• Asian equity markets traded positively following the firm handover from global peers as markets track stimulus developments and US President Trump’s health
• US President Trump has left the Walter Reed Medical Centre and returned to the White House
• US President Trump is planning to participate in the next Presidential Debate scheduled for October 15th, according to CNN
• White House Chief of Staff Meadows noted there is potential for a stimulus package, although doubts over Senate approval remain
• In FX, the DXY remained subdued below 93.50, EUR/USD eyed 1.1800 to the upside and GBP/USD traded rangebound below 1.3000
• RBA maintained the Cash Rate Target and 3yr yield target at 0.25%, as expected and reiterated forward guidance
• Looking ahead, highlights include EZ & UK construction PMIs, EIA STEO, ECB's Lagarde, Lane, Fed Chair Powell, Harker, Bostic, Kaplan

US PRESIDENT TRUMP/CORONAVIRUS UPDATE

US President Trump left the Walter Reed Medical Center and returned to the White House. President Trump also released a video message stating to not let the virus dominate you and that he feels great, while he added that he could have left hospital 2 days ago and that vaccines are coming momentarily. (Newswires) US President Trump's medical team earlier said he had met or exceeded all the discharge criteria, but was not entirely out of the woods and will receive another dose of Remdesivir (GILD) before going home and will another dose on Tuesday. Furthermore, they noted that President Trump does not have any respiratory complaints and has not had a fever in over 72 hours, while he will continue with dexamethasone. (Newswires)

US COVID cases +36,778 (prev. +49,327) and deaths +378 (prev. +703). New York COVID cases +933 (prev. +1,222) and deaths +8 (prev. +14), while it was also reported that schools in New York City’s COVID-19 hotspots will close from tomorrow. (Newswires)

US CDC revised its coronavirus guidance to acknowledge that it spreads through airborne transmission. (CNBC)

White House blocked the FDA proposal for stricter guidelines related to the release of coronavirus vaccine. (NYT)

France COVID cases +5,084 (prev. +12,565) and deaths +69 (prev. +32). (Newswires)

Ireland’s Cabinet recommended to shift the alert level for the entire country from level 2 to level 3 from midnight on Tuesday. (RTE)

ASIA

Asian equity markets traded positively following the firm handover from global peers amid optimism regarding President Trump's treatment and stimulus hopes, although the momentum has moderated in the region and Australia initially lagged on tentativeness heading into the RBA and budget announcement. The key risk events clouded trade in the ASX 200 (+0.2%) from the open although this was eventually shrugged off by outperformance in commodity-related stocks after the prior day’s rebound in oil prices and due to M&A news following a merger agreement between Northern Star Resources and Saracen Mineral Holdings. Nikkei 225 (+0.4%) was kept afloat by the recent currency weakness but with price action rangebound amid a lack of fresh catalysts and some resistance ahead of the 23,500 level, while the Hang Seng (+0.6%) was underpinned and rose to within 100 points of the 24,000 milestone but lacked the extra push needed amid the continued absence of mainland Chinese participants and with Hong Kong Chief Executive Carrie Lam stating that social distancing rules will be kept for a while. Finally, 10yr JGBs were lower amid the modest gains in stocks and following a breakdown of support at the psychological 152.00 level, with mixed results at the 30yr JGB auction also contributing to the uninspired picture.

US Secretary of State Pompeo and Australian Foreign Minister Payne shared concerns regarding malign actions by China in the region, according to a State Department official. (Newswires)

Sources working on the TikTok / Oracle (ORCL) deal stated that talks with the White House are progressing despite all that is going on, according to FBN's Gasparino. (Twitter)

UK/EU

Eurogroup President Donohoe said some of the EUR appreciation is thanks to the EU response to COVID and suggested they will continue to monitor the rate of EUR. (Newswires)

UK PM Johnson's 10pm curfew for pubs, restaurants and bars could come to an end after it was revealed that dozens of Conservative MPs are set to vote against it on Wednesday night. (Telegraph) 

FX

The DXY was lacklustre beneath 93.50 level to the positive risk tone and as a breakthrough in COVID-19 stimulus talks remained elusive despite hopes for a deal as US House Speaker Pelosi and Treasury Secretary Mnuchin continue their communication efforts. In addition, White House Chief of Staff Meadows noted there is potential for a stimulus package and that President Trump is committed to getting a COVID-19 aid bill done which he wants to move on expeditiously but also fiscally responsibly, although other reports suggested the GOP are still unconvinced with a Senate approval of stimulus is still seen as doubtful for the moment. EUR/USD held on to the prior day’s gains and sat in proximity for another attempt at the 1.1800 handle, while a recent note from Citi highlighted near-term negative risks for the single currency including the spike in COVID infections and Brexit headwinds but also reaffirmed its view regarding a high likelihood of a break above 1.2000 in the medium to long term. GBP/USD traded rangebound after the recent momentum stalled just shy of 1.3000. Elsewhere, USD/JPY was kept afloat by the mildly positive risk tone and antipodeans were marginally higher in which AUD/USD shrugged off a narrower than expected trade surplus amid the RBA rate decision and looming budget announcement, while the central bank kept rates unchanged as expected, reiterated its forward guidance and was somewhat optimistic on output, as well as unemployment which spurred a knee jerk reaction to AUD. However, this eventually faded and the currency reverted to pre-announcement levels as the central back also continues to consider how additional monetary easing could support jobs and acknowledged a decline in the 3yr yields was due to markets pricing probability of further policy easing.

RBA maintained the Cash Rate Target and 3yr yield target at 0.25%, as expected and reiterated its guidance that it will not increase the cash rate until progress is being made towards full employment and inflation is at the 2%-3% target band. RBA noted that the board continues to consider how additional monetary easing could support jobs as the economy opens up further but noted the contraction in Q2 output was smaller than in other countries and that labour market conditions have improved with the unemployment rate likely to peak at a lower level than previously anticipated. (Newswires)

Australian Trade Balance (AUD)(Aug) 2.6B vs. Exp. 5.2B (Prev. 4.6B). (Newswires) Australian Exports (Aug) M/M -4% (Prev. -4%) Australian Imports (Aug) M/M 2% (Prev. 7%)

COMMODITIES

WTI crude futures extended on the prior day’s gains above the USD 39/bbl, with the strength in oil culminating from the positive risk tone, stimulus hopes and with Delta strengthening to a hurricane which is projected to move towards the Gulf of Mexico and has prompted BP to evacuate non-essential personnel from several platforms. Elsewhere, gold was relatively unchanged as it took a breather above USD 1900/oz, while copper prices also flatlined overnight as the risk somewhat moderated in Asia and with price action hampered by the absence of Chinese buyers.

NHC stated that Delta was quickly strengthening over the Caribbean and was expected to become a Hurricane either Monday or Tuesday before approaching western Cuba, while it later confirmed that Delta had turned into a hurricane. (Newswires)

BP (BP/LN) is evacuating non-essential personnel from four offshore platforms due to storm Delta. (Newswires)

US

Treasuries saw pronounced bear-steepening on Monday as investors priced in the rising probabilities of US fiscal stimulus in a reflationary style; inflation breakevens widened. By settlement, 2s +1.2bps at 14.5bps, 10s +6.6bps at 76.0bps, and 30s +8.4bps at 156.4bps; 2s10s rose above 60bps for the first time since late-August; futures volumes were noticeable firmer than average amid a slew of block trades, both in Treasury futures and options. The majority of the selling occurred in the pre-market as US participants came to the scene and began pricing in the likelihood of a boost in debt supply from the US Treasury, either from a pre-election COVID aid deal or from a Biden-led blue Sweep. Adding to the pressure was the better-than-forecast ISM Services. Supply pressures were weighing on people’s minds as auction participants prepare for the 3s, 10s, and 30s Treasury offerings this week. Furthermore, there were several corporate issuers including Pepsi and Berkshire Hathaway. There was also a slew of high yield offerings, with desks noting a likely rush to launch riskier bond deals before entering a perceived pick-up in volatility into the US election. Meanwhile, the duration sell-off saw the 30-year yield hit multi-month highs, finding support around its 200dma at 156.6bps, the 10-year also broke above the 75bps figure for the first time since late-August, and before that, it hasn’t been above the level since June. T-note (Z0) futures settled 16+ ticks lower at 138-29+.

Fed's Mester (voter) said there is currently no need to raise the size of the Fed's bonds purchases and she would like the option to lengthen maturities of the bonds it purchases. (Newswires)

US House Speaker Pelosi and US Treasury Secretary Mnuchin spoke yesterday for roughly 1 hour where the two discussed the justifications for various numbers and plan to exchange papers in preparation for another phone call on Tuesday. (Newswires)

A source noted that US Treasury Secretary Mnuchin asked if he could visit Capitol Hill on Friday for stimulus talks and House Speaker Pelosi refused stating that she cannot trust the White House on COVID-19. However, it was also reported that a Pelosi spokesperson said Mnuchin has not yet asked for a meeting and that Pelosi was just making clear it would not happen in person anymore and only by phone in the near future, according to CNN’s Dana Bash. (Twitter)

White House aide Morgenstern said we have offered standalone bills on airlines as well as other issues and is hopeful the Democrats will come around. (Newswires)

US President Trump is planning to participate in the next Presidential Debate scheduled for October 15th, according to CNN's Gallman citing the Trump campaign's Director of Communications. Furthermore, it was separately reported that a virtual event is being considered for the next Presidential Debate, according to New York Times. (CNN/NYT)

POLL: Reuters/IPSOS poll of likely voters in Pennsylvania showed former VP Biden is ahead of US President Trump at 50% vs. 45% and the poll of likely voters in Wisconsin showed former VP Biden is ahead of US President Trump at 50% vs. 44%. (Newswires)

US Senator Graham indicated that he spoke with President Trump and he is forging ahead with the confirmation hearing next week for Amy Coney Barrett, while it was later reported US Senate Judiciary Committee scheduled the hearing regarding Barrett’s nomination to the Supreme Court for October 12th-15th. (Newswires/NBC)