• APAC stocks began the week on the front foot as the region took its opportunity to react to the dovish comments by Fed Chair Powell at Jackson Hole on Friday.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 future down 0.3% after the cash market closed with gains of 0.5% on Friday.
• DXY is a touch firmer but unable to recover much of Friday's lost ground. EUR/USD remains on a 1.17 handle.
• Bund futures have faded some of last Friday's gains, crude futures are steady.
• Looking ahead, highlights include German Ifo (Aug), US National Activity (Jul), Comments from Fed’s Logan and Supply from the EU.
• Note, today is a UK bank holiday. The desk is open as usual. 

SNAPSHOT

US TRADE

EQUITIES

• US stocks and bonds rallied on Friday after Fed Chair Powell gave the nod to a September rate cut during his speech at Jackson Hole, in which he stated that the shifting balance of risks may warrant adjusting the policy stance and warned that both goals are in tension with the downside risks to the labour market rising. Furthermore, he suggested that effects on consumer prices are now clearly visible and expects the effects will accumulate in the coming months, but also noted it is a reasonable base case that the inflation effect of tariffs will be short-lived. In the wake of the speech, a clear dovish reaction was observed, with markets pricing in 55bps of easing by year-end vs 48bps prior to the speech, while a September cut is still not fully priced in, but the probability had increased to 84% from 72%.
• SPX +1.52% at 6,467, NDX +1.54% at 23,498, DJI +1.89% at 45,632, RUT +3.86% at 2,362.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump announced on Friday a major tariff investigation on US furniture imports, with completion expected within 50 days and the tariff rate is yet to be determined.
• US food industry groups are pushing for exemptions from US tariffs and arguing that products from fish to cucumbers cannot be affordably grown at home, according to FT.
• European Commission President Von der Leyen defended the EU-US agreement on tariffs which she said was a 'conscious decision' that avoided a trade war and called it a "good, if not perfect agreement", according to euro news.
• Canadian PM Carney confirmed on Friday that Canada will remove its counter tariffs on all US goods covered by the USMCA trade deal, effective September 1st, 2025. Carney said Canada currently has the best trade deal with the US and it is important they do everything they can to preserve Canada's advantage, while he added that Canada will retain tariffs on steel, aluminium and autos as they work with the US to resolve issues there. Furthermore, it was reported over the weekend that Canada’s Trade Minister said Canada is optimistic about making a deal with US President Trump, according to Bloomberg.
• South Korea's President Lee said they will ultimately arrive at a reasonable trade deal with the US and he expects to discuss with US President Trump security and defence costs, as well as tariff negotiations.
• India’s Foreign Minister said trade negotiations are still going on and they have lines to maintain and defend, while he added the lines India cannot cross are the interests of farmers and small producers. Furthermore, he said India buying Russian oil was never brought up before the public announcement of tariffs and issues about buying Russian oil are not being used to target other major users such as China and the EU.
• French President Macron said he had an in-depth discussion on major international crises with South African President Ramaphosa, while they also reviewed economic and trade issues, as well as bilateral cooperation between France and South Africa.

NOTABLE HEADLINES

• Fed’s Musalem (2025 voter) said it is reasonable to expect the tariff inflation effect to fade, while he said more data is needed and he will be revising the rate path view all the way up to the September meeting. Musalem said Fed policy is modestly restrictive and the policy rate may warrant adjustment if risks to the job market intensify. Furthermore, he said inflation is above target with risk of persistence and the rate path could include a pause, as well as noted that the next jobs report may or may not be enough to justify a rate cut, depending on what it shows, and he is looking at the whole rate path, not just the rate decision at one meeting.
• US President Trump said regarding Fed Chair Powell that it is still too late and they should have cut rates a year ago.
• US Pentagon plans a military deployment in Chicago as President Trump eyes a crackdown, according to Washington Post.
• Fitch affirmed the US on Friday at AA+; Outlook Stable.
• US Commerce Secretary Lutnick confirmed on Friday that the US now owns 10% of Intel (INTC).

APAC TRADE

EQUITIES

• APAC stocks began the week on the front foot as the region took its opportunity to react to the dovish comments by Fed Chair Powell at Jackson Hole on Friday, in which he signalled the potential for a September rate cut as he noted that the shifting balance of risks may warrant adjusting policy.
• ASX 200 rallied to a fresh record high at the open but gave back a majority of the early gains as participants also digested a slew of earnings releases.
• Nikkei 225 advanced at the open but then lost steam and faded most of the early upward momentum to return to beneath the 43,000 level with headwinds from last Friday's currency strength and with some hawkish-leaning comments from BoJ Governor Ueda at Jackson Hole who expects a tightening job market to push up wages.
• Hang Seng and Shanghai Comp outperformed with the advances in Hong Kong led by property, mining and tech, while the mainland was also lifted after China's State Council called for efforts to bolster overall coordination and refine implementation mechanisms of large-scale equipment upgrades and consumer goods trade-in programs to better leverage their role in boosting domestic demand. Furthermore, participants digested several earnings releases and the PBoC announced last Friday to conduct CNY 600bln of 1-year MLF loans for today.
• US equity futures (ES -0.1%, NQ -0.1%) slightly pulled back after surging on Friday as hopes and bets for a September rate cut were boosted by Fed Chair Powell's dovish rhetoric.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 future down 0.3% after the cash market closed with gains of 0.5% on Friday.

FX

• DXY attempted to regain some composure after slumping last Friday in the aftermath of dovish comments from Fed Chair Powell who signalled the potential for a September rate cut at his key Jackson Hole speech in which he stated that a shifting balance of risks may warrant adjusting policy and the situation suggests downside risks to employment are rising, while he added that policy adjustment may be warranted, with rates still restrictive, and that preemptive action likely would be warranted should a tight labour market pose risk to price stability.
• EUR/USD gave back some of Friday's spoils, although the pullback is limited with the single currency lingering in 1.1700 territory after comments over the weekend from ECB officials including Kazaks and Rehn, who stated there was neither no need or rush to reduce rates further.
• GBP/USD reversed some of the post-Powell surge and just about sustained the 1.3500 status, while the world's largest FX trading hub shut on Monday due to the UK Bank Holiday.
• USD/JPY bounced back from a weekly trough and returned to the 147.00 level with the help of the positive risk environment, although the recovery was capped following hawkish-leaning comments from BoJ Governor Ueda at Jackson Hole.
• Antipodeans marginally softened as the dollar regained poise, but with the pullback cushioned following a much firmer-than-expected CNY reference rate setting.
• PBoC set USD/CNY mid-point at 7.1161 vs exp. 7.1551 (Prev. 7.1321).

FIXED INCOME

• 10yr UST futures slightly eased back from last week's peak but held on to most of Friday's spoils after rallying on Fed Chair Powell's dovish rhetoric in which he signalled a potential rate cut next month as he noted that the shifting balance of risks may warrant adjusting policy.
• Bund futures faded some of last week's gains and resumed its pullback from resistance around the 129.50 level ahead of German Ifo data.
• 10yr JGB futures failed to sustain recent gains and returned to flat territory following hawkish-leaning comments from BoJ Governor Ueda at Jackson Hole during the weekend.

COMMODITIES

• Crude futures traded rangebound amid a lack of energy-specific bullish drivers and with Iraq said to have raised its refining capacity to 1.3mln bpd from 1.1mln bpd last year.
• Iraq raised its refining capacity to 1.3mln bpd from 1.1mln bpd in 2024, according to the PM’s office.
• Libya’s NOC said it will host the first Libyan-US energy forum soon.
• US President Trump’s team reportedly withheld Venezuelan oil approval for non-US majors, according to Bloomberg.
• Spot gold marginally pulled back after surging on Friday as the dollar weakened in reaction to the dovish Powell comments.
• Copper futures eked mild gains with prices mildly supported alongside the positive risk environment.
• Codelco said Chile’s mining regulator authorised the restart of operations at Andes Norte and Diamante divisions of the El Teniente mine.

CRYPTO

• Bitcoin was choppy overnight and fell beneath the USD 113k level after a late dip during the weekend.

NOTABLE ASIA-PAC HEADLINES

• BoJ Governor Ueda said at Jackson Hole that barring a major negative demand shock, the labour market is expected to remain tight and put pressure on wages, while he added that competition for workers has increased and more people are switching jobs. Ueda said they will continue to monitor the labour market developments closely and incorporate that into monetary policy. Furthermore, he said wages are now rising and labour shortages have become one of the most pressing economic issues, as well as noted that the demographic shift that began in the 1980s is producing acute labour shortages and persistent upward pressure on wages.
• Japanese PM Ishiba said Japan agreed to strengthen security and economic ties with South Korea, while South Korean President Lee said they agreed on South Korea-Japan relations, which are important in a fast-changing global political landscape.
• Shanghai lifts the home buying limit in the outer suburbs effective August 26th, according to Bloomberg.
• RBNZ opened consultation on New Zealand's capital settings for deposit takers with the review to consider whether current prudential capital requirements are set at the right level, while the central bank proposed to lower the minimum capital requirement to NZD 5mln.

GEOPOLITICS

MIDDLE EAST

• Israel’s military conducted an attack on the Yemeni capital of Sanaa against targets which included a military compound where the presidential palace is located, two power stations and a fuel storage site.
• Iran’s Supreme Leader said the current situation with the United States was "unsolvable" and that they will stand strongly against the US demand to make Tehran ‘obedient’, according to Reuters citing state media.
• Iran is prepared to significantly lower uranium enrichment to prevent Britain reimposing UN sanctions, according to The Telegraph.

RUSSIA-UKRAINE

• Ukraine’s PM discussed security guarantees with US special representative Kellogg.
• US Pentagon quietly blocked Ukraine’s long-range missile strike on Russia with the US Defense Department withholding approval as the White House sought to entice Moscow to open peace talks, according to WSJ. However, it was later reported that Ukrainian President Zelensky said Ukraine has lately been using its own weapons to hit Russia and does not consult on this with Washington.
• Russian President Putin said on Friday that there is light at the end of the tunnel in Russia-US relations and that contacts continue after the Alaska summit, while he hopes that the first steps are the start to a full-scale restoration of relations, which still depends on the West.
• Russia and Ukraine conducted an exchange of POWs in which they swapped 146 POWs each.
• Russia’s Defence Ministry said Russian forces captured Filiia in Ukraine’s Dnipropetrovsk region, according to Interfax.
• Russian air defence forces shot down a Ukrainian drone near the Kursk nuclear power plant and a fire broke out at the plant, although there were no safety threats to people or the plant. However, the Kusk acting Governor separately commented that the Ukrainian drone attack on the nuclear power plant is a threat to nuclear safety.
• Russian air defences downed a drone flying towards Moscow. It was separately reported that Ukrainian drones attacked an industrial facility in Russia’s Samara region and that debris from a destroyed Ukrainian drone attack sparked a fire at Russia’s Novatek Ust-Luga terminal.
• Norway is providing air defences worth SEK 7bln to Ukraine, which will be delivered from Germany to Ukraine, with Norway and Germany funding two patriot systems including missiles.

OTHER

• North Korean leader Kim oversaw the firing of new air defence missiles, according to KCNA. In relevant news, South Korea confirmed it fired warning shots earlier last week at North Korean soldiers who briefly crossed the border between the two countries, according to the BBC.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said at Jackson Hole that the UK faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation since the COVID-19 pandemic, while he said the BoE shifted its focus away from long-term trends in unemployment to looking at levels of labour force participation instead, according to Reuters.
• ECB’s Lagarde said at Jackson Hole that the labour market has weathered recent shocks and proved to be surprisingly resilient in the face of an inflation shock and aggressive interest rate hikes, while she also commented that central bank independence is critically important.
• ECB’s Kazaks said the central bank entered a new monetary-policy phase where officials can focus on monitoring the economy rather than actively intervening to change its course, while he noted there is currently no need to lower rates further as inflation is at the 2% target and recent data has not signalled a marked change in the outlook since the quarterly projections in June, according to Bloomberg.
• ECB’s Rehn said the central bank is in no hurry to cut interest rates further after inflation reached its 2% target and with the economy performing slightly better than thought, according to Bloomberg.
• German Chancellor Merz said tackling economic woes is tougher than expected and that the US’s 15% tariffs on German exports will be a burden on the German economy, according to Bloomberg.
• Fitch affirmed the UK on Friday at AA-; Outlook Stable but stated that greater global uncertainty and weaker external demand will dampen investment growth.
• Italy’s Deputy PM Tajani said he opposes Italy imposing windfall taxes on banks, while he commented that banks should pay taxes and contribute but should not be surprised or scolded, according to Bloomberg.
• Canadian PM Carney will travel to Poland, Germany and Latvia during August 25th-27th and will meet with German Chancellor Merz, while Carney will be focused on strengthening relationships with European allies and advancing cooperation in key areas.