• Equity bourses/futures have gradually improved throughout the morning after a contained European open
• Action which occurs in limited newsflow and follows mixed APAC on a disappointing LPR adjustment which overshadowed support measures
• Crude and nat gas are bolstered by supply-side updates via the NHC and on Australian LNG
• USD drifts in a contained start to the week, EUR eyes OpEx while the JPY is undermined by upside in US yields
• EGBs and USTs slip though Gilts remain relatively resilient, US yields steeper
• Looking ahead highlights include the Bundesbank Monthly Report. Earnings from Zoom Video Communications.

EUROPEAN TRADE

EQUITIES

• Sentiment has gradually improved since the relatively modest European cash open despite a lack of fundamental developments, Euro Stoxx 50 +1.1%.
• Sectors are primarily in the green though Real Estate is lagging and resides in the red following updates from Crest Nicholson and the latest Rightmove data. At the other end of the spectrum, Energy outperforms given supply-side risks from Australia and the Gulf of Mexico.
• Stateside, futures were initially around the unchanged mark but have picked up in tandem with the above action with specifics light as we look towards the Jackson Hole symposium, ES +0.5%.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Dollar drifts in low key start to the week, but DXY holds above 200 DMA within 103.470-270 confines.
• Franc firmer and probing 0.8800 vs Buck as weekly Swiss sight deposits drop, Euro eyes option expiries on either side of 1.0897-70 range and Sterling capped amidst upside in EUR/GBP, with Cable capped between 1.2750-11 bounds and the cross near the top of a 0.8562-34 range.
• Yen undermined by a bounce in US Treasury yields as USD/JPY climbs towards 145.75 from 145.15.
• CNY and CNH were unimpressed with limited PBoC LPR easing, but off lows after major Chinese state banks absorbed offshore Yuan liquidity.
• PBoC set USD/CNY mid-point at 7.1987 vs exp. 7.2893 (prev. 7.2006)
• Turkish Central Bank ended implementation that stipulates a target for conversion from foreign currency deposits to FX-protected deposits and ended securities maintenance and reserve requirement practice based on the Turkish lira share of FX-protected deposits, while it stated that regulations were aimed to increase Turkish lira deposits while decreasing FX-protected deposits.
• China's major state-owned banks were reportedly seen mopping up offshore Yuan liquidity on Monday, via Reuters citing sources.
• Indian Foreign Secretary says BRICS discussing trade in national currencies, and not common currencies.
• Click here for more detail.
• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Debt divergent amidst a dearth of data and events.
• Bunds hover near 131.00 after filling the gap within a 131.41-130.97 Eurex range.
• Gilts outperform between 92.20-91.58 parameters after weak UK data and survey releases.
• T-note under par and closer to 101-09 trough than 109-22 peak and curve steeper.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are bolstered with multiple supply-side updates in focus, firstly the NHC said the system within the Gulf of Mexico has a high chance of formation.
• WTI October resides around USD 81.10/bbl while its Brent counterpart holds between USD 85.00-85.50/bbl; both of best levels but still firmer on the session.
• Additionally, the complex is perhaps deriving support from Australian LNG (see below), with Dutch TTF surpassing the EUR 40 mark in an initial move, while off best it still posts upside of circa. 6%.
• Unions at Woodside Energy's (WDS AT) North West Shelf offshore gas platforms "unanimously endorsed" giving 7 working days' notice to strike if bargaining claims are not met by Wednesday, according to Reuters.
• The Offshore Alliance, consisting of two key unions, will also finalise a strike vote at Wheatstone and Gorgon LNG ventures (operated by Chevron) by Thursday (August 24th); sources at the two LNG companies, cited by Reuters, believe some form of industrial action is likely in coming weeks.
• Spot gold is little changed and benefitting incrementally from the USD's downside but the overall risk tone keeps the yellow metal ear last week's USD 1886/oz low, while base metals have trimmed from initial best.
• Click here for Newsquawk analysis on the Australian LNG talks.
• Click here for more detail.

NOTABLE US HEADLINES

• WSJ's Timiraos wrote in an article over the weekend that higher productivity and increased deficits could raise the neutral rate of interest rates, limiting Fed cuts, and suggested the era of historically low interest rates could be over.
• Tropical storm Hilary moved towards the Baja California peninsula and the southwestern US, while a tornado warning was issued for southern California.
• The system in the Gulf of Mexico has a high chance of formation. Tropical storm watches or warnings may be necessary on Monday, according to the NHC.
• Click here for the US Early Morning Note.

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak is to spend GBP 100mln of taxpayer money on thousands of high-powered AI chips in an effort to catch up in the race for computing power, according to The Telegraph.
• Italy is reportedly to propose ex-economy minister Franco as their candidate for the ECB executive board in October when Panetta steps down to govern the Bank of Italy, via Reuters citing sources. Contrasts with sources in July that Italy was going to propose Cipollone
• UK Foreign Secretary Cleverly is to visit China at the end of August, via Reuters citing sources.
• Fitch affirmed Netherlands at AAA; Outlook Stable on Friday.

EUROPEAN DATA RECAP

• UK Rightmove House Price Index MM (Aug) -1.9% (Prev. -0.2%); YY (Aug) -0.1% (Prev. 0.5%)
• German Producer Prices YY (Jul 2023) -6.0% vs. Exp. -5.1% (Prev. 0.1%); MM (Jul 2023) -1.1% vs. Exp. -0.2% (Prev. -0.3%)

GEOPOLITICS

• Ukrainian President Zelensky arrived in the Netherlands for a meeting with Dutch PM Rutte, while it was also reported that Netherlands and Denmark committed to delivering F-16s to Ukraine with the first deliveries due around the new year, according to Reuters.
• Ukraine is nearing a deal with global insurers to cover grain ships, according to FT.
• Russian President Putin met high-ranking military commanders in the southern Russian city of Rostov-on-Don, according to RIA citing a Kremlin statement which did not specify the reason for the meeting.
• Russia conducted a missile strike on Ukraine’s Chernihiv which killed 5 and wounded 37.
• Russian Defence Ministry said anti-aircraft defences prevented an attack on the Belgorod region by two drones and that Russia destroyed a Ukrainian drone in the Moscow region early on Sunday, while Russia briefly halted flights to Moscow’s Vnukovo and Domodedovo airports although all Moscow airports are now operating normally.
• China’s military said it held a joint naval and air combat readiness patrol around Taiwan on Saturday and that this is a serious warning to Taiwan independence separatist forces, while Taiwan’s Defence Ministry said early on Sunday that 25 Chinese air force planes crossed the Taiwan Strait median line during the prior 24 hours, according to Reuters.
• Taiwan’s Presidential Office said China is ignoring their international responsibilities, increasing military threats and undermining regional stability, while it added that transits of Taiwanese leaders should not be an excuse for China to pick quarrels. It was also reported that the US State Department urged China to cease military, diplomatic and economic pressure against Taiwan.
• Russia-China naval drill in the Pacific Ocean has finished, according to Russia’s Defence Ministry cited by Interfax.
• North Korean leader Kim inspected a cruise missile test and navy unit, according to Yonhap.
• South Korean President Yoon said a new chapter of South Korea-US-Japan cooperation opened up after the Camp David summit, while he added the trilateral cooperation will grow stronger as North Korean threats increase and will develop into a strong forum along with AUKUS and the Quad.
• China's Foreign Ministry said after China's dialogue with Iran and Saudi Arabia that both countries have continued to improve relations leading to the formation of a wave of reconciliation in the Middle East, while China appreciates the correct decision made by the Iranian side and will continue to support Middle Eastern countries in exploring the road of development in line with their own national conditions.
• Iran summoned the Swedish and Danish Charges d’affaires over Koran desecration in the two countries, according to IRNA.

CRYPTO

• Bitcoin is under modest pressure this morning with newsflow light and the agenda ahead sparse as we look towards the main events at the tail-end of the week. Action which occurs despite modest downside in the USD; though, this hasn't picked up much steam in European hours as the overall risk tone becomes increasingly constructive.

APAC TRADE

• APAC stocks traded mixed as the disappointment with China’s decision on its Loan Prime Rates overshadowed China’s recent support efforts.
• ASX 200 was lacklustre with price action contained amid a busy week of earnings and as weakness in financials and defensives offset the gains in energy and tech.
• Nikkei 225 was underpinned after Japan announced to raise the minimum hourly wage by the most on record, although the index briefly wobbled in reaction to China’s benchmark rates before returning to session highs.
• Hang Seng and Shanghai Comp were pressured as China’s recent support efforts, including the PBoC and financial regulators’ meeting with bank executives where they told lenders to boost loans to support the economic recovery, were nullified by a narrower-than-expected cut to the PBoC’s 1-year Loan Prime Rate and the surprise decision to keep the 5-year LPR unchanged which is the reference rate for mortgages.

NOTABLE ASIA-PAC HEADLINES

• PBoC Loan Prime Rate 1Y (Aug) 3.45% vs. Exp. 3.40% (Prev. 3.55%); 5Y (Aug) 4.20% vs. Exp. 4.05% (Prev. 4.20%)
• PBoC and regulators met with bank executives and told lenders to boost loans to support the economic recovery, according to Bloomberg. PBoC said it will better implement prudent monetary policy in a precise and powerful manner, while it will keep credit growth stable and guide smooth credit function, as well as coordinate on resolving local government debt risks and will adjust and optimise credit policies for the property sector, according to Reuters.
• China is to push for the BRICS to become a geopolitical rival to the G7 with leaders from across developing nations to meet this week, according to FT.
• US President Biden is to sign a strategic partnership deal with Vietnam in the latest bid to counter China in the region, according to Politico.
• Singapore PM Lee said during an annual policy address that Singapore is keeping up economically and expects positive growth this year, while he hopes they will avoid a recession and said inflation is coming down but will stay higher than what they are used to. Furthermore, he said there will be financial support for workers who lose jobs and announced a SGD 7bln package for ‘young’ seniors to help with retirement.
• Japan's MOF raises the assumed long-term interest rate to 1.5% in FY24/25 (prev. record low 1.1% in FY23/24), via Kyodo; raises the assumed rate due to rising yields after BoJ policy tweak.

DATA RECAP

• New Zealand Trade Balance (NZD)(Jul) -1107.0M (Prev. 9.0M)
• New Zealand Exports (NZD)(Jul) 5.45B (Prev. 6.31B); Imports (NZD)(Jul) 6.56B (Prev. 6.3B)