• Asian equities traded higher as risk appetite in the region improved on the tepid performance seen on Wall St where most major indices finished in the green but tech underperformed
• The DXY heads into the EU open just above 93.50, EUR/USD hovers around 1.1750 and GBP/USD just below 1.3100
• US President Trump said he is mulling a capital gains tax cut, as well as an income tax cut for middle-income families
• Treasury Secretary Mnuchin said stated he has not spoken to House Speaker Pelosi or Senate Minority Leader Schumer since Friday but is willing to meet them
• Looking ahead, highlights include UK Labour Market Report, German ZEW Survey, Fed’s Daly (Non-voter) and Fed's Barkin (Non-voter), EIA STEO, supply from the UK and US

CORONAVIRUS UPDATE

Global COVID-19 cases surpassed 20mln, according to Johns Hopkins University.

US COVID-19 cases +48,690 (prev. +54,590) and deaths +558 (prev. +1,064), while a major newswire tally stated that US cases increased by at least 48,405 to a total of 5.11mln on Monday and deaths rose by at least 541 to a total of 163.2k. New York COVID-19 cases +476 (prev. +515) and deaths +2 (prev. +7), California cases +7,751 (prev. +5,540) and deaths +66 (prev. +67) although reports added that lab reporting issues mean prior days cases may be included in the California data, while a major newswire tally stated that California coronavirus cases increased by at least 12,784 on Monday including weekend backlog which would be the highest increase since the pandemic began and deaths rose by at least 91. (Newswires)

US President Trump is reportedly considering a rule to temporarily block US citizens from returning to the country if suspected of having coronavirus. (NYT)

ASIA

Asian equity markets traded higher as risk appetite in the region improved on the tepid performance seen on Wall St where most major indices finished in the green but tech underperformed and indecision lingered amid the ongoing stimulus talks stalemate, mixed views on President Trump’s recent executive orders and ongoing US-China tensions. ASX 200 (+0.5%) was positive as top-weighted financials spearheaded the advances and with the broad sector gains offsetting the weakness in gold miners and tech, while Nikkei 225 (+1.8%) was buoyed on return from an extended weekend helped by a predominantly weaker currency and after bank lending increased by its fastest pace on record. Hang Seng (+2.3%) and Shanghai Comp. (+0.5%) conformed to the upbeat mood after the PBoC upped its liquidity efforts with a CNY 50bln reverse repo injection and although China announced sanctions against officials in retaliation to US sanctions on Hong Kong, they refrained from imposing them on Trump administration officials. Furthermore, casino stocks are red-hot after reports China is to remove the quarantine requirement for Macau effective tomorrow and Next Digital shares surged over 400% in an extension of yesterday’s sharp intraday turnaround as activists piled into the shares in a show of support following the founder’s recent arrest and amid speculation it could sell its listed entity as a shell for other firms to acquire for a back-door listing. Finally, 10yr JGBs were lower and approached 152.00 to the downside as they played catch up to the recent weakness in T-notes and as havens were shunned amid gains in riskier assets, while the lack of BoJ presence in the market also added to the dampened mood for JGBs.

PBoC injected CNY 50bln via 7-day reverse repos for a net injection of CNY 50bln and kept rate at 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.9711 vs. Exp. 6.9713 (Prev. 6.9649)

US President Trump said the the US has already responded when asked regarding a response to Chinese sanctions, while he suggested that the phase 1 trade agreement with China means very little amid the great toll from the pandemic. (Newswires)

TikTok's talk with Microsoft (MSFT) unlikely to end in a deal, according to reports in SCMP. (SCMP)

Singapore GDP (Q2 F) Q/Q -42.9% vs. Exp. -42.9% (Prev. -41.2%). (Newswires) Singapore GDP (Q2 F) Y/Y -13.2% vs. Exp. -13.2% (Prev. -12.6%)

UK/EU

BoE's Ramsden said BoE will do more and increase pace of QE if economy slows and markets wobble again, while he confident they still have significant headroom to do more QE if there was a much weaker recovery and is confident there would be no further quarters of negative growth for UK's economy. (The Times)

UK PM Johnson reportedly blocked plans to invite Scottish First Minister Sturgeon to attend Cabinet meetings. (FT)

UK Barclaycard July consumer spending fell 2.6% Y/Y vs. 14.5% decline in June, restaurant spending fell 64.2% Y/Y vs. 86% decline in June, although takeaway spending was up 20.4%, while July spending in pubs and bars fell 43.0% Y/Y vs. 86.0% decline in June. (Newswires)

UK BRC Retail Sales YY (Jul) 4.3% (Prev. 10.9%). (Newswires)

German government mulls taking more stakes in companies following investment in airline Lufthansa (LHA GY). (Handelsblatt) 

FX

The DXY slightly softened to trade around the 93.50 level with price action dragged by the improved risk tone and recent breakdown in COVID-19 relief discussions, although both sides have suggested willingness to resume negotiations and Treasury Secretary Mnuchin also noted there remains room for compromise in discussions. As such, the greenback’s major counterparts nursed losses although EUR/USD stalled around 1.1750, while GBP/USD approached the 1.3100 handle but with gains capped by prior resistance and following comments by BoE's Ramsden that the BoE will do more and increase pace of QE if economy slows and markets wobble again. Elsewhere, USD/JPY was kept afloat by the risk tone which has also been the main driver for antipodean currencies which helped NZD/USD reclaim the 0.6600 handle and Westpac recently suggested the RBA will likely tolerate further AUD appreciation in the near-term.

Australian NAB Business Confidence (Jul) -14 (Prev. 1.0). (Newswires) Australian NAB Business Conditions (Jul) 0 (Prev. -7.0)

Turkey President Erdogan said he hopes market interest rates will fall further. (Newswires)

COMMODITIES

 WTI crude futures marginally gained above the USD 42.00/bbl level with prices underpinned by the improved risk tone overnight but with gains contained amid the light pertinent newsflow although there were recent comments by Saudi Aramco CEO that 2021 capex plan will be significantly lower than its previous target of USD 40bln-45bln and reaffirmed it is proceeding with increasing raise oil production to 13mln BPD, while focus now shifts to the latest stockpile numbers beginning with the private inventory report due later today. Gold prices re-approached the prior day’s lows in a continuation of the pullback from historic levels, despite the weaker greenback, and copper consolidated near the prior day’s highs as the constructive risk tone kept prices afloat.

US

The TPLEX had a choppy start to the week, as yields reversed earlier strength amid this week’s looming refunding supply and an improved risk tone. By settlement, 2s unch at 13bps, 10s +1bps at 57bps, and 30s +2bps at 124bps. USTs had been richening through Europe as the risk tone as participants were cautious after the weekend’s stimulus events/saga/breakdown. However, Treasury Secretary Mncuhin helped offset that with his semi-optimistic comments and said that a deal with Democrats could be reached this week. Simultaneously, the strength pared into the US cash equity open as stock futures, particularly cyclicals, saw upside. At the same time, there was likely concession at play ahead of this week’s USD 112bln Treasury refunding supply, which will be its largest offering to date. Similarly, rates were likely finding pressure amid a fresh slew of deals hitting the US IG market, including a USD 4bln 7-parter from Chevron (CVX) and USD 3.25bln 3-parter from Visa (V), as corporates re-tap the debt markets post-earnings. Meanwhile, swap spreads widened, more so at the front-end, amid the Fed’s new and increased capital ratio requirements for US banks post-stress tests, which analysts noted could raise funding pressures around stress dates (e.g. month-, quarter- and year-end) as it could portend banks to hold less Treasuries. T-note (U0) futures settled 2+ ticks lower at 139-28.

US President Trump commented the US will not proceed any further with Kodak (KODK) unless allegations are cleared, while he later stated that it looks like stocks will be topping records soon and that he is mulling a capital gains tax cut, as well as an income tax cut for middle income families. Furthermore, there were also separate comments from a White House spokesperson that President Trump is still motivated to have a COVID relief bill that includes direct payments to Americans and funding for schools. (Newswires)

US VP Pence told Governors that unemployment insurance benefits should be available now, while he added that President Trump is very open to aid payments to individuals and families. In related news, Treasury Secretary Mnuchin said most states will be able to execute unemployment insurance aid extension in the next week or two and stated he has not spoken to House Speaker Pelosi or Senate Minority Leader Schumer since Friday but is willing to meet them. (Newswires)

US House Speaker Pelosi said US President Trump can only postpone the payroll tax and not alleviate it. There were also comments from Senate Minority Leader Schumer that executive orders in general will not get the job done especially the incompetent ones issued over the weekend and that President Trump's recent action is so unserious in meeting the needs of America as to be pathetic. (Newswires)

US Democrats reportedly blame White House Chief of Staff Meadows for the failure to deliver on this round of talks, according to Bloomberg's Mohsin. (Twitter)

Fed's Evans (non-voter) said those affected by the crisis will require new policies to help them make it through the downturn, while he added that not all businesses will survive and many workers will need to find new employment. (Newswires)