• Asian equity markets traded mixed after the marginally firmer handover from Wall St amid the toing and froing in US COVID-19 relief discussions
• Caixin Services PMI missed estimates and Caixin Composite PMI was lower than previous but both remained in firm expansionary territory
• The DXY continued to soften and sits just above the 93.00 level, EUR/USD reclaimed 1.18, GBP/USD sits just below 1.31
• Gold soared to unprecedented heights and broke above the USD 2000/oz level for the first time ever
• White House Chief of Staff Meadows suggested substantial progress on eviction protections and unemployment was made
• Looking ahead, highlights include EZ, UK and US Services and Composite Final PMIs, EZ Retail Sales, ADP National Employment, US ISM Non-Manufacturing PMI, Weekly DoEs, Fed's Mester, BoJ Governor Kuroda, BCB Rate decision, supply from the UK and Germany
• Earnings from Allianz, BMW, Deutsche Post, Ahold Delhaize, Continental, Dialog Semiconductor, Teva Pharmaceuticals, Regeneron,  Marathon Oil, Moderna

CORONAVIRUS UPDATE

US COVID-19 cases +49,716 (prev. +47,576) and deaths +733 (prev. +469), while AFP later tweeted that the US added 53,847 new cases and 1,302 deaths in the past 24 hours, citing the Johns Hopkins University. California COVID-19 cases +4,526 (prev. +5,739) and deaths +113 (prev. +32), while Texas cases +9,167 (prev. +11,529) and deaths +245 (prev. +179). (Newswires)

Australia's Victoria State Premier confirmed a record 725 of new daily coronavirus infections, while Queensland state declared New South Wales and the Australian Capital Territory as coronavirus hotspots and will shut its borders to the 2 territories from August 8th. (Newswires)

The mortality rate was said to be roughly halved in hospitalized COVID-19 patients that received transfusions of blood plasma rich with antibodies from recovered patients, according to reports citing researchers conducting a large national study. (WSJ)

Novavax (NVAX) vaccine data was initially reported to have 8 patients that had side effects which required hospitalization with about 80% of volunteers had side effects at the site of injection, including pain and tenderness and over 60% had other side effects, mostly headaches, muscle pain and fatigue, according to STAT News. However, the story was later adjusted to note that 8 patients had side effects that were graded severe and the Co. stated that none required hospitalization, while all of the reactions were resolved after a few days with non life-threatening. (Stat News)

ASIA

Asian equity markets traded mixed after the marginally firmer handover from Wall St amid the toing and froing in US COVID-19 relief discussions and after the tech rally lost steam. ASX 200 (-0.5%) was negative and slipped back below the 6000 milestone with the losses led by financials amid notable weakness across the Big 4 banking names and as the virus outbreak causes further disruption with the Queensland state declaring New South Wales and the Australian Capital Territory as coronavirus hotspots and will shut its borders with those areas from August 8th. Conversely, Australia’s commodity-related sectors just about remained afloat as gold miners outperformed after the precious metal surged through the USD 2000/oz level for the first time ever. Nikkei 225 (-0.3%) was also subdued with exporter sentiment dampened by recent currency strength and with earnings also directing price action as the likes of Mitsubishi UFJ Financial Group and SoftBank Corp suffered after weaker results, while Sony also failed to sustain the early boost provided by improved earnings and  a JPY 100bln buyback announcement, as some fretted over the Co.’s cautious outlook. Hang Seng (+0.6%) and Shanghai Comp. (+0.3%) were choppy after slightly inconclusive data in which Caixin Services PMI missed estimates and Caixin Composite PMI was lower than previous but both remained in firm expansionary territory. In addition, the PBoC continued to refrain from liquidity efforts and it was also reported that US and China have agreed to conduct high-level talks on August 15th to assess Beijing’s compliance with the bilateral trade agreement. Finally, 10yr JGBs were higher and briefly prodded above the 152.50 level as they tracked the upside in T-notes and amid the weakness in Japanese stocks, while the BoJ were also present in the market today for JPY 570bln of JGBs predominantly focused in the belly of the curve and also offered to purchase JPY 300bln of corporate bonds from August 7th. 

PBoC skipped reverse repo operations for a net daily drain of CNY 30bln PBoC set USD/CNY mid-point at 6.9752 vs. Exp. 6.9736 (Prev. 6.9803)

Chinese Caixin Services PMI (Jul) 54.1 vs. Exp. 58.0 (Prev. 58.4) Chinese Composite PMI (Jul) 54.5 (Prev. 55.7)

US and China have agreed to high-level talks on August 15th to assess Beijing’s compliance with the bilateral trade agreement signed early this year, while USTR Lighthizer and Chinese Vice Premier Liu He will participate in the talks likely via videoconference, according to sources. (WSJ)

US Secretary of State Pompeo tweeted that human rights violations in Xinjiang must stop, while he added US sanctions on Xinjiang Production and Construction Corporation and 2 of its officials make clear that if China wants to participate on the world stage, it cannot behave this way. (Newswires)

US Department of Health and Human Services Secretary Azar is to visit Taiwan in the next few days with China opposed to the visit. There were also comments from the Taiwan Foreign Ministry that US Health Secretary Azar will meet with Taiwan President Tsai during that visit and that the visit shows firm US support for Taiwan, as well as a close US-Taiwan relationship. (Newswires)

Chinese Ambassador to the US said China is prepared to negotiate with other countries for peaceful solution to South China Sea disputes and stated that Beijing does not want to see escalation following mutual consulate closures. (Newswires)

White House said US will take action in the coming days on Chinese apps including TikTok and encourages China to fulfil its trade agreements but noted that President Trump is focused on TikTok. White House also said it will have some decision on the President’s order regarding the future of TikTok in the coming days as doubts grow that the Co, or Microsoft (MSFT) will comply with Trump's payment demands. (Newswires/FBN) A person involved in the TikTok sale process said discussions were now rapidly progressing to the terms of a deal with Microsoft (MSFT). (FT) China Global Times tweeted that the US crackdown on TikTok sets a dangerous precedent for the US and others to target Chinese companies and interests, while China must take reciprocal countermeasures to make it clear such behaviour will have consequences, citing experts. (Twitter)

UK/EU

UK Chancellor Sunak Rishi Sunak is reportedly considering raising business rates for the "most valuable properties", which has spurred concern the move could hurt firms already struggling amid the fallout from the pandemic, while Sunak is said to have asked feedback from the industry if large premises, offices and luxury shops should pay higher rates. (Telegraph)  

UK Ministers were urged to rethink unemployment measures after a survey of over 500 companies by the British Chambers of Commerce warned that they would not use job-protection schemes set out by Chancellor Sunak last month. (FT)

FX

The DXY continued to soften amid a decline in yields and following the toing and froing in coronavirus relief discussions where there has been mixed commentary as House Speaker Pelosi and Senate Minority Leader Schumer noted that the sides remain far apart. On the other hand, White House Chief of Staff Meadows suggested substantial progress on eviction protections and unemployment was made, while Treasury Secretary Mnuchin wants to have an understanding by end of the week so legislation can be passed but also suggested they will not go anywhere near to the USD 3.4tln for cost of the relief bill. The weaker greenback spurred its major counterparts with EUR/USD extending above the 1.1800 level and with GBP/USD edging back closer towards the 1.3100 handle after breaching through its 100-Hour MA level of 1.3071, while USD/JPY continued its retreat beneath 106.00 with the pair pressured by the USD-woes and soured risk tone. Elsewhere, antipodeans gained with NZD/USD supported by better than expected jobs data and with AUD/USD also firmer despite the RBA’s resumption of government bond purchases, as this was flagged at yesterday’s meeting and with the upside coinciding with the CNH strengthening to its highest level against USD since early March.

New Zealand Employment Change (Q2) Q/Q -0.4% vs. Exp. -2.0% (Prev. 0.7%). (Newswires) New Zealand Unemployment Rate (Q2) 4.0% vs. Exp. 5.8% (Prev. 4.2%)

COMMODITIES

 Commodities took a breather following the prior day’s gains in which gold soared to unprecedented heights and broke above the USD 2000/oz level for the first time ever with prices fuelled by a weaker greenback and declining yields which further added to the inflows for the precious metal that has already seen gain of more than 30% this year amid the global fallout and uncertainty brought on by the pandemic. Elsewhere, copper was indecisive in which price action oscillated within yesterday’s tight range around the USD 2.90/lb level and WTI crude futures was also consolidated following the prior day’s upward extension and brief test of the USD 42.00/bbl level with the latest private inventory report doing little to boost prices overnight despite showing a much larger than expected draw in headline crude stockpiles.

US Private Inventory Crude Stocks crude -8.6mln vs. Exp. -3.0mln. (Newswires)

GLOBAL NEWS

Lebanon President has called for an emergency meeting of the Supreme Defence Council following a huge blast at a port in Beirut where thousands were injured and dozens killed. Lebanon's President also stressed a need for a state of emergency declaration in Beirut for 2 weeks following the large explosion and said it is unacceptable that 2,750 tonnes of ammonium nitrate be in a warehouse for 6 years without safety measures, while there were also comments by the Lebanese PM that officials will pay the price for the Beirut explosion and that they will reveal facts regarding the dangerous warehouse that has been there since 2014. (Newswires/BBC)

US President Trump said he spoke to generals that don't believe the explosion in Lebanon was a warehouse accident and think it was a bomb of some kind, although reports later noted that 3 US Defense Department officials stated that there is no indication they've seen that the Beirut explosion was an attack. (Newswires/CNN)

US

The TPLEX bull-flattened today amid Monday’s bear-steepener/risk appetite unwinding and seeing some maturities reach new all-time-lows. By settlement, 2s unch at 11bps, 5s -3bps at 19.5bps, 10s -5bps at 51bps, and 30s -5bps at 120bps. The strength crescendoed into the US session despite equities also coming off their lows. However, stocks failed to meaningfully extend their gains from Monday, on the other hand, yields continued to tread lower. The tape was peppered with headlines about the 5-year yield making new ATLs, falling beneath 20bps, with many citing rising expectations of a more dire economic outlook hampered by fiscal stimulus running dry; the next resistance level will be the 50bps handle in the 10-year yield, which equates to around 140-21 on the T-Note (U0) contract. Wednesday will see the quarterly Treasury refunding announcement where it will upsize its auctions, although the increase is expected to be not as pronounced as the last announcement, so any raises that exceed those expectations could provide some near-term pressure on USTs; Service PMIs will also print, as will ADP employment amid heading into Jobless Claims on Thursday followed by a highly uncertain NFP on Friday. T-note (U0) futures settled 12+ ticks higher at 140-10+.

US President Trump was quoted as saying there is a "“big number coming out Friday on jobs”. (Newswires) Note, consensus currently looks for a 1.6mln print for the headline NFP release on Friday.

White House is considering three executive orders which are an eviction moratorium, suspending the collection of the payroll tax and trying to use unspent funds to allow states to put enhanced UI in place. There were separate comments from US Treasury Secretary Mnuchin that executive action is being prepared if Democrats don't yield and White House Chief of Staff Meadows said those offers will be put forward to Pelosi and Schumer. (Politico/Newswires)

US Treasury Secretary Mnuchin said he wants to have an understanding by end of the week so legislation can be passed but noted we are not going anywhere near to USD 3.4tln for cost of the relief bill. Furthermore, it was earlier reported that US Treasury Secretary Mnuchin also told GOP lawmakers at lunch that negotiators were no closer to a deal than a week ago. (Newswires/The Hill)

White House Chief of Staff Meadows said they made substantial progress on eviction protections and unemployment in relief discussions. It was also reported that White House Chief of Staff Meadows is said to be looking at redirecting funds already approved by Congress and putting it towards federal unemployment benefits, according to Washington Post citing sources. (Newswires/Washington Post)

US Senate Majority Leader McConnell accused House Speaker Pelosi of holding up virus relief bill due to "bizarre unrelated" carveouts such as for the marijuana industry. McConnell also said he prefers a "total solution" to the COVID bill and noted division among GOP senators, while he is prepared to support a deal that the White House and Congressional Democrats work out on COVID-19 aid. (Newswires)

US House Speaker Pelosi reiterated she does not think there will be a COVID relief deal this week, while she wants to end up with a USD 3.4tln bill this week the with votes in House next week although Senate Majority leader McConnell has rejected this figure. US House Speaker Pelosi later stated that negotiators agreed that they want to reach an agreement on coronavirus relief, while Senate Minority Leader Schumer said there will be two meetings today including one with the Postmaster General, although they noted that the sides remain far apart. (Newswires)

US Senator Perdue that Senate stimulus talks may take another two weeks. (Newswires)

Fed's Daly (non-voter) said the US needs a longer bridge of support for the economy and that there is room to let the economy go well beyond what people think is the maximum level of employment. (Newswires)