• Sentiment has deteriorated throughout the morning with focus very much on the busiest day of earnings season for Europe & US
• White House Chief of Staff Meadows said we are nowhere close to a deal; talks expected to resume today
• Johnson & Johnson (JNJ) - Single dose of the COVID-19 vaccine candidate demonstrates robust protection in pre-clinical studies
• Several Hong Kong opposition candidates say they have been disqualified from running in legislative council elections
• China's Ambassador to the UK says that the UK has meddled in HK affairs; undermining stability in the region. London has poisoned the relationship
• USD remains firm but by a small magnitude with major peers mixed but XAU pressured, UST yield curve is modestly bull-flattening
• Looking ahead highlights include US GDP Advance, PCE Prices & Initial/Continued Jobless Claims, supply from Italy
• Earnings include Amazon, Apple, Alphabet, Ford, Gilead, Mastercard

CORONAVIRUS UPDATE

Major newswire tally later reported that US coronavirus cases rose by at least 65,846 to 4.44mln and deaths rose by at least 1,468 to 151,241 which is the largest daily increase in deaths since May 27th. Texas cases increased by 9042 (Prev. +8,432) and death toll rose by a record 313 (Prev. +164)), while New York COVID-19 cases +715 (Prev. +534) and deaths rose by 5 (Prev. +9). (Newswires)

Florida is said to be shutting all state managed COVID testing sites from 17:00ET on Thursday due to a potential tropical storm in which the closure could last until next Wednesday, according to NYT's Mazzei. (Twitter)

Australia’s Victoria state Premier confirmed a record 723 additional coronavirus cases and announced that face masks are now mandatory across the state, while there were later comments from Australian PM Morrison that the coronavirus spike in Victoria state is very concerning. (Newswires)

Tokyo confirmed at least 365 new cases of coronavirus infections for Thursday, while the city will reportedly ask restaurants and karaoke bars to reduce hours between August 3rd-31st amid surge in virus cases. (Fuji TV, Nikkei)

Johnson & Johnson (JNJ) - Single dose of the COVID-19 vaccine candidate demonstrates robust protection in pre-clinical studies. First in-human Phase 1/2A clinical trial underway in US & Belgium; Phase 3 to commence in September; Study shows the candidate elicited a strong immune response which protected against subsequent infection. Phase 1/2A trial will  include over 1k adults; will evaluate both 1 & 2 dose scenarios. (Newswires)

Fears over a second wave of COVID-19 in the UK have been triggered by a warning from scientists at Cambridge University who have stated that the R-rate is now close to one in every part of the country. (Telegraph) UK Health Secretary Hancock increased the self-isolation time for those with COVID-19 symptoms to 10-days vs. current 7-days. Additionally, enhanced restrictions for Leicester are expected to be reviewed today. (BBC)  

ASIA

Asian equity markets were mostly kept afloat as the region took advantage of the post-FOMC tailwinds from Wall Street and as focus was centred on a deluge of earnings releases. ASX 200 (+0.7%) was led by outperformance in the tech sector and with mining names underpinned by Rio Tinto earnings. Nikkei 225 (-0.2%) also began positively although gains were later reversed amid recent currency strength and after Retail Sales Y/Y topped estimates but remained in contractionary territory. Furthermore, notable movers have been driven by corporate updates with Nomura Holdings the biggest gainer, while Isetan Mitsukoshi, TEPCO and Sumitomo Mitsui Financial Group are at the other side of the spectrum on dismal results. KOSPI (+0.3%) began the session on the front foot to print its best level since October 2018 after encouraging earnings from Samsung Electronics although some of the gains were later pared after shares of the tech and index behemoth stalled around the KRW 60,000 level. Elsewhere, Hang Seng (+1.1%) and Shanghai Comp. (+0.1%) were varied with indecision seen in the mainland following the prior day’s outperformance and after the PBoC opted for a neutral position in its latest liquidity operations. Finally, 10yr JGBs were subdued amid the flimsy sentiment in Tokyo and mostly weaker results at the 2yr JGB auction.

PBoC injected CNY 50bln via 7-day reverse repos for a net neutral daily position and maintained the reverse repo rate at 2.20%, while it also announced to conduct a CNY 5.0bln central bank bill swap. (Newswires) PBoC set USD/CNY mid-point at 6.9902 vs. Exp. 6.9939 (Prev. 6.9969)

Japanese Retail Sales (Jun) M/M 13.1% vs. Exp. 8.0% (Prev. 2.1%). (Newswires) Japanese Retail Sales (Jun) Y/Y -1.2% vs. Exp. -6.5% (Prev. -12.3%, Rev. -12.5%)

Japan has lowered its FY 2020 real GDP forecast to -4.5% and cautions that it could stretch to -% in the event of a 2nd large-scale COVID-19 outbreak overseas. (Newswires)

GEOPOLITICAL

Several Hong Kong opposition candidates say they have been disqualified from running in legislative council elections; 12 candidates including Joshua Wong have been disqualified. (Newswires)

Russian court has sentenced a US student accused of assault to 9-years in prison. (Newswires)

City Official's in China's Urumqi have told residents not to leave the city unless necessary. (Newswires)

US

US Senate Majority Leader McConnell said he hopes Republicans and Democrats can reach an agreement on unemployment by Friday, while he added that politicians should be negotiating eviction relief and that issues unrelated to coronavirus should be removed from stimulus. (Newswires)

White House Chief of Staff Meadows said we are nowhere close to a deal after leaving House Speaker Pelosi's office, while he also commented that Democrats are unwilling to do a short term unemployment insurance extension and predicts USD 600/week benefit will now expire. (Politico/Bloomberg/Twitter)

More discussions are expected today on the coronavirus bill with the two sides still far apart, according to Fox's Pergram. (Twitter)

White House Official said the administration is working on initiative to encourage US firms to shift production back to Americas from Asia which could bring back USD 30bln-50bln in US investment back to Americas from Asia. (Newswires)

Optimus Poll showed former VP Biden at 48% vs. President Trump at 40% (Prev. 45% vs. 41%) and Democrats at 45% vs. Republicans at 38% (Prev. 43% vs. 40%), conducted on July 28th. (Twitter)

UK/EU

China's Ambassador to the UK says that the UK has meddled in HK affairs; undermining stability in the region. London has poisoned the relationship. (Newswires)

UK widened the small business loan scheme to allow more smaller companies to have access to the government loan scheme after the EU relaxed state aid regulations, according to the Minister for Small Business, Consumer and Labour Markets Paul Scully. (Newswires)

UK & Japan trade talks are expected to continue past the July 31st deadline as, while many sections of the treaty are complete, concerns remain over market access, investment protection & rules of origin, according to officials. (FT)

UK car manufacturing declined by 42% during H1 to its lowest level since 1954. (FT)

EU Consumer Confidence Final (Jul) -15.0 vs. Exp. -15.0 (Prev. -15.0, Rev. -14.7)

-        Economic Sentiment (Jul) 82.3 vs. Exp. 81.0 (Prev. 75.7, Rev. 75.8)

-        Unemployment Rate (Jun) 7.8% vs. Exp. 7.7% (Prev. 7.4%, Rev. 7.7%)

German Saxony State CPI YY (Jul) 0.2% (Prev. 1.0%); MM (Jul) -0.5% (Prev. 0.6%)

-        Note, the nationwide Prelim. print for Germany is expected at 0.2% YY (Prev. 0.9%) & -0.2% MM (Prev. 0.6%)

EQUITIES

European equities (Eurostoxx 50 -1.7%) trade lower across the board with selling pressure continuing to pick up throughout the session amid a backdrop of light macro newsflow and a particularly busy earnings slate. Despite selling pressure in equity index futures becoming more prominent throughout the session, equity-specific focus has largely been centred around individual pre-market earnings reports from a vast number of large-cap names from across the region. Sector-wise, auto names are a notable laggard amid earnings from Volkswagen (-5.7%) and Renault (-5.7%) with the former reporting a H1 loss of EUR 1.4bln (prev. profit of EUR 9.6bln) and the latter posting a EUR 7.4bln loss; Renault CEO noting that results have acted as a “disturbing wake up call”. For the banking sector, Lloyds (-7.4%) trade lower after posting a GBP 602mln loss (prev. profit of GBP 2.9bln), Standard Chartered (-3.6%) and BBVA (-7.9%) are also down on the day post-earnings, whilst some reprieve for the sector has been presented by Credit Suisse (+0.2) after the Co. posted a 24% increase in net income whilst also announcing some structural changes in its operations. Large-cap energy names Shell (-1.7%) and Total (+1.3%) have both come to market with Q2 earnings today in which the former posting a USD 16.8bln writedown on its assets and the latter managing to avoid entering the red after recording a net income figure of USD 126mln during the quarter. Elsewhere, AstraZeneca (+2.8%) are a notable outperformer after reporting an increase in H1 profits and revenues with performance boosted by new medicines with the Co. continuing to focus on developing a vaccine for COVID-19. Swiss heavyweight Nestle (+0.4%) are firmer this morning after H1 organic sales rose 2.8% vs. Exp. 2.3% despite the fallout from the pandemic. Airbus (+3.0%) are another outperformer post-earnings despite posting a H1 loss of EUR 1.9bln with the Co. vowing to stem its sizable cash outflows. AB InBev (+5.4%) sit near the top of the Stoxx 600 after Q2 sales figures exceeded expectations during the pandemic. To the downside, Casino (-15.8%) reside at the bottom of the Stoxx 600 after posting a drop in sales and trading profits

EU antitrust regulators are to open a full scale investigation into Google (GOOGL) bid for Fitbit (FIT), according to sources. (Newswires)

United Parcel Service (UPS) Q2 2020 (USD): EPS 2.13 (exp. 1.07/1.10 reported); Revenue 20.5bln (exp. 17.48bln)

FX

USD - The Greenback continues to regroup after a knee-jerk slide in wake of the dovish/downbeat FOMC, as broad risk sentiment sours on heightened 2nd wave COVID-19 prompted by the latest daily updates showing increases in infections and deaths to new record levels in several cases. As such, the Buck has bounced across the board with the DXY pivoting 93.500 within 93.308-685 bounds compared to a low of 93.169 at one stage on Wednesday and now eyeing 2 top-tier US data points for near term direction (weekly initial claims and Q2 GDP) before remaining month end rebalancing kicks in.

AUD/NZD/CAD/NOK - No big surprise that the high beta, cyclical and commodity currencies have been hit hardest by renewed aversion and the mini or partial US Dollar revival, as the Aussie also laments another rise in virus cases in Victoria and retreats further nigh on 0.7200 peaks towards 0.7125, while the Kiwi fails to glean any lasting traction from improvements in ANZ business sentiment or an even bigger rebound in the outlook, with 0.6600 more tangible than 0.6700 that seemed reachable at one stage. Similarly, the Loonie has reversed sharply from multi-week highs around 1.3330 to sub-1.3400 against the backdrop of waning crude prices and the Norwegian Krona is back below 10.7000 vs the Euro even though the latter has unwound gains elsewhere.

EUR/SEK/CHF/JPY/GBP - All backing off amidst the downturn in risk appetite and Greenback recovery, with the single currency testing bids under 1.1750 having rallied just above 1.1800 late yesterday, but not quite far enough to probe the bottom end of a resistance zone stretching from 1.1815 to 1.1851 that includes a key Fib retracement (1.1822). However, the Swedish Crown has slipped through 10.3000 against the Euro in contrast to the Franc that is straddling 1.0750 and only handing back a portion of its gains vs the Buck between 0.9151-21 parameters in keeping with the safe-haven Yen that is holding a tight range either side of 105.00. Last, but not least, the Pound is actually confounding normal conventions, to a degree, and retaining sight of 1.3000, albeit capped ahead of Wednesday’s 1.3014 pinnacle and a chart hurdle just a few pips above (1.3018).

EM - General depreciation on overall risk factors, but the Rand also losing ground with GOLD, Rouble alongside Brent, Lira on a lack of Turkish reserves to arrest the slide and Mexican Peso ahead of Q2 GDP that is expected to extend the recessionary run to 5 quarters and by record margins.

New Zealand ANZ Business Confidence (Jul) -31.8% (Prev. -34.4%). (Newswires) New Zealand ANZ Activity Outlook (Jul) -8.9% (Prev. -25.9%)

FIXED

It could well be month end related, but debt and equities appear to be back in lock-step or inversely linked by conventional asset correlations anyway as 2nd wave coronavirus fears grow. Indeed, Bunds, Gilts and US Treasuries have all carved out new cycle peaks and are still advancing, at 177.51, 138.58 and 139-30 respectively on building safe-haven demand. Ahead, lots more data and potential drivers for bonds and stocks, headlined by latest US weekly claims and Q2 GDP.

COMMODITIES

WTI and Brent are in the red this morning following the general downturn in sentiment this morning which features European & US equity bourses firmly in negative territory on the busiest earnings session of the season for both European & US Co’s. For crude explicitly there hasn’t been anything fundamentally new for the complex since yesterday’s EIAs and as such it is once again tracking sentiment generally. Albeit, we did see updates from Total and Shell this morning who both highlighted strong oil trading results for the quarter which acted to mitigate some of the declines from energy prices. Additionally, on the mid-term supply front Shell CEO Beurden noted that they will only be drilling 22 exploratory wells this year which is some way below the originally guided 77. Moving to metals, spot gold is subdued this morning as the USD continues to grind higher; although, the precious metal is still in proximity to the USD 1950/oz mark a level which it was in proximity to around this time yesterday as well. Separately, for the metal ING believe it surpassing the USD 2000/oz mark is just a matter of time and forecast prices to be at USD 2100/oz by year-end. Elsewhere of note for cobalt and key miners of the metal such as Glencore where Panasonic are to launch cobalt free Tesla batteries in 2-3 years and have reduced the amount of cobalt used to below 5%.