• Asian equities traded subdued with risk appetite dampened by China crackdown concerns and soft US ISM data
• US indices finished mostly in the red although growth and tech were underpinned and lifted the Nasdaq to fresh record highs
• In FX, the DXY remains above 92.50, EUR/USD and GBP/USD languish on 1.18 and 1.38 handles respectively
• In commodities, WTI crude has steadied on a USD 73.00/bbl handle, whilst spot gold lost 1,800/oz status
• Looking ahead, highlights include FOMC Minutes, Fed's Bostic, supply from the UK & Germany

CORONAVIRUS

A study found that arthritis drugs tocilizumab and sarilumab reduced the risk of death and need for ventilators among hospitalized COVID-19 patients whereby administering one of the drugs in addition to corticosteroids lowered the risk of death by 17% compared with just administering corticosteroids, while the risk of progressing to mechanical ventilation or death was lowered by 21% for patients not on ventilators. (Newswires)

Fully vaccinated holidaymakers are set to get fast-track lanes at Heathrow in an attempt to open-up quarantine-free overseas travel to amber list countries. (Telegraph) UK Ministers are set to sign off on a plan that would permit people to travel from amber-list nations without having to isolate for up to ten days. (Times)

Spain's COVID-19 rate has reportedly increased to the highest in mainland Europe amid the spread of the Delta variant and infections among younger, unvaccinated people, according to FT research. Conversely, there were also reports regarding Germany where the Foreign Minister announced Germany is to lift all COVID-19 curbs as soon as next month. (Newswires/FT)

Osaka prefecture in Japan is seeking an extension to the quasi-emergency. In relevant news, Japan's top health adviser Omi said it is necessary to take effective anti-coronavirus measures prior to the start of the Olympics and the summer vacation, while there were also reports that Japan is considering banning fans from all Olympic events, although a separate report stated that Japan is mulling a 5.0k limit on spectators at the Tokyo Olympics. (Newswires)

New Zealand granted provisional approval for Johnson & Johnson (JNJ) unit Janssen's COVID-19 vaccine for those aged 18-years old and above. Elsewhere, authorities in Sydney, Australia confirmed that the lockdown will be extended for an additional week until at least July 16th. (Newswires)

Brazil's lower house approved the text of the bill that would allow breaking of patents for production of vaccines and medicines in the event of a public emergency. (Newswires)

ASIA

Asian equity markets traded subdued after the similar picture in global counterparts as risk appetite was dampened by China crackdown concerns and soft US ISM data, with the recent slump in oil prices amid OPEC uncertainty, and looming FOMC Minutes adding to the cautiousness. This resulted in most major US indices finishing in the red although growth and tech were underpinned by the lower yield environment to lift the Nasdaq to fresh record highs. ASX 200 (+0.7%) bucked the trend to reclaim the 7,300 level despite the announcement of a lockdown extension in Sydney for a third week, as the index was buoyed by strength in tech which found inspiration from Wall St counterparts whilst the largest weighted financials sector was also kept afloat. Nikkei 225 (-1.2%) was pressured by the weight of currency inflows and ongoing COVID-19 concerns with Osaka also seeking an extension of the quasi-emergency restrictions, while KOSPI (-0.8%) was subdued with index top component Samsung Electronics failing to benefit from better-than-expected preliminary Q2 results as the virus situation clouded over investor sentiment after daily infections increased by over 1,200 which was near South Korea’s record high. Hang Seng (-0.9%) and Shanghai Comp. (+0.4%) were mixed amid China crackdown concerns after its cabinet announced it will take tough action on illegal activities in the securities market and will step up regulation of Chinese firms listed abroad. In addition, the NDRC announced enhanced security checks for buildings taller than 100 metres and stated that construction of skyscrapers with a height of 500+ metres will not be approved, while losses in Hong Kong were exacerbated by pressure in the large oil names, weakness in Geely Auto after its sales dropped 9% and with Tencent suffering from the increased Beijing tech scrutiny which pressured its shares to a YTD low. Finally, 10yr JGBs tracked the advances in T-notes which had been spurred by haven flows and weak data to push the US 10yr yield to its lowest since February. The BoJ were also present in the market today for over JPY 900bln of JGBs and although it slightly reduced purchases in 5yr-10yr maturities, this was inline with its previously flagged buying intentions for Q3.

PBoC injected CNY 10bln via 7-day reverse repos with rate at 2.20% for a net daily drain of CNY 20bln. (Newswires) PBoC set USD/CNY mid-point at 6.4762 vs exp. 6.4708 (prev. 6.4613)

US urged China and the private sector to raise their involvement in a G20 debt moratorium for low-income countries impacted heavily by the pandemic and on a common framework for debt restructuring. (Newswires)

TikTok’s parent ByteDance may delay its IPO and could see its valuation cut, according to a CNBC reporter. (Twitter)

UK/EU

Binance temporarily suspended payments from EU's Sepa network. (FT)

FX

In FX markets, the DXY remained above the 92.50 level following the prior day’s gains whereby the greenback found support from a haven bid, with focus for the currency now shifting to the looming FOMC Minutes due later today. EUR/USD languished due to the recent USD strength, although the single currency was off its worse levels after having found a base around 1.1805. GBP/USD battled to hold on to the 1.3800 level after yesterday’s notable pullback from resistance at 1.3900 and USD/JPY was choppy around 110.50, with JPY-crosses also despondent after collapsing from the recent haven flows. The cautious risk tone and slump in oil prices have kept AUD/USD and NZD/USD constrained beneath 0.7500 and near the 0.7000 level, respectively, which also follows a weaker reference rate setting by the PBoC, while forecasts by ANZ Bank and Westpac for the RBNZ to hike rates in November failed to garner a reaction in NZD/USD as they echoed the previous forecasts made by ASB Bank and BNZ.

COMMODITIES

Commodity prices were contained overnight following the prior day's selling across the complex in which WTI crude futures slumped from a cyclical high just shy of the USD 77.00/bbl level to briefly test the USD 73.00/bbl where prices eventually found a base with the pressure attributed to the OPEC+ uncertainty following the breakdown in talks which Morgan Stanley suggest have mostly bullish implications in the short-term but potential bearish influences on the longer-term. In addition, the White House has been weighing in on the issue and had a number of high-level conversations with OPEC+ members including Saudi and was said to be encouraged by ongoing talks, while recent soft Industrial Orders data from Germany and Delta variant concerns have also contributed to the headwinds for oil. Gold was rangebound with attempts to nurse recent losses and extend above the USD 1800/oz level hindered by a steady greenback whilst copper rebounded off yesterday's lows but with the recovery contained by the subdued risk mood.

White House said the Biden administration is closely monitoring OPEC+ negotiations and had a number of high-level conversations with OPEC+ members like Saudi and others, while the US is encouraged by ongoing talks. Furthermore, White House Press Secretary said the US is always monitoring gasoline prices and wants access to affordable, reliable gasoline. (Newswires)

Saudi Energy Minister said there is no similarity between the situation OPEC is in now compared to March last year, while he added that the current agreement will remain in place, according to Energy Intel's Bakr. (Twitter)

Mexico's Economy Ministry said the San Rafael mine in Mexico which is operated by Americas Gold and Silver Corp and primarily produces silver, zinc and lead, will reopen following talks with unions that lasted for months. (Newswires)

GEOPOLITICAL

IAEA said Iran intends to produce uranium with 20% enrichment levels, while US State Department said the Iran decision to produce uranium enriched to 20% is a step backwards and that the window for diplomacy remains open on Iran nuclear talks with the US not imposing a deadline on nuclear talks. (Newswires)

White House said the Saudi Deputy Defense Minister is to meet with US officials where Khashoggi's death could be a topic, while the US expects to have a meeting next week with Russian officials on cybersecurity issues. (Newswires)

There were reports of a drone attack on Erbil International Airport in Iraq where US forces are base, although a Pentagon spokeswoman later stated that according to initial information, there was no structural damage, injuries or casualties from attack in Erbil, Iraq. (Newswires/Twitter)

US Special Representative for North Korea Sung Kim conducted a phone call with his Chinese counterpart which was the first of its kind since Kim was appointed to the position in May, while a US State Department spokesman later highlighted the critical role China can play in addressing the North Korean nuclear issue. (Yonhap)

Russian government hackers reportedly breached the Republican National Committee systems last week, around the time a Russia-linked criminal group carried out a large-scale ransomware attack, according to two sources familiar with the matter. (Newswires)

US

Treasuries were well bid, led by the belly, as a downbeat risk tone and sloppy ISM Services accentuated a bout of short-covering. 2s -1.6bps at 0.222%, 5s -5.4bps at 0.808%, 7s -6.5bps at 1.131%, 10s -6.2bps at 1.370%, 30s -4.8bps at 2.001%; TYU1 volumes were above recent averages. 5yr TIPS -7.6bps at -1.714%, 10yr TIPS -7.9bps at -0.971%, 30yr TIPS -5.5bps at -0.256%. SOFR and EFFR both unchanged at 5bps and 10bps, respectively. T-Note futures traded sideways around 132-20/10yr cash yield 1.44% throughout. Once Europe arrived for the day, offers were lifted for sovereigns on both sides of the pond amid a choppy equity open for the region - a big miss on German July ZEW Economic Sentiment survey provided tailwinds to bond bulls, falling to 63.3 from 79.8 vs exp. 75.2. Then when US players returned from the long weekend, bids caught some traction again with one desk noting mortgage related Treasury buying and some deal-tied receiving in swaps amid some heavy swappable IG supply lending some support - not to mention the slew of China IPO/ADR clampdown headlines that were hitting the tape. US 10yr yields were already floating dangerously close to the 1.40% resistance level before the ISM Services print, to which the disappointing survey results then saw the level broken straight through. Yields then hit their June lows (21st) amid a touted scrambling of short covering from a heavy short base, seeing T-Notes print daily highs of 133-12+, cash 10s eking past their June lows to print 1.352%, and cash 30s printing a daily low of 1.97%, but currently resides on the 2% big figure. It's worth noting that there is no Treasury coupon supply this week, so the usual post-NFP supply concession flows are absent, something which bond bears would have been yearning for in today's/this week's flow. Participants now look to Wednesday's FOMC Minutes release for potential catalysts. T-note (U1) futures settled 17+ ticks higher at 133-07.

White House said US President Biden wants climate tax credits and housing affordability included in the Democrats' reconciliation bill. (Newswires)

US Treasury Secretary Yellen is working with Congressional tax committees to implement OECD international tax agreements via reconciliation. Furthermore, an official said several countries are pushing for a global minimum tax rate higher than 15% and tax agreements are said to appeal to lawmakers on both sides of Congress. (Newswires)

USTR Tai requested that Canada abandon its proposed digital tax in light of the OECD agreement on corporate tax, while she emphasised the importance of Canada upholding USMCA commitments on home shopping. (Newswires)

US Defense Department is to cancel USD 10bln JEDI contract award to Microsoft (MSFT) and the Pentagon seeks a new multi-cloud, multi-vendor contract, while it is to seek proposals from Amazon (AMZN) and Microsoft (MSFT). Furthermore, Defense Department officials said the DoD will reach out to all five major US cloud suppliers later Tuesday on the new contracts and plans to make the new contract awards by around April 2022. (Newswires)

NHC issued a hurricane warning issued for a portion of the Florida gulf coast and later stated that Elsa regained hurricane strength southwest of Tampa Bay, while there were comments from Florida Governor DeSantis that Elsa is expected to make landfall on Florida's northern Gulf coast between 08:00:00-10:00EDT. (Newswires)