• Asian equity markets traded mostly positive as the region benefitted from the tech-led gains on Wall St
• Brexit talks are set to end without a breakthrough this week, albeit the UK has reportedly submitted a draft FTA
• In FX markets, the DXY gave back some gains, providing mild reprieve for EUR/USD and GBP/USD
• US House Speaker Pelosi says the timing is not right for a smaller coronavirus relief bill
• Looking ahead, highlights include UK retail sales, EZ, UK & US flash PMIs, Canadian retail sales, EZ consumer confidence

CORONAVIRUS UPDATE

US COVID-19 cases +46,500 (prev. +39,318); deaths +1,404 (prev. +1,172), while a major newswire tally stated that US cases increase by at least 43,422 to a total of 5.59mln and deaths rose by at least 1,068 to a total of 174.3k. California COVID-19 cases +5,920 (prev. +6,164) and deaths +163 (prev. +181), Texas cases +4,923 (prev. +6,474) and deaths +234 (prev. +309). (Newswires)

US CDC Director Redfield said the number of new COVID-19 cases is declining in the southern states and thinks they will see lower mortality nationwide, while he is also optimistic for a COVID-19 vaccine this fall. (Newswires)

UK added Croatia, Austria and Trinidad & Tobago to travel quarantine list, while it removed Portugal. (Newswires)

More medical experts have voiced concerns of a second wave of the virus worsening in winter with experts worried that UK is ill-prepared for a winter peak and that the public is becoming complacent. (Sky News) Separately, a Professor of Medicine at the University of Oxford has warned that people who caught COVID-19 in March might have already lost all of their protective antibodies, suggesting that antibodies could deplete by 10-30% per month. (Telegraph) 

ASIA

Asian equity markets traded mostly positive as the region benefitted from the tech-led gains on Wall St where Apple prodded above the USD 2tln market cap status and as firm gains in Tesla, Microsoft, Intel and Facebook also fuelled the big tech resurgence resulting to outperformance in the Nasdaq, although upside was capped in the broader market amid mixed data releases including higher than expected Initial Jobless Claims. ASX 200 (-0.1%) and Nikkei 225 (+0.4%) both initially took impetus from the constructive handover from US peers but with upside in Australia later retraced following soft PMI data and with weakness seen in defensives as well as the top-weighted financials sector, while the Japanese benchmark contended with the effects of a mixed currency and resistance at the 23,000 level. Hang Seng (+1.4%) and Shanghai Comp. (+0.8%) were underpinned amid the continued PBoC liquidity efforts in which it injected CNY 150bln through 7-day reverse repos and CNY 50bln in 14-day reverse repos. This was the first occasion the central bank utilized the latter instrument in around 2 months, and there was also recent confirmation from China’s MOFCOM that the US and China will be conducting the delayed trade discussions in the approaching days. Finally, 10yr JGBs were flat and continue to eye the 152.00 level to the upside despite the gains in Japanese stocks, with mild support provided by the BoJ’s presence in the market for JPY 870bln of JGBs and the central bank also offered to purchase JPY 200bln in corporate bonds from 25th August with a remaining 3-5yrs to maturity. 

PBoC injected CNY 150bln via 7-day reverse repos and CNY 50bln in 14-day reverse repos for a net weekly injection of CNY 160bln vs. CNY 490bln net injection last week with rates kept at 2.20% and 2.35% respectively. (Newswires) PBoC set USD/CNY mid-point at 6.9107 vs. Exp. 6.9108 (Prev. 6.9274)

Japanese National CPI (Jul) Y/Y 0.3% vs. Exp. 0.3% (Prev. 0.1%). (Newswires) Japanese National CPI Ex. Fresh Food (Jul) Y/Y 0.0% vs. Exp. 0.1% (Prev. 0.0%) Japanese National CPI Ex. Fresh Food %& Energy (Jul) Y/Y 0.4% vs. Exp. 0.5% (Prev. 0.4%)

UK/EU

Reports noted that this week's Brexit talks are set to end without a breakthrough, as pessimism returns and hopes for a deal slip, while UK negotiators reportedly submitted a plan for an FTA this week. (Newswires) Sources in the government have refused to confirm the existence of its supposed draft FTA, however, the Times has revealed that UK Chief Brexit Negotiator Frost presented a "consolidated legal text" this week, in a move that has been regarded as "desperate" by EU officials. (Times) 

UK GfK Consumer Confidence (Aug) -27 vs. Exp. -25.0 (Prev. -27.0). (Newswires)

FX

The DXY weakened in an unwinding of the post-FOMC Minutes strength, with the hard currency pressured amid gains in stocks. The greenback’s major counterparts marginally extended on the prior day’s rebound with EUR/USD approaching its 50-Hour and 100-Hour MA levels at 1.1876 and 1.1882 respectively, and GBP/USD held on to the 1.3200 handle but with upside capped amid pessimism related to Brexit negotiations as reports noted this week's Brexit talks are set to end without a breakthrough. Elsewhere, USD/JPY was subdued after it recently gave back the 106.00 status and antipodeans were kept afloat with AUD/USD testing resistance around the 0.7200 handle in tandem with the advances in CNH which strengthened to its best level against the greenback since January due to the USD-woes and firmer reference rate setting by the PBoC.

Australia Preliminary Retail Sales (Jul) M/M +3.3% (Prev. +2.7%); Y/Y +12.2%. Australian Bureau of Statistics stated that retail turnover increased in all states and territories in July aside from Victoria. (Newswires)

RBNZ Chief Economist Young Ha said pandemic restrictions in Auckland played a part in the August policy decision and projections, while he adds they are more likely to experience downside risks than upside risks. There were also comments from RBNZ official Buckle that they are facing considerable uncertainty and the central bank has scope to act aggressively if needed, while the he added the decision on negative rates is contingent on the health of the economy when the time comes and if we have those tools available. (Newswires)

COMMODITIES

WTI crude futures were range bound overnight just shy of the USD 43/bbl level as it consolidated following the prior day’s whipsaw action which initially saw prices slump beneath USD 42.00/bbl before wiping out all the losses shortly after. Nonetheless, price action has since calmed with the constructive risk appetite doing little to spur crude amid the lack of pertinent newsflow. Elsewhere, gold was contained below USD 1950/oz as the effects of a weaker greenback was offset by the lack of haven demand, while copper benefitted from the risk tone and outperformance in its largest consumer China. 

GEOPOLITICAL

US Secretary of State Pompeo said it would be an enormous mistake not to extend the conventional arms embargo on Iran and that if UN sanctions are violated, US will do everything it can to enforce them. France, Germany and the UK are not supporting the US move to restore Iranian sanctions but call on Iran to reverse all measures inconsistent with its nuclear commitments and return to full compliance immediately. (Newswires)

Russia requested a UN Security Council meeting on Iran for Friday and reports earlier noted that Russia rejected the plans to restore the UN sanctions on Iran as non-existent in which it stated that only a country that remains within the 2015 Iran nuclear deal can initiate the return of sanctions. (Newswires)

US

Treasuries bull-flattened on Thursday after the rate back-up post-FOMC minutes reversed, although found some renewed pressure from duration supply. By settlement, 2s unch. at 14.5bps, 10s -3bps at 64.5bps, 30s -4bps at 137.5bps; TYU volumes were low. After Wednesday’s bear-steepener, ignited by the aversion to YCC in the FOMC July minutes, yields spent the overnight session trundling lower. The Treasury strength then caught a second wind after both the Initial Claims print and the Philly Fed survey disappointed expectations, seeing the 10-year yield hit a LoD at 63.8bps, compared to its Wednesday high of 69bps. Yields then moved sideways, unreactive to next week’s Treasury auction size announcements (USD 50bln of 2-year notes, 51bln of 5-year notes, and 47bln of 7-year notes), up until the 30-year TIPS auction. The USD 7bln offering saw weak demand, tailing by 5.3bps, sending the 30-year TIPS yield up by a similar magnitude, seeing nominals at the long-end also drift higher by a couple of bps; similar to last week’s bond auction, the outright, record-low yields have failed to entice investors, especially in thin summer trading conditions. Meanwhile, participants were also likely hesitant to bring yields back to their lows in anticipation of Johnson & Johnson’s (JNJ) duration-heavy USD 7.5bln offering, which saw August IG volumes set a record of over USD 121bln. After a cautious economic tone set from today’s data slate, the market could have to reassess further if Friday’s Flash PMIs also fare worse. T-note (U0) futures settled 6 ticks higher at 139-18.

US President Trump said he would expand energy infrastructure in the second term and create 10mln jobs next year if re-elected, while he threatened tariffs on firms hiring overseas in a 2nd term. (Newswires)

US House Speaker Pelosi says timing is not right for a smaller coronavirus relief bill, according to a PBS interview. (Newswires)