• Asian equity markets began mostly higher as the region took impetus from the tech-led gains on Wall St
• The S&P 500 and Nasdaq moved to within close proximity of record highs, fuelled by strength across the big tech names
• US Trade Representative said the US is removing certain products from the UK and Greece from its tariff list and adding an equal amount of trade from France and Germany
• Additionally, the amount of products subject to countermeasures will remain at USD 7.5bln and tariff rates will be kept at 15% for aircraft and 25% for all other products
• The DXY remained softer, to the benefit of its major counterparts, leading EUR/USD to reclaim 1.1800
• US House Speaker Pelosi and Senate Minority Leader Schumer said the White House is not budging from their position concerning the size and scope of a legislative package
• Looking ahead, highlights include IEA Monthly Oil Report, US weekly jobs, Fed's Bostic, Brainard, US 30yr Auction

CORONAVIRUS UPDATE

US COVID-19 cases +55,540 (prev. +40,522); deaths +1,244 (prev. +565), while a major newswire tally stated that US cases increased by at least 51,848 to a total of 5.22mln and deaths rose at least 1,459 to a total of 166.1k. California COVID-19 cases +11,645 in which the increase includes a backlog (prev. +12,500) and a major newswire tally stated California cases increased by at least 7,914 on Wednesday and deaths rose by at least 148, while Texas cases +6,200 (prev. +8,913), deaths +324 (prev. +220) and hospitalizations fell by 188 to 7,028 which officials noted was a 6-week low. (Newswires)

Argentina and Mexico agreed to produce AstraZeneca’s (AZN LN) coronavirus vaccine for Latin America. (Newswires)

New Zealand PM Ardern said she expects the cluster of coronavirus cases to increase further before slowing. The health chief stated they do not currently need to widen restrictions outside of Auckland yet. Furthermore, health officials noted the cluster in Auckland had grown, which is said to raise the likelihood of a lockdown extension. (Newswires/AFP)

ASIA

Asian equity markets began mostly higher as the region took impetus from the tech-led gains on Wall St where the S&P 500 and Nasdaq moved to within close proximity of record highs, fuelled by strength across the big tech names and with Tesla front-running the advances following the recent announcement of a 5-for-1 stock split. However, some of the elation gradually waned overnight as focus turned to the deluge of earnings. ASX 200 (-0.4%) and Nikkei 225 (+2.0%) were mixed with price action for the biggest movers in Australia dictated by results, in particular the worst performers AGL Energy and Telstra after both posting weaker bottom lines for the full year, while the Japanese benchmark outperformed on a breakout above 23,000 to print its highest level since February. Hang Seng (Unch.) and Shanghai Comp. (Unch.) were indecisive with only minimal support seen from another substantial PBoC liquidity injection as geopolitical tensions remain in the background and tentativeness ahead of US-China talks on Saturday to assess the Phase-1 deal in which China will reportedly bring up WeChat and TikTok issues. Furthermore, Hong Kong was also kept indecisive amid choppy trade in index heavyweight Tencent which was eventually pressured despite topping earnings estimates as it refrained from an interim dividend and as it faces the impending WeChat ban in US. Finally, 10yr JGBs traded marginally higher after rebounding from yesterday’s floor and despite the strength in Japanese stocks, while the BoJ were also present in the market today for nearly JPY 1.2tln of JGBs in 1yr-10yr maturities.

PBoC injected CNY 150bln via 7-day reverse repos for a net injection of CNY 150bln at a rate of 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.9429 vs. Exp. 6.9388 (Prev. 6.9597)

UK/EU

Business leaders and trade unions urged the UK government for a furlough extension and warned Chancellor Sunak to safeguard the recovery or else it will fail. (The Times)

US Trade Representative in WTO Airbus (AIR FP) case said it is removing certain products from UK and Greece from the tariff list and adding an equal amount of trade from France and Germany effective September 1st, while the amount of products subject to countermeasures will remain at USD 7.5bln and tariff rates are kept at 15% for aircraft and 25% for all other products. Furthermore, USTR Lighthizer stated that EU and member states have not taken the actions required to comply with WTO decisions on Airbus case and that the US will begin a new process with the EU in an effort to reach an agreement that ensures a level playing field for US companies. (Newswires)

EU official said EU and US should increase efforts to negotiate a solution to ongoing trade irritants and that EU Trade Commissioner Hogan will continue active engagement with USTR Lighthizer, while the official added that the US decision to refrain from raising tariffs on EU goods avoids exacerbating the dispute. (Newswires)

UK RICS Housing Survey (Jul) 12 vs. Exp. -5.0 (Prev. -15.0, Rev. -13). (Newswires)

FX

The DXY remained softer following the outflows spurred by the stock gains during US trade and as both sides of the aisle continued to play the blame game for the breakdown in stimulus discussions with House Speaker Pelosi suggesting there is no use in continuing aid talks if GOP does not come to the table and that the White House is not budging from their position concerning the size and scope of a legislative package, while Treasury Secretary Mnuchin noted that Pelosi made it clear she is unwilling to continue negotiations unless WH agreed to USD 2tln proposal and that Democrats have no interest in negotiating. EUR/USD was firmer after breaking above the its 200-Hour MA level and nearby resistance of 1.1800 and GBP/USD also extended above 1.3050 due to the USD weakness and which follows the US announcement to maintain 15% tariffs on Airbus and 25% tariffs on other European goods, although it refrained from carrying out threats to impose tariffs on beer, gin and vodka, as well as modified which products are affected by tariffs in which certain goods from Britain and Greece will be removed from the USD 7.5bln list and replaced by goods from France and Germany. Elsewhere, USD/JPY was lacklustre as the outflows from JPY were offset by the USD-woes and antipodeans traded mixed with AUD/USD only marginally supported by much better than expected jobs data in which Employment Change beat expectations and Unemployment Rate was lower than feared, while NZD/USD was contained by resistance ahead of the 0.6600 level and amid comments from RBNZ Deputy Governor Bascand that a resurgence of the virus in New Zealand is a big risk to the outlook.

Australian Employment Change (Jul) 114.7k vs. Exp. 40.0k (Prev. 210.8k) Australian Full Time Employment Change (Jul) 43.5k (Prev. -38.1k) Australian Unemployment Rate (Jul) 7.5% vs. Exp. 7.8% (Prev. 7.4%) Australian Participation Rate (Jul) 64.7% vs. Exp. 64.4% (Prev. 64.0%)

RBNZ Deputy Governor Bascand said resurgence of the virus in New Zealand is a big risk to the outlook and RBNZ would need to consider additional monetary stimulus if there are periods of resurgence and extended lockdowns. Bascand added that the RBNZ will probably combine negative rates and funding for lending programme if further stimulus is needed beyond yesterday's QE extension but also noted that banks are resilient and have strength to get us through the current period. (Newswires)

RBNZ Chief Economist Young Ha said he wants to see a weaker NZD and noted negative rate policy option is not inevitable, while he added that bond buying targets mean to signal intent. (Newswires)

COMMODITIES

WTI crude futures traded sideways throughout the session after holding onto the prior day’s gains which had been spurred by the constructive risk tone and bullish EIA inventory data. Nonetheless, price action during the Asia-Pac session was muted amid mixed headlines with Nigeria planning to reduce an additional 114k BPD for this month and next to compensate for prior overproduction, although it was also reported that Kuwait reduced its OSP prices for September. Elsewhere, gold mildly benefitted from the weakness in the greenback although remained below the USD 1950/oz near-term resistance, while copper was slightly pressured as risk momentum began to wane.    

Nigeria plans to reduce an additional 114k BPD on top of its OPEC+ deal quota in August and September, according to Energy Intel citing Nigeria's petroleum minister. (Twitter)

Kuwait set September crude OSP to Asia at Oman/Dubai + USD 0.70/bbl, which is lower by USD 0.30/bbl from the prior month. (Newswires)

WSJ article noted that there is a growing fleet of large, idled crude tankers off China's coast, waiting for weeks as China ports struggle to handle inbound oil that has swamped its storage facilities. (WSJ)

GEOPOLITICAL

US sent 3 stealth bombers to the Indian Ocean island of Diego Garcia reportedly to address Chinese threat ahead of China's live firing naval drills north of Taiwan. (The Times)

US Central Command released a video showing Iranian forces boarding a Liberian ship in international waters. (Twitter)

US

The TPLEX was ultimately little changed/marginally steeper after a successful 10-year auction kept Tuesday’s acute sell-off from extending, despite an upside CPI print. By settlement, 2s unch. at 16bps, 10s +1bps at 67bps, and 30s +2bps at 137bps; volumes in the T-Note were also above recent averages once again. Yields had been extending their bear-steepener overnight and into the US session as equities made up for their late-session losses on Tuesday. The stronger than expected CPI print saw the Treasury selling pressure deepen further, although it was relatively modest amid the market likely being cautious on letting yields drift much further following the 10bps rate back-up in the long-bond on Tuesday. As the Europeans departed, cyclicals traded sideways, similar to yields. However, after the robust 10-year auction, yields came back in, although rose slightly amid some corporate deals hitting the market, including USD 4bln from CVS Health. Looking ahead, participants will be looking for further signs of easing Jobless Claims out of the US on Thursday. T-note (U0) futures settled 2 ticks lower at 139-06.

Fed's Daly (non-voter) said a lapse of extended unemployment benefits creates a gap in consumer demand and spending, while she added Congress will need to build a bridge now that dealing with the virus is longer than hoped. Furthermore, Daly stated forward guidance can make some of the Fed's instruments more effective by providing a clearer message and noted that some sectors will not fully return to pre-pandemic levels. (Newswires)

US President Trump said the US economy is doing significantly better than Europe and a 50% rebound in the stock market signals a V-shaped recovery, while he added he will terminate payroll taxes after the election. Furthermore, President Trump said he is very angry at China because they let the virus come into the US and the world. (Newswires)

US President Trump’s administration is reportedly to use FEMA funds to supplement unemployment insurance extension, which will cost USD 44bln to last five weeks. (FBN)

US House Speaker Pelosi and Senate Minority Leader Schumer said the White House is not budging from their position concerning the size and scope of a legislative package and that they will return to negotiations when the administration takes it seriously. (Newswires)

US Treasury Secretary Mnuchin said House Speaker Pelosi's statement is not an accurate reflection of our conversation and Pelosi made it clear she is unwilling to continue negotiations unless WH agreed to USD 2tln proposal, while he added that the Trump administration is willing to move ahead with legislation but Democrats have no interest in negotiating. (Newswires)

Ipsos poll showed former VP Biden leading President Trump in a 2-way race at 58% vs. 42% conducted Aug 10th-11th. (Twitter)