• APAC stocks were mostly lower after last Friday’s declines in stocks and bonds across global markets
• DXY traded rangebound near a monthly high, EUR/USD remained lacklustre, and USD/JPY was kept afloat
• Russia is to shut the Nord Stream 1 pipeline for three days citing maintenance; China’s Sichuan extended its factory power cuts
• The PBoC cut the 1-Year LPR by 5bps to 3.65% and reduced the 5-Year LPR by 15bps to 4.30% vs expectations for a 10bps cut to both
• ECB’s Nagel said the central bank must keep raising rates even if the risk of a recession increases
• Looking ahead, highlights include the Israel Policy Announcement, Swiss M3, UK CBI Trends & US National Activity Index
• Click here for the Week Ahead preview.

US TRADE

• US stocks and bonds declined on Friday amid inflationary concerns after German PPI data rose to nearly 40% which set off a risk asset cascade and skewed central bank pricing to the hawkish side, while a quiet session in the US provided no cover for risk bulls either.
• SPX -1.29% at 4,228, NDX -1.95% at 13,242, DJIA -0.86% at 33,706, RUT -2.17% at 1,957.
• Click here for a detailed summary.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Defence Ministry said Russian Kalibr missiles destroyed an ammunition depot containing missiles for US HIMARS rocket systems in Ukraine’s Odesa region, according to RIA.
• Ukrainian President Zelensky warned of a potential escalation by Russia ahead of Ukraine’s Independence Day on Wednesday, according to WSJ.
• UK PM Johnson, US President Biden, German Chancellor Scholz and French President Macron stressed in a call the importance of ensuring the safety and security of nuclear sites in Ukraine, according to Reuters citing a Downing Street spokesperson.
• US Deputy Treasury Secretary Adeyemo told Turkish Deputy Finance Minister Elitas that Russian entities and individuals are attempting to use Turkey to bypass western sanctions, while they discussed ongoing efforts to implement and enforce sanctions against Russia, according to Reuters.
• UN Secretary-General Guterres said it is important that all governments and the private sector cooperate to bring Russian food and fertilisers to the market, while he added that they are getting more food and fertiliser out of Ukraine and Russia is important to further calm commodity markets and lower prices for consumers. Guterres also said they are working hard with parties to remove obstacles in financing and insurance to enable Russian fertiliser and food exports, according to Reuters.
• The daughter of a prominent supporter of Russian President Putin was killed in a car bomb attack in a suburb near Moscow on Saturday night, according to FT.

CHINA-TAIWAN

• Taiwan’s Defence Ministry said 17 Chinese military aircraft and 5 warships continued activities around Taiwan on Saturday, while it detected 12 Chinese aircraft and 5 ships around Taiwan on Sunday in which 5 aircraft crossed the Taiwan Strait median line, according to Reuters.
• Indiana state governor Holcomb arrived in Taiwan on Sunday night ahead of other scheduled foreign visits to Taiwan this week including a group of Japanese lawmakers on Monday and another US delegation at the weekend, according to FT.

OTHER

• US President Biden's administration has recently been seeking to reassure Israel that it hasn’t agreed to new concessions with Iran and that a nuclear deal is not imminent although Israeli officials said they were not reassured, according to an Axios report citing US and Israeli officials.
• North Korea is expected to conduct a nuclear test before the US mid-term elections, according to Yonhap citing former South Korean spy chief Park Jie-won.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower after last Friday’s declines in stocks and bonds across global markets in the aftermath of red-hot PPI data from Germany which rose by a new record high and stoked inflationary concerns, while the region also digests the PBoC’s latest actions on its benchmark lending rates.
• ASX 200 was pressured with all sectors subdued and as the influx of earnings continued.
• Nikkei 225 declined at the open as it took its cue from global peers and following reports that PM Kishida tested positive for COVID-19, although the index clawed back around half of the losses with help from a weak currency.
• Hang Seng and Shanghai Comp were mixed with early indecision as participants reflected on the PBoC’s rate actions in which it cut the 1-Year LPR by 5bps to 3.65% and reduced the 5-Year LPR by 15bps to 4.30% vs expectations for a 10bps cut to both, while the reduction in the 5-Year LPR which is the reference for mortgages, also followed recent measures to support the construction and delivery of unfinished residential projects through special loan schemes from policy banks. This provided some early support for developers although the broader sentiment was restricted amid the extension of factory power cuts in Sichuan.
• US equity futures remained subdued amid lingering inflationary concerns and with markets looking ahead to the Jackson Hole Symposium for policy clues from Fed Chair Powell.
• European equity futures are indicative of a marginally lower open with the Euro Stoxx 50 future -0.3% after the cash market closed lower by 1.3% on Friday.

FX

• DXY traded rangebound near a monthly high after it recently reclaimed the 108.00 level to the upside and with the greenback making further headway against Asian currencies.
• EUR/USD remained lacklustre with parity the closest round level to the single currency amid energy-related concerns with the Nord Stream 1 pipeline to be shut for three days beginning at month-end.
• GBP/USD was contained amid supply chain concerns after workers at the UK’s biggest container port began an 8-day strike.
• USD/JPY was kept afloat on recent widening yield differentials and with Asian currencies softening against the dollar including KRW which fell to its lowest level against the buck since 2009 and with CNH also softer alongside the PBoC’s rate cuts.
• Antipodeans marginally outperformed in which NZD/USD gradually edged higher following comments from the RBNZ including Deputy Governor Hawkesby who suggested rates could reach 4.25%.
• Turkey’s Central Bank revised rules for Lira government bond collateral for FX deposits in which it raised the RRR for credit from 20% to 30% for bond collateral, according to Reuters.

FIXED INCOME

• 10yr UST futures were relatively flat with price action subdued following last Friday’s declines but with downside also stemmed after support held at 118.00 and with attention this week on the Fed’s Jackson Hole Symposium beginning on Thursday.
• Bund futures languished near a monthly low in the aftermath of the red-hot German PPI data,
• 10yr JGBs futures suffered from spillover selling and a lack of Rinban operations by the BoJ today.

COMMODITIES

• Crude remained subdued after Friday's late pullback amid anticipation of an Iran nuclear deal and despite reports the Biden administration attempted to reassure Israel that an agreement was not imminent, although the downside was limited amid energy supply concerns with Russia to shut the Nord Strem pipeline for three days from month-end due to maintenance.
• Russia is to shut the Nord Stream 1 pipeline for three days from August 31st which Gazprom said was due to maintenance being required for the pipeline's only remaining compressor, according to Reuters.
• Libya’s NOC said oil production was running at 1.211mln bpd, while the Waha Oil Co said gas output from the Faragh field increased to 149mcfd on Sunday from 95mcfd on Saturday, according to Reuters.
• Caspian Pipeline Consortium suspended oil loadings from two of three single mooring points at its Black Sea terminal for inspection, while CPC exports continue from the third mooring point and August loadings are currently unaffected, according to Reuters sources.
• Spot gold was contained by an uneventful dollar and as markets await clues from the Fed.
• Copper traded rangebound amid the PBoC's rate reductions and disruptions in China's Sichuan province due to the extension of power supply cuts for industries.

CRYPTO

• Bitcoin prices were lacklustre throughout the weekend and declined beneath the 21,500 level.

NOTABLE APAC HEADLINES

• China’s Sichuan extended its factory power cuts to August 25th, according to Caixin.
• Japanese PM Kishida tested positive for COVID-19 and is recuperating at his official residence, according to NHK.
• Singapore PM Lee announced to reduce mask requirements as the COVID-19 situation stabilises with masks to only be required for public transport and healthcare settings with everywhere else optional. PM Lee also confirmed that Deputy PM Wong has been chosen to be the next leader and said authorities will soon announce new initiatives to attract talent, according to Reuters.

CENTRAL BANKS

• PBoC 1-Year Loan Prime Rate (Aug) 3.65% vs. Exp. 3.60% (Prev. 3.70%)
• PBoC 5-Year Loan Prime Rate (Aug) 4.30% vs. Exp. 4.35% (Prev. 4.45%)
• ECB’s Nagel said the central bank must keep raising rates even if the risk of a recession increases as inflation will remain too high otherwise and said that Germany could see price growth of over 10% in the coming months, according to Rheinischen Post.
• RBNZ Deputy Governor Hawkesby said the strategy is to get monetary policy conditions comfortably above neutral and that they considered both a 25bps and 75bps hike before deciding to raise by 50bps this month. Hawkesby added that they will have a more balanced view on policy outlook once rates get to 4.00%-4.25% and said there is ambiguity surrounding the Cash Rate peak.
• RBNZ's Richardson said recent strong domestic and inflation pressure was a surprise, while he added that the bank is using full flexibility of its medium-term inflation mandate and that a 25bps rate hike wasn't a major part of the discussion.

EU/UK

NOTABLE HEADLINES

• Workers at UK’s largest container port Felixstowe began an 8-day strike which the union and shipping companies have warned could seriously impact trade and supply chains, according to Reuters.
• UK plans to enable households to get discounts on electricity bills if they cut use at peak times are set to be announced in the next two weeks, according to the BBC. Separately, GPs could write prescriptions for discounts on energy bills for the most vulnerable under a plan drawn up by the Treasury, according to The Guardian.
• Germany is to prioritise coal trains over passenger services amid its energy crisis, according to Welt am Sonntag.
• German Finance Minister Lindner plans to implement a relief package next month, according to Focus.
• Fitch affirmed Estonia at AA-; Outlook revised to Negative from Stable and affirmed Slovakia at A; Outlook revised to Negative from Stable, while Moody’s affirmed Cyprus at Ba1; Outlook revised to Positive from Stable and S&P raised Ukraine to CCC+ from SD.