• European equity bourses/US futures are essentially unchanged amid minimal newsflow in the European morning; ES +0.1%
• The DXY has been choppy within ranges and currently sub-93.00 with peers mixed but near-unchanged; debt is downbeat after earlier upside fizzled out in EGBs
• US VP Harris suggested that the US needs to increase pressure on Beijing and challenge its bullying
• The House voted to approve the USD 3.5tln budget blueprint and advance the USD 1tln infrastructure bill
• TSMC reportedly notified customers today that the price of all processes will increase by 20% with immediate effect, TSM is +3.0% in pre-market trade
• Looking ahead, highlights include US Durable Goods, DoEs, US 5yr supply

CORONAVIRUS UPDATE

US intelligence report did not make definitive conclusions regarding origins of COVID-19 and officials stated the investigation was hindered by lack of information from China. (Newswires)

A large study of US health workers found that the effectiveness of the Pfizer (PFE) and Moderna (MRNA) COVID-19 vaccines against infections declined to 66% from 91% after the Delta variant became more dominant. (Newswires/AFP)

Japanese PM Suga confirmed they are widening the state of emergency to an additional 8 prefectures, while it was separately reported that Japan will spend an additional JPY 1.4tln from its reserves on COVID-19. (Newswires)

ASIA

Asian stocks traded somewhat mixed and failed to fully sustain the early momentum from the US where the S&P 500 and Nasdaq extended on record highs amid notable strength in cyclicals, with upside limited as participants continued to await taper clues from Friday's Jackson Hole Symposium. ASX 200 (+0.4%) was kept afloat amid outperformance in tech and mining names and with earnings releases also driving the biggest moving stocks including WiseTech Global which rallied around 30% after its FY net profit doubled, while Nine Entertainment and Seven Group were at the other end of the spectrum despite posting improved results, with the latter’s Chairman and billionaire Kerry Stokes to step down in November. Nikkei 225 (-0.1%) was indecisive amid a mixed currency and as Japan seeks to extend its state of emergency to include an additional 8 prefectures, with comments from BoJ board member Nakamura also not providing much to excite markets as he stuck to the BoJ’s all too familiar script. Hang Seng (-0.1%) and Shanghai Comp. (+0.7%) traded tentatively despite the PBoC increasing its liquidity efforts to meet month-end demand, as participants also digested the latest varied US-China related headlines. These include the US approval of Huawei license applications to buy auto chips valued at hundreds of millions of dollars although it was separately reported that the SEC are to demand all Chinese firms to disclose more regarding investor risks including firms already trading in the US. Furthermore, insiders noted that China and the US should strengthen cooperation on cross-border regulation but stressed that China won't back down on bottom-line issues such as key data utilized by some Chinese companies related to national security, while there were more comments from US VP Harris who maintained a hawkish tone on China. Finally, 10yr JGBs were flat amid the indecisive mood in the region and following the lacklustre picture in T-notes despite a strong US 2yr auction and disappointing Richmond Fed survey, with the BoJ presence in the market for nearly JPY 1tln of JGBs also doing little to spur prices.

PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a net daily injection of CNY 40bln. (Newswires) PBoC set USD/CNY mid-point at 6.4728 vs exp. 6.4697 (prev. 6.4805)

US VP Harris suggested that they need to increase pressure on Beijing and challenge its bullying, while it was separately reported that US climate envoy John Kerry is expected to visit China next month. (Newswires)

Wall Street representatives and Chinese officials will revive discussions as they seek a common ground, while source reports noted the US approved Huawei license applications to buy auto chips valued at hundreds of millions of dollars. (Newswires)

China's Ningbo port resumed operation on Wednesday after shutting down for two weeks due to a COVID-19 case. (Newswires)

Japan and Taiwan will conduct their first bilateral security discussions on Friday; subsequently, China's Foreign Ministry has urged Japan to stop interfering in their internal affairs. (FT/Newswires)

US

US House voted 220 vs. 212 to approved the USD 3.5tln budget blueprint and advance the USD 1tln infrastructure bill which was as expected after House Democrats agreed on a path to advance budget and infrastructure package, while the House rules required an infrastructure vote by September 27th and adopting USD 3.5tln budget. (Twitter/Politico)

US President Biden is today expected to host a cybersecurity summit with executives from major tech, bank and energy firms – with the focus reportedly on national security threats. (WSJ)

UK/EU

German Ifo Business Climate New (Aug) 99.4 vs. Exp. 100.4 (Prev. 100.8, Rev. 100.7)

• Expectations New (Aug) 97.5 vs. Exp. 100.0 (Prev. 101.2, Rev. 101.0)
• Current Conditions New (Aug) 101.4 vs. Exp. 100.8 (Prev. 100.4)
• 70% of industrial businesses complain about bottlenecks in supply chains; half of companies in manufacturing and retail sectors want increased prices to cover rising costs

GEOPOLITICAL

US President Biden later confirmed the US is currently on pace to finish Afghanistan mission by August 31st and asked the Pentagon and State Department for contingency plans to adjust Afghanistan withdrawal if needed, while he added that completing evacuation by the deadline depends on the Taliban continuing to cooperate and that the G7 will stand united in approach to the Taliban. (Newswires)

World Bank said it paused disbursements in Afghanistan and is closely observing the situation, while it added it is exploring ways to remain in engaged in the country and preserve development gains. (Newswires)

Russia and Turkey could sign a new S-400 missile systems deal this year, according to Interfax. (Twitter) Earlier in the week IFX reports such a deal could be signed 'soon'

EQUITIES

Major bourses in Europe have conformed to a mixed picture (+0.2%) as the modest optimism seen around the cash open waned. Fresh fundamental newsflow has been light, whilst immediate price action was limited upon the release of an overall cautious German Ifo survey – with businesses citing supply chain concerns alongside rising COVID infections, whilst half the companies in manufacturing and retail also want increased prices to cover rising costs. US equity futures meanwhile remain stable in early European trade as eyes, for now, turn to the Fed’s Jackson Hole Symposium ahead of next week’s crucial US labour market report. Back in Europe, the breadth of the price action among the majors are narrow, with no standout underperformer/outperformer. Sectors are also mixed with no real theme. Travel & Leisure is however the standout outperformer – although likely on the back of the Leisure side with Evolution Gaming and Flutter Entertainment among the top gainers in Europe. Banks follow a close second amid the more favourable yield environment. Chip names meanwhile have not seen a clear reaction to source reports that contract manufacturer TSMC (+2.7% pre-market) is hiking prices by 10-20%. Some large-cap customers of TSMC include the likes of Apple, NVIDIA, Intel and AMD. On the other end of the spectrum, autos continue to be hit by the chip crunch prompting further halting of production, while Oil & Gas and Basic Resources also see mild losses. Interesting individual movers remain somewhat scarce but Deliveroo (-2.0%) shares slumped over 10% at the cash open but pared back losses within five minutes – with no clear catalysts behind the move. Note, US President Biden is today expected to host a cybersecurity summit with executives from major tech, bank and energy firms – with the focus reportedly on national security threats. Some companies reportedly attending include Apple, Amazon, Microsoft, Alphabet, JP Morgan, Bank of America, ConocoPhillips, PG&E, and Duke Energy.

TSMC (2330 TW/TSM) reportedly notified customers today that the price of all processes will increase by 20% with immediate effect, will include today's online production and orders that have been placed, via Chinese press. (Newswires) TSM is +3.0% in pre-market trade

China's Ministry of Industry and IT (MIIT) removed 67-apps from stores on Wednesday, due to failures to conclude required rectifications around irregular collection of personal information, via Global Times. (Twitter)

FX

USD - No major change in risk appetite or the general market tone, but the Greenback has gleaned enough traction to stall selling pressure that was slowly building on Tuesday to the point where the DXY looked prone to losing sight of 93.000 altogether and the Buck was on the verge of collapse through key levels against major and EM peers. However, the index appears to have found a base, albeit tentative, just above yesterday’s low (92.804) and is attempting to consolidate between 92.872-93.057 parameters ahead of US durable goods and a speech from Fed’s Daly that is due alongside results of the 5 year T-note auction.

JPY/CAD/CHF - If there was any doubt surrounding the close correlation between UST/JGB yield differentials and the Yen, then the latest price action in Usd/Jpy should remove lingering uncertainty as the headline pair bounces further from sub-109.50 lows amidst renewed or ongoing Treasury curve steepening in wake of a stellar 2 year sale. Moreover, decent option expiry interest from 109.85-90 (1.24 bn) may well be compelling around the NY cut in similar vein to Tuesday when roughly the same size lower down acted like a magnet irrespective of broad Buck weakness. Elsewhere, the Loonie’s increasingly tight link to oil prices is also evident given a fade in WTI and the rebound in Usd/Cad to 1.2600+, while the Franc has pared gains from close to 0.9100 and even nearer 1.0700 vs the Euro in wake of a sharp deterioration in Swiss investor sentiment.

NZD/GBP/AUD/EUR - The Kiwi has lost some altitude and momentum following NZ trade data showing a swing from surplus to deficit, but remains elevated around 0.6950 on divergent RBNZ/FOMC near term policy outlooks, while the Pound is still rangebound on the 1.3700 handle and just over 0.8550 in Eur/Gbp cross terms. Back down under, the Aussie is relatively resilient and pivoting 0.7250 even though construction work down during Q2 fell some way short of expectations. Conversely, the Euro is retesting resistance circa 1.1750 with some assistance from ECB’s de Guindos flagging imminent upgrades to macroeconomic projections rather than two misses out of three Ifo metrics, including a particularly big undershoot in expectations.

SCANDI/EM - Some compensation for the Nok via upbeat commentary from Norway’s PM on economic prospects, as Brent tops out and relief for the Try that has had to contend with a decline in Turkish manufacturing confidence and more reports about a new deal to buy Russian S-400 missiles before the end of 2021, according to Interfax. Meanwhile, a fairly rare PBoC liquidity injection with upcoming month end demand in mind has helped the Cny and Cnh cope with ongoing angst between China and the US on several fronts.

• Australian Construction Work Done (Q2) 0.8% vs. Exp. 2.5% (Prev. 2.4%)
• New Zealand Trade Balance (Jul) -402M (Prev. 261.0M, Rev. 245M)
• New Zealand Exports (Jul) 5.75B (Prev. 5.95B, Rev. 5.96B)
• New Zealand Imports (Jul) 6.16B (Prev. 5.69B, Rev. 5.71B)

Notable FX Expires, NY Cut:

• EUR/USD 1.1650 (664M), 1.1700 (1.03BLN), 1.1755 (255M), 1.1775-80 (781M), 1.1850 (280M), 1.1925 (493M)
• USD/JPY 109.50 (460M), 109.85-90 (1.24BLN), 110.20-25 (1.4BLN)

FIXED

It could be technical or fundamental if not a mixture of both, but the fact of the matter is that bonds are on the backfoot following a few attempts to revive fortunes, with Bunds briefly touching Fib resistance and Gilts on an even keel momentarily before fading again. The core Eurozone bond may have taken heed of relatively bullish remarks from the normally dovish ECB member de Guindos in context of PEPP guidance for September’s GC policy meeting, plus the unexpected improvement in Ifo current conditions, while its UK counterpart is likely declining in sympathy due to the absence of anything specific. Indeed, EZ debt is underperforming as Bunds slip to a minor new w-t-d Eurex low at 176.52, but Gilts hold at Monday’s Liffe base and US Treasuries sit just under par awaiting durable goods, Fed’s Daly and 5 year note issuance.

COMMODITIES

WTI and Brent front month futures have remained choppy with a downside bias within recent ranges ahead of the Jackson Hole Symposium, but perhaps more importantly next week’s decision-making OPEC+ meeting. It will be interesting to see whether the producers continue with the 400k BPD/month output increase in the face of peak growth, persisting Delta threats and pressure from the US to bring down prices. Further, the German Ifo metric only added to economic slowdown woes, whereby COVID was cited as a factor behind the pullback in morale. Elsewhere, prices were little moved by the weekly private inventories yesterday which printed a smaller-than-expected – with traders now looking ahead to the weekly EIA figure. Until then, price action will likely be dictated by the overall market mood in the absence of any fresh catalysts. WTI Oct’ resides just above USD 67/bbl (vs USD 67.66 high) whilst its Brent counterpart dipped back below USD 71/bbl (vs high 71.20/bbl). Elsewhere, spot gold has remained under pressure sub-1,800/oz amid as yield and Dollar dynamics result in a net-net negative for the yellow metal ahead of Fed speak starting tomorrow. LME copper prices have firmed since the European open despite the indecisive risk tone, but potentially as the Buck waned off best levels. Overnight reports meanwhile suggested Chilean state-owned miner Codelco, the world's largest copper producer, reached an agreement on a new contract with supervisors at the Andina mine – which accounted for some 10% of Codelco’s output. Meanwhile, iron ore futures saw a choppy overnight session as prices pulled back from recent highs, with traders citing fragile near-term fundamentals and the indecisive tone across the market.

US Private Energy Inventory Data (bbls): Crude -1.6mln (exp. -2.7mln), Cushing -0.5mln, Gasoline -1.0mln (exp. -1.6mln), Distillate -0.25mln (exp. -0.3mln). (Newswires)

US Department of the Interior said it expects to publish a sale notice for the Gulf of Mexico oil and gas auction in September, while it continues to review oil and gas leasing program. (Newswires)

Dubai set official crude differential to DME Oman for November at a discount of USD 0.20/bbl. (Newswires)