• European bourses are firmer but off-highs, Euro Stoxx 50 +0.3%; US futures have been steady and contained with the RTY outperforming
• DXY is pressured as activity-FX rebounds from last week's declines, whilst havens lag
• Flash PMIs were mixed but overall below forecasts - reactions were minimal
• The Fed’s Jackson Hole Symposium is shifting to a virtual event from the initial in-person format; schedule release August 26th at 20:00EDT
• China, Iran and Russia are to hold joint maritime exercises in the Persian Gulf late-2021/early-2022
• Looking ahead, highlights include US Flash PMIs, US Existing Home Sales

CORONAVIRUS UPDATE

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 (+1.8%) 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 (+1.0%) and Shanghai Comp. (+1.5%) 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.

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)

US

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)

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)

EU Markit Composite Flash PMI (Aug) 59.5 vs. Exp. 59.7 (Prev. 60.2)

• Manufacturing Flash PMI (Aug) 61.5 vs. Exp. 62.0 (Prev. 62.8)
• Services Flash PMI (Aug) 59.7 vs. Exp. 59.8 (Prev. 59.8)

German Markit Composite Flash PMI (Aug) 60.6 vs. Exp. 62.2 (Prev. 62.4)

• Manufacturing Flash PMI (Aug) 62.7 vs. Exp. 65.0 (Prev. 65.9)
• Services Flash PMI (Aug) 61.5 vs. Exp. 61.0 (Prev. 61.8)

UK Flash Services PMI (Aug) 55.5 vs. Exp. 59.0 (Prev. 59.6)

• Composite PMI (Aug) 55.3 vs. Exp. 58.4 (Prev. 59.2)
• Manufacturing PMI (Aug) 60.1 vs. Exp. 59.5 (Prev. 60.4)

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)

Taliban will not accept an extension past Aug 31st for the withdrawal of western soldiers, according to a source; adding that no Western government/official had approached the Taliban to extend the deadline. Would be consequences if US President Biden's administration was to delay the withdrawal of troops from Afghanistan, via AJ Breaking. (Newswires/Twitter)

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)

China, Iran and Russia are to hold joint maritime exercises in the Persian Gulf late-2021/early-2022, Ria citing the Russian Tehran ambassador. (Newswires)

Russia and Turkey could sign a new S-400 missile contract soon, Ifax reports. (Newswires)

EQUITIES

Equities remain on a firmer footing, but the region lost momentum shortly after the cash open and following a string of mixed/disappointing Flash PMI figures. All metrics remained in expansionary territory, but the common themes were COVID-related growth slowdown concerns alongside supply/demand led price pressures. Meanwhile, the Fed’s Jackson Hole Symposium format has shifted to an online event as opposed to the initial in-person meeting – with some suggesting that this shift in format signals near-term COVID caution from policymakers. Meanwhile, US equity futures hover around the levels seen heading into the European cash open, with the RTY (+1.0%) the marked outperformer vs the ES (+0.3%), NQ (+0.3%) and the YM (+0.5%). Back to Europe, the majors see somewhat of a varying picture vs the broad-based gains seen at the open. The DAX (Unch) resides as the laggard following an overall soft German PMI release, whilst the latest German INSA poll shows the CDU/CSU and the SPD neck-and-neck – marking the worst result ever for the CDU and an unexpected comeback for the SPD. Elsewhere, the CAC (+0.7%) narrowly outperforms as luxury names rebound from last week’s selloff. In terms of sectors, Retail (+1.3%) is the standout winner as Sainsbury’s (+12%) soars on the back of PE takeover speculation, with the Times noting of potential bids in excess of GBP 7bln, with the likes of Tesco (+2.0%) also lifted in tandem. Sticking with sectors, the broader picture is a pro-cyclical one with defensives towards the bottom of the bunch. In terms of other individual movers, Prosus (+1.0%) gains on the announcement of a USD 5bln share buyback scheme. On the flip side, DAX-listed Vonovia (-1.8%) announced a public takeover for Deutsche Wohnen (-0.4%)

FX

CAD/DXY - Far from all change within the G10 ranks, but the Loonie is rebounding further and firmly from recent lows with the aid of a similar recovery in oil prices that has lifted WTI back up beyond Usd 64/brl. Indeed, Usd/Cad is currently testing support just below 1.2750 having retreated from around 1.2840 and last Friday’s peak only just shy of the 1.2950 mark, while the Greenback has reversed from best levels almost across the board with the index hovering under 92.500 within a 93.485-209 band vs 93.734 at one stage on August 20. Ahead, US National Activity Index, Markit’s flash PMIs and Existing Home Sales.

AUD/NZD - The Aussie and Kiwi are also regaining some composure and the former is gleaning encouragement from a rebound in iron ore and other base metal prices as well to offset a degree of the ongoing COVID-19 issues that are adversely impacting both Antipodean countries and currencies. Hence, Aud/Usd is back above 0.7150 and Nzd/Usd has reclaimed 0.6850+ status as the Aud/Nzd cross straddles 1.0450 in wake of hawkish/bullish comments from RBNZ chief economist Ha overnight. Next up for the Kiwi, Q2 retail sales.

CHF/EUR/GBP - All firmer vs the Buck, with the Franc pivoting 0.9150 irrespective of latest weekly Swiss sight deposit balances indicating little in the way of intervention and Eur/Chf remains relatively depressed between 1.0742-16 parameters. Meanwhile, the Euro has bounced from sub-1.1700 amidst mixed Eurozone flash PMIs and the Pound from the low 1.3600 zone following even more contrasting UK preliminary prints.

JPY - The major laggard against the backdrop of firmer Treasury yields and a steeper curve, as the Yen recoils through a couple of technical supports and soaks up some export offers said to be layered upwards from 110.00, including the 55 DMA and 200 HMA at 109.80 and 109.91 respectively.

SCANDI/EM - Crude relief for the Nok, Rub and Mxn as Brent prices extend towards Usd 67.50, while the Zar is deriving traction from Gold’s recuperative gains and the Try via an improvement in overall risk sentiment rather than the fall in Turkish consumer sentiment. However, the Brl may be hampered by reports that Brazilian President Bolsonaro is having second thoughts about giving the BCB its independence.

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)

Polish Central Bank's Lon says if consumer confidence continues to decrease it would be difficult to support a rate hike in November; possible rates will remain unchanged until the end of his term. (Newswires)

FIXED

Debt futures have gradually recoiled from intraday peaks narrowly either side of parity even though risk sentiment in terms of equities has faded after a bright start to Monday’s session and it appears that the ongoing recovery in WTI and Brent has been a negative factor alongside chart impulses. Bunds, Gilts and the 10 year T-note are now just off fresh lows of 176.56, 129.91 and 133-30+ for losses of 59 ticks, 38 ticks and 5/32+ on the day respectively compared to +1 tick, -2 ticks and +2/32 at best ahead of a fairly busy pm agenda and rather conflicting EU prelim PMIs.

COMMODITIES

WTI and Brent front month futures remain on the front foot as optimism from the APAC session reverberated into Europe. That being said, the benchmarks have only chipped away at a fraction of last week’s losses. The fundamental landscape remains unchanged – with COVID the overarching force. On this note, Australia’s Victoria state expanded its lockdown beyond the city of Melbourne whilst New Zealand is to remain on a nationwide alert level 4 until at least midnight on Friday. Looking ahead, this week could see the release of OPEC sources heading into next week’s confab. Traders will also be cognizant of geopolitics as China, Iran, and Russia are poised to hold joint maritime exercises in the Persian Gulf late-2021/early-2022. WTI Oct’ inches towards USD 64/bbl from a base of USD 61.74/bbl, while its Brent counterpart mounts USD 67/bbl (vs low USD 64.60/bbl). Elsewhere, spot gold and silver gain as a softer Dollar keeps prices buoyed, but spot gold sees more contained trade in the run-up to this week’s Fed Jackson Hole Symposium. Meanwhile, base metals are bolstered by risk appetite and a broader rebound in commodities LME copper has reclaimed USD 9,000/t status whilst Dalian coke and coking coal hit limit up at the open, with traders also citing supply concerns arising from suspended Mongolian imports amid COVID concerns.

China has reportedly urged UK Trade Minister Liz Truss to ‘terminate’ steel protections, Politico's Lanktree