• Asian equity markets traded mostly higher as the region took impetus from the fresh record highs on Wall St
• USTR Lighthizer and Treasury Secretary Mnuchin spoke with China Vice Premier Liu He on Monday regarding implementation of the Phase 1 trade agreement
• Officials from both sides see progress and are committed to taking next steps required to ensure success of the deal
• The DXY was softer but remained above 93.00, EUR/USD reclaimed 1.18 and GBP/USD hovered around 1.3100
• Looking ahead, highlights include German GDP (detailed), IFO, US Consumer Confidence, Fed Discount Rate Minutes, Fed's Daly, supply from UK & Germany 

CORONAVIRUS UPDATE

US COVID cases +38,679 (prev. +45,265) and deaths +572 (prev. +1,006), while a major newswire tally stated that US cases rose by at least 37,854 to a total of 5.76mln and deaths rose by at least 482 to a total of 177.3k. New York COVID cases +408 (prev. +572) and deaths +7 (prev. +5), Texas cases +2,847 (prev. +4,923) and deaths +25 (prev. +234), while California cases +4,946 (prev. +6,777) and deaths +18 (prev. +146). However, a major newswire tally later stated that California cases increased by at least 8,003 and deaths rose by at least 106. (Newswires)

NIH's Fauci warned against a premature approval of a COVID-19 vaccine which could undermine trials of other candidates and said they should not receive emergency use authorization without proof of safety and efficacy. (Newswires)

Apple (AAPL) is to reportedly start reopening some of its stores it re-closed due to local spikes of COVID-19. (Newswires)

Germany added the Paris region to its list of COVID-19 risk areas. (Newswires)

ASIA

Asian equity markets traded mostly higher as the region took impetus from the fresh record highs on Wall St where cyclicals outperformed and with risk appetite also spurred by COVID-19 plasma treatment hopes, as well as reports US and China’s top trade negotiators held a constructive conversation on the Phase 1 agreement. ASX 200 (+0.2%) was led by tech and financials although gains in the benchmark index were capped by resistance at the 6200 level and amid headwinds from a deluge of earnings, while Nikkei 225 (+1.7%) outperformed as exporters cheered recent currency weakness and with the government to ease the ban on foreign residents returning to the country. Hang Seng (-0.5%) and Shanghai Comp. (-0.2%) also began higher after the PBoC boosted its liquidity efforts with a total CNY 300bln of reverse repo operations and following talks between USTR Lighthizer, Treasury Secretary Mnuchin and China’s Vice Premier Liu He in which both sides saw progress and were committed to taking the next steps required to ensure the success of the deal. However, gains later faded given that discussions were not much of a surprise and with the PBoC distancing itself from lowering capital requirements for bank, while Hong Kong was also cautious ahead of Chief Executive Lam’s announcement on social distancing arrangements later today as the current restrictions which limits public gatherings to two people are set to expire. Finally, 10yr JGBs were lacklustre with price action contained below the 152.00 level after weakness in T-notes and demand sapped by the gains in stocks, with the 20yr JGB auction doing little to spur prices despite printing improved results.

PBoC injected CNY 250bln via 7-day reverse repos and CNY 50bln via 14-day reverse repos for a net daily injection of CNY 200bln with the 7-day reverse repo rate maintained at 2.20% and 14-day maintained at 2.35% PBoC set USD/CNY mid-point at 6.9183 vs. Exp. 6.9189 (Prev. 6.9194)

PBoC Vice Governor Liu said it is unnecessary to lower regulatory requirement on banks' capital adequacy ratio. It was also reported that a PBoC official stated the PBoC's determination to maintain a normal monetary policy and China's monetary policy direction, as well as its flexible and appropriate monetary policy approach will not change. (Newswires)

USTR Lighthizer and Treasury Secretary Mnuchin spoke with China Vice Premier Liu He on Monday regarding implementation of the Phase 1 trade agreement and discussed steps China took to make structural changes called for in the deal. Furthermore, officials from both sides see progress and are committed to taking next steps required to ensure success of the deal, while China noted the sides had a constructive conversation on the trade agreement and on strengthening macroeconomic policy coordination. (Newswires)

India government is seeking to phase out equipment from Chinese companies including Huawei from its telecoms network amid border tensions, although there hasn't been any formal ban announcement. (FT)

FX

The DXY was softer but remained above the 93.00 level following on from yesterday’s indecision, with price action hampered by the constructive risk appetite and as participants await the Jackson Hole Symposium beginning on Thursday. The mild softness in the greenback marginally benefitted its major counterparts in which both EUR/USD and GBP/USD reclaimed the 1.1800 and 1.3100 handles respectively, as well as their nearby 50-Hourly MA levels. Elsewhere, USD/JPY briefly rose above 106.00 amid the increased risk appetite but then came off today’s highs owing to the USD-softness, while antipodeans were uneventful amid the light overnight calendar and stable CNY reference rate setting, with only minimal support seen due to their high beta statuses.

Australia Bureau of Statistics said payroll jobs declined 1.0% for the month to August 8th and payroll jobs in Victoria state fell 2.8% during the same period, while it added payroll jobs nationally on August 8th were around 4.9% below mid-March levels. (Newswires)

COMMODITIES

WTI crude futures stuck around the USD 42.50/bbl level despite the mostly constructive risk tone and with prices also unaffected by the offshore output disruptions in the Gulf of Mexico where 82.4% of production was estimated to have been cut due to adverse weather conditions. Nonetheless, the supply disruptions had minimal impact on prices whilst some major refineries also halted operations including Motiva’s Port Arthur, Texas refinery which is the largest in the US, while Brent crude was also little changed ahead of October contract options expiry today and with focus for the complex shifting to the latest stockpile data beginning with the private sector inventories later. Elsewhere, gold prices were contained near USD 1930/oz as the effects of a weaker greenback were offset by the lack of haven demand, while copper also failed benefit from the risk tone amid the humdrum trade across commodities and underperformance in China.

US offshore oil production cuts accounted for 82.4% of production in the Gulf (prev. 58%), while producers halted 1.52mln bbls of daily offshore oil production (prev. 1.06mln). (Newswires)

NHC said the centre of Laura was passing through the Isle of Youth and that hurricane and storm surge watches have been issued for parts of the Northwest Gulf Coast, while it noted that Marco has weakened to a tropical depression although heavy rainfall is still possible across portions of the Central Gulf Coast. (Newswires)

Motiva's Port Arthur Texas refinery (636k bpd) will be completely shut on Tuesday, while Total’s Port Arthur refinery (225k BPD) went into minimum production ahead of the storms and also plans a shutdown today. Furthermore, Chevron said it has shut-in facilities and evacuated all personnel in the Gulf of Mexico due to the tropical storms and BP also shut-in production, as well as evacuated all personnel from its platforms and in the Gulf of Mexico due to tropical storms. (Newswires)

Saudi Arabia and China's Norinco refinery project is "dead" and not suspended as previously suggested, according to an Energy Intel source. (Twitter)

GEOPOLITICAL

US Secretary of State Pompeo tweeted that in addition to continuing UN arms embargo, the UN sanctions we are restoring on Iran will re-impose accountability for other forms of malign activity by Iran. (Newswires)

US

Yields were little changed to fractionally higher in the front-to-belly as a cyclical rally kept seasonal bullish flow post-duration supply on the sidelines. At the same time, participants begin rolling their futures contracts. By settlement, 2s +1bps at 15.5bps, 10s +1bps at 65bps, and 30s unch. 135bps. Treasury futures richened as US participants entered the fray, coinciding with a modest paring of strength in equities. The move was shortlived, however, and soon reversed as equities found higher ground after the US cash equity open. Yields then moved sideways into settlement. The slight cheapening in the front-to-belly makes sense in the context of this weeks 2s, 5s, and 7s Treasury auctions, the former kicks off the offerings on Tuesday. Meanwhile, Consumer Confidence will also be on the radar tomorrow ahead of the Jackson Hole meeting later this week. T-note (U0) settled 1+ ticks lower at 139-16+; t-note (z0) settled 1+ ticks lower at 139-12+.

New York is reportedly probing whether US President Trump improperly inflated assets. (Newswires)

Around 200 members of Wisconsin National Guard is expected to be deployed to Kenosha, Wisconsin to assist amid the ongoing protests, according to sources. (Newswires)

Salesforce.com (CRM), Amgen (AMGN) and Honeywell (Hon) are to replace ExxonMobil (XOM), Pfizer (PFE) and Raytheon (RTX) in the DJIA, effective before the open on August 31st and prompted by Apple's 4-1 stock split reducing the tech sector weighting