• Asia-Pac equities traded mixed with a downside bias; the ASX 200 outperformed and the KOSPI lagged
• In FX, DXY traded on either side of 93.00 whilst the EUR saw a mild bid as EUR/GBP tested 0.85
• South Korea issued a weekend stay-at-home order whilst Australia's New South Wales reported record new COVID cases
• US FDA has allowed immunocompromised individuals to receive certain COVID booster shots, and said others do not need one at this point
• The Central Bank of Mexico hiked by another 25bps as expected, taking the rate to 4.50%
• Looking ahead, highlights include US Export/Import Prices & University of Michigan Sentiment (Prelim.)

CORONAVIRUS UPDATE

US FDA has allowed immunocompromised individuals to receive a booster shot of the Pfizer (PFE) and Moderna (MRNA) COVID vaccines; says others who are fully vaccinated do not need an additional dose right now. (Newswires) This was flagged earlier this week by NBC and WSJ sources.

The head of the WHO's investigation says that a Chinese Scientist might have started the pandemic after being infected with the coronavirus while collecting bat samples. (Telegraph)

South Korea's PM has asked the public to stay home over Liberation Day holiday, and warned of stern measures against illegal street rallies. (Yonhap)

Australia's New South Wales reported 390 (vs prev. 345) new locally-acquired COVID-19 cases - a new record; Premier says the upward trend will continue for "at least the next few days". (Newswires)

San Francisco will become the second US city to require proof of vaccination for many indoor activities, such as bars, restaurants and gyms. (SF Chronicle)

Malaysia lowered its 2021 economic growth forecast for a second time amid the pandemic, with the growth rate now seen between 3-4% from 6-7.5%. (Newswires)

ASIA

Asia-Pac stocks traded mostly lower as the region largely shrugged off the mild positive lead from Wall Street, which saw the SPX notch new ATHs above the 4,450 mark (Russell 2000 closed with modest losses). The index was bolstered by the tech and growth sectors, while energy, industrials, and materials were the worst performers. US equity futures resumed overnight trade flat and then experienced a dip in tandem with losses in China, but futures remained well within recent ranges. FTSE 100 futures (+0.2%) saw some modest gains vs the DAX (Unch), which conformed to the directionless mood across non-APAC assets. Back to APAC, the ASX 200 (+0.5%) hit a fresh record high with financials leading the gains and offsetting losses in the mining sector. The Nikkei 225 (Unch) was indecisive on either side of the 28k mark throughout the night, whilst the KOSPI (-1.3%) underperformed as the nation faces threats from rising COVID cases – which triggered a weekend stay-at-home order – alongside tough rhetoric from nuclear-savvy North Korea. Elsewhere, the Hang Seng (-0.9%) solidified a downside bias as the region tackles crackdown jitters, with Hong Kong extending on losses throughout the session with Alibaba and Tencent posting losses of 3% apiece. The Shanghai Comp (-0.3%) meanwhile was choppy but traded in the red for the most part as Mainland China faces rising COVID cases which in turn is expected to slow growth momentum.

China will submit a draft law on protecting personal information to NPC Standing Committee. "The law will standardize phenomenon such as apps' collection of personal information and price discrimination", according to an NPC spokesperson. (Global Times)

• PBoC injected CNY 10bln via 7-day reverse repos at a maintained rate of 2.20% for a net neutral daily and weekly position. (Newswires)
• PBoC set USD/CNY mid-point at 6.4799 vs exp. 6.4807 (prev. 6.4754)

FX

FX markets were once again quiet overnight with the DXY contained within a narrow band on either side of 93.000. Heading into the European open, the index isn’t far off yesterday’s 93.037 high, which if breached may open the door to this week’s current 93.195 high – with the next point of resistance above that the April high of 93.439. To recap, the data-highlight of the week thus far has been the US July CPI figures, which didn't stoke any 'runaway inflation' fears, although PPI for the month ran hotter-than-expected. Nonetheless, the index is, at this point, poised for a week of mild gains with Fed rhetoric increasingly tilting hawkish, and members teeing up the central bank for an official tapering announcement in September after the Jackson Hole Symposium later this month. EUR/USD retained an underlying bid overnight with the pair within reaching distance of 1.1750, and the EUR/GBP cross had several attempts to mount 0.8500 - ahead of its 21 DMA (0.8530), 50 DMA (0.8554), and 100 DMA (0.8590). EUR/USD remains some way off its 21 DMA (1.1797) as the pair looks to end the APAC week in the red – with technicians also flagging 1.1694 as a major downside level (38.2% Fib of the 2020-21 move). The pair was subdued throughout the week mostly as a function of the Buck, although sentiment in the EZ was hampered amid the intensifying COVID situation in the region – as per the German ZEW which stated expectations have fallen for the third time in a row and this points to an increased risk for the German economy. GBP/USD was constrained in APAC hours by technicals on either side – with the 21 DMA at 1.3828 and the 200 DMA at 1.3777 – technicians also flag the 50% Fib of the July bounce at 1.3776. Elsewhere, USD/JPY was stable under 110.50 – with participants also noting around USD 2bln in OpEx around the 110.45-50 mark which could keep the pair somewhat anchored. From a technical standpoint, the downside also sees the pairs 50 DMA (110.18), 21 DMA (109.97), and 100 DMA (109.69). Upside resistance meanwhile consists of yesterday’s 110.54 high ahead of Wednesday’s 110.79 peak. Antipodeans traded rangebound, whilst the weekly performance also looks somewhat contained thus far. The AUD/USD pair is currently poised for a week of losses as the COVID situation Down Under becomes increasingly dire – with the pair inching closer to its YTD low at 0.7287 (21st July low). Meanwhile, the NZD/USD fluctuated on either side of the 0.7000 mark – sandwiched between its 50 and 21 DMA as 0.7022 and 0.6990 respectively and looking ahead to next week’s RBNZ policy announcement which is expected to mark the first G10 central bank interest rate hike since the pandemic. Thus, the AUD/NZD was lacklustre under 1.0500 near its YTD trough at 1.0453.

Brazil Lower House Speaker Lira said the vote on tax reform bill will be delayed to Tuesday. (Newswires)

CENTRAL BANKS

The Central Bank of Mexico hiked by another 25bps as expected taking the rate to 4.50%, while it also maintained guidance with policy to be largely dictated by inflation in that for the next decisions. The vote was not unanimous again, with a 3-2 vote. Banxico highlighted that headline and core inflation expectations for 2021 increased again and those for the medium and long terms remained relatively stable at levels above the target. Although the shocks that have increased inflation are expected to be transitory, due to their variety, magnitude, and the extended horizon over which they have affected it, they may pose risks to the price formation process. Thus Banxico deemed it necessary for another 25bp hike. However, it did note that annual headline and core inflation projections are expected to decrease, particularly for horizons of one year and beyond, and to converge to the 3% target during the first quarter of 2023. But, the bank did hike nearer-term inflation forecasts. (Banxico)

BCB Chief Neto said "we now have a debate on how global inflation will contaminate emerging markets.". He noted that the "Key message is that we will do everything necessary to control inflation.", and recently, market inflation expectations for 2022 have risen. (Newswires)

NY Fed plans to purchase approximately USD 80bln in Treasury securities from 13/8/21 to 14/9/21. (Newswires)

COMMODITIES

WTI and Brent front month futures were subdued as the complex continues to be wary of the fluidity of the COVID situation in the APAC region. That being said, prices found a floor after the US FDA has allowed immunocompromised individuals to receive certain COVID booster shots, whilst suggesting that others at this point do not need an additional dose. The IEA and OPEC monthly reports yesterday differed in the sense that the former reduced its 2021 demand forecast due to the worsening pandemic, whilst the latter maintained its forecast unchanged – with the pandemic anticipated to be under control. This is somewhat telling of OPEC’s current mindset heading into the decision-making OPEC+ meeting at the start of September. Meanwhile, South Korea’s PM issued a stay-at-home order during the Liberation Day holiday this weekend, and Australia’s state of New South Wales reported a new record in new COVID cases. Elsewhere, spot gold and silver drifted higher as yields eased, with the former north of USD 1,750/oz and the latter just above USD 23.00/oz – with technicians also flagging a silver “death cross”. Turning to base metals, copper prices were unreactive to reports that BHP and Escondida workers have reached a wage deal – with sources in recent days suggesting an imminent deal. LME copper hovered under USD 9,500/t for most of the night before gaining a footing above the level. Elsewhere, Dalian iron ore futures opened lower by around 3% before extending on losses, with some pointing to reports of China cutting its steel production target during H2 – speculated to be a vehicle to control raw material prices.

Workers at BHP's (BHP LN/AT) Escondida copper mine have approved the new contract with the company, according to a source. (Newswires)

Goldman Sachs believes the White House call for OPEC+ to boost output is unlikely to materialise given the Delta variant threat, adding that an additional hike in OPEC+ quotas appears increasingly likely given the recent global supply disappointment. GS maintained its USD 80/bbl year-end target, and notes spare capacity will be completely nomalised by Spring 2022. (Newswires)

South Korean and Chinese Refiners have purchased at least 5mln barrels of US Mars crude loading in September due to lower prices, sources stated. (Newswires)

Chicago wheat futures hit an 8yr high after USDA cut output estimates. (Newswires)

GEOPOLITICAL

The UK, US and Canada are sending troops to Afghanistan to help evacuate their diplomats, soldiers and citizens as the Taliban advance. (Newswires)

Israeli Prime Minister Bennett told CIA Director Bill Burns in a meeting on Wednesday that the US and Israel should start working on a joint strategy for a scenario in which Iran elects not to return to the nuclear deal, according to Israeli officials cited by Axios. (Axios) The CIA director told Tel Aviv that chances of a return to the Iran nuclear deal have become more difficult, according to Al Jazeera citing Israeli media and Israeli officials. (Twitter)

Heavy rocket fire hit the Zelikan base of Turkish forces in northern Iraq in Mosul province, according to Sky News Arabia. (Twitter)

US Trade Representative and the South Korean Trade Minister spoke above supply chain resiliency and the importance of a strong US-SK bilateral trade relationship with open dialogue. (Newswires)

Arab Coalition intercepted an armed Houthi drone targeting Khamis Mushait, Saudi Arabia. (Saudi Gazette)

The US CIA is said to be mulling a special China unit in efforts to out-Spy Beijing, according to reports. (Newswires)

"Chinese mainland will never sit back and tolerate the US & the island of Taiwan to break the bottom line if the US invites Taiwan to participate in the virtual Summit for Democracy. By then, there will be unprecedented storms in the Taiwan Straits". (Global Times)

A large-scale joint military drill between China and Russia will kick off Friday at a training base in China. This drill will focus on counterterrorism and security training, and more than 10,000 troops will participate. (Global Times)

CRYPTO

US Democrat House Rep. Eshoo says the House should amend the crypto tax reporting provision. (Newswires)

US

There weren't many follow-through sales after the hot PPI print and decline in Initial Claims (although front-end inflation breakevens widened), and bonds saw somewhat of a bid into the NY cash equity open as stocks traded choppy. However, as stocks came off the lows and the 30yr auction loomed, bonds soon made news lows as Europe started closing up, with T-Notes printing a session low of 133-13 and cash 10s a yield high of 1.38% on the back of the sloppy auction. Although, there wasn't enough appetite for further sales post-auction and prices came off their lows into the settlement. Friday is a light calendar with the preliminary University of Michigan the only data highlight, with much attention on the consumer inflation expectations. T-Note (U1) futures settled 4 ticks lower at 133-14+

US Senator Sanders told WaPo he believed as many as 40 Democratic Senators were on board with spending upwards of USD 6trln, but were basically defeated by a handful of centrists whose votes they needed. (Washington Post)

FTC Chair Khan, in a letter to Senator Warren, called for blocking more M&A as the Lockheed (LMT) deal with Aerojet (AJRD) looms, aethe divestitures may be inadequate if a merger is illegal. (Newswires)

Tech policy groups reportedly plan to ask Apple (AAPL) to suspend customer devices' scanning plans amid rate internal criticism, sources stated. (Newswires)

Boeing's (BA) Starliner space capsule launch could be delayed several months due to repairs, WSJ sources note. (WSJ)