• European bourses are indecisive as travel names suffer as UK implements a quarantine for Spain while heavyweight SAP supports tech post-earnings
• UK government announced a 14-day quarantine rule for anyone arriving from Spain; France & Germany also on the radar
• White House Chief of Staff Meadows said the WH and Senate Republicans have reached a deal "in principle" on the next COVID-19 relief package, likely to be released today
• Chinese military began live-fire drills in the South China Sea on Saturday; US flag has been lowered at the Chengdu consulate
• DXY remains downbeat to the benefit of major peers and XAU which printed a record high of USD 1944.48/oz
• Looking ahead highlights include US Durable Goods & US 2yr & 5yr supply

CORONAVIRUS UPDATE

US CDC reported 64,582 new COVID-19 cases (Prev. +74,818) and deaths increased by 929 (Prev. +1,145) on July 26th. Texas reported 5,810 new COVID-19 cases (Prev. +8,112) and deaths rose by 153 (Prev. +168), current hospitalisation +248 (Prev. -209); according to the State Health Department. Florida reported 9,344 new COVID-19 cases (Prev. +12,199) and deaths increased by 78 (Prev. +126) while hospitalisation fell by 88 (Prev. -285) on Sunday. Arizona reported 1,973 new COVID-19 cases (Prev. +3,748) and deaths increased by 19 (Prev. +144) on Sunday. LA County reported 1,730 new COVID-19 cases (Prev. +3,628) and deaths rose by 10 (Prev. +53) on Sunday with hospitalisations at a record high, but the data is incomplete due to delays in State electronic lab reported, according to the County Health Department. California said current hospitalisation fell by 69, according to state health department. California coronavirus cases increased by at least 4,372 on Sunday, deaths rise by at least 21, according to a major newswires tally. (Newswires)

US Treasury Secretary Mnuchin said the next COVID-19 relief package will be introduced on Monday and wants to act quickly. Mnuchin added that he and WH Chief of Staff Meadows worked on technical issues on Saturday and said the entire relief plan is ready and worth USD 1tln. Mnuchin conceded that President Trump’s payroll tax cuts will not be in the package but stated the package will contain extended unemployment benefits with 70% "wage replacement". On the economy, the Treasury Secretary said parts are doing well and parts are not, but he expects to see a big rebound next quarter. (Fox News/Politico/Newswires)

White House Chief of Staff Meadows said the WH and Senate Republicans have reached a deal "in principle" on the next COVID-19 relief package, legislative proposal likely to be unveiled on Monday but a "handful" of issues still need to be resolved. (Newswires) US Senate Majority Leader McConnell said hopefully we can come together behind some package we can agree on in the next few weeks. Some are still mulling a temporary extension of the existing unemployment benefits to give Congress time to negotiate. (Washington Post) Note: unemployment benefits are set to expire at the end of this week. Multiple GOP Hill aides involved in the stimulus negotiations said they feel Treasury Secretary Mnuchin and White House Chief of Staff Meadows have undermined the legislative process. (Axios)

Moderna (MRNA) has announced the expansion of the BARDA agreement to support larger Phase III programme for its COVID-19 vaccine. Co. remains on track to deliver around 500mln doses per annum, and possibly up to 1bln doses per year, beginning 2021. (Newswires)

North Korean leader Kim Jong Un issued a state of emergency after a person suspected of having COVID-19 returned from South Korea after illegally crossing the border this month, state media said on Sunday. (Newswires)

Australia's Victoria State reported 532 new coronavirus cases (Prev. 459). (Newswires) 

China reported 61 new COVID-19 cases in Mainland (Prev. 46); 4 new imported cases (Prev. 11) and 44 new asymptomatic cases (Prev. 68). (Newswires)

Hong Kong reports 145 (Sunday 128) new cases of COVID-19 of which 142 are locally transmitted, new daily high. (Newswires)

Vietnam has evacuated 80k tourists from the central city of Danang following a COVID-19 outbreak there, according to a government statement. (Newswires)

UK government announced a 14-day quarantine rule for anyone arriving from Spain over fears of second wave following a spike in cases in Catalonia and Aragon. (BBC) Spain’s Foreign Ministry said the pandemic is under control in Spain and added that cluster outbreaks in Catalonia and Aragon should soon be brought under control and Spain is safe for tourism. Spain’s Foreign Ministry is focusing on convincing the UK government to exclude Canary Islands and Balearic Islands from quarantine rules. (Newswires)

Fears are growing that countries like France and Germany could join Spain on the UK’s quarantine list amid spikes in COVID-19 cases. Telegraph analysis shows most countries on the UK’s “safe list” have seen cases rise sharply over the past week. (Telegraph)

Germany COVID-19 cases rose by 340 (Prev. +305), whilst deaths rose by 0 (Prev. 0), according to RKI. (Newswires)

US – CHINA UPDATE

US federal agents and local law enforcement entered the Chinese consulate in Houston on Friday afternoon after Washington’s deadline for the closing of the diplomatic facility expired. (CNN) Meanwhile, China protested the “forced entry” into the Chinese consulate. (SCMP)

US flag was lowered at its Chengdu consulate in China shortly after the closure deadline. (SCMP)

The Chinese military began live-fire drills in the South China Sea on Saturday in a challenge to U.S. freedom of navigation operations there. China has warned civilian vessels not to enter the area. (Nikkei)

ASIA

APAC stocks traded choppy as initial optimism somewhat abated after Wall Street’s decline on Friday amid a struggle in tech shares coupled with rising US-Sino tensions, with the Dow snapping a three-week winning streek as Intel shares slumped over 15% post-earnings. ASX 200 (+0.3%) nursed earlier losses despite the rising case-count in Victoria, with upside led by strength in mining names. Nikkei 225 (-0.3%) lagged as the index played catch-up to the broader losses seen at the back end of last week, whilst JPY strength kept gains limited. Softbank shares cushioned losses for the index as investors had the first chance to react to reports that its chip arm is reportedly attracting interest from Nvidia. KOSPI (+1.1%) remained firm throughout the session as the case-count in South Korea stays on a downward trajectory. Elsewhere, the Hang Seng (+0.1%) saw initial momentum from the euphoria surrounding the debut of its tech index, of which over 40% comprises of shares from Alibaba (8.53% weighing), Tencent (8.52%), Meituan (8.33%), Xiaomi (8.11%) and Sunny Optical (8.02%), whilst Shanghai Comp (+0.1%) traded between gains and losses as industrial profits saw a rebound in June, although price action is upside was hampered amid the rising tensions between US and China. Finally, Taiwan’s TSMC rose over 9% on the back of the broader tech rally coupled with reports that Apple (AAPL) is setting up an R&D area for display tech at TSMC’s plant.

PBoC injected CNY 100bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily position. PBoC sets USD/CNY mid-point at 7.0029 vs. Exp. 6.9939 (Prev. 6.9938)

Chinese Industrial Profits YY (Jun) 11.50% (Prev. 6.00%). (Newswires) Chinese Industrial Profits YTD (Jun) -12.80% (Prev. -19.3%)

Beijing has resumed the issuance of shopping vouchers, with 1mln offline food & beverage coupons alongside 500k smart product coupons totalling CNY 12.2bln, in a bid to boost consumption. (Global Times)

The number of US IPOs by Chinese firms have more than doubled since the start of the year, according to Dealogic data, with sources stating that the figure could rise substantially with the listing of Chinese fintech Co. Lufax this year. (FT)

BoJ Summary of Opinions stated Japan's economy is likely to improve gradually from the second half of this year, but the pace is expected to be only moderate while the impact of COVID-19 remains; Japan's economy has been in an extremely severe situation, downward pressure on wages is likely to continue for the time being. CPI YY is likely to be negative for the time being, mainly affected by COVID-19 and the past decline in crude oil prices. Thereafter, it is expected to turn positive and then increase gradually, mainly due to economic improvement. (BoJ)

RBA's Assistant Governor Kent reiterates that the RBA is ready to buy bonds if needed to maintain the 0.25% yield target; Term Funding Facility (TFF) take-up at AUD 26bln vs. AUD 150bln allowance; expects banks to draw more from TFF as the deadline nears. RBA's Kent is not overly concerned about the AUD/USD level.  (RBA)

GEOPOLITICAL

US Special Envoy to Iran Hook said Iran continues repeatedly violate the arms embargo and added that the dispute among Gulf Arab states has continued for too long. (Newswires)

Israeli military said one of its drones crashed inside Lebanon. (Newswires) Explosions have been reported at a military compound inside Southern Baghdad, with the cause yet unclear, according to a military statement. (Newswires)

EU Commission said a WTO panel report confirms the legality of specific EU anti-dumping rules against Russia WTO law, while raising certain issues as regards their practical application. (Newswires)

Germany Foreign Minister said Germany has rejected US President Trump's proposal to let Russia back into the G7. (Newswires)

South Korea and US are to hold scale down military drills next month. (Newswires)

GEOPOLITICAL

US Special Envoy to Iran Hook said Iran continues repeatedly violate the arms embargo and added that the dispute among Gulf Arab states has continued for too long. (Newswires)

Israeli military said one of its drones crashed inside Lebanon. (Newswires) Explosions have been reported at a military compound inside Southern Baghdad, with the cause yet unclear, according to a military statement. (Newswires)

Germany Foreign Minister said Germany has rejected US President Trump's proposal to let Russia back into the G7. (Newswires)

South Korea and US are to hold scale down military drills next month. (Newswires)

US

Google (GOOG) - Australia's ACCC has launched federal court proceedings against the Co. over allegedly misleading consumers about expanded use of personal data and related changes to privacy policies. Co. intends to defend its position against the ACCC allegations. (Newswires)

UK/EU

UK Chancellor Sunak is said to be mulling a new tax on goods sold online due to mounting concerns over a collapse of the high street, according to the Times. (Twitter)

ECB’s Weidmann (Hawk) stressed that joint EU debt must not become a regular thing. In terms of Germany’s economy, said that the data overall shows the economy bottomed out in spring and is now gradually recovering. (Newswires)

Italian Finance Minister Gualtieri said that money from the EU Recovery Fund will not come soon enough to avert an autumn liquidity squeeze, whilst urging a formal request to the ESM to unlock EUR 36bln of immediate pandemic loans. (Telegraph)

German Ifo Business Climate New (Jul) 90.5 vs. Exp. 89.3 (Prev. 86.2, Rev. 86.3)

-        Current Conditions New (Jul) 84.5 vs. Exp. 85.0 (Prev. 81.3)

-        Expectations New (Jul) 97.0 vs. Exp. 93.7 (Prev. 91.4, Rev. 91.6)

EQUITIES

European indices have kicked the session off relatively indecisively (Eurostoxx 50 U/C) with the exception of the Spanish IBEX (-1.3%) which is the region’s clear underperformer after the UK imposed quarantine measures on those travelling from Spain. Given the measures taken by the UK and concerns that similar action could be taken by the UK on France and Germany, the travel & leisure sector is the clear laggard for the Stoxx 600, facing losses of around 2.5% with Tui (-12%), easyJet (-11%) and IAG (-8%) all lower on the session. Shares in Ryanair (-4.2%) are also seen lower in sympathy and following Q1 earnings with the Co. reporting a EUR 185mln loss and citing fears of a second wave in the autumn. Elsewhere, DAX-heavyweight SAP (+2.9%) has supported the index and the tech sector after confirming Q2 earnings (relative to prelim release) and announcing its intention to IPO its US subsidiary, Qualtrics. HSBC (-2.9%) have acted as a drag on the broader banking sector after reports noted the Co. is facing pressure to look at offloading its US retail bank in order to increase returns and address international tensions with China. Furthermore, the Co. has rejected allegations via Chinese media that they attempted to entrap Huawei in the act of breaking US sanctions and had provided US authorities with misleading information. Mining names are on a firmer footing this morning (Stoxx 600 basic resources +0.9%) with Co.’s in the sector cheering the ongoing rally in precious metals prices with spot gold breaching its all-time high at USD 1921.75/oz and spot silver higher by around 6%. Other notable movers include Atlantia (+4.8%) after source reports noted Italy's CDP is open to acquiring a controlling stake in the Co.'s Autostrade in an attempt to resolve pricing concerns for the unit. To the downside, Rolls Royce (-5.1%) are seen lower this morning after reports in the Telegraph stated the Co. is looking into an emergency sale of its ITP Aero division that builds parts for the Eurofighter Typhoon as it looks to raise billions to deal with the fallout form COVID-19.

FX

USD – The Dollar is looking increasingly weak on the bearish combination of US-China angst, 2nd wave coronavirus concerns and delays to more fiscal stimulus after extending losses overnight with the return of Japanese markets from their 4-day long holiday weekend, but GOLD and fellow precious metals continue to lead advances against the Greenback following a breach of the prior record peak and Xau setting a new ATH around Usd 1944/oz. However, the index has pared some declines ahead of sub-94.000 technical support at 93.814 (21 September 2018 low) and another base from 2 years ago at 93.713 (July 9) in the run up to US durable goods and the Dallas Fed manufacturing index.

JPY/NZD/EUR/AUD/GBP – The Yen has strengthened further vs the Buck and through 106.00 to test half round number resistance at 105.50, while the Kiwi pivots 0.6650 and Euro is straddling 1.1700 with some underlying traction from a broadly better than expected Ifo survey. Similarly, the Aussie is rotating around 0.7100 as US Dollar weakness more than offsets the ongoing COVID-19 spread in Victoria and RBA’s Kent underlines little concern about the current Aud/Usd level. Elsewhere, Sterling has also traversed another big figure largely at the Greenback’s expense, but faces a key chart obstacle in the form of a 1.2842 Fib retracement to compound no deal Brexit risk.

CAD/CHF/SEK/NOK – Soft oil prices and flaky risk sentiment are hampering the Loonie to a degree as it rotates either side of 1.3400, while the Franc seems reluctant to rally too far above 0.9200 given the latest jump in Swiss sight deposit balances alluding to more official intervention. However, the Scandinavian Crowns have both regained momentum vs the Euro within 10.3030-10.2665 and 10.6930-6325 parameters on solid fundamental and technical impulses (like Swedish household lending staying firm in June).

EM –The Rand is a regional outperformer and eyeing 16.5100 against the Dollar awaiting news from the IMF about SA’s request for a Usd 4.2 bn credit line to help fund anti-virus measures, but the Lira is still struggling to break free from 6.8500 even though Turkish manufacturing confidence improved to 100+ in July.

Fitch affirmed Greece at 'BB'; Outlook Stable. (Newswires)

S&P affirmed Turkey at B+; Outlook stable. (Newswires)

FIXED

The recovery in Bunds, Gilts and US Treasuries has gathered pace in recent trade and perhaps in recognition of the fact that EU equities led by the Dax did not derive more leverage from the encouraging elements of the Ifo survey. Moreover, the core Eurozone bond will have taken note of Italian debt retreating further from best levels amidst concern that EU rescue funds won’t be available early enough to cover the costs of COVID-19 support from Rome. The 10 year German bond has now reached 176.56, UK equivalent 138.25 and US 139-24 vs 175.96, 137.95 and 139-17 at worst to expose interim resistance ahead of Friday’s more meaningful peaks (176.98, 138.46 and 139-25 respectively). In terms of what still lies ahead on Monday’s agenda, US durable goods and Dallas Fed manufacturing straddle the weekly ECB QE updates and then front-loaded pre-FOMC supply kicks off via 2 and 5 T-notes. However, GOP stimulus may be the headline event.

COMMODITIES

WTI and Brent crude futures have begun the week on the backfoot, following the relatively indecisive performance in European equity bourses. For the complex itself, attention remains on what is now Tropical Storm Hanna after being downgraded from a Hurricane once it made landfall in the Southern Texas Coast, a downgrade which place crude prices under mild pressure at the time. Elsewhere, the complex has seen a few refinery updates notably the Marathon Galveston Bay, Texas (585k BPD) facility is said to be restarting units following on from a two-month overhaul while Total are selling their Lindsey (200k BPD) refinery to the Prax group. Looking ahead for the complex it’s a similar story to last week with little on the scheduling front aside from the usual weekly updates. As such, and given overnight price action, precious metals may once again hold the commodity markets gaze as spot gold has set a record high at USD 1944.45/oz and silver prices are bolstered by some 6% given USD weakness and the continuing decline for real yields. Elsewhere, base metals came under pressure during APAC hours given ongoing US-China tensions, but downside is limited by dollar downside.

Hanna has been downgraded to a Tropical Storm after making landfall in the Southern Texas Coast on Saturday as a category one hurricane. (NHC) South Texas called for evacuations ahead of the landfall. (Newswires)

Mexico is reportedly looking to launch its annual oil hedge, according to sources, who expect the hedge to be smaller this year due to the elevated prices of options. (Newswires)

Marathon's 585k BPD Galveston Bay, Texas refinery is said to be restarting its units following a two-month overhaul, sources state. (Newswires)

Baker Hughes US rig count (w/e July 25th): Oil +1 at 181, Nat Gas -3 at 68, Total -2 at 251. (Newswires)