• Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers; US equity futures drifted higher overnight
• In FX, the DXY was subdued below 94.00; Kiwi outperformed while USD/JPY topped 114.00
• UK government spokesperson said there is “still a substantial gap” between the UK and the EU on the Northern Ireland Protocol
• US State Department spokesperson said they are "engaged in diplomacy" with OPEC+ members regarding output
• Bitcoin (BTC) Futures ETF was reported to not face opposition from the SEC, according to sources
• Looking ahead, highlights include NY Fed Manufacturing, Retail Sales, University of Michigan, Fed's Williams, Bullard
• Earnings from Goldman Sachs, Prologis, Schwab, Truist Financial, PNC Financial Services

CORONAVIRUS UPDATE

US President Biden expects final FDA and CDC decision on Moderna (MRNA) and J&J (JNJ) boosters in the coming weeks. In relevant news. Moderna announced that the FDA advisory committee unanimously voted to approve emergency use of a booster does of its COVID-19 vaccine and it estimates that a booster of up to 50mg dose level could result in as many as 1bln additional doses, while it was also reported that the US FDA will send Merck’s (MRK) COVID-19 pill to an advisory committee for review and is using a public forum to discuss any safety concerns ahead of a potential authorization. (Newswires)

ASIA

Asia-Pac stocks traded higher amid tailwinds from the upbeat mood across global peers including the best day for the S&P 500 since March after strong US bank earnings, encouraging data and a decline in yields spurred risk appetite. The ASX 200 (+0.7%) was positive as the tech and mining sectors continued to spearhead the advances in the index in which the former took impetus from Wall St where the softer yield environment was conducive to the outperformance in tech, although mining giant Rio Tinto was among the laggards following weaker quarterly production results. The Nikkei 225 (+1.5%) was buoyed as exporters benefitted from the JPY-risk dynamic but with Fast Retailing failing to join in on the spoils despite an 88% jump in full-year net as its profit guidance underwhelmed with just 3% growth seen for the year ahead, while Taiwan's TAIEX (+2.2%) surged with the spotlight on TSMC earnings which reached a record high amid the chip crunch and with the Co. to also build a factory in Japan that could receive JPY 500bln of support from the Japanese government. The Hang Seng (+0.6%) and Shanghai Comp. (+0.3%) were initially indecisive amid the overhang from lingering developer default concerns although found some mild support from reports that China is to relax banks' mortgage limits through the rest of 2021. Focus was also on the PBoC which announced a CNY 500bln MLF operation, although this just matched the amount maturing this month and there are mixed views regarding prospects of a looming RRR cut with ANZ Bank's senior China strategist recently suggesting the potential for a 50bps cut in RRR or targeted MLF as early as today, although a recent poll showed analysts had pushed back their calls for a RRR cut from Q4 2021 to Q1 2022. Finally, 10yr JGBs marginally pulled back from this week’s advances after hitting resistance at the 151.50 level, with demand hampered amid the firm gains in Japanese stocks and the lack of BoJ purchases in the market today.

PBoC injected CNY 500bln in 1-year MLFs vs. CNY 500bln maturing with the rate maintained at 2.95%, while the central bank also injected CNY 10bln via 7-day reverse repos with the rate at 2.20% for a net neutral daily position. (Newswires)

• PBoC set the USD/CNY mid-point at 6.4386 vs exp. 6.4402 (prev. 6.4414)

China is said to relax banks' mortgage limits through the rest of 2021. This follows earlier press reports citing experts that China is expected to further leverage its monetary policy in the remainder of 2021 by reducing the cash that banks must hold in reserve to bolster the economy. (Newswires/China Economic Net)

US GOP Senators Rubio, Cornyn and Scott call on the Biden administration to blacklist Huawei's former unit Honor. In relevant news, GOP Senator Cotton delayed the vote on a key Commerce Department nominee over China export control policy questions. (Newswires)

Japanese PM Kishida reportedly pledges to steer Japan away from Abenomics and Finance Minister Suzuki separately commented that PM Kishida instructed him to work on additional tax system for jobs. (Newswires/FT)

UK/EU

A UK government spokesperson said there is “still a substantial gap” between the UK and the EU on the Northern Ireland Protocol and Brexit Minister Frost will meet with EU’s Sefcovic in Brussels this Friday to begin the intensive negotiations. (Politics Home) Sources suggested that UK ministers were pleasantly surprised by how far the EU had moved in their proposals. (Times)

EU nations want the European Commission to prepare a contingency plan for a trade war with the UK in case the latter suspends parts of the Brexit agreement. (FT)

The UK government is to loosen restrictions on foreign truck drivers to ease supply chain issues and is issuing 800 visas for pork butchers over the next six months. (Newswires)

FX

In FX, the DXY was subdued below the 94.00 level amid the mostly positive risk tone and following the recent pullback in yields. EUR/USD was marginally higher overnight and reclaimed the 1.1600 handle, as well as some of the lost ground from yesterday’s recoil in European yields. GBP/USD was steady but off the prior day’s best levels amid ongoing Brexit frictions with the UK government noting there is “still a substantial gap” between the UK and the EU on the Northern Ireland Protocol and with EU nations reportedly calling for the European Commission to prepare a contingency plan for a trade war with the UK in case the latter suspends parts of the Brexit agreement. USD/JPY extended on its best levels since December 2018 alongside the strength in Japanese stocks - with the pair breaching 114.00 to the upside, while antipodeans lacked excitement amid a light calendar and with NZD/USD taking a breather from recent outperformance although the activity currencies are kept afloat amid the constructive tone.

COMMODITIES

WTI crude futures slightly outperformed amid the predominantly positive mood across riskier assets. Oil prices had also weathered the bout of pressure triggered by bearish DoE inventory data which showed a much larger than expected build in headline crude stockpiles, as well as reports that the US were "engaged in diplomacy" with OPEC+ members regarding output. Gold prices flatlined after recently hit resistance at the USD 1,800/oz level but with downside limited by a weaker greenback, while copper was also relatively unchanged and failed to benefit amid the gains in stocks.

White House said it is looking at options on how to improve logistics of moving energy supply around the country, while a State Department spokesperson said they are "engaged in diplomacy" with OPEC+ members regarding output. In relevant news, US Deputy Secretary of State Sherman called on Russia to do more to ensure European energy security in a meeting with Russian Deputy PM Overchuck. (Newswires)

Spanish PM Sanchez said the idea of centralised, European buying of gas is gaining ground in Brussels and energy decree waived for utilities is not deriving extraordinary profits linked to gas. (Newswires)

GEOPOLITICAL

US Secretary of State Blinken met with Saudi Foreign Minister bin Farhan Al Saud in which they exchanged views on the Iranian nuclear program and international talks regarding this, according to the Saudi Foreign Ministry. In related news, Saudi Arabia is reportedly serious about talks with Iran and was mulling permitting Iran to reopen its Jeddah consulate, although talks have not made sufficient progress to restore full diplomatic relations. The report added that Saudi's Foreign Minister described talks with Iran as cordial and that negotiations were exploratory. (Newswires/FT)

US

Treasuries were bid amid soft PPI and BoE's Mann pushing back on hike expectations, but strength was led by the belly as the recent flattener broke its streak. By settlement, 2s -1.6bps at 0.352%, 3s -3.2bps at 0.630%, 5s -3.7bps at 1.050%, 7s -3.3bps at 1.344%, 10s -2.8bps at 1.521%, 20s -2.0bps at 1.978%, 30s -1.7bps at 2.024%; TYZ1 volumes were below average. 5yr TIPS -5.2bps at -1.715%, 10yr TIPS -4.6bps at -1.009%, 30yr TIPS -2.4bps at -0.334%; 5yr BEI -0.6bps at 2.801%, 10yr BEI +0.1bps at 2.510%, 30yr BEI -0.5bps at 2.368%. Bunds led a recovery in govvies in the European session after the German growth outlook downgrade by IFO. On the Treasury curve, it's worth noting the stealth bull-steepener seen out of Europe, with the belly driving the gains after its recent heavy selling earlier this week. The softer-than-expected (albeit still high) PPI data was incrementally bullish for the curve, although trade direction was made murky with the first sub-300k reading in initial jobless claims post-COVID adding to evidence of employment progress. There was later additional tailwinds, led by the belly, after comments across the pond from BoE's Mann, who said she can wait on hiking interest rates given financial conditions have already started to tighten amid other BoE officials speaking hawkishly. Note that while the morning in Europe had seen a reprieve in curve flattening, it was ultimately short-lived as the long-end regained its bid into the NY session – the Fed's long-end buyback was an added tailwind. Ahead of the weekend, traders now look to Friday's US retail sales and UoM prelim. survey, and particularly the inflation expectations component after yet another rise to survey records from the NY Fed earlier this week. T-note (Z1) futures settle 9 ticks higher at 131-16.

Fed's Barkin (2021, 2024 voter) said FOMC September guidance that tapering may soon be warranted was advance warning the Fed had promised and noted there is still a lot to learn on whether recent inflation levels will be sustained and how further is maximum employment. Barkin also said it was very clear in early summer that COVID-19 was driving inflation and that inflation today looks broad based, while he added it is a sensible time to talk about taper as that gives time to figure out what's happening with inflation. Barkin also said he is willing to be patient on allowing time for Americans who left the labour force to come back to it and hopes that tapering will be a positive move in the expectations-setting process for inflation. (Newswires)

Fed's Harker (2023 voter) said it will soon be time to begin tapering monthly purchases and that he wouldn't expect a rate hike until late 2022 or early 2023 unless the inflation picture shifts dramatically. Furthermore, Harker sees GDP growth of around 5.5% this year and 3.5% next year, while he forecasts inflation at 4% this year and a bit over 2% next year, but noted that there is upside risk inflation will run higher than his forecast. (Newswires)

NY Fed's Logan said the standing repo facility and FIMA repo facility should support smooth functioning of treasury markets. Logan added the reverse repo facility has not led to large flights to safety nor affected the structure of money markets and expects its usage to come down over time, while there is progress in transition away from Libor needs to accelerate. (Newswires)

US President Biden signed the legislation to raise the US debt limit, as expected. (Newswires)

US Moderate Democratic Senator Sinema told House Democrats this week that she won't vote for reconciliation without vote on infrastructure bill, according to sources. (Newswires)

Bitcoin Futures ETF was reported to not face opposition from the SEC. (Newswires)