• Asian equity markets traded lacklustre heading into month-end after somewhat mixed Chinese PMI data with the region failing to take advantage of the momentum from US
• US futures were boosted after-hours following big tech earnings in which Apple, Alphabet, Amazon and Facebook all beat on top and bottom lines
• DXY continued to weaken and extended its decline below the 93.00, EUR/USD briefly breached 1.1900 and GBP/USD remains above 1.3100
• US President Trump said he does not want a delay of 2020 election but thinks mail-in ballots will cause issues
• White House Chief of Staff Meadows that it is too late to avert a gap on unemployment insurance and that he was not even optimistic about next week
• Looking ahead highlights include EZ CPI (Flash) & GDP (Prelim), US PCE & Core PCE Price Index, Chicago PMI & University of Michigan (Final), Canadian GDP
• Earnings: Exxon, Chevron, Phillips 66, Caterpillar, Merck, Colgate

CORONAVIRUS UPDATE

US COVID-19 cases rose 65,935 (Prev. +59,862) and deaths rose by 1,417 (Prev. +1,194), while a major newswire reported that US coronavirus cases rose by at least 67,783 to 4.51mln and deaths rose by at least 1,187 to 152,383. California COVID-19 cases rose by 10,197 (Prev. +8,755) and deaths increased by 194 (Prev. +197), while Texas coronavirus cases rose by 8,800 to 412,107 (Prev.+9,042) and deaths rose by 322 (Prev. +313). (Newswires)

US President Trump reiterated tremendous progress has been made on vaccines, while he reportedly ordered immediate COVID-19 tests and has lined up the military for vaccine distribution. (Newswires)

NIH's Fauci said convalescent plasma and vaccine work is emerging and reiterated he is cautiously optimistic on a vaccine, while it was also noted that LabCorp (LH) is to offer a free antibody test program to help accelerate COVID-19 blood plasma donation and that health officials urged those who had COVID-19 to donate plasma to help the fight against the virus. In related news, a US Health official noted that "several hundred" people were vaccinated in the first day of Pfizer (PFE) & BioNTech's (BNTX), as well as Moderna's (MRNA) COVID-19 vaccine trials. (Newswires)

Spain COVID-19 cases rose by 2,789 (Prev. +2,031) which was the largest rate of increase since the lockdown was lifted on June 21st, while France’s Health Agency warned that COVID-19 spread is accelerating and people in ICU units are up for the first time in more than 16 weeks. (Newswires)

UK government announced a major local lockdown for Greater Manchester, East Lancashire and parts of West Yorkshire, while the news rules would permit households to can go to restaurants and pubs although new guidelines will elaborate that 2 households should not go to hospitality together, according to ITV's Paul Brand. (ITV/Twitter)

ASIA

Asian equity markets traded lacklustre heading into month-end after somewhat mixed Chinese PMI data with the region failing to take advantage of the momentum from US, where futures were boosted after-hours following big tech earnings in which Apple, Alphabet, Amazon and Facebook all beat on top and bottom lines. ASX 200 (-1.9%) was dragged lower by underperformance in the commodity related sectors and with the top-weighted financials also heavily pressured, while there were reports that Australian PM Morrison recently held emergency discussions with the Victoria state Premier which included possible further restrictions for movement within Melbourne and a shutdown of non-essential businesses. Nikkei 225 (-2.4%) was hampered by unfavourable currency flows and although Industrial Production data beat expectations for June, quarterly output was at a decline of 16.7% which was the largest drop according to comparable data since 2015. Furthermore, the biggest movers were driven by earnings including Panasonic, while SoftBank shares also suffered due to the currency effects despite a share repurchase announcement of up to 12.3% of shares for JPY 1tln. Hang Seng (+0.2%) and Shanghai Comp. (-0.1%) were both initially positive with outperformance in the mainland after the PBoC’s liquidity efforts resulted to a net weekly injection of CNY 120bln, although this eventually faded following the latest mixed data releases in which Chinese Official Manufacturing PMI topped estimates but Non-Manufacturing PMI missed and Composite PMI slowed although all figures remained in expansionary territory. Finally, 10yr JGBs eked mild gains amid the soured risk appetite in the region and with the BoJ present in the market for JPY 450bln of JGBs predominantly concentrated in the belly of the curve.

PBoC injected CNY 20bln via 7-day reverse repos for a weekly net injection of CNY 120bln vs. Prev. weekly net drain of CNY 170bln and it maintained the 7-day reverse repo rate at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.9848 vs. Exp. 6.9781 (Prev. 6.9902)

Chinese Manufacturing PMI (Jul) 51.1 vs. Exp. 50.7 (Prev. 50.9) Chinese Non-Manufacturing PMI (Jul) 54.2 vs. Exp. 54.5 (Prev. 54.4) Chinese Composite PMI (Jul) 54.1 (Prev. 54.2)

US Senate Committee backed allowing Americans to sue China over the virus, while there were separate reports that Senators Blumenthal (Dem.) and Hawley (GOP) were urging the DoJ to investigate Zoom and TikTok. Furthermore, US Department of Transport refused to approve flights from Chinese carriers and blamed Chinese government actions of restricting airlines and a US security official separately alleged that Chinese Government-backed hackers targeted Moderna (MRNA) in a move to try and steal valuable data. (Newswires)

Japanese Industrial Production (Jun) M/M 2.7% vs. Exp. 1.2% (Prev. -8.9%). (Newswires) Japanese Industrial Production (Jun P) Y/Y -17.7% vs. Exp. -19.3% (Prev. -26.3%)

Japan’s government raised its assessment on Industrial Production in which it stated that the fall has stopped and is picking up, although a METI official said that April-June output decline of 16.7% was the largest quarterly drop according to comparable data since 2015. (Newswires)

UK/EU

Confederation of British Industry warns most companies lack time and resources to prepare for a no-deal Brexit with 20% of firms said to be less prepared than they were at the start of the year due to disruptions form the pandemic, according to the FT. (FT)

FX

The DXY continued to weaken and extended its decline below the 93.00 level after recent grim data ahead of the looming expiry of USD 600/week Unemployment Benefits. Furthermore, Senate GOP efforts to pass an extension to enhanced jobless benefits at a rate of USD 200/week failed and there were also comments from White House Chief of Staff Meadows that it is too late to avert a gap on unemployment insurance and that he was not even optimistic about next week. The greenback’s major counterparts were lifted in which EUR/USD tested 1.1900 to the upside and GBP/USD gained a firmer footing at the 1.3100 handle despite the rising COVID concerns in some parts of the EU and the UK government announcing a major local lockdown in parts of northern England, as the broad USD weakness remained the main narrative across the FX space. Elsewhere, USD/JPY retreated further below the 105.00 handle which has prompted some mild jawboning from officials, while antipodeans held on to recent gains but with advances limited after softer PPI and Private Sector Credit data from Australia and with ANZ warning of a material risk the New Zealand economy could enter a double dip recession in Q4.

COMMODITIES

Commodities were marginally positive on the back of continued USD weakness which helped WTI recoup some of the losses seen during yesterday’s trade where price took out key support levels and briefly dipped below USD 39.00/bbl amid ongoing demand concerns due to second wave virus fears. Nonetheless, WTI crude futures have since recovered off their lows with price action kept around USD 40.00/bbl level throughout the overnight session. Elsewhere, gold prices were underpinned by the USD woes and copper also gained but with upside restricted by the indecisive risk tone and following mixed Chinese PMI data.

GEOPOLITICAL

US Secretary of State Pompeo said US will widen Iran metals-related sanctions to 22 additional materials. (Newswires)

US

The Treasury curve bull flattened more pronouncedly on Thursday after a bout of risk-off saw yields dip lower into new territory. By settlement, 2s -1bps at 12bps, 5s -2bps at 23bps, 10s -4bps at 54bps, and 30s -5bps 119bps. Yields had already been falling overnight alongside equities, taking the 10-year beneath the key 57bps level that it had, up to now, respected. Yields hit their lowest right after the Tier 1 data slate out of the US, where risk assets came under further pressure as continuing claims rose for the first time since early May and the grim, historic Q2 GDP print. Reports noted that real and fast money accounts were said to be “chasing” algo buy programmes that got triggered as yields sunk further. The push saw the 10-year touch an intraday low of 53.8bps, at the same time, 5s made a new all-time low again at 22.8bps, while the 2-year made a low of 11.7bps, just short of its all-time low of 10.5bps in May. As the session extended the strength in USTs faded, somewhat, as equities made their ways off of lows, where dealers and relative value accounts were reported to have seized the low yields and taken some profits on longs. T-note (U0) futures settled 8+ ticks higher at 140-00+.

US President Trump said he wants temporary extension of extra unemployment benefits and is asking Democrats to help approve legislation on eviction moratorium, while he also commented that he does not want a delay of 2020 election but thinks mail-in ballots will cause issues and also blamed China for the impact from COVID-19. (Newswires)

US Treasury Secretary Mnuchin said we are going back to the negotiating table and that the best-case scenario is that a deal is made in the next few days but added it will take time to reach an unemployment deal. (Twitter)

White House Chief of Staff Meadows said it is too late to avert a gap on unemployment insurance and had been hopeful regarding a deal for unemployment but later noted that he was not even optimistic about next week. (Newswires/Twitter)

US Senate Majority Leader McConnell is planning to move the Senate towards test votes early next week on unemployment insurance and other extenders, while GOP Senators Romney, Collins and McSally were also reported to have introduced a jobless aid extension bill. (Newswires)

US Senate GOP's were said to be moving towards offering a standalone extension of enhanced unemployment benefits, temporarily stepping back from a big package ahead of the deadline today, although it was later reported that the US Senate failed to pass extension to enhanced jobless benefits at a rate of USD 200/week. (Politico/Newswires)

After-Market Earnings

Alphabet Inc Class C (GOOG) (Communication Services/Interactive Media & Services) Q2 20 (USD): EPS 10.13 (exp. 8.21/8.29 reported); Revenue 38.3bln (exp. 37.37bln). Additional 28bln Class C share buybacks authorized. Revenue breakdown: Advertising: 29.87bln (exp. 29.74bln). YouTube ads revenue: 3.82bln (prev. 4.04bln). Cloud: 3.00bln (exp. 3.09bln). Other bets: 0.148bln (exp. 0.152bln). Traffic acquisition costs: 6.69bln (exp. 6.71bln). Saw increased revenue for the Play store due to active buyers amid lockdown, CFO noted a gradual improvement in its advertising business has been seen throughout Q2. Co. shares were seen higher by 0.5% in after-market trade.

Amazon.com Inc. (AMZN) (Consumer Discretionary/Internet & Direct Marketing Retail) Q2 20 (USD): EPS 10.30 (exp. 1.46/1.34 reported); Revenue 88.9bln (exp. 81.56bln). Segment breakdown: AWS: 10.81bln (exp. 10.93bln). Online stores: 45.9bln (exp. 40.23bln). Other: 4.2bln (exp. 3.90bln). Physical stores: 3.77bln (exp. 4.48bln). Subscription services: 6.01bln (exp. 5.98bln). Third party seller services: 18.2bln (exp. 15.62bln). Worldwide quarterly shipping costs: 13.65bln (prev. 10.94bln). Guidance: Q3: Revenue 87-93bln (exp. 86.34bln). Saw high prime membership engagement during the quarter. Co. shares were seen higher by 5% in after-market trade.

Apple (AAPL) Q3 2020 (USD): EPS 2.58 (exp. 2.04); Revenue 59.69bln (exp. 52.25bln), Co. announces 4:1 stock split effective August 24th, refrains from Q4 guidance. Revenue breakdown: iPhone: 26.42bln (exp. 22.37bln). Services: 13.16bln (exp. 13.18bln). Mac: 7.08bln (exp. 6.06bln). iPad: 6.58bln (exp. 4.88bln). Wearables: 6.45bln (prev. 6.28bln) expects to see current iPhone performance to persist in the September quarter although anticipates new iPhone supply to be delayed. Seeing higher switcher rate from Android after the iPhone SE release. Q3 sales boosted by strong iPhone SE launch and stimulus. CEO Cook is “profoundly optimistic” about future of the co, while customers response to its new MacBook’s is extremely strong; expects to see Mac performance in Q3 continue into Q4. The new iPhone will be launched a few weeks later than usual. On its Apple TV+, it is yet to meaningfully restart production of Apple TV+ series due to COVID-19. Co. shares were seen higher by 6.4% in after-market trade.

Facebook, Inc. (FB) (Communication Services/Interactive Media & Services) Q2 20 (USD): EPS 1.80 (exp. 1.39); Revenue 18.7bln (exp. 17.4bln). EPS 1.80 (exp. 1.39); Revenue 18.7bln (exp. 17.4bln). Advertising revenue: 18.3bln (exp. 16.79-17.31bln) expect full quarter year-over-year ad revenue growth rate for the third quarter of 2020 will be roughly similar to this July performance. Users: Expects the number of Facebook DAUs and MAUs to be flat or slightly down in most regions in the third quarter of 2020 compared to the second quarter of 2020. DAUs: 1.79 bln (exp. 1.75bln). MAUs: 2.7bln (exp. 2.62bln). Co. shares were seen higher by 6.5% in after-market trade.