• APAC equities traded mixed; the Nikkei gave up its catch-up gains and China was choppy
• US equity futures were dented alongside sentiment despite the absence of a catalyst at the time
• Fed's Rosengren (2022 voter) said the Fed should announce QE tapering in September for a start this fall
• China's Daily noted that the PBoC may have to cut the RRR or interest rate to spur growth
• North Korea warned the US and South Korean military drills mean they will face even greater security threats
• US Senate's infrastructure deal vote is expected today at 11:00EDT/16:00BST
• Looking ahead, highlights include German ZEW, US Labour Costs/Productivity (Prelim.), Chinese M2, EIA STEO, Fed's Evans & Mester, supply from the UK and US
• Earnings: Porsche, Flutter, SYSCO

CORONAVIRUS UPDATE

EU will not impose travel restrictions on the US despite the COVID surge. (Newswires) US CDC raised the travel advisory for France and Israel to the highest level, while the travel advisory for Singapore has been raised to level two. (Newswires)

Australia's New South Wales reports 356 (vs prev. 283) new locally acquired COVID-19 cases - a new record. (Newswires)

ASIA

APAC equities traded mixed in what was a choppy session as the region adopted the lead from Wall Street, whereby the DJIA and SPX posted mild losses whilst the NDX eked out a day of gains - with earnings dying down and the Fed’s Jackson Hole Symposium nearing. Overnight, US equity futures resumed flat and traded with no firm direction for the first half of the session, but later dipped as the risk tone in Asia-Pac soured - with no catalysts at the time. The Nikkei 225 (+0.1%) outperformed at the open on catch-up play after its long weekend, but the index shed its earlier gains of over 1% and conformed to the cautious tone. The ASX 200 (+0.2%) gradually gave up its opening gains, whilst the KOSPI (-0.7%) was subdued throughout the session after North Korea vowed to strengthen pre-emptive strike capabilities as the US and South Korea gear up for their annual military drills this week and the next. The Hang Seng (+0.3%) and Shanghai Comp (+0.1%) were once again volatile as China attempts to balance rising factory-gate prices and slowing growth momentum – with reports overnight via China’s Daily suggesting the PBoC may have to cut the RRR or interest rate to spur growth. Recently, SGH Macro Advisor sources from the Politburo meeting suggested the PBoC is expected to cut the RRR in a targeted way for some institutions, but not to adjust the policy rate. As a reminder, almost exactly a month ago, the PBoC announced a surprise 50bps RRR cut which released some CNY 1tln in long-term funds.

• PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily position. (Newswires)
• PBoC set USD/CNY mid-point at 6.4842 vs exp. 6.4822 (prev. 6.4840)

CENTRAL BANKS

Fed's Rosengren (2022 voter) said the Central Bank should announce in September that it will start reducing its USD 120bln in purchases of Treasury and MBS this fall. (AP)

Fed's Barkin (2021, 2024 voter) said the Fed has made substantial further progress towards taper benchmark on price, adding inflation has hit 2% and looks like it may stay there. He noted demand does not yet seem dented by the Delta variant, and demand for labour continues to outpace the supply of people willing to work. Barkin noted the current pressures on wages are intense at lower levels of the pay scale, and inflation expectations near the target support the idea that recent inflation rates are temporary. Barkin feels the focus should be on the employment to population ratio. Barkin said it looks like the labour market does have more room to run, and he is bullish on the housing market even if rates go back to more normal levels given tight supply and strong demand. Barkin expects a high level of spending in the economy for some time, and he is not marking down his forecast because of the delta variant at this point. (Newswires)

Fed's Bostic (2021, 2024 voter) said substantial further progress on the goal on inflation has effectively been met, could achieve that on employment if there is another month or two of strong job gains. Bostic reiterated that rates could lift off in 2022. He would be in favour of completing the taper in a shorter period than what was done in previous rounds. Bostic thinks the Fed could start to taper purchases between October and December, but he is open to moving it forward. Bostic is also open to the idea that if the Delta COVID-19 variant comes through in more difficult and challenging ways, policy could need to be adjusted, but he does not expect Delta variant to lead to widespread shutdowns seen last year, but could lead to slower momentum, rather than a contraction. (Newswires)

China's Daily noted that the PBoC may have to cut the RRR or interest rate to spur growth. Meanwhile, the People's Daily suggested that there is no need for the PBoC to inject additional short-term OMO funds. (Newswires) Recently, SGH Macro Advisor sources from the Politburo meeting suggested the PBoC is expected to cut the RRR in a targeted way for some institutions, but not to adjust the policy rate.

UK/EU

UK FCA is said to be mulling introducing new rules to block banks from closing high street branches to guarantee reasonable public access to cash facilities, sources state. (FT)

• UK Barclaycard UK July consumer spending +11.6% vs 2019 levels. (Newswires)
• UK BRC Retail Sales YY (Jul) 4.7% (Prev. 6.7%)

FX

In FX, the DXY struggled to meaningfully mount 93.000, but the Index maintains an underlying bid amid the increasingly hawkish noises out of Fed members, with 2022 voter Rosengren joining the club calling for a September QE taper announcement. Meanwhile, on Capitol Hill, the Senate tees up for a vote on the infrastructure deal at 11:00EDT/16:00BST. The bill is expected to pass and head to the House, where lawmakers are set to decide on the internals of the bill, alongside whether House Speaker Pelosi will move with a bill without having a Reconciliation bill passed by the Senate. EUR/USD and GBP/USD traded lacklustre under 1.1750 and 1.3850 respectively, and action is dictated by the Dollar, with the latter in the vicinity of its 21 DMA at 1.3830. The JPY trimmed the modest losses seen at the start of the session as the risk tone soured, but nonetheless, USD/JPY was contained to a 10-pip range. Elsewhere, the AUD gave up its earlier outperformance as the state of New South Wales recorded a jump in COVID cases to a new record, but the NZD was hit as the AUD/NZD run to 1.0500 pushed the NZD/USD below its 21 DMA at 0.6984.

COMMODITIES

WTI and Brent front month futures held mild gains with the former eyeing USD 67/bbl to the upside throughout the night and the latter inching towards USD 69.50/bbl. The complex saw some reprieve from reports that the EU will not be pursuing a US travel ban, albeit the US CDC has raised to the highest levels travel advisories for France and Israel. Elsewhere the US has tempered down hopes of an imminent nuclear deal with Iran. US officials have said they may be open to an interim deal including limited sanctions relief, but some suggest the hard-line Iranian president may not be interested in talks at the moment. Oil traders will also keep on the radar the developments of the tropical disturbance in the Caribbean Sea, with the potential to disrupt trade around the Gulf of Mexico. In terms of metals, spot gold and silver traded with mild gains but still near yesterday’s post-flash-crash APAC levels. Spot gold felt some resistance near its 100 WMA around USD 1,737/oz, and spot silver found some support at 25.50/oz. Elsewhere, LME copper is on a firmer footing as workers at JX Nippon’s Caserones copper mine in Chile announced a strike after talks collapsed during the government’s mediation period. Meanwhile, the world's largest copper mine, Escondida, and its majority owner BHP have extended talks in an effort to avoid strikes.

Peruvian Finance Minister stated he is confident the Government can increase mining taxes without affecting competitiveness; mining taxes should rise although it is likely only for companies without tax stability agreements. (Newswires)

BHP (BHP LN/AT) and the union at the Escondida copper mine have extended contract talks in an effort to avoid a strike, according to the union. (Newswires)

Chile's Caserones copper workers are to strike in Chile, according to the Union. (Newswires)

NHC notes of gusty winds and heavy rain across the Leeward Islands, with a new tropical storm warning issued. (Newswires) The trajectory shows landfall in Florida on Saturday with the direction still pointing towards the Gulf of Mexico - threatening exports from and around the area.

GEOPOLITICAL

North Korea warned the US and South Korean military drills mean they will face even greater security threats. North Korea vowed to strengthen pre-emptive strike capabilities. (Newswires/Yonhap) As a reminder, Yonhap sources yesterday suggested that South Korea and the US will conduct a preliminary training this week in the run-up to next week's main summertime military exercise.

US raised concerns about Huawei in Brazil's 5G telecoms network during a visit by national security adviser. Brazil made no commitments to the US about Huawei during visit by US National Security Adviser. US warned Brazil that Huawei would be facing chip shortages going forward, which would affect consumers. (Newswires)

Russia's Foreign Ministry said it will close entry to Russia for multiple representatives of the UK, according to Interfax. (Newswires)

US Secretary of State Blinken and his Japanese counterpart "reiterated their shared opposition to any unilateral attempts to change the status quo in the East China Sea and activities that undermine, destabilize, or threaten. (Twitter)

Chinese Court is expected this week to rule on the case of the detained Canadian businessman Spavor, sources state. (Newswires) Chinese court reaffirmed the death penalty for a Canadian national convicted of drug smuggling. (WSJ)

CRYPTO

US Senators have blocked changes to crypto reporting rules in the infrastructure bill in a blow to the crypto industry. As such, language for oversight of digital currencies remains in the bill. (Newswires)

AMC (AMC) CEO said the Co. will have the tech to receive payment in Bitcoin by the end of the year. (Newswires)

US

Treasuries were sideways in APAC amid the latest COVID woes creating fresh restrictions in China, seeing growth downgrades from the sell-side as a result, while Japan was also away on Monday. Bonds caught a bid as European trade got underway in light newsflow, with desk noting short-covering after Friday's post-NFP puke. The strength continued through into the NY cash equity open, where T-Notes printed a session high of 134-06+, only to reverse course as stocks recovered from a choppy open. Furthermore, the chunky pipeline of corporate issuance likely weighed ahead of this week's 3yr, 10yr, and 30yr Treasury supply on Tuesday, Wednesday, and Thursday, respectively. Selling picked up also after US JOLTS job openings rose to a record high, albeit for June, but still notable with one observer highlighting that there are now fewer unemployed people than there are job openings, while the quits rate also ticked higher, indicative of it being a "worker's market". T-Notes printed lows of 133-25+ around the European close and hovered near the level through into the futures settlement with looming supply keeping bulls at bay. T-NOTE (U1) FUTURES SETTLED 7 TICKS LOWER AT 133-25

US Senate Majority Leader Schumer said there’s a deal on the final passage of the bipartisan infrastructure bill. (Twitter) The Senate's infrastructure vote is expected to be at 11:00EDT/16:00BST, according to sources in both parties. (Politico) Schumer said the Senate will move to the budget resolution after it passes the infrastructure bill. (Twitter)

US President Biden talked up his economic plan, noting that "Jobs are up. Unemployment is down." (Twitter)