• Asian equity markets were lower on spill-over selling from peers on Wall St; Hong Kong underperformed
• White House Economic Adviser Kudlow said we are examining all deals regarding China-based firms that may list in US
• US President Trump said he thinks the 2020 election will end up at the Supreme Court and that is why it is important to have nine justices
• US Congress is reportedly readying to leave Washington as early as this week until after the election and therefore will not be able to put through any coronavirus relief
• UK Chancellor Sunak is to address the Commons at ~12:30BST to unveil an emergency COVID-19 rescue plan to protect jobs
• Looking ahead, highlights include SNB, Norges Bank, CBRT & Banxico Rate Decisions, ECB Economic Bulletin, German Ifo, US Initial/Continued Jobless Claims, Fed's Powell, Williams, Kaplan, Bostic, Barkin, Evans, Bullard, Norges Bank's Olsen, BoE's Bailey and supply from Italy, UK & US

CORONAVIRUS UPDATE

US COVID cases +49,285 (prev. +39,345) and deaths +813 (prev. +438). (Newswires)

US President Trump said 4 COVID-19 vaccine candidates are in final stage of trial in US and the administration is giving USD 200mln for states to distribute vaccines to high-risk people, while the White House may or may not approve the FDA proposal to add a hurdle to the vaccine approval which he stated appeared to be a political move. (Newswires)

US CDC Director stated it could take until April, May, June and possibly July to get the entire American public vaccinated from COVID. There were also separate comments by NIH’s Dr Fauci that there will maybe be 50mln doses of COVID-19 vaccine by November, over 100mln in December and 700mln by April, while NIH's Fauci said he expects to know by November or December whether or not there will be an effective vaccine. (Newswires)

US FDA issued an emergency use authorization for the first serology/antibody point-of-care COVID test. (Newswires)

US’ largest genetic study shows COVID-19 mutating and potentially evolving amid the rapid US spread, while reports found that the mutations did not make the virus deadlier. (Washington Post)

EU is reportedly close to finishing preliminary talks with Novavax (NVAX) for the supply of its potential COVID vaccine, according to an EU source. There were also separate reports that China's Sinovac said Phase 3 results for its COVID-19 vaccine is likely to be out by November. (Newswires)

England and Wales reportedly rolled out smartphone app to trace contacts and check local risk levels, while it was separately reported that a 3-tier traffic light system is planned for local coronavirus lockdowns in England which will based on infection rates and determine the restrictions imposed. (Newswires/Telegraph)

ASIA

Asian equity markets were lower on spill-over selling from peers on Wall St where the major indices were dragged by broad weakness across all sectors and hefty losses in the big tech names, while President Trump's comments also spurred concerns of a contested election. This was after he stated that he thinks the 2020 election will end up at the Supreme Court which is why it is important to have nine justices and later refused to commit when questioned about a peaceful transition of power if he loses the election. ASX 200 (-1.1%) was dragged lower by underperformance in tech and miners, as well as losses in financials after Westpac agreed to pay a record AUD 1.3bln fine over anti-money laundering breaches, while Nikkei 225 (-1.1%) was also subdued as exporters suffered from the recent inflows into the currency and ill-effects of the JPY-risk dynamic. Hang Seng (-2.3%) and Shanghai Comp. (-1.5%) conformed to the broad downbeat tone after a tepid liquidity effort which resulted to a net daily injection of CNY 10bln and it refrained from 7-day reverse repos owing to the National Day Golden Week holiday which begins next Thursday. Furthermore, there was still no significant improvement in US-China related headlines as US Secretary of State Pompeo reiterated calls for US  Governors to increase scrutiny on state pension funds' investments into Chinese companies, while TikTok filed for a preliminary injunction against President Trump’s ban. Finally, 10yr JGBs were rangebound and failed to benefit from the risk averse tone after similar lacklustre trade in T-notes and with demand also hampered by weaker results at the 40yr JGB auction.

PBoC injected CNY 120bln via 14-day reverse repos at rate of 2.35% for a net daily injection of CNY 10bln. (Newswires) PBoC set USD/CNY mid-point at 6.8028 vs. Exp. 6.8064 (Prev. 6.7986)

TikTok filed for a preliminary injunction against President Trump’s ban and it was also reported that ByteDance applied for a license in China which is in line with China’s tech export requirements. (Newswires)

US Secretary of State Pompeo reiterated call to US Governors to increase scrutiny on state pension funds' investments into Chinese companies, while he added that the State Dept is reviewing the activities of two organisations of China's United Front Work Department (UFWD) that are operating in the US. (Newswires)

China's Global Times tweeted using the UN platform for a political campaign lacks decency and that major countries should act like major countries not continuously shunning responsibilities for the world, messing up domestic problems and blaming others, citing analysts. (Twitter)

White House Economic Adviser Kudlow said we are examining all these deals in China-based firms that may list in the US, while he added that he doesn't think there will be another broad stimulus package and will take a look at potential executive action regarding airlines. (Newswires)

BoJ Minutes from the July Meeting stated that members agreed the central bank must ease without hesitation if needed with eye on impact of pandemic on the economy and that Japan's economy had been in an extremely severe situation with the impact of COVID-19 remaining at home and abroad, although noted economic activity had resumed gradually. Furthermore, it stated exports and industrial production had declined substantially with overseas economies being depressed significantly, while members agreed there was risk financial intermediation could stagnate if financial institutions' profits remain under prolonged strain. (Newswires)

UK/EU

UK Chancellor Sunak is to unveil today an emergency COVID rescue plan to protect jobs that is expected to include wage subsidies, VAT cuts and more loans for struggling businesses. The Chancellor is expected to address the House of Commons around 12:30BST. Sunak also announced yesterday that the Autumn Budget would be scrapped this year due to the pandemic. (Times/Telegraph/BBC) UK PM Johnson reportedly put his foot down and overruled Chancellor Sunak to keep the triple lock increases to the state pension. (The Times)

UK government reportedly faces a "week from hell" at the Commons next week with 3 Tory backbench rebellions in 3 days, according to Times Radio's Tom Newton Dunn. (Twitter)

British Chambers of Commerce survey found around 51% of companies had not taken any steps recommended by the government to prepare for changes to the trade of goods at the end of the transition period. (Newswires)

EU Economic Commissioner Gentiloni said Brussels is seeking to pressure capitals to remove structures that facilitate aggressive tax planning in the region as part of the recovery fund reform plans to ensure a level playing field. (FT)

FX

In FX markets, the DXY held on to the prior day’s gains after upside was spurred by the broad risk aversion and steeper yield curve, despite the abundance of dovish Fed rhetoric in which Fed’s Clarida said he wants inflation to spend time above 2% and expects the Fed to keep rates lower for longer. In addition, Fed's Evans suggested the Fed is to ensure inflation will rise and that he was in a distinct minority advocating that inflation should go to 2.5%, while Fed’s Rosengren seemed pessimistic in reaching 2% inflation in 4 years and noted that QE would only provide limited additional stimulus as rates are already low. EUR/USD was subdued due to the recent USD strength which saw the single currency decline towards a floor at the 1.1650 level, while GBP/USD oscillated slightly above 1.2700 on tentativeness after reports the Autumn budget was scrapped due to the deteriorating COVID situation and as participants await UK Chancellor Sunak’s announcement on measures to safeguard jobs. Elsewhere, USD/JPY eyed 105.50 to the upside owing to the strength in the greenback and JPY-crosses were pressured by haven flows, while antipodeans suffered from their high beta statuses with AUD/USD dragged beneath 0.7050, which also follows a weaker PBoC reference rate and recent calls for the RBA to cut next month.

Canada’s government said it will launch a campaign to create more than 1mln jobs, restoring employment to pre-pandemic levels and will extend wage subsidy programme through to the summer of 2021. It is to also introduce support for hardest-hit industries, including travel, tourism, and hospitality, while it will address corporate tax avoidance by digital giants and will act to ensure their revenue is shared more fairly. Furthermore, there were later comments from PM Trudeau that a second wave of the virus is already occurring in 4 largest provinces and Autumn could be much worse than the spring but added we can afford additional spending as interest rates are low. (Newswires)

New Zealand Trade Balance (Aug) -353M (Prev. 282M, Rev. 447M). (Newswires) New Zealand Exports (Aug) 4.41B (Prev. 4.91B, Rev. 5.04B) New Zealand Exports (Aug) 4.41B (Prev. 4.91B, Rev. 5.04B)

COMMODITIES                                                          

The widespread risk aversion and stronger greenback dragged WTI back below the USD 39.50/bbl, while this followed the jittery price action seen yesterday after the latest EIA inventory report. Gold prices trickled lower and approached closer towards the USD 1850/oz level and silver prices underperformed to briefly give up the USD 22/oz level due to the recent strength in the greenback, while copper extended below the psychological USD 3.00/lb level amid the global downbeat mood.

Norwegian offshore oil workers have threatened to go on strike from September 30th in the event annual pay negotiations with employers fail. Strikes could occur at Norway’s leading Sverdrup oil field. (Newswires)

Morgan Stanley anticipates iron ore prices to weaken in which it sees prices at USD 100/ton in Q4 and to decline to USD 81/ton next year, citing easing demand from China during winter and increasing shipments from Vale. (Newswires)

GEOPOLITICAL

South Korea’s Defence Ministry confirmed that North Korea killed a South Korean fisheries official that went missing earlier this week and who was said to be attempting to defect to the North, while it condemned North Korea's actions, as well as demanded punishment for those responsible. (Newswires/Yonhap)

US Ambassador to Turkey has said the non-payment of money from Turkey’s state hospitals to international healthcare Co’s, totalling ~USD 2.3bln, has become a significant issue in US-Turkey trade relations. (FT)

US

Treasuries were marginally steeper on Wednesday despite the equity selling, with chunky supply applying pressure. By settlement, 2s unch. at 14bps, 10s +1bps at 67.5bps, 30s +1bps at 142bps; futures volumes were light. There was a slew of Fed speak although nothing really that incremental, with Clarida being the highlight. The downside in USTs was gradual, and began in early-Europe trade, with participants gearing up for the US 5-year & 2-year FRN auctions and heavy corporate supply slate (around 14 IG issuers in the dollar market including a USD 7.25bln M&A bond from GILD). The USD 53bln 5-year auction went down well, stopping through the 0.285% WI by 1bps, with above-average participation from both the Directs and Indirects. Meanwhile, there was some support found for rates in latter trade, coinciding with the pick-up in equity selling, but also some suggestions that due to the strong demand for Gilead’s bond deal, some of the accounts did not get as much as they would have liked and therefore unwound some of their rate-locking hedges in Treasuries. In STIRs, participants have flagged heavy volume in EDZ0/H1 spreads as some chunky trades have been placed in anticipation of funding pressure around year-end; note that 3m USD LIBOR printed a new all-time low this week. More imminently, participants now look to Thursday’s Jobless Claims data and continued Fed speak, including the influential Williams. T-note (Z0) futures settled 4 ticks lower at 139-16.

US President Trump said he thinks the 2020 election will end up at the Supreme Court and that is why it is important to have nine justices. Furthermore, President Trump later stated that he does not have a meeting planned with Judge Barbara Lagoa but she is on his list for potential Supreme Court nominees, while he declined to commit when questioned about a peaceful transition of power if he loses the election. (Newswires)

Fed Quarles (voter) said prospects are good for the US and other advanced economies, but the hole is deep and downside risks remain, while he added the US recovery is a good way off and it will take continued support to sustain a robust recovery. (Newswires)

Fed's Evans (2021 voter) said if the Fed only allows inflation to overshoot to 2.25% and not 2.50%, it will take until 2026 to average 2% inflation and that he is in a distinct minority on indicating inflation should go to 2.50%. Furthermore, he added that doing more bond-buying prematurely won't be as effective and it may be better to wait on bond buying until unemployment gets closer to 6% which could be earlier, while he added that the Fed may consider adjusting pace, maturity of bond buying once there's more clarity on the economy. (Newswires)

Fed's Rosengren (non-voter) suggested 'we'd be lucky' to get 2% inflation in 4 years and that QE would only provide limited additional stimulus as rates are already low. Rosengren later stated that his baseline is for the pandemic to worsen during fall and winter which would weaken economic activity, while he expects lockdowns in some areas of the country and noted that weaker growth could delay reaching the 2% inflation target which would require rates to be kept lower for longer. Furthermore, Rosengren stated that the US will very likely face a credit crunch towards year-end if banks experience stress from commercial real estate loans. (Newswires)

Congress is reportedly readying to leave Washington as early as this week until after the election and therefore will not be able to put through any coronavirus relief. (CNN)