• European bourses are firmer this morning in-line with the cautious gains overnight ahead of the main Jackson Hole event today of Fed’s Powell
• USD is firmer vs most G10 counterparts particularly Sterling as backstop optimism fades, though NZD outperforms on RBNZ comments overnight
• China Global Times Editor Hu Xijin says "Based on what I know, China will take further countermeasures in response to US tariffs on USD 300 billion Chinese goods. Beijing will soon unveil a plan of imposing retaliatory tariffs on certain US products."
• Looking ahead, highlights include Canadian Retail Sales, US New Home Sales, Fed’s Powell, Bullard, Mester, Kaplan & Harker & BoE’s Carney

JACKSON HOLE & G7 SCHEDULES

·        Schedule for both events

·        Jackson Hole & Recent Comments

ASIA-PAC

Asian equity markets traded with cautious gains as participants await Fed Chair Powell’s looming speech at the Jackson Hole Symposium and after the lack of conviction on Wall St. where risk appetite was dampened by hawkish Fed rhetoric, as well as decade-low US Manufacturing PMI data. ASX 200 (+0.3%) was positive with stock news in Australia dominated by earnings including Goodman Group and Sims Metals which have surged due to profit growth, although upside in the index was limited by weakness in the commodity sectors especially gold miners after the precious metal slipped below USD 1500/oz level. Elsewhere, Nikkei 225 (+0.4%) was supported by favourable currency moves, while Hang Seng (+0.5%) and Shanghai Comp. (+0.5%) were higher despite early indecisiveness after China’s MOFCOM reiterated its threat to retaliate against the US in the trade dispute and amid mixed signals from the PBoC in which they conducted reverse repos but resulted to a net liquidity drain for the week and softened its reference rate, although not as weak as anticipated. Finally, 10yr JGBs were subdued amid similar weakness in T-notes and as stocks in the region eked mild gains, although downside was stemmed amid the BoJ’s presence in the market for over JPY 1.2tln of JGBs in 1yr-10yr maturities.

PBoC injected CNY 80bln via 7-day reverse repos for a weekly net drain of CNY 30bln vs. last week's CNY 300bln injection. (Newswires)

PBoC set CNY mid-point at 7.0572 vs. Exp. 7.0674 (Prev. 7.0490)

White House Economic Adviser Kudlow said the US is making pretty good progress in trade discussions with Japanregarding telecoms and agriculture, while there were separate comments from Japanese Economy Minister Motegi that they will resume ministerial level talks with US on trade today and are getting close to a conclusion. (Newswires)

Japanese National CPI (Jul) Y/Y 0.5% vs. Exp. 0.5% (Prev. 0.7%). (Newswires) Japanese National CPI Ex. Fresh Food (Jul) Y/Y 0.6% vs. Exp. 0.6% (Prev. 0.6%) Japanese National CPI Ex. Fresh Food & Energy (Jul) Y/Y 0.6% vs. Exp. 0.5% (Prev. 0.5%)

Sources close to US President Trump state that the White House is in a China bind, with a trade deal with China being 'tough to improbable' in the deteriorating environment., Axios

Subsequently, China Global Times Editor Hu Xijin says "Based on what I know, China will take further countermeasures in response to US tariffs on USD 300 billion Chinese goods. Beijing will soon unveil a plan of imposing retaliatory tariffs on certain US products. China has the ammunition to fight back, US side will feel the pain.” (Twitter)

US

US President Trump plans to pressure France to repeal new tax on US tech giants and will call for India to lower tariffs at the G7. In other news, White House will reportedly not move forward with plan to cut foreign aid by billions according to sources, although US Secretary of State Pompeo later stated that President Trump is still undecided on what to do. (Newswires/Politico)

White House Economic Adviser Kudlow said he thinks economy is strong and does not believe recession talk, while he added the US is still looking at tax cuts 2.0 which US President Trump has not taken off the table and just meant there won’t be anything immediate. Kudlow also suggested there could be tax cuts before 2020 election and that short-term payroll tax cut is unlikely although personal rates could be lowered, and capital gains tax could be reduced. (Newswires)

Fed's Kaplan (Non-Voter. Dove) noted that global growth risks and trade uncertainty could result to a rate cut. (Newswires/WSJ)

GEOPOLITICS

Russian President Putin has ordered Russia's military to prepare measures in response to US missile tests, Putin wants the military to take exhaustive measures to prepare for a reciprocal response, according to Russia's Kremlin. Adding that Russia does not want to be drawn into a arms race. (Newswires)

North Korea Foreign Minister Ri said US Secretary of State Pompeo casts dark shadows over US-North Korea talks and that Pompeo is more interested in his political ambitions than US foreign policy, while the Foreign Minister added we have given enough time to US and are ready for both dialogue and confrontation, while he added it would be a miscalculation if US continues with sanctions and that North Korea can remain the biggest threat to US for a long time. (KCNA)

Russian Finance Ministry said Russia is "actively considering" issuing Yuan-denominated bonds on the Moscow Exchange; Sputnik

South Korea's Deputy National Security Advisor Kim says Japan has not only rejected but ignored their offers for a dialogue, provides a chance to strengthen South Korea/US alliance. (Newswires)

Ireland will look to block its free trade deal between the EU and South American trade bloc unless Brazil takes action to protect the Amazon rainforest. (Newswires)

UK/EU

UK Tory Remainers who are intent on stopping a no-deal are reportedly attempting to delay Brexit by preparing to hold their own talks with Brussels, sources state. A Downing Street source added that Brussels could reject any request for an extension, even if PM Johnson is legally bound to ask for one. (Times)

Remain rebels in the UK Conservative party have delayed their attempt to force PM Johnson to abandon a No-deal Brexit amid disagreement with MPs in other parties on when to act. (The Sun)

EU officials want to set up a EUR 100bln wealth fund to bolster "European champions" against American and Chinese business rivals like Google, Apple and Alibaba. (Politico)

German Finance Ministry spokeswoman says it is now time to use "cleverer methods" to ensure the German economy grows, adds that Germany is not in a recession. (Newswires)

EQUITIES

European equities opened and remained on a somewhat firmer footing (thus far) [Eurostoxx 50 +0.3%] on the last trading day of the week which follows on from an initially cautious Asia-Pac session before sentiment turned for the better ahead of Fed Chair Powell’s opening remarks at the Jackson Hole Symposium at 1500BST/1000EDT. Sectors are mostly in the green with the exception of the energy sector which coincides with recent losses in the oil complex. Meanwhile, the IT sector outperforms as stellar earnings from US-listed Salesforce.com (+6.8% pre-market) provided tailwinds to DAX heavyweight SAP (+0.6%), which accounts for around 1.5% of the Stoxx 600 index. In terms of individual movers, Thyssenkrupp (+0.7%) opened higher amid source reports that it is planning to merge its steel unit with Klöckner (+8.3%). Also, it’s worth keeping in mind a report by Politico which stated that EU Officials are seeking to create a EUR 100bln wealth fund in order to bolster ‘European Champions’ against American and Chinese business rivals such as Apple (+0.6% pre-market), Google (+0.9% pre-market) and Alibaba (+0.9% premarket).

FX

USD - The Greenback has nudged up a bit further from post-US manufacturing PMI lows that saw the DXY skirt 98.000, and the index is now edging back up towards wtd peaks just shy of 98.500 posted on Tuesday within a 98.185-436 range. Relatively hawkish rhetoric from Fed’s George and Harker have underpinned the Buck ahead of Chair Powell’s keynote speech that is being eyed for clearer policy guidance given this week’s FOMC minutes highlighting divisions between voters beyond the 2 dissenters against July’s 25 bp insurance/mid-cycle rate cut.

NZD/GBP - Not quite all change, but positions and roles have partially reversed for the Kiwi and Pound following supportive comments from RBNZ Governor Orr and less euphoria/hype about the prospect of formulating a plan for the Irish backstop that is mutually acceptable for the UK and EU. To recap, NZ’s Central Bank head indicated that the recent larger than expected OCR ease (1/2 point) affords some time for assessment before deciding whether more stimulus is needed in November and effectively signally a pause next month, while French President Macron and German Chancellor Merkel have both been receptive to PM Johnson and the notion that a resolution to the Irish backstop impasse can be reached before it’s too late, but the ball and onus to come up with something different is back in UK hands. In response, Nzd/Usd has rebounded towards 0.6400, with AUD/Nzd back under 1.0600 as Aud/Usd pivots 0.6750 amidst the ongoing, incremental rise Usd/Cny mid-point rates, while Cable has retraced more of its gains through 1.2200 at one stage.

CHF/JPY - The Franc and Yen are both weaker vs the Dollar as US Treasury yields rise and the curve steepens, while safe-haven demand is also waning with global trade and geopolitical tensions still prevalent, but not escalating (at present). As such, Usd/Chf and Usd/Jpy are firmer around 0.9850 and 106.50 handles respectively.

CAD/EUR - The Loonie and Euro remain relatively rangebound vs the Greenback circa 1.3315 and 1.1065, with the former looking for more independent inspiration from Canadian retail sales data after failing to glean any real or lasting impetus via firm CPI and other minor macro inputs this week (wholesale trade and manufacturing sales). Meanwhile, the single currency is hanging on above 1.1050 and the 2019 base (1.1029) awaiting insight from Fed’s Powell, September’s ECB policy meeting to see how much stimulus is delivered after minutes underlining heightened economic concerns and what happens next in Italy on the political front.

EM - The Rand is outperforming and clawing back recent losses vs the Buck with a less downbeat/negative take from Moody’s on the SA fiscal outlook following extra financial assistance for Eskom helping alongside a less bearish technical backdrop as Usd/Zar reverses through 15.2500 and 15.1500 before basing around 15.1300.

RBNZ Governor Orr reiterated a rate cut earlier reduces likelihood of having to do more later and stated they will do whatever it takes to support New Zealand economy but can afford to wait and observe what is happening, while he added that they will see what the situation is like in November and will cut if necessary. (Newswires)

FIXED

Some consolidation, short covering and perhaps even dip buying after the early sell-off fuelled by deeper losses in UK bonds on the back of renewed Brexit deal hopes. However, Gilts are still markedly lagging around 133.55 within 133.84-38 parameters vs Bunds that have bounced off 177.48 lows towards 178.00 and US Treasuries reclaiming 130-00, albeit still soft and re-steepening. As noted and widely regarded, Fed’s Powell is expected to headline Friday’s agenda, but breaking news will be a factor and on that note latest comments from Russia and reports on US-China trade look rather risk-off.

COMMODITIES

WTI and Brent futures are choppy in a relatively tight parameter as all eyes turn to Fed Chair Powell for any hint on the magnitude of the widely anticipated Fed rate cut in September against the backdrop of some recent hawkish Fed rhetoric. WTI futures remain contained in a 55.20-60/bbl range whilst its Brent counterpart straddles on either side of 60/bbl. Elsewhere, gold is marginally softer intraday and remains below the 1500/oz mark, largely weighed on by a firmer Greenback, in anticipation for the Fed Chair’s speech. Copper on the other hand is rebounding off recent lows, albeit prices remain below 2.6/lb with desks citing US-China optimism as a driver, although a retracement of recent losses/some profit taking may also be factors. Meanwhile, Dalian iron ore surged over 3% overnight following the ruthless sell-off in recent days, also potentially due to profit-taking heading into a risk-packed weekend. Finally, ING notes that the recent surge in Nickel prices seem to be running out of steam after prices declined around 4% this week. “The speculated supply disruptions from Indonesia have not materialised yet, whilst the demand-side continues to face pressure as margins for stainless steel producers take a hit” the analysts state.