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Markets Mixed, EUR/USD The Standout

FRANCE AUCTION RESULTS

France Sells E10.355bn of OATs

     EXCLUSIVE: The U.S. and China should set up a special communication
mechanism before the U.S. presidential election in order to prevent "unexpected
incidents" because existing channels have been disrupted as bilateral relations
hit their lowest ebb since 1979, China's former Vice Finance Minister Zhu
Guangyao told MNI. On the domestic economy, Zhu said China's GDP should grow by
more than 3% in 2020 as the Covid-19 pandemic recedes within the country, but
officials are increasingly wary of the danger of an uneven "K-shaped" recovery
with different sectors outpacing others both at home and abroad.
     POLICY: China has told the UK to stop interfering in Hong Kong's affairs or
face the consequences after London on Monday suspended an extradition treaty
with Hong Kong and implemented an arms embargo. "China urges the UK not to go
further down the wrong path, otherwise it will suffer the consequences," said an
unnamed spokesperson at the Chinese Embassy in the UK, according to China's
government-run portal China.com.cn.
     LIQUIDITY: The People's Bank of China (PBOC) injected CNY10 billion via
7-day reverse repos with the rate unchanged. This resulted in a net drain of
CNY20 billion given the maturity of CNY30 billion of reverse repos, according to
Wind Information. The operation aims to keep liquidity reasonable and ample, the
PBOC said on its website.
     RATES: The seven-day weighted-average interbank repo rate for depository
institutions (DR007) decreased to 2.0846% from 2.1523% on Monday, Wind
Information showed. The overnight repo average fell to 1.5514% from 1.9341%.
     YUAN: The yuan weakened to 6.9936 against the dollar from 6.9912 on Monday.
PBOC set the dollar-yuan central parity rate lower for a second day at 6.9862,
compared with the 6.9928 set on Monday.
     BONDS: The yield on 10-year China Government Bonds was last at 2.9100%,
down from the close of 2.9200% on Monday, according to Wind Information.
     STOCKS: The Shanghai Composite Index rose for the fourth trading day by
0.20% to 3,320.89. Hong Kong's Hang Seng Index rallied 2.31% to 25,635.66.
     FROM THE PRESS: The market expects the PBOC to cut the interest rate on the
medium-term lending facility (MLF) in Q3 to support recovery that began in Q2
and promote lower borrowing costs for businesses, the 21st Century Business
Herald reported citing Wang Qing, chief analyst with Golden Credit Ratings. The
PBOC leaving LPR unchanged yesterday was expected given MLF rate has been stable
and that banks' face rising marginal costs, the newspaper said citing Wen Bin,
chief researcher at China Minsheng Bank.
     China's economic policies should focus on effectively expanding domestic
demand, particularly consumer spending, in the second half by stabilizing
employment, increasing subsidies to low-income families and accelerating the
reopening of hotels and restaurants, malls, entertainment and tourism, the
Economic Information Daily reported citing Wang Yiming, a former deputy director
of the Development Research Centre of the State Council. Annual growth could
reach about 3% this year, Wang was reported saying.
     China recorded box office sales over CNY3 million yesterday after cinemas
reopened for the first time in six months, compared CNY248 million on the same
day a year ago, the Securities Daily reported. Movie theatre sales may recover
to only 20-30% of normal levels in August and September due to continued social
distancing rules, and may return to normal in October, the newspaper reported
citing HuaAn Securities.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MBQ$$$]