• European bourses are marginally firmer in tentative and contained trade amid minimal newsflow
• US equity futures trade sideways in the run-up to the final jobs report before the Fed's Jackson Hole Symposium
• In FX, the DXY continues to grind higher to the detriment of peers across the board while EUR/GBP approaches YTD lows
• 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 Broadbent
• Earnings: 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)

Japan's COVID cases hit new record of 15,645 vs prev. 15,301, via NHK; Tokyo infections 4,515 vs yesterday's 5,042. (Newswires)

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)

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)

US

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)

Top House Democrats are still actively considering a range of options to boost the debt limit this fall, including lifting it as part of a massive reconciliation bill that’s key to President Biden’s legislative agenda, according to sources; no final decision was made on which approach to take, but the reconciliation option was heavily discussed. Some Democrats are under the impression that the White House wants Congress to include the debt limit in a reconciliation package, but White House sources told us they’re not weighing in. (Punchbowl)

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

UK/EU

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

GEOPOLITICAL

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)

Rocket sirens are sounding on the Lebanese/Israeli border for the 2nd time in 48 hours, according to Conflict News; subsequently, the Israeli Defence Force has started a response wave with artillery fire, according to Aurora Intel. (Twitter) Subsequently confirmed that the initial rocket fire was from Lebanon's Hezbollah

EQUITIES

European equities (Eurostoxx 50 +0.1%) trade with little in the way of firm direction as fresh macro impulses remain light and traders eye the US jobs report later today. The July report might help to shape expectations of when the Fed will announce, and then start, the process of tapering its asset purchases. Accordingly, some analysts argue that 'good data is bad for the prospects of continued policy accommodation' may be the play book traders reach for, while others suggest that many of the key debates will not be resolved with the release of the July jobs report. Newsflow surrounding China continues to strike a negative tone with Alibaba is reportedly to warn of higher taxes as the crackdown in China widens, whilst Meituan is set to receive a USD 1bln fine for allegedly abusing its dominant market position, according to WSJ sources. Sectoral performance in Europe is predominantly soft and narrow, with Insurance on top following a strong earnings report from Allianz with revenue, net income and operating profit all exceeding analysts’ expectations. The only other gainers are Basic Resources and Autos. At the bottom of the list is Travel and Leisure with names such as IAG, easyJet and Ryanair down 2.5%, 2.3% and 1.7%. Travel and leisure is followed by Construction & Materials and Retail. Healthcare is flat with Hikma Pharmaceuticals (-5.5%) acting as a drag on the sector after HY results were met poorly by the market. After hours today, traders will be eyeing results from Berkshire Hathaway.

Please see here for the Daily European Equity Opening News and the Additional Equity News for the morning's European earnings/stories.

FX

USD - The Greenback has regained composure after Thursday’s pull-back from post-ISM and Clarida peaks amidst further retracement in US Treasury yields and curve re-steepening before the latest NFP release. In fact, the DXY has carved out a marginal new high at 92.436 and is inching closer to technical resistance ahead of the semi-psychological 92.500 level in the form of the 21 DMA that has eased slightly to 92.444 today. However, the Dollar remains relatively rangy against G10 counterparts and cautious in the run up to the headline event that has probably been elevated in status given the FOMC shift towards tapering last month and recent Fed rhetoric underscoring the message that there has been further progress towards the substantial bar set for unwinding some stimulus.

EUR/CHF/AUD - Decent option expiry interest between 1.1810-15 (1.2 bn) may help the Euro stem declines vs the Buck, not to mention sentimental bids almost certainly lurking around 1.1800, but it looks ominous for the single currency in Eur/Gbp cross terms following a breach of 0.8500 as the 2021 low approaches (0.8474) and there is little the way of support until 0.8450 where expiries reside (1 bn). Meanwhile, the Franc has retreated further from 0.9050+ towards 0.9100 and the Aussie has lost grip of the 0.7400 handle again with some blessing from RBA Governor Lowe and little in the way of fresh impetus from the SOMP.

NZD/JPY/GBP/CAD - The Kiwi is clinging to 0.7050 vs its US rival and still outpacing its Aussie peer through 0.7500 on even loftier RBNZ rate hike expectations stoked by a significantly stronger than expected NZ labour report, while the Yen is holding above 110.00, though well off best levels on the aforementioned back up in UST yields and meandering inside 100 and 21 DMAs. Elsewhere, Sterling is hovering in the low 1.3900 area in wake of super BoE Thursday that has applied pressure on UK rates given lower thresholds for slowing down and unwinding the MPC’s APF, and the Loonie is straddling 1.2500 with all eyes on the Canada/US jobs face-off that is scheduled 90 minutes before Ivey PMIs.

EM - No respite for the Try that is trying to tread water circa 8.6000 vs the Usd against the backdrop of moderately firmer oil prices and yet another jump in year end Turkish CPI forecasts, while the Zar is still rueing Gold’s loss of Usd 1800/oz status and SA cabinet changes that included the Finance Minister.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.1810-15 (1.2BLN), 1.1865-70 (1.2BLN)
• EUR/CAD: 1.4820 (1.1BLN)
• EUR/GBP: 0.8450 (1BLN), 0.8500-15 (436M), 0.8590 (420M)

FIXED

Big figure breaks in Bunds and Gilts have not precipitated a freefall, but the core EU bonds extended reversals from w-t-d peaks to 69 ticks at 196.92 and 77 ticks at 129.95 respectively before finding underlying bids on Eurex and Liffe. Meanwhile, US Treasuries continue to back track and underperform with the 10 year benchmark yield revisiting 1.25% and the curve steeper again awaiting NFP amidst arguably even more heightened anticipation than normally associated with the monthly release given hawkish words from Fed VC Clarida this week.

COMMODITIES

WTI and Brent are modestly firmer this morning though the bulk of the session’s performance occurred early-on in the day and the breadth of performance in European hours has been very minimal. Currently, the benchmarks post gains of circa USD 0.30/bbl. Crude specific commentary has been minimal; however, geopolitics remain in focus, following reports of sirens in Israel due to rocket fire from Lebanon’s Hezbollah - an event which caused the Israeli Defence Force to retaliate with artillery fire. In terms of metals, spot gold and silver are pressured in-light of the USD’s grinding foray higher that has dragged the yellow metal to sub-USD 1800/oz levels. For the complex, as with the broader macro environment, attention is almost entirely on the upcoming US NFP report for any further insight into the Fed’s taper narrative. Finally, copper prices are bolstered though the LME price remains someway from the USD 10k/T mark as workers at BHPs Escondida, Chile mine have been told to prepare for strike action as government-mediated talks are said to be progressing very slowly.

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