• European equities (Eurostoxx 50 -0.3%) trade with a mild negative bias with sectors mixed; US futures essentially flat
• The RBNZ kept rates unchanged at 0.25%; cited lockdown and uncertainty
• DXY is contained holding above 93.00 with peers equally contained ex-NZD post RBNZ; USTs are flat after APAC pressure pre-20yr supply & Fed events
• Fed's Rosengren supports a taper announcement next month for a start this fall and get on track to halt purchases by the middle of 2022
• Fed's Kashkari stated that the end of this year and beginning of next year are reasonable possibilities for the start of tapering
• Looking ahead, highlights include Canadian CPI, US Building Permits, Housing Starts, DoEs, FOMC Minutes. Earnings from Cisco

CORONAVIRUS UPDATE

New Zealand Prime Minister Ardern told radio New Zealand that there were four new cases of COVID-19 which were all confirmed as the Delta variant, while she later confirmed another two new cases and that they were linked to the outbreak in Australia. Furthermore, there were comments from New Zealand Health Chief Bloomfield that they can expect 50-100 cases in the latest outbreak. (Newswires)

Tokyo COVID-19 cases 5,386 vs prev. 4,377. (Newswires)

ASIA

Asia-Pac bourses gradually improved and managed to shrug-off the early cautiousness stemming from the weak handover from Wall Street where the major indices snapped their streak of record closes. Upside in Asia was limited as participants digested a plethora of earnings releases. ASX 200 (-0.1%) was indecisive with outperformance in utilities and financials offset by losses in the mining-related sectors, while there was an abundance of earnings releases including BHP and Woodside Petroleum although their shares failed to benefit despite printing firmer results and the announcement a petroleum merger, with the headwinds due to weakness in underlying commodity prices. NZX 50 (+0.7%) was underpinned after the RBNZ surprisingly kept rates unchanged at 0.25% in which it cited the lockdown and uncertainty for its decision to refrain from a lift-off, while Nikkei 225 (+0.6%) gradually strengthened despite the initially choppy mood which was at the whim of the domestic currency and after mixed machinery orders and trade data. Hang Seng (+0.5%) and Shanghai Comp. (+1.1%) conformed to the mild positive bias with focus shifting to incoming earnings including Tencent which are due later today, while reports also noted that China vowed to increase the proportion of the middle-income group and is said to be seeking to raise rural consumption to as much as CNY 10tln. Finally, 10yr JGBs were lacklustre amid mixed data from Japan and with demand sapped after risk sentiment in Tokyo gradually improved, but with downside also stemmed given the BoJ’s presence in the market for over JPY 1.3tln of JGBs with 1yr-10yr maturities.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires) PBoC set USD/CNY mid-point at 6.4915 vs exp. 6.4909 (prev. 6.4765)

China's Industry Ministers has found that 43 apps have harassed users and has ordered them to make changes; includes Tencent's WeChat, Suning, Iqiyi and Vip.com. (Newswires)

• Japanese Trade Balance (JPY)(Jul) 441.0B vs. Exp. 202.3B (Prev. 384.0B)
• Japanese Exports YY (Jul) 37.0% vs. Exp. 39.0% (Prev. 48.6%)
• Japanese Imports YY (Jul) 28.5% vs. Exp. 35.1% (Prev. 32.7%)
• Japanese Machinery Orders MM (Jun) -1.5% vs. Exp. -2.8% (Prev. 7.8%)
• Japanese Machinery Orders YY (Jun) 18.6% vs. Exp. 15.8% (Prev. 12.2%)

US

Fed's Rosengren (2022 voter) said he supports a QE taper announcement next month for a start this fall and get on track to halt purchases by the middle of 2022, while he also noted that the rising pricing and debt loads fuelled in part by QE could eventually jeopardise the recovery. (FT)

Fed's Kashkari (2023 voter) stated that the economy is reopening although it is uneven and despite the strong July jobs report, there are still 6-8mln Americans not working who would have been had the pandemic not happened. Kashkari stated the timing of the taper will depend on progress in the labour market, while he added that the end of this year and beginning of next year are reasonable possibilities for the start of tapering and his best guess is the Fed is still a few years away from raising interest rates. (Newswires)

US House Speaker Pelosi met with senior White House officials yesterday to strategise about the passage of the infrastructure bill, according to Axios; no details on the playbook have been provided. (Axios)

UK/EU

UK is aiming to strike an 'interim' trade deal with India, while the UK Department for International Trade said that they we're currently in the pre-negotiation scoping phase of a free trade agreement with India. (Newswires/City A.M.)

UK Chancellor Sunak has reportedly come under further pressure to suspend the pension triple lock. The Chancellor is understood to be mulling a new formula to calculate the rise in the basic state pension for next year. (Guardian)

The recent climbdown from Poland in the rule-of-law dispute with the European Commission might only grant it temporary reprieve from EU sanctions. (Politico)

UK CPI YY (Jul) 2.0% vs. Exp. 2.3% (Prev. 2.5%); MM (Jul) 0.0% vs. Exp. 0.3% (Prev. 0.5%)

• Core CPI YY (Jul) 1.9% vs. Exp. 2.2% (Prev. 2.3%)

EU HICP Final YY (Jul) 2.2% vs. Exp. 2.2% (Prev. 2.2%); X Food & Energy Final YY (Jul) 0.9% vs. Exp. 0.9% (Prev. 0.9%)

• X Food, Energy, Alcohol & Tobacco Final YY (Jul) 0.7% vs. Exp. 0.7% (Prev. 0.7%)

GEOPOLITICAL

US President Biden agreed with UK PM Johnson to hold a virtual G7 leaders' meeting next week to discuss a common strategy and approach regarding Afghanistan, according to the White House. (Newswires)

At least two US officials stationed in Germany sought medical treatment after developing symptoms of the mysterious health complaint known as Havana Syndrome, according to diplomats. (WSJ)

EQUITIES

European equities (Eurostoxx 50 -0.3%) trade with a mild negative bias as gains in the futures markets faded ahead of the cash open. Hopes had been for a firmer start to the session given the more upbeat tone seen in Asia-Pac bourses, however, a lack of fresh macro impulses from a European perspective saw enthusiasm wane amid holiday-thinned conditions. Stateside, futures are hugging the unchanged mark as investors await minutes from the FOMC’s July announcement and pre-market earnings from US retailer Target while Lowe's beat on top and bottom lines alongside raising FY21 guidance. Sectoral performance in Europe is relatively mixed with modest outperformance in Real Estate and Travel & Leisure names. Basic Resources lag peers as BHP gives back some of yesterday’s earnings-inspired gains with the Co. facing criticism over its decision to abandon its FTSE 100 listing in favour of Sydney. Individual movers are somewhat sparse as the region heads out of earnings season. That said, results from Alcon (+11.0%) and a subsequent guidance raise have sent their shares to the top of the Stoxx 600. Carlsberg (+2.8%) is also gaining post-earnings with the Co. increasing guidance and announcing a share buyback following a recovery in beer volumes. To the downside, Persimmon (-2.5%) sit near the foot of the FTSE 100 despite noting that current forward sales are up around 9% from pre-pandemic levels.

US senators urge FTC to probe Tesla (TSLA) over self-driving claims. (Newswires)

FX

EUR, GBP - The Sterling has pushed forward past its G10 peers with no clear catalyst behind the rise. UK CPI metrics fell short of expectations for July across the board with clothing and footwear, and a variety of recreational goods and services made the largest downward contributions, whilst the upside was led by rises in second hand vehicles. Pre-data, desks flagged a cooling of inflation as a by-product of the base effects from 2020 - with the August report expected to mark a pickup in inflation. GBP/USD rebounded from its current 1.3729 base back above 1.3750 ahead of its 200DMA at 1.3778. EUR/USD trades just north of 1.1700 having tested the level to the downside in the early hours, with technicians flagging 1.1695 as the next support point (38.2% fib of the 2020-21 move), a dip below that opens the door to 1.1688 (16th Oct low) ahead of the psychological 1.1650. The pair was unmoved by unrevised EZ CPI metrics across the board.

DXY - The Buck is on a mildly softer footing as risk sentiment is seemingly more constructive than it had been earlier this week - with some desks also noting of a reversal in the crowded long USD. The Fed Chair kept his cards close to his chest during yesterday's appearance and ahead of tonight's FOMC minutes (full preview available in the Newsquawk research suite). DXY threatens a breach of 93.000 at the time of writing having had waned from its earlier 93.150 high, whilst the next point of support is still some way off at yesterday's 92.611 low.

NZD, AUD, CAD - The non-US Dollars resided near the top of the G10 bunch in early European trade with mild gains but then lost the top spots to the EUR and GBP. Overnight, the RBNZ opted for a hawkish hold in its OCR vs dwindling expectations for a 25bps hike heading into the confab. The central bank's stance is being framed as hawkish nonetheless as it remains on a course towards removing monetary stimulus given the backdrop of strong economic data, with this decision merely a "pause" in the face of a COVID threat, whilst banks suggest that lockdown downfalls can be addressed by fiscal policy. NZD/USD saw a knee-jerk lower to a new YTD low (0.6868) upon the surprise hold but immediately retraced it and reclaimed a 0.6900 handle as the rate path saw sizeable upgrades across the board. NZD/USD however encounters some mild pressure as US players enter the fray and react to the RBNZ. The AUD/NZD cross similarly fleetingly spiked above 1.0500 to match yesterday's 1.0540 best before relinquishing the level. Meanwhile, AUD/USD traded subdued overnight as base metal prices continued to be impacted by Chinese intervention with the AUD/USD pair around the 0.7250 mark within a narrow 0.740-69 range. Elsewhere, the Loonie looks ahead to its inflation figures later in the session with the USD/CAD pair just north of 1.2600 but off the 1.2640 overnight high. Analysts at SocGen suggest that the pair above its 200 DMA (1.2560) opens the door for a rise closer towards 1.3000 - with the CAD-WTI correlation also strengthening over the past month to 0.5 from 0.25.

JPY, CHF - The traditional safe-havens are flat with not much to report as traders look for the next catalyst. USD/JPY found support at 109.50 and just about eclipsed its 100 DMA at 109.65, with the 50 DMA then seen at 110.15. USD/CHF is sandwiched between its 50 and 100 DMA at 0.9148 and 0.9124 respectively.

RBNZ kept the OCR unchanged at 0.25% vs expectations for a 25bps hike and noted the decision was in context of the imposition of level 4 restrictions on activity across New Zealand and in light of health uncertainty, while it noted that the need to reinstate containment measures highlights the serious risks to health and the economy from the virus. RBNZ stated that it will assess inflation and employment outlook on an ongoing basis with a view to reduce the level of monetary stimulus over time and the Committee agreed the least regrets policy stance is to further reduce monetary policy stimulus. Furthermore, it sees the OCR at 0.59% in December 2021 (prev. 0.25%), 1.38% in September 2022 (prev. 0.49%), 1.62% in December 2022 (prev. 0.67%) and 2.14% in September 2024. (Newswires)

FIXED

Core EZ debt is firmer having recovered from modest overnight pressure though the broader debt space hasn’t been able to make much ground with USTs still slightly softer on the session. Overnight, USTs came under pressure taking the benchmark slightly below yesterday’s trough though drivers were slim and volumes minimal with JGBs lacklustre, potential catalysts include concession going into the 20yr US sale. Additionally, the accompanying higher yields could have been in anticipation ahead of Fed 2022 voter and Hawk Bullard alongside the July FOMC Minutes. However, ING caveats that even the above events may not be sufficient to impact recent ranges, while SocGen believes that the 10yr yield surpassing 1.30% (~200 DMA) and ideally 1.35% is required for a return to early-August steepening. Crossing the pond where the mornings UK inflation data dipped as expected though by a larger amount than consensus and the BoE’s own prediction. However, energy prices and base-effects are the main drivers behind the reading and it does not appear to change the base-case for a sharp increase over the next few months. Price wise, Gilts have picked up throughout the morning in tandem with peers and, unlike USTs, have been able to make headway and retain a foothold into positive territory; holding above 130.00 though off current 130.11 peak. In the EZ, final inflation readings passed without fanfare and as such Bunds have been moving in tandem with the price action outlined for Gilts. Although, a solo extension to fresh 177.08 highs, surpassing Monday’s peak, occurred going into the bidding deadline for the 2050 Bund outing which was well received with an in-line retention accompanying by a strong b/c, even given a negative average yield. Technically, if the morning’s bid continues then resistance via the August 5th high lies at 177.61.

COMMODITIES

WTI and Brent front-month futures are on a mildly firmer footing, with the former around USD 67/bbl (vs low USD 66.42/bbl) and the latter around USD 69.50/bbl (vs low USD USD 68.90/bbl). However, in the grander scheme, prices are consolidating amid a lack of catalysts ahead of the FOMC policy decision. Last night's inventory report turned out to be mildly bullish but participants await confirmation from the EIA metrics later, with the headline seen drawing 1.055mln bbls. Another development to keep on the radar - India has begun selling oil from strategic reserves after a policy shift and as part of a plan to commercialise its storage and lease space. Meanwhile, spot gold and silver are overall little changed ahead of the FOMC minutes, with the former hitting interim resistance at USD 1,794/oz (vs low USD 1,787/oz). Some reports that have been gaining focus - US-listed Palantir has bought USD 50.7mln in gold bars and will be accepting payment in gold as the firm prepares for a "black swan event". Turning to base metals, LME copper is flat within a tight range amid a lack of catalysts. Elsewhere, Dalian iron ore future and Shanghai rebar futures again saw a session of hefty losses, with some traders citing steel producers re-selling iron ore bought under longer term contracts to miners after China cut its steel output target. Further, China's Dalian commodity exchange is to increase speculative margin requirements for September coke futures to 20%, as of the August 20th settlement.

US Energy Inventory Data (bbls): Crude -1.2mln (exp. -1.1mln), Cushing -1.7mln (exp. -2.1mln), Gasoline -1.2mln (exp. -1.7mln), Distillate +0.5mln (exp. +0.3mln). (Newswires)

China's Dalian commodity exchange is to increase speculative margin requirements for September coke futures to 20%, as of August 20th settlement. (Newswires)