• Asian equity markets traded cautiously amid a lack of fresh macro drivers and following on from the somewhat choppy performance of US counterparts
• In FX, the DXY rebounded from support around 93.00, dragging EUR/USD towards 1.18 and GBP/USD below 1.3150
• WTI crude futures plateaued just south of the USD 43.50/bbl level following the prior day’s advances; output disruptions remain in focus
• US President Trump's Administration is reportedly mulling accusing China of 'genocide' over the maltreatment of the Uighur Muslims
• Looking ahead highlights include, US Durable Goods, ECB's Schnabel & BoE's Haldane. Supply from Germany & US

CORONAVIRUS UPDATE

US COVID cases +33,076 (prev. +38,679); deaths +394 (prev. +572), while a major newswire tally stated that US cases increased by at least 38,204 to a total of 5.72mln and deaths rose by at least 1,210 to a total of 178.5k. California cases +4,480 (prev. +4,946) and deaths +105 (prev. +18), while Texas cases +6,091 (prev. +2,847) and deaths +181 (prev. +25). (Newswires)

US President Trump's administration strengthened COVID-19 surveillance with new reporting and testing requirements for nursing homes and other providers, in which the regulatory changes will require nursing homes to test staff and offer testing to residents for COVID-19, while those that fail to do so could face fines. The US Department of Health and Human Services said the Trump administration will distribute 1.5mln N95 respirators to nursing homes from the strategic national reserve. (Newswires)

Miami-Dade (the most populous county in Florida) is to let restaurants reopen for indoor dining from Monday August 31st. (Newswires)

UK COVID cases +1,184 (prev. +853) and deaths +16 (prev. +4). (Newswires)

Global Times stated that all confirmed COVID-19 patients in Beijing hospitals have been cured and discharged. (Twitter)

ASIA

Asian equity markets traded cautiously amid a lack of fresh macro drivers and following on from the somewhat choppy performance of US counterparts, where the DJIA underperformed whilst the S&P 500 and Nasdaq eventually extended on record highs. ASX 200 (-0.9%) underperformed in which utilities and financials led the broad descent across its sectors and as earnings continued to dominate headlines. Nikkei 225 (-0.1%) swung between gains and losses in tandem with an indecisive currency and as early momentum was stalled by resistance at the 23,350 level, with slight political uncertainty also clouding sentiment following PM Abe’s recent hospital visits that have spurred some speculation of a possible step-down, although officials were quick to refute this. Elsewhere, Hang Seng (-0.1%) and Shanghai Comp. (-1.1%) were subdued despite the recent constructive trade discussions, as there were also reports the Trump administration is mulling accusing China of 'genocide' over the maltreatment of Uighur Muslims. Furthermore, the PBoC continued its liquidity efforts but to a lesser extent and refrained from 14-day reverse repos in today’s open market operations, while Alibaba shares were a notable gainer overnight after its affiliate Ant Group filed for an IPO in Hong Kong and Shanghai as it targets a USD 225bln valuation and could raise as much as USD 30bln which would be the biggest on record. Finally, 10yr JGBs were lower in a continuation of the retreat from the 152.00 level and amid spillover selling from USTs, while prices also failed to benefit despite the lacklustre risk appetite and BoJ’s presence in the market for nearly JPY 1.2tln of JGBs with 1yr-10yr maturities.

PBoC injected CNY 200bln via 7-day reverse repos for a net daily injection of CNY 50bln at a rate of 2.20% PBoC set USD/CNY mid-point at 6.9079 vs. Exp. 6.9086 (Prev. 6.9183)

US President Trump's Administration is reportedly mulling accusing China of 'genocide' over the maltreatment of the Uighur Muslims. (Politico)

NEC Director Kudlow said China is implementing the phase one trade deal so far and they are still going forward with China on trade, while USTR Lighthizer is fine with China's implementation of the Phase One agreement so far. There were also comments from White House Trade Adviser Navarro that the Phase One trade deal with China is alive and well and that China is buying commodities as it said it would. (Newswires)

China’s Agriculture Ministry stated that China's imports of soybeans are expected to steadily increase in H2 and after the implementation of the China-US trade deal, more soybeans from the US will be imported to China. (Global Times)

US reportedly set preliminary duties on certain Chinese steel cylinder products. (Newswires)

UK/EU

Germany is to extend its wage support program through to the end of next year, which doubles the length of the program to 24 months. (Newswires)

FX

The DXY nursed some of yesterday’s losses as it rebounded from support near 93.00 but with upside limited in the aftermath of disappointing Consumer Confidence data and amid month-end factors at play with Citi suggesting FX hedge rebalancing flows point to a bias for net USD selling next Monday. Nonetheless, the marginal rebound in the greenback has coincided with slightly higher US yields and as such, dragged EUR/USD away from near-term resistance beneath the 1.1850 level and marginally pressured GBP/USD towards its 200-hour MA at 1.3134, amid pessimism over Brexit discussions. Elsewhere, USD/JPY retained 106.00 status and majority of yesterday’s spoils but with further upside restricted by resistance around 106.50, and antipodeans were also rangebound due to the cautious risk tone and uninspiring data including a narrower than expected contraction in Construction Work Done for Australia and slightly softer New Zealand Trade Data.

Australian Construction Work Done (Q2) -0.7% vs. Exp. -5.8% (Prev. -1.0%)

New Zealand Trade Balance (NZD)(Jul) 282M (Prev. 426.0M, Rev. 475M) New Zealand Exports (NZD)(Jul) 4.91B (Prev. 5.07B, Rev. 5.08B) New Zealand Imports (NZD)(Jul) 4.63B (Prev. 4.64B, Rev. 4.61B)

BoC Deputy Governor Schembri said well-anchored inflation expectations in Canada will be tested by COVID, while achieving its 2% inflation target depends on credibility of that target and anchoring of public expectations. Furthermore, he stated that the BoC is looking at a number of alternative monetary policy frameworks and that average inflation targeting is one of them. (Newswires)

COMMODITIES

WTI crude futures plateaued just south of the USD 43.50/bbl level following the prior day’s advances which were helped by yesterday’s USD weakness and further output disruptions owing to the extreme weather conditions as Laura was upgraded to a hurricane and with offshore oil production cuts in the Gulf of Mexico estimated at 84.3%. Furthermore, the latest private inventories added to the bullish factors which showed a wider than expected draw to headline crude stockpiles, although the reaction to the report had been muted. Elsewhere, gold was contained as the greenback nursed losses overnight and copper prices also traded sideways amid the cautious risk tone.

US Private Energy Inventories (w/e Aug. 21st): Crude -4.5mln (exp. -3.7mln, prev. -4.3mln). (Newswires)

BSEE stated that offshore oil production cuts in the Gulf of Mexico are estimated at 84.3% (prev. 82.4%) and estimates natural gas production of 60.94% (prev. 56.92%) in the region has been shut in. (BSEE)

NHC said Laura was heading west-northwest across the central Gulf of Mexico and is anticipated to strengthen to a major hurricane before landfall on Wednesday night or Thursday morning. (Newswires)

Marathon Galveston Bay, Texas Refinery (571k BPD) reported a potential shutdown due to Hurricane Laura, while Valero (VLO) Port Arthur, Texas refinery (395k BPD) was also shutting and Citgo Lake Charles, Texas (428k BPD) refinery announced also it was shutting ahead of Hurricane Laura. Shell (RDSA LN) is said to be maintaining operations at its 275k BPD Deer Park Texas refinery, according to sources. (Newswires)

GEOPOLITICAL

US Secretary of State Pompeo tweeted there is no surprise Venezuela's illegitimate Maduro regime is looking to Iran for weapons and this is why we are restoring all UN sanctions on Iran including the arms embargo, while he added the US will fully enforce the sanctions. (Twitter)

Israeli Army said it bombed Hamas targets in southern Gaza in response to incendiary balloon, while it also struck Hezbollah outposts in Lebanon after shots were fired at Israeli troops, but noted no injuries were reported. (Newswires)

Sweden has ramped up its military readiness amid the "heightened security situation" due to Russian military manoeuvres. (FT)

US

The TPLEX bear-steepened on today as the positive risk-tone from Monday extended. By settlement, 2s unch. at 15.5bps, 10s +4bps at 68.5bps, 30s +4.5bps at 139.5bps; over 44% of the combined OI in September and December T-Note futures is now in the latter as the roll period extends ahead of Friday’s First Intention date. The extended cyclical risk tone overnight saw USTs and EGBs offered into the US session, taking the US 10-year yield to the 70bps handle. One shouldn’t discount the possibility of preparations for a “disappointment” from how detailed the Fed framework announcement will be this week, where some could be expecting a similar market reaction to last week’s minutes, which didn’t quite reach the dovish expectations the market had held the FOMC to. Meanwhile, the record-size USD 50bln 2-year Treasury auction went down with ease, stopping through the 0.155% WI by 0.3bps, decent B/C ratio and less than average Dealer participation. T-note (U0) futures settled 6+ ticks lower at 139-10; t-note (z0) futures settled 7 ticks lower at 139-05+.

Fed Discount Rate Minutes saw all 12 regional Fed bank boards support maintaining the discount rate and some directors saw activity pickup, albeit from low levels. Federal Reserve Bank directors noted that the COVID-19 pandemic and response continue to weigh on economic activity, particularly in light of recent surges of the virus in some parts of the country. (Newswires)

Fed's Barkin (non-voter) said he doesn't see evidence the Fed's balance sheet is creating inflation. (Newswires)

Fannie Mae and Freddie Mac are to postpone the 0.5% mortgage surcharge until December 1st from September 1st after a push back from lenders, lawmakers and consumer groups. (Newswires

US President Trump tweeted that Wisconsin Governor should call in the National Guard which is ready, willing and more than able, while he suggested to end the problem fast in regards to the ongoing protests in Kenosha where fires have been set following a police shooting. (Twitter)