• President Trump tested positive for COVID-19; announcement sparked a risk-off move featuring ES dropping to current session lows in proximity to -2.0%
• Sentiment remains largely driven on POTUS’ update with DXY firmer but now just back below 94.00 and UST’s firmer with the curve bear-flattening
• US House passed the Democratic stimulus plan which Republicans oppose; passed after Speaker Pelosi announce no bipartisan deal was achieved last night
• EU Commission President & UK PM are to hold a video-conference tomorrow where UK PM is expected to request entry into the negotiation ‘tunnel’
• While USD is firmer GBP remains supported ahead of tomorrow’s Brexit call and JPY retains a post-POTUS COVID-19 bid
• Looking ahead, highlights include US NFP, Factory Orders, Uni. of Michigan (F), Fed's Harker, European Council Special Meeting

CORONAVIRUS UPDATE

US President Trump said he and the First Lady will begin the quarantine process after testing positive for coronavirus. (Newswires/Twitter) Link to Newsquawk analysis piece on the immediate focus points as details remain vague.

159k restaurant jobs could be lost in New York and half of the city's restaurants could close permanently due to COVID-19, according to reports citing state audit estimates. (Newswires/FT)

AstraZeneca (AZN LN) - COVID-19 vaccine trials have now resumed in Japan. (AstraZeneca)

Australian PM Morrison confirmed a Trans-Tasman bubble which will permit quarantine free travel between Australia and New Zealand. (Newswires)

Russian Kremlin says no plans to re-impose lockdowns in face of rising COVID-19 cases and President Putin will be getting inoculated against it. (Newswires)

Germany's IFT Biologika and German Infection Research Center DZIF are to launch COVID-19 human trials, according to regulators. (Newswires)

ASIA

Asian equity markets traded lower and the E-mini S&P is showing substantial losses after US President Trump tested positive for COVID-19. ASX 200 (-1.4%) reversed yesterday’s strength in which energy and mining-related sectors led the downside following weakness across the commodities complex and as a lacklustre financials sector also contributed to the losses for the index. Nikkei 225 (-0.7 %) was initially buoyed at the open as it played catch-up on return from yesterday’s surprise trading halt in Tokyo due to hardware issues, which Japan’s FSA is reportedly to consider a punishment for. This subsequently weighed on Japan Exchange Group shares and Fujitsu was also pressured given that the Co. is the hardware provider for the market operator, while most the gains in the benchmark index were gradually pared alongside a broad tentative tone and with a lack of participants due to closures in China, Hong Kong, Taiwan, South Korea and India. Finally, 10yr JGBs were rangebound amid the mixed risk tone and with price action stuck near the 152.00 focal point, while a tepid Rinban announcement by the BoJ which were present in the market for JPY 570bln, also ensured the lackadaisical price action for government bonds.

China’s Ambassador to the US said the countries should lose no time in taking US-China bilateral relations on to the right track. (Newswires)

US Secretary of State Pompeo says Huawei's investments are predatory actions that no nation must allow; US and Europe must join forces to stop Chinese Communist Party from succeeding. (Newswires)

Hong Kong deployed thousands of police against pro-democracy protests. (FT)

Japan is to start work on a new stimulus package by year-end which will be submitted to parliament when it convenes for a regular session in January. Japanese Finance Minister Aso says not considering now compiling a 3rd extra budget, adds now is the time to make full use of emergency budget reserve to respond to the COVID-19 crisis. (Newswires)

US

US President Trump said he likes his debates with Biden just how they are and is against potential changes that seeks to avert a repeat of the chaos from their first debate. (AFP)

US House voted 214-207 to pass the USD 2.2tln Democrat stimulus plan, which the Senate Republicans oppose. (Newswires) This came after US House Speaker Pelosi said there was no agreement on a COVID-19 relief last night, while she added that additional stimulus will also be required in 2021. (Newswires) US Senate Majority Leader McConnell said he supports additional stimulus but it must be a narrow package and that if Pelosi and Mnuchin reach a deal, he will take a look at it, while he also noted that he has not decided on a date to vote on Judge Barrett. (Newswires)

Some vulnerable GOP Senators are reportedly concerned about the impasse on relief and are fretting facing voters without a new COVID-19 aid in place. (Politico)

UK/EU

European Commission President von der Leyen & PM Johnson to hold a video-conference tomorrow as a stock take of negotiations and discussion over the next steps. Regarding the call, UK PM Johnson is expected to take direct control of Brexit talks in his call with European Commission President von der Leyen tomorrow and plea for the EU to enter into the "tunnel" phase of discussions, according to The Times; sources state this is a good sign but caveat that Barnier is less certain now is the appropriate time to enter the tunnel. Separately, EU and UK are to hold further trade talks ahead of the EU summit, EU sources state. (Newswires/Twitter/Times)

Senior EU Diplomats are downbeat on a Brexit breakthrough, one saying they cannot give way on basic union principles and worry PM Johnson no longer has political space for a compromise, Times' Dunn. Additionally, UK Housing Secretary Jenrick says some very significant issues remain to be resolved re. Brexit; too soon to say what tomorrow's EU Commission President & UK PM talks mean. (Newswires/Twitter)

EU CPI Flash YY (Sep) -0.3% vs. Exp. -0.2% (Prev. -0.2%)

-        CPI-X Food & Energy Flash YY (Sep) 0.4% vs. Exp. 0.8% (Prev. 0.6%)

-        CPI-X Food, Energy, Alcohol & Tobacco Flash YY (Sep) 0.2% vs. Exp. 0.5% (Prev. 0.4%)

GEOPOLITICAL

EU leaders reached an agreement regarding Belarus and Turkey in which they will impose sanctions on Belarus for violence and its election, although President Lukashenko was not included in the sanctions, while it warned that Turkey could face sanctions if it continues with its gas exploration in Cypriot waters. European Council President Michel said the next 2 weeks will be crucial with Turkey and the summit deal opened a path for dialogue but also showed firmness, while they will return to the Turkey question at the December summit. Furthermore, German Chancellor Merkel said EU leaders agreed they want constructive relations with Turkey and hope for negotiating dynamic with the country. (Newswires)

Turkish Foreign Ministry says Turkey will continue exploration and drilling around Cyprus until Turkey and Greece start negotiations to share resources. (Newswires)

US President Trump instructed the government to withhold nonhumanitarian assistance to 9 countries including North Korea, China, Cuba, Iran and Russia until they meet minimum standards on human trafficking. (Yonhap)

Russia Foreign Minister Lavrov and Turkish Foreign Minister Cavusoglu confirmed readiness for close coordination to stabilize situation regarding Armenia-Azerbaijan conflict. (Newswires)

EQUITIES

European cash indices briefly trimmed earlier losses (Euro stoxx 50 -0.9%) which were triggered by US President Trump announcing his positive COVID-19 test, in turn sparking risk aversion across markets. Since then, cash and futures have been attempting to lift off lows, with some Brexit optimism potentially providing support as the news of a videoconference between the European Commission President and the UK PM was received well by participants, alongside the Pound, whilst the two sides will continue with negotiations in the run up to the EU Summit mid-month. That being said, EU diplomats are still downbeat over a Brexit breakthrough whilst a UK minister highlighted that very significant issues need to be resolved. Nonetheless, the attempted recovery was fleeting, Europe trades mostly lower with the exception of Spanish and Austrian stocks, with the former supported by ACS (+18%) after Vinci (+2.6%) submitted a bid to acquire the Co’s industrial division. Sectors meanwhile opened lower across the board, but thereafter gained some composure; albeit, Energy remains the laggard whilst Telecoms tops the charts with follow-through from yesterday’s French 5G auction – which raised EUR 2.8bln, as Iliad (+4.0%), Orange (+2%) and Bouygues (+1.3%) prop up the sector. The sectoral breakdown paints a similar picture with Travel & Leisure still under pressure amid the implications of the COVID-19 resurgence on the sector. In terms of individual movers, Lagardere (-0.2%) trades with modest losses despite Vivendi (+0.6%) upping its shareholding of the Co. to 26.7% from 21.2%. Ryanair (-2.2%) meanwhile sees losses amid source reports that the Co. is mulling purchasing Boeing 737Max aircrafts for ~EUR 16bln, whilst traffic September traffic numbers fell -64% YY and the Co. was operating at around 53% of normal September schedule.

Walmart (WMT) to sell ASDA to TDR Capital Consortium for GBP 6.5bln, according to Sky News. (Sky News)

Tesla (TSLA) CEO Musk tweets 'next year for sure' in response to comments around a Indian market entry. (Newswires)

FX

JPY/USD/AUD – The Yen is in demand on safe-haven grounds after an initial Greenback rally on news of US President Trump catching the coronavirus saw the DXY knee-jerk just over 94.000, with Usd/Jpy subsequently retreating from around 105.66 to test bids/support below 105.00 and the index hovering just above a 93.709 low. Conversely, the Aussie has borne the brunt of risk aversion, as Aud/Usd reverses from the high 0.7100 region through 0.7150, with little consolation from retail sales not dropping quite as much as expected in August. Ahead, NFP would ordinarily command headline status on the first Friday of a new month, but the data now looks somewhat inconsequential in light of the aforementioned events in Washington.

GBP – More wild swings for Sterling, partly in line with broad sentiment, but again due to Brexit developments in the main and independently of other external or domestic factors. Cable is firmly back over 1.2900 and Eur/Gbp circa 0.9060 compared to 0.9100+ at one stage following reports that UK PM Johnson and European Commission President von der Leyen will hold a video call on Saturday to assess the situation on trade talks after this week’s formal round of discussions, and the former will push for the 2 sides to enter the tunnel stage of negotiations even though EU chief of Brexit matters, Barnier, is unsure the time is right.

CAD/NZD/EUR/CHF – All still softer against their US counterpart, with the Loonie pivoting 1.3300, Kiwi midway between 0.6654-16 parameters, Euro holding above 1.1700 within a 1.1697-1.1750 range and Franc straddling 0.9200. Aside from keeping a White House vigil in the run up to monthly US jobs data, Eur/Usd looks well flanked by decent option expiries given 1.3 bn at 1.1700, 2 bn at 1.1750 and 1.7 bn at 1.1800, if recent peaks in the headline pair are breached. For the record, very little reaction to softer than forecast prelim Eurozone inflation as the individual national reports indicated a downside skew to consensus.

SCANDI/EM - The Norwegian Crown may be deriving some traction from a lower than anticipated September jobless rate to compensate for weak oil prices and the impending strike action, but Eur/Nok is not down as much in percentage terms as Eur/Sek, albeit back under the psychological 11.0000 level in similar vein to the latter that has crossed 10.50000 to the downside. Elsewhere, EM currencies are broadly softer vs the Usd, but especially the Rub amidst ongoing diplomatic and geopolitical tensions, on top of Brent losing grip of the Usd 40/brl handle

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1700 (1.3BLN), 1.1750 (2BLN), 1.1800 (1.7BLN)

Australian Retail Sales (Aug) M/M -4.0% vs. Exp. -4.2% (Prev. 3.2%). (Newswires)

FIXED INCOME

UK bonds have lost momentum and hold of the 136.00 handle alongside slippage in Short Sterling futures on expectations that PM Johnson and EU Commission head von der Leyen agree to advance trade talks to the next critical level or at least conclude that there are enough grounds to stage more formal talks ahead of the mid-October deadline in time for the next Summit. The 10 year benchmark is off worst levels, but lagging counterparts between 135.81-136.16 extremes, as Bunds hold firmly and close to their 174.92 peak despite outperformance in the Eurozone periphery and US Treasuries sit above parity with the curve slightly flatter ahead of NFP, Fed’s Harker for the last of several appearances this week and factory orders awaiting more news on the condition of the President, and Wall Street’s reaction to his contraction of COVID-19.

COMMODITIES

WTI and Brent futures remain pressured, albeit volatility has somewhat cooled down in recent trade, with the initial downside sparked by the risk aversion experienced following President Trump’s positive test. Newsflow which sent WTI Nov and Brent Dec to lows of USD 37.22/bbl (vs. high 38.65/bbl) and USD 39.40/bbl respectively (vs. high 40.77/bbl). Again, crude-specific news flow has been light and we are awaiting the NFP data for some impetus; alongside any further developments around Trump’s COVID-19 diagnosis. Looking ahead, next week seems fairly quiet in terms of crude-specific events, although the OPEC World Oil Outlook on the 8th could garner some attention with regards to its medium-term forecasts, but there is a possibly the release will get sideline if the report is consistent with the July release – as was the case last year. Spot gold meanwhile was bid early-doors on safe-haven inflow, which took the yellow metal to a high of USD 1917/oz, whilst spot silver briefly topped USD 24/oz before both precious metals waned off highs. In terms of base metals, LME copper fell to the lowest in seven weeks due to USD upside and sentiment effect from US President Trump. Meanwhile, aluminium prices fell amid talks of US aluminium exemptions for producers in UAE and Bahrain.

Planned Black Sea exports of CPC blend crude oil have been revised up to 4.81mln tons for October from 4.73mln ton in the preliminary plan. (Newswires)

Libya's Zueitina terminal is to load 3.8mln bbls of crude oil on 5 tankers in October. (Newswires)