• Risk sentiment is slightly softer but performance overall is contained, ES -0.2%, amid limited newsflow
• DXY is firmer and remains above 93.50, with activity currencies lagging and safe-havens marginally positive once again
• China's legislature passed the Personal Information Protection Law
• Fed Chair Powell is to speak on 'The Economic Outlook' at the Jackson Hole Symposium on August 27th at 15:00BST/10:00EDT
• Looking ahead, highlights include Canadian retail sales & Fed's Kaplan

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)

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)

Tokyo COVID-19 cases 5,405 vs prev. 5,534. (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 (-1.0%) 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 (-1.8%) and Shanghai Comp. (-1.1%) 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 regulators are reportedly considering pushing Chines companies seeking US listings to hand over data supervision to third-party firms, according to sources. (Newswires)

China's Securities regulator is supportive of the rollout of A-share index futures in Hong Kong and would benefit risk-management tools for overseas investors. (Newswires)

US

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

UK/EU

UK Retail Sales MM (Jul) -2.5% vs. Exp. 0.4% (Prev. 0.5%, Rev. 0.2%); YY (Jul) 2.4% vs. Exp. 6.0% (Prev. 9.7%, Rev. 9.2%)

• Ex-Fuel MM (Jul) -2.4% vs. Exp. 0.2% (Prev. 0.3%); YY (Jul) 1.8% vs. Exp. 5.7% (Prev. 7.4%, Rev. 6.8%)

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

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)

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

EQUITIES

After a relatively flat open, European equities (Stoxx 600 Unch) have initially drifted lower in quiet trade with the Stoxx 600 on track to close the week out with losses of around 1.8%, however the mild losses diminished in the run-up to the US entrance. The Asia-Pac handover was a negative one once again with notable losses in Chinese bourses after China's legislature passed its Personal Information Protection Law and reports noted that the domestic market regulator is to hold discussions with relevant enterprises today regarding the spirit industry. Futures in the US are also succumbing to the selling pressure with the ES showing losses of 0.2%. From a regional perspective in Europe, French and Italian equities have been downgraded to underweight versus neutral at UBS. Sectoral performance is mostly softer with Retail the only outlier to the upside with Inditex (+1.5%) the largest contributor to the gains. Autos are lagging once again as investors digest the continued fallout from chip shortages which saw Toyota announce that it will have to cut production at several plants next month. Marks & Spencer (+11.4%) sit at the top of the FTSE 100 with the Co. now expecting profits to be at the upper end of its prior GBP 300-500mln range following encouraging trading. Morrisons (+4.4%) is another notable gainer after CD&R boosted its offer for the Co. to GBP 2.85/shr from 2.30/shr; Morrisons said CD&R's offer has been recommended unanimously by the board.

Crypto exchange Binance says all new users must now complete intermediate verification to access Binance products and services, otherwise accounts will be only allowed to withdraw. (Newswires)

FX

DXY - The index continues to extend on the upside seen post-FOMC as the risk tone remains tilted towards caution/risk aversion. Overnight, the DXY found a floor at 93.500 before rising to 93.684 at best as sentiment in Europe is tainted in early trade. From a technical standpoint, the index eyes resistance around the 93.900 mark - which acted as a ceiling on several occasions during Q3 and Q4 2020. Above that, a breach of the psychological 94.000 mark could open the door to resistance around 94.300 (4th Nov 2020 high), 94.500 and thereafter the 100 and 200 WMAs at 94.650 and 94.807 - although these are still some way off. To the downside, yesterday’s low was at 93.214, the psychological 93.000, whilst the 21 DMA (92.674) and the 50 DMA (92.377) reside just below. Ahead, an empty state-side calendar but price action will likely be dictated by the risk tone. As a side note Fed Chair Powell is to speak on the economic outlook at the Jackson Hole Symposium on August 27th at 15:00BST/10:00EDT.

AUD, CAD, NZD - The non-US high betas are again at the bottom of the bunch in early European trade - subdued by the overall risk tone. The Loonie is the notable laggard - but seemingly more so on technical as opposed to crude dynamics. USD/CAD found support at 1.2800 overnight and tests 1.2900 to the upside at the time of writing, following the CAD's crude-drive demise during the week. As a reminder, SocGen earlier this week suggested that USD/CAD 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. Participants look ahead to today's Canadian Retail Sales for an impulse. If the pair mounts 1.3000, then the 100 and 200 WMAs overlapping around 1.3077. Meanwhile, the AUD and NZD are pressured by the worsening domestic cases prompting an extension of the Kiwi nationwide lockdown alongside Australia's Sydney's curbs extended until the end of September. NZD/USD threatens a breach of 0.6800 to the downside from a 0.6852 overnight high. The AUD/USD similarly threatens a downside breach of 0.7100 after finding a current base close to the psychological level. Meanwhile, the AUD/NZD cross remains in favour of the Kiwi - likely on the RBA/RBNZ differential, with the latter still on course aggressively tighten before the former.

JPY, CHF - The safe-havens FX trade flat/firmer amid the cautious risk tone and amid a lack of fresh catalysts. USD/JPY remains sandwiched between its 21 DMA (109.84) and 100 DMA (109.63), with the next downside level being interim support around 109.47 (Wed and Thu lows). USD/CHF is similarly contained just under 0.9200 but north of its 50 DMA (0.9160).

EUR, GBP - The European majors are relatively uneventful, but the EUR has been drifting lower in recent trade against the Buck and Sterling. EUR/USD trades within a tight 1.1670-89 range, with 1.1650 the next real support point. It's worth noting that the pair sees some EUR 1.1bln in OpEx between strikes 1.1700-1.1710 for today's NY cut. Sterling, meanwhile, was unreactive to sub-par July retail sales – amid the dissipating effects from the Euro 2020 Championship. GBP/USD trades just off session lows in its current 1.3610-48 parameter. A breach of 1.3600 could open the door to support at 1.3589 and 1.3570 (21st and 20th July lows). EUR/GBP trades in a current 0.8556-82 band, with the 100 DMA seen at 0.8591.

TRY - The USD/TRY pair saw a flash crash overnight - with some suggesting a fat finger trade. The pair fell from 8.5278 to 8.2562.

Major FX Option Expiries for today's NY cut

• EUR/USD: 1.1675 (638M), 1.1700-10 (1.1BLN), 1.1715-25 (567M), 1.1750 (373M), 1.1800 (756M), 1.1825 (282M)
• USD/JPY: 108.65-75 (1.3BLN), 109.00 (370M), 109.70-72 (330M), 110.00 (322M), 110.13 (310M), 110.20 (260M)

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)

FIXED

The main core benchmarks look set to end the week with a very modest bid stemming from the slightly softer general risk tone. Currently, USTs are posting gains of a handful of ticks but are within easy reach of the unchanged mark and have been for the entire morning, as newsflow slows substantially ahead of a thin afternoon docket. For reference, the session high is 134.14 and thus remains capped by touted resistance at the 134.20 mark that has been mentioned throughout the week. In a similar vein, Bunds and Gilts are modestly firmer but have not been able to stray too far from the unchanged level. Albeit magnitudes are slightly more pronounced for Gilts which are likely deriving impetus from the softer than expected retail sales print; although, much of this has been attributed to one-off factors, such as the Euros. Returning to Bunds which have managed to print a best of 177.22 in non-existent newsflow that brings us back to the double-top which formed this week at 177.24. In terms of the day ahead, Canadian retail sales serve as the only pertinent data release while Fed’s Kaplan, 2023 voter and a hawk, will speak at a Texas University event that features a Q&A.

COMMODITIES

WTI and Brent front-month futures are once again on a softer footing amid the continuing COVID concerns coupled with the cautious tone around the market. On the former, the overnight session saw an extension of the Kiwi nationwide lockdown alongside Australia's Sydney's curbs extended until the end of September. Aside from that news flow has been quiet for the complex and the market in general - with sentiment and Delta woes likely to take precedence in the absence of catalysts. WTI makes its way back towards UD 63/bbl (vs high 64.04/bbl) and Brent towards USD 66/bbl (vs 66.93 high). Elsewhere, spot gold and silver vary but remain flat in the grander scheme above USD 1,775/oz and north of USD 23/oz respectively. Base metals meanwhile see a mild rebound from yesterday's violent selloff, but benchmark LME copper remains sub-9,000/t after finding a ceiling at the mark.