• Sentiment remains somewhat sour in a mild pull-back from vaccine induced upside after mixed APAC data pre-ECB & US data
• Chinese GDP and Industrial Production topped estimates whilst Retail Sales disappointed and showed a surprise contraction
• US is reportedly considering a travel ban on members of the Chinese Communist Party, although reports added that President Trump may ultimately reject a possible travel ban
• DXY is rangebound but firmer with major peers softer while debt remains in mild demand
• Looking ahead highlights include, US Initial/Continued Jobless Claims, Retail Sales & Philadelphia Fed, ECB Rate Decision & Press Conference, Fed's Williams & Evans, ECB's Panetta
• Earnings from Morgan Stanley, Bank of America, Johnson & Johnson, Abbott, Netflix

CORONAVIRUS UPDATE

AFP later tweeted that US cases rose by a record 67,632 citing tracker data, while a major newswire tally suggested US coronavirus cases rose by at least 67,889 to 3.52mln which was the 2nd largest daily increase on record. Texas coronavirus cases increased by a new daily record of 10,791 and deaths rose by a record 110, according to the State Health Department. (Newswires)

Oxford scientists believe that they have made a breakthrough regarding a COVID-19 vaccine as they found their jab triggered a response that could provide a "double defence". (Telegraph) Note, this appears to be similar to the report yesterday from ITV’s Peston.

Tokyo Governor Koike said she is hearing Tokyo's coronavirus infections could surpass 280 (Prev. +143). (Newswires)

ASIA

Asian stocks traded negatively as the recent vaccine optimism that underpinned global stocks took a back seat to the slew of tier-1 releases in the region including Australian Employment numbers, as well as Chinese GDP, Industrial Production and Retail Sales data. ASX 200 (-0.7%) was subdued with underperformance seen in commodity names and amid rumours of a potential Stage 4 lockdown surrounding Victoria state where its capital Melbourne is currently under stage 3 restrictions. Nikkei 225 (-0.8%) was pressured by recent detrimental currency flows and after falling short of the 23K status, while KOSPI (-0.6%) also declined after the BoK kept rates unchanged at 0.5% as expected and provided a grim tone on the economy. Elsewhere, Hang Seng (-2.0%) and Shanghai Comp. (-4.5%) failed to benefit from the mostly better than expected Chinese data in which GDP and Industrial Production topped estimates but Retail Sales disappointed and showed a surprise contraction which led to concerns related to consumer demand and an uneven recovery. Finally, 10yr JGBs were higher amid the negative mood across stocks and improved demand at the enhanced liquidity auction for 2yr-20yr JGBs.

PBoC injected CNY 50bln via 7-day reverse repos with the rate kept unchanged at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.9913 vs. Exp. 6.9919 (Prev. 6.9982)

Chinese GDP (Q2) Q/Q 11.5% vs. Exp. 9.6% (Prev. -9.8%) Chinese GDP (Q2) Y/Y 3.2% vs. Exp. 2.5% (Prev. -6.8%) Chinese Industrial Production (Jun) Y/Y 4.8% vs. Exp. 4.7% (Prev. 4.4%) Chinese Retail Sales (Jun) Y/Y -1.8% vs. Exp. 0.3% (Prev. -2.8%) Chinese House Prices (Jun) Y/Y 4.9% (Prev. 4.9%)

China stats bureau said it will maintain flexibility in economic policy and stated that retail sales data shows consumption recovery still needs to be bolstered. (Newswires)

US is reportedly considering a travel ban on members of the Chinese Communist Party, although reports added that President Trump may ultimately reject a possible travel ban. (Newswires) US President Trump had reportedly leaned against additional US sanctions on top Chinese officials for now as he does not want to escalate China tensions, although reports noted that this decision was made prior to him signing the legislation related to China’s Hong Kong actions. (Newswires)

White House Chief of Staff said the Trump administration is examining national security risks of TikTok, WeChat and other apps that risk allowing a foreign adversary to gather information on Americans, while action on this will likely be in weeks not months. (Newswires)

BoK kept its 7-Day Repo Rate at 0.50%, as expected and through unanimous decision. BoK stated that growth will be weaker than May forecast and recovery will also be slower than estimated for consumption and exports, while inflation is to remain weak. Furthermore, BoK Governor Lee said uncertainties to the growth path are very high and they are ready to increase purchases of government bonds if required. (Newswires)

US

EU top court rules that the EU privacy shield is not valid in the case for Facebook (FB), says the standard contractual clauses with the EU are valid. (Newswires)

UK/EU

Several large listed UK companies said they are increasing stockpiling and reviewing contingency plans in case of border disruption ahead of Brexit deadlines. (FT)

BoE Governor Bailey reportedly told Conservative lawmakers yesterday that interest rates in the UK are likely to stay low for a long time and the central bank "will do everything it can to support the economy". (Newswires) 

UK Claimant Count Unemployment Change* (Jun) -28.1k vs. Exp. 250.0k (Prev. 528.9k)

-        Avg Wk Earnings 3M YY* (May) -0.3% vs. Exp. -0.4% (Prev. 1.0%)

-        Avg Earnings (Ex-Bonus)* (May) 0.7% vs. Exp. 0.5% (Prev. 1.7%)

German Europe Minister Roth is optimistic that a deal on the budget and stimulus package can be reached at the EU Summit but added the size of the EU recovery fund is a core area of conflict. (Newswires)

EQUITIES

European equities have started the session on the backfoot (Eurostoxx 50 -0.7%) as markets take a breather from some of the recent vaccine-inspired gains. Macro newsflow from a European perspective has been light as markets look ahead to the latest policy announcement from the ECB today and perhaps more importantly the upcoming negotiations on the EU recovery fund and budget. In terms of the composition of losses in Europe, all sectors trade lower with the exception of oil & gas names which trade closer to the unchanged mark post-yesterday’s JMMC agreement while telecom names are erring higher as well. The laggard in Europe is Food & Beverage with Heineken (-2.5%) a noteworthy underperformer after the Co. reported a 16% decline in H1 sales. Elsewhere, for the luxury sector, Richemont (-5.3%) sit near the foot of the Stoxx 600 after posting a near 50% decline in Q1 trading revenue in what was a particularly bleak earnings report. Other movers include Zalando (+2.1%) and Atos (-1.7%) post-earnings, whilst Deutsche Lufthansa (-3.0%) lag other travel & leisure names despite noting that it hopes to get around 90% of its short haul flights back up and running by the end of October.

FX

USD - The Dollar has clawed back more lost ground vs G10 and EM rivals on renewed safe haven demand as euphoria over COVID-19 vaccines fades somewhat and markets look ahead to key events, like the ECB, US retail sales data and weekly initial claims. However, the DXY still looks precarious just above 96.000 after Wednesday’s bearish break below the round number (to 95.770 and just off the June low), as coronavirus cases and deaths continue to rise in several states and reach fresh record peaks in some areas, such as Texas yesterday.

GBP/NZD/AUD - The major victims of a reversal in broad risk sentiment and associated Greenback revival, but with Cable also undermined by negative technical factors having lost grip of the 1.2600 handle and a series of shorter term MA levels, including the 50, 100 and 200 markers, on the way down through 1.2550. Note, conflicting UK jobs data has not really impacted, but the Pound may be taking heed of NIRP expectations in Short Sterling futures that been brought forward by some 6 months in wake of BoE’s Tenreyro’s ‘live’ revelation yesterday. Meanwhile, benign NZ CPI and a mixed Aussie employment report have not helped the Nzd or Aud retain gains vs the Usd, with the former back under 0.6550 and the latter retreating through 0.7000.

EUR/CAD/JPY/CHF - Also unwinding outperformance relative to the Buck, as the Euro relinquishes 1.1400+ status ahead of the ECB policy meeting and press conference amidst another heavy spread of option expiries descending from just shy of Wednesday’s high (circa 1.1452) at 1.1440-30 (1 bn) through 1.1380-75 (1 bn) down to 1.1350 (2 bn). Note, a full preview of the upcoming July ECB convene and presser is available on our Research Suite and will be reposted via the headline feed in the run up to the event. Similarly, the Loonie is paring back post-BoC between 1.3502-29 parameters against the backdrop of softer crude prices, while the Yen has pulled back from over 107.00, albeit some distance from 1.5 bn expiry interest at 107.25-35, and the Franc is straddling 0.9450.

SCANDI/EM - General weakness, or payback after midweek session strength with few exceptions and the oil/commodity bloc bearing the brunt of the general deterioration in temperament. However, the Cnh is holding around 7.0000 following another firm PBoC Cny fix and a slew of Chinese data overnight that was either side of expectations, but comfortably above consensus in terms of Q2 GDP.

Australian Employment Change (Jun) 210.8k vs. Exp. 112.5k (Prev. -227.7k) Australian Full Time Employment (Jun) -38.1k (Prev. -89.1k) Australian Unemployment Rate (Jun) 7.4% vs. Exp. 7.4% (Prev. 7.1%) Australian Participation Rate (Jun) 64.0% vs. Exp. 63.6% (Prev. 62.9%)

New Zealand CPI (Q2) Q/Q -0.5% vs. Exp. -0.5% (Prev. 0.8%). (Newswires) New Zealand CPI (Q2) Y/Y 1.5% vs. Exp. 1.5% (Prev. 2.5%) New Zealand RBNZ Sectoral Factor Model Inflation (Q2) 1.8% (Prev. 1.7%)

FIXED

Gilts are still afloat after reaching a new Liffe peak at 137.91, but not really threatening 138.00 or Tuesday’s session best of 138.01 that stands in the way of the contract high (138.15) awaiting any further negative rate nuances via BoE’s Haldane and/or Governor Bailey. However, Bunds and Eurozone debt peers have lost more traction as the clock ticks down to the ECB and EU stocks pare losses, with the core bond retesting overnight Eurex lows vs 176.36 at one stage. Elsewhere, US Treasuries are essentially flat, like the curve profile ahead of a raft of data and more Fed speak before Secretary of State Pompeo delivers an address amidst increasingly fractious relations with China.

COMMODITIES

WTI and Brent are once again subdued following the modest pullback in sentiment more broadly before today’s key central bank event. For the crude complex itself, since yesterday’s JMMC meeting where they confirmed OPEC+ will begin easing production cuts to 7.7mln BPD (~8.3mln BPD when taking compensation into account) there has been very little in the way of fundamental updates. As attention now returns more so to the demand side of the equation and the impact of any further COVID-19 induced headwinds; for the supply side, attention will be on whether OPEC+ members who are required to over-compensate do so as well as the situation in areas including Libya. Elsewhere, spot gold has had a somewhat more rangebound session but has most recently erred lower as European equity bourses attempt to rise from their session lows.

Saudi Energy Minister said the effective oil cuts in August will be around 8.1-8.2mln BPD and reportedly commented that it is too late to change August quotas at this JMMC since term lifters' nominations are already set for the month. (Newswires)

Russian Energy Minister Novak said global oil demand was down by 10mln BPD on average in July but stated that the global oil market is balanced and stable, while he added we are in line with agreed schedule on oil output cuts by OPEC+ and that the easing of oil output cuts will not lead to increase in oil exports. (Newswires)