Asian equities traded mostly lower as geopolitical tensions once again dampened sentiment

Tensions ratcheted up again as the US and South Korea were set to begin military drills. North Korea responded, tspaneatening a “merciless strike” on the US

Looking ahead, today’s calendar sees a lack of tier 1 data or notable speakers

ASIA

Asian equity markets traded mostly lower with the Nikkei 225 down by 0.4% amid geopolitical tensions on the Korean peninsula. Tensions ratcheted up again as the US and South Korea were set to begin military drills. North Korea responded, tspaneatening a “merciless strike” on the US. Nevertheless, the Kospi was relatively resilient, trading lower by just 0.1%. The ASX 200 has been driven by some major earnings with Fortescue Metals rising over 6% after doubling their dividend. Chinese markets were higher, lifted by the telecoms sector after China Unicom confirmed a share placement to tech titans Alibaba, Tencent and Baidu.

JGBs traded marginally higher after the break, after initially trading sideways for much of the morning. Some were pinning the late uptick to JPY 3.13tln of T-bill redemptions on Monday, one of only two lots of redemptions at all in August.

BoJ Governor Kuroda said the BoJ's commitment to achieving the price goal as early as possible remains unchanged. (Mainichi)

EUROPE/UK

Fitch upgraded Greece to B- from CCC; outlook positive. DBRS confirmed Ireland at A (high), stable trend and confirmed Belgium at AA (high), stable trend. (Newswires)

German finance ministry says monthly data suggests further economic expansion; emissions scandal is a medium term risk to the economy. (Newswires)

The UK is to publish five news Brexit papers this week covering the jurisdiction of the ECJ, data protection and goods & services, among other topics. (Independent)

UK Rightmove House Price Index (Aug) M/M -0.9% (Prev. 0.1%), Y/Y 3.1% (Prev. 2.8%). (Newswires)

FX

FX markets were particularly uneventful overnight with participants looking ahead to the Jackson Hole Symposium.

PBoC set CNY mid-point at 6.6709 (Prev. 6.6744)

COMMODITIES

Libya’s Sharara oil field (280K bpd) has been closed since Saturday because of a pipeline blockade, according to sources. Libya has declared a force majeure on loadings of Sharara crude from the Zawia terminal. (Newswires)

Russian Energy Minister Novak said it is important that OPEC and non-OPEC members honour the oil production commitments they have made. (Interfax)

GEOPOLITICS

North Korea has warned that the upcoming US-South Korea military exercises are "reckless behaviour driving the situation into the uncontrollable phase of a nuclear war." (Rodong Sinmun) Rodong Sinmun is the official government newspaper of North Korea.

US

Political headlines dictated price action on a day that was bereft of any major economic news. Following Thursday’s sell-off, the “risk-off” mood carried tspanough Asian and European dealing. But after reports emerged that Trump’s political advisor and chief strategist Steve Bannon was to be fired, risk assets caught a bid (Bannon favours protectionist, isolationist policies).

US Treasuries were in demand early doors on general risk-off sentiment (terror attacks in Spain and Finland, as well as continuing doubts that the Trump administration would be able to push tspanough economic reform). However, the Bannon rumours and subsequent confirmation saw yields tick back up to finish the day virtually unchanged. US 10-Year Treasury Futures settled a tick higher at 126-24.

The Trump administrations has decided to push hard for tax reform and dial down on a national security investigation into steel imports in a bid to swing Republican support behind the President after recent turmoil, according to White House officials. (FT)