• European equities drift lower as the APAC sentiment reverberated into the region
• US President Trump signed executive orders to ban transactions with TikTok’s parent ByteDance, as well as Tencent-owned WeChat in 45 days
• US President Trump Working Group on Financial Markets recommended Chinese companies currently listed on US exchanges be compliant with US accounting standards or be delisted
• US Treasury Secretary Mnuchin said the sides are closer on a lot of issues but far apart on some big issues
• US House and Senate are out today; it is unclear if there will be more COVID-19 relief bill talks, according to Fox
• In FX, DXY gains ground above 93.000; NZD, EUR, CHF and CAD are the major victims; TRY continues to weaken
• Looking ahead, highlights include US and Canadian Labour Market Reports, Fed's Rosengren

CORONAVIRUS UPDATE

Swiss Government has signed an agreement with Moderna (MRNA) for procurement of 4.5mln vaccine doses and is in talks with other vaccine companies. (Newswires)

Novavax (NVAX) and Takeda (4502 JT) have announced a collaboration for Novavax COVID-19 vaccine; Japan anticipates to manufacture over 250mln doses. Japanese Health Minister also said Japan has agreed with AstraZeneca (AZN) that it will acquire 120mln doses of the COVID-19 vaccine if successfully developed, with first 30mln doses by March 2021. (Newswires)

ASIA-PAC

Asian equity markets failed to sustain the positive handover from Wall St where all major indices notched gains as tech resumed its outperformance and Apple continued to print fresh record highs to edge closer towards the USD 2tln market cap status, while sentiment stateside was also underpinned by lower jobless claims data and with COVID-sensitive sectors such as airlines, hotels and casinos supported in late trade after the US State Department lifted advisory against all international travel and returned to its previous system of country specific levels of travel advice. Nonetheless, the momentum faded in Asia with the region cautious heading into the latest Chinese trade data which later proved to be mostly better than expected and with US-China tensions stoked after US President Trump signed executive orders to ban transactions with TikTok’s parent ByteDance, as well as Tencent-owned WeChat in 45 days. ASX 200 (-0.6%) and Nikkei 225 (-0.4%) were both negative in which Australia’s mining names gave back some of their recent gains and as Japan digested earnings, with sentiment also dampened by concerns of a weaker consumer as although Household Spending in June rose by its fastest pace since data was made available in 2000, the actual decline in household spending for the April-June quarter of 9.8% Y/Y was the steepest contraction on record. Hang Seng (-1.8%) and Shanghai Comp. (-0.9%) conformed to the downbeat tone due to the US recent actions against TikTok and WeChat which saw Tencent shares slump over 7%, while US President’s Working Group on Financial Markets earlier recommended Chinese companies currently listed on US exchanges to be compliant with US accounting standards or be delisted. Finally, 10yr JGBs were relatively flat with minimal gains seen amid the risk averse tone and the BoJ present in the market for JPY 940bln of JGBs focused on 1yr-3yr and 5yr-10yr maturities.

PBoC injected CNY 10bln via 7-day reverse repos for a net weekly drain of CNY 270bln vs. CNY 120bln net injection last week and will sell CNY 20bln of 3-month bills & CNY 10bln of 1-year bills in Hong Kong on August 13th. (Newswires)

Chinese Trade Balance (CNY)(Jul) 442.2B vs. Exp. 286.8B (Prev. 328.9B) Chinese Exports (CNY)(Jul) Y/Y 10.4% vs. Exp. 0.9% (Prev. 4.3%) Chinese Imports (CNY)(Jul) Y/Y 1.6% vs. Exp. 2.5% (Prev. 6.2%)

Chinese Trade Balance (USD)(Jul) 62.33B vs. Exp. 42.0B (Prev. 46.42B) Chinese Exports (USD)(Jul) Y/Y 7.2% vs. Exp. -0.2% (Prev. 0.5%) Chinese Imports (USD)(Jul) Y/Y -1.4% vs. Exp. 1.0% (Prev. 2.7%)

China's Foreign Ministry said that the US' drone sales to Taiwan are a serious violation of the One China principle, US should stop the sales; China will firmly defend its own principles. (Newswires)

US President Trump signed an executive order related to divestment of TikTok as expected and stated that TikTok could be used for disinformation campaigns to benefit the CCP. Furthermore, he stated that any transaction subject to US jurisdiction with ByteDance is prohibited beginning in 45 days, while he said he also signed an executive order banning any transaction with WeChat and owner its Tencent (700 HK) in 45 days although an official later clarified that the order involves WeChat and not other Tencent transactions. (Newswires)

US President Trump Working Group on Financial Markets recommended Chinese companies currently listed on US exchanges be compliant with US accounting standards or be delisted. Reports added that Chinese companies would have until January 1st, 2022 to comply otherwise they wouldn’t be able to trade on US listed exchanges, while there is no transition period and it would go into effect immediately if the rule is implemented by the SEC. (Newswires)

RBA Statement on Monetary Policy reiterated the board will not increase the cash rate target until progress is being made towards full employment and inflation target, while it added the board is committed to do what it can to support jobs, incomes and businesses. Further purchases of government bonds will be undertaken as necessary in secondary market and that there is no need to adjust mid-March package considering the nature of challenges from the pandemic. RBA sees GDP Y/Y at -6.0% in June and December this year, sees 5% growth December next year and 4% growth December 2022, while it sees CPI at 1.25% in December 2020, 1.0% December 2021 and 1.5% December 2022 in which the Forecast assumes cash rate and 3yr yield target remain at current levels. (Newswires)

US

US House and Senate are out today; it is unclear if there will be more COVID-19 relief bill talks, according to Fox's Pergram. (Newswires)

US Treasury Secretary Mnuchin said the sides are closer on a lot of issues but far apart on some big issues and that President Trump wants to do a deal but will not sign a bill with a large amount of money for state and local governments, while he added we've made a lot of progress and talks are not over. Mnuchin also commented that our first choice is a global deal but will do a smaller one and that the White House offered to compromise on enhanced unemployment. (Newswires)

White House Chief of Staff Meadows said going into talks that he wouldn't be there if he didn't have at least a glimmer of hope and the President wants a deal, but added if a topline number is not reached, we have very little incentive for further talks. However, following the discussions, White House Chief of Staff Meadows said they're still a considerable amount apart on a compromise which can be signed into law. (Newswires)

US House Speaker Pelosi said negotiators had a consequential meeting that showed differences between each sides’ values, while she added we are very far apart and that it was most unfortunate. (Newswires)

US Senate Minority Leader Schumer said Democrats are very disappointed with the result of talks, although urged the Republicans to keep talking, while he added that White House negotiators were unwilling to meet in the middle and wanted a deal mostly their way. (Newswires)

US President Trump confirmed he has signed proclamation re-imposing aluminium tariffs on Canada and said it is necessary to defend the industry, while the tariffs will be at 10% and will start on August 16th. Furthermore, a Canadian Government source had earlier warned that Canada would impose retaliatory tariffs on US goods if the US went ahead with aluminium tariffs on Canada and Deputy PM Freeland later stated the tariff is unwarranted and unacceptable, while she added Canada intends to swiftly impose dollar-for-dollar countermeasures in response. (Newswires)

UK/EU

Bank of England Deputy Governor Ramsden, on policy outlook said he will not get into speculation on where we could be in November but we do have further headroom, and added we are not actively planning for negative rates, using tried and tested policies such as QE. Furthermore, Ramsden said there are no plans for equity purchases. (CNBC)

EQUITIES

European stocks are modestly softer [Euro Stoxx 50 -0.3%] as the downbeat APAC performance seeps into the region after China lodged stern opposition to the US’ executive order on China’s TikTok and WeChat, alongside the State’s drone sale to Taiwan. Broader sectors are mixed with underperformance seen in the energy sector amid losses in the complex, whilst Telecoms remain firm as Deutsche Telekom (+2.8%) holds onto gains amid stellar numbers from T-Mobile (+5.5% pre-mkt) of which Deutsche Telekom owns 43.5%. The sectoral breakdown adds little meat to the bones and provides no clear risk bias, whilst the Travel & Leisure sector remain pressured amid fears of further additions to quarantine lists prompting travel cancellations. In terms of individual movers: BP (-2.6%) trades lower as sources stated that it is poised to sell a large chunk of its oil and gas assets even if crude prices rise; oil giants usually hold assets in the longer-term even if prices fall – with a view of bringing marginal production online contingent on improving market conditions. Rolls-Royce (-3.4%) is hit on the back of source reports that activist investor ValueAct has reportedly sold its entire 10.9% stake in the group since 2017. Finally, Hikma Pharmaceuticals (+9%) extended on gains after raising its FY20 generic revenue guidance alongside its operating margin, whilst the CEO later stated that the group entered a manufacturing deal for Gilead’s remdesivir treatment, potentially providing added impetus.

FX

USD - The Dollar continues to benefit from corrective and positional trade rather than any real fundamental shift in sentiment or direction, as consolidation and short covering persists pre-NFP and the showdown talks in Washington to resolve differences on the next relief bill. It’s debatable whether the monthly BLS report or fiscal deadline will be Friday’s headline-grabbing event, but for now the Buck has clawed back more lost ground against G10 peers and the index is holding between 93.227-92.759 parameters, above Thursday’s 92.495 new 2020 low.

NZD/EUR/CHF/CAD - The major victims of the Greenback’s ongoing recuperation, if not quite revival, as the Kiwi backs off from a test of resistance/offers into 0.6700 and the Euro fades into 1.1900 where 1.5 bn option expiries reside. Note also, the single currency has found ventures above the round number unsustainable and is now south of almost equally large expiry interest at 1.1850 (1.2 bn), with bids said to be underpinning around 1.1820-10 and a key Fib in close proximity (1.1823). Meanwhile, the Franc remains sub-0.9100 and straddling 1.0800 vs the Euro as SNB reserves data reveal a decline, and the Loonie has reversed further towards 1.3400 from recent 1.3250+ multi-month highs following the reintroduction of US tariffs on Canadian aluminium and impending like-for-like countermeasures. More immediately, the 2 NA nations go head-to-head on the jobs front with July data due simultaneously ahead of Canada’s Ivey PMIs.

AUD/GBP - Also down vs their US counterpart, but clinging to or near big figure/psychological levels at 0.7200 and 1.3100 respectively, as the Aussie draws some underlying support from encouraging or arguably upbeat Chinese trade data and the Pound retains an element of post-BoE strength even though MPC member Ramsden leaves the door open for more stimulus in November should the need arise. For the record, no major reaction down under to the RBA’s SOMP or comments from Deputy Governor Ellis largely underlining latest policy meeting assessments and guidance.

JPY - Still no big make or break for the Yen that is pivoting 105.50 after a late fixed related recoil yesterday and Japanese reserves showing a rise conducive with, but not conclusive, a degree of official intervention, albeit this time around 100 pips above the low 104.00 area.

EM - Simply no respite for the Lira that has crashed to fresh all time depths against the Dollar and Euro for that matter, even though the CBRT has started withdrawing liquidity provisions and instructing banks to use the overnight lending facility at 9.75% ahead of a 50% reduction in primary dealer OMO limits as from Monday. Usd/Try paring back a tad from 7.3650 or so.      

FIXED INCOME

Bonds have extended pre-NFP parameters on both sides in some cases, but are now back within range and possibly prone to meandering or idling mainly sideways as the clock ticks down to the US (and Canadian) employment reports. Bunds rebounded to a marginal new intraday high at 177.67 (+7 ticks vs -23 ticks at worst) before running out of steam and Gilts touched parity at 138.47 (compared to 23 ticks sub-par at the Liffe low) in the slipstream or perhaps commentary from BoE’s Ramsden that seemed to boost the flagging Short Sterling strip on the premise that he sees more policy (easing by implication) headroom, albeit non-committal in terms of additional stimulus in November. Elsewhere, US Treasuries have drifted down from overnight session peaks, but remain firm and the curve fractionally flatter awaiting Friday’s headline event, or rather events as the jobs data could well be overshadowed by fiscal developments.

COMMODITIES

WTI and Brent front month futures drift lower in a correlated move with the equity markets as news-flow for the complex remains scarce ahead of the US jobs report. An earlier Saudi-Iraq statement did the rounds but provided no fresh substance – with the two nations reaffirming their commitment to the OPEC+ pact. WTI Sept resides around USD 41.50/bbl having had briefly dipped below the figure, whilst Brent Oct lost its 45/bbl-status after oscillating on either side of the figure in early hours. Elsewhere, spot gold is relatively uneventful and remains contained around the USD 2060/oz mark, as has been the case throughout the European morning, whilst spot silver sees more pronounced losses as price consolidate from yesterday’s outperformance.  In terms of base metals, Dalian iron ore prices retreated overnight following yesterday’s warning from the Dalian exchange around investing rationally amid the recent rally, whilst Shanghai copper saw losses as US-Sino tensions continue to ratchet.

SocGen sees gold prices averaging USD 1850/oz in 2020 and USD 2050/oz in 2021. (Newswires)