• Equities build on a firm APAC handover as newsflow slows this morning
• FDA authorized the emergency use of convalescent plasma as treatment for hospitalized COVID-19 patients
• President Trump is considering fast tracking the UK vaccine which is currently being developed by AstraZeneca before the election, although AstraZeneca later denied this
• US President Trump raised the prospect of decoupling from China in which he suggested the US doesn’t have to do business with China
• Crude is supported on general sentiment and the Gulf of Mexico supply situation; ~58% of production shut on Sunday
• Looking ahead the calendar sees a lack of pertinent data and the start of the US Republican National Convention

CORONAVIRUS UPDATE

US FDA authorized the emergency use of convalescent plasma as treatment for hospitalized COVID-19 patients. US President Trump confirmed the announcement which he stated will expand access to plasma treatment and suggested plasma treatment is proven to reduce mortality by 35%, while there were also separate reports that President Trump is considering fast tracking the UK vaccine which is currently being developed by AstraZeneca before the election, although AstraZeneca later denied this. (Newswires/FT)

China launched the emergency use of COVID-19 vaccines which were going through clinical trials. (Global Times)

US COVID-19 cases +45,265 to a total 5.64mln and deaths +1,006 to a total 175.7k, while a major newswire tally stated that US coronavirus cases increased by at least 31,344 to a total of 5.72mln on Sunday and deaths rose by at least 450 to a total of 176.8k. Florida COVID-19 cases +2,974 to a total 600,571 and deaths +51 to a total 10,462, Texas cases +4,398 to a total 577,537 and deaths +104 to a total 11,370, while a major newswire tally stated that California coronavirus cases increased by at least 3,139 on Sunday and deaths rose by at least 16. (Newswires)

UK COVID-19 cases +1,041 (prev. +1,288) and deaths +6 (prev. +18). (Newswires)

Italy’s Health Minister Speranza suggested that coronavirus situation doesn’t warrant imposing additional restrictions such as a new lockdown or travel ban between provinces, while he added it is different than the first phase and noted that both France and Germany have refrained from imposing additional measures despite higher infection rates. (Newswires)

Australia's Victoria State Premier announced that they are to allow the extension of the state of emergency, that was set to expire on Sept. 13th, for up to a year which is the legal instrument that allows rules on facemasks, COVID-safe work plans and limits on pubs, cafes and restaurants. (Newswires)

New Zealand PM Arden extended the Auckland level 3 lockdown restrictions to August 30th. (Newswires)

South Korea is considering moving the country to Level 3 lockdown restrictions, the highest level and up from the current Level 2, in a nationwide move given the increases in cases with ~3k reported in the last 10 days. (Newswires)

ASIA

Asian equity markets traded mostly positive and E-mini S&P topped the 3,400 mark following Friday’s tech-fuelled gains on Wall St and the recent emergency use authorization of convalescent plasma for treatment of COVID-19 which was suggested to reduce mortality by 35%, but with gains capped by US-China decoupling concerns following comments by US President Trump. ASX 200 (+0.3%) and Nikkei 225 (+0.3%) were initially indecisive before outperformance in tech then proved to be the deciding factor to keep stocks afloat in Australia and with earnings results the main catalyst for the biggest stock movers, while the Japanese benchmark was also higher as it made another attempt at the 23,000 focal point. Hang Seng (+1.7%) and Shanghai Comp. (+0.2%) were underpinned by another firm liquidity effort by the PBoC, although gains in the mainland were tempered by the ongoing US-China tensions after President Trump raised the prospect of decoupling from China and suggested the US does not have to do business with China. In addition, the People’s Liberation Army are to conduct military drills across 3 major Chinese sea regions in the approaching days which is aimed at deterring Taiwan secessionists and the US, while increased IPO activity also attracts funds from the broader market with 18 firms listing in the ChiNext today as part of reforms in the tech board aimed at fast-tracking IPOs and which saw some of the newly-listed names surge as much as 500%. Finally, 10yr JGBs were positive despite the mild gains in stocks as prices tracked recent upside in T-notes and with the BoJ also present in the market for a total of JPY 450bln of JGBs predominantly concentrated in 3yr-5yr maturities.

PBoC injected CNY 100bln via 7-day reverse repos and CNY 60bln in 14-day reverse repos for a net daily injection of CNY 110bln and maintained 7-day reverse repo rate at 2.20% and 14-day reverse repo rate at 2.35%. (Newswires)

-        PBoC set USD/CNY mid-point at 6.9194 vs. Exp. 6.9201 (Prev. 6.9107)

US President Trump raised the prospect of decoupling from China in which he suggested the US doesn’t have to do business with China, while he later commented regarding decoupling which he noted is something he would certainly do if China don’t treat us right. (Fox News)

WeChat users group filed a suit to block the Trump administration's ban on the messaging app which they said was unlawful and TikTok is to also file a suit to challenge US President Trump's executive order. It was separately reported that China's Huawei and ZTE (763 HK) slowed the pace of the 5G rollout in China amid impact of US restrictions and Huawei asked a mobile phone component supplier last week to temporarily suspend development of new products amid problems related to MediaTek chip supplies due to US restrictions. Conversely, reports noted that Russia is prepared to co-operate with China and Huawei on 5G technology which Moscow is currently trying to develop, according to reports citing Foreign Minister Lavrov. (Newswires/FT/LTN/Interfax)

China’s Global Times Editor tweeted there is increasing concern regarding risk of war as the US & Taiwan challenge the "One-China principle" by demonstrating stronger political relations coupled with US' blatant show of muscle in Taiwan Strait and South China Sea, while he suggested the situation is heading towards spiralling out of control. In related the news, it was also reported that the People’s Liberation Army will be conducting military drills across 3 major Chinese sea regions in the approaching days which is aimed at deterring Taiwan secessionists and US. (Twitter/Global Times) China reportedly met with diplomats of 10 ASEAN members earlier in the month to propose resumption of talks and convey concerns about increasing risks of conflicts from activities by "non-regional countries". (SCMP)

US

US House voted 257-150 on Saturday to approve the bill which provides USD 25bln to the Postal Service and halt the operational services which has caused delays for the mailing system, although the White House had threatened to veto the House postal service bill. (Newswires)

US President Trump’s senior adviser Conway is to leave the White House at end of the month. (Washington Post)

Democratic Presidential Nominee Biden has stated he would be prepared to shut the country down due to COVID-19 if that was the recommendation of scientists, ABC interview. (FT)

ByteDance investors are reportedly looking into the use of their stakes to assist in financing the bid for TikTok, according to sources; Microsoft (MSFT) reportedly remains the lead bidder. Subsequently, China Foreign Ministry, on ByteDance to file a lawsuit against Trump administration, says China supports relevant companies taking up legal weapons to safeguard their rights and interests. (Newswires)

UK/EU

A rift in the Conservative party reportedly broke out regarding whether tax increases are required to plug the gaps in public finances with the Treasury concerned about the rising debt level which increased to more than GBP 2tln, although PM Johnson’s chief adviser Cummings prefers spending reductions rather than an increase in taxes. (Telegraph)

UK PM Johnson is against plans by Chancellor Sunak to temporarily suspend pension protections to avert big increases caused by the “triple lock”, in an effort to boost public finances, with the PM concerned that such action could result to a backlash from older voters. Furthermore, Chancellor Sunak was separately reported to have threatened to withhold funding for poorly thought out infrastructure projects. (Telegraph/Times)

Reports alleged the EU is attempting to impose Brexit in name only which raises the prospects of a no-deal exit. Furthermore, a senior Whitehall source accused the EU as treating PM Johnson’s government the same as former PM May’s by seeking a deal that would tie Britain to EU rules, while officials also stated that Cabinet Minister Gove spends the majority of his time in preparation for a no-deal. (Sunday Times/Twitter) In relevant news, UK Cabinet has drawn up emergency plans to protect the UK from a second COVID-19 wave coinciding with a no-deal Brexit; note, the plans are reportedly dated July 2020. (The Sun)

UK is reportedly set for a record-breaking economic rebound in Q3 amid increased spending post-lockdown, although some economists are concerned the strong initial recovery may quickly peter out. (FT)

European Trade Commissioner Hogan is facing calls to quit after allegedly breaching COVID-19 regulations. An official close to the trade chief said the Hogan is not resigning. Subsequently, Irish PM Martin says absolute assurances are required from Hogan that he did not breach COVID-19 restrictions. (Guardian/Newswires)

Nicolai Tangen, who is due to become head of the Norwegian Sovereign Wealth Fund on September 1st, reportedly faces the choice of either resigning or selling his stake in AKO Capital due to conflicts of interests. Note, he was previously told he would be able to keep a ~43% stake; is to meet with the Norges Bank today to discuss next steps. (FT)

S&P affirmed Switzerland at AAA; Outlook stable. (Newswires)

EQUITIES

European equities kick the week off on a firm footing (Euro Stoxx 50 +1.8%) as the region picked up the baton from a similarly positive APAC session. Some attribute upside in stocks, and generally firmer sentiment, to the US FDA authorising the emergency use of convalescent plasma as a treatment for hospitalised COVID-19 patients, but the FDA indicated that more trials are needed to prove its effectiveness. It is also worth keeping in mind that against the backdrop of global monetary and fiscal stimulus, a lack of “bad news” can be sufficient to support equity sentiment, particularly during thinned holiday trading. Furthermore, the US and the EU have signed a “mini-deal” in which the EU agreed to eliminate tariffs on US lobsters in exchange for the US halving import taxes on around USD 160mln worth of European goods. Although, the size seems relatively small, the deal signals a shift in sentiment between the two nations, which provides scope for further potential agreements between the two sides. A slight dichotomy is seen between the European and US index futures, with the former outperforming the state-side contracts, potentially due to (to some degree) tail risks heading into Fed’s Jackson Hole Symposium, US GDP and PCE releases this week, alongside stalled fiscal stimulus talks. Sectors are all higher but provide little by way of a bias, with Oil & Gas the marked outperformer amid recent gains in the complex, whilst IT follows a close second a continuation of the sector’s rally on Wall Street on Friday. Travel & Leisure names lag as some APAC countries/states/cities mull extending lockdown orders, including South Korea, Australia’s Victoria state and New Zealand’s Auckland. In terms of individual movers: BT (+5.7%) tops the Stoxx 600 board on the back of reports that the Co. is gearing up to defend itself for takeover approaches by Private Equity firms. The Co. is yet to receive a formal bid, but PE firms are reportedly looking into such a move. Meanwhile, AstraZeneca (+3.1%) is supported by reports that the Trump Admin is reportedly considering fast-tracking the Co’s COVID-19 vaccine candidate to have it in use ahead of the November election. Finally, Wirecard (-2.5%) holds its position as a laggard after being formally dropped out of the DAX 30 and replaced by Delivery Hero (+1.3%).

FX

AUD/NZD - The Aussie is benefiting from broad risk appetite and ongoing weakness in the Kiwi on NZ’s COVID-19 related problems and disappointing data in the form of Q2 retail sales. Hence, Aud/Usd is holding relatively firm in the high 0.7100 area, while Aud/Nzd retests 1.1000 and Nzd/Usd languishes below 0.6550 ahead of NZ trade for the first month of the current quarter on Tuesday evening. Back to the cross, a very large 1.4 bn option expiry at the 1.1000 strike may cap the upside ahead of the NY cut.

USD/EUR - Not quite role reversal, but a marked change of fortunes as the Dollar loses post-US PMI momentum and the DXY struggles to maintain 93.000+ status within a 93.016-266 range. Accordingly, the Euro has pared losses and is back above 1.1800, albeit tentatively as 2nd waves of the coronavirus spread across the Eurozone.

CAD/CHF/GBP/JPY - All narrowly mixed against the Greenback, with the Loonie towards the base of a 1.3186-52 band and deriving some traction from crude prices that are mildly bid on weather induced production cuts and site evacuations. Elsewhere, the Franc is hovering around 0.9100 and 1.0750 vs the Euro after less pronounced increases in Swiss bank sight deposits, Sterling has unwound more UK PMI gains amidst the ongoing Brexit trade stalemate, with Cable under 1.3100 and Eur/Gbp above 0.9000, while the Yen is caught between 105.94-70 parameters and 50/100 HMAs that sit at 105.84 and 105.70 respectively.

SCANDI/EM - Bullish risk sentiment and the aforementioned upturn in oil are keeping the Sek and Nok underpinned, while the Cnh has extended advances from a stronger PBoC Cny fix overnight through 6.9050, but the Try is lagging sub-7.3500 in wake of Fitch downgrading Turkey’s sovereign ratings outlook to negative from stable. Elsewhere, the Rub, Zar and Mxn all gleaning degrees of support from underlying commodities, while the Brl awaits Brazilian consumer confidence.

Goldman Sachs sees the case for USD depreciation remaining intact citing factors including USD being overvalued and US real interest rates to remain negative for several years, while it further cited a steady recovery of the economy from the pandemic. However, it also noted factors for consolidation to persist which includes pandemic uncertainty, Fed outlook and US politics. (Twitter)

New Zealand Retail Sales (Q2) Q/Q -14.6% (Prev. -0.7%). (Newswires)

New Zealand Retail Sales (Q2) Y/Y -14.2% (Prev. 2.3%)

Fitch affirmed Turkey rating at BB-; Outlook revised to Negative from Stable. (Newswires)

Brazilian President Bolsonaro’s reaction when questioned on a BRL 89k payment to his wife from a former police officer has sparked significant pushback within Brazil. (Guardian)

FIXED INCOME

The steady rise in stocks seems to have gradually sapped demand for debt, with Bunds and US Treasuries down to new intraday lows (at 176.80 and 139-16+ vs 177.25/139-22 at best), while Gilts cling to positive territory after failing to reach Friday’s Liffe high. Light Summer volumes continue to exacerbate price action, but Friday’s upbeat US PMIs and progress on anti-virus vaccines appear to be overshadowing 2nd wave concerns and the prospect of a no deal Brexit plus the uncertainty surrounding the Presidential election. More immediately, July’s US national activity index and ECB QE tallies are due on a sparse Monday docket before this week’s bigger releases and events, like Ifo tomorrow and Jackson Hole that starts on Thursday.

COMMODITIES

WTI and Brent front month futures continue to eke mild gains in early European hours, with prices supported by the overall constructive tone across the market coupled by supply woes as the Gulf of Mexico is poised for a double whammy from Tropical Storms Marco and Laura – with the former set to make landfall later today and the latter on Wednesday. Reports noted that as of Sunday, around 58% of the Gulf of Mexico production has been shuttered, according to the Bureau of Safety and Environmental Enforcement – equating to around 1mln BPD. Desks also point to the fragility of refining activity amidst floods. “Although given the large amount of refined product stocks at the moment, the market would likely be able to handle any disruptions to refined product supply better this time around” analysts at ING conclude. WTI Oct meanders just north of USD 42.50/bbl (vs. low 42.23/bbl) whilst its Brent counterpart similarly resides above USD 44.50/bbl (vs. low 44.29/bbl) – with the WTI/Brent arb tightening on the aforementioned Gulf of Mexico developments. Elsewhere, spot gold and silver have recovered from overnight lows in tandem with losses in the Dollar. The yellow metal eyes USD 1950/oz vs. low 1930.30/oz) to the upside whilst spot silver nurses overnight losses to reclaim a firmer footing above USD 26.50/oz (vs. low 26.25/oz). Turning to base metals, Dalian iron ore futures closed lower by almost 2% with traders citing dampening demand for steel products amid seasonal effects and floods. Conversely, LME copper rises amid the gains in stocks, softer Dollar and with inventories falling to a 13-year low. 

US President Trump said he approved the disaster declaration for California amid wildfires, while he also approved the disaster declaration for Puerto Rico and Louisiana amid Hurricane Marco and Tropical Storm Laura. Furthermore, the NHC earlier announced that Marco turned into a hurricane with a life-threatening storm surge and hurricane force winds expected along parts of the US Gulf Coast, while Tropical Storm Laura was heading towards eastern Cuba with heavy rainfall and life-threatening flash flooding continuing over parts of the Dominican Republic and Haiti. (Newswires)

Hurricane warnings discontinued for Storm Marco but dangerous storm surge is still anticipated, according to the NHC; Tropical Storm Laura is forecast to become a Hurricane Tuesday and then make landfall on Wednesday. Prior to this: BHP is tapering down operations at Shenzi and Neptune platforms in the Gulf of Mexico and noted that evacuations were to be completed by Sunday afternoon. Furthermore, Shell (RDSA LN) said on Friday that there were no impacts from Gulf of Mexico storms to its production it began reducing non-essential personnel from some sites, while BP (BP LN) also evacuated employees from the Gulf of Mexico and began to shut production at four of its plants in the region. (Newswires)

Syria said an Arab gas pipeline explosion has resulted in a total blackout out in the country, while the government later declared the explosion targeting the main line feed could be a terrorist act. (Newswires)