• Asia-Pac stocks eventually followed suit to the mostly positive handover from the US; US equity futures traded with mild gains overnight
• In FX, DXY remained lacklustre, EUR/USD and GBP/USD were little changed, USD/JPY held onto 110.00 and AUD was pressured
• RBA Governor Lowe said it is difficult to understand markets pricing in of hikes in 2022 and 2023
• UK ministers are said to be mulling axing pre-departure COVID tests to “low risk” countries for the fully-vaccinated, according to The Telegraph
• NHC said Nicholas has strengthened into a hurricane with strong winds and storm surges in portions of the central and upper Texas coasts
• Looking ahead, highlights include the UK Jobs Report, US CPI, Norges Bank Regional Network Report, IEA MOMR, supply from the Netherlands, Italy, UK and Germany

CORONAVIRUS UPDATE

Merck (MRK) CEO expects clinical data on COVID vaccine in H2 of this year, and possible EUA before year-end. (Newswires)

A UK COVID booster programme will be confirmed later, the BBC understands. The booster would be a single dose of the Pfizer (PFE) vaccine at least six months after a second dose. The programme will reportedly be similar to the proposals published by vaccine experts in June, which suggest over 70s and high-risk individuals will be vaccinated first, before expanding to all adults over 50. (BBC) UK Department of Health and Social Care said children aged 12-15 will be offered the COVID-19 vaccination beginning next week. (Newswires)

UK ministers are said to be mulling axing pre-departure COVID tests to “low risk” countries for Britons who have been fully vaccinated. Cheaper lateral flow tests may however be needed for travellers from “high risk” red list countries and unvaccinated arrivals. (Telegraph)

Australia's New South Wales reported 1,127 new locally transmitted COVID-19 cases and Victoria state reported 445 news cases, while Canberra's COVID-19 lockdown is to be extended for an additional four weeks. (Newswires)

ASIA

Asia-Pac stocks eventually followed suit to the mostly positive handover from the US, where a late rebound helped Wall Street snap a five-day losing streak but with gains capped ahead of US CPI data. The ASX 200 (+0.1%) traded with a non-committal tone for most of the session as outperformance in energy was offset by losses in the tech sector and although New South Wales posted its lowest daily COVID infections in almost two weeks, this was still over 1,100 cases and there was also the announcement of a four-week lockdown extension for Canberra. The Nikkei 225 (+0.5%) gained as exporters cheered a weaker currency which briefly lifted the index to its highest in more than three decades, while the KOSPI (+1.1%) outperformed despite the lack of fresh catalysts aside from South Korean President Moon targeting fully vaccinating 70% of the population by the end of next month. The Hang Seng (-0.2%) and the Shanghai Comp. (-0.2%) were lacklustre ahead of tomorrow’s activity data and speculation the PBoC may not fully roll over this month’s MLF maturities, while the focus was on China Evergrande with the Co.’s May 2023 Shanghai exchange-traded bond paused due to abnormal fluctuations in which it rose by nearly 23% on denial of bankruptcy rumours, although its actual shares were down 10% after it flagged a continued significant decline in contract sales and is exploring asset sales, as well as hired financial advisers to assess its capital structure. Finally, 10yr JGBs were subdued as Japanese stocks traded at 31-year highs and amid the uninspired picture for T-notes and Bund futures, while firmer demand at the enhanced liquidity auction for longer-dated JGBs failed to inspire underlying bond prices.

PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires)PBoC set USD/CNY mid-point at 6.4500 vs exp. 6.4490 (prev. 6.4497)

Japanese environment minister Koizumi would reportedly support vaccine minister Kono for LDP leadership and it was also noted that Ishiba will not contend in the race to replace PM Suga. (Newswires)

US President Biden is to host an in-person summit with leaders of Australia, India and Japan at the White House on September 24th and will focus on COVID, climate, emerging technologies and cyberspace, and promoting a free and open Indo-Pacific. (Newswires)

UK/EU

The UK government became a shareholder in more than 150 companies during the pandemic after spending about GBP 1.1bln to support 1,190 companies through the Future Fund and with about 158 of the companies converting the loans into equity stakes. (Guardian)

UK Trade Minister Truss said the UK should look to Asia’s booming market for growth. (Times)

FX

In FX, the DXY remained lacklustre near the 92.50 level after the prior day’s rangebound performance amid the choppy risk tone and ahead of looming US CPI data. EUR/USD consolidated after having recovered from a recent brief slip to beneath the 1.1800 handle and its nearby 50-DMA. GBP/USD was little changed amid a lack of pertinent newsflow with the pair contained between resistance at 1.3850 and a floor near its 200-DMA of 1.3831. USD/JPY held on to the 110.00 status and JPY-crosses were kept afloat amid the gains in Japanese stocks, while antipodeans were constrained despite the firmer than expected Home Price data from Australia and improved NAB Business Surveys with AUD/USD later pressured by comments from RBA Governor Lowe who reiterated that the OCR is unlikely to rise before 2024, as well as noted it is difficult to understand markets pricing in of hikes in 2022 and 2023. Furthermore, Lowe sees Q3 GDP likely to shrink by at least 2% with the risk of a significantly larger contraction and suggested that inflation temporarily above 3% would not be a problem.

RBA Governor Lowe said the Delta outbreak has delayed but not derailed the recovery and reiterated the OCR is unlikely to rise before 2024, while he noted it is difficult to understand markets pricing in of hikes in 2022 and 2023. Lowe added that rates might increase in other countries but domestic factors are different and that the board judged fiscal policy is best response to current Delta lockdowns. Lowe sees Q3 GDP likely to shrink by at least 2% with risk of a significantly larger contraction and stated they cannot keep buying bonds forever with purchases likely to stop sometime next year. Furthermore, he stated that they need to see unemployment in low 4's to lift wages and that inflation temporarily above 3% would not be a problem. (Newswires)

Norway's centre-left oppositions parties were seen to win the parliamentary election according to projections from VG, NRK, and TV2. It was later reported that Norway's conservative incumbent-PM Solberg called Labour Leader Store to concede the election. (Newswires)

• Australian NAB Business Confidence (Aug) -5 (Prev. -8.0)
• Australian NAB Business Conditions (Aug) 14 (Prev. 11.0)
• Australian Home Price Index (Q2) 6.7% vs. Exp. 6.0% (Prev. 5.4%)

COMMODITIES

WTI crude futures extended on the prior day's gains and to test the USD 71.00/bbl level to the upside as Hurricane Nicholas threatens disruptions along the Texas coast. Gold prices were rangebound beneath USD 1800/oz amid an uneventful Greenback and heading into today's US CPI data, while copper flatlined amid the tentative risk tone in Asia and indecision in its largest buyer China.

BSEE Gulf of Mexico production shut-in at 43.6% or 794k BPD Monday (prev. 49% on Sunday, and 66% on Friday). (Newswires)

NHC said Nicholas has strengthened into hurricane with strong winds and storm surges in portions of the central and upper Texas coasts. (Newswires)

Houston Ship Channel halted inbound and outbound transit activity ahead of Tropical Storm Nicholas and Corpus Christi pilots suspended boardings due to heavy seas as tropical storm Nicholas approaches the Texas coast. In related news, Citgo Corpus Christi, Texas refinery is being secured ahead of Tropical Storm Nicholas and Occidental (OXY) said facilities are implementing procedures ahead of Tropical Storm Nicholas, while Exxon Mobil (XOM) said it has begun preparing for severe weather at its Baytown and Beaumont refineries and complexes. Furthermore, Phillips 66 (PSX) said Sweeny refinery and midstream assets along Texas coast, as well as the Lake Charles plant in Louisiana have activated Hurricane preparedness ahead of Storm Nicholas but noted there was no impact to operations at this time. (Newswires)

Marathon's Galveston Bay, Texas refinery (593k bpd) plans normal output through the tropical storm and Motiva was also said to have increased staff and plans normal operation at its Port Arthur, Texas refinery (636.5k bpd). Furthermore, Valero Port Arthur, Texas refinery (636.5k bpd) was planning normal operations and Lyondell's Houston refinery (268k bpd) will also maintain output throughout the storm, according to sources. (Newswires)

Shell (RDSA LN) said its Appomattox, Enchilada/Salsa and Auger assets in Gulf of Mexico continue to increase output, while its Mars, Ursa and Olympus assets remain shut in. (Newswires)

GEOPOLITICAL

Gulf Arab official said Afghanistan is an earthquake that raises questions about whether the US' Arab allies can rely on Washington and that they are likely to see a struggle over the region between China and Pakistan on one side, and India, Iran, and Russia on the other. (Newswires)

White House said it remains prepared to engage diplomacy with North Korea toward objective of denuclearisation of the Korean Peninsula. (Newswires)

US

The Treasury curve bull-flattened by 3bps amid touted short-covering ahead of CPI data, with rumours around a soft print, although flows were mixed in light trade. By settlement, 2s -0.2bps at 0.215%, 3s -0.7bps at 0.441%, 5s -1.1bps at 0.805%, 7s -1.4bps at 1.106%, 10s -1.7bps at 1.324%, 20s -2.5bps at 1.835%, 30s -2.8bps at 1.906%; TYZ1 volumes were very low. 5yr TIPS +3.7bps at -1.794%, 10yr TIPS +2.9bps at -1.037%, 30yr TIPS +1.0bps at -0.339%. SOFR and EFFR both unchanged at 5bps and 8bps, respectively. Eurodollars bull-flattened in line with the Treasury curve. The curve was bid through into the NY handover, with one desk noting CTAs out covering shorts along with specs, however, that was offset somewhat by hedge funds selling in the long-end, as well as sales tied to the chunky IG new issue pipeline. There were some additional headwinds for bond bulls on the back of "deeper-than-thought" inflation comments from industrial giant 3M (MMM), which were accentuated by the latest NY Fed consumer inflation expectations rising to new survey highs – participants will look for further confirmation on consumer sentiment in the prelim. UoM survey Friday. T-Notes hit session highs of 133-12+ before paring slightly into the NY afternoon. T-note (Z1) futures settle 4+ ticks higher at 133-09+.

US SEC Chair Gensler said SEC staff are examining five market structure projects and wants to make the US Treasury market more resilient, while it may make Treasury platforms register with the SEC. (Newswires)

US senior Senate Republicans reportedly threatened to block Treasury nominations if the Biden administration doesn't blacklist the Nord Stream 2 firm. (Newswires)

An Israeli cyber arms dealer exploited new Apple (AAPL) iPhone software vulnerability which affects most versions of the device, according to researchers, but Apple has since fixed the vulnerability. (Newswires)