• European bourses are softer across the board with US futures also pressured albeit to a lesser extent, ES -0.1%
• DXY is firmer but capped by 93.00 with peers subdued across the board while debt continues to pullback but has stabilised slightly most recently
• Fresh newsflow has been sparse and largely on geopols/COVID-19 boosters and as such not moving the macro dial
• The BoK became the first major Asian central bank to hike rates since the pandemic began
• Looking ahead, highlights include ECB Minutes, US GDP (2nd), IJC, Fed's Kaplan, Bullard, ECB's Schnabel, supply from the US

CORONAVIRUS UPDATE

UK is reportedly gearing to begin inoculations for 12-year-olds with the NHS drawing up plans and health officials have stated that children would not need parental consent to receive jabs under a vaccination programme in schools. (Telegraph)

Furthermore, Moderna confirmed it was notified and that it is investigating cases of particulate matter in product vials of its COVID-19 vaccine in 1 lot distributed in Japan, while it has placed one product lot and two adjacent lots on hold. (Newswires/Kyodo)

Australia's New South Wales reported 1,029 new locally transmitted COVID-19 cases and it was announced that the state-wide lockdown is to be extended to September 10th. (Newswires)

Tokyo COVID-19 cases 4704 vs prev. 4228. (Newswires)

ASIA

Asia-Pac stocks traded cautiously amid a deluge of earnings releases and as markets await the Jackson Hole Symposium, while US equity futures trickled lower overnight following another consecutive day of record highs on Wall St where financials led but tech lagged amid the rising yield environment. ASX 200 (-0.5%) was negative with the index dragged lower by underperformance in gold miners and defensive sectors, with price action also influenced by an overload of earnings releases and another daily record of COVID-19 infections in New South Wales where the regional lockdown will be extended to at least September 10th. Nikkei 225 (+0.1) wiped out opening gains with sentiment hampered by COVID-19 concerns which recently prompted a widening of the state of emergency and the KOSPI (-0.6%) also retraced early advances after the BoK became the first major Asian central bank to hike rates since the pandemic began. Hang Seng (-1.1%) and Shanghai Comp. (-1.1%) declined with stocks such as AAC Technologies and Xiaomi underperforming in Hong Kong despite their improved earnings releases and with Evergrande flagging a 29%-39% decline in profits. In addition, regulatory concerns lingered after China’s MIIT removed 67 apps from stores on Wednesday due to failures to conclude required rectifications around irregular collection of personal information. Finally, 10yr JGBs were lower as yields in the Asia-Pac region tracked their counterparts in where the curve bear steepened which was attributed to positioning for a hawkish Fed and roll activity, while the regional also digested the BoK rate hike and mixed results at the 20yr JGB auction.

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 6.4730 vs exp. 6.4699 (prev. 6.4728)

BoK increased the 7-Day Repo Rate by 25bps to 0.75%, as expected, with the decision not unanimous as board member Joo dissented. BoK maintained 2021 growth forecast at 4.0% which it sees slowing to 3.0% in 2022 and increased 2021 inflation forecast to 2.1% from 1.8% and raised 2022 inflation forecast to 1.5% from 1.4%. BoK Governor Lee stated that monetary policy alone won't fix financial imbalances and that the timing for additional rate hike depends on COVID-19 and pace of debt growth, while he also noted that recent declines in the KRW seem to be due to a stronger USD. (Newswires)

Japan's ruling LDP agreed to conduct the leadership election on September 29th and the Ishihara faction of Japan's LDP is to support PM Suga's re-election at the party leadership vote. Furthermore, it was separately reported that the lower house election is likely to be in October or later. (Newswires/Sankei)

Chinese Commerce Ministry says China and the US will maintain normal commercial and economic communications; US and China should work together to increase cooperation on trade. (Newswires)

UK/EU

UK Investment Minister Grimstone suggested that the UK is not turning more protectionist and that the country welcomes Chinese investment as long as it is to the UK’s advantage. (FT)

UK’s HS2 high-speed railway project that will run from London to northern England is reportedly set to be scaled back with the eastern branch of the project between Birmingham and Leeds in doubt as cutting it could save GBP 40bln. (FT)

EU Money-M3 Annual Growth (Jul) 7.6% vs. Exp. 7.7% (Prev. 8.3%)

• Loans to Non-Financials (Jul) 1.7% (Prev. 1.9%); Loans to Households (Jul) 4.2% (Prev. 4.0%)

GEOPOLITICAL

US senior official said President Biden will discuss concerns with Israeli PM Bennett that Iran has broken out of the box ever since former President Trump abandoned the nuclear deal, while the official added that the US remains committed to a diplomatic path, but there are alternatives if it fails which the official did not elaborate on. (Newswires)

US Embassy advised Americans not to travel to Kabul Airport and for US citizens at the airport's Abbey Gate, East Gate and North Gate to leave immediately. Furthermore, NATO Secretary-General Stoltenberg warned that the threat of a terror attack at Kabul Airport was increasing every day, while Australia's Foreign Minister also stated there is an ongoing and very high threat of a terrorist attack at Kabul Airport. Most recently, the UK Armed Forces Minister Heappey says the threat to Kabul airport is highly credible.(Newswires)

EQUITIES

European bourses trade predominantly lower (Stoxx 600 -0.6%) but off worse levels in what has been a choppy morning but quiet in terms of news flow. Losses in Europe accelerated at the cash open. US equity futures are also subdued but to a lesser extent than their peers across the pond – with the NQ (-0.2%) narrowly lagging vs ES (Unch) potentially on yield dynamics, ahead of several Fed speakers scattered throughout today and tomorrow in the run-up to Chair Powell’s address (full preview available in the Newsquawk Research Suite). Back to Europe, the SMI (+0.1%) narrowly outperforms its peers amid a robust performance in the defensive Healthcare sector, with gains spearheaded by pharma-giant Roche. Sectors overall do not portray a particular theme. Media opened as the outperformer and has retained that spot – largely on the back of Vivendi’s performance after a broker upgrade. Vivendi accounts for a substantial 13.4% of the Media sector. IT and Basic resources opened as the laggards, although the former has since trimmed losses and the latter remains subdued. In terms of individual movers, Deutsche Bank’s (-1.8%) DWS arm (-12%) slumped after the US SEC opened a probe into the asset management arm, amid claims it overstated how much it used sustainable investing criteria to manage its assets. Other movers remain somewhat uninteresting with CRH (+1.8%), Bouygues (+1.5%) and Hays (+1.9%) all firmer post-earnings. One to keep on the radar for automakers – China's Securities Daily reportedly noted that the EV market is overheating and shows risks. Elsewhere, Tesla’s (-0.5% pre-market) Berlin Gigafactory will be subject to discussions on potential domestic objections today.

FX

USD - The Dollar remains firm relative to most majors, though off best levels following Wednesday’s rebound that appears to have been more ‘dead cat’ than decisive in terms of a real turning point as the clock continues to tick down Fed Chair Powell tomorrow. In the run up, IJC data will likely be far more influential than the 2nd Q2 GDP release, barring radical revisions, while commentary from Kaplan and Bulard could provide further insight about tapering intentions and the 7 year note auction concludes what has been a mixed bag of issuance from a demand perspective. Hence, Treasuries are still cautious and supportive for the Greenback to an extent as the DXY hovers just under 93.000 within a 92.968-807 range vs yesterday’s wider 93.135-92.801 extremes.

CHF/AUD/NZD/GBP/CAD - Not much to choose between biggest loser and those bearing up better to be honest, but the Franc is lagging behind and below 0.9150 against the Buck, while also retreating toward 1.0800 vs the Euro having caressed the round number below not long ago. Elsewhere, it’s a tight tussle down under amidst all the Aussie and NZ pandemic problems, but Aud/Usd is holding just above 0.7250 and Nzd/Usd around 0.6950, with the latter encouraged, if not boosted by stronger than expected Q2 Capex. The Pound has faded beyond 1.3750 in the ongoing absence of anything UK specific to offer independent impetus, and the Eur/Gbp cross seems stymied inside technical levels in the form of 50 and 100 DMAs at 0.8547 and 0.8589 respectively, while the Loonie is still under 1.2600 and loosening links with crude prices as focus switches Canadian average earnings, to a degree.

JPY/EUR - The Yen is striving to contain losses through 110.00 ahead of Tokyo CPI that might offer a distraction to Japan’s deteriorating COVID-19 situation and the UST-JGB yield spread vigil that is becoming more bullish for Usd/Jpy, but could find support via the 50 DMA at 110.15.. Conversely, the Euro extended just over 1.1770 to probe the 21 DMA that stands at 1.1772 today before waning in advance of ECB minutes (see 10.00BST post on the Headline Feed for a preview), then comments from GC members Villeroy and Schnabel.

SCANDI/EM - Hardly any traction or reaction to a raft of Swedish releases even though unemployment fell markedly as the Sek trades softer between a 10.2420-10.2220 against the Eur, while the Rub and Mxn are weaker alongside pull-backs in Brent and WTI, with the latter awaiting Banxico minutes for additional guidance/direction. On that note, the Krw only got a fleeting fillip from the BoK’s 25 bp rate hike, as this was in line with consensus and was not a unanimous decision.

Norges Bank will, from today, return to ordinary liquidity management and use of the F-deposit facility; surplus liquidity will be withdrawn using F-deposits. (Norges Bank)

• Australian Capital Expenditure (Q2) 4.4% vs. Exp. 2.5% (Prev. 6.3%)
• Australian Private Capital Expenditure 2020-2021 (Est. 7) 125.7B (Prev. 124.0B)
• Australian Private Capital Expenditure 2021-2022 (Est. 3) 127.7B (Prev. 113.6B)

Notable FX Expiries, NY Cut:

• EUR/USD 1.1675 (348M), 1.1695-05 (1.6BLN), 1.1785 (500M), 1.1795-00 (720M), 1.1900 (956M)
• USD/CAD 1.2460 (1.22BLN), 1.2695-05 (1.7BLN)

FIXED

Debt futures are off worst levels, but not before descending to deeper lows and conforming to stronger sell uptick vs buy dip momentum that resulted in Bunds, Gilts and the 10 year T-note hitting 175.71 (-27 ticks), 129.35 (-18 ticks) and 133-15 (-5/32) before pausing again. No fresh catalysts for the selling or obvious rationale, but clearly the technical backdrop is getting more bearish amidst relatively low seasonal volumes and for UK and US bonds position rolling from Sep to Dec contracts may also be impacting price action. Moreover, Treasuries still have one more supply hurdle to negotiate and 7 year issuance usually goes down well with the foreign contingent, but China is said to be more inclined to reduce UST holdings so it will be interesting to see how prominent indirect bidders are when results of the Usd 62 bn auction are unveiled after jobless claims, the second release of Q2 GDP and, KC Fed manufacturing. Also up ahead, Fed and ECB speakers plus minutes from the latter.

COMMODITIES

WTI and Brent October futures remain subdued, but choppy, with the complex seemingly tracking risk appetite in the absence of fresh catalysts. There is little new to report on the COVID front aside from increasing noise regarding the necessity of booster jabs – with US President Biden’s administration reportedly planning boosters at six months instead of eight months. Aside from the Fed, the focus will fall on the OPEC+ meeting slated for the 1st September, with the JTC meeting beforehand. Participants will be on the lookout for sources alongside hints as to whether the group will go ahead with the 400k BPD increase in output in the upcoming month. OPEC+ members have been quiet, whilst the US called for members to release more output in a bid to lower gasoline prices for consumers. In the interim, energy markets will likely take their cue from the overall market mood alongside Dollar influence. WTI Oct, at the time of writing, trades meanders around USD 67.50/bbl (vs high USD 68.15/bbl) while its Brent counterpart resides around USD 71.50/bbl (vs high USD 72.13/bbl). Precious metals are also modestly softer as the Buck remains choppy and yields higher. Spot gold sees several nearby DMAs, with the 21 at USD 1,785/oz, the 50 at USD 1,790/oz, and the 200 and 100 at SUD 1,809.50/oz and USD 1,810.50/oz. Meanwhile, LME copper subdued around the middle of a relatively tight range amid the cautious tone across markets. Dalian iron ore contacts traded higher but gave up most of their early gains, whilst ANZ bank forecasts iron ore demand to slump 87mln tons due to China curbs.