• Asia-Pac bourses resumed the downtrend seen across global counterparts which dragged Wall Street back from record highs
• The US is to add additional Chinese entities to its economic blacklist over human rights abuses in Xinjiang
• In FX, the DXY remains sub-92.50, EUR/USD and GBP/USD sit on 1.18 and 1.37 handles respectively
• ECB sources said policymakers failed to agree on new policy guidance; will be revisited on July 22nd
• Looking ahead, highlights include UK GDP and Output Data, ECB Minutes, Canadian Labour Market Report, ECB's Lagarde

CORONAVIRUS UPDATE

Pfizer (PFE) CSO Dolsten said the Co. expects to file for US EUA of a booster dose of its COVID-19 vaccine within one month and that a study showed a third booster shot provided an immune response that was 5- to 10-fold higher than after a second dose. Dolsten stated that multiple European countries and others are mulling a third dose even before the US EUA and that they have Has capacity to produce billions of more doses next year, while it is also developing a booster shot to target the highly transmissible Delta variant. However, the US FDA and CDC provided a joint statement which noted Americans that have been fully vaccinated do not require booster shots at this time but added that they are prepared for booster doses if and when the science shows boosters are needed. (Newswires)

A study published in journal Nature found that people that were previously infected with COVID-19 were more likely to be re-infected and that a single dose of either the Pfizer or AstraZeneca vaccine was only 10% effective against the Delta variant, although two doses of either vaccine generated a neutralizing response of 95%. (Telegraph)

Sinovac's (SVA) COVID-19 vaccine Coronavac is said to have high efficacy against PCR-confirmed COVID-19 with a good safety profile, with interim analysis from a phase 3 trial showing 83.5% efficacy against symptomatic COVID-19. (The Lancet)

South Korean PM said they are to raise COVID-19 restrictions to the highest level for Seoul beginning July 12th and the country reported COVID-19 daily cases increased by a new record of 1,316 cases, while President Moon will hold an emergency meeting regarding the COVID crisis on Monday. (Newswires/Yonhap)

Sydney imposed stricter COVID-19 measures in locked down areas, while New South Wales Premier stated it is hard to see opening by next Friday and that the state is facing the biggest challenge since the pandemic began. (Newswires)

ASIA

Asia-Pac bourses resumed the downtrend seen across global counterparts where there was an unwinding of the reflation trade amid growth slowdown concerns and Delta variant fears, which dragged Wall Street back from record highs with the declines led by financials as yields continued to retreat for an 8th straight session. ASX 200 (-1.3%) was pressured as tech heavily underperformed the broad weakness across nearly all sectors amid a worsening COVID-19 situation that forced Sydney to impose stricter COVID-19 measures in already locked down areas, while the New South Wales Premier also suggested a potential extension to the lockdown and that the state is facing the biggest challenge since the pandemic began. Nikkei 225 (-1.3%) slumped on the weight of the recent haven flows into its currency and neared a correction after falling almost 10% from the February peak, with sentiment not helped after Japan confirmed an emergency declaration in Tokyo and that fans will be banned for most Olympic events. KOSPI (-1.6%) was also impacted by virus woes including a new record increase in cases for a second consecutive day and the raising of COVID-19 restrictions in Seoul to the highest level for two weeks beginning July 12th. Hang Seng (+0.7%) and Shanghai Comp. (-0.7%) both began subdued amid ongoing regulatory concerns with Beijing said to tighten rules for future foreign listings and after Chinese fitness app Keep pulled its New York IPO plans due to the recent Didi issues. Furthermore, it was reported that the US is to add additional Chinese entities to the economic blacklist regarding human rights in Xinjiang and use of high-tech surveillance as soon as today, although there was an update from S&P Dow Jones Indices regarding sanctions in which it noted several companies including China National Chemical Corp, China National Chemical Engineering, China Shipbuilding Industry, China United Network Communications, CNOOC Finance and CRRC among those eligible for index inclusion, which potentially helped the shift in mood for Hong Kong. Finally, 10yr JGBs were lower in which the benchmark eased back following a near two-week rally, despite the weakness in Japanese stocks and with demand subdued by the lack of BoJ presence in the market today.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4755 vs exp. 6.4754 (prev. 6.4705)

• Chinese CPI YY (Jun) 1.1% vs. Exp. 1.3% (Prev. 1.3%)
• Chinese PPI YY (Jun) 8.8% vs. Exp. 8.8% (Prev. 9.0%)

US President Biden said the US needs to focus on shoring up America's core strengths to meet new strategic competition with China and other nations. (Newswires)

US is to add additional Chinese entities to the economic blacklist regarding human rights in Xinjiang and use of high-tech surveillance as early as this Friday, according to sources. (Newswires)

China's Global Times tweeted that the Mission of China to the EU and the Office of the Commissioner of Ministry of Foreign Affairs in Hong Kong slammed European Parliament’s motion on HK as a blatant interference in China’s internal affairs and called for a stop to political maneuvers. (Twitter)

MSCI announced to delete some Chinese securities as of July 26th close but confirmed it will include Didi ADRs to large cap segment of MSCI China All Shares Indices as of close on July 14th, while S&P Dow Jones Indices issued updates regarding additional removals due to sanctions in which it stated that China Communications Construction Group is impacted by the prohibitions, but noted that several companies including China National Chemical Corp, China National Chemical Engineering, China Shipbuilding Industry, China United Network Communications, CNOOC Finance and CRRC among those eligible for index inclusion. (Newswires)

UK/EU

UK PM Johnson is reportedly considering a bank holiday if England win the Euro 2020 final on Sunday with July 19th a potential date being discussed. (The Times)

UK and EU clashed regarding Brexit divorce bill with the UK Treasury insisting it is GBP 35bln-39bln, while EU suggested it was over GBP 40bln. (FT)

UK Chancellor Sunak called for progress on a global tax agreement including the minimum corporate tax rate and how to split revenue from the large multinationals heading into the G20. (Newswires)

UK's Advertising Standards Authority from this month will be commencing a major effort to remove any misleading or irresponsible crypto advertisements, particularly focusing on online adverts. Identifying crypto as a 'red alert' priority.(FT)

ECB is reportedly to delay any proposal outlining policy guidance for the time being and ECB sources said policymakers failed to agree on a new policy guidance when they finalised the conclusion of a broad strategy review although will revisit the issue on July 22nd. Furthermore, some argued that the review is not a policy meeting so policy decisions should not be made in such a gathering, while some opposed any big change in the guidance arguing that the new, symmetrical 2% inflation target is not very different from the bank's previous goal and the inclusion of housing cost would actually raise not lower inflation. (Newswires)

FX

In FX markets, the DXY remained below 92.50 after the recent declines in yields and in the aftermath of this week’s FOMC Minutes, while jobless claims numbers printed above forecasts, although the greenback has since recovered some losses overnight helped by the broad risk-aversion. EUR/USD held on to much of Thursday’s gains where it scaled back above 1.1800 with price action largely influenced by the USD. The ECB’s Strategic Review had little repercussions for the single currency despite shifting to a new symmetric 2% inflation target, while GBP/USD was choppy beneath 1.3800 amid cross-Channel frictions regarding the size of the Brexit divorce bill. USD/JPY attempted to nurse some losses after slipping beneath 110.00 and antipodeans were also pressured due to the broad risk aversion, tougher restrictions in Australia and after mixed Chinese inflation data in which CPI missed forecasts but PPI matched analyst estimates.

COMMODITIES

Commodities were mostly kept afloat overnight with WTI crude futures relatively flat as prices take a breather from yesterday's recovery in which prices rebounded from the USD 71.00/bbl level despite the lack of catalysts and the broad negative risk tone. Nonetheless, price action has since stalled around USD 73.00/bbl as fresh COVID-19 restrictions and Delta variant concerns restrict further upside in oil. Gold was also kept rangebound near USD 1800/oz amid a steady greenback and copper was resilient in which it managed to nurse some of its recent losses, unfazed by the broad risk aversion.

Kuwait set August crude OSP for Asia at Oman/Dubai + USD 2.05/bbl which is up USD 0.80/bbl from July, while Qatar set August Marine crude OSP at Oman/Dubai + USD 1.90/bbl and Land crude OSP at Oman/Dubai + USD 1.70/bbl. (Newswires)

Venezuela's PDVSA started producing two upgraded crude grades for domestic refining in efforts to boost its motor fuels output as it does not currently have enough crude, while June production averaged 193k BPD which is15% of the nation's installed capacity. (Newswires)

CME lowered COMEX copper futures maintenance margins by 9.1% to USD 6,000/contract for July and lowered COMEX 5000 silver futures initial margins for speculators by 10% to USD 14,850/contract. (Newswires)

GEOPOLITICAL

US President Biden said the US military mission in Afghanistan will conclude on 31st August. (Newswires)

Russia-led military bloc said it is ready to mobilise its full military capacity if the situation on the Afghan border deteriorates, while it was separately reported that a Russian fighter jet reportedly escorted a French spy plane over the Baltic Sea. (IFX/Sputnik)

North Korea has removed from its top leadership an official who played a major role in developing the regime's nuclear and missile arsenal according to a newly released photo. (Nikkei)

Venezuela's government is reportedly set for discussions with the opposition in August, according to sources. (Newswires)

US

Treasuries had quite the rollercoaster as fresh multi-month lows for yields were made in European trade to then pare back most of the move. 2s -2.2bps at 0.194%, 5s -4.4bps at 0.736%, 10s -3.6bps at 1.285%, 30s -3.5bps at 1.909%; TYU1 volumes were decent. 5yr TIPS -5.7bps at -1.695%, 10yr TIPS -6.5bps at -0.957%, 30yr TIPS -5.1bps at -0.252%. SOFR and EFFR both unchanged at 5bps and 10bps, respectively. Another directionless APAC session for Treasury trade, with a downbeat risk tone on the back of the virus resurgence seeing Tokyo toy with a new State of Emergency declaration, seeing the US 10yr hug 1.32% and T-Notes (U1) 133-18. Once Europe arrived for the day, participants started to lift the offer for govvies - perhaps as more pored over the relatively dovish FOMC Minutes from Wednesday evening. Regardless, ahead of the ECB's Strategy Review announcement, the German 10yr Bund yield printed lows of -34bps, the lowest since April, while the US 10yr printed 1.250%, just missing its 200dma at 1.237% - the benchmark hasn't traded beneath the 200DMA since November 2020. T-note (U1) futures settled 11 ticks higher at 133-28.

Fed's Daly (voter in 2021 and 2024) warned that the Delta variant is a threat to the global recovery and that one of the biggest risks to global growth going forward is to prematurely declare victory on the coronavirus, while she added that raising rates from near-zero would have to wait until asset purchases were wound down. (FT)

New York Fed announced termination of the commercial paper funding facility in which the final distribution of assets were made on June 29th and July 7th to the Treasury and Fed, respectively. (Newswires)

US Senate Banking Chair Brown said Fed Vice Chair of Supervision will not be reappointed and suggested that the position is to be changed in October. (Newswires)

Boeing (BA) 737 MAX is said to edge towards China return as test flights near, according to sources. (Newswires)