• Early gains in European equities fizzled out whilst US equity futures hold onto gains
• US Ambassador to China abruptly stepped down, with a replacement unlikely before US elections according to sources
• AstraZeneca (AZN LN) and the University of Oxford have resumed their coronavirus vaccine trial
• ByteDance reportedly picked Oracle as the winning bidder for its TikTok operations in US; latest sources said ByteDance will not sell to either Microsoft or Oracle
• The DXY languished just above the 93.000 handle; GBP/USD claws back some of last week’s losses
• Looking ahead, highlights include OPEC MOMR, ECB's Makhlouf, Lane

CORONAVIRUS UPDATE

World Health Organization reported the largest daily increase of worldwide COVID-19 cases in which global cases increased by 307,930 and deaths rose by 5,537 in 24 hours. (Newswires)

US CDC reported total coronavirus cases increased to 6.47mln from 6.43mln and deaths rose to 193.2k from 192.4k, while a major newswire tally stated that US cases increased by at least 33,171 to a total of 6.53mln and deaths rose by at least 392 to a total of 194.1k. Texas COVID-19 cases rose by 1,840 to a total of 659.4k and deaths rose by 47 to a total of 14,190, while a major newswire tally stated that California cases increased by at least 2,238 to 761.0k and deaths rose by at least 52 to 14.4k. (Newswires)

AstraZeneca (AZN LN) and the University of Oxford have resumed their coronavirus vaccine trial. (Newswires)

UK coronavirus cases +3,330 (prev. +3,497) and France cases +7,183 (Prev. record increase of +10,561). (Newswires)

UK Government adviser and professor of experimental medicine at Imperial College London, Peter Openshaw, warned the UK faces another national lockdown "in short order" unless people adhere to the new COVID-19 restrictions. In separate news, ministers reportedly believe that a national curfew would be the obvious next step for containing the coronavirus if the new lockdown restrictions fail to reverse the increase of infections. (Sky News/Telegraph) A leaked document revealed the extent of the UK testing shortfall in which there is said to be a backlog of 185,000 swabs and with the programme overstretched that it is shipping tests to labs in Italy and Germany. (Sunday Times)

New Zealand PM Ardern extended Level 2 virus restriction in Auckland for 1 week and the rest of the country will move to Level 1 restrictions on midnight September 21st, while they will review restrictions on September 21st. (Newswires)

A Chinese virologist claims to have evidence that COVID-19 was made in a controlled lab in Wuhan and is planning to release proof in the next few days. (New York Post)

ASIA

Asian equity markets were positive across the board and US equity futures also began the week on the front foot as sentiment was underpinned by vaccine hopes amid reports that AstraZeneca resumed its vaccine trials and with M&A news also contributing to the constructive risk tone, after SoftBank confirmed it will sell its Arm unit to Nvidia, and ByteDance reportedly picked Oracle as the winning bidder for its TikTok operations in US. ASX 200 (+0.7%) was led higher by strength in commodity names although gains were capped by resistance in the index near around the 5900 level and underperformance seen in tech and financials, with the latter dragged amid losses in Macquarie Group after it flagged a 35% Y/Y decline to H1 2021 results. Nikkei 225 (+0.7%) was also positive ahead of today’s LDP leadership vote in which Abe loyalist and current Chief Cabinet Secretary Suga is widely seen as the front runner to succeed PM Abe with around 70% of LDP’s Diet members expected to support his bid to become the party leader. Furthermore, SoftBank shares surged around 9% after confirmation to sell its Arm Holdings unit for USD 40bln which would be the largest ever semiconductor deal and reports also noted executives revived discussions regarding taking SoftBank private following its recent asset disposals, while KOSPI (+1.3%) was among the biggest gainers as index heavyweight Samsung Electronics benefitted on news it outbid TSMC to win a KRW 1tln order from Qualcomm. Hang Seng (+0.6%) and Shanghai Comp. (+0.6%) also conformed to the broad constructive risk tone amid the TikTok related developments and as participants digested the latest lending data in which both New Yuan Loans and Aggregate Financing topped forecasts. Finally, 10yr JGBs were marginally higher following a recent break above the 152.00 resistance level but with gains limited by the broad positive risk tone and a tepid BoJ Rinban announcement valued at a total JPY 150bln.

PBoC injected CNY 80bln via 7-day reverse repos at a rate of 2.20% for a net daily drain of CNY 20bln. (Newswires) PBoC set USD/CNY mid-point at 6.8361 vs. Exp. 6.8384 (Prev. 6.8389)

Chinese House Prices (Aug) Y/Y 4.8% (Prev. 4.8%). (Newswires)

ByteDance picked Oracle (ORCL) as the winning bidder for TikTok's US assets after it had rejected the offer from Microsoft (MSFT), whilst Walmart (WMT) is reportedly continuing talks with the ByteDance leadership and Oracle regarding taking an investment in TikTok. In related news, ByteDance was previously reported to not include the transfer of its algorithm as part of any sale, while there were prior reports that China opposed a forced sale of TikTok's US business and would rather see it shut as Chinese officials believe a forced sale would make both ByteDance and China appear weak in the face of pressure from Washington, although it was also reported that TikTok was pushing forward with the deal to meet the upcoming deadline and it intends to bring the proposal to the White House by September 20th. (Newswires/Axios/SCMP) Subsequently, ByteDance reportedly will not sell TikTok US operating to Microsoft (MSFT) or Oracle (ORCL), according to China State TV citing sources. (Newswires)

China is imposing stricter rules and capital demands on large firms such as Ant Group and China Evergrande Group in an effort to curb risks in the financial industry, in which new regulations will require licenses for non-financial companies that conduct business in at least two financial sectors and which are designated as financial holding companies. (Newswires)

US Ambassador to China Terry Branstad will be stepping down after more than three years in Beijing, a source confirmed to CNN Monday. (CNN)

Japan’s Chief Cabinet Secretary Suga said there was no limit to the amount of bonds the government could issue to support the economy amid the fallout from the coronavirus pandemic. In other news, outgoing Japanese PM Abe was reported to have made another visit to hospital. (Newswires)

US

US President Trump tweeted that he signed a new executive order to lower drug prices which will ensure the US receives the same low prices that big pharmaceuticals give to other countries. (Newswires)

POLL: Morning Consult Wisconsin poll shows former VP Biden leads President Trump at 50% vs. 43% (prev. 50% vs. 43%), conducted September 12th

UK/EU

UK senior Tories are refusing to back down on their revolt against PM Johnson regarding the Internal Market Bill, despite the PM's warning that Brussels could "carve up our country" without it. (Sky News) 

UK government aides and ministers are reportedly mulling options including opting out of human rights laws which sets up a new battle front with the EU. Furthermore, UK PM Johnson also accused the EU of threatening to impose a food blockade in the Irish Sea. (Telegraph)

UK Chief Brexit Negotiator Frost said the UK government needs powers in reserve to avert a disruption to the balance of peace in Northern Ireland and said that the EU made it clear there is no guarantee the UK will be listed as a third country for food imports and that if we are not listed, we will not be able to move food to Northern Ireland. (Newswires)

European Parliament leaders’ draft statement noted that MEPs will veto any future trade deal with UK unless the Internal Market Bill is pulled so the Withdrawal Agreement is implemented in full. (Telegraph/Newswires)

Irish PM Martin said a no-deal would be ruinous for Britain and that he wants a decent free trade deal with UK. There were also comments from Irish Foreign Minister Coveney that EU-UK trade talks are now in a very difficult place and that this week’s talks in Brussels will be an important window, while he suggested to not overreact but firmly call the UK out and suggested to not lose focus on the bigger prize of a trade deal by year-end. Coveney also noted that the most likely reading is that the approach from Britain is a negotiating tactic. His reading is that the UK wants a deal on trade, adding that there are not many issues remaining to secure a thin FTA with the UK and believes that some of the issues with the UK can be resolved, including state aid. (Newswires)

UK Chancellor Sunak is reportedly mulling a tax break worth billions of pounds to spur large companies to spend and in which they will be able to deduct costs of technology, machinery and industrial premises from bills. There were also reports that Sunak is said to be contemplating a delay of the budget until the New Year amid uncertainty regarding a potential second wave of the virus, according to sources. (Telegraph)

ECB’s Lagarde said incoming data shows a strong recovery but is also uneven, uncertain and incomplete. Lagarde added that keeping job support schemes in place is vital to avoid a sharp increase in unemployment in the future and that underlying price pressures have weakened. (Newswires)

ECB's De Guindos said that they are closely observing the impact of FX rate on price stability and that the ECB does not target the exchange rate but added that it is an important variable. (Newswires)

ECB's Rehn said underlying price pressures in the euro area have stabilized at a low level which isn’t in line with the ECB’s target and added that the inflation outlook is a concern. (Newswires)

EU is mulling selling green bonds as part of its fund raising for the bloc’s EUR 750bln COVID-19 economic spending plan. (FT)

Bank of France upgraded 2020 GDP forecast to -8.7% (Prev. -10.3%); 2021 to +7.4% (Prev. +6.9%); 2022 downgraded to +3.0% (Prev. +3.9%). (Newswires)

S&P affirmed Portugal at BBB; Outlook Stable, affirmed Norway at AAA; Outlook Stable, affirmed Austria at AA+; Outlook Stable, affirmed Luxembourg at AAA;Outlook Stable, affirmed Malta at A-;Outlook Stable and affirmed Ukraine at B; Outlook Stable. Moody's affirmed Poland at A2; Outlook Stable and cut Turkey to B2 from B1; Outlook remains Negative. (Newswires)

EQUITIES

A relatively tame start to the week in terms of fresh fundamental catalysts for Europe, albeit the initial upside seen across cash and futures at the open fizzled out (Euro Stoxx -0.1%) as the region failed to coat-tail on gains seen during APAC hours ahead of a risk-packed week which includes the FOMC policy decision, the US-Sino spat over TikTok’s US assets and Quad witching. Sectors in Europe are now mixed, with Travel & Leisure leading the gains whilst Banks and Health Care resides on the other side of the spectrum, as the former is weighed on by a lower yield environment and the latter shrugged off AstraZeneca’s (-0.3%) COVID-19 vaccine trial resumption with Oxford University, but note US President Trump tweeted that he has signed a new executive order to lower drug prices. The IT sector meanwhile remains underpinned by NVIDIA’s USD 40bln deal to acquire Softbank’s Arms Holdings – touted to be the largest semiconductor deal. In terms of individual movers, LSE (-0.8%) is softer despite a myriad of bids for its Borsa Italiana unit ahead of its Refinitiv takeover, including from the likes of CDP/Euronext (-2.6%), Deutsche Boerse (-0.9%) and SIX, with the latter reportedly making the highest offer. Sticking with M&A, Metro AG (+7%) share are bolstered by reports that EP Global Commerce is launching a takeover offer for shares in Co. with the aim of raising investments to above 30%. EP is expected to offer EUR 8.48/ordinary share and EUR 8.87/preference share – Metro board strongly believes the offer substantially undervalues the Co. Elsewhere, Dassault Aviation (+9.6%) is supported by a deal with Greece for 18 Rafales fighter jets – but the terms of the deal were undisclosed. Finally, H&M (-3.2%) is pressured by a broker downgrade at Morgan Stanley.

Gilead (GILD) – Co. is to buy cancer drugmaker Immunomedics (IMMU) in a USD 21bln deal, transaction anticipated in Q4 2020. The offer will be funded through about USD 15bln in cash on hand and USD 6bln in newly issued debt. (CNBC)

Apple’s (AAPL) major iPhone assemblers are among the companies expected to win approval to participate in a USD 6.6 billion stimulus programme to bring manufacturing to India, SCMP sources. (SCMP)

Microsoft (MSFT)/ Amazon (AMZN) - Microsoft are to signed cloud-partnership deals with startups in competition with Amazon over cloud, according to WSJ citing sources. (WSJ)

FX

NZD/AUD/GBP/NOK/SEK - Latest COVID-19 developments have boosted the Kiwi across the board as NZ PM Adern pre-announced a downgrade in nationwide restrictions to Level 1 starting next Monday, while Auckland will remain level 2 for a further week pending another review of the situation. Nzd/Usd is back up near 0.6700 in response, while the Aud/Nzd cross has retreated sharply from around 1.0925 towards 1.0865 as the Aussie remains capped ahead of 0.7300 vs its US counterpart awaiting RBA minutes and Q2 house prices overnight. Note, Aud/Usd appears reluctant to track YUAN gains off a modestly firmer PBoC Cny midpoint fix and in wake of better than expected Chinese new loan and aggregate financing data, perhaps due to ongoing concerns about the fraught relationship between the 2 countries. Elsewhere, some respite for Sterling after last week’s significant underperformance as Cable reclaims 1.2800+ status following a shallower pull-back and Eur/Gbp retreats through 0.9250 awaiting more reverberations from the IMB that is scheduled to be presented to Parliament today. Note, some market observers and a Newsquawk contact are pointing to several key levels in Cable just under last Friday’s base including the 50 DMA, 100 WMA and 200 DMA at 1.2761, 1.2749 and 1.2735 respectively, while rebounds may struggle beyond 1.2900 barring a major U-turn on the Internal Market Bill or breakthrough on Brexit trade talks given the 200 WMA at 1.2932. In Scandinavia, mildly contrasting performances with the Norwegian Crown holding above 10.7000 against the Euro even though oil prices are flagging again, but the Swedish Krona struggling to stay afloat within a 10.4030-10.3750 range amidst deteriorating risk sentiment.

JPY/EUR/CHF/DXY - All moderately firmer vs the Dollar that has failed to sustain its post-US CPI momentum, albeit in part due to relative strength elsewhere, as the index meanders between 93.328-048 parameters. The Yen has clawed back a bit more lost ground to test 106.00+ levels after the LDP win for Abe advocate Suga, while the Euro has bounced off a firmer base to pivot 1.1850 in advance of more commentary from the ECB and the Franc is hovering just over 0.9100 following the latest rise in weekly Swiss sight deposits.

CAD/EM - The Loonie is somewhat lethargic and straddling 1.3170 against its US peers against the backdrop of weakness in crude, but holding up better than the Rouble that is trying to contain losses under 75.0000 alongside Brent beneath the psychological Usd 40/brl mark. However, the Lira is arguably showing more resilience just off 7.5000 on the back of Moody’s Turkish ratings downgrade and the stand-off with Greece, but doubtless with help coming via state bank support.

FIXED INCOME

Bunds and Eurozone bond peers are diverging from UK and US equivalents ahead of latest weekly updates on the APP and PEPP, but perhaps more in anticipation of what ECB’s Makhlouf and Lane have to say after last week’s policy meeting seemed to downplay the degree of concern about Euro strength in terms of dampening inflation and hampering the export element of the bloc’s economic recovery. Indeed, the 10 year German benchmark is just shy of a 174.27 Eurex high in contrast to Gilts that look a bit crestfallen above a 136.56 Liffe base as the BoE cancelled today’s buy-back operation due to technical issues, and US Treasuries that are toppy after Friday’s firmer than forecast CPI data. However, Bunds are facing chart resistance and support in futures and cash at current levels chiming with -50 bp.

COMMODITIES

WTI and Brent front month futures continue to edge lower in early European trade, despite a lack of fundamental newsflow and against the backdrop of a softer USD. A busy week for the complex with highlights including the OPEC Monthly Oil Market report today (12:40BST/07:40ET), tomorrow IEA report, and the JMMC meeting on the 17th – with prior reports noting that delegates are concerned over the recent slide in energy prices, although Saudi sources reaffirmed the commitment to the pact and downplayed deeper production cuts last week. Meanwhile, desks continued to point to a less-rosier than expected demand outlook reflected by a number of producers cutting their OSPs, “Although this shouldn’t come as too much of a surprise given the weakness that we have seen in refinery margins”, ING writes. On the refinery front, eyes have turned back to the Gulf of Mexico where Tropical Storm Sally is expected to strengthen to a hurricane later today. Participants will be keeping an eye on production shut-ins and refining activity, with the latter particularly vulnerable to flooding, and with the Gulf Coast account for just under 54% of US capacity. Sticking with supply-side, Libya’s National Army (the group that imposed an 8-month blockade), has promised to reopen Libya’s energy shipments after talks with other Libyan group and the US embassy in Tripoli, according to a statement on Saturday. WTI has dipped below the USD 37/bbl level (vs. high 37.68/bbl), while its Brent counterpart surrendered its USD 40/bbl handle to print a base under USD 39.50/bbl. Elsewhere, spot gold and silver eke mild gains, largely as a function of the softer USD and heading into this week’s risk events. The yellow metal meanders sub-1950/oz having had tested the level in APAC trade, whilst spot silver fails to reclaim a USD 27/oz+ status. Over to base metals, Dalian iron ore gained over 2% overnight as a steady rise in iron ore stockpiles added to the firmer demand narrative from China, whilst Shanghai copper held onto gains of some 1% amid the broader gains in Chinese markets.

NHC said Tropical Storm Sally forecast to produce life-threatening storm surge, Hurricane-force winds, and heavy rainfall along portions of the northern gulf coast starting later today. NHC stated that Tropical Storm Sally's slow motion poses a significant risk of flash flooding over south eastern Louisiana, southern Mississippi, southern Alabama and the Florida Panhandle through Wednesday morning, while reports noted it is expected to make landfall by New Orleans as a hurricane. (Newswires)

BP evacuated non-essential workers from its Nakika and Thunderhorse platforms in the Gulf of Mexico and Chevron shut its Blind Faith and Petronius platforms due to tropical storm Sally. Furthermore, Murphy Oil shut its Delta House platform and Equinor shut its Titan platform in Gulf of Mexico due to the storm threat. (Newswires)

Iraq lowered October Basra light crude price to Asia to Oman/Dubai plus USD 0.30/bbl which was cut from a premium of USD 1.50/bbl, while Iraq also lowered prices for US to ASCI plus USD 0.40/bbl and cut OSP price for Europe to Brent minus USD 0.70/bbl. (Newswires)

BP warned of a peak to global oil demand within the next few years. (FT)

GEOPOLITICAL

US intelligence report stated that Iran is considering a plot to assassinate the US Ambassador to South Africa as it is still looking to avenge the death of General Soleimani, according to reports citing a US government official. (Politico)

China released 5 Indian men that were temporarily detained by the People’s Liberation Army (PLA) for crossing into its territory following from Chinese state media that the men were spies. (SCMP) China Global Times noted that PLA intensive aerial and naval exercises near Taiwan on Wednesday and Thursday, was a move that experts said was part of normal training missions aimed at honing the capabilities to win a war should one break out in the Taiwan Straits. (Global Times)