• Asia-Pac stocks traded cautiously as the region struggled for direction post-US market closures
• The RBA announced it is to proceed with tapering whilst also extending the period to at least February from mid-November
• Chinese trade data topped estimates in USD terms with a 25.6% Y/Y jump in exports
• The Nikkei 225 briefly reclaimed 30k to the upside amid the upcoming leadership transition
• The DXY is contained in the low 92.00's whilst Antipodeans lag in the G10 FX space
• Looking ahead, highlights include the German ZEW Survey, EZ Revised GDP and Final Employment, ECB weekly purchases, supply from the UK, Germany and the US

CORONAVIRUS UPDATE

UK announced the NHS will receive an additional GBP 5.4bln over the next six months to support the COVID response. (Newswires)

Takeda (6502 JT) announced that it will manufacture and provide 150mln doses of the Novavax (NVAX) COVID-19 vaccine in Japan. (Newswires)

ASIA

Asia-Pac stocks traded cautiously as the region struggled for direction after a non-existent lead due to the holiday closure in the US and tentativeness amid key announcements including the RBA policy decision and Chinese trade data. ASX 200 (-0.2%) remained pressured by underperformance in the mining sector after Dalian iron ore futures slumped around 5% near the open and with losses across the industry heavyweights BHP, Rio and Fortescue, while participants also lacked commitment heading into the RBA policy decision where the RBA announced it is to proceed with tapering whilst also extended the period to at least February from mid-November. Nikkei 225 (+0.9%) continued to benefit from the upcoming leadership transition which helped the index shrug off disappointing household spending data to briefly reclaim the 30k level with shares of Keyence and Murata boosted on their looming inclusion to the benchmark index, while the addition of Nintendo also underpinned its shares albeit to a lesser extent. Hang Seng (+0.5%) and Shanghai Comp. (+0.8%) gradually shrugged off the early indecision as participants awaited the latest Chinese trade data which topped estimates in USD terms including a 25.6% jump in exports. However, the market reaction to the data was muted with the CNY-denominated trade figures less convincing and amid mixed regulatory-focused headlines including reports that China will strengthen regulations to prevent a disorderly expansion of capital but will also support Chinese companies to list in Hong Kong and will step up monitoring of cross-border capital flows to maintain market stability. Finally, 10yr JGBs recouped some of the recent losses and re-approached the 152.00 level amid weak Household Spending data and continued gains in Japanese stocks, but with upside limited after relatively stable/slightly softer metrics from the 30yr JGB auction including a lower b/c and accepted prices.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a CNY 40bln net daily drain. (Newswires) PBoC set USD/CNY mid-point at 6.4533 vs exp. 6.4519 (Prev. 6.4529)

Japanese Finance Minister Aso said they will consider compiling a budget with focus on digital, environmental policies, regional economies and ageing population. Furthermore, he doubts if Japan's finances would risk a weaker JPY and inflation, while he suggested it would be good for the next PM to boost government revenue and restrain spending. (Newswires)

Japanese LDP leadership candidate Kishida said he will have the BoJ maintain the 2% price target if he becomes PM, while he called for a more than JPY 30tln pandemic stimulus package. In relevant news, an LDP lawmaker said allies of former defence minister Ishiba were divided whether to support him or vaccines minister Kono for LDP leadership. (Newswires)

• Chinese Trade Balance (USD)(Aug) 58.3B vs. Exp. 51.1B (Prev. 56.6B)
• Chinese Exports YY (USD)(Aug) 25.6% vs. Exp. 17.1% (Prev. 19.3%)
• Chinese Imports YY (USD)(Aug) 33.1% vs. Exp. 26.8% (Prev. 28.1%)
• Chinese Trade Balance (CNY)(Aug) 376.3B vs. Exp. 495.5B (Prev. 362.7B)
• Chinese Exports (CNY)(Aug) 15.7% vs. Exp. 22.5% (Prev. 8.1%)
• Chinese Imports (CNY)(Aug) 23.1% vs. Exp. 9.1% (Prev. 16.1%)
• Japanese All Household Spending MM (Jul) -0.9% vs. Exp. 1.1% (Prev. -3.2%)
• Japanese All Household Spending YY (Jul) 0.7% vs. Exp. 2.9% (Prev. -5.1%)

UK/EU

UK PM Johnson will announce a national insurance increase today worth GBP 10bln to fund NHS and social care despite the criticism from within the Tory party. (FT)

UK PM Johnson was able to secure a major concession from the EU on the Northern Ireland protocol and is now allowed to extend several grace periods in a move the will avoid a fresh "sausage war". (Telegraph)

TheCityUK warned that London risks losing its status as a top financial centre and called for Britain to ease taxes on banks, as well as relaxing rules for hiring from abroad to help it compete with other financial hubs such as New York and Hong Kong. (FT)

German Economy Minister Altmaier was reportedly rushed to hospital from an economic committee meeting due to a health emergency. (Newswires)

• UK BRC Retail Sales YY (Aug) 1.5% (Prev. 4.7%)

FX

In FX markets, the greenback was lacklustre following the recent holiday lull with the DXY contained within the weaker end of the 92.00 level and had begun fading the recent rebound from post-NFP losses. The dollar lacked pertinent newsflow overnight although there were recent adjustments by Goldman Sachs which lowered its US GDP growth forecast for Q4 2021 and subsequently raised its view for the year after, while looking ahead at this week's calendar, US data remains light for Tuesday although there is a slew of Fed speakers scheduled from mid-week. EUR/USD was marginally higher but contained within the prior day’s range with participants eyeing the ECB meeting on Thursday where policymakers are expected to maintain rates and size of the PEPP although focus will be on the pace of purchases for Q4. GBP/USD eked mild gains after finding support around Friday’s lows near its 200-DMA of 1.3818 and after the recent extension of the Northern Ireland grace period for a third occasion by the UK to provide time to discuss solutions to issues with the EU which the European Commission acknowledged but remained steadfast in its unwillingness for renegotiations on the protocol. JPY crosses were kept afloat amid the gains in Japanese stocks and following disappointing Household Spending data, while antipodeans were indecisive with AUD/USD briefly lifted after the RBA’s decision to proceed with its current tapering plan of AUD 4bln weekly purchases which was extended to at least February and with NZD/USD receiving a tailwind after the New Zealand 10yr yield increased to its highest since April 2019, although both pairs eventually faded their gains.

RBA left its Cash Rate unchanged at 0.10% as expected and maintained its tapering plan with weekly purchases at AUD 4bln (vs split expectations), while it extended the purchase period until at least February (vs prev. mid-November), citing the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak. RBA added this setback to the economic expansion is expected to be only temporary and the Delta outbreak is expected to delay, but not derail, the recovery. Furthermore, the Board is committed to maintaining highly supportive monetary conditions to achieve a return to full employment in Australia and inflation consistent with the target and it will not increase the cash rate until actual inflation is sustainably within the 2%-3% per cent target range. (Newswires)

COMMODITIES

WTI crude futures were choppy around the USD 69/bbl level and with mild support in Brent crude amid the cautious gains in Asia stocks, albeit with upside capped by resistance at USD 72/bbl. There was also a continued slow resumption for Gulf of Mexico production where 99 platforms remained evacuated, and participants will have to wait a day later for the latest inventory reports owing to the recent Labor Day holiday. Elsewhere, gold traded rangebound amid an uninspired greenback and lack of catalysts for the precious metal, while copper declined amid weakness in Chinese commodity prices including Dalian iron ore futures which slumped around 5% in early trade and despite the mostly better than expected Chinese trade data.

BSEE estimates approximately 83.9% of oil production in the Gulf of Mexico has been shut in (prev. 88.3%) and approximately 80.8% of the gas production in the Gulf of Mexico has been shut in (prev. 82.7%), while a total of 99 oil and gas production platforms remain evacuated. It was also reported that the US Coast Guard was investigating nearly 350 reports of oil spills in and along the Gulf of Mexico following Hurricane Ida. (Newswires)

US

US markets were closed on Monday for Labor Day.

Goldman Sachs lowered Q4 2021 GDP growth forecast to 5.5% from 6.5% and sees 2021 GDP growth at 5.7%, while it raised Q4 2022 GDP growth forecast to 3.7% from 3.0% and sees 2022 GDP growth at 4.6%. (Newswires)