• European bourses are firmer as risk-sentiment recovers from yesterday's pressure though US futures remain mixed and comparatively more contained
• The DXY is pressured at session lows with G10 peers supported across the board ex-JPY after yesterday's notable rally
• Core debt has pulled-back given the broader tone with yields elevated though significantly lower on the week as focus turns to Monday's US supply
• PBoC has cut the RRR by 50bps; weighted average for all financial institutions now at 8.90%. As of July 15th
• The US is to add additional Chinese entities to its economic blacklist over human rights abuses in Xinjiang
• Looking ahead, highlights include 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)

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)

The Dutch are to roll-back some COVID-19 restrictions given increasing infection levels, ANP News. (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 (-1.0%) 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 (-0.6%) 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 (-1.1%) 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. (-0.1%) 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 has cut the RRR by 50bps; weighted average for all financial institutions now at 8.90%. As of July 15th. Adding that they will maintain prudent monetary policy. Releasing around CNY 1trl of long-term liquidity, some of which will be utilised to repay the maturing MLF for financial institutions. Link to newsquawk analysis

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%)

Chinese M2 Money Supply YY (Jun) 8.6% vs. Exp. 8.2% (Prev. 8.3%)

• New Yuan Loans (Jun) 2120B vs. Exp. 1800.0B (Prev. 1500.0B)
• Outstanding Loan Growth (Jun) 12.3% vs. Exp. 12.1% (Prev. 12.2%)

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 manoeuvres. (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)

US

Fed's Daly (2021, 2024 voter) 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)

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)

UK GDP Estimate YY (May) 24.6% vs. Exp. 25.9% (Prev. 27.6%); MM (May) 0.8% vs. Exp. 1.5% (Prev. 2.3%)

• 3M/3M (May) 3.6% vs. Exp. 3.9% (Prev. 1.5%)

UK's ONS says limited trade data will be published at 12:00BST, full release next week. (Newswires)

ECB's Weidmann says the Bank is not aiming for inflation either above or below 2% (this is important to him). Temporary deviations from the target can occur but will not set policy based in targets not being met in the past. (Newswires)

GEOPOLITICAL

Russian fighter jet reportedly escorted a French spy plane over the Baltic Sea. (Sputnik)

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

EQUITIES

European equities (STOXX 600 +0.8%) are trading higher across the board in a move that appears to be more of a recovery from yesterday’s heavy losses than one driven by fresh bullish impetus. By way of context, in what has been a choppy week for the region, the Stoxx 600 is on track to see the week out with losses of just over 1% but resides just ~5 points away from its ATH printed on 14th June. Macro drivers are, for the most part, a case of “as you were” with nothing incremental since yesterday’s close and a light docket ahead; aside from the PBoC's RRR cut, though this had been touted earlier in the week. Stateside, ES trades firmer to the tune of 0.3%, NQ is modestly pressured lower by -0.2% while the beleaguered RTY is higher by 1.0% in what has been a bruising week for the index. Sectors in Europe are firmer with outperformance seen in Travel & Leisure, Autos and Basic Resources. Again though, some of these moves have more of an air of recouping lost ground than anything more constructive. Oil & Gas names are lagging peers but are just about positive on the session as energy markets await any further clarity on the OPEC+ front after talks fell apart earlier in the week. In terms of stock specifics, Airbus (+2.7%) is a notable gainer in Europe after noting a pickup in deliveries in June with the plane maker now having delivered 297 airplanes in H1 2021. In the luxury space, Burberry (+2.7%) are seen higher after being upgraded to buy from neutral at Goldman Sachs, with support also seen throughout the luxury space. Volkswagen (+1.7%) could be one to watch with source reports indicating that the Co. will today discuss whether to extend CEO Diess’ contract until 2025.

Phillip Morris (PM) has agreed to the acquisition of Vectura (VEC LN), deal values Vectura at around GBP 1.045bln. (Newswires)

TSMC (2330 TW) June sales TWD 148.47bln (prev. TWD 121.0bln YY). (Newswires)

US President Biden is today expected to sign a competition related executive order, covering:

• Tech names: via encouraging federal agencies to crack down on the way that major tech companies grow via M&A and gain competitive advantages by leveraging consumer data, according to the NYT
• Pharma names: to call on federal health officials to increase efforts to lower the price of prescription drugs as part of an executive order that he plans to sign today, according to Washington Post
• Internet providers: encouraging the Federal Communications Commission to reinstate net neutrality rules, according to Axios

FX

DXY - The Dollar remains off best levels and its new post-FOMC peaks that were set on Wednesday, but has pared some declines against safer havens that outweighed gains vs riskier counterparts during yesterday’s session. The index has settled into tighter range around the 92.500 mark having lost sight of the half round number several times within yesterday's 92.792-239 extremes, and not getting any respite from US data as weekly and continuing jobless claims were both higher than expected. Currently, the index is at the lower-end of the day's range which currently resides sub-92.30. Ahead, only wholesale inventories and sales due in terms of macro releases and no scheduled Fed speakers, so a Monetary Policy report at 16.00BST prepared for Chair Powell’s semi-annual testimonies to the Senate Committee on Banking, Housing, and Urban Affairs, and to House Committee on Financial Services next week could well take centre stage.

AUD/JPY - Far from all change, but as good a gauge of how the landscape and general market tone has improved is the fact that the Aussie and Yen have swapped places in the G10 rankings, with the former now topping the table and the latter propping it up. Aud/Usd has secured a firmer grip of the 0.7400 handle with some assistance from resilient copper prices, while Usd/Jpy has rebounded through 110.00 at best having held just above 109.50 on Thursday and then squeezing higher into the 4 pm London fix.

CAD/NZD/GBP/EUR/CHF - All narrowly mixed vs the Greenback, as risk appetite picks up a bit more on the back of China’s RRR cut wef July 15 and perhaps earlier than signalled by the Cabinet earlier this week. The Loonie is also gleaning support from a rebound in oil ahead of Canadian labour data with Usd/Cad now eyeing 1.2500 to the downside having faded around 1.2590 only yesterday. Meanwhile, the Kiwi is looking more assured circa 0.6950 in the run up to next week’s RBNZ policy meeting, the Pound has tested 1.3800 irrespective of broadly weaker than forecast UK data in the form of monthly GDP, IP and breakdown, the Euro is consolidating between 1.1826-59 and the Franc has slipped back to pivot 0.9150. Note, decent expiry option interest in Eur/Usd close by may keep the pair capped into the NY cut as 1 bn rolls off at the 1.1850 strike and 1.1 bn at 1.1875.

SCANDI/EM - Mixed Norwegian data appears to have been largely dismissed as the Nok rebounds alongside Brent towards Usd 75/brl, but for the record CPI metrics were a tad softer than forecast the trade surplus swelled in June compared to the previous month. Elsewhere, the Try is firmer amidst upgrades to end year CPI, GDP and repo rate forecasts in the latest CBRT survey, but the Cnh and Cny are retesting 6.5000 after the aforementioned PBoC RRR cut (50 bp) having had little or no time to digest above consensus Chinese new Yuan and outstanding loans, plus M2 money supply metrics.

FIXED

Bond bulls have been back in action and almost gave Bunds sufficient impetus to close the gap, at 174.32 vs Thursday’s 174.34 Eurex close, but sellers continue to dominate direction and Gilts are now just off a minor new Liffe intraday low of 128.91 (-51 ticks on the day vs -27 ticks at ‘best’) and the 10 year T-note closer to its 133-14+ overnight base than 133-26 apex. So, more consolidation, corrective trade and retracement at the end of a stellar week for the complex. Ahead, ECB minutes, speakers, and relatively minor US data before the Fed’s report in prep for Powell next week.

COMMODITIES

Crude benchmarks are bid this morning posting gains in excess of 1.0% given the broader risk tone after yesterday’s heavy losses; however, the magnitude of today’s move is relatively slim when compared with what we have seen this far this week. For instance, WTI has printed a range of just over USD 6.0/bbl this week, and we are currently around this mid-point of this range. Newsflow explicitly for the complex has been very minimal. As such, the benchmarks are tracking the broader risk tone while participants remain attentive for any OPEC+ updates, specifically between the UAE and Saudi/Russia. Moving to metals, spot gold and silver are marginally firmer though performance is quite rangebound thus far with gold holding a few dollars above the USD 1800/oz mark compared to the session low of USD 1796.8/oz and Monday’s weekly trough of USD 1783.3/oz. Elsewhere, base metals are buoyed by broader risk appetite rather than any specific macro driver in a continuation of APAC performance where the metals were largely resilient to the tentative macro tone.

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)

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)