• Asia-Pac bourses traded mixed although have shown an improvement compared to the losses in global counterparts
• Losses in the US came in the context of recent hawkish Fed rhetoric ahead of Powell and events in Afghanistan
• The DXY straddled 93.00 amid a non-committal tone and contained price action in the FX space
• Further reports note that Biden is expected to reappoint Powell as Fed Chair whilst Brainard could be appointed as Vice-Chair
• Looking ahead, highlights include US PCE/Core PCE, Personal Income, Uni of Michigan (Final), Fed Chair Powell, Bostic, Harker, Mester, Bullard

CORONAVIRUS UPDATE

French Health Minister said a fourth COVID wave has stabilised this month. (Newswires)

Australia's Technical Advisory Group on Immunization recommended the Pfizer (PFE) vaccine for people of the age of 12-years and above. (Newswires)

New Zealand PM Ardern said all of the country south of the Auckland boundary will move to a level 3 lockdown from midnight on August 31st and Auckland will likely remain at level 4 for another 2 weeks, while she had also commented that a level 4 lockdown is the most effective tool with the lockdown making a difference and that they may be seeing the start of a plateau. (Newswires)

ASIA

Asia-Pac bourses traded mixed although have shown an improvement compared to the losses in global counterparts that were triggered by the deadly terror attack in Kabul which killed dozens including 13 US service members and with the recent hawkish Fed rhetoric also providing headwinds ahead of the Jackson Hole Symposium where all eyes are on potential taper clues from Fed Chair Powell. ASX 200 (Unch.) was constrained by underperformance in tech and consumer stocks, with the mood not helped by disappointing Retail Sales data and losses in Australia’s largest retailer Wesfarmers despite reporting a 16.3% increase in profits and AUD 2.3bln distribution, as it also flagged a moderation of its Bunnings' trading performance for the current fiscal year. Nikkei 225 (-0.5%) was mildly lower as exporters suffered from recent inflows into the domestic currency and after mixed Tokyo inflation data which despite averting a decline in Core CPI for the first time in 13 months, remained at a far distance from the 2% target. Hang Seng (+0.5%) and Shanghai Comp. (+0.5%) recovered opening losses with sentiment underpinned by continued PBoC liquidity efforts and with analysts speculating that the central bank is likely to cut RRR and step-up credit supply soon, while participants also digested a slew of earnings releases and were unfazed by China’s cyberspace administration’s issuance of draft guidelines on regulating internet-related algorithms. Finally, 10yr JGBs were slightly lower following the indecisive trade seen in T-notes ahead of the key Fed event and with demand sapped by the absence of the BoJ from the market today.

PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net injection. (Newswires) PBoC set USD/CNY mid-point at 6.4863 vs exp. 6.4849 (prev. 6.4730)

China's cyberspace administration issued draft guidelines on regulating algorithms used by internet services to provide recommendations for users. (Newswires)

PBoC is likely to cut RRR and step up credit supply soon, according to a Chinese press report citing analysts, while Nomura also stated that the PBoC may conduct a targeted RRR cut soon. (Newswires/China Securities/Journal)

China MOFCOM extended the anti-subsidy investigation on certain glycol ethers imports from the US to 14th March 2022 and extended the anti-dumping investigation to 28th February 2022. (Newswires)

• Chinese Industrial Profits YY (Jul) 16.4% (Prev. 20.0%)
• Chinese Industrial Profits YTD YY (Jul) 57.3% (Prev. 66.9%)
• Tokyo CPI YY (Aug) -0.4% vs. Exp. 0.0% (Prev. -0.1%)
• Tokyo CPI Ex. Fresh Food YY (Aug) 0.0% vs. Exp. -0.2% (Prev. 0.1%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Aug) -0.1% vs. Exp. 0.0% (Prev. 0.0%)

UK/EU

French President Macron says the EU will make sure that Britain sticks to the Northern Ireland protocol, during a visit to Dublin. (Telegraph)

FX

FX markets exhibited a non-committal tone with price action choppy heading into the Jackson Hole event. This saw the greenback trade both sides of the 93.00 level which it reclaimed during Wall Street amid the risk aversion and hawkish rhetoric from Fed speakers including Bullard and George with Kaplan later noting the US would be a lot healthier if the Fed begins to wean the economy off asset purchases and that he wants to start tapering soon but suggested it should be conducted gradually over around eight months. EUR/USD was indecisive after a lack of excitement from the recent ECB Minutes and with the single currency oscillating around 1.1750 where there are a cluster of nearby key MA levels including its 50-hour and 100-hour moving averages, while GBP/USD was uninspired after its recent retreat to sub-1.3700. USD/JPY and JPY-crosses were subdued amid the inconclusive Tokyo inflation data and mixed sentiment which also restricted antipodeans, with AUD/USD not helped by weaker than expected Australian Retail Sales and forecasts by CBA for the RBA to backtrack on its tapering plans.

• Australian Retail Sales MM Final * (Jul) -2.7% vs. Exp. -2.3% (Prev. -1.8%)

COMMODITIES

Commodities were mixed with WTI crude futures recovering from the prior day's losses to reclaim the USD 68/bbl level with price action at the whim of the risk appetite and a choppy greenback, while there were several supply side headlines including reports of potential delays to restore oil production at an offshore cluster hit by a fatal fire on the weekend and with producers evacuating platforms ahead of Tropical Storm Ida which is projected to strengthen over the Gulf of Mexico. Gold eked marginal gains and retested the USD 1800/oz level amid the indecisive greenback but with gains capped as all focus remains on the Jackson Hole, while copper prices mirrored the tentative mood.

NHC said Tropical Storm Ida is forecast to become a hurricane when it nears western Cuba and is expected to further strengthen while moving over the Gulf of Mexico, while it later stated that hurricane watches have been issued for parts of the northwestern Gulf Coast. (Newswires)

BP (BP/ LN) was reportedly evacuating four Gulf of Mexico oil platforms and shutting production, while Exxon's (XOM) Baton Rouge refinery (502k BPD) began severe weather preparations ahead of hurricane threat. BHP (BHP LN) was also preparing to evacuate staff from the Shenzi oil production platform in the US Gulf of Mexico and Chevron (CVX) noted that its non-essential personnel are being moved from Gulf of Mexico facilities as part of storm preparedness procedures. (Newswires)

Efforts to restore oil production at an offshore cluster hit by a fatal fire on the weekend could lag official projections, according to sources, as connecting wells is proving more difficult than planned. (Newswires)

Arabian Gulf Oil Company (AGOCO) announced the suspension of all its activities due to the failure to allocate the necessary funds. AGOCO is the largest subsidiary of Libya’s NOC. (AGOCO/Newswires)

China is to release metals from state reserves on September 1st: 30k tons of copper, 50k tons of zinc and 70k tons of aluminium. (Newswires)

GEOPOLITICAL

US President Biden said terrorists attacked Kabul airport and intelligence assesses that it was carried out by ISIS-K, while he added the situation on the ground is still evolving and warned that the US will not forgive and will hunt down those that carried out the attack to make them pay. Biden also stated the US will not be deterred and will continue with the evacuation, while he has asked for plans to strike ISIS-K and will respond with force and precision at a time of US choosing. Furthermore, he stated there is no evidence so far of collusion between the Taliban and ISIS-K, while his meeting with Israeli PM Bennett was rescheduled for Friday. (Newswires)

NATO diplomat said all foreign forces are aiming to evacuate citizens and embassy workers from Afghanistan by August 30th, while Taliban forces will increase security and forces to manage crowds Kabul airport gates. There were also comments from a Taliban official that at least 28 of the 60 Afghans killed outside Kabul Airport were Taliban members and the official noted there was no reason for foreign forces to extend the deadline for exiting Afghanistan. (Newswires)

Islamic State claimed responsibility for the Kabul airport attacks which killed at least 13 US service personnel and more than 60 Afghan civilians, while the US CENTCOM chief expects attacks to continue and the Pentagon also said there were other active threats against the Kabul airfield. (Newswires)

Russian Foreign Minister told his Iranian counterpart that talks on the nuclear deal in Vienna should restart as soon as possible. (Tass)

US

A choppy day of trading in illiquid conditions saw yields along the Treasury curve rise to the highest in two weeks, as Fed's Bullard, who votes on policy in 2022, continued to call for the central bank to pursue an aggressive taper timeline, which would see the process completed in Q1 2022, after which he suggested the Fed should be allowing maturing securities to run-off, decreasing the size of its balance sheet. Although his position is well known, he did not show any major concerns about the Delta Variant, as his colleague Robert Kaplan (who is also aggressive in his tapering views) did last week, but seemed less concerned today. However, as the session progressed, yields went back to neutral levels ahead of remarks due from Fed boss Powell on Friday. Elsewhere, regarding the progress of the Sep/Dec roll, desks suggests futures have now rolled over 75% of their positions into the later contracts ahead of first notice next Tuesday. The Treasury Thursday sold USD 62bln of 7yr notes, tailing by 0.4bps, which is a smaller tail size than both the last auction and recent averages, while the cover ratio improved slightly; the participation metrics showed the indirect takedown rising a little vs the prior and the previous six-auction averages. Another point worth noting is that there were spurts of Treasury buying on Thursday as the dreadful news from Afghanistan resulted in a moderate bid for havens, which then impacted other rate-sensitive FX (JPY fell under 110.00 briefly, while Gold climbed), although this proved fleeting, and we didn't see complete haven participation (CHF, for instance, didn't draw much haven demand). Attention now pivots to Jackson Hole to see if Fed chair Powell reveals any clues about the taper timing and configuration, although many have argued that those seeking firm details may be left disappointed; instead, a point of focus might be on the extent to which Powell expresses fears on the Delta variant -- any overt fears would be in contrast to his position at the July FOMC, and might suggest to markets that the Fed was to pursue a slightly less hawkish timeline on the taper. US T-note futures (U1) settle 1 tick lower at 133-19.

Fed's Kaplan (2023 voter) repeated that he sees resilience in the economy to the Delta variant and that asset purchases had their purpose and time, but are no longer well suited to the situation and the housing market does not need any more support from the Fed. Furthermore, he does not see anything likely to change his view that the Fed rates lift off would be appropriate next year although tapering earlier gives flexibility. (Newswires)

US President Biden is reportedly to make announcements regarding the Fed later in the fall in which he is said to be considering reappointing Fed Chair Powell and appointing Fed's Brainard as Vice Chair to appease liberal democrats. (Newswires)

US Supreme Court ruled to block President Biden's temporary ban on evictions, while the White House said it is disappointed by the Supreme Court ruling to end moratorium on evictions and noted that President Biden is calling on cities, states, landlords and cabinet agencies to urgently act to prevent evictions. (Newswires)

USTR Tai told the Turkish Trade Minister countries must remove individual digital services taxes in connection with OECD and G20 tax processes. (Newswires)