivered to northwest Syria from Turkey. (Newswires)

EQUITIES

European stock markets initially attempted to nurse losses seen at the open before losing steam as the mid-week session goes underway [Euro Stoxx 50 -0.9%], following on from a mixed APAC lead overnight. Fresh fundamental newsflow has been light for the session, with the calendar also sparse, albeit key risk events, aside from COVID-19 US-China headlines, could include UK Chancellor Sunak’s fiscal unveiling alongside the European Commission’s potential compromise recovery fund proposal. Sectors are all in negative territory with a clear defensive bias, with the detailed breakdown also painting a similar picture. Financial names underperform, likely on the back of HSBC (-4.0%) amid reports President Trump’s aides were said to propose undermining the USD/HKD peg, although the idea had not been put forward to President Trump and certain officials opposed the idea. In terms of other individual movers, Nokia (-7.5%) shares extend on losses amid a negative broker move coupled with speculation that Verizon may be dropping the Co. as a 5G partner, Nokia stated that it continues working with Verizon amidst these reports. On the flip side, Deutsche Post (+0.8%) remains buoyed after reporting an improvement in Q2 prelim figures whilst noting FY22 EBIT in the least favourable case of EUR 4.7bln and the most favourable case in excess of EUR 5.3bln.

Alibaba's (BABA) fintech arm ANT is planning a Hong Kong float as soon as this year, targeting USD 200bln valuation, sources state. (Newswires)

FX

USD - The Dollar and its G10 currency counterparts are stuck in a rut after 2 volatile sessions, but ultimately no clear direction amidst fluctuating and flaky risk sentiment on coronavirus updates interspersed with economic data and surveys supporting the recovery from first wave pandemic lows. Major pairings are muted and the subdued state of affairs exemplified by the DXY showing little sign or inclination to stray too far either side of the 97.000 level that has been magnetic of late. Moreover, Wednesday’s agenda does not bode well in terms of market-moving potential, barring any surprises from UK Chancellor Sunak and/or an unscheduled event given a blank US agenda beyond weekly mortgage applications and then consumer credit.

CHF/EUR/CAD - All marginally firmer against the Greenback, but within relatively tight confines as noted above, as the Franc hovers just below 0.9400, Euro shy of 1.1300 where a hefty 1.9 bn option expiry resides and Loonie pivots 1.3600 ahead of Canadian housing starts and an update from Finance minister Morneau on the economy in context of measures taken to combat COVID-19.

JPY/XAU/NZD/GBP/AUD - The Yen remains tethered between 107.70-40 parameters with a light underlying bid that is also apparent in Gold as bullion continues its assault on Usd 1800/oz, while the Kiwi is still straddling 0.6550 and fractionally outpacing the Aussie around 1.0600 in cross terms due to the return to lockdown in Melbourne. As such, Aud/Usd is capped circa 0.6950 in similar vein to Cable on the 1.2550 axis in advance of the aforementioned Economic Update. Note, contacts are touting stops at 1.2530 that are currently being tested and could be filled in conjunction with the absorption of offers in Eur/Gbp close to 0.9000.

SCANDI/EM - Not much lasting reaction to weaker than forecast Norwegian GDP data hot on the heels of a drop in manufacturing output yesterday, with Eur/Nok flitting either side of 10.7000 and Eur/Sek likewise around 10.4300. However, more pronounced activity in the Hkd overnight following reports that the US may target the peg in response to China’s security legislation with the HKMA forced into concerted intervention.                    

FIXED

It remains rather tentative and low key in terms of volumes and conviction, but Bunds have now eclipsed yesterday’s Eurex session peak to trade up at 176.34 awaiting results of Germany’s 5 year auction, while Gilts have added another 3 ticks to their earlier Liffe best at 137.82 in the run up to Sunak. However, US Treasuries are still lagging somewhat and perhaps wary of looming 10-year supply amidst a pickup in corporate issuance and with little else on today’s docket aside from weekly mortgage applications and consumer credit.

Canada is reportedly considering the issuance of longer-term debt, as servicing costs fall amidst lower rates, according to sources; expects servicing costs to be lower this year vs. Prev. even given the emergency COVID-19 spending. (Newswires)

COMMODITIES

A choppy session thus far for the crude complex, albeit prices remain somewhat flat and within tight ranges amid a lack of notable catalysts. Overnight, upside in WTI and Brent front month contracts were hampered by a surprise build in private inventories (crude stocks +2mln vs. Exp. -3.1mln), while the relevant headlines overnight were also on the bearish side with ADNOC set to boost oil exports next month and Total’s Port Arthur refinery said to be running at 60% capacity due to subdued demand. On the flip side, EIA lifted 2020 world oil demand growth forecast by 190k BPD (to 8.15mln BPD Y/Y fall) but cut 2021 world oil demand growth view by 190k BPD (to 6.99mln BPD Y/Y increase) – with participants awaiting the IEA report on Friday. Looking ahead, aside from COVID-19 headlines and sentiment-driven moves, the complex will likely eye the weekly DoE release for confirmation of the Private Inventory data, whilst State-side production will also be in focus as some believe output has bottomed. Elsewhere, spot gold has extended on gains but has decoupled from its safe-haven status, whilst Dollar dynamics also provided little influence on prices. The yellow metal has eclipsed the 1800/oz mark for the first time since 2012 before immediately running into selling pressure at the key figure. Copper meanwhile briefly topped USD 2.8/lb to levels last seen in January amid supply woes coupled with hopes of a rebounding Chinese economy.

US Private Inventory Crude Stocks +2mln vs. Exp. -3.1mln (Prev. -7.2mln). (Newswires)

China has reportedly hired Morgan Stanley (MS) & Goldman Sachs (GS) to serve as advisors on energy pipeline asset transfers which are said to be valued in excess of USD 40bln, aim is to complete this by end-September, according to sources. (Newswires)

UAE's ADNOC will be boosting August oil exports as OPEC+ cuts are set to ease, according to sources. (Newswires)

Total's Port Arthur, Texas refinery is reportedly operating at 60% capacity amid low demand, according to sources. (Newswires)

China Industry Ministry has set the first batch of rare earth smelting and separation quota for 2020 at 63.5k tonnes. (Newswires)