• European equities lost steam after China announced retaliatory sanctions on US officials
• Targets of the Chinese sanctions include Senators Rubio & Cruz, Freedom House President Abramowitz and Human Rights Watch Director Roth; effective as of today
• A lack of progress in Congressional stimulus talks prompted President Trump to go ahead with taking executive action
• Trump took action on enhanced unemployment benefits, evictions, payroll tax deferral and student loan relief
• Reports noted that the orders are likely to face some legal challenges, while the enhanced unemployment benefits would require states to pay for the 25% of additional benefits
• In FX, DXY is firmer above 93.500, GBP is resilient, whilst other G10s are pressured by the USD
• Looking ahead, highlights include Fed’s Evans (Non-voter)

CORONAVIRUS UPDATE

US CDC reported coronavirus cases rose by 54,940 to a total 4,974,959 and death toll rose by 1,064 to 161,284, while a major newswire survey later stated that US coronavirus cases increased by at least 46,248 to a total of 5.06mln on Sunday and deaths rose by at least 496 to a total of 162.6k. Florida coronavirus cases rose by 6,229 on Sunday to a total of 532,806 and deaths rose by 77 to a total of 8,315, Texas coronavirus cases rose by 4,879 on Sunday to 486,362 and deaths rose by 116 to a total 8,459, while Texas 7-day average test positivity rate increased to a record 20.3%. California coronavirus cases rose by at least 5,540 to 162,604 and deaths rose by at least 67 to a total of 10,378 according to a major newswires tally. (Newswires)

NIH's Fauci said COVID-19 vaccines are likely to be 50-60% effective, so we cannot abandon public health measures. (Newswires)

UK coronavirus cases rose by 1,062 which surpassed the 1,000 level for the first time since June. In related news, the UK official daily death count could be abandoned following an investigation into the method of counting the death toll. (Newswires/Telegraph)

Scientists working on Britain's best hope for a COVID-19 vaccine are reportedly divided on whether to deliberately infect healthy patients in order to test the vaccine and potentially speed up the process. Some scientists argue that such an approach carries too much risk. (Telegraph)

South Korea's public health authorities said they have found three new mutated genome sequences of the novel coronavirus among imported cases. (Yonhap) Hong Kong reports 69 (Prev. 72) new cases of COVID-19 of which 67 are locally transmitted. (Newswires)

ASIA

Asian equity markets eventually traded mostly higher on what was an indecisive start to the week amid the thinned conditions due to holiday closures in Japan and Singapore, with participants mulling over the recent US NFP beat, firmer than expected Chinese inflation data and last week’s Congressional impasse which prompted US President Trump to sign executive orders over the weekend. ASX 200 (+1.8%) was underpinned with financials and consumer staples frontrunning the broad-based sector gains and as earnings also provided a tailwind. Elsewhere, a rally in Hyundai Motor shares helped fuel the KOSPI (+1.5%) after reports it is to create a family of Ioniq-brand electric vehicles in its pursuit to become the third-largest EV maker by 2025, while Hang Seng (-0.5%) and Shanghai Comp. (+0.8%) were indecisive as participants digested the latest inflation figures from China which were firmer than expected but showed that PPI remained negative and with risk appetite in Hong Kong mired by the arrest of Next Digital’s founder Jimmy Lai who is a main contributor to the pro-democracy camp and the highest-profile arrest under the National Security Law so far which subsequently saw as much as a 16% intraday drop in Next Digital shares.

PBoC injected CNY 10bln via 7-day reverse repos for a CNY10bln net injection with rate kept at 2.20% PBoC set USD/CNY mid-point at 6.9649 vs. Exp. 6.9617 (Prev. 6.9408)

Chinese CPI (Jul) M/M 0.6% vs. Exp. 0.4% (Prev. -0.1%) Chinese CPI (Jul) Y/Y 2.7% vs. Exp. 2.6% (Prev. 2.5%) Chinese PPI (Jul) Y/Y -2.4% vs. Exp. -2.5% (Prev. -3.0%)

Twitter (TWTR) has reportedly approached China's ByteDance to express interest in purchasing its US operations, sources state. (BBC) Blackstone has reportedly discussed joining Microsoft (MSFT) in a potential bid for ByteDance's TikTok, according to sources. (Fox Business) Separately, TikTok is not willing to move its HQ to London from the US without a public statement of support from the UK government, although UK PM Johnson is facing a split among ministers over the GBP 3bln investment promised by ByteDance, according to sources. (SCMP) TikTok Engineers have reportedly worked on technical separation from Bytedance several months before Trump's September 15th deadline for a deal, sources state; Microsoft is facing a technically complex challenge in TikTok carveout. (Newswires)

China is set to sanction US officials in response to recent sanctions on Hong Kong, which China argues violates international law. Targets of the sanctions include Senators Rubio & Cruz, Freedom House President Abramowitz and Human Rights Watch Director Roth; effective as of today. (Newswires)

US National Security Adviser O’Brien commented that Chinese hackers were aiming at US election infrastructure ahead of the election in November. (WSJ)

A US official confirms to Voice of America that the US and South Korea will hold joint military exercises from August 16-28. An earlier round of drills was postponed in the spring because of coronavirus concerns. (Newswires)

Hong Kong police arrested Next Digital (282 HK) founder Jimmy Lai on suspicion of colluding with foreign forces which is the most high-profile arrest under the national security law in Hong Kong, while police confirmed they made 7 arrests today under the national security law and added the operation is still in process with more arrest possible. (Newswires)

UK Foreign Office issued a joint statement with US, Canada, Australia and New Zealand regarding erosion of rights in Hong Kong in which it stated it is gravely concerned by unjust disqualification of candidates and postponement of Legislative Council elections, while it urged Hong Kong to reinstate eligibility of candidates so elections can proceed. (Newswires) 

US

US President Trump signed executive orders for coronavirus relief following the failure of talks in Congress to reach an agreement with the executive action concerning enhanced unemployment benefits of USD 400/week (Prev. USD 600/week), providing assistance to renters and homeowners, payroll tax deferral and student loan relief. Furthermore, reports noted that the orders are likely to face some legal challenges, while the enhanced unemployment benefits would require states to pay for the 25% of additional benefits and must agree to enter this agreement with the federal government which has led to questions of how many states will be able to afford it. (Newswires)

US Senate is in session today; a few senators will be in Washington DC until/if there is a COVID-19 relief bill to vote on; "Expect lots of discussion on Trump’s exec action to bypass Congress & if that’s Constitutional"; via Fox's Pergram. (Twitter)

US President Trump said he heard mostly positive things regarding executive action and that states can afford to kick in USD 100/week for benefits, while he added the Democrats might be inclined to make a deal now. President Trump also stated the payroll tax cut may be permanent which would have no impact on social security as reimbursements would be made through the general fund, while he added the White House would talk again with Democrats on stimulus if talks are not a waste of time and that Democrats have called and want to get together. (Newswires)

US House Speaker Pelosi stated that the sides have to reach an agreement and have to meet half way following the executive action taken by President Trump, while Senate Minority Leader Schumer stated that President Trump’s executive orders are unworkable, weak and far too narrow. Schumer also said he hopes that Republicans who hung their hat in the executive orders will now be forced to come to the table and accept a compromise to meet in the middle. (Newswires)

UK/EU

A third of British employers are planning job reductions in Q3, according to reports citing a survey by the Chartered Institute of Personnel and Development. (FT)

European Economy Commissioner Dombrovskis confirmed that EU restrictions on national budgets, suspended over the pandemic, will not apply again until 2022 at the earliest. (FT)

German Finance Minister Scholz confirmed that the Social Democrats have unanimously nominated him as a candidate for Chancellor next year. (Twitter) 

EQUITIES

European stocks have lost steam since the cash open and now see a mixed performance [Euro Stoxx 50 +0.1%], following on from a similar APAC handover – with downside in the European session emanating from China’s sanctions announcement against some US officials in a tit-for-tat retaliation for US’ move last week over HK Chief Executive Lam alongside ten other Chinese/Hong Kong officials. The move from China was widely expected but reinforces the ever-escalating tensions between the two nations, not to mention the condemned high-level meeting between US and Taiwan on Monday. Broader indices trade without conviction with no major under/outperformers, albeit the region has come off post-China lows. Sectors are also seeing a mixed performance with no clear risk profile to be derived – Energy outperforms amid gains in the complex whilst IT continues to be weighed on by the escalating US-Sino tech landscape. The sectoral breakdown adds little meat to the bones, with Banks outpacing, Travel & Leisure retaining gains and Tech the laggard. Individual movers include Suez (+3.2%) amid reports Co’s Waste division is said to have attracted interest from German billionaire Scharz and could be worth EUR 35bln. Co. could mull an auction for the unit if talks with Scharz collapse, sources stated. Elsewhere, AA (+12.9%) shares soared after Co’s top shareholder Dickson (12% stake) said he believes GBP 0.40/shr very “opportunistic” and argued the stock is worth much more than current price. Finally, Roche (-0.1%) remains subdued after its Phase III study for Etrolizumab met its primary endpoint of inducting remission vs. placebo in only two out of three studies.

FX

USD - The Greenback remains on a firmer footing following Friday’s above forecast rise in jobs and lower than expected unemployment rate, but the DXY looks toppy around 93.500 and has not quite been able to emulate its post-NFP peak (93.629) within a 93.601-290 band. Relatively light, lacklustre Monday trading volumes have been compounded by market holidays in Japan (Mountain Day) and Singapore (National Day), while the Buck may be capped by the ongoing stalemate over fiscal stimulus in Washington and some modest unwinding of bear-steepening along the US Treasury curve.

GBP - Sterling continues to display a degree of resilience across the board, and aside from a short base Cable seems to be forming a base circa 1.3050 and Eur/Gbp appears intent on a test of 0.9000 given the Euro’s failure to sustain gains through 0.9050 and 0.9100 in line with key round number or psychological level failures vs the Dollar. However, the Pound faces some independent hurdles in wake of last Thursday’s BoE from tomorrow in the form of labour and earnings data before GDP and ip on Wednesday.

AUD/JPY/CAD/EUR/NZD/CHF - All weaker against their US rival, albeit mildly and to varying extents as the Aussie pivots 0.7150 amidst bullish iron ore projections from Westpac, the Yen meanders between 106.05-105.73, Loonie pare some losses to reclaim 1.3400+ status and Euro finds some support ahead of 1.1750 having waned circa 1.1800. Note, mega option expiry interest at the big figure (3 bn) could be keeping the headline pair in check, but a decent amount in Usd/Jpy at 105.50 (1.65 bn) appears to be safe ahead of the NY cut. Elsewhere, the Kiwi is hovering just below 0.6600 and lagging its Antipodean peer with Aud/Nzd straddling 1.0850 after deteriorations in ANZ’s business sentiment and activity outlook overnight. Nevertheless, the Franc is the current G10 laggard sub-0.9150 vs the Greenback and under 1.0750 against the single currency as weekly Swiss bank sight deposits increase yet again.

SCANDI/EM - A firm start to the week for crude prices via supportive vibes from Saudi Arabia, Iraq and Gulf oil producers has helped the Norwegian Crown rebound further than the Swedish Krona from recent lows, but the former may also be taking note of largely firmer inflation metrics. Conversely, the Turkish Lira has handed back a chunk of Friday’s recovery gains to revisit all time lows under 7.3650 even though the Banking Watchdog has trimmed the asset ratio rate to 95% from 100%

FIXED INCOME

It’s far from abundantly clear or certain, but Bunds, Gilts and US Treasuries have bounced relatively firmly against the backdrop of fading Eurozone periphery debt and EU stocks to post fresh recovery peaks from earlier lows at 177.46, 138.16 and 140-00+ respectively. However, the former is now facing more chart resistance between 177.49-51 having breached a 50% Fib retracement of Friday’s post-NFP retreat, at 177.37, and curves remain steeper for choice, as UK STIRs in particular perk up again and Mar22 alongside Jun22 contracts return to parity after their BoE retracement. Ahead, relatively low key US jobs data especially after the aforementioned official BLS report.

COMMODITIES

WTI and Brent front month futures continue to drift higher in early trade, with the benchmarks underpinned by Saudi Arabia, Iraq and Gulf producers stating that they are encouraged by recent signs of improvement in the global economy and reaffirm commitments to the OPEC+ supply curb deal. These comments come ahead of the JMMC meeting on August 18th, in which the non-policy-setting panel will review compliance and demand data and make recommendations to the oil producers. Furthermore, Friday’s Baker Hughes rig count also provides some support after active oil rigs declined by four. Looking ahead, participants are likely to focus on any further US-Sino developments and State-side stimulus talks in the absence of pertinent data releases. Elsewhere, spot gold remains uneventful on either side of USD 2030/oz, with spot silver eking mild gains above USD 28/oz. In terms of base metals, Dalian iron ore and Shanghai copper both saw losses on Monday as sentiment in the region was dampened by the US’ sanctions on the Hong Kong and Chinese officials in relation to the National Security Law. Meanwhile, analysts at Westpac have lifted their near term iron ore forecast to USD 100/t (Prev. USD 90/t for September) but still see it moderating from there to USD 87/t by end-2021 (unchanged); copper revised higher from USD 6,000/t to USD 6,400/t.

Saudi Aramco reported Q2 net profit fell 73.4% Y/Y to SAR 24.6bln and revenue fell 57% Y/Y, while it noted that Q2 saw impact of lower crude prices, as well as declining refining and chemicals margins. (Newswires)

GLOBAL NEWS

Protesters clashed with police in the Belarus capital of Minsk following the Presidential Election in which state exit polls projected incumbent Lukashenko is set to win around 80% of the votes. Furthermore, police were said to be using water cannons, tear gas and sound bombs, while there were also reports of a police van driving through the crowd. (Newswires/Twitter)