• European stocks trade flat/firmer amid a lack of fresh catalysts; DAX is pressured by its IT exposure whilst FTSE 100 outperforms
• US President Trump said the government reached an agreement with Moderna (MRNA) for delivery of 100mln doses of its vaccine candidate
• US Senator Kamala Harris has been chosen as former VP Joe Biden’s running mate
• RBNZ kept rates unchanged as expected, widened its LSAP and agreed that the package of additional monetary tools must remain in active preparation which includes a negative OCR
• In FX, DXY is softer, EUR and GBP benefit while NZD underperforms, TRY unwinds some recent gains
• Looking ahead, highlights include US CPI, DoEs, Fed's Rosengren, Kaplan, Daly, supply from the US

CORONAVIRUS UPDATE

Major newswire tally stated US cases increased by at least 52,751 to a total of 5.16mln on Tuesday and deaths rose by at least 1,413 to a total of 164.6k. Major newswires tally stated California cases increased by at least 11,448 on Tuesday and deaths rose by at least 176. Elsewhere, Texas cases +8,913 (prev. +4,455) and deaths +220 (prev. +31). (Newswires)

US President Trump said the government reached an agreement with Moderna (MRNA) for delivery of 100mln doses of its vaccine candidate and also commented that three vaccine candidates are now in phase 3 trials. Moderna (MRNA) confirmed the supply agreement in which it stated the new government award is for up to USD 1.525bln and option was granted to the US government to buy as many as 400mln additional doses. (Newswires) 9.0% higher in the pre-market

NIH's Fauci said he hopes that the Russians have actually, definitively proven that the vaccine is safe and effective but seriously doubts that they've done that. On this, Russia is to commence production of their COVID-19 vaccine within 2-weeks, Tass citing the Russian Health Minister; and clinical trial results are also to be published in 2-weeks. (Newswires/Tass)

China's Jingzhou city in Hubei reports one COVID-19 case; individual turned positive again after recovering months ago. (Newswires) Elsewhere, South Korea and Japan are in talks over ways to ease coronavirus entry restrictions for business travellers, a diplomatic source said Wednesday, (Yonhap)

ASIA

Asian equity markets traded with a lacklustre tone following on from a weak lead from US where the major indices faltered in late trade after comments from US Senate Majority Leader McConnell dashed some stimulus hopes and saw the S&P 500 retrace its earlier gains which had initially pushed the index to within 1% of its all-time high. ASX 200 (-0.1%) was subdued with underperformance seen in gold miners following the aggressive pullback in the precious metal which retreated firmly below the USD 2000/oz level. Furthermore, nearly all its sectors languished in the red aside from financials which showed some resilience despite CBA posting an 11.3% decline in FY cash profits, while recent data releases contributed to the dampened mood after a further deterioration in Westpac Consumer Sentiment and with Wage Growth at its slowest pace in 27 years. Nikkei 225 (+0.4%) was choppy as participants digested earnings including SoftBank which was pressured following a drop in Q1 pre-tax profits, and NZX 50 (-1.3%) suffered from lockdown restrictions following reports of the country’s first COVID-19 cases after having gone 102 days without any locally-transmitted spread of the virus, although some of the losses were stemmed following the RBNZ announcement to expand its QE program. Elsewhere, Hang Seng (+1.4%) and Shanghai Comp. (-0.6%) initially conformed to the glum mood despite a strong liquidity effort by the PBoC which injected CNY 140bln through 7-day reverse repos as participants also react to weaker than expected lending data from China and as US-China tensions lingered. Finally, 10yr JGBs are weaker in the aftermath of yesterday’s extended retreat and following recent losses in T-notes, while participants were also kept sidelined amid the enhanced liquidity auction for longer dated JGBs which attracted weaker interest than prior.

PBoC injected CNY 140bln via 7-day reverse repos for a net injection of CNY 140bln with rate at 2.20% PBoC set USD/CNY mid-point at 6.9597 vs. Exp. 6.9603 (Prev. 6.9711)

China Vice Foreign Minister stated that the approaching months are crucial for US-China relations, while the official added that China needs to keep the relations on the right track and ensure they do not run out of control or derail. (Newswires)

White House document stated US ban on TikTok could prevent app stores and advertisers from conducting business with the app, while it was separately reported that TikTok tracked user data for at least 15 months by sidestepping a privacy safeguard in Google's Android system. (Newswires/WSJ)

US

Federal Reserve said it revised pricing on municipal liquidity facility in which it lowered amount by which interest rate for taxable notes is adjusted relative to tax exempt notes and lower interest rate spread on tax-exempt notes by 50bps. (Newswires)

US Senator Kamala Harris has been chosen as former VP Joe Biden’s running mate. (Newswires)

Monmouth University poll showed former VP Biden at 51% vs. President Trump at 41% (Prev. 52% vs. 39%) nationally, in a poll conducted August 6th-10th. (Newswires)

UK/EU

UK Chancellor Sunak is reportedly weighing a delay of the Autumn budget amid virus second wave fears. (FT)

UK said that positive progress continues to be made in many areas covered by the agreement with the US on trade discussions. Most chapter areas are moving into the advanced stages of trade discussions. It was agreed that negotiations should continue to pace throughout the Autumn. UK and US have agreed to postpone the planned SME dialogue that was due to take place later in 2020. (Newswires)

UK GDP Prelim QQ (Q2) -20.4% vs. Exp. -20.5% (Prev. -2.2%); Prelim YY (Q2) -21.7% vs. Exp. -22.4% (Prev. -1.7%)

-        Estimate MM (Jun) 8.7% vs. Exp. 8.0% (Prev. 1.8%)

-        Estimate 3M/3M (Jun) -20.4% vs. Exp. -21.2% (Prev. -19.1%)

GEOPOLITICAL

US official and a diplomatic source said UN Security Council will likely vote on Friday regarding US plan to extend the Iran arms embargo, according to Fox News correspondent Rich Edson. (Twitter/Fox News)

Iraq cancelled Turkish Defense Minister visit that was set for Thursday and summoned the Turkey's Ambassador to give him a protest note following reports of a Turkish deadly drone attack. (Newswires)

EQUITIES

European equities trade flat/firmer after an uninspiring cash open [Euro Stoxx 50 +0.1%] as sentiment somewhat improved from a downbeat APAC handover. News flow has again been light in early hours with little by way of fresh fundamental catalysts to shift the dials. That being said, the DAX (-0.2%) holds its position as the laggard as heavyweight SAP (-0.9%) fails to trim losses amid the broad tech underperformance seen Wall St and Asia-Pac, whilst the FTSE 100 (+0.6%) trades on the other side of the spectrum bolstered by its heavy energy and financials exposure. Sectors are mixed with no clear risk profile to be derived, with the breakdown seeing banking names among the gainers after ABN AMRO (+5.3%) reported lower than expected loan loss provisions whilst Q2 operating income was more-or-less in-line with forecasts. The energy sector meanwhile is propped up by price action in the oil complex, whilst Travel & Leisure remains pressured amid fears of the impact of resurging cases in the sector. In terms of individual movers, Sunrise Communications (+26%) soared at the open and held onto gains as Liberty is to acquire Co. for CHF 110/shr for a total of CHF 6.8bln. Note, shares closed at CHF 86.20 yesterday. E.ON (-1.6%) remains in the red after cutting its FY adj. net guidance and EBIT guidance. Asos (+4.6%) remains firmer, albeit off highs, after the group noted that profit before tax for the FY is expected to be significantly ahead of market forecasts.

Tesla (TLSA) will implement a 5-for-1 share split, a move timed to make the stock less expensive for individual investors after the company become the world’s most valuable automaker. (Newswires) 5.5% higher in pre-market trade

Tencent (700 HK/TCEHY) Q2 net income CNY 33.11bln vs. Exp. CNY 27.29bln, Revenue CNY 114.883bln vs. Exp. CNY 112.44bln; due to the pandemic, offline project deployment has not fully resumed in Q2 in cloud and other business services. Combined MAU of Weixin and WeChat CNY 1.21bln vs. Exp. CNY 1.13bln. (Newswires)

FX

NZD/AUD - The Kiwi has fallen further from recent highs on renewed 2nd wave pandemic concerns following an outbreak in Auckland and reports that up to 4 more people may have contracted the virus, while latest negative OCR vibes via the RBNZ have also undermined sentiment more so than the LSAP extension and increase to Nzd 100 bn from Nzd 60 bn that was widely expected. Nzd/Usd is now hovering below 0.6550 and Aud/Nzd fading from 1.0900+ peaks overnight, as the Aussie drifts back towards 0.7100 in wake of Westpac’s August consumer sentiment showing a downturn in morale and Q2 wages sub-consensus for the weakest y/y rate of growth in 27 years.

USD - More real yield appreciation and associated GOLD depreciation (Xau down through Usd 1900/oz at one stage) boosted the Buck across the board, with the DXY hitting 93.909 before waning ahead of 94.000 and last week’s 93.997 apex after a late swoon on Wall Street amidst the ongoing fiscal relief stalemate. Ahead, US CPI comes hot on the heels of firmer than forecast PPI reads, but unlikely to impact much in the current less data-centric mood.

JPY - Another victim of relative Dollar strength and US Treasury curve concessions for Quarterly Refunding, as Usd/Jpy shifts into a loftier range in the upper 106.00 region and Eur/Jpy rebounds from just shy of 125.00 to around 125.55.

SEK/NOK/CHF/EUR/GBP/CAD - The tide has turned somewhat in Scandinavia where the Swedish Crown has been inflated by firmer CPI prints to an extent, while the Norwegian Krona has lost momentum alongside crude prices, but both are still outperforming vs the Euro circa 10.2600 and 10.5500 respectively as the single currency tops out against the Greenback following unsuccessful attempts to clear 1.1800 and the 200 HMA near the round number. Elsewhere, the Franc is paring declines from 0.9200, but respecting resistance at 0.9150 and Sterling has recoiled from 1.3100+ on Tuesday to test support into 1.3000, largely shrugging off not quite as bad as feared, though still pretty abject UK GDP along the way. Similarly, the Loonie handed back more gains vs its US counterpart as oil slipped and broad risk sentiment/appetite dipped before bouncing circa 1.3350.

EM - Payback after yesterday’s strong recovery rallies, and perhaps a few signs of Cny/Cnh caution in the run up to Saturday’s US-Sino Summit as China’s Foreign Ministry warns against the danger of playing with fire in reference to US Health Chief Azar’s trip to Taiwan.

RBNZ kept the OCR unchanged at 0.25% as expected and widened the LSAP to NZD 100bln to June 2022 from Prev. NZD 60bln to May 2021, while it added that QE eligible assets remain the same and it will provide additional stimulus as necessary. RBNZ agreed that the package of additional monetary tools must remain in active preparation which includes a negative OCR and noted that purchase of foreign assets remain an option although Governor Orr later commented that buying foreign assets would not be effective in current conditions. Furthermore, the Committee agreed that any future reduction in rates, if complemented by a funding or lending programme, could provide an effective way to deliver stimulus and agreed that further monetary stimulus was needed to achieve its remit targets.

RBNZ Governor Orr commented at the press conference that policymakers are ready to lend funds to banks at negative rates but reserves at RBNZ would also have negative rates and stated that the mortgage deferral will be extended, while Assistant Governor Hawkesby commented that the cap on holdings of government bonds was lifted to 60% from 50% and the MPC endorses front loading of QE purchases. (Newswires)

Australian Westpac Consumer Sentiment Index (Aug) 79.5 (Prev. 87.9); M/M -9.5% (Prev. -6.1%). (Newswires) Australian Wage Price Index (Q2) Y/Y 1.8% vs. Exp. 1.9% (Prev. 2.1%); Weakest growth in 27 years

Swedish CPIF YY* (Jul) 0.5% vs. Exp. 0.3% (Prev. 0.7%); MM* (Jul) 0.2% (Prev. 0.6%)

FIXED INCOME

Mediocrity in most EU stocks compared to superlative performances put in on Tuesday before some post-US open plateauing, suggests that the ongoing weakness in bonds is largely supply-related. Indeed, the fact that Gilts have pared declines after a very well received DMO offering from 136.89 to just over 137.00 provides more evidence, while Bunds are also off worst levels at 176.37 vs 176.18 in wake of 2030 German auction results that were strong in terms of all traditional measures, bar a large retention. Elsewhere, US Treasury futures remain narrowly mixed and the curve in steepening mode awaiting the bumper T-note sale, CPI and a trio of Fed orators.

COMMODITIES

WTI and Brent futures eke mild gains in early trade with prices supported by the larger-than-expected draw in private crude inventories (-4.4mln vs. Exp. -3.1mln), whilst EIA’s STEO also provided a bullish outlook, with 2020 and 2021 world oil demand forecast upgraded by 40k BPD and 30k BPD respectively, whilst also lowering 2020 US production forecasts by 370k from the prior report. Aside from that, news flow has been scarce, WTI September meanders on either side of USD 42/bbl (vs. low USD 41.53/bbl) whilst its Brent October counterpart briefly rose above USD 45/bbl after printing a base at USD 44.49/bbl. Elsewhere, precious metals see gains in what seems to be a consolidation from yesterday’s dire losses, spot gold tested USD 1950/oz to the upside (vs. low 1863/oz) before coming off highs, and spot silver briefly reclaimed a USD 26/oz handle from a sub-25/oz base.  Meanwhile, due to price fluctuations, the Shanghai Gold Exchange said it will increase margin requirements for gold contracts to 12% from 9%, trading limit to be raised to 11% from 8%, whilst margin requirements for silver contracts will also be raised to 16% from 13%, trading limit to be raised to 12% from 15%. In terms of base metals, Shanghai copper declined in tandem with Chinese stocks in the run-up to US-China meeting, whilst the stalemate on US fiscal stimulus added to the downbeat tone overnight. Dalian iron ore prices retreated overnight after the China Iron and Steel Association predicted iron ore discharging difficulties and port congestion issues are seen easing later this month.

US Private Inventory Crude Stocks (w/e 7th August) Crude -4.4mln (exp. -3.1mln). (Newswires)

CME raised COMEX 100 gold futures initial margins by 6.9% to USD 10,230/contract from USD 9,570/contract and raises COMEX 5000 silver futures maintenance margins by 15.2% to USD 13,250/contract from USD 11,500/contract

Iran set September Iranian Light Crude price to Asia buyers at Oman/Dubai + USD 1.00/bbl which is down USD 0.30 from the prior month. (Newswires)