• Price action is tentative and largely directionless for European bourses after similar APAC session while US futures are marginally positive
• DXY has slipped further after yesterday’s initial late-door pullback, with major peers firmer as such while UST yield curve is slightly steeper
• US President Trump said there are some parts of the Republican coronavirus relief bill he does not support but didn’t specify which parts
• US Senate Democratic Minority Leader Schumer said the business liability requirement in GOP coronavirus relief plan is unacceptable
• Looking ahead highlights include FOMC Rate Decision & Press Conference.
• Earnings include Boeing

CORONAVIRUS UPDATE

US President Trump gave a press conference in which he referred to the pandemic as the "China virus" and also noted that Pfizer vaccine is heading in a very positive direction, while he congratulated Kodak on the production deal with US to produce critical pharmaceuticals and stated the DPA is being used to provide USD 675mln loan to launch Kodak Pharmaceuticals. (Newswires)

Moderna (MRNA) is pitching its virus vaccine at USD 50-60 per course for US and other high-income countries which it intends to prioritize. (Newswires)

California coronavirus cases, according to a major newswire, increased by at least 10,063 and deaths rose by at least 171 which would be the largest on record. Texas coronavirus cases rose by 8,432 to 394,265 (prev. +4,267) and deaths rose by 164 to 5,877 (prev. +44), while a major newswire tally stated that coronavirus cases increased by at least 10,029 to a total of 412,121 and the death toll rose by at least 221 to 6,506 which would be a record increase. (Newswires)

Russia is reportedly preparing for the world's first approval of a Covid-19 vaccine by mid-August, although questions remain regarding safety and effectiveness. In other news, US officials alleged that Russia is spreading coronavirus disinformation through 3 English-language websites. (Newswires/AP)

UK Gov’t vaccine task force Chair Bingham has said it is more likely a vaccine which provides only a year's immunity or mitigates symptoms will be developed, rather than a ‘silver bullet’. (FT)

UK recovery trial says it "will be continuing with the Tocilizumab arm" of the possible COVID treatment despite the failure in the Roche (ROG SW) trial. (Newswires)

European Commission have signed a contract with Gilead (GILD) for COVID-19 medicine. (Newswires)

Hong Kong Chief Executive Lam has warned the city is on the verge of a large scale community outbreak given increasing COVID-19 cases. (BBC)

ASIA

Asian equity markets traded somewhat indecisively following a lacklustre handover from Wall St where participants pondered over a slew of mixed earnings and as the looming FOMC conclusion and approaching fiscal cliff added to the cautious tone. ASX 200 (-0.2%) and Nikkei 225 (-1.2%) were subdued with Australia contained by underperformance in the commodity-related sectors and tech, as well as the ongoing second wave fears which has prompted Queensland state to shut all borders to the greater Sydney area in New South Wales, while Tokyo stocks were hampered by detrimental currency flows and with focus also centred on earnings updates. This includes Nissan which shares slumped around 10% after it flagged a record loss for the year and Canon shares suffered double-digit declines following an 80%  drop in H1 net, while McDonald's Holdings Japan were also heavily pressured on news McDonald's Corp plans to substantially reduce its stake in the Co. to around 35% from 49.99%. Hang Seng (+0.5%) and Shanghai Comp. (+2.1%) swung between gains and losses with early opening weakness eventually pared after the PBoC’s marginal liquidity effort and with headlines also dominated by earnings updates. Finally, 10yr JGBs gained as they took their cue from the bull flattening in US and subdued risk appetite in Tokyo, while the presence of the BoJ added to the support with the central bank in the market for JPY 800bln heavily focused on 1yr-5yr maturities.

PBoC injected CNY 30bln via 7-day reverse repos for a net injection of CNY 30bln PBoC set USD/CNY mid-point at 6.9969 vs. Exp. 6.9964 (Prev. 6.9895) 

Fitch affirmed Japan’s sovereign rating at A; but revised the Outlook to Negative from Stable. Fitch said it sees Japan's economy contracting 5% this year before rebounding to 3.2% growth next year, while it expects the BoJ to maintain current interest rate settings through at least end-2022 under YCC framework. (Newswires)

GEOPOLITICAL

China's Global Times tweeted that rumours say the US could launch attacks on Chinese islands and reefs in the South China Sea, but this is basically impossible as US knows this will lead to an all-out war, citing an expert. (Newswires/Tweeter)

Yemen’s government and southern separatists reached an agreement regarding power sharing. (Newswires)

US

US President Trump said there are some parts of the Republican coronavirus relief bill he does not support but didn’t specify which parts, while he responded that they are going to take care of the people when questioned regarding expiring federal unemployment benefits. (Newswires)

Reported that US Senate Republicans are deeply divided regarding their own coronavirus package and White House Chief of Staff Meadows commented that Democrats indicated they are unwilling to negotiate down their demand for extending the USD 600/week supplemental unemployment benefit. (Newswires/The Hill)

US Senate Majority Leader McConnell suggested it will be difficult to predict when both chambers will be able to pass a bipartisan stimulus bill. (CNBC)

US Senate Democratic Minority Leader Schumer said the business liability requirement in GOP coronavirus relief plan is unacceptable. There were also separate comments from US House Speaker Pelosi that she does not believe US Senate Majority Leader McConnell is ready to make a deal regarding virus relief, while she intends to meet with him on Wednesday and that both sides are airing differences. (Newswires)

UK/EU

UK BRC Shop Price Index (Jul) Y/Y -1.3% (Prev. -1.6%). (Newswires)

Curtailing the UK furlough scheme in October will be a "mistake" that will cost 1.2mln jobs in 2020, according to Niesr. (The Times) 

BoE's Haldane says that when he spoke to estate agents during his visit to the Northeast England, they reported a rapid rebound since May, optimism was tempered following meeting with community groups and local charities. (Newswires)

ECB's Stournaras says the bank will make a decision on when to unwind its pandemic stimulus program largely based on inflation developments, suggesting that emergency asset purchases could go on for longer than initially expected. (Newswires) 

EQUITIES

European equities (Eurostoxx 50 U/C) have traded with little in the way of firm direction thus far in what has been a morning largely dominated by individual earnings reports rather than broader macro themes. Sector-wise retail names outperform peers with Kering (+4.2%) shares firmer post-earnings despite revenues plunging by around 30% and cautioning that losses in H1 revenue will likely not be offset in H2. Additionally, UK retailer Next (+6.0%) are the top performer in the Stoxx 600 post-earnings with the Co. forecasting an improvement to its baseline scenario seen in April and expectations of making a profit even in the worst-case scenario. Elsewhere, the European banking sector has been in focus today with Deutsche Bank (-2.0%) opening with gains of around 3% before staging a pullback throughout the session following pre-market earnings in which the Co. exceeded revenue expectations for Q2 and raised its revenue outlook. To the downside in the sector, Barclays (-4.3%) are lower on the session post-earnings with the Co.’s provisions coming in above expectations amid fears of a pickup in bad loans amid the fallout from COVID. Elsewhere, BASF (-4.3%) are a notable laggard in Europe after Q2 sales were negatively impacted by a slightly lower price level and were unable to provide FY guidance. UK homebuilders are also suffering this morning following earnings from Taylor Wimpey (-8.9%) after posting a GBP 39.8mln loss and forecasting a 40% decline in home completions in 2020. Looking ahead, asides from the FOMC and wrangling in Washington over the stimulus bill, today’s docket sees another busy one for earnings with Anthem, Spotify, General Electric, Boston Scientific, Boeing, General Motors due to report in the pre-market with Qualcomm and Paypal due after-hours.

FX

USD – Some may cite pre-FOMC caution as a reason for renewed downside pressure, but in truth the Greenback was already wilting towards the end of Tuesday’s EU session after the DXY failed to build a base back on the 94.000 handle and the index is now struggling to keep sight of 93.500 within a 93.800-385 range. Prior to the main events (policy announcement at 19.00BST and press conference chaired by Powell at 19.30BST), a raft of US data, but nothing top-tier or likely to alter the Buck’s largely luckless fortunes, especially as month end selling could start in earnest from today.

AUD/CHF/EUR – The major beneficiaries of the latest US Dollar downturn, with the Aussie within a whisker of recent highs and not too far from 0.7200 in wake of fractionally better than expected Q2 CPI data overnight (though still deflationary and the biggest q/q decline on record). Meanwhile, the Franc is forging fresh multi-year gains through 0.9150 and the Euro has bounced following a test of 1.1700 yesterday to 1.1760+ and eyeing its 1.1781 peak from Monday, which would expose 1.1800 again and a 1.1815-51 resistance zone.

GBP/CAD/JPY/NZD – Also advancing mainly at the Greenback’s expense, as Cable breaches another key chart hurdle around 1.2955 to open a path towards option barriers said to be sitting at 1.3000, the Loonie rebounds from sub-1.3400 to circa 1.3340, the Yen makes a more convincing break above 105.00 where 1 bn option expiries reside and the Kiwi returns to pivot 0.6650 after peering above 0.6675 and similar size expiry interest. Note, little sign of angst for the Jpy after Fitch downgraded Japan’s ratings outlook to negative from stable or dovish BoJ commentary via Amamiya.

SCANDI/EM – Relatively upbeat Swedish industrial sentiment indicators helping to keep the Krona afloat and a bounce in crude assisting the Norwegian Crown, while EM currencies are deriving varying degrees of support from the broadly weak Buck. However, the Rand is also inflated by SA CPI rising for the first time in 4 months and Lira is lagging even though Turkish banks are said to have sold around Usd 2 bn to defend the Try and the CBRT upgraded it year end inflation forecast to 8.9% from 7.4%.

Australian CPI (Q2) Q/Q -1.9% vs. Exp. -2.0% (Prev. 0.3%). (Newswires) Australian CPI (Q2) Y/Y -0.3% vs. Exp. -0.4% (Prev. 2.2%) Australian Trimmed Mean CPI (Q2) Q/Q -0.1% vs. Exp. 0.1% (Prev. 0.5%) Australian Trimmed Mean CPI (Q2) Y/Y 1.2% vs. Exp. 1.4% (Prev. 1.8%) Australian Weighted Median CPI (Q2) Q/Q 0.1% vs. Exp. 0.1% (Prev. 0.5%) Australian Weighted Median CPI (Q2) Y/Y 1.3% vs. Exp. 1.2% (Prev. 1.7%)

FIXED

A broad loss of momentum following the ascent to fresh peaks, and perhaps some focus on pre-month end supply alongside technical selling given the lack of follow-through buying when Bunds topped out at 177.29 and Gilts waned at 138.56. However, UK debt may also have taken note of better than expected BoE data before Haldane said estate agents in the North of England are see a rapid rebound in housing activity, while pre-FOMC positioning could also have contributed to the pull-back from best levels. Similar caution in US Treasuries consolidating off recent highs with the curve largely unchanged in terms of profile in the run up to trade and housing data before the Fed and chair Powell take centre stage.

COMMODITIES

WTI and Brent front month futures are firmer by circa 1% as it stands, with newsflow for the crude complex once again quiet and little aside from last night’s private inventories which printed a larger than expected to draw of 6.83mln. While the complex is supported this morning, it is only some USD 0.20/bbl firmer on the week for WTI and still off the week’s USD 41.91/bbl high and the month’s peak of USD 42.49/oz. For the session ahead focus will be on the EIA report for confirmation of the private release; albeit, expectations look for a modest build of 0.357mln from last week’s more substantial build of 4.892mln. Turning to metals, where spot gold is trading in the middle of a much narrower range after yesterday’s downside action which saw it drop near to the USD 1900/oz mark’ at present, the low is at USD 1948/oz and high some USD 14/oz above this. Elsewhere, Rio Tinto provided a H1 update, the first major iron ore miner to do so, remarking that order books are full given strong China demand for the ore and high prices in H1 helped alleviate COVID-19 related impacts; albeit, noted the recovery for US & Europe is tentative at present.

US Private Inventory Crude Stocks crude -6.8mln vs. Exp. +0.4mln. (Newswires)

UAE's ADNOC to lower September crude oil nominations by 5% across all grades. (Newswires)