• Asian stocks began the week mostly higher as the region picked up the baton from last Friday’s tech-driven momentum on Wall Street
• A US judge granted a preliminary injunction which blocks US President Trump's ban on new TikTok downloads from US app stores
• UK Ministers are reportedly preparing to impose total social lockdown across much of Northern Britain and possibly London
• BoE’s Tenreyro said we have been testing our toolkit and the evidence on negative rates has been encouraging
• In FX markets, USD was subdued around 94.50, EUR/USD trades below 1.1650 and GBP/USD trades firmer
• US House Speaker Pelosi thinks a coronavirus stimulus deal is still possible and suggested that Democrats will make a new ‘proffer’ to US Treasury Secretary Mnuchin
• Looking ahead, highlights include ECB's Schnabel, Lagarde, Fed's Mester

CORONAVIRUS UPDATE

US CDC reported total coronavirus cases rose to a total of 7.06mln from the prior of 7.01mln and that total deaths rose to 204.0k from a prior of 203.2k. (Newswires)

Florida Governor DeSantis announced that restrictions on restaurants in the state were being lifted and the state was to enter Phase Three with immediate effect, which permits all businesses to open across the state. (Florida Politics)

Italian PM Conte said there will not be a new national lockdown as the country is “in a completely different situation” compared with the beginning of the year, while he added the government has strengthened the health system & there may be more stringent measures in specific areas. (Newswires)

France reported 11,123 new coronavirus cases in the past 24 hours to increase total cases to 538,569 and total deaths rose to 31,727 from 31,700 the prior day. (Newswires) France’s National Council of the Order of Doctors head Bouet warned that the second wave is arriving faster than anticipated and that the country faces a months-long COVID-19 epidemic that will overwhelm its health system if something does not change. (AFP)

UK coronavirus cases rose by 5,693 on Sunday (prev. +6,042 on Saturday). (Newswires) UK Ministers are reportedly preparing to impose total social lockdown across much of Northern Britain and possibly London. The plan would initially see all pubs, restaurants and bars shut for a two-week period, whilst households would be banned indefinitely from meeting each other in any indoor location. (The Times)

Australia’s Victoria state is to accelerate relaxing the COVID-19 restrictions after new infections slowed to less than 20 a day. (Newswires)

China’s Global Times noted that China's Ministry of Industry and Information Technology established special teams of experts to prepare for and speed up mass production of vaccines against the coronavirus. (Global Times)

Johnson & Johnson (JNJ) vaccine induced immune responses in most people who received the shot in a small early-stage trial and displayed an acceptable safety profile, according to a study. (WSJ)

ASIA

Asian stocks began the week mostly higher as the region picked up the baton from last Friday’s tech-driven momentum on Wall Street where all major US indices recovered from opening losses and the Nasdaq printed its first weekly gain this month. ASX 200 (+0.1%) and Nikkei 225 (+0.6%) were positive with Australia led by tech as the sector followed suit from US peers and with sentiment mildly underpinned by news Victoria state is to speed up its easing of COVID-19 restrictions. However, gains were capped due to weakness in consumer staples and financials, while Tokyo stocks shrugged off a choppy currency. Hang Seng (+0.6%) and Shanghai Comp. (+0.2%) were initially mixed with underperformance in the mainland following a net liquidity drain by the PBoC and as participants digested the latest developments between the world’s 2 largest economies. This includes the US federal judge decision to grant a preliminary injunction against President Trump's ban on TikTok downloads from US app stores which had been set to take effect from midnight, while SMIC shares slumped after the US Commerce Department announced tighter restrictions on China’s largest chipmaker on allegations that exports to the Co. posed an unacceptable risk of being diverted to military end-use. Nonetheless, the mood in Hong Kong was more constructive with HSBC registering its biggest intraday gain in over a decade after Ping An Insurance acquired 10.8mln H-shares to boost its stake to 8%. Finally, 10yr JGBs were rangebound with price action sideways as demand is sapped by the mildly positive risk tone but with downside stemmed amid the BoJ’s presence in the market for a total of JPY 900bln of JGBs.

PBoC injected CNY 40bln via 14-day reverse repos at a rate of 2.35% for a net daily drain of CNY 60bln and announced to conduct CNY 5bln of central bank swaps. (Newswires) PBoC set USD/CNY mid-point at 6.8252 vs. Exp. 6.8236 (Prev. 6.8121)

Chinese Industrial Profits (Aug) Y/Y 19.1% (Prev. 19.6%). (Newswires) Chinese Industrial Profits YTD (Aug) Y/Y -4.4% (Prev. -8.1%)

A US judge granted a preliminary injunction which blocks US President Trump's ban on new TikTok downloads from US app stores, while the US Commerce Department stated it will comply to the TikTok injunction and will take efforts to defend the executive order on TikTok. There were also separate reports that a Pennsylvania judge on Saturday rejected a request from 3 TikTok content creators to temporarily block the ban on the app which they earned a livelihood from. (Newswires/The Verge)

China’s Global Times stated the Trump administration’s move to split TikTok's global operations from its China business and its aspiration to take over TikTok global operations at a later stage, looks shrewd, but in essence is outright pillage of a non-US company. (Global Times)

US Department of Commerce tightened restrictions in which it required companies to apply for licenses to export to SMIC (981 HK) and alleged that it posed an “unacceptable risk” of being diverted to “military end use”. However, SMIC said it was not aware of such a notification and that it has no ties to the Chinese military, nor does it manufacture for any military end-uses. (FT/Global Times) US lawmakers are considering subsidies of about USD 25bln to encourage companies to move chip production facilities back to US amid rising competition with China in the high-tech sector. (Nikkei)

China’s Global Times Editor tweeted that US is clearly preparing for new provocative actions, while he warned that if the US expels Chinese diplomats, the same number of US diplomats will be expelled from China and if the US closes the Chinese Consulate in New York, the US consulate in Shanghai or Hong Kong must be closed. (Twitter)

US diplomats must obtain approval from Beijing’s foreign ministry before they can meet with Hong Kong government officials or personnel from the city’s educational institutions and societies, according to SCMP citing sources. (SCMP) This comes after US Secretary of State Pompeo announced that Chinese diplomats in the US would need to seek permission before they could meet with local government officials or visit university campuses.

UK/EU

BoE’s Tenreyro said we have been testing our toolkit and the evidence on negative rates has been encouraging, while she also noted there has been almost full pass through of negative rates to lending rates in most countries. Furthermore, Tenreyro sees a very weak global outlook, adding that local COVID outbreaks will interrupt any V-shaped recovery. Tenreyro added (Newswires)

UK Chief Brexit Negotiator Frost hinted at progress in the trade discussion on Friday night, but insisted the Brussels needs to be more "realistic" regarding the rules that would be acceptable for the UK. Furthermore, Brussels sources also suggested that the tide may be turning after UK signalled a commitment to reaching a free trade deal with the EU. (Telegraph)

A UK Government official said a lot of work remains in Brexit talks with differences on fisheries and the level playing field still significant, while the official added the EU’s more constructive attitude will need to be put into more realistic policy positions in upcoming days. Furthermore, there were earlier reports that the EU informed the UK that it was time to commit to key components of the trade deal. (Newswires)

Brussels reportedly sought to quell increased optimism regarding an imminent Brexit deal amid concerns UK PM Johnson has not secured support from key advisers and his party for compromises required in the final stages of negotiations. (Guardian)

Irish PM Martin stated that he was pessimistic about the chances of a UK-EU trade deal but insisted he can still build a strong relationship with UK PM Johnson. (inews.co.uk)

ECB’s de Cos stated that significant monetary stimulus should remain in place and further measures shouldn’t be discounted if they become necessary, while he added there is no room for complacency on the EUR exchange rate (Newswires/La Razon)

ECB’s Visco said the recent appreciation of EUR is worrying us because it causes downward pressure on prices amid already low inflation, while he added that monetary policy implications are obvious and that we’ll have to intervene if downward pressures jeopardise price stability objective. (Newswires)

Fitch affirmed UK at AA-;Outlook Negative, affirmed Poland at A-;Outlook Negative and affirmed Estonia at AA-;Outlook Stable. (Newswires)

FX

USD was subdued around 94.50 with the currency hampered by the mildly positive risk tone and with participants tentative ahead of upcoming risk events for the greenback including the first of the presidential debates on Tuesday evening, the Senate vote on the Continuing Resolution to avert a government shutdown and NFP data due on Friday. EUR/USD was lacklustre with the single currency rangebound below 1.1650 after recent comments from central bank officials including ECB’s de Cos who suggested there is no room for complacency on the EUR exchange rate, while ECB’s Visco stated the recent EUR appreciation is worrying because it causes downward pressure on prices amid already low inflation and noted they would have to intervene if downward pressures jeopardise the price stability objective. GBP/USD was mildly higher on slight optimism after UK Chief Brexit Negotiator Frost hinted at progress in the trade discussions last week, although he also insisted Brussels needs to be more "realistic" on what rules the UK is willing to accept and it was reported that Brussels sought to quell the increased optimism regarding an imminent deal on concerns UK PM Johnson may not have the support for compromises needed in the final stages of talks. In addition, BoE’s Tenreyro recently commented that the central bank have been testing the toolkit and that evidence on negative rates has been encouraging, while she stated there has been almost a full pass-through of negative rates to lending rates in most countries. Elsewhere, USD/JPY trickled lower amid the uninspiring greenback and antipodeans were slightly higher with AUD/USD back above 0.7050 due to the mostly positive tone and with Westpac pushing back its forecast for an RBA rate cut from October to the November meeting.

New Zealand PM Ardern is projected to retain power according to the Newshub-Reid Research poll which showed support for her Labour Party at 50.1%, while support for the opposition National Party was at 29.6% which suggests the Labour Party may not need to rely on any coalition partners. (Newswires)

COMMODITIES                                                          

WTI crude futures traded marginally lower and prodded below the USD 40/bbl level amid the ongoing subdued demand brought on by the pandemic and with Russian Energy Minister Novak noting that global demand is expected to decline as much as 10% this year, while an increase in the latest Baker Hughes Rig Count also suggested an increase on the supply-side. Elsewhere, gold flatlined as the tailwinds from a weaker greenback were offset by the lack of haven demand and copper benefitted alongside the marginally positive risk tone. 

Baker Hughes Rig Count (25/Sep): Oil rigs +4 at 183, natgas rigs +2 at 75, total rigs +6 at 261. (Newswires)

Russian Energy Minister Novak said global oil demand is seen to decline by as much as 10% this year and urged global energy market players for combined efforts in the face of the crisis caused by the pandemic, during a G20 energy ministries online conference. (Newswires)

GEOPOLITICAL

US sources in Iraq notes information of plan to storm the US Embassy in Baghdad and take hostages, while the Iraqi government is said to evacuate the Green Zone in Baghdad, according to Twitter reports. (Twitter)

Armenia said it shot down two Azerbaijani helicopters and destroyed three tanks in clashes around the disputed Nagorno-Karabakh region where reports noted civilians casualties, while Russian President Putin called for an end to the fighting and held discussions with Armenian PM Pashinyan through a call on Sunday. (Sky News)

US

The Treasury curve was little changed, as were major curve spreads. If you wanted to pick anything to note, it was that 30s yields are slightly higher (under 1bps) while the rest of the curve is slightly lower (under 1bps). If one were to push for a narrative, you may be able to argue that the long-end was probably sensitive to the equity gains, where US indices have rebounded heading into the weekend, and next week's A-List data (which includes a Presidential Debate, Nonfarm Payrolls, ISM, PCE, Personal Spending/Consumption), but even then, the move in 30s yields is minuscule. The rest of the curve may be reticent to rise ahead of month-end, where some desks are suggesting the extension for Treasuries is around 0.09yrs, an above-average amount; additionally, stimulus hopes are fading, despite the Democrats potentially tabling their USD 2.4trln bill next week (seen as 'dead on arrival'). T-Note futures (Z0) settled 2 ticks higher at 139-20+.

Fed's George (non-voter) warned that bank strains could still materialise and that banks must be vigilant given stresses in their core markets, while she added that monetary policy and capital rules may hasten ongoing consolidation in banking industry. (Newswires)

US President Trump picked Amy Coney Barrett for nomination to the Supreme Court and suggested that confirmation hearings on her nomination will begin October 12th. Furthermore, President Trump said we will have a tremendous victory in the election but also stated we will be counting ballots forever after the November 3rd election and that he did not discuss the election with his US Supreme Court nominee Barrett. (Newswires)

US President Trump tweeted that he will be strongly demanding a drug test of former VP Biden prior to, or after, their debate on Tuesday night and that he will agree to take a test also. (Twitter)

US President Trump reportedly paid USD 750 in federal income taxes for 2016 and 2017, while he paid no income taxes in 10 of the last 15 years, according to New York Times citing tax return data. However, US President Trump later dismissed the reports on his tax payments as fake news. (New York Times/Newswires)

Washington Post/ABC poll has former VP Biden ahead of President Trump at 53% vs. 43% among registered voters and NYT/SIENA poll has former VP Biden ahead of President Trump at 49% vs. 41%. NBC News/MARIST poll has former VP Biden ahead of President Trump at 52% vs. 44% in Michigan and at 54% vs. 44% in Wisconsin, while CBS poll has President Trump ahead at 47% vs. 46% in Georgia but former VP Biden ahead at 48% vs. 46% in North Carolina. (Politico)

US House Speaker Pelosi thinks a coronavirus stimulus deal is still possible and suggested that Democrats will make a new ‘proffer’ to US Treasury Secretary Mnuchin. (Newswires)

American Airlines (AAL) agreed to a USD 5.5bln loan with the US Treasury Department and has immediately drawn USD 550mln. (Newswires)