• European bourses have been erring marginally higher throughout the session, with similar performance for US futures; amidst quiet newsflow
• DXY remains pressured and dropped briefly to a new YTD trough, as such major FX peers are largely firmer this morning
• Senate Republicans are planning to propose a slimmed down relief bill which is expected to include USD 10bln for the USPS and USD 300 in boosted unemployment benefits till December 27th
• Oracle (ORCL) has reportedly joined the pursuit to purchase TikTok's US operations
• Looking ahead, highlights include US Building Permits & Housing Starts. Earnings: Walmart

CORONAVIRUS UPDATE

Major newswire tally stated that US cases increased by at least 39,105 to a total of 5.46mln on Monday and deaths rose by at least 530 to a total of 170.0k. Texas cases: +7,368 (prev. +6,744) and deaths +51 (prev. +238). Elsewhere, a major newswire tally stated that California coronavirus cases increased by at least 9,197 and deaths rose by at least 96. (Newswires)

WHO said the Western Pacific region has entered a new stage of the pandemic where nations are able to minimize large-scale disruption, while it added that the pandemic is changing with 20yr, 30yr and 40yr age groups increasingly driving the spread. (Newswires)

More than 70 workers have tested positive for COVID-19 at a Nottinghamshire dessert factory in UK which supplies major grocery retailers, while all 1600 workers are to be tested. (The Guardian)

German COVID-19 cases rose by 1,693 - the largest increase since April 25th. (Newswires)

ASIA

Asian equity markets traded mixed following a similar indecisive performance for stocks on Wall St amid a lack of fresh developments on the macro front and with participants tentative ahead of the risk events later in the week. ASX 200 (+0.8%) and Nikkei 225 (-0.2%) were varied with Australia kept afloat by strength in healthcare, tech and metal miners as gold made its way back closer towards the USD 2000/oz level, although gains were capped for the index by disappointing earnings with financials pressured after Westpac scrapped its dividend citing a highly uncertain outlook and BHP shares were subdued by weaker results. Furthermore, consumer staples suffered after Coles reported a slump in pre-tax profits and with Treasury Wine Estates the worst performing stock due to China launching anti-dumping investigations on imports of Australian wine. Conversely, the Japanese benchmark was negative with exporters hampered by a stronger currency, while Hang Seng (+0.1%) and Shanghai Comp. (+0.4%) remained positive after the PBoC continued its liquidity efforts and with Hong Kong set to announce a 3rd round of COVID-19 relief, although tensions persisted as reports suggested the delay in trade review talks was likely due to a lack of atmosphere and the US also recently tightened restrictions on Huawei's access to US technology and semiconductors. Finally, 10yr JGBs were higher amid weakness in Japanese stocks and following the gains seen in T-notes, but with further gains restricted by mostly weaker results at the 30yr JGB auction in which the bid to cover and accepted prices declined from prior.

PBoC injected CNY 100bln via 7-day reverse repos at rate of 2.20% for a net daily injection of CNY 50bln

PBoC set USD/CNY mid-point at 6.9325 vs. Exp. 6.9309 (Prev. 6.9362)

Hong Kong is to launch a 3rd round of coronavirus relief, according to reports citing Hong Kong Chief Executive Lam. (Newswires)

China MOFCOM launched anti-dumping investigation on imports of Australian wine. (Newswires)

Oracle (ORCL) has reportedly joined the pursuit to purchase TikTok's US operations, while reports noted that the Co. was seriously contemplating acquiring TikTok's US, Canada, Australia and New Zealand operations and was working with a group of US investors which already own a stake in ByteDance. (FT)

US 

US President Trump said he will create tax credits for companies that bring jobs back from China and will strip Federal contracts from companies that outsource critical industries. (Newswires)

House Speaker Pelosi expects bipartisan support for the Democratic house bill for the post service. (Newswires/)

US Senate Republicans are planning to propose a slimmed down relief bill which is expected to include USD 10bln for the USPS and USD 300 in boosted unemployment benefits till December 27th. (Politico)

UK/EU

Diplomats from Austria, Sweden, Denmark and the Netherlands (Frugal Four) are pushing for a 2% deflator to be applied to the rebates won during the Recovery Fund negotiations. Southern and Eastern member states are resisting the demand - one EU diplomat said there is no consensus on the deflator. (FT)

EQUITIES

European bourses trade mostly firmer [Euro Stoxx 50 +0.5%] after recovering from broad-based losses seen at the cash open, despite a lack of fresh catalysts and against the backdrop of thinner August volumes. The initial defensive bias seen across sectors has somewhat faded, with broader sectors now mostly higher with no clear risk profile to be derived. The detailed breakdown sees Travel & Leisure and Autos the top performers, whilst Banks and Financial Services hold onto losses amid a lower yield environment, whilst ECB’s VP de Guindos also noted that banks are unlikely to fully recovery from the pandemic before 2022. In terms of individual movers, Clariant (+5.2%) holds onto opening gains with traders citing reports yesterday that the group and China’s Chemtex have agreed on a biofuel partnership, in which the two parties will collaborate to market and sell Clariant’s sunliquid technology licenses, as well as services and supplies for advanced biofuel plants in China. Elsewhere, mining-giant BHP (-1.5%) remains subdued post-earnings after missing analyst expectations across a number of metrics, albeit share prices have lifted off lows alongside the broader markets, with BHP losses potentially cushioned by the announcement of thermal coalmine sales within two years. Meanwhile, AstraZeneca (+0.5%) outperforms the healthcare sector as the Co’s Imfinzi has been grated priority review in the US. Finally, the Bank of America August Global Fund Manager Survey showed that investors say long US tech was most crowded trade, then long gold, whilst top tail risks are COVID-19 second wave followed by US-China trade war and the US election.

Home Depot Inc (HD) Q2 20 (US): Diluted EPS 4.02 (exp. 3.71), Revenue 38.1bln (exp. 34.47bln)

Amazon (AMZN) is reportedly expanding physical offices and is preparing to add 3.5k jobs across New York, Phoenix, San Diego, Denver, Detroit and Dallas; WSJ reports. (WSJ)

Uber (UBER) and Lyft (LYFT) are looking at licensing their brands to operators of vehicle fleets in California, according to NYT sources. (NY Times)

US States are looking for around USD 26.4bln from major pharma companies to help pay for damages as a result of the opioid crisis. Current talks involve McKesson (MCK), AmerisourceBergen (ABC), Cardinal Health (CAH) and Johnson & Johnson (JNJ); WSJ sources. (WSJ)

Norway's Sovereign Wealth Fund: returned -3.4 percent, equivalent to -188 billion kroner; fund had a value of 10,400 billion kroner as at 30 June 2020, of which 69.6 percent was invested in equities, 2.8 percent in unlisted real estate, and 27.6 percent in fixed income. (Newswires)

FX

XAU/DXY – Another retreat in real rates for Gold bugs to embrace and reload long positions to the broad detriment of the Dollar, as the index retreats further to fresh ytd lows (92.469) after a failing to sustain gains above 93.000 in listless seasonal trade. Ahead, US housing data is highly unlikely to alter the landscape before Wednesday’s FOMC minutes, initial claims and flash PMIs, but tomorrow’s 20 year auction could conceivably impact Treasuries after last week’s Quarterly Refunding prompted pronounced bear-steepening with ramifications for the Greenback and other currencies by default.

GBP/CAD/JPY – The Pound has recovered from Monday’s lethargy and rebounded to the top of the major ranks, with Cable establishing a firmer base on the 1.3100 handle and within striking distance of early August highs (1.3186), while Eur/Gbp has drifted back down to pivot 0.9050. Elsewhere, the Loonie is extending advances vs its US counterpart beyond 1.3200 ahead of Canadian CPI tomorrow and not showing any real adverse reaction to news of Finance Minister Morneau’s resignation, while the Yen has made a decisive break through 106.00 to expose recent peaks around 105.32-30 in wake of an improvement in Japan’s Tankan index, albeit still deeply negative.

EUR/AUD/CHF – Also firmer against the Buck, as Eur/Usd retests resistance above 1.1900, the Aussie eyes loftier levels over 0.7200 amidst more constructive cross-flows down under and hardly a flinch on the RBA minutes that merely reiterated forward policy guidance (accommodation to continue as long as required alongside 0.25% 3 year yield target for progression towards full employment and inflation remit). Similarly, the Franc registered a new multi-year apex circa 0.9038 before Swiss trade and ip data on Thursday.

NZD/NOK/SEK – The G10 laggards, with the Kiwi still reeling from COVID-19 2nd wave concerns and also having to contend another dovish RBNZ call after ANZ joined the chorus anticipating further easing to -0.25% by early Q2 next year. Nzd/Usd is straddling 0.6550, but Aud/Nzd has extended to 1.1040+ following brief retracement through 1.1000 overnight. Meanwhile, the Swedish and Norwegian Krona have both lost impetus vs the Euro around 10.3300 and 10.5100 after a decline in industrial inventories and against the backdrop of waning crude prices.

EM – Most regional currencies are retrieving losses or appreciating further vs the Dollar, but yet again the Lira is flagging just above 7.4000 awaiting the latest CBRT rate meeting in stark contrast to the Yuan heading towards 6.9100 irrespective of ongoing US-China tensions outside of Phase 1 trade deal terms that Beijing claims will be adhered to even though the meeting to discuss progress has been delayed.

RBA Minutes from the August 4th meeting stated that accommodative approach will be kept for as long as necessary and 3yr yield target will be maintained until there is progress towards full employment and inflation. Members also noted the downturn was not as severe as earlier anticipated and a recovery was underway for most of Australia but added that the recovery is likely to be slower than expected. Furthermore, it stated it is likely that fiscal and monetary support will be required for some time and that there is no need to adjust package of measures in current environment, although board agreed to continue to assess the evolving situation and did not rule out adjustments if circumstances warranted. (Newswires)

Canadian Finance Minister Morneau has announced his decision to resign. (Radio Canada).

FIXED INCOME

Gilts had already lost impetus if not quite enthusiasm before the 1st of today’s DMO offerings and have not taken the relatively solid 2023 results for granted or a bullish omen given less avid investor appetite for longer-dated issuance of late. In fact, the 10-year debt future has retreated further from best levels (138.27) to 137.00 and a new Liffe low, while Bunds pare gains after a reasonable 7-year sale from 30 ticks to single digits. Elsewhere, US Treasuries have also drifted down from overnight session highs and the curve is virtually unchanged having been considerably flatter at one stage in the run up to housing data and the latest weekly Redbook updates before Wednesday’s 20 year auction and FOMC minutes.

COMMODITIES

WTI and Brent front month futures oscillate between gains and losses as prices recover from overnight lows alongside the stock markets’ grind higher. That being said, news flow has again remained light for the complex ahead of the JMMC meeting tomorrow – where no major surprises are expected. Meanwhile, Russian Energy Minister Novak has contracted the coronavirus, but is showing no symptoms and will tune in to tomorrow’s meeting via videocall. Before that, the weekly Private Inventory report is due today, with forecasts for headline crude inventories to have fallen ~2.9mln barrels over the last week. Elsewhere, spot gold and spot silver trade on a firm footing above USD 2000/oz and 26/oz respectively, aided by a softer USD. Base metals overnight continued to be bolstered by the PBoC’s recent liquidity injection, with Dalian iron ore rising some 3%. Separately, LME copper continues to grind higher as it tracks the stock markets and with falling LME inventories also supportive for the red metal. Finally, BHP’s outlook notes that there was extremely challenging demand in H1 for its products and expects iron ore prices to ease from current spot levels and China’s growth to moderate over time.