• Choppy end to the week for stocks amidst a flurry of updates as debt remains in demand & dollar dips
• US is said to be mulling a tariff list against France for around USD 500-700mln in goods
• Texas COVID-19 cases increased by the most since the pandemic began and the Governor predicts next week will be worse
• EU Council President Michel proposes a budget of EUR 1.074tln & recovery fund total maintained at EUR 750bln
• IEA raises 2020 oil demand forecast by 400k BPD, demand decline in Q2 was less severe than expected
• China's Foreign Ministry says China will impose reciprocal measures if the US insists on moving forward with sanctions
• Large-cap Chinese shares were pressured after two state-backed funds said they plan to trim holdings
• Looking ahead, highlights include US PPI & Canadian Labour Market Report

CORONAVIRUS UPDATE

US coronavirus cases rose by at least 60,565 which was a 2nd consecutive record increase and the death toll rose by at least 838 to a total 133,134 according to a major newswire tally, while AFP tweeted the US coronavirus caseload rose by a record of over 65,000 in 24 hours, citing the Johns Hopkins tracker. (Newswires/Twitter)

Texas cases rose by 10,709 to a total of 240,255 which is the largest increase since the pandemic began and the death toll increased by 75 to a total of 3,026 (Prev. +116) according to a major newswire tally. (Newswires)

US President Trump said the US has enough PPE kits for health workers, while he suggested US is well on the way towards vaccine and therapeutics, according to a Fox interview. (Newswires)

Texas Governor Abbott predicts next week will look worse regarding the coronavirus situation and pleaded that wearing masks is the only strategy remaining to avoid another shutdown of the local economy. Elsewhere, the Nevada Governor announced bars in Clark County, where Las Vegas is located, to close on Friday until further notice amid COVID-19 spike, while New York City Mayor De Blasio said large events in the city are now cancelled through to September 30th. (Newswires/The Dallas Morning News)

Australian PM Morrison said news from Victoria state is very concerning and announced Australia will reduce the number of inbound arrivals and will conduct a nationwide review of hotel quarantine. In related news, Australia's Victoria state Treasurer announced an AUD 534mln support package for businesses during the lockdown, while he forecasts unemployment increasing to 11% and GDP declining 14%. (Newswires)

Tokyo reports over 240 additional cases of coronavirus today vs. Prev. 224 yesterday, which is a new daily record increase. (Newswires)

Hong Kong reported 38 new cases (Prev. 42) of which 32 are locally transmitted (Prev. 34); health official says they are very concerned about the spread of COVID in the City, with particular difficulties in tracing. (Newswires)

Chinese CDC says Beijing's latest COVID-19 outbreak was caused by a virus strain from Europe, and transmitted through multiple exposure methods; for example, contaminated environments and goods, Global Times reports.

UK reportedly turned down EU coronavirus vaccine scheme following warnings by officials of costly delays and a failure to secure assurance that the UK would receive vaccines on time. (The Telegraph)

EU COUNCIL MFF & RECOVERY FUND PROPOSAL

European Council President Michel proposes a budget of EUR 1.074tln (Prev. EUR 1.1tln); in line with source reports.

Recovery fund total maintained at EUR 750bln. Remits maintained for Denmark, Germany, Netherlands, Austria, Sweden in real terms on basis of 2020; Balance between loans vs. grants preserved in next EU budget. Repayments will commence from 2026 while the Commission are to look to approve national recovery plans within two-months and this will need approval from a qualified majority.

-        Grants: total maintained at EUR 500bln

o    EUR 217bln in 2021-22; EUR 93bln in 2023 - Rest to be distributed thereafter

-        Rebates:

o    Germany: EUR 3.671bln

o    Netherlands: EUR 1.576bln

o    Sweden: EUR 798mln

o    Austria: EUR 237mln

o    Denmark: EUR 197mln

ASIA

Asian stock markets were negative following a lacklustre performance across global peers amid lingering coronavirus concerns and as US-China tensions were stoked by several escalatory reports such as the US enacting sanctions on 4 Chinese individuals for human rights abuses including the Xinjiang security bureau director and a top member of the Chinese Communist Party. ASX 200 (-0.6%) was led lower by underperformance in the energy sector after the recent pullback in oil prices and amid ongoing lockdown headwinds, with the Victoria state Treasurer anticipating GDP to decline 14%, although the downside for the index was stemmed by resilience in the tech sector which continued to ride on the work from home bandwagon. Nikkei 225 (-1.1%) was subdued by the weight of the haven currency inflows and with some large retailers pressured including Fast Retailing, Seven & I and Lawson after weaker earnings. Hang Seng (-1.8%) and Shanghai Comp. (-2.0%) underperformed after PBoC inaction resulted to a total CNY 290bln liquidity drain this week and as anti-China sentiment persisted with the Trump administration said to be finalising regulations this week that will bar US government from purchasing goods and services from several Chinese tech firms including Huawei and ZTE. Furthermore, it was also reported that China state funds were also said to plan cutting holdings in some companies including PICC. Finally, 10yr JGBs were slightly higher due to the weakness in stocks and following the bull flattening stateside in the aftermath of a blockbuster 30yr auction, while the BoJ were also present in the market today for JPY 870bln on JGBs with an emphasis on 1-3yr and 5-10yr maturities.

PBoC skipped reverse repo operations for a net weekly drain of CNY 290bln vs. Prev. CNY 490bln drain. (Newswires) PBoC set USD/CNY mid-point at 6.9943 vs. Exp. 6.9934 (Prev. 7.0085) and stated that CNY will be traded directly with more currencies.

China state funds are said to be planning to cut holdings in PICC and other China-listed firms, with China’s National Council for Social Security Fund planning to sell up to 884.5mln A-shares in PICC or a 2% stake valued around USD 1bln during the next 6 months, citing the need for asset allocation and investment. (Newswires)

US and European banks in Hong Kong are auditing clients to identify potential Chinese and Hong Kong officials that could face US sanctions, according to sources. The unnamed banks said that if sanctioned, clients would have to be cut off from their services which could result in losing revenue from Chinese banks and state-owned enterprises. (FT)

China Daily's Chen tweeted that Western leaders are shamefully quiet when Washington attacked and began withdrawal from WHO, while he added that if it were China doing this, some politicians would have a field day bashing China, let alone many China haters on Twitter. (Twitter)

US

China's Foreign Ministry says the US' decision is serious interference in Chinese affairs and China will impose reciprocal measures if the US insists on moving forward with such sanctions; subsequently, China has decided to take reciprocal measures against relevant US institutions and individuals relation to Xinjiang, Global Times. (Newswires/Twitter)

White House Chief of Staff Meadows said President Trump will sign 3 executive orders on cutting prescription drug costs. (Newswires)

UK/EU

UK Culture Secretary Dowden announced that gyms, swimming pools and sports facilities will be permitted to reopen from July 25th. (Newswires)

US is said to be mulling a tariff list against France for around USD 500-700mln in goods, with items targeted potentially including French wine, cheese, and handbags. The announcement could come as soon as today. (Newswires)

GEOPOLITICAL

North Korean leader's sister Kim Yo Jong said a summit with US President Trump may not occur this year but added we never know, while she also stated that another summit with Trump would only be beneficial for the US. (KCNA)

China's PLA is fully capable of destroying all of Taiwan's military installations within a few hours, before seizing the island shortly after, Global Times Editor. (Twitter)                                  

A large explosion was heard in south west Tehran, Iran according to reports citing social media, while other sources suggested the blast may have hit an IRGC missile facility/warehouse. (Twitter)

EQUITIES

A choppy session for European equities as the region swings between gains and losses [Euro Stoxx 50 +0.2%] as sentiment somewhat improves from the downbeat APAC session in early hours. Europe opened with broad-based losses of some 0.5% but the upside coincided with the IEA oil market reported which raised its global oil demand growth forecasts which noted that demand decline in Q2 was less severe than expected. Furthermore, the unveiling of the compromise EU recovery fund underpinned benchmarks amid attempts to narrow the rift among EU members, whilst unanimous backing is not needed, thus decreasing chances of a veto. Nonetheless, major bourses are mixed with no stand-out out/underperformer. Sectors are also mixed with little by way of a risk-tone to be derived, with the detailed breakdown providing no further meat on the bone. The IT sector outperforms following numbers from chip giant TSMC which topped revenue estimates; thus propping up fellow chip names such as STMicroelectronics (+5.0%), Infineon (+2%). The energy sector meanwhile remains the underperformer. Energy names meanwhile remain subdued amid price action in the complex with Shell (-0.7%) and BP (-0.3%). In terms of individual movers, LVMH (-0.7%) and Kering (-0.2%) are subdued amid source reports US may release a French tariff list targeting French wine, cheese and handbags, however, Pernod Ricard (+0.1%) holds its ground, potentially due to the recent announcement of French aid for the wine sector.

ByteDance is considering an overhaul of TikTok's corporate structure as they look to distance themselves from Beijing, executives are reportedly looking at options including creating a HQ outside China, SCMP. (SCMP)

FX

USD - The Dollar remains elevated after yesterday’s swift and sudden rebound on deteriorating sentiment surrounding fresh coronavirus outbreaks in the US and elsewhere, with the DXY getting very close to 97.000 again having fallen to a 96.233 low and failing to derive any initial momentum from encouraging weekly jobless claims data. However, the Greenback is paring some gains vs major counterparts ahead of PPI and the weekend as crude prices bounce on an upgrade in the IEA’s 2020 global oil demand forecast due to a smaller Q2 drop than previously envisaged.

JPY - Notwithstanding the Buck’s renaissance, demand for the Yen has pushed Usd/Jpy down through 107.00 and a multi-month bull level at 106.90 to expose 106.75 and deeper lows, while Jpy crosses are also depressed on the aforementioned renewed risk aversion.

AUD/CAD/NZD - Hardly a surprise to see the activity/cyclical/commodity bloc underperforming, with the Aussie back around 0.6950, Loonie pivoting 1.3600 and Kiwi straddling 0.6550 having hit peaks around 0.7000, 1.3500+ and 0.6600 respectively on Thursday. Ahead for the Cad, jobs data for June will be watched closely for more signs of recovery following a rather downbeat Canadian economic and fiscal update.

EUR/GBP - Both narrowly mixed vs the Dollar, but struggling to keep sight of round numbers relinquished when the Usd took flight late in the EU session yesterday, and with the Euro also capped by decent option expiry interest between 1.1300-10 (1 bn) and bearish Eur/Gbp impulses. On that note, Eur/Usd is also eyeing some technical levels in the form of the 200 HMA (1.1272) and a Fib retracement (1.1262).

CHF/NOK/SEK - The Franc is softer across the board with any sign of safe haven positioning more than offset by the fact that SNB will be on the offer, while the Norwegian Crown is lagging due to the recoil in oil rather than inflation data that was somewhat mixed vs consensus. Conversely, the Swedish Krona is bucking risk-off leanings after Riksbank minutes reaffirming a high bar for reverting to a sub-zero repo rate and more likelihood of further stimulus via QE if required

FIXED

Although stocks have regrouped to a degree, bonds continue to climb and Bunds have found some additional leverage closer to home as Eurozone periphery peers appear unimpressed with a sub-Eur 1.1 tn budget proposal. Hence, the 10 year German debt future has now eclipsed twin peak upside resistance from the end of last month to trade at 176.92 and a fraction shy of -50 bp in cash terms, while Gilts have edged a bit further above 138.00 to 138.15 and US Treasuries are tagging along. Indeed, the 10 year note has been inches away from its 139-25 contract high amidst marked bull-flattening after a solid long bond sale and the yield is eyeing 55 bp ahead of a key downside level at 0.539% from April 21.

COMMODITIES

IEA raises 2020 oil demand forecast by 400k BPD to 92.1mln BPD; demand decline in Q2 was less severe than expected; 2021 demand rise is lower than previously expected due to improved 2020 recovery view; outlook skewed to the downside. Additionally, Global oil supply fell by 2.4mln BPD in June to a 9yr low. US production in May fell 1.3mln BPD MM and June fell by 500k BPD. Highlights that Libya's oil production by end 2020 could be as much as 900k BPD higher than today. (IEA/Newswires)

Goldman Sachs said an environment where China outperforms the US is ideal for gold which increases its confidence regarding its USD 2000/ounce target, and that it believes we are entering a near perfect environment for silver to finally perform. Furthermore, it forecasts gold prices at USD 1740/oz this year and USD 1988/oz next year, while it sees silver at USD 18.13/oz this year and USD 21.75/oz next year. (Newswires)