• European bourses are contained but with a negative bias while US futures have a slight positive bias, ES +0.2%
• Both Caixin Services and Composite PMIs fell into contractionary territory
• FX space is very contained with antipodeans modestly outperforming once again while USD/JPY rose above 110.00 briefly amid political updates
• Japanese PM Suga will not run in the LDP leadership race and is set to step down as PM
• Beijing is reportedly considering taking Didi (DIDI) under state control, according to sources
• Looking ahead, highlights include US Services & Composite PMIs (final), US NFP, ISM Services PMI

CORONAVIRUS UPDATE

Australian PM Morrison announced they will receive 4mln Pfizer (PFE) COVID-19 vaccine doses in a swap agreement with Britain which will arrive this month. In relevant news, Australia's New South Wales reported 1,431 locally transmitted COVID-19 cases and the state Premier expects the next two weeks to be the worst for COVID infections. (Newswires)

ASIA

A positive leaning bias was seen for Asia-Pac bourses after further disappointing PMI data from China only partially offset the tailwinds from US where the S&P 500 and Nasdaq Comp registered fresh all-time highs after encouraging US data, but with price action limited for most indices as the NFP jobs report looms on the horizon. ASX 200 (+0.5%) was kept afloat by strength in commodity-related stocks as energy names took inspiration from the outperformance of the sector stateside and with news of a vaccine swap deal with the UK for 4mln Pfizer vaccine doses helping ease some of the concerns from a record jump of infections in New South Wales. Nikkei 225 (+2.0%) was underpinned amid reports that Japan is drafting a roadmap for relaxing COVID-19 restrictions and with exporters helped by recent weakness in the domestic currency although not all have benefitted with index heavyweight Fast Retailing among the worst performers following a near-40% Y/Y drop in last month’s sales. The Japanese benchmark then extended on gains and the TOPIX printed its highest since 1991 after reports that PM Suga will not run in the LDP leadership race which paves the way for a new PM and could effectively lead to additional stimulus considering recent comments from leadership contender Kishida who had called for swift economic measures worth tens of trillions of yen to cope with the virus pain. Hang Seng (-0.7%) and Shanghai Comp. (-0.4%) lagged with the mainland indecisive as participants digested the recent announcement by Chinese President Xi to set up a Beijing stock exchange for SMEs and following another bout of disappointing PMI data in which both Caixin Services and Composite PMIs fell into contraction territory, while Hong Kong tech names continued to suffer from Beijing’s regulatory crackdown with China reportedly to strengthen its review of game content and had also ordered ride hailing companies to correct their unfair market practices. Finally, 10yr JGBs were initially flat as downward pressure from the gains in Japanese stocks was counterbalanced by the presence of the BoJ in the market for over JPY 1tln of JGBs, although 10yr JGBs eventually breached the 152.00 level to the downside in reaction to the announcement that PM Suga will not be seeking another term which spurred expectations of future stimulus measures.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net drain. (Newswires) PBoC set USD/CNY mid-point 6.4577 vs exp. 6.4560 (Prev. 6.4594)

China's Cabinet said China will accelerate measures to attract overseas investors in domestic futures trading and will establish an international Yuan-denominated commodity futures market, while it will launch pilot schemes for IP rights securitisation and more futures contracts including shipping futures. (Newswires)

Japanese PM Suga will not run in the LDP leadership race and is reportedly to step down as PM, according to press reports. PM Suga later confirmed he will not run for LDP leadership and said he wants to focus on COVID-19 measures, while he added that running in the LDP leadership race and handling COVID measures will require a large amount of energy. Furthermore, he will hold an additional press conference next week. (Newswires/NHK/Kyodo)

• Chinese Caixin Services PMI (Aug) 46.7 vs. Exp. 52.6 (Prev. 54.9)
• Chinese Caixin Composite PMI (Aug) 47.2 (Prev. 49.2)

UK/EU

UK PM Johnson is expected to announce a manifesto-breaking tax increase as early as next week to fund social care overhaul with a rise in National Insurance that will see 25mln people pay more tax. (Telegraph) Separate reports suggest that Chancellor Sunak could scrap the pension triple lock as soon as next week. (Newswires)

British Retail Consortium data showed that visits to UK shops in August rose by 10ppts M/M amid staycations and workers returning to the office. (FT)

EU Markit Composite Final PMI (Aug) 59.0 vs. Exp. 59.5 (Prev. 59.5)

• EU Markit Services Final PMI (Aug) 59.0 vs. Exp. 59.7 (Prev. 59.7)
• German Markit Composite Final PMI (Aug) 60.0 vs. Exp. 60.6 (Prev. 60.6)
• German Markit Services PMI (Aug) 60.8 vs. Exp. 61.5 (Prev. 61.5)

UK Markit/CIPS Services PMI Final (Aug) 55.0 vs. Exp. 55.5 (Prev. 55.5)

• Composite PMI Final (Aug) 54.8 vs. Exp. 55.3 (Prev. 55.3)

GEOPOLITICAL

Saudi coalition has intercepted and destroyed an explosive-laden drone launched by the Houthis, via Al Jazeera. (Twitter)

Taiwan says four Chinese military military aircrafts entered that Air Defence Identification Zone (ADIZ) on Friday. (Newswires)

EQUITIES

Cash bourses in Europe trade mixed (Euro Stoxx 50 -0.2%; Stoxx 600 -0.1%), although with price action caged in the run-up to the US jobs report (full preview available on in the Newsquawk research suite). News flow has once again been quiet in early European hours, with catalysts also light, although the downward revisions in EZ services and composite PMIs had little effects on stocks, the release was balanced by commentary suggesting: “…another strong quarter-on-quarter rise in [EZ] GDP is on the cards for the third quarter, and we’re certainly on track for the eurozone economy to be back at pre-pandemic levels by the end of the year, if not sooner". US equity futures trade with an upside bias, but the NQ (Unch) lags the RTY (+0.4%), YM (+0.1%) and ES (+0.2%), with yields proving to be a headwind for the former. Back in Europe, sectors are mixed but the breadth of the price action is narrow and with no overarching theme. Travel & Leisure reside as the laggards following yesterday’s outperformance, whilst Basic Resources sit at the top of the pile despite waning base meal prices. Banks have made their way up the list in tandem with the ticks higher in yields, and subsequently, tech is pressured. In terms of individual movers, Ashmore (-5.0%) resides at the foot of the Stoxx 600 post-earnings, whilst Nexi (-1.5%) is pressured after the Italian watchdog opened a probe into the Nexi-SIA tie-up. Meanwhile, Deutsche Boerse is poised to release the details today of the DAX expansion – which will see 40 constituents as of mid-September. Little has been released thus far about the announcement but by historical standards, it is likely to take place after the European cash close, with the expansion assumed to come into effect after Quad witching on the 17th.

Apple (AAPL) Watch production is poised to ramp up starting the end of September, according to Digitimes citing sources. (Digitimes)

Tesla (TSLA) CEO Musk has informed employees that “this is the craziest month of deliveries Tesla will ever have”, according to electrek; additionally, reporting that Cybertruck has been delayed to late 2022 and CEO Musk not expect volume production to be achieved until 2023, as there is so much new technology in the vehicle. (electrek)

Beijing is reportedly considering taking Didi (DIDI) under state control, according to sources. (Newswires)

FX

DXY/CAD/EUR/GBP/JPY - It’s probably far too premature to suggest that Dollar/major and EM pairs may have marked out ranges for the big BLS release already, but the index looks pretty restrained having slipped into a lower range either side of 92.200 and just above the last fairly recent low ahead of 92.000. Thursday’s more encouraging US jobs data proxies have not made a lasting impression as the DXY meanders between 92.262-151 after another ‘dead cat’ bounce, awaiting the official report to assess further progress towards the ‘substantial’ threshold set by the Fed for tapering. Meanwhile, the Loonie has extended its oil-fuelled recovery towards 1.2530 against the Greenback, but could now face more than mere psychological resistance at 1.2500 given 1.4 bn option expiry interest at the strike, not to mention even heftier expiries at 1.2550 (1.8 bn) that may yet exert upside influence in Usd/Cad. Similarly, the Euro has inched further beyond 1.1850 and closer to 1.1900 irrespective of softer than forecast or downwardly tweaked final Eurozone services and composite PMIs, and dire retail sales, but may be thwarted by 1.4 bn rolling off in Eur/Usd between 1.1875-80 at today’s NY cut. Sterling is also digesting weaker than preliminary UK services and composite PMIs that may keep a lid on Cable into 1.3850 along with 1 bn expiry interest residing at 1.3815-20 vs the current circa 1.3824 low. Elsewhere, the Yen has settled down somewhat after a hectic Asian session when Usd/Jpy was rattled by Japanese PM Suga confirming reports that he will not contend the LDP leadership race and instead concentrate on tackling the COVID-19 outbreak, and is now very near 110.00 again where 1.5 bn expiries could be tripped.

AUD/NZD - The Aussie and Kiwi have picked up where they left off yesterday following only slight and brief hesitation around their newly attained big figure levels, and the former appears unfettered by 1.8 bn expiry interest at 0.7350 within a 0.7395-0.7438 range, while the latter is sitting comfortably on the 0.7100 handle even though the Aud/Nzd cross remains elevated above 1.0400 amidst positive news on the vaccine front for Australia that has secured a 4 mn Pfizer shot swap deal with the UK.

EM - More bad news for the Cnh/Cny via contractionary Caixin services and composite PMIs, but little fallout as the PBoC renews its pledge to make prudent monetary policy flexible, targeted and appropriate, while improving financial risk prevention and maintaining the stable operation of bond, currency and stock markets, plus preventing external shocks. Moreover, China’s Cabinet stated its intent overnight to accelerate measures to attract overseas investors in domestic futures trading and establish an international Yuan-denominated commodity futures market. Conversely, the Try has been rocked by yet another Turkish CPI overshoot that increases the CBRT’s policy dilemma and raises more doubt about the Bank and Government’s belief that inflation will start to slow down in Q4. Note, headline inflation is now higher than the 19% 1 week repo rate at 19.25%.

FIXED

In contrast to this time yesterday, debt futures are sitting off fresh intraday lows rather than hovering under new highs and this could just be due to caution or a defensive stance before NFP. However, the more chart focused participants and short term traders may also be positioning for a more pronounced post-ADP/manufacturing ISM correction after Bunds, Gilts and the 10 year T-note all topped out marginally shy of Thursday and/or w-t-d pinnacles between 172.73-48, 128.74-41 and 133-18+/14+ parameters. Also to come, the services ISM, but almost bound to be overshadowed regardless of the headline number or employment sub-component given the fact that labour data is out 90 minutes beforehand.

China's Finance Ministry to issue CNY 20bln of Yuan-denominated Treasury bonds in Hong Kong during 2021, CNY 8bln on September 23rd. (Newswires)

COMMODITIES

WTI and Brent front month futures trade sideways with the former around USD 70/bbl and the latter just under USD 73.50/bbl. The contracts have displayed some divergence in recent trade, with the Brent-WTI arb widening to around USD 3.3/bbl from around USD 2.8/bbl at worst yesterday. The mild divergence between the contract could be related to reports that around 94% of GoM crude production remains shut-in, with production also reportedly facing recovery issues, whilst the remnants of Hurricane Ida wreaked havoc across the East Coast – all pointing to more subdued demand for US oil. In contracts, with OPEC+ out of the way, Brent also saw a sizeable upside revision from OPEC’s JTC, with the next focus from a policy perspective being the Iranian nuclear talks. In terms of today’s trade, crude prices will likely track sentiment ahead of the US labour market report. Elsewhere, spot gold and silver are underpinned by the softer pre-NFT dollar, with little new to report on that front ahead of the Tier 1 US data. From a technical standpoint, spot gold remains sandwiched between its 100 DMA (1,814/oz) and 200 DMA (1,809.31/oz). LME copper remains capped by the dismal Chinese data overnight and caged head of NFPs. Elsewhere and further to yesterday’s Dalian Commodity Exchange margin requirements increase for coke and coking coal futures, the DCE is also to limit single-day open positions for coking coal and coke futures to 100 lots for non-futures companies as of the September 6th trading day.

US Coast Guard separately announced that Port Fourchon and Port of Houma reopened with some restrictions following Hurricane Ida. (Newswires)

BHP's Escondida copper mine production fell 17% Y/Y to 86,300 tonnes in July (prev. -21.6% Y/Y to 82,900 tonnes in June) and Chile's Collahuasi copper mine production fell 7.1% Y/Y to 54,000 tonnes in July (prev. -6.7% Y/Y to 53,900 tonnes in June). (Newswires)