• European bourses & US futures are modestly softer in a rangebound session featuring little fundamental updates
• US President Trump has returned to the White House stating he feels great and vaccines are coming momentarily; reportedly planning to partake in the next debate
• Biontech (BNTX) and Pfizer (PFE) have initiated a rolling submission to the EMA for their COVID-19 vaccine candidate
• FX features a contained USD with peers little changed aside from a softer AUD while the US yield curve is a touch steeper
• RBA maintained rates and the 3-year yield target alongside reiterating forward guidance
• Looking ahead, highlights include EIA STEO, ECB’s Lagarde & Lane; Fed Chair Powell, Harker Bostic & Kaplan. US 3-year supply

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 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)

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

Biontech (BNTX) and Pfizer (PFE) have initiated a rolling submission to the European Medicines Agency for SARS-COVI-2 vaccine candidate BNT162B2. (Newswires)

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 (+0.4%) 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 (+0.5%) 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 (+0.9%) 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)

US

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)

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)

Fed's Bullard (non-voter) says he likes monetary policy right now, does not think we have to do anything different now or into next year. (WSJ)

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)

POLL: CNN poll sees Biden expanding lead over Trump to 16pts (Prev. 8pts) among likely voters at 57% vs. 41%, conducted Oct 1st-4th (vs. Prev. 51% to 43% on 28th Aug-1st Sept). (CNN)

US Senate Judiciary Committee scheduled the hearing regarding Barrett’s nomination to the Supreme Court for October 12th-15th. (Newswires/NBC)

UK/EU

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) 

EU Chief Brexit Negotiator Barnier's negotiating team is expected to arrive in London tomorrow, with Barnier to arrive later in the week, according to BBC's Kuenssberg citing an EU Official. (Twitter)

ECB's Lagarde says fears that instead of a v-shaped recovery, the rebound will be more shaky. "We are prepared to use all the tools that will produce the most effective, efficient and proportionate income" (WSJ)

ECB's Makhlouf says the Euro area economy has rebounded from the low points in April; average inflation targeting is something the ECB should be looking at. (Newswires)

EQUITIES

European equities began the session relatively directionless before ebbing into negative territory and thereafter trimming some losses (Eurostoxx 50 -0.1%) as attention continues to remain on the health of President Trump and hopes of a US fiscal package. With regards to the President, Trump left the Walter Reed Medical Center and returned to the White House last night with the US leader remaining adamant that he “feels great”. In terms of the ramifications for the upcoming election, polling over the weekend showed a widening of the lead for former VP Biden, however, the survey period centred more on the immediate aftermath of last week’s debate rather than the public’s response to the President’s virus diagnosis. Therefore, polling over the coming days which is able to encapsulate both events could provide markets with greater impetus in assessing the outcome of the November vote. On the fiscal front, US negotiators remain at loggerheads despite upbeat commentary from various officials with White House Chief of Staff Meadows noting there is potential for a stimulus package; doubts over Senate approval remain. In terms of the performance in Europe, indices are now mixed with the IBEX (+0.8%) remaining an outlier to the upside, as was the case for a bulk of yesterday’s session. Sectoral performance is also relatively mixed with banks firmer thus far, potentially following on from yesterday’s more favourable yield environment, interestingly, Barclays in a recent note recommended that investors start selectively adding exposure to the European banking sector. Telecom names have been supported by gains in Telia (+5.1%) after divesting a unit and announcing an additional divided. Elsewhere to the upside, travel & leisure names such as Ryanair (+4.8%), easyJet (+4.2%) and IAG (+2.8%) are trading firmer alongside reports noting that the UK is expected to implement a COVID-19 testing system for arrivals this month, a move designed to halve the current 14-day quarantine for those arriving from high-risk countries. To the downside, lagging sectors include tech, healthcare and chemicals. In terms of individual stories, equity news-flow has been on the lighter side this morning with the main headline being that Engie has agreed to the sale of the majority of its stake in Suez to Veolia. Suez took note of the Veolia purchase in a hostile manner and says it will use all the means at its disposal to protect the interest of its employees, clients and stakeholders, and will avoid a creeping takeover.

FX

DXY - The Dollar index posts modest gains in tandem with mild losses across the equity-space,  but remains within a tight range around 93.500 after seeing little follow-through from US President Trump’s discharge to the White House, whilst US stimulus remains far from a done deal with talks to continue today. DXY has widened its overnight range in recent trade with the upper band now at 93.527, having had printed a base at 93.333 at the cash open, with upside levels including the 21 DMA (93.602) ahead of yesterday’s high of 93.832. Looking ahead, the data-slate remains light but speakers abundant, with Fed Chair Powell, voters Harker and Kaplan alongside 2021 voter Bostic on the docket.

AUD, NZD, CAD - The non-US Dollars are softer to varying degrees with clear underperformance seen in the AUD post-RBA and Aussie Budget. AUD/USD eclipsed 0.7200 to match the 50 DMA (0.7208) after the Central Bank opted to stand pat on rates (vs. outside calls for a 15bps cut), albeit this upside thereafter petered out as participants digested the release which noted “Both fiscal and monetary support will be required for some time given the outlook for the economy and the prospect of high unemployment… The Board continues to consider how additional monetary easing could support jobs as the economy opens up further.” Meanwhile, little action was seen upon the unveiling of the Aussie Budget which largely fell in-line with expectations flagged by major banks. AUD/USD now re-eyes 0.7150 to the downside after briefly dipping below the level in early European hours. The Kiwi and Loonie meanwhile move in tandem to the Buck, with NZD/USD retaining its 0.6600+ status but within a 30-pip intraday band. USD/CAD meanwhile stays below 1.3300 after finding a base at its 50 DMA (1.3238) whilst attempting to top its 21 DMA (1.3266), with the Loonie also influence from choppy crude prices.

EUR, GBP - Mixed trade after both currencies initially moved at the whim of the Buck. GBP/USD remains choppy with recent price action seeing the pair rebound off session lows after (1.2960) earlier eclipsing the 1.3000 to match the 16th Sept high (1.3006) on reported stops triggered around the round figure, with the most recent upside coinciding with BBC reports that EU’s s Brexit Negotiation Barnier is to arrive in London for further talks at the end of the week amid the recent pledge from both sides to intensify talks. Elsewhere, the release from the Eurogroup yesterday was in-line with expectations in which finance ministers acknowledged the recent EUR price action but stopped short of intervening, whilst ECB’s President Lagarde reiterated that the Central Bank is prepared to use tools and is ready to address the situation as it develops. ECB’s Makhlouf meanwhile suggested average inflation targeting is something the ECB should examine, albeit with no-follow through to the Single Currency. EUR/USD meanders around 1.1775 following an earlier test of 1.1800, with the current base at 1.1766.

JPY - The Yen outperforms in the G10 FX space on traditional safe-haven inflows which sees USD/JPY trickle lower from its session high of 105.78 to a current low of 105.53 with notable opex today on either side of current levels including USD 1.2bln at 106.00 and USD 1.1bln at 105.00.

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) Subsequently, RBA watcher McCrann suggests it is now very likely that it will deliver a ‘rate cut plus’ on Cup Day (November 3rd).

Australian Budget: sees 2021 budget deficit at AUD 213.7bln (vs. Westpac Exp. AUD 240bln; Prev. AUD 184.5bln); Gross debt projected to surpass AUD 1tln by 2021/22. Estimated tax cuts would boost GDP by AUD 3.5bln. Under the Government's changes, individuals will benefit from bringing forward the tax cuts in Stage 2 of its Plan, as well as a one-off additional benefit from the low- and middle-income tax offset in 2020-21. Link to economic forecasts.

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%)

Notable FX Expiries, NY Cut:

-        EUR/USD: 1.1715-25 (1BLN), 1.1780 (261M), 1.1800 (600M), 1.1820 (1BLN), 1.1830 (500M), 1.1840-50 (1BLN), 1.1855 (425M)

-        USD/JPY: 104.75 (620M), 105.00 (1.1BLN), 105.50 (440M), 106.00 (1.2BLN), 106.10-15 (1BLN).

FIXED INCOME

Overall, the core debt complex has had a very lacklustre start to the day as focus turns somewhat from POTUS health updates to the day’s pertinent central bank speakers and supply slate. Beginning with the UK, where the benchmark is essentially unchanged and has been meandering within narrow session ranges thus far. While supply is in focus the first tranche out of the UK didn’t spark any notable movement in Gilts in-spite of it being relatively well-received. Moving to the continent, where the Bund is similarly little moved on the session with modest ranges exhibited thus far; notably, the double-bottom which was in-play from yesterday at 174.16/17 continues to hold firm this morning (current session low: 174.18). Newsflow for the area has been relatively slow thus far featuring a handful of ECB speakers but nothing to fundamentally change the narrative while the morning’s German I/L was poorly received – but, similarly to the UK, passed without event. Turning to USTs the curve is little changed as we stand but does perhaps have a modest steepening bias continuing the theme from the pronounced bear-steepening that was in-play yesterday. However, the 10-year is essentially flat on the session given participants remain very much focused on Fed Chair Powell who is speaking at the NABE and will be looked at for any more timely updates prior to tomorrow’s September FOMC minutes. Additionally, the first of this week’s stateside issuance features USD 52bln in 3-year notes.

COMMODITIES

WTI and Brent front month futures remain elevated amid developments near the Gulf of Mexico, with Hurricane Delta strengthening to a Category 2 hurricane ahead of expected landfall on Friday, whilst BP and Chevron have already started evacuating personnel in anticipation. Additional oil companies are expected to announce evacuations over the coming days as the hurricane nears, albeit it is not yet known in which form it will make landfall. Elsewhere participants are also keeping an eye on the escalating tensions between Armenia and Azerbaijan in the event pipelines/refineries/ports of the OPEC+ producer are targeted. Both WTI and Brent see gains of some USD 0.5/bbl apiece, with the former briefly topping USD 39.75/bbl and the latter eyeing USD 42/bbl to the upside. Elsewhere, spot gold sees a choppy session within a tight USD 8/oz range as it largely moves on USD-dynamics, with a similar story for spot silver. Finally, LME copper ekes mild gain with some citing optimism regarding US President Trump returning to the White House, albeit more so a follow through from the APAC optimism.

Total (FP FP), Granduits (102k BPD) oil refinery's fuel oil, bitumen & gas exports have halted due to strike action, according to the union. (Newswires)

NHC says that Hurricane Delta is rapidly Intensifying into a category 2 hurricane. Extremely dangerous hurricane conditions expected for the Northeastern Yucatan Peninsula starting early Wednesday. (Newswires)