• Asia-Pac stocks were mostly positive with the region mildly taking impetus from last Friday's gains on Wall St
• The S&P 500 and Nasdaq extended on record highs post-Powell
• In FX, the DXY remains softer and sub-93.00, EUR/USD has reclaimed 1.18 status
• The SPD has continued to make further gains in the latest polling data with Scholz coming out on top in the latest debate
• Oil producers in the Gulf of Mexico shut in around 96% of crude output and about 94% of natgas production due to Hurricane Ida
• Looking ahead, highlights include regional and national German CPIs, EZ Consumer Confidence (final), ECB's Schnabel. Note, UK markets are closed on account of the Bank Holiday

CORONAVIRUS UPDATE

US President Biden said they are considering starting booster shots earlier and he discussed a booster shot timeline with NIH's Fauci in which an additional shot after five months was reportedly being discussed, while the NIH launched a study of an extra COVID vaccine dose in people with autoimmune disease. However, the White House later stated that official guidance for a COVID booster shot remains eight months and that nothing has changed regarding the eight-month timeline. (Newswires)

US President Biden said Chinese officials have worked to prevent investigators from assessing origins of COVID-19 and that the US will work with partners to press China to share information. The US probe of COVID origins was reportedly inconclusive without help from China and found some evidence the origin could be from animals or a lab, while the intelligence community in US remained divided on the most likely origin. (Newswires)

Italy has scrapped the five-day COVID-19 quarantine for travellers from the UK that are fully vaccinated and that provide a negative test result. Elsewhere, the German state of Baden-Wuerttemberg is mulling a ban on unvaccinated people from visiting restaurants and concerts as pressure increases on authorities to act. (Bild am Sonntag)

Moderna (MRNA) and Takeda (4502 JT) issued a joint statement and had notified the deaths of two people that received the Moderna’s COVID-19 vaccine in Japan although stated that they do not have evidence at this time that the deaths were caused by the vaccine, while Moderna noted it had suspended three lots of the vaccine last week after foreign particles were found in the vaccine. (Newswires)

New Zealand PM Arden confirmed that Auckland will remain on level 4 for another two weeks and all areas outside of Auckland will move to level 3 from a level 4 lockdown with the level 3 to be in effect for a week. There were also separate reports that a New Zealand woman died with myocarditis after receiving the Pfizer (PFE) COVID-19 vaccine, while China reportedly failed to approve the Pfizer (PFE) / BioNTech (BNTX) COVID-19 vaccine despite its wide use in western countries. (Newswires)

ASIA

Asia-Pac stocks were mostly positive with the region mildly taking impetus from last Friday's gains on Wall St where the S&P 500 and Nasdaq extended on record highs as all focus centred on Fed Chair Powell's Jackson Hole speech. However, the gains across Asian bourses were only mild as participants in Asia also digested a slew of earnings and with US equity futures contained heading into month-end and this week’s risk events including Friday’s US jobs numbers. ASX 200 (+0.2%) was kept afloat by strength in mining names which benefitted from early advances in underlying commodity prices and with shares in Fortescue Metals boosted after it announced record profits and dividends, although the tailwinds for the index were offset by the losses in tech and the largest-weighted financials sector, as well as cautiousness from another record increase in daily COVID-19 cases impacting New South Wales. Nikkei 225 (+0.5%) traded with a slightly positive bias after better-than-expected Retail Sales data from Japan but with price action capped by an indecisive currency. Hang Seng (+0.1%) and Shanghai Comp. (+0.3) were choppy amid an overload of earnings releases including China’s largest banks ICBC and CCB which failed to benefit despite printing improved full year results, while regulatory concerns lingered with planning to propose new rules banning companies with large amounts of sensitive consumer data from undertaking US IPOs and after China began a two-month campaign to crack down on commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. Finally, 10yr JGBs were higher as they tracked the continued upside in T-note futures which approached just shy of the 134.00 level in the aftermath of the dovishly-perceived commentary from Fed Chair Powell, while the BoJ were also present in the market today for just over JPY 1tln of JGBs mostly concentrated in 3yr-10yr maturities.

PBoC injected CNY 50bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net daily injection. (Newswires) PBoC set USD/CNY mid-point at 6.4677 vs exp. 6.4654 (prev. 6.4863)

US Secretary of State Blinken held a phone call with Chinese Foreign Minister Wang in which they discussed Afghanistan and US-China relations, while Wang stated that China will engage with the US based on its attitude towards China. In relevant news, it was also reported that a senior Pentagon official held a discussion last week with the Chinese military for the first time under the Biden administration. (Newswires)

China began a two-month campaign to crack down on commercial platforms and social media accounts that post finance-related information deemed harmful to its economy. Furthermore, WeChat, Douyin, Kuaishou and Sina Weibo will begin rectifying irregular practices involving publishing financial information on their platforms in response to the latest crackdown by Beijing. (Newswires/Global Times)

China is said to ask brokers to increase supervision of margin trading. In other news, China is reportedly tightening mortgage approvals in major cities amid a stricter approach to screening qualifications, while certain Chinese cities are said to have made changes to auction rules to slow price increases. (Newswires/China Securities Journal)

• Japanese Retail Sales MM (Jul) 1.1% vs. Exp. 0.4% (Prev. 30.1%)
• Japanese Retail Sales YY (Jul) 2.4% vs. Exp. 2.1% (Prev. 0.1%)

UK/EU

UK Trade Minister Truss said they aim to conclude discussions to join the trans-Pacific trade group by end-2022 and hopes the US can be persuaded to rejoin the group. (FT)

UK Federation of Small Businesses warned the government that the business rates system is regressive and outdated which could hamper the recovery. (Yahoo Finance)

INSA poll showed German SPD extended its lead with support at 24%, while German Chancellor Merkel’s conservatives were at 21% and Greens at 17%, Additionally, a Forsa poll showed that SPD’s Olaf was viewed as the winner of Sunday’s debate by 36% of those surveyed, while Greens candidate Baerbock was seen to have won by 30% of surveyed and conservatives’ Laschet at 25%. (Newswires)

FX

In FX markets, the DXY weakened following the Jackson Hole event whereby the lack of the explicit taper signal from Fed Chair Powell overshadowed the various hawkish commentary from other FOMC voters and regional Fed Presidents and dragged the DXY below the 93.00 level. EUR/USD took advantage of the weaker greenback and eventually reclaimed the 1.1800 handle but has since stalled after hitting resistance at the nearby 50DMA and with weekend newsflow for the bloc extremely light aside from the widening in support and perceived debate win by the German SPD party ahead of next month’s election, while GBP/USD held near last week’s highs with price action quietened amid the Bank Holiday closure in the UK. USD/JPY retreated beneath 110.00 in the aftermath of the Jackson Hole Symposium although JPY-crosses were kept afloat by the mild positive risk tone and antipodeans traded tentative amid a lack of tier-1 data releases with AUD/USD and NZD/USD reverting to test the 0.7300 and 0.7000 levels, respectively.

• Australian Business Inventories (Q2) 0.2% vs. Exp. 1.3% (Prev. 2.1%, Rev. 2.4%)
• Australian Gross Company Profits (Q2) 7.1% vs. Exp. 3.0% (Prev. -0.3%, Rev. -0.6%)

COMMODITIES

Commodities were mixed with an initial gap higher in oil futures at the reopen after oil producers in the Gulf of Mexico shut in around 96% of crude output and about 94% of natgas production due to Hurricane Ida to lift WTI crude futures to above the USD 69/bbl level. However, the gains were then faded as the hurricane, which triggered a mass power outage and disaster declaration for Louisiana, also resulted in disruptions to the Colonial Pipeline and refineries. Gold prices were steady above the USD 1800/oz as the precious metal held on to its gains amid a softer greenback post-Powell, while copper prices were underpinned by the mostly positive risk tone and strength in Chinese commodity prices including Dalian iron ore futures which jumped around 5% at the open.

Baker Hughes Rig Count (27/08/21): Oil +5 at 410, Natgas unchanged at 97, total +5 to 508. (Newswires)

Oil producers have shut-in 95.65% of US Gulf of Mexico crude output totalling 1.74mln bpd and 93.75% of natgas production, while the Colonial Pipeline announced it will temporarily shut fuel lines from Houston, Texas to Greensboro, North Carolina and Marathon Petroleum's Garyville, Louisiana refinery (556k bpd) was also shut down over the weekend. US President Biden said Hurricane Ida is life threatening with the devastation likely to be immense and beyond the coasts, while he added they are planning for the worst from the hurricane and that it would take weeks for some places to restore power following the hurricane. Furthermore, President Biden later declared a major disaster for Louisiana and Entergy announced that all of New Orleans had lost power due to catastrophic transmission damage from Hurricane Ida. (Newswires)

UAE's ADNOC lowered crude allocation by 5% to term customers for November which is a steady reduction from October. (Newswires)

GEOPOLITICAL

US military struck back against IS on Saturday in which it bombed an IS member in Afghanistan and US military also launched a drone strike on Sunday which killed an Islamic State member suspected to be planning a suicide attack on Kabul airport. In relevant news, President Biden had warned that another attack was highly likely in the next 24-36 hours and military officials told US President Biden on Friday that the next few days of the mission in Afghanistan will be the most dangerous period to date, while there were reports overnight that as many as five rockets were fired at Kabul airport which were intercepted by a US anti-missile system. (Newswires/CNBC)

US National Security Adviser Sullivan said the Taliban privately stated that they will allow safe passage of Americans, US residents and Afghan allies after the August 31st deadline. Sullivan stated the US will not have an embassy presence in Afghanistan from September 1st but added that the US is capable of suppressing the terrorism threat in Afghanistan without permanent military presence on the ground, while he also noted that the US will consider further strikes and other operations against ISIS-K plotters. (Newswires)

Taliban official said they are aiming for a swift handover of Kabul airport from the US and are waiting for the final nod from Americans to secure full control of the airport, while other reports noted that Turkey is nearing an agreement with the Taliban regarding Kabul airport which would maintain Turkish presence in Afghanistan to secure commercial and political interests. In relevant news, the Taliban agreed that all foreign nationals and Afghans with travel authorisation will be able to leave and it was separately reported that two Pakistani soldiers were killed by militant fire across the border in Afghanistan. (Newswires)

US President Biden said the US-Israel relationship is as strong as it can be and that they will have other measures if diplomacy first doesn't work with Iran, while they are discussing plans to make sure Iran never develops nuclear weapons. There were also comments from Israel PM Bennett who agreed with US President Biden that there are other options for Iran if diplomacy does not work and said they will have to stop Iran's centrifuges. (Newswires)

US President Biden will welcome Ukrainian President Zelenskiy to the White House on September 1st, while visit will affirm unwavering US support for Ukraine sovereignty and territorial integrity in the face of ongoing Russian aggression, according to the White House. (Newswires)

A Houthi strike against a Yemen military base on Sunday killed at least two people and injured more than a dozen, according to medical sources. (Newswires)

North Korea reportedly appears to have resumed operations at the Yongbyon nuclear reactor which produces plutonium. (Newswires)

US

Treasuries were bid after Powell avoided any explicit taper signal. By settlement, 2s -2.2bps at 0.217%, 3s -3.2bps at 0.420%, 5s -4.4bps at 0.800%, 7s -3.8bps at 1.098%, 10s -3.4bps at 1.310%, 20s -2.3bps at 1.847%, 30s -2.3bps at 1.918%; 5yr TIPS -9.4bps at -1.824%, 10yr TIPS -8.7bps at -1.087%, 30yr TIPS -7.2bps at -0.352%. SOFR unch. at 5bps and EFFR unch. at 9bps. Treasuries were choppy to end the week with all eyes on Fed Chair Powell, although it wasn't exactly smooth sailing beforehand amid hawkish Fed speak from regional Fed Presidents, particularly from Fed's Mester (who has been quiet as of late) who said she is comfortable the Fed has met the substantial further progress threshold. The comments also came shortly after Core PCE data which continues to rise but was in line with expectations, while personal income saw a hefty 1.1% increase and spending rose 0.3%, in line with expectations, but fell 0.1% in real terms. However, given the Fed has already met its inflation goals and focus is largely on employment, the data had little immediate reaction with Powell also overshadowing the release. Despite the hawkish fed speak from regional Presidents, Powell struck his usual dovish tone and thus re-entered the bid into Treasuries, Powell did not give any explicit taper signal, aside from that he expects it to occur late this year. The Treasury curve was lower with longer end yields little changed while the belly saw the most action. US T-note futures (Z1) settled 10 ticks higher at 133-10.

Fed Vice Chair Clarida (voter) stated there has been clear progress on the labour market which is in agreement with Fed Chair Powell and he would support a taper if the labour market gains continue as expected, while he added that we will get a better read on the labour market this fall. (Newswires)

Fed's Waller (voter) said we have definitely made progress on inflation and that one more good jobs report will be sufficient to be able to start tapering. Waller added that he would like to start to taper early this fall and does not see a reason to wait, while he definitely would like to see MBS taped faster and would like to finish taper by mid-2022 to have the space to raise rates if required. (Newswires)

Fed's Mester (2022, 2024 voter) reiterated the Fed has basically met the criteria for tapering asset purchases and believes the Fed should use the September meeting to lay out thinking about the pace and timing of tapering and looks to end taper by mid-2022. Mester also noted that whether they start tapering in November or December, it is not going to make a material difference for the economy and reiterated that even if there is some pullback, she thinks the economy will remain strong. (Newswires)

Fed's Bullard (2022 voter) said he favours tapering treasuries by USD 20bln a month and MBS by USD 10bln a month. (Newswires)

White House forecasts budget deficit to reduce by USD 684bln in the next decade, while there were separate comments from White House Economic Adviser Bernstein that they need to keep pushing a robust recovery in the US. (Newswires)