• Sentiment remains firm but European bourses are off highs while US futures remain steady with gains of 0.5%
• Weekend updates saw a record rise in global COVID-19 cases, whilst Florida saw its largest increase in cases since the pandemic began
• US is reportedly weighing limited options to sanction China for its actions in Hong Kong
• China's Foreign Ministry says it will impose sanctions on US lawmakers in response to sanctions over Xinjiang
• US is to issue 25% tariffs on USD 1.3bln of French goods in retaliation to the digital tax, although new duties will not be imposed for 6 months
• FX space see USD choppy around the U/C mark with peers struggling to find clear direction; USTs are flat & yield curve has a mild steepening bias
• Analog Devices upped Q3 guidance and PepsiCo beat on EPS & revenue
• Looking ahead, highlights include Fed's Williams, BoE Governor Bailey

CORONAVIRUS UPDATE

WHO reported a record daily increase in coronavirus cases of more than 230k in 24 hours. (Newswires)

US CDC reported new coronavirus cases rose 62,918 to a total of over 3.2mln and the death toll rose by 906 to a total of 134,572. Florida coronavirus cases rose by 15,300 to a total of 269,811 which was the largest increase since the pandemic began although there was a substantial rise in testing and the percentage of positive cases fell to 11.25% from 12.59%. Texas coronavirus cases rose by 8,196 to a total of 258,658 and its hospitalizations rose by 327 to a 14th consecutive record high of 10,410, while Arizona cases increased by 2,537 which was the first day in more than a week in which cases increased by less than 3,000. New York City reported zero COVID-19 deaths for the first time since the pandemic hit New York state. (Newswires) 

UK coronavirus cases increased by 650 to 289,603 and the death toll rose by 21 to 44,819. (Newswires)

Tokyo Governor says 119 cases of COVID-19 infections have been confirmed today, data is still being analysed though. (Newswires)

AstraZeneca is preparing to begin trials on an antibody treatment that could help protect older people from COVID-19 for up to six months. (Times)   

Japanese Economic Minister Nishimura said the government may ask Tokyo and surrounding areas to request business shutdowns dependent on the extent of the coronavirus situations there, while it was separately reported that Tokyo is to waive accommodation taxes through September 2021. (Newswires/Japan Times)

Hong Kong Health authorities called for tougher measures to control the virus spread, as well as for residents to stay home and avoid social gatherings, while they warned the situation was "getting a bit out of hand". (Newswires)

Germany Health Minister warns that the danger of a second wave pandemic is real in Germany; adds there might not be a 'second wave' in the Autumn, though. (Newswires)

First longitudinal study has found that COVID-19 antibody’s peaked after around 3-weeks after the commencement of symptoms and thereafter swiftly declined. Specifically, 60% of individuals generated a potent antibody response only 17% retained this level 3-months later. (Guardian)

ASIA

Asian equity markets began the week mostly positive as the region benefitted from the recent tailwinds from Wall St. where encouraging Remdesivir data and outperformance in financials last Friday ahead of upcoming earnings, helped markets shrug off the rising COVID infection numbers to lift all major US indices and helped the Nasdaq to a fresh all-time high. ASX 200 (+1.0%) was led higher by outperformance in utilities and the top-weighted financials sector, as the latter took its cue from its counterpart stateside and as big 4 bank Westpac was buoyed by reports it is mulling divesting over AUD 4bln in non-core wealth assets, while Nikkei 225 (+2.2%) outperformed on a break above the 22,500 level with participants unfazed by the increasing risks associated with the outbreak flare-up in Tokyo. Hang Seng (+0.2%) and Shanghai Comp. (+1.8%) were also positive after the PBoC provided its first liquidity injection following a 2-week hiatus and amid recent better than expected lending data from China. This helped domestic markets shake off the initial tentativeness after local press continued to urge rationality regarding stocks and amid the continued US-China tensions with US President Trump suggesting a Phase 2 trade deal was unlikely at this point and the US State Department warned US citizens in China of increased arbitrary detention, while China had also threatened to impose reciprocal measures if the US insists on moving forward with sanctions. Finally, 10yr JGBs were weaker amid gains in stocks and spillover selling following Friday’s pullback in USTs, while the lack of BoJ presence in the market ahead of its 2-day policy meeting tomorrow, also contributed to the tame demand for bonds.

PBoC injected CNY 50bln via 7-day reverse repos for a CNY 50bln net injection with the rate kept at 2.20% (Newswires) PBoC sets USD/CNY mid-point at 6.9965 vs. Exp. 6.9957 (Prev. 6.9943)

US is reportedly weighing limited options to sanction China for its actions in Hong Kong, as Hong Kong’s financial centre status limits the actions available to Washington given that any significant measures also risk affecting US and other western companies and consumers. (WSJ)

China's Foreign Ministry says it will impose sanctions on US lawmakers in response to sanctions over Xinjiang. (Newswires)

US State Department warned US citizens in China of increased arbitrary detention and to exercise increased caution. (Newswires)

White House Trade Adviser Navarro said further actions on TikTok and WeChat is expected, while he added that President Trump is only just getting started and will not rule out banning the apps. (Newswires)

US

US House Speaker Pelosi said she believes US Congress can reach a compromise to extend the jobless payments and unemployment insurance for Americans impacted by the pandemic shutdowns. (Newswires)

UK/EU

UK Chancellor Sunak is planning sweeping tax reductions and to relax planning laws in as many as 10 new freeports within a year from December as part of efforts to support the economy post-Brexit. (Telegraph) Separately, the Gov’t has begun to look into plans to manage the ‘average higher levels of corporate debt’ resulting from the pandemic, findings will feed into the Autumn budget. (FT)

UK Cabinet Minister Gove said they are looking at developing infrastructure at Kent in south east England to stop bottlenecks in trade flows post-Brexit, while he added the UK will lay out more regarding the Irish border later this month and stated that there is movement on talks with EU but that differences remain. (Newswires/BBC)

UK is planning to withhold power to control state aid from Scotland and Wales post-Brexit and is expected to propose in a bill during Autumn which will provide the legal powers for Westminster to control state aid policies for the whole country. (Newswires/FT)

UK is to place checks on exports to the EU from 2021; as part of a Brexit Border plan. (Newswires)

US is to issue 25% tariffs on USD 1.3bln of French goods in retaliation to the digital tax, although new duties will not be imposed for 6 months. (Newswires)

EU ‘Frugal Four’ (Five) are reportedly demanding cuts to the EUR 750bln recovery fund and deeper cuts to the next budget than those announced by Council President Michel last week. Officials believe the EUR 750bln figures is unlikely to survive the summit unscathed. (FT)

German states are to borrow EUR 95bln to fund their efforts to support the economy amid the fallout from the coronavirus pandemic. (Newswires)

Poland’s incumbent President Duda has declared victory after receiving ~51% of the vote via an exit poll, rival Trzaskowsik has said the results are too close to call. Official results expected later today. (BBC)

GEOPOLITICAL

North Korea warned UK will pay the price for introducing new sanctions on North Korea. (Yonhap)

EQUITIES

European equities have kicked the week off on the front-foot (Eurostoxx 50 +0.8%) in an extension of the gains seen last week as markets thus far continue to shrug off the rising global COVID-19 case count whereby the WHO reported a record daily increase of over 230k cases in a 24 hour period over the weekend. From a European perspective, it is worth noting that the WHO stated that the largest increases in cases were seen in the US, Brazil, India and South Africa and therefore a bulk of the focus currently resides outside the continent. Furthermore, some desks have attributed the positive sentiment thus far to mounting hopes ahead of the upcoming EU summit as the bloc continues to negotiate its recovery fund. That said, work is still be done on appeasing the so-called “frugal four” and as such, some have cautioned that a deal might not come until later in the month. Gains in Europe are currently favouring cyclical names with autos, basic resources and travel & leisure names outperforming peers. However, as European indices pullback from earlier session highs, the composition of sector-wide performance could stage a rotation if sentiment deteriorates further. In terms of stock specifics, Akzo Nobel (+4.1%) trade higher after posting a Q2 update, whilst the same can also be said for the likes of DNB (+10.8%) and G4S (+8.7%). To the downside, the main outlier is Atlantia (-15.5%) after Italian PM Conte warned that proposals from the Co. are unsatisfactory thus far and the government will not sacrifice public interest over the Co. Additionally, Ubisoft (-9.0%) also trade lower on the session after undertaking multiple personal changes in response to allegations/accusations of misconduct.

Analog Devices (ADI) have raised their Q3 guidance, anticipate revenue of USD 1.45bln, +- USD 30mln. Given better than expected demand. Additionally, confirm acquisition of Maxim Integrated

PepsiCo (PEP) Q2 2020 (USD): EPS 1.32 (exp. 1.25); revenue 15.95bln (exp. 15.38bln). Not providing a financial outlook for fiscal year 2020 at this time.

FX

AUD/NZD - Although the US Dollar has pared some losses and the DXY is holding above 96.500 within 96.387-685 parameters, the Aussie is still outpacing G10 counterparts in wake of a 2nd consecutive Usd/CNY midpoint fixing below the psychological 7.0000 level and a broad upturn in risk sentiment. Aud/Usd is hovering within a 0.6984-41 range ahead of NAB business conditions and confidence overnight, while the Aud/Nzd cross has rebounded through 1.0600 as the Kiwi lags vs its US peer around 0.6560 in advance of NZ CPI data on Wednesday. Note also, a dovish note from ANZ may be weighing on the Nzd as the bank believes that the RBNZ should carefully consider policies to weaken the exchange rate and is keeping all options on the agenda (ie NIRP).

CAD/EUR - The Loonie is also benefiting from the positive risk tone with Usd/Cad meandering from 1.3602 to 1.3556 even though crude prices are softer, while the Euro is just keeping afloat of 1.1300 after topping out ahead of 1.1340 and decent option expiry interest extending to 1.1350 (1 bn).

GBP/CHF/JPY - Sterling ran in to supply at 1.2660+ levels again and faded a fraction shy of Friday’s circa 1.2667 high to form a 2nd consecutive marginally lower peak having hit 1.2670 on July 9, and Cable is now striving to retain the 1.2600 handle as Eur/Gbp bounces from just under 0.8950 towards 0.8975 in the run up to the next round of Brexit talks. Also ahead and a potential Pound mover, 2 separate speeches by BoE Governor Bailey. Elsewhere, the Franc is pivoting 0.9400 against the Greenback and 1.0640 vs the Euro following another sizeable increase in Swiss domestic bank sight deposits on the eve of a speech by SNB chair Jordan. Similarly, the Yen is straddling 107.00 and 121.00 vs the single currency after a loss of safe haven premium, and now eyeing Japanese ip tomorrow for some independent impetus.

SCANDI/EM - Some loss of bullish momentum for the Norwegian Krona as risk appetite wanes and oil drifts, while the Swedish Crown is also apprehensive awaiting CPI on Tuesday. However, the Turkish Lira has pared some declines in wake of better than expected, albeit still bleak ip and a narrower than forecast current account deficit.

Polish Election Commission reported that incumbent Duda is to secure the Presidential ballot. (Newswires)

FIXED

Bunds remain below parity, but just a tick better than opening highs, while Gilts have managed a 26 tick recovery from 137.55 to get within 7 ticks of Friday’s close as EU stocks slip further from best levels. However, sentiment remains positive overall to the detriment of safe-haven bonds and US Treasuries are essentially flat with the curve fractionally steeper ahead of commentary from the Fed via Williams and Kaplan on an otherwise blank agenda for data.

COMMODITIES

WTI and Brent have had a downbeat start to the week with both benchmarks posting losses in excess of 1% and WTI Aug’20 future having dropped back below the USD 40/bbl handle. The most recent declines have arisen as sentiment more broadly takes a slight leg lower; albeit, with European and US equity futures still very much in positive territory. Over the weekend there were a number of updates on the crude front firstly, and one of the likely drivers of the morning’s downside, Saudi Arabia and other producers are seen as likely to increase output in August. In light of the easing of COVID-19 lockdown restrictions but the ongoing spread of cases is weighing on these plans. Additionally, desks note that OPEC+ are to begin easing production cuts from August, a measure which would be in-fitting with the current deal. Further clarity on the plans for OPEC+ ahead will arise from Wednesday’s JMMC meeting; although, it is worth bearing in mind the JMMC do not have the power to set policy themselves, they can only make recommendations to the broader OPEC+ members. Elsewhere, a resumption of woes for Libya’s NOC as the force majeure on all oil exports has been reimplemented, after cargoes docked and loaded late last week at Es Sider, due to LNA saying the blockade is to continue. Turning to metals, spot gold is firmer by some USD 10/oz thus far for the session and resides towards the top end of a relatively confined range which has notable seen the lower end drop beneath USD 1800/oz. Price action for the metal has largely been dictated by the mild pullback in general sentiment and broader USD moves.

Saudi Arabia and other major producers are likely to raise output in August amid easing of coronavirus lockdowns although a continued spread of the virus is said to cast a shadow on their plans, while other reports noted that Saudi proposed to ease current production curbs by 2mln bpd to 7.7mln bpd. (NYT/WSJ)

Saudi Aramco reduced August allocation of Arab heavy and medium crude to at least 4 refiners in Asia, while it was separately reported that Aramco is raising its gasoline prices in July. (Newswires)

Iran set August Iranian Light Crude price to Asia buyers at Oman/Dubai + USD 1.30/bbl which is up USD 1.00 from the prior month. (Newswires)

Libya's NOC reinstated the force majeure on all oil exports after the LNA said the blockade will continue and the also stated that the UAE instructed the LNA to resume its oil blockade. (Newswires)

Yemeni Houthi's says that they targeted the Jizan oil facility (400k BPD); no confirmation from Saudi Arabia. (Newswires)