• Asian equity markets began the new trading month mixed after last Friday’s positive close on Wall St where the tech sector rallied
• US President Trump said he may ban TikTok and is looking at a lot of alternatives for TikTok
• Source reports later stated that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft
• The DXY was firmer around the 93.50 level as it extended on its rebound from fresh 2-year lows, EUR/USD is sub 1.18 and GBP/USD sub 1.31
• White House Chief of Staff Meadows suggested there is still a long way to go in coronavirus relief negotiations and that he is not optimistic of reaching a long-term deal
• Looking ahead, highlights include, EZ, UK & US Manufacturing PMIs (Final), US ISM Manufacturing PMI & Construction Spending, Fed’s Bullard & Evans
• Earnings: HSBC, Societe Generale, Natixis, Marathon, McKesson, Tyson Foods

CORONAVIRUS UPDATE

US CDC reported coronavirus cases rose by 58,947 to 4.6mln and deaths rose by 1,132 to a total of over 154k, while a major newswire tally showed that US coronavirus cases rose by at least 45,688 to 4.68mln and deaths rose by at least 420 to 155,343. (Newswires)

A major incident was declared in Greater Manchester, UK due to a continued rise in coronavirus infections with substantial increases for Manchester, Oldham and Tameside. (Manchester Evening News)

Ireland’s Health Minister said they are considering additional measures to restrict non-essential travel. (Newswires)

Australia’s Victoria state declared a state of disaster with the state capital of Melbourne to be subjected to tougher restrictions including a curfew from 8pm-5am to at least September 13th. (Sky News)

Philippines is to reimpose tougher coronavirus restrictions in and around the capital of Manila for 2 weeks from August 4th, while the health ministry reported 5,032 new coronavirus infections which was a record daily increase. (Newswires)

ASIA

Asian equity markets began the new trading month mixed after last Friday’s positive close on Wall St where the tech sector rallied following earnings from the industry giants including Apple which rose to a fresh record high, but with upside in the region restricted ahead of this week’s risk events and after continued stalemate in US coronavirus relief discussions. ASX 200 (-0.3%) was subdued as gains in commodity related sectors were offset by underperformance in the top weighted financials and with trade hampered by reduced liquidity due to bank holiday in New South Wales, while risk appetite was also weighed by a state of disaster declaration in Victoria with the state capital of Melbourne to be subjected to tougher restrictions including a curfew through to at least September 13th. Nikkei 225 (+2.2%) was the stellar performer as it coat-tailed on recent favourable currency flows and after Q1 Final GDP topped estimates, although there were some notable losses seen in Shinsei Bank and Mazda post earnings, as well as Seven & I on news it is to acquire Speedway convenience stores from Marathon Petroleum in a deal valued around USD 18.9bln. Hang Seng (-1.0%) and Shanghai Comp. (+1.1%) were mixed after PBoC inaction resulted to a CNY 100bln liquidity drain and as participants digested a more than 50% drop in HSBC HY profits, as well as the highest Chinese Caixin Manufacturing PMI reading since 2011. There was also plenty of focus around tech after reports that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft and will reportedly take action on Chinese software companies that threaten national security in the approaching days, while the worst performing index is the Philippines PSEi (-3.6%) which slumped from the open as Manila prepares to re-enter tougher coronavirus restrictions which take effect from tomorrow. Finally, 10yr JGBs were lower amid a surge in Japanese stocks and with the BoJ present in the market for JPY 450bln of JGBs predominantly focused on 1yr-3yr maturities, while the central bank recently announced its buying intentions for August in which it maintained the current pace of purchases for all maturities.

PBoC skipped reverse repo operations for a net daily drain of CNY 100bln. (Newswires) PBoC set USD/CNY mid-point at 6.9980 vs. Exp. 6.9984 (Prev. 6.9848)

Chinese Caixin Manufacturing PMI (Jul) 52.8 vs. Exp. 51.3 (Prev. 51.2); Highest since January 2011. (Newswires)

US President Trump said he may ban TikTok and is looking at a lot of alternatives for TikTok, while it was separately reported that President Trump is to order China's Bytedance to sell its TikTok US operations. In related news, China's ByteDance was said to have agreed to divest the US operations of TikTok entirely and source reports later stated that President Trump is to allow 45 days for ByteDance to negotiate the sale of TikTok to Microsoft (MSFT). (Newswires)

US Secretary of State Pompeo said that President Trump will take action on Chinese software companies that threaten national security in the approaching days. (Fox News)

Japanese GDP (Q1 F) Q/Q -0.6% vs, Exp. -0.7% (Prev. -0.6%). (Newswires) Japanese GDP (Q1 F) Y/Y -2.2% vs. Exp. -2.8% (Prev. -2.2%)

UK/EU

UK PM Johnson is said to have instructed officials to draw up nuclear plans to avert another nationwide lockdown, which is expected to involve asking millions of more people over the age of 50 to stay at home if local crackdowns are unsuccessful in curbing a 2nd wave of the outbreak. The report also noted that measures could also include the sealing off of London from the rest of the country. (The Sunday Times)

UK Trade Secretary Truss will be meeting with US officials this week, where she is expected to raise retaliatory tariffs as part of the Airbus (AIR FP) and Boeing (BA) dispute alongside the prospect of further tariffs being levied on UK goods. Sources stated that the UK Trade Secretary is expected to meet with USTR Lighthizer on Monday and Tuesday. (FT)

French Junior European Affairs Minister said the France will push for rule-of-law sanctions as part of the EU recovery plan and noted that EU must be tougher on countries such as Poland and Hungary where officials and activists have said freedoms were under threat amid alleged increasing authoritarianism. (Newswires)

FX

The DXY was firmer around the 93.50 level as it extended on its rebound from fresh 2-year lows with the recovery unfazed by the US outlook revision to Negative from Stable by Fitch and lack of breakthrough in discussions on relief during the weekend in which White House Chief of Staff Meadows suggested there is still a long way to go in coronavirus relief negotiations and that he is not optimistic of reaching a long-term deal. The greenback’s major counterparts were subdued in which EUR/USD pulled back from resistance ahead of the 1.1800 handle and breached below its 100-Hour MA at 1.1779, while GBP/USD failed in its attempt to reclaim the 1.3100 status. Elsewhere, USD/JPY held on to most of Friday’s gains despite giving back the 106.00 status and antipodeans were lacklustre due to the USD recovery with AUD tentative ahead of tomorrow’s RBA policy decision and as hedge funds are said to be resuming bearish positions on NZD for the RBNZ meeting later this month.

COMMODITIES

WTI crude futures were lacklustre amid the mixed risk appetite but with downside stemmed by a floor around the USD 40/bbl level. Furthermore, pertinent news flow was light for the energy complex with that latest Baker Hughes rig count inconsequential, although volume of crude headed for China was said to be at the lowest since early May according to reports citing super tanker movements. Elsewhere, gold prices were steady with the precious metal taking a breather from its recent surge to a new all-time high, while copper prices were subdued after Friday’s pull-back and amid the overnight indecision. 

Baker Hughes US rig count Oil rigs -1 at 180 and Nat Gas +1 at 69, while total rigs were unchanged at 251. (Newswires)

Volume of crude bound for China has plunged to its lowest level since early May with the number of large and very large crude carriers dropping by 12 to a total of 111 last week. (Newswires)

US

Yields were ultimately slightly lower again on Friday as overnight risk asset strength - aided by big tech blowout earnings - cooled into the weekend. By settlement, 2s -1bps at 11bps, 5s -2bps at 21bps, 10s -1bps at 53bps, 30s -1bps at 119bps. The weekly close beneath 57bps in the 10-year yield establishes a new range for the benchmark in what was previously sparsely explored territory, ahead of its all-time-low yield at 31.8bps, which it briefly touched and rebounded off violently back in March. The 10-year is not alone either, with other maturities in the belly making new all-time-lows this week, such as the 5-year yield. The macro narrative at this stage is the resurging COVID-19 case growth across the globe, with a fiscal cliff upon Americans (as unemployment benefits expire and no new stimulus agreed on, yet), which is calling into question any further recovery, something which high-frequency indicators (as heavily noted by the Fed) are picking up too. The crowded trade a few weeks ago in USTs had been curve steepeners (mainly 5s30s amid expectations of the Fed on hold for the coming years), although the growing signs of the economy plateauing and the new reality of COVID becoming a recurring issue is likely causing many to reconsider their growth outlooks and their conviction of accompanying reflation-style trades. T-note (U0) futures settled 2 ticks higher at 140-02+.

US President Trump tweeted that House Speaker Pelosi & Senate Minority Leader Schumer have no interest in making a deal that is good for the US and its people, while he added that all they want is a trillion dollars and much more for their Radical Left Governed States, most of which are doing very badly. Furthermore, President Trump added he is very disappointed in Schumer for blocking the temporary extension of the unemployment benefits and that Democrats are holding back the checks that were ready to be sent out. (Twitter)

White House Chief of Staff Meadows said there is still a long way to go in coronavirus relief negotiations and that discussions on Saturday were a step in the right direction, although he is not optimistic of reaching a long-term deal, while US Treasury Secretary Mnuchin commented that the White House agrees enhanced unemployment is necessary but does not want to overpay people and suggested they have to be careful not to pile on enormous debt for future generations. (Newswires/CBS)

US House Speaker Pelosi commented that US President Trump is standing in the way of enhanced unemployment benefits and that unemployed Americans need USD 600 extra per week in unemployment aid during the pandemic, while she also stated that she does not have confidence in coronavirus task force coordinator Dr. Birx. (Newswires)

US House Majority Leader Hoyer said the House is to remain in session until a deal is reached on COVID-19 relief bill and is expected to meet at some point in August as COVID-19 aid bill negotiations continue. There were also reported that the US House passed USD 1.3trln package of appropriations bills for Federal agency funding on Friday, although it was seen as a non-starter among Republicans. (CBS/Politico)

Fed’s Kashkari (voter, dove) said a high level of US personal savings means Congress can support those who are hurting the most and that Congress should use this opportunity to support the American people, while he also stated that the high US debt level is not an issue because US does not fund deficit by overseas borrowing. (Newswires)

Fitch affirmed US at AAA; revised outlook to Negative from Stable. (Newswires)

US NHC said the centre of Tropical Storm Isaias will move near east coast of Florida and the move from offshore of the Georgia coast to the mid-Atlantic states on Monday and Tuesday, while a hurricane watch and storm surge warning has been issued for parts of the Carolinas. (Newswires)