• European bourses are firmer but contained with earnings dominating as macro updates are minimal; Euro Stoxx 50 +0.4%, ES U/C
• USD has been pressured to the benefit of peers ex-JPY, though performance is overall relatively contained while USTs & EGBs diverge
• Fed's Daly (2021, 2024 voter) said her modal outlook is the Fed will be able to taper later this year or early next - but emphasized data dependency
• China said it opposes the US' arms sales to Taiwan, urging the US to stop this, vowing to take countermeasures
• Looking ahead, highlights include US Initial/Continued Jobless Claims, Canadian Trade Balance, BoE Policy Announcement & Press Conference, Fed's Waller
• Earnings: ViacomCBS, Kellogg

CORONAVIRUS UPDATE

UK is removing the quarantine requirement for fully jabbed travellers coming back from France, and added Germany, Austria, and Norway to the Green List. (Twitter)

US President Biden Administration is developing a plan to require nearly all foreign nationals traveling to the US to be fully vaccinated; WH is not immediately planning on lifting international travel restrictions but it is developing a policy. (Newswires)

Japan's PM Suga expanded the state of emergency to additional areas; on this, Japan's new COVID-19 cases exceed 15k for the first time vs prev. 14.1k, via NHK & Tokyo COVID-19 infections 5,042 vs yesterday's 4,166. (Newswires)

Australia's New South Wales reported 262 new locally-acquired COVID-19 cases - a new record high. (Newswires)

ASIA

Asia-Pac equities saw a mixed session with the breadth of the price action narrow following a subdued lead from Wall Street, in which the DJIA shed 0.9% and the S&P 500 dipped around 0.5%, but the NDX eked out a day of gains. US equity futures resumed trade with mild and broad-based gains across the board, with the ES above 4400 for most of the session. The futures were unfazed by Fed's Daly (2021/24 voter) joining the club calling for a potential QE taper this year, although at several points during her interview she stressed data dependency - ahead of Friday's jobs data. Back to APAC, the ASX 200 (+0.3%) held its head above 7,500, but losses in its heavyweight mining sector capped gains. Nikkei 225 (+0.4%) saw mild tailwinds from currency dynamics, but traders remained cautious as Japan proposed expanding the COVID-related restrictions to eight more prefectures - note, some are urging for a nationwide State of Emergency. The KOSPI (+0.2%) remained caged amid a lack of catalysts. The Hang Seng (-0.2%) and Shanghai Comp (+0.1%) were choppy and dipped at the open following reports in China’s Securities Times targeting gaming tax – albeit Chinese markets thereafter conformed to the tentative tone. Finally, 10yr JGB futures were modestly softer in tandem with their US peer.

China's Securities Times says the tax on the gaming sector should be moderately similar to the traditional industry, noting that the current taxes allow more people to be addicted to games. (Newswires)

A magnitude 6.5 earthquake hit an area near Taiwan. (Newswires)

PBoC injected CNY 100bln via 7-day reverse repos at a maintained 2.20% rate for a net daily drain of CNY 20bln. (Newswires)

PBoC set USD/CNY mid-point at 6.4691 vs exp. 6.4683 (prev. 6.4655)

CENTRAL BANKS

Fed's Daly (2021, 2024 voter) said her modal outlook is the Fed will be able to taper later this year or early next - but emphasized data dependency. Daly passed inflation off as transitory and said high inflation could last until next year but not forever. Daly noted the rise in house prices is a supply-demand issue which will be resolved as supply comes back online, and she noted the Delta variant is starting to temper activity across the country. (PBS Newshour)

The Brazilian Central Bank hiked its Selic rate by 100bps as expected, to 5.25% from 4.25% in a unanimous decision. The Bank sees another 100bps hike at the next meeting in September. The BCB noted that the baseline scenario and balance of risks indicate that a rate hike cycle to a level above neutral is appropriate, the rate hike reflects the view that recent inflation dynamics and reopening of the economy could further increase inflation expectations. However, the risks to baseline scenario remain in both directions. (Newswires)

US

US CBO will release the cost estimate for the infrastructure bill on Thursday. (Newswires)

China-US container shipping rates have hit a record level in excess of USD 20k/40ft container, freight trackers. (Newswires)

JP Morgan (JPM) launched an in-house Bitcoin fund for wealthy clients, according to Coindesk. (Coindesk)

UK/EU

Kantar poll for Focus: German Chancellor Merkel's Conservative Bloc at 24%, Greens at 22%, and SPD at 18%. (Newswires)

EU IHS Markit Construction PMI (Jul) 49.8 (Prev. 50.3)

• German IHS Markit Construction PMI (Jul) 47.1 (Prev. 47)

UK Markit/CIPS Construction PMI (Jul) 58.7 vs. Exp. 64 (Prev. 66.3)

GEOPOLITICAL

The Biden administration has approved its first arms sale to Taiwan, a potential USD 750mln deal. (Newswires) Subsequently, China said it opposes the US' arms sales to Taiwan, urging the US to stop this, vowing to take countermeasures. (Newswires)

Israeli Defense Minister Gantz says that Israel is ready to strike Iran, via journalist Levy. (Twitter)

US President Biden's new US weapons export policy has neared completion with briefings to congress, and will contain additional screening layer for human rights issues at customer countries, according to sources. (Newswires)

Israeli military confirmed it had conducted air strikes against areas in South Lebanon in response to an earlier rocket fire. (Newswires)

EQUITIES

European equities (Eurostoxx 50 +0.3%) trade firmer in what has been a busy morning of earnings reports for the region as macro developments for the Eurozone remain light. Marginal gains and a subsequent record high for the Stoxx 600 have come amongst the backdrop of a mixed APAC and Wall St. lead whilst US futures currently hug the unchanged mark. Note, Goldman Sachs raised its year-end S&P 500 forecast to 4700 vs prev. 4300. Sectoral performance in Europe is mixed with Tech names top of the leaderboard, closely followed by Industrial Goods and Services which has been bolstered by earnings from Siemens (+3.2%) after the Co. reported solid earnings and raised FY21 guidance. Capping gains for the sector have been Deutsche Post (-1.4%) whose earnings were less well-received by the market. To the downside, Basic Resources names lag peers with earnings from Glencore (-1.1%) unable to grant the sector with much in the way of reprieve after the commodity-trader and mining giant reported record H1 results. Retail names have been hampered by Zalando (-8%) who sit at the bottom of the Stoxx 600 with JP Morgan labelling results as “strong but disappointing in the context of expectations”. In what has been a particularly busy morning for the German corporate calendar, Bayer (-5.3%), Adidas (-4.3%) and Continental (-2.3%) sit at the foot of the DAX post-results. For the banking sector, opening gains for Credit Agricole (-1.2%) proved to be fleeting as optimism surrounding Q2 profits faded. In the UK, Lloyds (-3.5%) and NatWest (-0.6%) have suffered at the hands of action from Goldman Sachs with the former cut to sell from neutral and later removed from GS’ conviction list amid potential headwinds from mortgage pricing. Finally, Rolls Royce (+3.8%) is the best performer in the FTSE 100 post-earnings bolstered by cost reductions and asset sales.

Please see here for the Daily European Equity Opening News and the Additional Equity News for the morning's European earnings/stories.

Goldman Sachs increases its year-end S&P 500 forecast to 4700 vs prev. 4300; 2022 forecast to 4900 vs prev. 4600. (Newswires)

President Biden is to set a target for 50% EVs by 2030, with US automakers backing the goal of 40-50% EV sales by 2030; Biden will also lay out the schedule for the next round of vehicles emissions standards. (Newswires)

FX

USD - The Dollar has lost a bit of its post-ISM and Clarida vigour after extending recovery gains, as attention turns to the next batch of US data for more assessment in context of further progress towards the ‘substantial’ level that will ignite the Fed’s QE taper. Today’s agenda includes Challenger lay-offs as another proxy for NFP on Friday, plus trade and a timelier snapshot of the labour market via weekly and continued jobless claims, while 2021 FOMC voter and one of the most hawkish policy-makers, Waller, is also scheduled to speak again, albeit on the subject of Digital Currency. In the interim, the DXY has drifted back down from 92.352 at best to 92.173 and may have encountered some technical and psychological offers as the 21 DMA resides just shy of 92.500 at 92.447 today.

AUD/NZD/GBP - It may be a case of seizing the opportunity when it arrives for the Aussie rather than relying on fundamentals or specifics given the deteriorating virus situation that has prompted a 7 day snap lockdown in the 2nd largest state, but Aud/Usd has bounced quite firmly to probe 0.7400 again and the Aud/Nzd cross is holding around 1.0475 as the Kiwi consolidates near 0.7050. Meanwhile, the Pound is also taking advantage of the broad Greenback retreat, with Cable reclaiming 1.3900+ status awaiting independent impetus and direction from the BoE from high noon when MPC minutes and the latest MPR accompany the rate and APF vote split, and all come before Governor Bailey takes the floor an hour later - full preview in the Research Suite and at 9.57BST on the Headline Feed.

CAD/CHF/EUR/JPY - All narrowly mixed vs the Buck, as the Loonie rebounds through 1.2550 ahead of Canadian trade data and eases away from hefty option expiry interest between 1.2545-50 (1.6 bn) against the backdrop of firmer crude prices that is also giving the NOK and MXN a fillip, while the Franc meanders within a 0.9078-53 range in the run up to Swiss FX reserves tomorrow, the Euro pivots 1.1840 and Yen rotates around 109.60 (100 DMA), both eyeing some big to mega option expiries either side or above current levels as well (see 7.02BST post on th Headline Feed for sizes and strikes in Eur/Usd and Usd/Jpy).

EM - The Try is a notable underperformer and back under 8.5000 against the Usd as the Fed tilts more hawkishly vs an essentially redundant or ineffective CBRT due to constraints from Turkish President Erdogan, in stark contrast to the Brl that bucked the weaker trend to end the midweek session just above 5.1700 following the BCB’s latest 100 bp SELIC rate increase and guidance that another is slated for September.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1795-1.1800 (1.4BLN), 1.1825-30 (1.2BLN), 1.1850-60 (3.6BLN), 1.1885 (1BLN)
• USD/CAD: 1.2470 (669M), 1.2525-30 (831M), 1.2545-50 (1.6BLN)
• USD/JPY: 109.00 (697M), 109.15-20 (767M), 109.25-35 (1BLN), 109.50 (1.2BLN), 110.00 (724M)

Brazilian President Bolsonaro reiterated that the payment of the social programme "Bolsa Familia" will be readjusted by 50%. Brazil has to be cautious with resources, but will take Bolsa Família for BRL 300, which could go 400 (currently at BRL 190). (Newswires)

FIXED

Bunds and Gilts are showing signs of fatigue after earlier exertions, but continue to regain composure following their falling in sympathy with Treasuries post-services ISM and hawkish Fed commentary on Wednesday. Indeed, the 10 year German debt future is clawing back more of its losses to trade at 177.31 (+37 ticks on the day and 46 ticks above the midweek Eurex low), while its UK equivalent reached 130.39 at best (¼ point over par and 30 ticks off yesterday’s Liffe base) before waning and is now biding time to see what the ‘Old Lady’ has to say from 12.00BST onwards. Conversely, T-notes and the long bond are still licking wounds inflicted by the so called FOMC influencer and Chair Powell’s right hand man, Clarida, in advance of a busy pm agenda pre-NFP tomorrow, including the more timely labour market metrics provided by IJC updates.

COMMODITIES

Crude benchmarks are supported as things stand though magnitudes are slim, and trade has been rangebound for much of the morning, in-fitting with the broader risk tone as we primarily await tomorrow’s US labour data. Currently, WTI and Brent post gains of USD 0.40/bbl and are within reach of the sessions peak. Fresh newsflow explicitly for the complex has been minimal with the main notable update stemming from geopolitics where the Israeli Defense Minister said they are ready to strike Iran; though further details on this are very minimal at present. Elsewhere, UBS wrote that the oil market should resume its upward trend in spite of the COVID-19 delta variant; specifically, expecting a H2 Brent range of USD 75-80/bbl. Turning to metals where spot gold and silver have barely deviated in both European and APAC trade, with fresh catalysts on the macro front slim as players digested yesterday’s Clarida remarks ahead of a speech from voter Waller today; albeit this is on digital currencies. For reference, spot gold lies within a USD 6/oz range around USD 1810/oz. Elsewhere, Glencore reported H1 earnings (see equity section) though the commodity specific commentary was largely a reiteration of the recent production report. However, Glencore does highlight that strong trading performance was delivered in all key commodity teams during the year, benefitting from strong metals pricing and expanded margins; in contrast to the outsized oil earnings which dominated H2-2020.