• Asian equity markets sustained the mixed lead from their counterparts on Wall St where the S&P 500 and Nasdaq notched fresh record intraday highs
• President Trump stated that he postponed talks with China and does not want to talk with China right now
• Brexit trade discussions are reportedly set to stall again after Brussels dismissed UK demands for continued wide-ranging EU access for British truckers, according to the FT
• In FX, the DXY was granted some reprieve overnight with EUR/USD capped below 1.1950 and GBP/USD sub-1.3250 heading into EU trade
• US House Speaker Pelosi said Democrats are willing to cut COVID-19 demands "in half" to get agreement on stimulus bill
• Looking ahead highlights include, UK, EZ & Canadian CPI, FOMC Minutes & JMMC, Fed's Barkin, supply from the UK, Germany & US, earnings from Target, NVIDIA & Analog Devices  

CORONAVIRUS UPDATE

US COVID cases +40,117 (prev. +41,893) and deaths +520 (prev. +654), while a major newswire tally stated that US coronavirus cases increase by at least 42,674 to a total of 5.50mln on Tuesday and deaths rose by at least 1,287 to a total of 171.9k. New York cases +655 (prev. +408) and deaths +8 (prev. +6), while Texas cases: +7,282 (prev. +7,368 and deaths +216 (prev. +51). Elsewhere, a major newswire tally stated that California coronavirus cases increased by at least 5,854 and deaths rose by at least 186. (Newswires)

NIH's Fauci said it is likely that a COVID-19 vaccine should be available later in 2021 to everyone in US that wants it. (Newswires)

ASIA

Asian equity markets sustained the mixed lead from their counterparts on Wall St where the S&P 500 and Nasdaq notched fresh record intraday highs shortly after the open, although the tone briefly soured before picking back up again with participants somewhat tentative and volumes thinner due to the lack of data and risk events ahead. Nonetheless, ASX 200 (+0.8%) was positive with the best performing stocks in the index driven by earnings, while Nikkei 225 (+0.2%) was rangebound as participants digested mixed releases including disappointing Machinery Orders and although trade data printed better than expected, there were still substantial contractions to both Exports and Imports. Elsewhere, Shanghai Comp. (-0.3%) weakened alongside the closure of morning trade in Hong Kong due to a typhoon signal, as well as the continued antagonism between US-China as President Trump noted that he postponed talks with China and does not want to talk with China right now, while he responded “we'll see“ when questioned if he will pull out of the trade agreement. Finally, 10yr JGBs were choppy with mild pressure seen as Japanese stocks just about remained afloat, but with downside also stemmed amid the BoJ presence in the market for JPY 770bln of JGBs with 3yr-10yr maturities.

PBoC injected CNY 150bln via 7-day reverse repos for a net injection CNY 10bln at a rate of 2.20%

PBoC set USD/CNY mid-point at 6.9168 vs. Exp. 6.9165 (Prev. 6.9325)

US President Trump said China made the largest corn order in history last week because China knows he is not happy. Furthermore, President Trump later stated that he postponed talks with China and does not want to talk with China right now, while he also responded “we'll see“ when questioned if he will pull out of the Phase 1 trade deal with China. (Newswires/Twitter)

US President Trump said Oracle (ORCL) is a good company and may take over TikTok's US businesses, while he added there must be a solution by September 15th and that the US Treasury must get its share from the sale of TikTok. (Newswires)

White House Chief of Staff Meadows said there were no new US-China trade discussions scheduled and that USTR Lighthizer continues to have discussions with Chinese counterparts regarding Phase 1 deal commitments. (Newswires)

Huawei and ZTE (763 HK) asked suppliers to slow down shipments of certain 5G base station-related products in June, so that they can redesign products and change some equipment to remove as much US content as possible. (Nikkei)

US State Department is asking colleges and universities to divest from Chinese holdings in their endowments amid delisting risk, in which it warned schools to get ahead of potentially more onerous measures on holding the shares. (Newswires)

Hong Kong Exchange (388 HK) cancelled the morning trading session due to a typhoon signal but then announced that trading in securities and derivatives markets will resume at 1330HKT/0630BST. (Newswires)

Japanese Trade Balance (JPY)(Jul) 11.6B vs. Exp. -77.6B (Prev. -268.8B, Rev. -269.3B). (Newswires) Japanese Exports (Jul) Y/Y -19.2% vs. Exp. -21.0% (Prev. -26.2%) Japanese Imports (Jul) Y/Y -22.3% vs. Exp. -22.8% (Prev. -14.4%) Japanese Machinery Orders (Jun) M/M -7.6% vs. Exp. 2.0% (Prev. 1.7%) Japanese Machinery Orders (Jun) Y/Y -22.5% vs. Exp. -17.6% (Prev. -16.3%)

UK/EU

UK PM Johnson is holding out against calls for an Autumn reshuffle and will only make 'minor' cabinet changes after the summer recess, before conducting a full reset in the New Year after the Brexit transition period finishes. (Telegraph)

Brexit trade discussions are reportedly set to stall again after Brussels dismissed UK demands for continued wide-ranging EU access for British truckers. (FT)

Politicians in Australia are calling for any post-Brexit trade deal with the UK to involve freedom of movement in order to "create a powerful force for free trade and liberal values". (Telegraph) 

FX

The DXY was relatively steady heading into today’s FOMC minutes and received some reprieve from the recent losses that saw prices drop to a fresh 2-year low beneath 92.50. As such, the greenback’s major counterparts gave back some of the prior day’s spoils with the 1.1950 level now acting as resistance in EUR/USD and GBP/USD slightly eased off an 8-month peak as focus turns to the resumption of Brexit talks in which officials are working to have an agreement in time for the EU summit in October although reports have suggested that trade discussions are set to stall again after Brussels dismissed UK demands for continued wide-ranging EU access for British truckers. Elsewhere, USD/JPY was choppy at the 105.00 handle amid the mixed data and risk sentiment, while antipodeans were uninspired due to the lack of catalysts to spur price action but with downside also stemmed after the PBoC set the strongest CNY reference rate since January.

Canadian PM Trudeau said he intends to suspend parliament and recall legislators on 23rd September to outline the agenda for post-COVID recovery. Furthermore, PM Trudeau stated that taxes will not be going up which is the last thing Canadians need. (Newswires)

COMMODITIES

The WTI crude October contract was contained below USD 43.00/bbl despite a larger than expected draw in the latest headline crude private sector inventory data. Furthermore, reports that LNA commander Haftar agreed to reopen Libya’s oil fields and ports failed to spur any meaningful reaction for prices, while focus for the energy complex turns to the OPEC+ JMMC meeting later. Elsewhere, gold prices were slightly softer with the precious metal retreating back below the USD 2,000/oz level as the greenback found mild reprieve and copper was marginally underpinned and briefly rose above the USD 3/lb level as LME prices rose to their highest level in more than 2 years.  

US Private Energy Inventory Crude -4.3mln bbls vs. Exp. -2.7mln bbls. (Newswires)

US President Trump administration reportedly mulls tighter sanctions on Venezuelan oil. (Newswires)

Libya National Army commander Haftar agreed without preconditions to reopen Libya’s oil fields and ports after seven months of forced closure amid local and international pressure. (Libya Observer)

Qatar Petroleum is offering October-loading Al-Shaheen crude at spot discounts for the first time since May, according to sources. (Newswires)

US

Another modest flattening of the Treasury curve as the wider risk tone wasn’t particularly enamoured by the S&P 500 printing new ATHs. By settlement, 2s -0.5bps at 14.5bps, 10s -1.5bps at 66.8bps, 30s -2.5bps at 139bps; TYU contract volumes were lower than recent averages. It was gentle trade for yields as duration steadily made ground throughout the session. Yields were unreactive to the stronger than forecast July Housing Starts and Building Permit data. Furthermore, as the S&P 500 briefly printed ATHs the move failed to sustain, and wider cyclicals/value names were the laggards again, keeping Treasury sellers at bay. The strength so far this week has seen the 10-year yield come back down to within a whisker of its 100dma at 66.1bps, after breaking above it last week for the first time since last year. The long bond is also sitting a couple of bps above its 100dma at 136bps, that it crossed above last week for the first time since June. Wednesday’s 20-year bond auction could be critical for near-term directionality in duration, where a similarly poor result as last week’s bond auction could resume the rate back-up that has so far failed to extend this week. T-note (U0) futures settled 2 ticks higher at 139-12+.

US House Speaker Pelosi said Democrats are willing to cut COVID-19 demands "in half" to get agreement on stimulus bill, while there were later reports that a senior US official reportedly sees a real desire by some lawmakers from both parties to achieve a smaller stimulus agreement of around USD 500bln which could include postal service funding and other items. (Newswires)