• European bourses are mixed/flat in a pullback from the mornings grinding bid; US futures are firmer by ~0.4%
• DXY is downbeat but still holds above yesterday’s low to the modest benefit of major peers
• White House Chief of Staff Meadows said the USD 1.5tln proposal from bipartisan lawmakers does not align with the Trump administration's priorities although could pave opening for further talks
• Crude is supported amidst Hurricane Sally effects, which has now made landfall and an unexpected sizeable private inventory draw
• Looking ahead, highlights include, US Retail Sales, Canadian CPI, New Zealand GDP, FOMC Policy Decision & Fed Chair Powell

CORONAVIRUS UPDATE

Major newswire tally stated that US cases increased by at least 37,017 to a total of 6.61mln and deaths rose by at least 1,105 to a total of 195.7k. Texas cases +4,816 (prev. +2,595) and deaths +132 (prev. +21). (Newswires)

US President Trump said that a coronavirus vaccine could be 3 or 4 weeks away, during a town hall event. (ABC News)

ASIA

Asian equity markets traded mixed and only partially benefitted from the tech-led gains in US, with the region tentative heading into the upcoming flurry of central bank announcements beginning with the FOMC later today. ASX 200 (+1.0%) and Nikkei 225 (+0.1%) were positive with Australia buoyed as the tech and telecoms sectors found inspiration from the outperformance of their counterparts stateside, while the advances in Japan have been tempered by a firmer currency and mixed data which showed a surprise Trade Surplus and narrower than expected contraction to Exports, although Exports were still at a substantial decline and Imports missed to suggest a weak consumer profile. In addition, participants await incoming PM Suga’s inauguration and the conclusion of the BoJ’s 2-day policy meeting which kicks off today. Conversely, Hang Seng (U/C) and Shanghai Comp. (-0.4%) lagged after a neutral PBoC liquidity operation and ongoing US-China tensions following the WTO ruling that US tariffs on China violated trade rules, as the US have spoken against the WTO announcement and President Trump suggested he may do something about the WTO following the ruling, while it was also reported the US is to announce charges related to Chinese hacking and blacklisted a Chinese developer in Cambodia, amid allegations they built facilities on land seized from locals which could be used to host military assets. Finally, 10yr JGBs were flat with price action stuck near the 152.00 resistance level and amid the indecisive risk tone, while participants were also tentative as the BoJ begins its 2-day policy meeting.

PBoC injected CNY 120bln via 7-day reverse repos at a rate of 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.7825 vs. Exp. 6.7808 (Prev. 6.8222)

US DoJ is to announce charges and arrests today for computer intrusion campaigns concerning China. (Newswires)

ByteDance proposed to the CFIUS to carve out TikTok's global business and retain a majority stake and called for CFIUS supervision of TikTok's global business to ensure safety of its US user data, according to a source. Reports noted that TikTok is to become a standalone US company to satisfy the White House and Oracle (ORCL) is to be a minority holder in its global business, with ByteDance remaining a majority shareholder. Furthermore, sources suggested other US investors, potentially Walmart (WMT) and Microsoft (MSFT) would own a minority stake, while TikTok's data across the globe would be processed independently by Oracle and Beijing has reportedly shown support for the plan. (FT)

Global Times Op-Ed called Nvidia (NVDA) purchase of Arm Holdings from SoftBank (9984 JT) disturbing and calls for regulatory caution from China regulators. (Newswires)

Japanese Trade Balance (JPY)(Aug) 248.3B vs. Exp. -37.5B (Prev. 11.6B, Rev. 10.9B). (Newswires) Japanese Exports (Aug) Y/Y -14.8% vs. Exp. -16.1% (Prev. -19.2%) Japanese Imports (Aug) Y/Y -20.8% vs. Exp. -18.0% (Prev. -22.3%)

Japan's Suga has been elected as PM by the lower house as expected; press conference 13:00BST/08:00ET. (Newswires)

US

US President Trump said he would call House Speaker Pelosi at the right time and said they have had some pretty good talks with Democrats on coronavirus relief. (Newswires)

White House Chief of Staff Meadows said the USD 1.5tln proposal from bipartisan lawmakers does not align with the Trump administration's priorities although could pave opening for further talks. (Newswires)

There were also separate that House Majority Leader that the 'Problem Solver' caucus proposal for USD 1.5trln COVID relief would not be enough. However, he welcomes their ideas and believes that Treasury Secretary Mnuchin and House Speaker Pelosi have continued talks over COVID relief, while he is to table a stopgap funding bill for vote in the House next week. (Newswires)

HarrisX poll showed former VP Biden leads US President Trump at 45% (-2) vs. 39% (Unch.), conducted September 14th. (Newswires)

OECD Forecasts, Real GDP Growth:

-        World: 2020 -4.5% (Prev. -6.0%). 2021 +5% (Prev. +5.2%)

-        US: 2020 -3.8% (Prev. -7.3%). 2021 +4% (Prev. +4.1%)

-        Euro Area: 2020 -7.9% (Prev. -9.1%). 2021 +5.1% (Prev. +6.5%)

-        UK: -10.1% (Prev. -11.5%). 2021 +7.6% (Prev. +9.0%)

UK/EU

UK Chancellor Sunak is reportedly looking at plans for a limited extension of the business rates holiday which currently runs until the end of the year and applies to the retail, hospitality and leisure industry. The Chancellor is also facing calls by business to lower employers' National Insurance contributions. (Telegraph) 

The Times' Shadow MPC voted unanimously for policy settings to be left unchanged this month, suggesting that the Bank should instead focus on financial stability. (Times) 

Four senior US Congressmen reportedly wrote a letter to UK PM Johnson which repeated the warning there will not be a US-UK trade deal if the legislation to override the Withdrawal Agreement is not pulled, according to Sky News' Coates. (Twitter) UK Foreign Secretary Raab will meet US Secretary of State Pompeo and House Speaker Pelosi today to reassure them over the Internal Markets Bill. (BBC)

UK CPI MM* (Aug) -0.4% vs. Exp. -0.6% (Prev. 0.4%); YY* (Aug) 0.2% (Prev. 1.0%)

-        Core CPI MM* (Aug) -0.6% vs. Exp. -0.9% (Prev. 0.4%); YY* (Aug) 0.9% vs. Exp. 0.6% (Prev. 1.8%)

EQUITIES

European cash bourses eke mild gains (Euro Stoxx 50 +0.1%) alongside US equity futures (ES +0.4%, NQ +0.4%, YM +0.4%) amidst a relatively light session thus far in terms of news flow, and in the run up the FOMC policy decision later today (full preview available in Research Suite). Cash bourses are mostly higher with the exception of the FTSEs (FTSE 100 -0.1%, FTSE MIB -0.2%) whilst broad-based gains are experienced throughout the rest of the region. UK’s FTSE sees a number of large-cap mining names consolidating after yesterday’s firm performance. Sectors across Europe are mostly higher with no real risk profile to be derived. The retail sector leads the charge, with the likes of Inditex (+7.5%) and Salvatore Ferragamo (+8.9%) propping up the sector post-earnings, whilst the IT sector coat-tails on the Wall Street sector performance yesterday. In terms of individual movers, Lufthansa (-1.6%) share remain pressured as sources said the group could cut its fleet by 130 planes and cut further jobs, altogether equating to around 28k vs. Prev. indicated 26k, while separate reports said the Co. has cut its year-end flights guidance. Meanwhile, the main shareholders of Caixabank (+0.3%) and Bankia (+2.3%) have given the green light for a merger, with a meeting reportedly called for tomorrow to approve to approve the terms, according to sources.

FedEx (FDX) Q1 2021 (USD): EPS 4.87 (exp. 2.69/2.57 reported); Revenue 19.3bln (exp. 17.55bln)

Adobe (ADBE) Q3 2020 (USD): Adj. EPS 2.57 (exp. 2.41); Revenue 3.23bln (exp. 3.16bln); guidance, Q4 2020 Adj. EPS 2.64 (exp. 2.64); Revenue 3.35bln (exp. 3.36bln)

Microsoft (MSFT) raises quarterly dividend by 10% to USD 0.56/shr.

Spotify (SPOT) calls on regulators to act urgently to restrict Apple's (AAPL) "anti-competitive" behaviour following the Apple One subscription announcement. (Newswires)

FX

DXY - Hardly a surprise to see the Dollar mostly rangebound and the index recoil to its confines around the 93.000 axis that has been pivotal for a while, as many if not most currency market participants keep positions light in the run up to the FOMC. However, US retail sales data looms before the big event and often possesses the potential to surprise given a wide spread of forecasts either side of consensus for the headline number and key control group GDP component. For now, the DXY is holding within a 92.852-93.189 band as major counterparts largely respect recent support, resistance and round number or psychological levels.

AUD/NZD/NOK - Marginal outperformers on a combination of factors, including strength in underlying commodities and crude, while the Aussie has piggy-backed yet another firm PBoC CNY fix and the Kiwi is underpinned by better than expected Q2 current account balances and the NZ Government upgrading its 2020 GDP and unemployment rate projections. Aud/Usd and Nzd/Usd are consolidating above 0.7300 and 0.6700 respectively, as Eur/Nok retreats from close to 10.7200 through 10.6500.

JPY/EUR - Also firmer vs the Greenback, but the Yen and Euro are still waning ahead of 105.00 and 1.1900 amidst more decent option expiry interest, between 105.25-15 in Usd/Jpy (1.4 bn) and 1.1835-25 in Eur/Usd (1.1 bn), with the latter also wary about ECB insinuations regarding the strength of the single currency. Back to the Yen, next up the BoJ and in the interim mixed Japanese trade metrics and Suga approved by the lower house as new PM.

GBP/CHF/CAD/SEK - The Pound appears top heavy again above 1.2900 against the Buck and 0.9200 in Euro cross terms as the Brexit implications of the IMB continue to hamper Sterling in addition to formidable technical hurdles in Cable from 1.2933 to 1.2935 (200 WMA/Fib and 55 DMA) and some pre-BoE caution. Elsewhere, the Franc remains stuck in a 0.9100-0.9050 rut, like the Loonie between 1.3200-1.3150 awaiting independent direction from Canadian CPI and the Swedish Krona within 10.4320-10.4035 vs the Euro in wake of Sweden’s ESV fiscal watchdog revising its GDP forecast for this year to show less contraction than envisaged in June, as per other state and private entities.

EM - Apart from the ongoing appreciation of the Yuan and gains fuelled by the depressed Dollar/oil price rebound, pretty mundane midweek session trade awaiting Fed policy pronouncements, guidance, the SEP and chair Powell’s press conference. However, the Lira is still struggling to pare declines from record lows under threat of EU sanctions following a warning from the EP that a resolution to that effect will be on Thursday’s agenda.

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1825-35 (1.1BLN), 1.1845 (250M), 1.1845-50 (700M)

-        USD/JPY: 105.00 (836M), 105.15-25 (1.4BLN), 105.75 (316M), 106.00 (330M), 106.15-25 (800M), 106.45-50 (1.2BLN)

Australian Westpac Leading Index (Aug) M/M 0.5% (Prev. 0.1%). (Newswires)

New Zealand Current Account (Q2) Q/Q 1.8B vs. Exp. 0.6B (Prev. 1.6B). (Newswires) New Zealand Current Account/GDP (Q2) -1.9% vs. Exp. -2.5% (Prev. -2.7%)

New Zealand forecasts 20/21 bond issuance of NZD 50bln vs. Prev. forecast of NZD 60bln in budget and sees 21/22 issuance at NZD 35bln vs. Prev. forecast of NZD 40bln in budget. Furthermore, the government revised June quarter GDP forecast to -16% vs. Prev. forecast of -23.5% and 2020 GDP to -3.1% vs. Prev. forecast of -4.6%, while it expects unemployment to peak at 7.8% vs. Prev. forecast of 9.8% in the budget. (Newswires)

FIXED INCOME

Somewhat mixed German and UK auction results are keeping core bonds contained, but not quite as one might expect given a solid DMO sale in contrast to the marginally less than twice oversubscribed long dated Bund offering. However, the 10 year EU benchmarks and US Treasuries are lagging Eurozone semi and peripheral peers to an extent and Gilts could be taken aback by the relative strength in Sterling in the face of heightened no deal Brexit prospects. Ahead, all eyes and ears will turn to the Fed, but US retail sales are notoriously erratic and could easily jolt Bunds, Gilts and T-notes out of 173.94-174.15, 136.10-36 and 139-15 to 139-18+ respective ranges.

COMMODITIES

WTI and Brent front month futures are continuing the grind higher seen during the APAC session as the complex is underpinned by the large surprise drawdown in Private crude inventories (-9.5mln bbls vs. Exp. +1.3mln bbls) alongside developments in the Gulf of Mexico. Hurricane Sally has been upgraded to a Category 2 hurricane as it makes landfall, with the latest update noting that historic and life-threatening flooding is likely through Wednesday along and just inland of the Florida Panhandle. The BSEE estimated Hurricane Sally cut 26.9% of US gulf offshore oil production (prev. 21.4%) and Nat Gas shut off in the region is seen at 28.0% (prev. 25.3%), whilst refining activity is also closely watched due to its vulnerability to flooding, and as just under 54% of US capacity sits in PADD III in the Gulf Coast. Meanwhile, the JMMC gears up to meet tomorrow, with eyes on any commentary regarding oil prices and market outlook. Sources last week said the recent price decline has caused concern in Riyadh, however, not enough to induce panic, and Saudi is planning to keep production steady. “We are likely to see the group once again put pressure on those who are still producing above their quota levels to comply”, ING predicts, with reports also noting that OPEC+ compliance in August stood at 101%. Looking ahead, the weekly EIA crude stocks will be released at the usual time, with the headline expected to show a build of 1.271mln bbls. Elsewhere, precious metals benefit from the softer USD, with spot gold extending gains above USD 1950/oz having had tested the level to the downside in overnight trade. Spot silver holds its head above USD 27.00/oz after printing a base at USD 27.02/oz – with eyes turning to the FOMC decision. In terms of base metals, LME copper erased earlier losses with the aid of a weaker Dollar, whilst Dalian iron ore futures fell overnight amid falling steel margins in China dampening the demand outlook for the base metal.

US Private Inventory (w/e 11th Sept): Crude -9.5mln (exp. +1.3mln). (Newswires)

NHC says Hurricane Sally has strengthened into a Category 2 hurricane, inching north-northeastward; Sally has since made landfall near the Gulf shores. (Newswires)

US Coast Guard reopened the Ports of New Orleans, Baton Rouge, Plaquemine, St. Bernard and South Louisiana with restrictions. (Newswires)

OPEC+ compliance with oil production cuts in August at 101%, according to sources. (Newswires)

GEOPOLITICAL

US President Trump affirmed that Bahrain's approach towards peace will encourage all to engage in the peace process, while he later commented that 5 or 6 additional countries are on track to normalize relations with Israel. (Newswires)

EU Parliament is to warn Turkey of the possibility for further sanctions, due to vote on Thursday on such a resolution - would be non-binding input for the September 24th -25th summit. (Newswires)