• APAC equities saw a mixed session; the ASX 200 hit a new high and the KOSPI lagged
• FX markets were quiet, DXY tested yesterday's high before pulling back, USD/JPY remained above 110.50
• Crude futures drifted lower overnight amid COVID developments in the Asia-Pac region
• US Senate passed the infrastructure bill as expected; most GOP Senators pledged to not help Democrats on the debt ceiling
• North Korea said it will make South Korea and the US feel a "massive security crisis every minute".
• Looking ahead, highlights include German CPI (Final), US CPI, Fed's Bostic & George, supply from UK, Germany, and the US
• Earnings: Dialog Semiconductor, E.ON, Uniper; eBay

CORONAVIRUS UPDATE

US President Biden said he does not believe he has the power to intervene in states where they are banning mask mandates, but the administration is looking into it. (Newswires)

The UK has ordered 35mln doses of the Pfizer (PFE) COVID vaccine for next year’s autumn booster campaign at a significantly higher cost - in response to demand. UK government is set to announce the GBP 1bln deal this week. (Times)

Australia's Victoria's State Premier extends Melbourne's lockdown for another seven days amid its COVID situation. (Newswires)

New Zealand has restricted travel from Fiji and Indonesia after labelling them very high-risk countries due to COVID. (Newswires)

South Korea's daily COVID cases surpass 2,200 for the first time - hitting a record, according to the Health Minister. (Newswires)

ASIA

APAC stocks saw a mixed session following the similar handover from Wall Street, which saw the SPX and DJIA pushed to new records, whilst the NDX was pressured by higher yields. Overnight, US equity futures opened flat and held a horizontal pattern, with a broad-based performance seen across the major contracts heading into the US CPI print later today. Over in Europe, the FTSE 100 futures (+0.1%) saw early mild outperformance overnight as the current macro landscape provides tailwinds for the mining, oil, and financial names in the underlying cash index. As such, the ASX 200 (+0.4%) was supported by its exposure to those sectors and hit a new intraday record high, whilst one of the “Big Four” banks CBA dipped post-earnings but then conformed to sector-wide gains. The Nikkei 225 (+0.5%) took an early lead on the back of strength in its industrial and financial names, but later pulled back towards the 28k mark whilst Softbank shares remained weak following underwhelming earnings. The KOSPI (-0.7%) stayed subdued after North Korea warned of “massive security crises every minute”, as the US and South Korea gear up for the annual military drills. The Hang Seng (-0.1%) was choppy and fluctuated between gains and losses whilst the Shanghai Comp (+0.3%) was somewhat stable following the volatile price action earlier this week.

• PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily position. (Newswires)
• PBoC set USD/CNY mid-point at 6.4831 vs exp. 6.4835 (prev. 6.4842)

CENTRAL BANKS

Fed's Evans (2021, 2023 voter) would like to see a few more jobs reports before a taper decision but noted that the Fed is likely to meet the taper benchmark of 'substantial further progress' later this year. Evans said he's perfectly comfortable waiting until there is more progress on employment, and the US economic outlook continues to be strong but some uncertainty remains. Evans said it would be fine if MBS and Treasuries were tapered in proportion to current purchases, but he has no strong view. Evans noted the recent price increases were "quite large" with "no sugarcoating" the pain felt by households and businesses. (Newswires)

US Senator Banking Chair Brown stated Quarles should be replaced at the Fed. (Newswires)

BCB Monetary Policy Director Serra stated the bank is concerned with the possibility of not the hitting center of the 2021 target, adding that 5.25% is still a low benchmark interest rate by Brazilian standards. The director stated that the Central bank has been intervening occasionally to keep the FX market functioning and is not concerned with the level of the exchange rate, and may evaluate future use of options to intervene in the FX market, although it is not a good tool to deal with volatility. (Newswires)

The RBNZ announced new foundations to strengthen and modernise the Reserve Bank; a new "Governance Board" will be appointed beginning mid-2022. (RBNZ)

UK/EU

UK ministers are set to make traffic provisions to France indefinite amid expectation of further cross-Channel disruption. (Guardian)

FX

In FX, DXY hovered above 93.000 and retested yesterday’s 93.139 high before pulling back, with participants flagging resistance around the 93.194 July high – a breach of this will open the door to levels last seen in April. EUR/USD and GBP/USD traded sideways with the former meandering just above 1.1700 whilst the latter briefly dipped below its 21 DMA (1.3830). USD/JPY drifted higher overnight, but eyes several interim resistance levels on its way to 111.00, including 110.69 (8th and 14th July high), 110.81 (17th June and 7th July high), and 110.97 (28th June and 6th July high). AUD/USD and NZD/USD traded rangebound, although the former failed to breach resistance at 0.7050 whilst the latter traded on either side of 0.7000 – with the AUD/NZD cross flat under 1.0500.

Brazil's Lower House voted down proposals backed by President Bolsonaro to rejig the voting system. (Newswires)

COMMODITIES

WTI and Brent front-month futures drifted lower throughout the APAC session as the region reacted to mounting COVID concerns - with the former dipping below USD 68/bbl and the latter sub-70.50/bbl at worst. Prices started seeing mild downticks as New Zealand announced travel restrictions to travelers from Indonesia and Fiji due to COVID risks, whilst the lockdown extension in Australia's Melbourne and record-high South Korean COVID cases only added to the downside bias. Before that, the complex overlooked the smaller-than-expected draw in the weekly Private Inventories (Crude -0.82mln vs exp. -1.3mln), whilst the EIA STEO maintained its 2021 global demand growth forecast – assuming continuing economic growth and increasing mobility. The EIA expects Brent to remain near current levels for the remainder of 2021, averaging USD 72/bbl from August through November. Traders should however be cautious about putting too much weight on the monthly energy reports given the fluidity of the COVID situation – with snap lockdowns, lockdown extensions, and travel bans constantly shifting the landscape. Elsewhere, spot gold and silver clambered off lows as the Dollar eased off highs, with the former finding overnight support around USD 1,725/oz and the latter around USD 23.25/oz. Over to base metals, Chinese Dalian iron ore futures rose almost 4% in early trade as the broader commodities markets took a breather. Finally, LME copper lost the USD 9,500/t handle as workers BHP and workers at the Escondida copper mine extended the government mediation period in a bid to reach a wage deal and avert strikes.

Workers at BHP's Escondida mine do not reach a deal; negotiations will continue, according to a statement. (Newswires) Chile's Caserones copper mine is reportedly continuing to operate during the Chile strike. (Newswires)

US Energy Inventory Data (bbls): Crude -0.82mln (exp. -1.3mln), Cushing -0.41mln, Distillates +0.67mln (exp. -0.5mln), Gasoline -1.11mln (exp. -1.7mln). (Newswires)

EIA in its Short Term Energy Outlook (STEO) maintained its 2021 world oil demand at 5.33mln BPD Y/Y, but cut its forecast for 2022 world oil demand growth by 100k BPD, and now sees demand at 3.62mln BPD Y/Y. EIA expects 2021 US crude output to fall 160k BPD to 11.12mln BPD (prev. -210k BPD). (Newswires) The OPEC MOMR and IEA OMR will both be released on the 12th of August

Goldman Sachs noted the net impact on oil from the Delta variant remains moderate and their base case remains that the Delta wave will impact oil demand (including in China) for only two months - consistent with prior cycles. GS now forecast August and September global oil demand at around 97.8mln BPD, with Q3 only 800k BPD lower vs pre-Delta forecasts. (Newswires)

Tropical Disturbance Six has developed into Tropical Storm Fred just south of Puerto Rico. (NHC)

GEOPOLITICAL

North Korea said it will make South Korea and the US feel a "massive security crisis every minute". (Yonhap)

Chinese court has sentenced Canadian Michael Spavor to 11 years in prison for alleged espionage. The US Embassy in China calls for the immediate release of Canadians Spavor and Kovrig, according to a statement. (Newswires)Spavor and Kovrig were arrested in December 2018 after Huawei executive Meng was detained in Canada on a US extradition request

Mexican Foreign Minister said relations with the US are going "very well" and "are advancing" following a meeting with a top US official. (Newswires)

CRYPTO

Coinbase (COIN) Q2 2021 (USD): EPS 6.42 (exp. 2.33), Revenue 2.23bln (exp. 1.78bln). Trading volume USD 462bln vs exp. USD 381.64bln. Ethereum trading volumes surpassed Bitcoin trading volumes on Coinbase for the first time, driven by growth in the DeFi and NFT ecosystems. (businesswire) CEO said the Co. wants to be the "Amazon of assets" and list every legal crypto out there. (Newswires)

Hackers have stolen around USD 600mln in one of the largest cryptocurrency heists. Blockchain site Poly Network said hackers had exploited a vulnerability in its system and taken thousands of digital tokens such as Ether. (BBC)

US

T-Notes hit their lows of the session as Europe departed, just like Monday, printing 133-16, with the 10yr cash yield printing a peak of 1.35% (the highest since mid-July). The yield peak coincidentally came not long after Fed's Mester (2022 voter) was out on wires warning about non-transitory inflation, although the regional Fed president didn't directly comment on tapering/rate hikes. Yields traded sideways slightly off the lows for the remainder of the session, with the solid 3yr auction not seeing any meaningful follow-through (more below). Participants now look to Wednesday's 10yr auction and the week's data highlight, CPI, for evidence of inflation that doesn't seem so transitory (shelter prices will garner a lot of attention). T-Note (U1) futures settled 7+ ticks lower at 133-17+.

The US Senate has voted 69-30 to pass the USD 1trln infrastructure bill. All 48 Senate Democrats and two independents vote to proceed on the USD 3.5trln budget plan, with the final vote at 50-49. (Newswires) Most GOP Senators signed a pledge to not help Democrats on the debt ceiling, according to WSJ, with 46 Republicans signing the letter (WSJ) In the 50-50 split Senate, Democrats do not meet 60 votes threshold needed to pass a debt-ceiling raise via the ordinary legislative process.

The US House is cutting its recess short and coming back August 23rd, according to Punchbowl's Sherman. The House will consider the Senate's Budget Resolution if they pass it by then. (Twitter/Newswires)

White House stated President Biden remains committed to passing infrastructure bill and budget resolution on dual tracks. US President Biden said he thinks a significant portion, if not all, of the reconciliation bill can be attained. (Newswires)

New York Governor Cuomo has resigned after harassment allegations; will take effect in 14 days. (Newswires)

Intel (INTC) launched a USD 5bln corporate bond sale, five-parter (7yr, 10yr, 20yr, 30yr and 40yr). (Newswires)

Exxon Mobil (XOM) is reportedly seeking buyers for its US shale gas properties. Exxon is marketing the properties itself and aims to receive bids this month - no buyers have yet been identified, according to sources. (Newswires)