Asian markets traded lower overnight, although they seem to be recovering some losses as I type.

ASX was down 1.2%, led lower by financials and miners, but has recovered around half of that drop and is now trading at -0.6% on the day.

USD slightly firmer overnight, but pretty tight ranges overall.

European markets are set to open slightly higher.

Here's the full BBG piece on the German wage support program David mentioned;

Germany extended a program that has kept millions of people from losing their jobs to help Europe’s biggest economy recover from the coronavirus crisis.

At a meeting in Berlin on Tuesday, Chancellor Angela Merkel’s coalition agreed to provide job-preserving subsidies until the end of 2021. The subsidies, originally intended for 12 months, pay the bulk of paychecks and allow companies to hold on to workers during an economic shock.

“The virus continues to change and affect our lives and our economies,” said Annegret Kramp-Karrenbauer, head of Merkel’s Christian Democratic party. “We want to stabilize our economy and save jobs.”

Germany has used the compensation program to prevent mass layoffs before, helping the country weather the financial crisis in 2008 and 2009. There were about 5.6 million people receiving the benefits in July, compared with 7 million people in May, according to the Munich-based Ifo Institute for Economic Research.

‘Far From Normal’

The expanded benefits were part of a huge spending package aimed at helping the country emerge from the worst crisis in the post-war era, and the extension indicates that a rebound may take longer than initially anticipated.

Still, there was good news on Tuesday with a report showing German companies have turned slightly more optimistic that the economy’s road to recovery will continue. Ifo’s business confidence gauge rose more than expected in August, while expectations also improved.

German business confidence increased in August

Ifo President Clemens Fuest warned that while the recovery is on track, things are “far from normal,” and companies are likely to continue to cut jobs.

Germany’s wage-support program initially covers as much as 67% of net wages for households with children and increases over time. The European Commission is using the German program as a model for a regional effort to ensure that workers are furloughed and not sacked.

Aside from the wage benefits, the coalition agreed on a contentious election reform. The changes will be implemented in two steps, starting in next year’s national vote and continued in 2025. The goal is to reduce the size of the lower house of parliament, which currently has a record 709 seats.

The number could have grown to more than 800 seats after the next election because of a system that grants additional representation depending on the results.

The coalition also agreed to use some of the funds from the European Union’s recovery fund to equip teachers with laptop computers. The program is set to cost 500 million euros ($590 million).

‘To the End’

The extension of the wage program wasn’t uncontroversial. Some politicians fretted over the costs, while Ifo’s Fuest worried that prolonging the program too long could delay necessary shifts in the labor market.

“It’s a good instrument, but there is the danger that in areas where we need structural change, where we need people to move to different jobs, we prevent that structural change,” he said. “I think it’s too early to extend it.”

Finance Minister Olaf Scholz waved off the concern, saying an extension would provide stability as coronavirus infections spike across Europe. Extending wage support means that companies “will know that we will look after things right through to the end,” he said during a panel discussion in Vienna earlier on Tuesday.

Data published Tuesday confirmed that the German economy suffered a severe blow in the second quarter. Investment collapsed by 7.9% and household spending slid 10.9%, resulting in a 9.7% drop in total output. Exports registered a decline of more than 20%.

“With the wage-support program, we have an instrument that many are jealous of,” said Norbert Walter-Borjans, co-head of the Social Democrats, Merkel’s junior coalition partner. “The crisis is far from over,” so it’s important that it was extended, he said.

On the calendar, French consumer confidence is up first, with forecasts ranging between 92 & 96 vs the previous reading of 94.

US durable goods the "highlight" this afternoon, and speeches from ECB's Schnabel, BoC's Wilkins, & BOE's Haldane.