• Equities are contained though Europe has a slight downside bias while US futures are bid, ES +0.3%
• In FX, the DXY is subdued and sub 92.50, peers firmer across the board and JPY leading the charge
• Chinese Industrial Production and Retail Sales data missed expectations
• South Korean military stated that North Korea fired two ballistic missiles; though, the US assess that there is no immediate threat
• Microsoft (MSFT) announced an up to USD 60bln share buyback programme and raised its quarterly dividend by 11%, +1.3% pre-market
• Looking ahead, highlights include Canadian CPI, US Industrial Production, New Zealand GDP, ECB's Lane & Schnabel, BoJ's Kuroda

CORONAVIRUS UPDATE

Pfizer (PFE) will apply for US approval in November to vaccinate young children between six months to five-years-old against COVID-19. (Newswires)

Regeneron (REGN) announced new US government agreement to acquire additional doses of its antibody cocktails in which it will supply extra 1.4mln 1,200mg doses of REGN-COV to the US government by January 31st next year. (Newswires)

AstraZeneca (AZN LN) was reportedly side-lined in Britain's COVID-19 vaccine booster dose drive with the government to offer either the Pfizer (PFE)/BioNTech (BNTX) vaccine or Moderna (MRNA) vaccine to all over 50s irrespective of their first two jabs. (Times)

Tokyo COVID-19 cases 1,052 vs prev. 1,004. (Newswires)

ASIA

Asia-Pac stocks mostly followed suit to the losses on Wall St where cyclicals underperformed and financials were hit as yields declined in the aftermath of the cooler-than-expected CPI print, with the region also digesting disappointing Chinese activity data. The ASX 200 (-0.3%) was pressured by weakness in financials and the commodity-related sectors including energy following similar underperformance stateside after oil prices whipsawed on Typhoon-related disruptions and details of the upcoming Chinese state reserve selling. Nikkei 225 (-0.5%) also suffered due to recent inflows into the currency and with sentiment not helped by the weaker-than-expected Machinery Orders, while the KOSPI (+0.2%) bucked the trend after the Unemployment Rate fell to a record low in August, and with the index unfazed by a ballistic missile launch from North Korea. The Hang Seng (-1.8%) and the Shanghai Comp. (-0.2%) were dampened following the miss on Chinese Industrial Production and Retail Sales data, but the indices were off worse levels as the poor data spurred calls for easing and with the state bureau also trying to paint the economy in a good light, whereby it suggested that main economic indicators still maintained fairly good growth in August and economic operations are still in recovery. Furthermore, the PBoC announced a CNY 600bln MLF operation to fully rollover this month’s maturities and US President Biden refuted reports that he was turned down by Chinese President Xi during their call last week for a face-to-face meeting. Hefty losses however remained for Hong Kong-listed casino stocks which were down by double-digit percentages as Macau begins gaming law revision and licence consultations. Finally, 10yr JGBs gained with prices helped by the risk aversion and post-CPI bull flattening stateside, while the BoJ were also in the market today for over JPY 1.3tln of JGBs with 1-10yr maturities.

PBoC injected CNY 600bln via 1-year MLF vs CNY 600bln maturing with the rate maintained at 2.95% and the central bank 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 6.4492 vs exp. 6.4470 (prev. 6.4500)

US President Biden reportedly proposed a face-to-face meeting with Chinese President Xi during their call last week, although President Xi did not respond. However, President Biden later said it was untrue that Chinese President Xi turned him down for a meeting. (Newswires/FT)

Wall Street executives and Chinese officials are reportedly set to conduct a virtual meeting. In other news, China is to launch targeted measures for small exporters, according to local press citing the Vice Commerce Minister. (Newswires/China Securities Journal)

China stats bureau said major macro economic indicators are in a reasonable range and foundation for economic recovery needs to be consolidated. It also stated that the main economic indicators still maintained fairly good growth in August and economic operations are still in recovery, while it added that online consumption continued to be active. (Newswires)

• Chinese Industrial Production YY (Aug) 5.3% vs. Exp. 5.8% (Prev. 6.4%)
• Chinese Retail Sales YY (Aug) 2.5% vs. Exp. 7.0% (Prev. 8.5%)
• Chinese Fixed Assets Investment Rural YY (YTD)(Aug) 8.9% vs. Exp. 9.0% (Prev. 10.3%)
• Chinese China House Prices YY (Aug) 4.2% (Prev. 4.6%)
• Japanese Machinery Orders MM (Jul) 0.9% vs. Exp. 3.1% (Prev. -1.5%)
• Japanese Machinery Orders YY (Jul) 11.1% vs. Exp. 15.7% (Prev. 18.6%)

US

White House adviser Deese said Delta variant has a short-term impact on jobs and but added that the labour market is on the right path. (Newswires)

US Treasury suspended former President Trump administration's changes to Fannie Mae and Freddie Mac share agreements. (Newswires)

Microsoft (MSFT) announced an up to USD 60bln share buyback programme and raised its quarterly dividend by 11%. (Newswires)

UK/EU

UK CPI YY (Aug) 3.2% vs. Exp. 2.9% (Prev. 2.0%); MM (Aug) 0.7% vs. Exp. 0.5%

• Core CPI YY (Aug) 3.1% vs. Exp. 2.9% (Prev. 1.9%); MM (Aug) 0.7% vs. Exp. 0.4%

UK cabinet reshuffle to take place after PMQs (~12:00BST/07:00EDT), according to several sources cited by Politico's Casaliccho. (Twitter)

France-UK power cable to be out of action until October 13th, at the earliest. (Newswires)

GEOPOLITICAL

North Korea fired an unidentified projectile in the east which Japan's coast guard said appeared to be a missile, while the South Korea military later stated that North Korea had fired two ballistic missiles. Japan's Defence Ministry warned that North Korea's ballistic missile test poses a threat to the world. Furthermore, Japanese PM Suga said North Korea's launch of what was identified as a ballistic missile is outrageous and he strongly condemns this latest action. (Newswires/Yonhap) US military assess that the most recent N. Korea missile launch does not pose an immediate threat to the US or its allies. (Newswires)

South Korea has developed a new ballistic missile capable of launching a larger warhead, a new supersonic cruise missile. PM Moon has attended a successful test of a submarine-launched ballistic missile. (Newswires)

China is testing its air defence forces in Tibet against possible Indian missiles or jets, according to state media. (SCMP)

The top Iranian international negotiator Araghchi has been replaced by JCPOA critic Kani. (Newswires)

US Republican Senator Graham and House Republican Waltz introduced resolutions calling on Secretary of State Anthony Blinken to designate the Taliban as a terrorist organization and to freeze all Afghanistan government assets held in the US. (Axios)

Saudi air defenses have destroyed a drone launched by Yemen's Houthis towards Abha airport, Al Hadath. (Newswires)

EQUITIES

Bourses in Europe have adopted a downside bias (Euro Stoxx 50 -0.1%; Stoxx 600 -0.1%) vs the mixed/uninspiring start seen at the cash open and following on from a mostly downbeat APAC handover. US equity futures have been edging higher in during the morning, but the magnitude of the price action is again contained, with the tech-laden NQ (+0.3%) narrowly outperforming the cyclically induced RTY (+0.1%) in a continuation of the divergence seen post-US CPI. Back to Europe, sectors are mostly negative but one of the few in the green include Oil & Gas – spurred on by the gains across the energy complex, whilst Banks also see some consolidation following yesterday’s hefty yield-induced losses. The downside meanwhile features more cyclical names, such as Retail and Travel & Leisure, in what seems to be a continuation of the value unwind seen post-US CPI yesterday. In terms of individual movers, Deliveroo (+1.4%) holds onto gains following a deal with Amazon, although competitor Just Eat Takeaway (-4.0%) is subsequently hit. Elsewhere, Lagardere (-3.5%) shares fell after Le Point reported that its HQ was raided yesterday in relation to "abuse of power, presentation of inaccurate accounts, dissemination of false or misleading information, abuse of corporate assets and vote buying". Daimler (+0.6%) is supported by commentary from its CFO, who expects Mercedes to return to more normal performance in Q4 and confirmed FY21 profit margin guidance. Meanwhile, the pre-market saw earnings from the likes of Darktrace (+9.0%), Fevertree (+1.5%), Inditex (-1.5%), Mediaset (+1.4%), and Tullow Oil (+6.6%).

Microsoft (MSFT) announced an up to USD 60bln share buyback programme and raised its quarterly dividend by 11%. (Newswires) +1.3% in pre-market trade

FX

JPY/GBP/DXY - The Yen has extended post-US CPI gains vs the Dollar to probe 109.50 irrespective of underwhelming Japanese machinery orders data or a marginal back-up in Treasury yields and curve realignment from flatter levels. Instead, Usd/Jpy and Yen crosses appear to be moving in line with bearish technical impulses and an element of safe-haven positioning amidst several geopolitical developments that could flare up, like North Korea’s latest ballistic missile tests, China testing its air defence forces in Tibet against possible Indian missiles or jets, according to state media cited by SCMP, and Saudi air defenses destroying a drone launched by Yemen's Houthis towards Abha airport, Al Hadath. However, the headline pair may yet find underlying bids into 109.00 and 1.4 bn option expiry interest between 109.60-70 could also sap strength from the Yen ahead of trade data tomorrow. Meanwhile, Sterling is back on a firmer footing in wake of a clean sweep of forecast topping UK inflation metrics, including headline and core CPI eclipsing the upper end of the BoE’s target band, with Cable regaining 1.3800+ status and testing the 200 DMA at 1.3830. Conversely, the Buck’s broad bounce is waning, as the index slips back from 92.683 through 92.500 in the run up to more data (Empire State, import/export prices, ip and cap u).

AUD/NZD/EUR/CAD/CHF - All clawing back ground against the Greenback after their flip-flop or knee-jerk advances on Tuesday, with the Aussie forming a base above 0.7300 pre-labour report, the Kiwi creeping over 0.7100 again in time for NZ Q2 GDP, the Euro securing a firmer grip of the 1.1800 handle, the Loonie rebounding from sub-1.2700 before Canadian CPI and Franc continuing its revival from lows some way under 0.9200.

SCANDI/EM - Notable Nok outperformance, and aside from the latest Norges Bank regional survey underscoring overwhelming expectations for a hike this month, Brent is offering more traction as it eyes Usd 74.50/brl and also give the Rub a boost. Elsewhere, the Mxn is riding a WTI wave beyond Usd 71/brl after a bigger than anticipated API crude drawdown and the Zar is bouncing, albeit belatedly, as Gold pivots Usd 1800/oz, while the Cnh and Cny have shrugged off disappointing Chinese retail sales and ip on general Usd weakness and relief that the PBoC opted to roll the 1 year MLF in full.

FIXED

Bunds are at the forefront of a decent bond bounce from post-UK inflation release lows, and regardless of the fact that Eurozone ip also exceeded expectations by a big margin. Of course the latter was preempted by national releases and Germany beating consensus handsomely, while Gilts are also grinding higher in wake of a solid 10 year DMO auction, albeit not as strong as the previous 2031 sale even though the average yield was close to 75 bp. The core EU benchmarks have forged fresh intraday peaks within 171.99-66 and 128.07-127.79 extremes on Eurex and Liffe respectively, while US Treasuries are essentially flatlining ahead of NY Fed manufacturing, import/export prices, ip and cap u.

COMMODITIES

WTI and Brent front month futures are once again on a firmer footing, with the contracts extending upside in early European trade in conjunction with the cash open. News flow for the complex has been light to spur the upside, but the strength does come amid a larger-than-expected draw in the weekly Private Inventory data alongside bullish internals ahead of today’s DoEs – with the headline looking for a draw of 3.54mln barrels. The complex this week also saw bullish commentary from both OPEC and the IEA, which could be acting as wind in the sails. Meanwhile, from a COVID standpoint, the booster programme is poised to set off, particularly in the UK, which abates fears of a persistent slowdown in activity by the Delta COVID variant. WTI Oct’ has topped USD 71.50/bbl (vs low 70.65/bbl) whilst Brent Nov’ trades north of USD 74.50/bbl (vs low 73.78/bbl). Meanwhile in terms of gas, Norway’s Equinor is ramping up gas production where possible to meet the European demand and expects fundamentals behind the high European gas prices to continue into autumn and winter. Gas prices have since firmed, +2.4% last for the NG Oct’ contract. Elsewhere spot gold and silver are relatively flag with a mild divergence, spot gold trades on either side of the USD 1,800/oz mark which coincides with its 21 DMA. Several other DMAs reside in close proximity including the 50 DMA (1,798/oz), 200 DMA (1,807/oz), and the 100 DMA (1,815/oz). Turning to base metals. LME copper is firmer and attempts to gain a firmer footing above USD 9,500/t following yesterday’s declines. Meanwhile, the Chilean Copper Commission downgraded its average copper price projection to USD 4.20/lb for 2021 vs prev. USD 4.30/lb, whilst maintaining its 2022 forecast as USD 3.95/lb. Dalian iron ore futures overnight slid to a nine-month low amid compounding demand concerns, according to desks.

Kremlin notes that the quick launch of Nord Stream 2 would balance gas prices in Europe, including in the spot market; gas exports to Europe by Rosneft have repeatedly been raised, with no decision taken. (Newswires)

Goldman Sachs recommends that gas consumers protect themselves via out-of-the-money calls for the winter period, under extreme scenarios. (Newswires)