• APAC stocks kicked off the week in the green, following a similar lead from Wall Street, whilst the focus overnight was on Chinese markets after Friday's stock support measures.
• DXY was caged to a tight range above 104.00 after Friday’s choppy session, AUD outperformed whilst the JPY stood as the G10 laggard.
• ECB President Lagarde on Friday said the ECB needs to set rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target.
• BoJ Governor Ueda over the weekend said underlying inflation in Japan is still below 2%, which is a reason to stick to the current monetary policy approach.
• Looking ahead, highlights include EZ M3, US Dallas Fed Manufacturing, and supply from the EU and the US.

US TRADE

EQUITIES

• US stocks and bonds moved off the Powell lows throughout the rest of Wall Street's choppy session, with stocks closing in the green while the Treasury curve flattened.
• SPX +0.67% at 4,405, NDX +0.85% at 14,941, DJIA +0.73% at 34,346, RUT +0.40% at 1,853.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden to deliver remarks on lowering healthcare cost on Aug 29th, according to Bloomberg.

CENTRAL BANKS

FEDERAL RESERVE

• Fed's Goolsbee (2023 voter) said he still feels like there is a path to a soft landing, according to CNBC. He said he does not like to speculate about upcoming Fed action (when asked if the Fed is done hiking). Goolsbee added the Fed debate is moving towards how long to keep rates up, rather than the overall level. He said there has been an improvement in core inflation, but inflation remains too high and cannot declare victory, and you cannot change the inflation target until you hit it, whilst the Fed is willing to be patient in getting inflation back to the 2% goal, according to Reuters.
• Fed's Harker (2023 voter) said data will dictate what FOMC does in September, according to Reuters.
• Fed's Mester (2024 voter) said we are getting closer to where we need to be with rates and need to see more evidence inflation is coming down, according to CNBC. She said there is still probably more work to do with rates, and she didn't have rate cuts pencilled in for next year in June SEPs but will re-evaluate that in September. She said the Fed's next and possibly last rate hike "doesn't necessarily have to be September, but I think this year," according to Reuters.
• WSJ's Timiraos said, after Fed Chair Powell's speech on Friday, that markets were not expecting a September rate hike, and Powell did not try to change those expectations; he kept the door open to a Q4 rate hike highlighting hawkish elements paired with dovish ones.

ECB

• ECB President Lagarde said the ECB needs to set rates at sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target, according to Reuters. ECB President Lagarde said ECB decisions will be taken on a meeting-by-meeting approach, depending on the data. President Lagarde said she is "pretty confident" that by the end of 2023, inflation numbers will look different.
• ECB's Kazaks said there are risks on both sides of monetary policy. Regarding tightening too much or too little, he would still err on the side of raising rates, according to Reuters. Kazaks said a rate pause would not mean stopping, and he is in no rush to say they are done on rates, adding that core inflation is still elevated.
• ECB's Holzmann said he cannot give the all-clear on inflation and the core rate remains very high. He said data will ultimately decide if the ECB hikes again, and he suspects the ECB will have to raise rates somewhat higher, according to Reuters.

BOE/BOJ

• BoE's Broadbent said policy will react to evidence on spare capacity and indicators of domestic inflation as it comes through, and policy may well have to stay in restrictive territory for some time yet. Broadbent added that it is unlikely that inflation second-round effects will unwind as rapidly as they emerged, according to Reuters.
• BoJ Governor Ueda said underlying inflation is still below 2%, which is a reason to stick to the current monetary policy approach. He added that domestic demand is still on a healthy trend, although this needs to be confirmed by Q3 data, according to Reuters. He added that for Japan, the US strength is offsetting some of China's weakness, and the weakness in China appears to be centered on the property market.

APAC TRADE

EQUITIES

• APAC stocks kicked off the week in the green, following a similar lead from Wall Street, whilst the focus overnight was on Chinese stocks after Friday's support measures announced by authorities.
• ASX 200 was supported by the energy and gold sectors whilst the broader mining sector was subdued by Fortescue Metals Group, which missed on net expectations and reported an impairment charge.
• Nikkei 225 was also supported by its energy sector, with the index eventually surging above the 32k mark seeing some early resistance around the level.
• Hang Seng and Shanghai Comp were boosted at the open with the Mainland posting gains north of 3% as markets reacted to Friday’s measures to boost investor confidence. In Hong Kong, China Evergrande slumped 80% after resuming trade following a 17-month hiatus.
• US equity futures resumed electronic trade with modest gains across the board but with the breadth of the market narrow.
• European equity futures are indicative of a firmer open, with the Euro Stoxx 50 future +0.8% after cash markets closed higher by 0.1% on Friday.

FX

• DXY was caged to a tight range above 104.00 after Friday’s choppy session which ultimately saw a range of 103.73-104.44.
• G10s were mostly but modestly firmer against the Dollar with the Antipodeans narrowly outperforming.
• The Aussie was supported by a trifecta of commodity gains, above-forecast Aussie retail sales, and a firmer-than-expected Yuan fixing by the PBoC which induced some strength in the Chinese currency at the time.
• The JPY underperformed and was subdued against the Dollar following dovish commentary from BoJ Governor Ueda over the weekend, who suggested underlying inflation is still below 2%, which is a reason to stick to the current monetary policy approach.
• PBoC sets USD/CNY mid-point at 7.1856 vs exp. 7.2854 (prev. 7.1883)

FIXED INCOME

• 10yr UST futures were steady after the treasury curve flattened on Friday in the wake of Fed Chair Powell, which resulted in choppy price action as he took a more balanced approach.
• Bund futures found some overnight support around 132.00 but remained within Friday’s 131.86-132.57 parameter at the time of writing.
• 10yr JGB futures eventually tracked price action in Western counterparts and saw relatively contained price action.

COMMODITIES

• Crude futures were relatively flat as traders pondered over Friday reports regarding a potential agreement between the US and Iran on the entry of Iranian oil into the global market, while participants also keep an eye on the Gulf of Mexico as Tropical Storm Idalia strengthens rapidly.
• Spot gold traded sideways and found overnight support around USD 1,915/oz as the Dollar remained subdued.
• Base metals saw modest gains across the board, with the positivity from China amid its support market measures keeping sentiment across industrial metals constructive.
• Tropical Storm Idalia is bringing heavy rains to portions of western Cuba and the Yucatan Peninsula. It is expected to become a hurricane over the eastern Gulf of Mexico, according to the NHC. NHC says Tropical Storm Idalia is a little stronger and is likely to see additional strengthening while it approaches the northeastern Gulf coast.
• An oil leak has been found in a transmission pipeline linking Kharg Island to Iran's Genaveh port, according to Tasnim. The magnitude of the spill was not specified, according to Reuters.
• Baker Hughes Rig Count: Oil -8 to 512, NatGas -2 to 115, total -10 to 632.

CRYPTO

• Bitcoin retested USD 26k to the downside overnight, but price action was caged.

NOTABLE ASIA-PAC HEADLINES

• China's Finance Ministry said China will cut stamp duty on stock trading by half from August 28th, according to Reuters.
• The Chinese Securities Regulator said China will slow the pace of IPOs and further regulate share reductions. The regulator added that exchanges will also lower margin requirements, according to Reuters.
• China today suspended some quantitative T+0 algorithmic trading via brokers amid concerns that T+0 may encounter one-sided market conditions and lead to risk exposure, STCN media reported
• China Evergrande (3333 HK) H1 2023 (CNY): Net -33bln (prev. -64.2bln YY). Revenue 128.2bln (prev. 89.3bln). Co. said its ability to continue will depend on a successful implementation of an offshore debt restructuring plan, and successful negotiations with the rest of the lenders on repayment extensions, according to Reuters.
• PBoC injected CNY 332bln via 7-day reverse repos with the rate at 1.80% for a CNY 298bln net injection, according to Reuters.
• Foxconn (2317 TT) founder Terry Gou is to run for the Taiwanese presidency, according to Reuters.
• New Zealand said it is to trim budget allowances and measures amid a deterioration in the global economy and particularly in China, according to Reuters.

DATA RECAP

• Chinese Industrial Profits (Jul) YY -6.7% (Prev. -8.3%)
• Chinese Industrial Profits YTD (Jul) -15.5% (Prev. -16.8%)
• Australian Retail Sales MM Final * (Jul 2023) 0.5% vs. Exp. 0.3% (Prev. -0.8%)

GEOPOLITICS

• Iranian press Tasnim said, "Although Iran and the United States are still far from each other regarding the nuclear program, they seem to have reached an agreement on the entry of Iranian oil into the world market". In this regard, American officials have implicitly acknowledged that they have lifted some sanctions related to the sale of Iranian oil, and Tehran has announced an unprecedented increase in oil production in the past 5 years, via X.
• Russia's Investigation Committee confirmed Wagner leader Prigozhin was among those who died in the plane crash, according to Reuters.
• Russian SU-30 plane escorted a US drone Reaper over the Black Sea, according to Ria.
• US Trade Secretary Tai reportedly raised concerns with India over its new order mandating licenses for the import of some tech products such as personal computers, laptops, and tablets, according to a statement cited by Reuters.
• Three US marines have died and five have been seriously injured after a helicopter crashed during a military exercise in Australia, according to Sky News.
• China will hold the third China-Africa peace and security forum between August 28th and September 2nd, according to the Chinese Defence Ministry cited by Reuters.
• Taiwan Defence Ministry said 6 Chinese aircraft crossed the Taiwan Strait median line in the past 24 hours.
• Chinese Commerce Minister met with US counterpart Raimondo on Monday; Raimondo said the US wants healthy competition with Beijing, does not intend to hinder Chinese progress, and sees many areas they can work with China, according to Bloomberg.

EU/UK

NOTABLE HEADLINES

• UBS (UBSG SW) reportedly considers its first AT1 bond sale since the Credit Suisse deal, according to Bloomberg.
• The UK Metropolitan Police is on high alert following a significant security breach that led to officers' and staffs' details being hacked. All 47k personnel have been notified about the potential exposure of their photo, names, and ranks, according to Sky News.
• Germany’s ruling Social Democratic Party will vote on a proposal to lower limits on rent increases in a bid to tackle inflation. The proposal calls for a three-year residential rent cap of 6%, according to Bild citing a draft resolution.
• Fitch affirms the Czech Republic at "AA-"; outlook Negative.