• The mood in Asia was mostly subdued following on from the losses in European bourses and indecision stateside
• Energy was the worst-performing US sector once again as oil retreated for a 6th consecutive day and cyclicals lagged
• China's legislature passed the Personal Information Protection Law
• In FX, the DXY remains firm above 93.50, EUR/USD and GBP/USD remain on 1.16 and 1.36 handles respectively
• Looking ahead, highlights include German PPI, UK & Canadian retail sales

CORONAVIRUS UPDATE

US officials are investigating the possibility Moderna's (MRNA) COVID-19 vaccine is linked to higher risk of an uncommon side effect such as a higher risk of myocarditis in younger adults. (Washington Post)

New Jersey Governor Murphy is to announce teachers in the state must be vaccinated for COVID, while Oregon is also to require vaccinations for teachers and staff. (Newswires)

A mass rollout of COVID-19 booster vaccines to all over-50s in the UK this autumn could be shelved with government scientists mulling limiting third jabs to the most vulnerable, according to reports citing sources close to the Joint Committee on Vaccination and Immunisation. (Telegraph)

Australia's New South Wales reported 642 locally transmitted COVID-19 cases, while the state Premier announced they will extend the Sydney lockdown until end-September and imposed curfews, as well as for masks to be worn everywhere outside. There were also separate reports that Australia's Health Department approved GlaxoSmithKline's (GSK LN) Sotrovimab for COVID-19 treatment. (Newswires)

New Zealand PM Ardern announced that the nationwide lockdown will be extended to Wednesday and stated that cases so far are linked with the outbreak not just isolated to Auckland. Furthermore, she stated they do not know the full scale of the Delta outbreak, while 11 new COVID-19 cases were reported today and the health minister announced there were 3 cases found in Wellington. (Newswires)

ASIA

The mood in Asia was mostly subdued following on from the losses in European bourses and indecision stateside where energy was the worst performing sector once again as oil retreated for a 6th consecutive day and cyclicals lagged. Nonetheless, ASX 200 (+0.1%) weathered the risk aversion despite the extension of the Sydney lockdown to end-September and curfew announcement, with participants digesting another influx of earnings results and as strength in defensives kept the index afloat. Nikkei 225 (-0.8%) retreated towards the 27k level amid a choppy currency and with notable losses seen in automakers after Toyota announced to reduce domestic capacity by 40% as the worsening COVID-19 situation in the region impacts auto parts supplies. Hang Seng (-2.5%) and Shanghai Comp. (-1.8%) were pressured by Beijing’s tightening regulatory grip on the private sector with the market regulator to hold discussions with relevant enterprises today regarding the spirit industry and China's legislature passed personal information protection law, while the PBoC provided no surprises on its benchmark rates in which it maintained the 1-Year and 5-Year Loan Prime Rates at 3.85% and 4.65%, respectively. Finally, the gains in JGBs were only minimal despite the risk aversion with prices subdued after the whipsawing in T-notes and with the BoJ also refraining from JGB purchases, while Aussie yields were slightly softer following relatively firm demand at the Australian government 2025 bond auction.

• PBoC 1-Year Loan Prime Rate (Aug) 3.85% vs. Exp. 3.85% (Prev. 3.85%)
• PBoC 5-Year Loan Prime Rate (Aug) 4.65% vs. Exp. 4.65% (Prev. 4.65%)

China's legislature passed the Personal Information Protection Law, although surprisingly postponed the vote on including anti-sanctions legislation to Hong Kong's Basic Law. In relevant news, China's market regulator was reported to hold discussions with relevant enterprises regarding spirit industry and China's cyberspace administration issued draft regulations on auto data security regulation. (Newswires/CCTV/SCMP)

Chinese government reportedly raided a China-based partner of US non-profit auditing firm Verite back in April over Xinjiang forced labour allegations. Furthermore, the staff of Verite's Chinese affiliate were reportedly interrogated daily for weeks and bank accounts were frozen, while the shutdown is expected to further complicate compliance with US customs rules on Xinjiang. (WSJ)

UK/EU

UK GfK Consumer Confidence (Aug) -8 vs. Exp. -7.0 (Prev. -7.0)

FX

In FX markets, the DXY held onto the spoils from its recent haven bid which had propelled it to above the 93.50 level. Treasury Secretary Yellen noted potential challenges from the Delta variant and that it makes sense for some states to continue providing assistance. EUR/USD was lacklustre as it took a back seat to the USD strength, while GBP/USD languished at its lowest level in nearly a month. USD/JPY was choppy after the risk-aversion recently dragged it back beneath 110.00 and amid the continued soft CPI data that showed mobile carrier fees fell by nearly 40% which was in fitting with one of the key agendas of PM Suga’s government. Antipodeans were contained due to their high-beta statuses and this week’s commodity sell-off, as well as losses in CNH after the PBoC set the weakest reference rate since April. Furthermore, ANZ Bank pushed back its forecast for the first rate hike from the RBA by six months to H1 2024 although this failed to garner any reaction in the seismometer as the RBA have continuously reiterated its guidance that suggests no rate hikes until 2024 at the earliest, while there were more comments from RBNZ Governor Orr who noted it was not a good week to reduce monetary stimulus but suggested that the October meeting is live.

RBNZ Governor Orr said this week was not a good week to reduce monetary stimulus and thought it was best to observe the situation for now but noted that COVID-19 cases alone will not stop a rate hike. Governor Orr also responded that October is a live meeting when asked about the potential for a hike for that meeting and stated that they need to continue to move on policy, while he added they cannot wait for uncertainty to lift and that a lot of work to do to get back to neutral rate of 2.0%. (Newswires)

COMMODITIES

Commodities nursed losses overnight in which WTI crude futures attempted to reclaim the USD 64/bbl level but with the rebound limited after oil prices registered a sixth consecutive decline yesterday amid the ongoing bearish themes including concerns of a slowdown in growth, Delta fears and a firmer greenback, while reports also noted Nigeria reduced OSPs for September oil prices. Gold prices were contained as headwinds from the firmer greenback was offset by the precious metal's haven properties and copper also found reprieve despite the mostly subdued risk appetite after recently finding support beneath the USD 4/lb level and as the recent slump in Chinese commodities eased.

Nigeria lowered September Bonny crude official selling price to USD -0.31/bbl vs. dated Brent and lowered September Qua Iboe official selling price to USD -0.34/bbl vs. dated Brent. (Newswires)

GEOPOLITICAL

US President Biden's administration is concerned that equipment such as humvees, planes, helicopters and other equipment that were seized by the Taliban could land in the hands of ISIS or turned over to China and Russia. It was also noted that the Biden administration was considering launching strikes on larger equipment but also fear it could provoke the Taliban. There were separate comments from US National Security Adviser Sullivan that the administration is highly focused on potential for a terrorist attack by a group like ISIS-K in Afghanistan. (Axios/Twitter/NBC)

UK Foreign Minister Raab commented following the G7 meeting that the Afghanistan crisis requires an international response. (Newswires)

Israeli jets conducted strikes on targets around Damascus, Syria and Syrian air defences were activated in response. (Twitter)

US

The TPLEX bull-flattened by around 4bps on Thursday, which was actually off the flattest levels as risk recovered somewhat after decent Jobless Claims and mixed Philly Fed. By settlement, 2s +0.1bps at 0.220%, 3s -0.3bps at 0.430%, 5s -1.1bps at 0.767%, 7s -2.0bps at 1.034%, 10s -3.0bps at 1.243%, 20s -3.8bps at 1.798%, 30s -3.5bps at 1.878%; TYU1 volumes were average. 5yr TIPS +1.8bps at -1.740%, 10yr TIPS -0.1bps at -1.049%, 30yr TIPS -2.3bps at -0.307%. SOFR unchanged at 5bps, although EFFR oddly dipped by a 1bp to 9bps, the first fall (outside of month-end) since the IOER hike in June. The NY handover saw yields bounce off the lows amid a new COVID low for Initial Jobless Claims, while a rise in Employment and New Orders in the Philly Fed survey offset the disappointing headline figure. As NY cash equity trade got underway, T-Notes found themselves gyrating between 134-10/13 for the rest of the session with the curve still comfortably flatter on the day – there was little else on the calendar to cause a commotion. There was a decent 30yr TIPS auction, which did see long-end inflation breakevens rise slightly, and also a touted steepener at the long-end of the futures curve amid 6k classic bond contracts bought against 3k ultra bonds sold, but otherwise, little to report for USTs ahead of an exceptionally quiet calendar for Friday. T-note (U1) futures settled 6 ticks higher at 134-10+.

US Treasury Secretary Yellen said the Delta variant could challenge local markets and the economy. Furthermore, she noted that while extra federal unemployment benefits will expire, it may make sense in some states to continue assistance. (Newswires)

Fed Chair Powell is to speak on the economic outlook at the Jackson Hole Symposium on August 27th at 15:00BST/10:00EDT. (Newswires)