• Sentiment strengthened after the European cash open whilst gold gave up USD 2000/oz with fundamental drivers at the time sparse; US futures firmer and towards session peaks, e-mini S&P hit record highs
• US President Trump said he is mulling a capital gains tax cut, as well as an income tax cut for middle-income families
• Russian-made COVID-19 vaccine has received regulatory approval, according to Russian President Putin via RIA
• New Zealand has confirmed new local COVID-19 cases after 102 days of no cases, will be placed under Level-2 restrictions; updates which pressure NZD, albeit still firmer on the day
• DXY is downbeat as equities remain elevated with major peers all benefiting aside from JPY while EUR & GBP are yet to convincingly eclipse 1.18 and 1.31 respectively against the USD
• Looking ahead, highlights include Fed’s Daly (Non-voter) and Fed's Barkin (Non-voter), EIA STEO, supply from the US

CORONAVIRUS UPDATE

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

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. Major newswire tally stated that California coronavirus cases increased by at least 12,784 on Monday including a 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)

The first Russian-made COVID-19 vaccine has received regulatory approval, according to Russian President Putin via RIA; hopes production will commence soon. (Newswires)

New Zealand has confirmed new local COVID-19 cases after 102 days of no cases; four confirmed cases in one family; source of the cases is unknown. NZ will be placed under Level 2 restrictions, via PM Ardern. As of 12:00 Wednesday, Auckland will be moving to Level 3 restrictions for 3-days. Health Chief notes that it was inevitable that the country would have another case of community transmission, NZ is prepared for this. (Newswires)

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 (+2.1%) and Shanghai Comp. (-1.2%) 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 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)

Chinese M2 Money Supply YY* (Jul) 10.7% vs. Exp. 11.1% (Prev. 11.1%)

-        New Yuan Loans* (Jul) 992.7B vs. Exp. 1200.0B (Prev. 1810.0B)

-        Outstanding Loan Growth* (Jul) 13.0% vs. Exp. 13.2% (Prev. 13.2%)

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%)

US

US President Trump 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)

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 ILO Unemployment Rate (Jun) 3.9% vs. Exp. 4.2% (Prev. 3.9%)

-        Claimant Count Unemployment Change (Jul) 94.4k vs. Exp. 10.0k (Prev. -28.1k)

-        Employment Change (Jun) -220k vs. Exp. -288k (Prev. -126k)

-        Average Week Earnings 3M YY (Jun) -1.2% vs. Exp. -1.1% (Prev. -0.3%)

-        Average Earnings (Ex-Bonus) (Jun) -0.2% vs. Exp. -0.1% (Prev. 0.7%)

German ZEW Economic Sentiment (Aug) 71.5 vs. Exp. 58.0 (Prev. 59.3)

-        ZEW Current Conditions (Aug) -81.3 vs. Exp. -68.8 (Prev. -80.9)

-        Hopes for a speedy economic recovery have continued to grow, but the assessment of the situation is only improving slowly

-        Poor earnings expectations for the banking sector and insurers over the next six months is cause for concern

EU ZEW Survey Expectations (Aug) 64.0 (Prev. 59.6)

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)

EQUITIES

European equities trade higher across the board [Euro Stoxx 50 +2.7%], with upside accelerating after the cash open as sentiment improved following an initially bleak APAC handover – prompting DAX cash and Sept futures to gain above 13k, albeit fresh fundamental catalysts remain light throughout the session thus far; some modest impetus coincided with vaccine updates from Russia. Firm gains are also seen across all European sectors, with cyclicals/value clearly outpacing defensives, whilst the breakdown paints a similarly performance, with Travel & Leisure topping the chart, closely followed by Oil & Gas, Autos and Banks, whilst the other side of the spectrum sees Healthcare and Chemicals as the laggards. In terms of individual movers, UK listed Cineworld (+17%) extended on earlier gains and resides at the top of the Stoxx 600 amid reports that the group could go private. BP (+3.7%) coattails on the back of firmer energy prices coupled with source reports the group is said to be mulling the sale of its German chemicals’ unit DHC Solvent Chemie. Mediobanca (+5.9%) extends on opening gains after the ECB gave the green-light for shareholder Del Vecchio to increase his stake in the Co. to 13-14% from 10%.

China smart phone shipments (July) -35.5% YY, CAICT. (Newswires)

FX

USD – Another back up in US Treasury yields and mild steepening along the curve into record refunding has underpinned the Dollar to a degree, but a deeper retracement in spot bullion to test support around the psychological Usd 2000/oz level coincided with the DXY marginally eclipsing Monday’s high at 93.729. However, the Greenback has lost momentum against the backdrop of extended gains in global equities that is keeping high beta/cyclical currencies supported and safe-haven demand suppressed.

AUD/NZD/CAD/NOK – As noted above, the Aussie is benefiting from bullish risk sentiment to the extent that declines in NAB business sentiment and conditions have not weighed on Aud/Usd unduly, while the Kiwi is just keeping tabs with 0.6600 ahead of Wednesday’s RBNZ policy meeting even though the bias may be skewed towards a more dovish event compared to the prior assessment and guidance, while NZ reports a local outbreak of COVID-19 cases after a 100+ day run of no infections at all. Elsewhere, elevated crude prices are helping the Loonie and Norwegian Crown remain afloat around 1.3300 and 10.5800 vs the Buck and Euro respectively, with the former now looking for some independent impetus via Canadian housing starts.

EUR/CHF/GBP – All benefiting from the aforementioned Dollar fade, with the index now back under 93.500 again and Euro rebounding between 1.1723-83 parameters following a somewhat mixed ZEW survey, the Franc paring losses within a 0.9168-34 range and Pound maintaining 1.3050+ status, but not quite able to retest yesterday’s best a few pips over 1.3100 in wake of mostly weaker than forecast UK labour and pay data.

JPY – The Yen is marginally underperforming either side of 106.00 on a loss of safety premium and with Japanese markets back from their long holiday weekend, but little lasting reaction to a wider than anticipated Japanese current account surplus.

EM – Oil’s ongoing resurgence is helping the Rouble and Mexican Peso supplement gains vs the flagging Greenback. but the SA Rand has not been deterred by Gold’s meltdown or looming data and has breached key technical resistance in the form of the 100 DMA (17.6240) on the way up towards 17.5400. Similarly, the Turkish Lira is back in recovery mode as tighter CBRT funding conditions prompt some short covering, while Brazil’s Real awaits BCB COPOM minutes from the last meeting.

South Africa's Eskom is to implement load reduction during the evening peak hours today. (Newswires)

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

FIXED INCOME

Multiple bearish factors, including EU equities markedly extending gains (Dax beyond 13k for example) have pushed core bonds back further from recent highs, and with Bunds also acknowledging relative resilience in Eurozone periphery debt on their way down through several chart supports ahead of 177.09 (like a 50% Fib at 177.26). However, Gilts have tested Monday’s 137.69 low and still have long end DMO supply to make room for and the US Treasury curve is seeing more of a bear-steepening concession in preparation for record refunding. Also ahead, NFIB, PPI data, latest weekly Redbook readings, Fed’s Barkin and Daly.

COMMODITIES

WTI and Brent front-month futures continue to grind higher in early trade, with upside more-so a function of the overall risk tone as opposed to fresh fundamental catalysts, albeit prices remain underpinned by the recent upbeat assessment from Saudi, Iraq and Gulf members alongside the constructive outlook by Saudi Aramco post-earnings. The benchmarks experienced modest downside heading into the European cash open, in which prices briefly dipped below 45/bbl for the Brent Oct contract, whilst WTI Sep tested 42/bbl, before recovering lost ground and some more. Looking ahead, traders will be eyeing the weekly Private Inventory release, with expectations for crude stockpiles to decline by almost 4mln barrels, but ahead of the weekly release, participants will pay attention to the EIA Short Term energy Outlook which will include US crude production forecasts for the rest of 2020 and 2021. Elsewhere, precious metals are under pressure this morning with spot gold south of USD 2000/oz and spot silver just about holding onto a USD 28/oz handle having briefly dipped below the figure. No fundamental news flow coincided with the losses across precious metals but action could merely be a function of tech play alongside some profit taking/stops being triggered. In terms of base metals, Dalian iron ore futures snapped its two-day losing streak as prices were bolstered by falling portside inventories, whilst LME copper prices saw early downside amid the firming USD at the time; albeit, has since nursed losses.

Saudi Aramco will raise price of domestic gasoline starting August, according to state TV cited by EnergyIntel's Bakr. (Twitter)