• Bourses in Europe have retained the uninspiring price action seen at the cash open (Euro Stoxx 50 -0.1%; Stoxx 600 -0.1%)
• In FX, DXY remains on the front foot to the detriment of G10 peers; USD/JPY eyes 110.00 to the upside while GBP/USD probes 1.3800
• Crude prices have extended their declines as US player enter the fray from the long weekend; WTI futures did not settle yesterday
• 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
• Looking ahead, highlights include ECB weekly purchases, and supply from the US

LABOR DAY NEWS

Pfizer (PFE) booster COVID-19 vaccine shot is on schedule for a possible September 20th rollout, according to a source. It was separately reported that Moderna (MRNA) booster submission to the US FDA requires stronger data from the Co. and the process is likely to take a few weeks behind Pfizer (PFE). (Newswires)

The White House has proposed a USD 65bln plan to combat future pandemics. (WSJ)

Senior White House officials have attempted to dispel fears that President Biden’s USD 3.5tln spending plans will be hindered by increasing divisions among Democrats with White House Chief of Staff Klain noting that the package continues to advance and that they will work together to find a path forward to put together a plan that can pass in Congress and be signed by the President. (Newswires)

Chinese regulators are to tighten supervision on the financial services industry and electric vehicles. (Newswires)

Saudi lowered OSP to Asia for October to Oman/Dubai USD +1.70/bbl vs prev. premium of USD 3.00/bbl, while the price differential to northwest Europe was kept at a discount of USD 1.70/bbl vs. ICE Brent crude and prices to US was also maintained at a premium of USD 1.35/bbl vs. ASCI. (Newswires)

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 (Unch) 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 (+0.7%) and Shanghai Comp. (+1.5%) 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%)

US

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)

CENTRAL BANKS

BoE's Saunders said GDP level is now probably fairly near pre-pandemic levels, and inflation has picked up faster than expected, and the UK no longer need as much stimulus as previously. Saunders is concerned that continuing with asset purchases when CPI is at 4% could lead to medium-term inflation expectations to drift higher and could prompt a more severe policy response later. Saunders said it is best to ease off the accelerator than apply the brakes and if the Base Rate does increase in the next year or so it would be to a relatively limited extent. Saunders said the UK will not face persistent inflation problem and it could be right to think of rates increasing in the next year or so, depending on economic conditions, and quite a lot of the drivers of inflation are transitory. (Newswires)

The 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)

PBoC Vice Governor said China will not resort to flood-like stimulus and space of monetary policy is relatively big; there is no large shortfall of base money. The PBoC will maintain prudent monetary policy. Liquidity supply and demand will remain basically balanced in incoming months, no big shortfall or big fluctuations are expected. (Newswires)

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's spokesman says the Cabinet has agreed to the PM's proposals on social care reform. (Newswires)

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 Poll: SPD 25% (+2), CDU/CSU +19% (-2), Greens 17% (-1), FDP 13% (+1), AfD 11%, Linke 6%, according to a Forsa poll. (Newswires)

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

• EZ GDP Revised QQ (Q2) 2.2% vs. Exp. 2.0% (Prev. 2.0%)
• EZ Employment Final QQ (Q2) 0.7% vs. Exp. 0.5% (Prev. 0.5%)

GEOPOLITICS

Turkish Foreign Minister says there is positive momentum with the UAE, ties will fall back on track if this continues. (Newswires)

EQUITIES

Bourses in Europe have retained the uninspiring price action seen at the cash open (Euro Stoxx 50 -0.1%; Stoxx 600 -0.1%) amidst a lack of fresh catalysts and ahead of the US' return from its Labor Day holiday. The tone this morning thus far has remained tentative, with participants keeping powder dry as Thursday's ECB looms, whilst a plethora of post-NFP Fed speakers are scattered between Wednesday and Friday. US equity futures have traded on either side of the flat mark but with mild underperformance seen in the RTY (-0.1%) vs its ES (+0.1%), YM (+0.1%) and NQ (+0.1%) peers. This morning has also seen some positive omens out of banks on equities – Barclays raised its SPX price target to 4600 from 4400 (vs 4535 close on Friday), whilst UBS raised its Stoxx 600 target to 510 from 470 (vs current ~474) and upped its 2021 EPS growth forecast to 60% & forecast 15% growth in '22. The Swiss bank continues to see an earnings-driven market & expect P/E multiples to modestly derate to 16x 12m forward by year-end. Sticking with Europe, sectors are primarily negative with no discernible bias and the breadth of price action narrow. Still, the Telecoms sector has retained the top spot, albeit to a lesser magnitude vs the open. Deutsche Telekom (+0.7%) is the driving force behind the Telecom outperformance after opening higher by around 3% following its agreement with Tele2 (-0.1%) to sell their shares (25% and 75%respectively) in T-Mobile Netherlands to the Apax funds and Warburg Pincus. Furthermore, Deutsche Telekom also entered a long-term strategic partnership and share swap agreement with Softbank. Additionally, Deutsche Telekom CEO noted that the Co. is looking at options for its BT (+0.9%) stake and expects something to happen within the next 12 months. Deutsche Telekom owns a 12.06% stake in BT. The former divestment of the Dutch T-Mobile unit has also given rival KPN (+4.1%) a lift, potentially on sector consolidation tailwinds. In terms of individual movers, Allianz (-0.3%) remains mildly pressured after German watchdog BaFin has reportedly launched a probe into Allianz over structured Alpha Investment Funds. Meanwhile, Salzgitter (+3.4%) was bolstered after another guidance upgrade – citing sustained upbeat development in prices and demand.

Raytheon (RTX) is being investigated by US authorities in relation to payment to a consultant for the Qatar Armed forces and whether bribes were involved, according to WSJ sources. (WSJ)

US FCC will study whether deals between landlords and internet service providers raise prices for consumers as part of the Biden administration's push on increasing competition in the economy, according to Axios sources. (Axios)

FX

AUD/NZD - Some relative calm after the overnight storm for the Aussie that knee-jerked higher on the back of the RBA’s decision to press ahead with plans to trim bond purchases to Aud 4 bn/week from Aud 5 bn before recoiling in response to the decision to extend the QE timeframe to at least mid-February 2022 from mid-November this year due to a delay in the economic recovery and increased uncertainty associated with the Delta outbreak. To recap, markets were finely divided over the possibility of the Board aborting its planned tapering altogether or ploughing on, so a decent reaction in Aud/Usd and Aud/Nzd was almost guaranteed, but the headline pair is pulling back a bit further from circa 0.7469 to under 0.7400 and the cross is eyeing 1.0400 compared to just above 1.0450 at one stage even though the Kiwi is slipping back in sympathy between 0.7153-10 parameters after spiking alongside 10 year NZ yields vs its US peer.

DXY/CAD - Having dipped a solitary tick under Monday’s 92.105 Labor Day low, the index subsequently regained composure and sufficient momentum to notch a marginally higher high at 92.324 vs 92.314 against the backdrop of more pronounced bear-steepening in US Treasuries and other global bonds in the run up to this week’s heavy supply schedule. Moreover, the Greenback gleaned traction from the inability of several major counterparts to cash in when the pendulum was swinging in their favour. In terms of fundamentals, employment trends for August are rather obsolete given Friday’s official jobs data, so the Usd 58 bn 3 year note auction is likely to warrant more attention before the rest of the refunding and the US agenda picks up in general from tomorrow with the latest Fed Beige Book and speakers. Meanwhile, the Loonie has lost a bit more of its oil-powered impetus as WTI crude meanders and is also heading into Wednesday’s BoC policy meeting cautiously within a 1.2582-19 band.

EUR/CHF/GBP/JPY - All narrowly mixed against the Dollar and rangy, as the Euro continues to hold above 1.1850, but beneath 1.1900 irrespective of Eurozone surveys (like a weak ZEW) or data and is probably keeping counsel for the ECB instead, while the Franc is pivoting 0.9150 and hardly reacted to softer than expected Swiss jobless rates. Elsewhere, Sterling derived some support from BoE’s Saunders underlining his more hawkish leanings (see 8.34BST post on the Headline Feed for bullets), but not enough to revisit 1.3850+ peaks and is now probing the 1.3800 handle following a breach of the 200 DMA and 50 DMA. Similarly, the Yen is striving to keep afloat of 110.00 in wake of Japanese household spending missing consensus by a mile and before attention switches to Q2 GDP, Jule trade and current account balances plus August’s Economy Watchers Poll.

SCANDI/EM- Some underperformance in the Nok vs Sek and Eur as Norwegian manufacturing output reversed almost all of its prior month rise, while the Cnh/Cny are softer following mixed Chinese trade data and the Zar is weighing up softer Gold prices back beneath the 100 DMA vs stronger than anticipated SA Q2 GDP, with the latter not providing much of a counterbalance at present.

FIXED INCOME

The technical backdrop was never really that encouraging once Bunds and US Treasuries lost their powers of recovery overnight and Gilts resumed Liffe to find core debt counterparts in reverse gear, but the sheer volume of issuance appears to have been a major contributing factor to their subsequent downfall. Indeed, the latter hardly mustered a positive response to a very well received short-dated DMO sale given the impending 50 year offering and the 10 year debt future remains rooted near the base of a 128.13-42 range, while its German peer has fallen through a double bottom, 172.00 and trendline support at 171.75 on the way to 171.65 (-71 ticks on the day) amidst an abundance of EZ Green and Next Generation syndications and pipelines rather than relatively small German linkers. Similarly, USTs are weak and the curve steepening before Usd 58 bn 3 year notes kick off a holiday-compressed refunding remit.

EU is to issue EUR 80bln of long-term "Next Generation" bonds this year with the first issue planned for October 2021 via syndication. (Newswires)

COMMODITIES

WTI and Brent front month futures are choppy after the overnight upsipde momentum petered out as European players entered the fray. Prices had been hovering just above USD 69/bbl and USD 72.50/bbl, respectively before losing both levels with newsflow for the complex on the lighter side. Participants will notice a dichotomy between the intraday price changes due to the lack of WTI futures settlement yesterday on account of the US Labor Day holiday – with the weekly Private Inventory data also delayed until later today, whilst the EIA Weekly Petroleum Status Report is deferred to Thursday 16:00BST/11:00EDT. Over in the GoM, BSEE estimated approximately 83.9% of oil production in the Gulf of Mexico shut-in (prev. 88.3%), and about 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, albeit this is unlikely to affect policy in the near term as things stand. Elsewhere, spot gold and silver have been drifting lower in tandem with the rise in the Buck, although with technicals also bearing some weight in the absence of fresh catalysts. Spot gold fell back below its 100 DMA (USD 1,815/oz) and has sights on the 200 DMA (1,809.59/oz) at the time of writing. Similarly, spot silver hit a ceiling at its 50 DMA around 24.80/oz. Meanwhile, copper prices declined overnight – with LME still subdued and back under USD 9,500/t -as Chinese copper imports fell to over a 2yr low, whilst Chinese iron ore imports rose for the first time in five months. However, analysts believe this is short-lived given China's steel target reduction.

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)