• European/US equity futures diverge with US benchmarks under modest pressure ahead of US data
• DXY is firmer with peers pressured across the board ex-NZD; core debt is subdued as short-lived consolidation fizzled out
• US, UK and Australia agreed on a new security partnership for the Indo-Pacific region
• UK ministers are to announce that vaccinated travelers will no longer be required to take a COVID test before entering England
• China's NDRC announced it will sell additional copper, aluminium and zinc reserves
• Looking ahead, highlights include US Philadelphia Fed, Initial/Continued Jobless Claims, Retail Sales and ECB's Lagarde

CORONAVIRUS UPDATE

Pfizer (PFE) and Moderna (MRNA) said protection from their COVID-19 vaccines waned over time with Pfizer noting that efficacy fell about 6% every two months following the second dose. However, other reports noted that Moderna new data shows its vaccine remains highly effective against COVID-19 in real-world effectiveness study during the surge in Delta cases and the Co. believes data supports the benefit of an MRNA-1273 booster dose. (Newswires/FT)

UK ministers are to announce that vaccinated travellers will no longer be required to take a COVID test before entering England under new proposals in which the green and amber destinations will be merged into of category of safe destinations, while there will be a separate list of “no go” countries which hotel quarantines will be required. (FT)

ASIA

Asian equity markets traded mostly lower as the region failed to sustain the momentum from Wall St where all major indices finished higher after risk appetite was spurred by stronger than expected NY Fed Manufacturing data and with plenty of attention on a bullish note from JPMorgan which expects the SPX to reach 4,700 by the end of 2021 and surpass 5,000 in 2022 on better-than-expected earnings. The ASX 200 (+0.6%) was led higher by the energy sector following similar outperformance stateside after oil prices surged by more than 3% during the prior session amid the constructive mood across risk assets and recent bullish inventory data, with Australian defence contractor Austal among the biggest gainers in the local benchmark after the US, UK and Australia announced a new security partnership for the Indo-Pacific region in which the US will provide Australia with the capability to deploy nuclear-powered submarines in an effort to counter China. The Nikkei 225 (-0.6%) failed to hold on to early gains with sentiment dampened by recent currency strength and weaker than expected Exports data, while the KOSPI (-0.7%) was pressured following hawkish rhetoric from North Korea concerning the recent missile launch which was from a new railway-borne missile system and reportedly serves as an efficient counter strike weapon to threatening forces. The Hang Seng (-1.5%) and Shanghai Comp. (-1.3%) declined with Hong Kong pressured by underperformance in the property sector and with several casino names extending on yesterday’s slump amid regulatory concerns. Sentiment was also clouded by the recent ‘AUKUS’ partnership to counter China and ongoing Evergrande default woes with Co. shares at decade lows and its onshore bonds suspended after Chinese authorities told lenders not to expect any interest payments due next week and following the credit rating downgrade by S&P due to depleted liquidity. Finally, 10yr JGBs were kept rangebound as headwinds from the selling in USTs were offset by the lacklustre risk appetite in Asia and with demand also sapped by weaker metrics from this month's 20yr JGB auction.

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 6.4330 vs exp. 6.4354 (prev. 6.4492)

China is reportedly probing 'blind-box' funds for compliance regarding their investment positions and if they adhere to the stated contractual terms. (China Securities Journal)

China Vice Premier Liu He says he will explore ways to help alleviate pressure from rising costs on small firms; will use capital markets to help small firms. (Newswires)

Japanese Chief Cabinet Secretary Kato said they are considering convening an extraordinary session of Parliament on October 4th to select a new PM. There were also comments from LDP leadership contender Kono that they cannot change monetary policy radically due to the pandemic hit to the economy and that the must offer tax exemptions to companies that boost distribution of wealth to workers, while he added that any new stimulus package must first lay out targets before deciding the size of spending and should prioritise spending on 5G and renewable energy. (Newswires)

A large earthquake has occurred near Noto, Ishikawa Prefecture in Japan. (Newswires)

• Japanese Trade Balance Total Yen (Aug) -635.4B vs. Exp. -47.7B (Prev. 441.0B, Rev. 439.4B)
• Japanese Exports YY (Aug) 26.2% vs. Exp. 34.0% (Prev. 37.0%)
• Japanese Imports YY (Aug) 44.7% vs. Exp. 40.0% (Prev. 28.5%)

US

US House Ways and Means Committee advanced the plan to increase taxes on the wealthy and corporations in US as part of the Democrats' reconciliation spending bill which moves the tax plan to House negotiations on the full reconciliation bill. (Newswires)

Treasury Secretary Yellen called Senate Minority Leader McConnell on Wednesday to discuss the debt-limit situation, according to Punchbowl citing sources, however, it doesn’t sound like much progress was made. (Punchbowl)

UK/EU

UK Tory part staff were told by the new party co-chairman Oliver Dowden to start preparing for a general election which could come in around 20 months' time. (Telegraph)

German election SPD candidate Scholz, current poll front-runner, and finance minister/deputy Chancellor is to be questioned by MPs regarding the money laundering scandal on September 20th. (FT)

ECB's Rehn says growth is still robust but still needs support as outlook is clouded by bottlenecks and virus variants; rate hike not yet in sight but will one day happen so govts should prepare; they will most likely make a decision on PEPP in December. (Newswires)

GEOPOLITICAL

US, UK and Australia agreed on a new security partnership for Indo-Pacific region in which the US will provide Australia with capability to deploy nuclear-powered submarines but will not provide it with nuclear weapons and the submarines will not be deployed with atomic weaponry, while the leaders also plan further collaboration to enhance joint capabilities in range of areas including cyber, artificial intelligence and quantum technologies. It was also noted that US President Biden did not inform Chinese President Xi of the new partnership in their recent call but did tell him the US is determined to play a strong role in the region. Furthermore, President Biden stated that they will work to build a free and open Indo-Pacific and said this is about investing in alliances and updating them to meet threats. (Newswires)

US President Biden will host UK PM Johnson at the White House next week. (Newswires)

China's embassy in Washington said that countries should shake off their cold-war mentality and ideological prejudice, in response to the US, UK and Australia security pact; subsequently, China's Foreign Ministry says Australia, US and UK are damaging regional peace and stability. There were also separate comments from Australian PM Morrison who confirmed that they will halt submarine program with France and said that Australia's missile strike capability is to be improved, while New Zealand PM Ardern stated that Australian nuclear subs will be banned from New Zealand waters. (Newswires)

China Global Times noted that China is to take a necessary response to UK Parliament's ban of the Chinese ambassador and possible retaliation includes suspending or terminating trade and other exchanges, according to observers. Furthermore, it noted that London should adjust its mindset on China and that bungling bilateral ties would be detrimental for the UK, citing observers. (Twitter)

In terms of the details regarding North Korea’s test fire on Wednesday, it was from a new railway-borne missile system which serves as an efficient counter strike weapon to threatening forces, according to state media. (KCNA)

EQUITIES

Stocks in Europe have conformed to a more constructive risk mood (Euro Stoxx 50 +0.7%; Stoxx 600 +0.6%) after experiencing a mixed open, which followed on from a varied APAC session that saw Mainland China and Hong Kong under pressure. US equity futures, meanwhile, have seen a divergence from Europe and trade modestly softer ahead of US retail sales. Back to Europe, bourses experience broad-based gains with marginal underperformance in the FTSE 100 (+0.5%) – weighed on by the underperforming Basic Resources sector (the only sector in the red) as base metals remain pressured. On the flip side, Travel & Leisure stands as the outperformer amid tailwinds from a Ryanair (+6.3%) traffic growth guidance update, alongside reports that UK ministers are to announce that vaccinated travellers will no longer be required to take a COVID test before entering England under new proposals – also supporting the likes of easyJet (+3.3%) and IAG (+2.7%). Banks are bolstered by the higher yield environment whilst Oil & Gas continue to cheer oil prices north of USD 70/bbl. Overall, the sectors do portray somewhat of an anti-defensive bias. In terms of individual movers, Continental (-11%) listed its drive division, Vitesco Technologies, on the Dax 30 today. Vitesco will be listed as an additional value on the Dax for today only, after which it will not be eligible for a regular place in the bourse and will be demoted accordingly. Elsewhere, Thales (+1.3%) and Safran (+2.6%) have shrugged reports that Australia terminated its submarine programme with France.

FX

EUR/DXY - Bears have been prowling and knocking hard on the door for a while in Eur/Usd following a couple of dead cat bounces, but no material recovery rallies beyond 1.1850 and the pressure has finally told as underlying bids around 1.1800 are filled or pulled. Moreover, the headline pair has breached technical support just shy of the round number in the form of 21 and 50 DMAs that align at 1.1798 today and is now probing new post-ECB lows around 1.1766 amidst almost all round Euro weakness that has pushed Eur/Gbp down towards a double bottom around 0.8510 and Eur/Jpy through 129.00. Conversely, the Buck has regrouped and recharged after another retreat below 92.500 in the index, albeit shallower in wake of Wednesday’s strong NY Fed manufacturing survey that helped to erase post-CPI losses and more. Indeed, the DXY has rebounded further towards Monday’s current w-t-d peak (92.887) to 92.794 and cleared a couple of chart hurdles along the way, including its 50 and 21 DMAs, at 92.635 and 92.694 respectively. Ahead, jobless claims, retail sales and the Philly Fed.

CHF - The major casualty or loser in the face of the Greenback revival, as Usd/Chf retests recent 0.9240+ highs, but the Franc is not benefiting from Euro weakness given that the Eur/Chf cross is holding firmly above 1.0850, and this could be a sign of official intervention or simply caution ahead of next Thursday’s Quarterly SNB policy review.

AUD/GBP/CAD - All unable to evade the clutches of their US counterpart, and the Aussie also labouring within a 0.7347-09 range in wake of a disappointing jobs report that only beat consensus in unemployment rate terms due to a fall in labour market participation caused by COVID-19 lockdowns. Meanwhile, Sterling is back under the 200 DMA and hovering near 1.3800 irrespective of the aforementioned outperformance against the Euro and another bank revising its BoE rate outlook to forecast an earlier hike on the back of yesterday’s hot UK inflation data (GS now seeing tightening in May 2022). Elsewhere, the Loonie has stalled on approach to 1.2600 alongside a pull-back in crude and now eyeing Canadian housing starts before wholesale trade following similarly frothy CPI prints on Wednesday.

NZD/JPY - The Kiwi is bucking the overall trend and still clinging to the 0.7100 handle, while consolidating gains vs its Antipodean peer around 1.0300 with bullish impetus from NZ Q2 GDP surpassing expectations significantly to ensure the domestic economy entered pandemic restrictions on a very solid footing. Conversely, the Yen has broadly overlooked a much wider than anticipated Japanese trade deficit impacted by exports missing the mark by some distance, as Usd/Jpy meanders between 109.46-21 parameters, albeit off midweek lows closer to 109.00.

SCANDI/EM/PM - The Sek and Nok remain firm with assistance from Eur frailty, but EM currencies are depreciating vs the Usd and Gold has reversed beneath more DMAs and a cluster of lows to trip some stops said to be sitting around Usd 1780/oz.

FIXED

Gilts managed to carve out a marginal new recovery high at 127.68 vs Wednesday’s 127.83 Liffe settlement price, but the bounce and bout of consolidation was short-lived given the more recent retreat to a fresh intraday low of 127.42 (-41 ticks) in wake of GS joining others with an earlier call for the BoE to raise rates, and pile further pressure on the already underperforming Short Sterling strip. However, selling upticks remains the trend and profitable strategy elsewhere, as Bunds remain underwater and the 10 year T-note near its 133-08+ overnight base awaiting a raft of top-tier US data and the Philly Fed to see if the Empire State was a flash in the pan.

COMMODITIES

WTI and Brent front month futures are choppy and essentially flat intraday at the time of writing, with the former around USD 72.50/bbl (72.34-99 range) and the latter around USD 75.50/bbl (75.21-87). News flow for the sector has been relatively light, but prices remain elevated near recent highs. The morning saw constructive commentary from Ryanair, which feeds into jet fuel demand. On the flip side, Libya's NOC announced the resumption of crude exports from the Sidra and Ras Lanuf ports following protests. It's also worth being cognizant of potential Chinese intervention at these levels via the release of state reserves, as Chinese PPI last month remained elevated partially on crude prices – and Beijing also pledged continued efforts to stabilise prices if needed. On that note, China announced the release of another batch of copper, aluminium and zinc from state reserves to guide prices gradually lower to a reasonable range. As such, LME metals are mostly lower but off worst levels, although copper remains under USD 9,500/t. Turning to precious metals, spot gold and silver are on the backfoot as they fall victim to the firmer Dollar, with the former losing further ground under USD 1,800/oz (1,796-81 range) and the latter back to levels around USD 23.50/oz (23.96-54 range).

China's NDRC said prices of copper, aluminum and zinc are still running at a high level, and the relevant authorities will continue to release material reserves to ensure prices will gradually return to reasonable ranges; follows the NDRC saying it will sell additional copper, aluminium and zinc reserves. (Newswires)

India's GST Council is likely to discuss increasing GST rates on iron, copper, aluminium, lead and zinc ores to 18% from 5%, according to sources. (Newswires)