• Asia-Pac bourses were firmer throughout the night; US equity futures also drifted higher
• In FX, the DXY marginally pulled back from recent gains, high-betas outperformed, and havens lagged
• The Fed’s Jackson Hole Symposium is shifting to a virtual event from the initial in-person format
• Fed's Kaplan (2023 voter) stated if they saw that the Delta variant would be persistent or start to affect demand, they would have to adjust policy views accordingly
• US President Biden issued an executive order allowing for sanctions to be imposed with respect to certain Russian energy export pipelines
• Looking ahead, highlights include EZ, UK, US Flash PMIs, US Existing Home Sales

CORONAVIRUS UPDATE

EU expects Novavax (NVAX) to submit key data for COVID-19 vaccine approval around October, while a Novavax spokesperson said the Co. is confident in a late September/early October timeline for EU data. (Newswires)

Pfizer (PFE)/ BioNTech (BNTX) COVID-19 vaccine is expected to receive full approval from the US FDA in the week ahead which could occur as early as Monday. (WSJ)

Cadila Healthcare (CDH IS) received EUA from the Drug Controller General of India for ZyCoV-D which is the world’s only needle-free COVID-19 vaccine. (Newswires)

Australian police clashed with hundreds of anti-lockdown protesters in Melbourne and Sydney on Saturday as officials reported the country’s highest daily increase in COVID-19 cases. In relevant news, Victoria state expanded its lockdown beyond the city of Melbourne, starting from Saturday afternoon and State Premier Andrews also announced measures to slow the rate of transmission among young people. (CNBC)

New Zealand reported 35 new cases of COVID-19 today and PM Ardern announced intention to suspend Parliament for a week, while she also stated that New Zealand will remain on an alert level 4 lockdown until at least midnight on Friday and the lockdown in Auckland will remain until midnight on August 31st. (Newswires)

Shanghai authorities quarantined hundreds of people with an aim to stop a fresh COVID-19 outbreak in the city after infections were detected in airport cargo workers. (Newswires)

South Korea anticipates to fully vaccinate half of the population against COVID-19 by end-September. (Newswires)

ASIA

Asia-Pac bourses traded higher with the region encouraged as Bitcoin returned to the 50k level, and after last Friday's stock rebound in Europe and the US, despite the ongoing Delta variant fears and with participants looking ahead to the Jackson Hole Symposium later in the week. The ASX 200 (+0.4%) was kept afloat amid the outperformance in tech and mining names although gains were capped after Australia recently extended on its record daily infections, and following clashes between anti-lockdown protesters and police in Melbourne and Sydney. The Nikkei 225 (+1.7%) rallied at the open, helped by a more favourable currency and with the index unfazed by the Yokohama mayoral election that was won by the opposition candidate and viewed as a voter rebuke against PM Suga. The Hang Seng (+2.0%) and Shanghai Comp. (+1.1%) were both lifted with the former front running the advances among the major indices on a rebound from bear market territory, with HKEX shares boosted after it agreed to launch MSCI China A 50 Connect Index Futures and after last week’s quarterly review announcement in which the number of constituents in the Hang Seng Index will increase to 60 from 58 which boosted new additions Li Ning, Xinyi Glass, and China Merchants Bank but dragged BoCom shares which were dropped from the benchmark effective September 6th. In addition, mainland China was also buoyed after zero locally transmitted COVID cases were reported and with China’s securities regulator planning to create conditions for audit cooperation with the US, although it was also said to possibly ask Chinese companies seeking US listings to hand over data supervision to third-party firms. Finally, 10yr JGBs were lower and T-notes suffered similar losses with haven demand sapped by the broad rebound in global sentiment and amid the BoJ's absence from the market.

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 6.4969 vs exp. 6.4930 (6.4984)

China Mofcom said China will sign more free trade agreements and upgrade existing deals, while the Commerce Minister stated that the nation's foreign trade could face a more complicated situation next year. (Newswires)

Japanese PM Suga said the top priority is fighting the spread of COVID-19 and he humbly accepts the results of Yokohama mayoral election but added there is no change in plan to run for LDP leadership when the time comes. This followed earlier reports that opposition party candidate Yamanaka won in the Yokohama mayoral elections which reportedly makes PM Suga less likely to call for an early election and is to seek a dissolution of the lower house beginning in October. (Newswires)

CENTRAL BANKS

Fed’s Jackson Hole Symposium on August 26th-28th which was due to be held in person, is shifting to a virtual format. (Newswires) Some have noted that this signals caution from the Fed.

Fed's Kaplan (2023 voter; hawk) stated if they saw that the COVID Delta variant would be persistent or start to affect demand, they would have to adjust policy views accordingly although noted that it is good to wean off asset buys as soon as they are able to. Kaplan also stated that he still expects GDP to grow 6.5% in 2021, but is watching the COVID delta variant closely and sees PCE inflation rate ending 2021 at 3.8-3.9%, as well as the unemployment rate drifting lower to 4.5% by year-end. (Newswires)

US Treasury Secretary Yellen told senior White House advisers that she supports reappointing Fed chair Powell, according to people familiar with the matter. (Newswires)

ECB's Schnabel said expect inflation to keep increasing until year-end, especially in Germany, but then sees inflation to decline significantly next year. (Newswires)

UK/EU

UK ministers have rejected logistic and retail trade industry calls to provide visas for EU truck drivers to fill the shortage of lorry drivers in UK although accepted that more training courses are required to increase the number of hauliers. (FT)

PayPal (PYPL) is reportedly launching crypto buying and selling in the UK. (Newswires)

German Election Poll: CDU/CSU 22% (-3), SPD 22% (+2), Green 17% (-0.5), AfD 12% (+1), FDP 13 (+0.5), via INSA. (Bild)

Swedish PM Lofven will resign as PM and leader of the Social Democrats in three-months at the November party congress, wants a new party leader in place before the September 2022 elections. Finance Minister Andersson is regarded as the most likely replacement. (FT)

FX

In FX , the DXY marginally pulled back from recent gains and retreated beneath the 93.50 level as the broadly constructive mood dampened haven appetite and with participants looking ahead to the Jackson Hole Symposium, which will now be conducted as a virtual event later in the week - which in and of itself signals caution. Sticking with the Fed, there were notable comments on Friday from Fed’s Kaplan who stated that if they saw that the COVID Delta variant would be persistent or start to affect demand, they would have to adjust policy views accordingly, but noted that it is good to wean off asset buys as soon as they are able to. Treasury Secretary Yellen meanwhile gave her backing for Powell to remain at the Fed’s helm. EUR/USD rose back above 1.1700 to breach the nearby 100-hour MA as it benefitted from the USD weakness and GBP/USD also advanced but with upside eventually limited by resistance near 1.3650 and with recent reports noting that UK ministers rejected logistic and retail trade industry calls to provide visas for EU truck drivers to address the shortage of hauliers. USD/JPY and JPY-crosses were higher amid the encouraging risk tone, while antipodeans also gained from the improved mood which coincided with a rebound in commodities and comments from RBNZ Chief Economist Ha, who affirmed the likelihood of future rate hikes in which he noted the monetary policy stance still holds despite the Delta outbreak and although the variant raises economic uncertainty, it is not a game-changer.

RBNZ Chief Economist Ha said monetary policy stance still holds despite the Delta outbreak and the Delta variant does raise economic uncertainty but is not a game changer, while he added there is no pressure to act on the economy. (Newswires)

Brazilian President Bolsonaro was reported to "regret" giving autonomy to the Brazilian Central Bank. (Newswires)

COMMODITIES

Crude futures began the week positive with the complex underpinned by a softer Greenback and the improved risk appetite after prices ended last week at a three-month low, and with the latest Baker Hughes rig count showing a third straight week of increases in online US oil rigs. Gold prices mildly benefitted from the weaker USD but with upside capped ahead of the virtual Jackson Hole Symposium later this week, while copper gained amid the constructive mood and advances in Chinese commodity prices which was led by coking coal hitting limit up shortly after the open. In addition, Goldman Sachs maintained its bullish view on commodities, as well as kept Q4 price targets of USD 80/bbl for oil and USD 10,620/ton for copper.

US Baker Hughes (w/e August 20th): Oil +8 at 405, Nat Gas -5 at 97, and Total +3 at 503. (Newswires)

US EPA to recommend higher biofuel blending mandates for 2022 than 2021 and 2020, while it is expected to issue 2021 and 2022 proposals at the same time, according to sources. (Newswires)

GEOPOLITICAL

UK PM Johnson said he will convene G7 leaders on Tuesday for urgent discussions on the situation in Afghanistan with a role sought for China and Russia. PM Johnson also stated that it is vital the international community works together to ensure safe evacuations and prevent a humanitarian crisis, as well as support the Afghan people, while the White House confirmed that President Biden will be part of the virtual G7 leaders’ meeting. (Newswires)

US President Biden stated the US has continued to make progress on Afghanistan evacuations and that the first priority is to get Americans out of the country as soon as possible. President Biden added that the US had expanded the safe zone around Kabul Airport and the Taliban were cooperative in extending the perimeter but also noted that US has a long way to go and a lot could still go wrong in the evacuation, while he added that he would support sanctions on the Taliban depending on the context. There were separate comments from US National Security Adviser Sullivan who stated that the US has the capacity to get large numbers of Americans out of Afghanistan and that the US has been in contact with a few thousand Americans which they are working to help get safely to the airport, although he also warned that Islamic State poses a threat to Americans in Afghanistan. In relevant news, US enlisted commercial airlines to help with the evacuation from Kabul Airport and it was also reported that Kuwait approved the passage of 5,000 Afghans that will be evacuated to the US. (Newswires/CNN/Fox/FT)

Afghan anti-Taliban leader Massoud said they want the Taliban to realise the only way ahead is through negotiation and that they do not want war but will resist any invasion. Furthermore, he wants an inclusive broad-based government in Kabul representing all ethnicities and has no problem with a government which the Taliban participates in, while he stated that he will not surrender the region under his control to the Taliban. (Newswires)

US President Biden issued an executive order allowing for sanctions to be imposed with respect to certain Russian energy export pipelines, while there were comments from Secretary of State Blinken that the US is to impose sanctions on one Russian vessel and two individuals involved with Nord Stream 2 pipeline. US also imposed fresh Russia-related sanctions on nine Russians and two Russian entities involved in Navalny's poisoning or Russia's chemical weapons programme. (Newswires)

German Chancellor Merkel called for an agreement to extend gas transportation through Ukraine and prolong the contract which ends in 2024, while she added that gas should not be utilised as a geopolitical weapon. (Newswires)

US nuclear envoy said US and South Korea discuss possible humanitarian assistance to North Korea, while envoy also states that US has no hostile intent towards North Korea and military exercises are purely defensive. (Newswires)

US State Department was reportedly recently hit by a cyber-attack which was believed to have occurred a couple of weeks ago, while a source noted that the State Department has not experienced significant disruptions and its operations have had not been impeded without confirmed an incident occurred. (Newswires)

US

Treasuries were offered in the belly ahead of 2s, 5s, and 7s supply, while duration was better supported. By settlement, 2s +0.6bps at 0.226%, 3s +1.6bps at 0.446%, 5s +2.0bps at 0.785%, 7s +2.3bps at 1.056%, 10s +1.8bps at 1.260%, 20s -0.3bps at 1.793%, 30s -0.3bps at 1.874%; TYU1 volumes were below average. 5yr TIPS +4.9bps at -1.688%, 10yr TIPS +3.3bps at -1.016%, 30yr TIPS +0.5bps at -0.306%. Eurodollars were a couple bps weaker from a few years out the curve. SOFR unch. at 5bps and EFFR unch. at 9bps. Trade was sideways into the NY handover, to which sellers emerged. IFR noted real money were out booking profits for the week. However, there was a bounce that did coincide with comments from Kaplan acknowledging that the Fed could change its tune if the Delta variant was to worsen the demand outlook. What's more, the long-end was driving the bounce after a multi-month low offer/cover ratio in the Fed's long-end buyback with dealers reluctant to let go of their long-end inventories. But, concession ahead of next week's 2s, 5s, and 7s made way in otherwise light trade, with the belly of the curve feeling the brunt of gradual selling pressure to lows, while the long-end held up better. T-Notes printed a session low of 134-02 in the NY afternoon, with cash 10s at a session high of 1.27%. T-note (U1) futures settled 6+ ticks lower at 134-04.

US President Biden was briefed on the deadly flash flooding in Tennessee and said that FEMA stands ready to support the state, while he also noted that Henri has potential for widespread consequences that could impact hundreds of thousands of people in New England and that FEMA has prepositioned materials in the region to respond to Henri which made landfall in Rhode Island. Furthermore, NHC said slow-moving Henri is expected to continue to produce heavy rainfall and flooding in parts of southern New England and northern Mid-Atlantic states on Monday. (Newswires/WSJ)

Scion Asset Management's Michael Burry held USD 280mln puts on iShares 20yr+ Treasury Bond ETF at the end of June. (Newswires)