• Asia-Pac equities saw a mixed session; Mainland China narrowly underperformed
• US equity futures traded sideways in the run-up to the final jobs report before the Fed's Jackson Hole Symposium
• In FX, DXY was firmer, EUR and GBP were flat whilst the AUD and NZD lagged
• RBA Governor Lowe welcomes a lower AUD rate, but stressed that it is not a target
• US Senate Majority Leader Schumer confirmed the infrastructure bill amendment process debate will recommence Saturday
• Looking ahead, highlights include US & Canadian Labour Market Reports, BoE's Bailey
• Earnings: Allianz, ING, Hikma Pharmaceutical, LSE, Norwegian Cruise Line

CORONAVIRUS UPDATE

The Biden administration is said to be considering using federal regulatory powers and the threat of withholding federal funds from institutions to push more Americans to get vaccinated, according to sources; talks are in the early stages. This could apply to institutions as varied as long-term care facilities, cruise ships and universities. (Washington Post)

US FDA expects to have a strategy on COVID-19 vaccine boosters by early September that would lay out when and which vaccinated individuals should get the follow-up shots. (WSJ)

ASIA

Asia-Pac equities saw a mixed and caged session in the run-up to the last US labour market report before the Fed’s Jackson Hole Symposium (Click here for the Newsquawk preview). The region overlooked the gains on Wall Street - which saw the S&P 500 notch another record high, whilst the DJIA and NDX closed with gains of around 0.8% apiece. US equity futures overnight resumed trade flat, and have moved sideways throughout the session. Back to APAC, the ASX 200 (Unch) briefly dipped below 7,500 but stayed within a tight range, whilst the Nikkei 225 (+0.3%) and KOSPI (-0.2%) were uneventful. Elsewhere, the Chinese markets underperformed at the open before conforming to the tentative tone, with the Hang Seng (-0.2%) printing losses of almost 1% at one point, but the index then trimmed its downside – participants pin the volatility on investors jitters from the ongoing crackdowns. The Shanghai Comp (-0.5%) was subdued ahead of the Chinese inflation data over the weekend, whilst on the trade font, WSJ sources reported that US business groups representing retailers, chip makers, farmers, and others — are calling on the Biden administration to restart negotiations with China and cut tariffs on imports. Finally, 10yr JGB futures tracked US Treasury futures lower in the run-up to the US jobs report.

US business groups representing retailers, chip makers, farmers and others —are calling on the Biden administration to restart negotiations with China and cut tariffs on imports, stating that they are a drag on the US economy. (WSJ)

China's Foreign Ministry's Hong Kong branch has expressed firm opposition and strongly condemns US' move of extending temporary safe haven to certain Hong Kong residents in the US. (Newswires)

China's State Planner said they will release reserves of commodities essential for livelihood in a timely and targeted manner. (Newswires)

PBoC injected CNY 10bln via 7-day reverse repos at a maintained 2.20% rate for a net daily drain of CNY 20bln - weekly drain of CNY 40bln. (Newswires)

PBoC set USD/CNY mid-point at 6.4625 vs exp. 6.4625 (prev. 6.4691)

CENTRAL BANKS

Fed's Kashkari (2023 voter, dovish) said the economy has not made "substantial further progress", but if a strong labour market is seen in fall as expected, that bar would be met. He said most of the inflation seen currently is only in a few sectors and as the economy returns to normal the price increases will level off, and is not seeing evidence yet of high inflation prints driving up inflation expectations. (Newswires)

US Democrat Senator Manchin said the Fed should reverse easy-money policies and asked Chair Powell in a letter to stop bond buying amid inflation worries. (WSJ)

Fed has announced post-stress-test capital requirements for big banks; Goldman Sachs (GS) and Morgan Stanley (MS) face the highest requirements at 13.4% and 13.2% respectively. (Newswires)

RBA Governor Lowe said the Australian economy has bounced back quicker than forecast and the labour market recovery has been most remarkable, the RBA is prepared to act in response to further bad news on the health front. Governor Lowe welcomes a lower AUD rate, but stressed that it is not a target. He is not particularly concerned about inflation in Australia and tapering QE is not tightening policy. Lowe noted that the cumulative effect of QE matters, and not the pace. Lowe said they are not a point of needing macro prudential tightening, but could be early next year. (Newswires) The rest of the commentary was largely in-line with the recent Policy Statement.

The RBA Statement on Monetary Policy (SoMP) said the recent outbreaks of the Delta variant across Australia, and the resulting lockdowns, have introduced a high degree of uncertainty to the outlook for the second half of this year. At the end of 2021, the RBA sees Unemployment at 5%, GDP at 4%, Trimmed mean inflation at 1.75%, and Wage growth at 2.25%. (RBA) Desks caution to take the SoMP with a pinch of salt given the fluidity of the COVID situation in Australia.

The RBI left its rates unchanged with the Repo Rate at 4.00% as expected in a unanimous decision, and retained its accommodative stance in a 5-1 vote. RBI Governor Das noted that recent inflation pressures are creating concerns, but these are transitory and continued policy support is needed to support the nascent and hesitant recovery. (Newswires)

UK/EU

Infratest Dimap poll for Ard: German Chancellor Merkel's Conservative Bloc at 27% and Greens at 19%. (Newswires)

FX

In FX, DXY gained some traction in early trade despite a distinct lack of newsflow or any major developments. The index made its way above yesterday’s 92.352 high as it homed in on the 21 DMA at 92.444. Other G10s were largely influenced by the Buck – with some mild initial underperformance in the Kiwi as the NZD/USD pair dipped below 0.7050 at the same time as the AUD/NZD cross gained a footing above 1.0500. For the most part, AUD overlooked RBA Governor Lowe’s address in which he mainly repeated the Policy Statement from earlier in the week, but suggested tapering QE is not a tightening of policy, and that the RBA is prepared to act in response to further bad news on the health front – just the state of New South Wales reported another record increase in COVID cases. AUD/USD remained stable above 0.7400 throughout most of Governor Lowe's speech until a bid in the Dollar took the pair below the level, whilst a later comment from the RBA Governor in preference of a lower AUD rate kept the currency under pressure - but Lowe stressed that the RBA does not target the exchange rate. USD/JPY was supported by the Buck, with the pair testing its 21 DMA (109.89) to the upside overnight as it eyed the 110.00 mark, and the 50 DMA at 110.10. EUR/USD and GBP/USD saw mild losses due to the Greenback, but EUR/GBP remained flat just under 0.8500. In the EM FX space, the ZAR came under pressure during US trade after South African Finance Minister Mboweni stepped down in a cabinet reshuffle. USD/ZAR saw a knee-jerk higher to 14.75 from around 14.35 before stabilising at 14.50.

South African President Ramaphosa said Finance Minister Tito Mboweni has asked to be excused and replaced by Enoch Godongwana. (Newswires)

Brazil Senate Rapporteur published the text of the Bill for the payment of tax debts in instalments ('REFIS') with discounts ranging from 75% to 100% and increase the maximum term for instalment payments of the debts for 120 months (vs to 86 months). (Newswires)

COMMODITIES

WTI and Brent futures traded sideways overnight amid a lack of catalysts, with WTI Sep' back on a USD 69/bbl handle and Brent Oct' finding a floor at USD 71/bbl. Aside from COVID, JCPOA-related newsflow has started to pick up again following the inauguration of Iranian President Raisi - with the US repeating that it is ready to return to Vienna for talks with Iran, but the ball is in Tehran's court. Elsewhere, with the OPEC+ meeting on the horizon and given that quotas have in essence been set until the end of 2022, the Iraqi minister highlighted the next potential point of friction among members being export levels. Over to precious metals, spot gold and silver drifted lower amid a firmer Dollar and higher yields - which prompted the yellow metal to test USD 1,800/oz to the downside whilst silver found some support just above USD 25/oz. In terms of base metals, LME copper held an upside bias and traded on either side of USD 9,500/t, with workers at the largest copper mine Escondida being asked to prepare for a strike amid slow progress in negotiations mediated by the Chilean government.

Union at Chile's Escondida copper mine has asked members to prepare for a strike due to slow progress in negotiations. (Newswires)

Iraq minister says OPEC's next battle will be over who exports more. (Newswires)

GEOPOLITICAL

US State Department said it hopes Iran seizes the opportunity now to advance diplomatic solutions and US reiterated it is prepared to return to nuclear talks in Vienna, and urges Iran to return to negotiations soon. US repeated that this process cannot go on indefinitely, and the opportunity to revive the deal will not last forever. US called it an urgent priority and hopes Iran treat it with the same degree of urgency. US declined to put a timeline on the opportunity to revive a deal. (Newswires)

US Secretary of State Blinken reaffirmed US support for inter-Korean dialogue and engagement, and the importance of complete denuclearization and establishment of permanent peace on the Korean Peninsula. (Twitter) The US government appears to envision offering partial sanctions relief in exchange for North Korea taking denuclearization steps but such "incremental" sanctions relief would be difficult to move forward without congressional support. (Yonhap) The US is open to offering humanitarian assistance to North Korea, US Ambassador to the UN Thomas-Greenfield said, signaling Washington's willingness to revive dialogue with Pyongyang. (Nikkei) North Korea conducted tests at the Yongbyon nuclear complex between December 2020 and February this year, according to a draft U.N. report obtained by Nikkei. (Nikkei)

US

T-Notes were tracking little changed through the APAC session, with continued lockdown woes in Japan and elsewhere. There was a modest bid into the European session on light volume only to reverse as US trade got underway. Driving the sales were another post-COVID low in US Challenger Layoffs for July (18.9k vs prev. 20.5k), which was then accentuated by a fall in Initial Jobless Claims (385k vs exp. 384k; prev. 399k). The selling ran right through into US cash equity open. One desk notes that hedge funds sold the front end out to the belly, with curve flatteners funnelling through alongside trading accounts and real money – domestic and overseas portfolios, as well as bank trading desks, were also reportedly booking profits across the curve ahead of Friday's jobs report. While data today was supportive to the bearish price action, there has arguably been continued repricing on the back of Fed's Clarida comments from Wednesday that are causing a shift in the tide. T-Note (U1) futures settled 10+ ticks lower at 134-16.

US Senate tees up procedural vote to break filibuster on bipartisan infrastructure bill for Saturday. Final passage likely this weekend, according to Fox's Pergram. "This now means that the Senate will vote to pass the bill either Saturday or potentially Sunday. That requires a simple majority." (Twitter) US Senate Majority Leader Schumer said the Senate will return on Saturday at noon to vote on cloture and then proceed under regular order to finish the bill. (Twitter)

US House Freedom Caucus announced opposition to bipartisan infrastructure bill, according to Fox's Pergram. (Twitter)