• Asian equity markets traded mixed after failing to take full impetus from the fresh record highs stateside
• US Defense Secretary Esper said Beijing has repeatedly failed to keep promises to adhere to international laws, whilst a US official stated that US actions regarding the South China Sea are a mere start
• EU Trade Chief Hogan confirmed reports that he is to resign as EU Trade Commissioner
• UK officials have warned that negotiations with Japan over a post-Brexit trade agreement could take weeks to conclude rather than days amid disagreements over agriculture
• Looking ahead, highlights include Swiss GDP, US GDP (2nd Estimate), Initial/Continued Jobless Claims, Fed Chair Powell, BoC's Macklem & ECB's Lane at the JH Symposium, Banxico Minutes and supply from the US

CORONAVIRUS UPDATE

US COVID cases +37,086 (prev. +33,076) and deaths +1,142 (prev. +394). Furthermore, a major newswire tally stated US cases increased by at least 43,459 to a total of 5.84mln on and deaths rose by at least 1,199 to a total of 179.7k, while the HHS said the current 7-day average of COVID-19 deaths is down 9% from the prior average. New York COVID-19 cases +566 (prev. +629) and deaths +3 (prev. +2), Texas cases +5,045 (prev. +6,091) and deaths +229 (prev. +181), California cases +6,004 (prev. +4,480) and deaths +150 (prev. +105), while it was also reported that California Governor Newsom is to release new reopening guidelines on Friday. (Newswires)

NIH's Fauci expressed concerns about interpretations of recommendations made in coronavirus task force discussions and stated that it may give the incorrect assumption that asymptomatic spread is not a great concern when in fact it is. (CNN)

UK Air Bridge between London and New York to enable travellers to side-step the quarantine is under discussion in top level US and UK government talks. (The Telegraph)

Western governments are reportedly concerned regarding Beijing's commitment to identify the source of the pandemic after WHO investigation team failed to visit Wuhan. (FT)

South Korea confirmed 441 additional coronavirus cases (prev. +320) and urged businesses to have employees work from home after it reported the largest increase of daily coronavirus cases since March. Furthermore, South Korea Health Ministry said discussions continue about potentially increasing social distancing to level 3, while it was also reported that India’s daily coronavirus cases increased by a record 75,760 to a total 3.31mln. (Newswires)

Abbott Laboratories (ABT) received US FDA emergency use authorization for its USD 5, 15-minute, easy-to-use coronavirus test, while the Co. said it will ship tens of millions of tests next month and will ramp up to 50mln tests per month in October. (Newswires)

ASIA

Asian equity markets traded mixed after failing to take full impetus from the fresh record highs stateside which was led once again by a surge in big tech, with the region kept tentative by ongoing US-China tensions and ahead of the looming Jackson Hole Symposium. ASX 200 (+0.4%) was led higher by metal miners following the prior day’s advances in precious metals and with sentiment also supported amid better than expected Private Capex data which included upward revisions to yearly capex estimates. Conversely, Nikkei 225 (-0.5%) was pressured as exporters suffered from the ill effects of recent currency strength, while the KOSPI (-0.6%) also weakened after virus cases rose by the most since March and following the BoK rate decision where the central bank maintained rates at 0.50% as expected but downgraded its 2020 growth forecast in which it now anticipates a wider contraction of 1.3% for the economy. Elsewhere, Hang Seng (-0.7%) and Shanghai Comp. (+0.3%) were cautious as US-China tensions were stoked after the US blacklisted more Chinese firms including several subsidiaries of China Communications Construction Company which saw shares in the parent drop nearly 5%. Other notable stock movers today included HSBC (-1.6%) which was pressured by recent accusations from US Secretary of State Pompeo that it is aiding Beijing’s crackdown on Hong Kong and continues to provide services to people sanctioned by the US, although Xiaomi (+13.0%) shares have surged after it more than doubled its Q2 profit. Finally, 10yr JGBs were positive following the bull steepening stateside in the wake of a strong 5yr US auction, with the slightly soured Asia-Pac tone also providing a tailwind for bond prices, although some of the gains were later pared after mixed results at today’s 2yr JGB auction. 

PBoC injected CNY 100bln via 7-day reverse repos for a net daily drain of CNY 60bln at a rate of 2.20%. (Newswires) PBoC set USD/CNY mid-point at 6.8903 vs. Exp. 6.8838 (Prev. 6.9079)

Chinese Industrial Profits (Jul) Y/Y 19.6% (Prev. 11.5%). (Newswires) Chinese Industrial Profits YTD (Jul) Y/Y -8.1% (Prev. -12.8%)

US Defense Secretary Esper said Beijing has repeatedly failed to keep promises to adhere to international laws, while he added that China has hampered global efforts to combat the virus and its military continues to pursue aggressive modernization plan. Furthermore, Esper also suggested the US needs to be able to deal with China and Russia in all areas of the globe. (Newswires)

US official stated that US actions regarding the South China Sea are a mere start, while the official added there is a non-transparency problem with China Communications Construction Company, and they have an unfortunate record on projects. (Newswires)

China Global Times stated that earlier sanctions from US reminds that shunning the US no longer works and pursuit of legal action and countermeasures should be considered, citing experts. (Global Times)

UK is to reportedly consider TikTok data curbs but will not block its London HQ, while it is likely to find TikTok a lower threat than Huawei, while it was reported that TikTok CEO Mayer resigned following US threat to ban the app. (Newswires/FT)

Bank of Korea kept its 7-Day Repo Rate unchanged at 0.50% as expected vias unanimous decision. BoK Governor Lee said exports will perform better in H2 than H1 but added the recovery in exports will only be gradual and that monetary policy needs to be actively used if economic downturn widens although any further rate cuts need to consider potential adverse effects, while he stated they have other tools ready aside from rate cuts including OMOs. Furthermore, BoK forecasts 2020 GDP growth at -1.3% vs. Prev. -0.2% and sees 2021 GDP growth at 2.8%, while it sees 2020 inflation at 0.4% vs. Prev. 0.3% and 2021 inflation at 1.0%. (Newswires)

UK/EU

EU Trade Chief Hogan confirmed earlier reports that he is to resign as EU Trade Commissioner. (Newswires) Politico reported yesterday that EU’s former ambassador to Washington, David O’Sullivan, is touted in Dublin as the potential successor to Hogan. (Politico) Reports also noted that European Commission President Von der Leyen could be forced to reshuffle her team once Ireland proposes its new appointee. (Newswires)

UK Government officials have warned that negotiations with Japan over a post-Brexit trade agreement could take weeks to conclude rather than days amid disagreements over agriculture. (Times)

Germany cancelled plans for Brexit talks at the EU Ambassadors summit due to a lack of any tangible progress in discussions. (The Guardian)

Former Australian PM Tony Abbott is tipped to become the joint President of UK new Board of Trade. (Times)

FX

In FX markets, the DXY was lacklustre beneath the 93.00 level following the prior day’s whipsawing in which support from better than expected US Durable Goods data, later faded amid the heightened risk appetite as stock markets extended on record levels, while the currency now lies in wait for the looming speech by Fed Chair Powell at the Jackson Hole Symposium. The greenback’s major counterparts were rangebound overnight with EUR/USD contained by resistance at 1.1850 where the 200-Hourly MA also resides nearby, while GBP/USD retraced some of its recent gain and briefly slipped below 1.3200 amid ongoing pessimism as it was recently reported that Germany cancelled plans for Brexit talks at next week’s EU Ambassadors summit due to a lack of any tangible progress in discussions. Elsewhere, USD/JPY oscillated around the 106.00 level amid the soured overnight tone and antipodeans were little changed to hold on to this week’s gains after better than expected Australian Capex data, as well as a firmer PBoC reference rate setting, but with upside in both AUD/USD and NZD/USD restricted by resistance at the 0.7250 and 0.6650 levels respectively.

Australian Capital Expenditure (Q2) -5.9% vs. Exp. -8.4% (Prev. -1.6%, Rev. -2.1%). (Newswires) Australian Private Capital Expenditure 2020-2021 (AUD)(Est. 3) 98.6B (Prev. 90.9B) Australian Private Capital Expenditure 2019-2020 (AUD)(Est. 7) 116.84B (Prev. 115.4B)

Argentina formally requested the start of a consultation for a new IMF programme. (Newswires)

COMMODITIES

WTI crude futures traded sideways around the USD 43.00/bbl level amid the mixed risk appetite and following an uneventful EIA inventory report. Focus on the complex remains on the ongoing hurricane threat after Laura strengthened to a Category 4 hurricane, although the latest estimates of production shut ins for the Gulf of Mexico were unchanged at 84.3%. Elsewhere, gold slightly pulled back overnight as yesterday’s resurgence was stalled by resistance at USD 1955/oz and with participants now awaiting Fed Chair Powell’s remarks at the Jackson Hole Symposium, while copper was traded flat overnight in tandem with the mixed risk appetite.

NHC said Hurricane Laura has become an "extremely dangerous" Category 4 hurricane and later updated that Hurricane Laura was located around 140 miles south of Lake Charles, Louisiana with maximum sustained winds reaching 145 miles/hour. (Newswires)

BSEE estimated offshore oil production cuts in Gulf of Mexico was unchanged at 84.3% (prev. 84.3%) and Nat Gas production cuts at 60.94% (prev. 60.94%). (Newswires)

US Department of Energy said it is ready to use Strategic Petroleum Reserve if it is necessary amid Hurricane Laura. (Newswires)

Natural Gas Pipeline Co declared a force majeure at in Cameron Parish, Louisiana Line due to storm path of Hurricane Laura. (Newswires)

GEOPOLITICAL

Four US service members were injured after an altercation with Russian forces in northeast Syria this week, according to a draft military statement and a person familiar with the matter. (Politico)

EU Foreign Policy Chief Borrell said the EU will present a wide set of options regarding Turkey, while it was also reported that Greece is open to significant de-escalation if Turkey relents in the East Mediterranean. (Newswires/AFP)

US

The Treasury curve was modestly steeper after another strong Treasury auction and duration bidding offset an earlier rate back up ahead of Jackson Hole. By settlement, cash 2s unch. at 15.5bps, 5s unch. at 29bps, 10s +0.5bps at 69bps, 30s +2bps at 141bps. T-Note volumes were above average although highly distorted due to the contract roll; 65% of the cumulative September and December OI is now in the December contract ahead of Friday’s First Intention day. Rates had been sold off overnight, with analysts citing the chunky Australian auction spurring wider duration hedges. Furthermore, participants were seemingly front-running Powell’s Jackson Hole speech on Thursday, with jitters over how comprehensive the framework review announcement will be. Reports noted algo sell programmes and CTAs contributing to the sell-off, where the Durable Goods print only accentuated the move; real money was said to have been nibbling at the higher yields, providing support. However, the sell-off soon pared as the record size, USD 51bln 5-year Treasury note auction saw strong demand (echoing Tuesday’s 2-year) where the 0.307% WI was stopped through by 0.9bps, covered 2.71x (vs average 2.48x), and saw dealers take a minimal 17.82% (vs average 27.8%). Thursday’s 7-year auction will be interesting to see how the less Fed-supported tenor fares after recent duration auctions saw dismal demand. Jackson Hole will be the other key focal point for the rates market on Thursday, although Jobless Claims and the second reading of US Q2 GDP/PCE will also be of note. T-note (U0) futures settled flat at 139-10; t-note (z0) futures settled flat at 139-05+.

Fed’s Bowman (voter) said the economy has bounced back noticeably, but far from back to normal and noted that stimulus checks, as well as enhanced jobless benefits have been a substantial source of support. Furthermore, she stated the Fed will continue to monitor progress and respond promptly and flexibly to support recovery. (Newswires)

US Republicans are reportedly refining the new 'skinny' stimulus proposal which would not include stimulus checks and would be valued at USD 500bln, while there were separate comments from US Senator Johnson said he's optimistic about getting 51 GOP senators on board with a "targeted" COVID relief bill that they could be called back to vote on before Labor Day. (CNBC/Washington Post)

US Democratic source said that there has not been any communication around the CARES relief between the two sides. (Twitter/Fox Business News)

White House said following unrest in Kenosha, Wisconsin, it has assisted the state in the deployment of nearly 1,000 National Guard troops, while the US Justice Department deployed over 200 agents and marshals from FBI, ATF and US Marshals Service due to the riots. In relevant news, the Wisconsin Justice Department stated that investigators recovered a knife from parked car that Jacob Blake was reaching into before being shot by police. (Newswires)