• European bourses and US equity futures are mixed; DAX and IT sector outperforms after SAP’s prelim results
• US coronavirus cases rose by more than 60,000 for a record daily increase according to a major newswire tally; Texas death rise was the largest since the pandemic began
• China’s Foreign Minister said China is willing to develop ties with the US but relations face serious challenges
• Australia is to suspend the extradition agreement with Hong Kong while New Zealand will review relationship settings with Hong Kong
• FX sees the USD choppy, G10s largely in tight ranges & Sterling outperforms
• Looking ahead, highlights include US Initial & Continued Jobless Claims, Eurogroup Meeting & Banxico Minutes, supply from the US

CORONAVIRUS UPDATE

US coronavirus cases rose by more than 60,000 for a record daily increase according to a major newswire tally, while AFP tweeted that US coronavirus cases rose by 55,000 in 24 hours in which it cited the Johns Hopkins tracker and noted the actual number is likely higher due to issues over getting tested. (Newswires)

Texas coronavirus cases rose by 9,979 to 220,504 and the death toll rose by 98 to 2,813 which was the largest increases since the pandemic began, according to the State Health Department. (Newswires)

Tokyo confirms over 220 new coronavirus cases (Prev. 75) which is a record daily increase. Tokyo Governor Koike said Tokyo coronavirus cases are very high today and that more testing is leading to more confirmed virus cases. (Newswires)

Hong Kong reports 42 new cases; 34 locally transmitted; virus cases jump most since pandemic began. (Newswires)

Gilead (GILD) is reportedly in discussions in German to increases supplies of Remdesivir, according to WiWo; intend to deliver additional supplies in the fall; German head says the Co. can increase its worldwide monthly production to two-million treatment cycles in December. (WiWo)

US CDC & other officials are working on plans to determine distribution order for a COVID-19 vaccine which would be offered to medical and national security officials first, then other essential workers & those at high risk, NY Times citing prelim plan. (NY Times)

ASIA

Asian equity markets traded mostly higher as the region took its cue from the positive rollover from US, where a late tech-led push helped all major indices finish in the green and lifted the Nasdaq to another record close on what had otherwise been predominantly indecisive session amid COVID-19 concerns. ASX 200 (+0.6%) and Nikkei 225 (+0.4%) were positive with gains in Australia led by tech as the sector found inspiration from its counterparts stateside and with gold miners euphoric after spot prices of the precious metal rose above USD 1800/oz for the first time since 2011, while stocks in Tokyo remained afloat after better than expected Machinery Orders data which showed a surprise expansion of 1.7% M/M although upside was initially capped amid virus fears. Hang Seng (+0.3%) and Shanghai Comp. (+1.4%) began indecisive after the PBoC continued to refrain from liquidity operations and with Chinese press calling for investors to manage risks, but gradually advanced amid a more amicable tone from China as Foreign Minister Wang stated that US-China relations need a more positive message and that China is willing to develop ties with US based on sincerity, despite noting that relations face serious challenges. Furthermore, Alibaba shares were among today’s stellar performers to track the upside in its US listing following reports its unit Ant Financial plans a Hong Kong IPO despite a denial by the unit. Finally, 10yr JGBs were indecisive as gains in stocks saw prices stall around the 152.00 level and with participants side-lined ahead of today’s 5yr auction. Finally, 10yr JGBs were indecisive as gains in stocks saw prices stall around the 152.00 level but later eked mild gains following firm demand at the 5yr JGB auction result.

PBoC skipped reverse repo operations for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 7.0085 vs. Exp. 7.0042 (Prev. 7.0207)

Chinese CPI (Jun) Y/Y 2.5% vs. Exp. 2.5% (Prev. 2.4%) (Newswires) Chinese PPI (Jun) Y/Y -3.0% vs. Exp. -3.2% (Prev. -3.7%)

China’s Foreign Minister Wang Yi said US-China relations need a more positive message and China is willing to develop ties with the US based on sincerity but added that US-China relations face serious challenges. Furthermore, he hopes the US builds a more objective and calm understanding of China and stated China is open to resume dialogue and all level talks with the US, while he added that China has never intended to challenge or replace the US and has no intention of confronting US. (Newswires)

Australian PM Morrison announced to suspend the extradition agreement with Hong Kong and announced to extending visas by 5 years for skilled and graduate visa holders. Furthermore, the Australian government advised its citizens in Hong Kong to reconsider the need to remain there due to the national security law and warned of increased risk of detention on vaguely defined national security grounds, while it also advised citizens against travelling to Hong Kong. (Newswires)

New Zealand says it will review relationship settings with Hong Kong including the extradition arrangement, control of exports and travel advice. (Newswires)

UK Foreign Secretary Raab said he spoke to counterparts from US, Canada, Australia and New Zealand regarding the Hong Kong national security law which poses a threat to basic rights and freedoms guaranteed under Joint Declaration, while he urged China to live up to promises to Hong Kong. (Twitter)

German Chancellor Merkel is under pressure domestically to follow Britain’s lead and take a harder line against China after the National Security Law in Hong Kong. (Times)

Google has ditched plans to offer major new cloud services in China, alongside other politically sensitive counties, partially due to geopolitical tensions and the virus outbreak, sources state. (Newswires) 

Japanese Machinery Orders (May) M/M 1.7% vs. Exp. -5.4% (Prev. -12.0%). (Newswires) Japanese Machinery Orders (May) Y/Y -16.3% vs. Exp. -17.1% (Prev. -17.7%)

US

Congressional Budget Office said the US budget gap in June totalled USD 863bln which is near the entire fiscal 2019 deficit. CBO also stated that government spending in June tripled from the prior year and PPP spending pushed outlays to USD 1.1tln, while federal revenues declined 28% in June to 242bln. (Newswires)

The Hill/HarrisX poll showed former VP Biden maintained his lead over US President Trump at 43% vs. 39% (Prev. 43% vs. 39%), according to a survey conducted July 3rd-4th. In related news, a political science professor said earlier this week there is a 91% chance President Trump will win the November election, citing "The Primary Model" which has successfully predicted 5 out of the 6 elections since 1996. (The Hill/Independent)

UK/EU

UK International Trade Secretary Truss is reportedly worried that borders will not be ready for 2021 and that ports might not be fully ready, while she sees Northern Ireland protocol unlikely and that UK plans could be challenged at the WTO. (Business Insider)

UK RICS Housing Survey (Jun) -15 vs. Exp. -25.0 (Prev. -32.0). (Newswires)

Another EU leaders' summit could take place on July 27/28 if member states do not reach a deal on July 17/18th, according to Bloomberg Journalist Chrysoloras. (Newswires)

GEOPOLITICAL

A new assessment by the Pentagon states that China presents the biggest military threat to the US. China has been promoted to the top of a list of most dangerous rivals. (Times)

Recent satellite images reportedly showed activity at a previously undeclared North Korean nuclear facility which researchers suspect is being used to develop nuclear weapons. (CNN)

EQUITIES

European equities have somewhat diverged to trade mixed [Euro Stoxx 50 +0.5%] as the optimism seen during the APAC session, which initially reverberated across Europe, petered out for some indices. Sentiment overnight was more-so a function of the tech-led gains seen on Wall Street and rally among miners, whilst Chinese press called on investors to manage risks accordingly amid the recent gains seen in the Mainland and Hong Kong. On that front, and more-so from a technical standpoint, reports note that over 70% of the CSI300 have a 14-day RSI over 70 – i.e. an overbought signal. Back to Europe, the FTSE 100 (-0.1%) is the only core bourse in the red amid unfavourable currency dynamics coupled with some large-cap movers to the downside. Sectors are mixed with a cyclical bias, with the detailed breakdown also painting a similar picture. The IT sector heavily outperforms peers and the broader market amid SAP’s (+7.7%) prelim earnings in which it reiterated guidance and stated that business recovered more than expected in Q2, while its flagship cloud revenue rose 21% YY. SAP carries an almost-10% weighting in the DAX and as such, the German index outperforms regional peers. Elsewhere, Rolls-Royce (-7.0%) immediately reversed course after opening higher by 3%, originally stemming from a positive trading update at face-value, as the breakdown warned of a significant revenue drop over the next seven years. Elsewhere, Siemens (+1.0%) hold onto gains after reports shareholders will vote on its proposal to spin off 55% of Siemens Energy to them. Finally, Atlantia (-9.0%) shares were halted to the downside after Italy’s 5-Star Leader Di Maio said the Co’s motorway concessions need to be withdrawn.

FX

GBP - Cable is consolidating gains on the 1.2600 handle in wake of Wednesday’s fiscal support measures from UK Chancellor Sunak, while Eur/Gbp probes stops and support said to be sitting sub-0.8970 on positive Brexit vibes following EU chief negotiator Barnier conceding some ground on post-transition zonal arrangements, prompting more short covering of oversold Sterling positions. However, resistance looms ahead of the next round number in the form of a Fib retracement level at 1.2680 and then the 200 DMA at 1.2698.

NZD/AUD - The Kiwi and Aussie continue to benefit from Greenback weakness alongside upturns in broad risk sentiment that are compensating/offsetting negatives for the latter via the COVID-19 related problems in Melbourne, Victoria that has now prompted Tasmania to extend its state of emergency. Nzd/Usd has advanced closer to 0.6600 with independent impetus coming from an improvement in ANZ business sentiment and even more pronounced rebound in the activity outlook, while Aud/Usd has retested 0.7000 as the Aud/Nzd cross hovers above 1.0600. Conversely, the DXY is struggling to retain sight of 96.500 having dipped below support to 96.233 in the run up to the latest US initial claims data and wholesale inventories, as the Buck remains prone to safe haven unwinding and the ongoing spiral in coronavirus infections/deaths in several hotspots.

CAD/CHF/EUR/JPY - All narrowly mixed and still eyeing Usd moves alongside the general market tone, but the Loonie also conscious of decent option expiry interest between 1.3495-1.3500 (1 bn) and the 200 DMA (bang on 1.3500) ahead of Canada’s June leading index that follow’s yesterday’s economic and fiscal snapshot. Meanwhile, the Franc is meandering around 0.9375 and 1.0635 vs the Euro that pivots 1.1350 against the Dollar amidst expiries extending from 1.1300 (1.8 bn) through 1.1350-60 (1 bn) to 1.1375 (1.1 bn). Elsewhere, the Yen has eked gains towards 107.00 having been confined to a relatively tight range either side of 107.50, but could yet gravitate back given 1.1 bn option expiry for the NY cut, and with Jpy crosses firmer in line with the overall risk tone.

SCANDI/EM - Indecisive and choppy trade across the board, but currencies mostly on the up and especially the Yuan that has made a more concerted 7.0000+ break following a PBoC midpoint fixing very close to the level and yet more strength in Chinese stock indices overnight.

New Zealand ANZ Business Confidence (Jun) -29.8 (Prev. -34.4). (Newswires) New Zealand ANZ Activity Outlook (Jun) -6.8 (Prev. -25.9)

FIXED

Core debt remains firm/underpinned after overcoming some initial/early wobbles, but it has been another hard grind without much depth or conviction as Bunds topped out at Tuesday’s high and 7 ticks short of yesterday’s 176.37 Eurex best. Similarly, Gilts pared more declines to trade in positive territory at 137.63, but half-heartedly amidst the backdrop of ever increasing budget deficit dynamics and flat US Treasuries awaiting long bond issuance and the latest weekly jobless claims update before another speech by Fed’s Bostic.

COMMODITIES

WTI and Brent front month futures trade choppy within tight ranges with price action somewhat lacklustre amid a lack of newsflow for the complex coupled with a number of bearish factors including this week’s inventory releases. News-flow for the complex has been light in early trade, although on the geopolitical front, one to keep on the radar would be the escalating tensions between Saudi and the Houthis, with the latest reports nothing that a Saudi-led coalition in Yemen have reportedly struck and destroyed two explosive laden-boats south of the port of Al Salif, according to Saudi TV. Nonetheless, crude prices remain flat/modestly softer with WTI Aug just above USD 40.50/bbl and Brent Sep keeps its head above USD 43/bbl. Elsewhere, spot gold retains at USD 1800/oz+ status having touched a recent high of USD 1816/oz. Shanghai copper hit a 16-month high on supply woes coupled with a firm performance in Chinese markets, whilst Dalian iron ore extended gains for a fifth straight day as steel mills replenish inventories on higher demand hopes.

Saudi-led coalition in Yemen have reportedly struck and destroyed two explosive laden-boats south of the port of Al Salif, according to Saudi TV. (Newswires)

Krelim says Russia has no plans to hold talks with Saudi Arabia ahead of the JMMC meeting on the 15th July. (Newswires)