• A non-committal European session thus far with bourses within ranges and modestly firmer at present
• President Trump stated that he postponed talks with China and does not want to talk with China right now
• Brexit trade discussions are reportedly set to stall again after Brussels dismissed UK demands for continued wide-ranging EU access for British truckers
• Lowes (LOW) beat on EPS & revenue and highlights that sales momentum continues into August
• US Oil Fund (USO) has received a Wells notice from the SEC
• DXY has dipped slightly from its overnight rebound, hampered by antipodean strength while debt has been dictated by supply
• Looking ahead, highlights include Canadian CPI, FOMC Minutes & JMMC, Fed's Barkin, supply from the US, earnings from Target, NVIDIA & Analog Devices

CORONAVIRUS UPDATE

Major newswire tally stated that US coronavirus cases increase by at least 42,674 to a total of 5.50mln on Tuesday and deaths rose by at least 1,287 to a total of 171.9k. Texas cases: +7,282 (prev. +7,368 and deaths +216 (prev. +51). Elsewhere, a major newswire tally stated that California coronavirus cases increased by at least 5,854 and deaths rose by at least 186. (Newswires)

ASIA

Asian equity markets sustained the mixed lead from their counterparts on Wall St where the S&P 500 and Nasdaq notched fresh record intraday highs shortly after the open, although the tone briefly soured before picking back up again with participants somewhat tentative and volumes thinner due to the lack of data and risk events ahead. Nonetheless, ASX 200 (+0.7%) was positive with the best performing stocks in the index driven by earnings, while Nikkei 225 (+0.3%) was rangebound as participants digested mixed releases including disappointing Machinery Orders and although trade data printed better than expected, there were still substantial contractions to both Exports and Imports. Elsewhere, Shanghai Comp. (-1.2%) weakened alongside the closure of morning trade in Hong Kong due to a typhoon signal, ultimately, Hang Seng (-0.7%); as well as the continued antagonism between US-China as President Trump noted that he postponed talks with China and does not want to talk with China right now, while he responded “we'll see“ when questioned if he will pull out of the trade agreement. Finally, 10yr JGBs were choppy with mild pressure seen as Japanese stocks just about remained afloat, but with downside also stemmed amid the BoJ presence in the market for JPY 770bln of JGBs with 3yr-10yr maturities.

PBoC injected CNY 150bln via 7-day reverse repos for a net injection CNY 10bln at a rate of 2.20%

PBoC set USD/CNY mid-point at 6.9168 vs. Exp. 6.9165 (Prev. 6.9325)

President Trump stated that he postponed talks with China and does not want to talk with China right now, while he also responded “we'll see“ when questioned if he will pull out of the Phase 1 trade deal with China. (Newswires/Twitter)

President Trump said Oracle (ORCL) is a good company and may take over TikTok's US businesses, while he added there must be a solution by September 15th and that the US Treasury must get its share from the sale of TikTok. (Newswires)

White House Chief of Staff Meadows said there were no new US-China trade discussions scheduled and that USTR Lighthizer continues to have discussions with Chinese counterparts regarding Phase 1 deal commitments. (Newswires)

Huawei and ZTE (763 HK) asked suppliers to slow down shipments of certain 5G base station-related products in June, so that they can redesign products and change some equipment to remove as much US content as possible. (Nikkei)

US State Department is asking colleges and universities to divest from Chinese holdings in their endowments amid delisting risk, in which it warned schools to get ahead of potentially more onerous measures on holding the shares. (Newswires)

Japanese Trade Balance (JPY)(Jul) 11.6B vs. Exp. -77.6B (Prev. -268.8B, Rev. -269.3B). (Newswires) Japanese Exports (Jul) Y/Y -19.2% vs. Exp. -21.0% (Prev. -26.2%) Japanese Imports (Jul) Y/Y -22.3% vs. Exp. -22.8% (Prev. -14.4%) Japanese Machinery Orders (Jun) M/M -7.6% vs. Exp. 2.0% (Prev. 1.7%) Japanese Machinery Orders (Jun) Y/Y -22.5% vs. Exp. -17.6% (Prev. -16.3%)

US 

Senior US official reportedly sees a real desire by some lawmakers from both parties to achieve a smaller stimulus agreement of around USD 500bln which could include postal service funding and other items. (Newswires)

UK/EU

UK PM Johnson is holding out against calls for an Autumn reshuffle and will only make 'minor' cabinet changes after the summer recess, before conducting a full reset in the New Year after the Brexit transition period finishes. (Telegraph)

Brexit trade discussions are reportedly set to stall again after Brussels dismissed UK demands for continued wide-ranging EU access for British truckers. (FT)

Politicians in Australia are calling for any post-Brexit trade deal with the UK to involve freedom of movement in order to "create a powerful force for free trade and liberal values". (Telegraph) 

UK CPI YY* (Jul) 1.0% vs. Exp. 0.6% (Prev. 0.6%); MM* (Jul) 0.4% vs. Exp. -0.1% (Prev. 0.1%)

-        Core CPI YY* (Jul) 1.8% vs. Exp. 1.3% (Prev. 1.4%); MM* (Jul) 0.4% (Prev. 0.2%)

EU HICP Final YY (Jul) 0.4% vs. Exp. 0.4% (Prev. 0.4%)

-        HICP-X F&E Final YY (Jul) 1.3% vs. Exp. 1.3% (Prev. 1.3%)

-        HICP-X F,E,A&T Final YY (Jul) 1.2% vs. Exp. 1.2% (Prev. 1.2%)

GEOPOLITICS

Dutch PM Rutte tweets the EU is working on targeted sanctions. Dialogue must lead to a solution that reflects the vote of the people. (Twitter)

EQUITIES

European equities trade with little in the way of firm direction (Eurostoxx 50 +0.3%) with ongoing pessimism surrounding US-China relations and stimulus talks in Washington unable to impose any meaningful sway on summer-thinned European markets. Price action thus far has been more of a case of treading water ahead of the US entrance to market, although Europe has seen a modest pick-up in recent trade as indices across the Atlantic continue to eye record highs. From a sectoral standpoint in Europe, energy names are a laggard in-fitting with price action in with some of the modest losses seen in the complex, albeit downside is relatively small in terms of magnitude. Elsewhere, some of the travel & leisure names such as IAG (+2.9%), easyJet (+0.5%) and Ryanair (+0.9%) began the session on a slightly firmer footing amid reports in UK press that Heathrow could expand its testing capabilities in an attempt to replace the imposition of blanket quarantines. Utility names are seen lower in Europe amid losses in RWE (-4.0%) with the DAX-constituent having completed a USD 2bln share issue to support its expansion into renewable energy. Of note for the DAX, investors are awaiting the release of the updated composition of the index at 21:00BST today with reports suggesting that Wirecard could be replaced by Delivery Hero (+0.8%).  Maersk (+4.7%) have been a standout outperformer thus far following its Q2 earnings release, in which the Co. beat on estimates for profits and subsequently reinstated guidance at a higher level than indicated previously.

Lowes (LOW) Q2 2020 (USD): EPS 3.75 (exp. 2.95/2.84 reported); Revenue 27.3bln (exp. 24.27bln). Quarterly sales +135%. SSS: +35.1% (exp. +13.2%). All merchandising divisions posting comparable sales growth exceeding 20%; looking ahead, our sales momentum continues into August. (Newswires)

Panasonic are to boost production capacity of batteries for Tesla next year in an investment expected to exceed $100 million, (Nikkei)

FX

DXY - The broader Dollar and index are losing steam as the APAC consolidatory strength, which reverberated into early European hours, fades ahead of the FOMC Minutes (Full preview available in the Research Suite). DXY found an overnight base at 92.150 ahead of the YTD low at 92.124, with the index now residing closer to the middle of the current 92.150-92.388 intraday band.

NZD, AUD, CAD - The non-US Dollars posted various degrees of resilience vs. the Buck in overnight trade and have since extended on gains as the Dollar wanes. NZD/USD outperforms in the G10 FX space after finding support at the 0.6600 mark before topping its 21 DMA at 0.6621. AUD/USD gains in tandem after breaching mild resistance around 0.7237-43, but market participants eye a sustained break above the 200 WMA at 0.7255 ahead of the Feb 2019 weekly high at 0.7295. Meanwhile, the Loonie ekes mild gains despite losses in the crude complex with potential technical factors at play - USD/CAD drifted below its 200 DMA (1.3169) overnight before dipping under 1.3150 as it eyes the release of Canadian CPI later today.

GBP, EUR - Both marginally firmer against the USD, although the former saw some fleeting strength on the back of UK CPI metrics notably topping forecasts across the board, mainly due to a less significant decline in clothing prices alongside the easing of lockdown restrictions. Cable meanders around mid-range after printing a post-CPI high of 1.3267 (low 1.3230) ahead of the Dec 31st 2019 high of 1.3283. EUR/USD meanwhile remains within recent ranges and moves in tandem with the USD, having had shrugged off Final CPI figures heading into the European summit on Belarusian sanctions, albeit EU diplomats noted that these are unlikely to be agreed on until the end of this week at the earliest. Note: EUR/USD sees a hefty EUR 1.7bln in options expiring at strike 1.1900 at the NY cut.

CHF, JPY - Mixed trade between the CHF and the JPY, with the former compliant to USD-action and the latter flat after a choppy APAC session amid mixed data and an absence of clear sentiment. USD/CHF inched closer towards 0.9000 to the downside, with yesterday’s low residing at 0.9008. USD/JPY remains sub-105.50 after rebounding from an overnight base at 105.11, with the pair seeing USD 762mln in options rolling off at 105.00 and USD 800mln scattered between 105.25-30. For the technicians, if 105.00 fails to hold then focus will turn on 104.86 which marks the 76.4% Fib of the Jul-Aug rise.

Yuan - A firm session for the Yuan as the recent Dollar weakness prompted the PBoC to set the CNY mid-point at a 7-month high, with today’s USD/CNY setting at 6.9168 vs. yesterday’s 6.9325. USD/CNH was driven lower during the APAC session and briefly traded sub-6.9000 for the first time since January.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1650 (276M), 1.1755 (1.38BLN), 1.1900 (1.7BLN)

-        USD/JPY: 105.00 (762M), 105.25-30 (800M), 105.80 (480M) 106.00 (375M), 106.50-65 (940M), 106.75 (280M), 106.90-00 (1.1BLN), 107.25 (420M), 108.00 (500M)

FIXED INCOME

During APAC hours the complex firmed marginally once again albeit desks note that volumes were low compared with recent days, futures volumes roughly 70% of the typical figure which isn’t too surprising given the disruptions within Hong Kong alongside summer effects. Given the relatively light schedule for today data wise, focus has/will be on supply. Firstly, the UK auction was softer than the previous outing by a notable margin and this does appear to have coincided with a stalling of the upside in Gilts. Prior to this and along with core debt counterparts, Gilts had been experiencing a grinding bid throughout the morning in-spite of the firmer UK CPI metrics likely as the reading is somewhat overlooked ahead of the August number; on which, the BoE have estimated that headline CPI will be subdued given the VAT cut for hospitality and eat-out to help-out scheme, potentially trimming ~0.4% each off the headline – Lloyds highlight the possibility of a reading at/below 0.0% for the month. Technically, if the upside resumes then there is still someway to go from the current session high of 137.32 to recent peaks such as 138.13 from August 11th. Turning to Bunds which saw a stellar 2050 issuance with a strong b/c and smaller retention than the previous outing; b/c being the metric of note nearing 3.0x. As such, and as has been the theme recently, this auction elevated the Bund to a session high of 176.83 – however, still someway from last week’s high of 177.64. Stateside, the complex is painting a similar picture to core European peers and has been grinding higher with the yield curve modestly bull-flattening at present. Following the European theme, US supply is in focus today, particularly as the longer-ended supply last week was the weakest of that week’s substantial issuance given the heavy quarterly refunding; as a result of this today’s bond is ~5bln larger. Generally, 20-year issuance has performed well, and BMO look for a solid result today (full details available in the Newsquawk Bond Auction Preview). Additionally, FOMC minutes is on the docket along with some Fed speak shortly after.

COMMODITIES

WTI and Brent October futures have been edging lower in early European trade as participants eye the fallout of the JMMC meeting poised to commence from 15:00BST. Although no fireworks are expected from the meeting, market chatter yesterday noted of a possible recommendation of an early taper of the output cut deal, speculations that were dismissed by Russian Energy Minister Novak last week. Focus will likely fall on the laggards’ compliance levels amid pledges to over-comply to make up for their earlier shortfalls, whilst commentary on the JMMC’s outlook will also garner attention given resurging COVID-19 cases. Alongside the meeting, the weekly EIA inventories will be released, with headline crude forecast to have fallen 2.670mln barrels in the past week after private inventories printed a larger than expected draw of 4mln barrels vs. Exp. -2.7mln – with prices shrugging off the release. Elsewhere, Eastern Libyan authorities are to allow limited and temporary exports from the blockaded oil ports in a bid to free up storage to allow fuel production for fire stations. The blockades have resulted in a build-up in condensates and the reduction of gas production used for power stations. In terms of precious metals, spot gold and silver largely move in tandem with the Dollar amidst a lack of fresh catalysts, with the former meandering just under USD 2,000/oz and the latter just north of USD 27.50/oz. UBS remains constructive on gold over the next 6-month, with its base case is at USD 2,000/oz and an upside case of USD 2,200-2,300/oz, whilst UBS’ silver upside case resides around USD 30-40/oz. Over to base metals, Dalian iron ore continued to rise amid firm demand from China as steel mill outputs remain near record levels. However, analysts at ING note that as uncertainties over Brazilian supply subsides, the bank expects prices to ease. Meanwhile, copper prices gain as mining giant Rio Tinto lowered its copper guidance to 135k-175k tons from 165k-205k tons.

US Private Energy Inventory Crude -4.3mln bbls vs. Exp. -2.7mln bbls. (Newswires)

US Oil Fund (USO) has received a Wells notice from the SEC. (Newswires)

US President Trump administration reportedly mulls tighter sanctions on Venezuelan oil. (Newswires)