• European indices are firmer this morning as risk sentiment recovers somewhat, to the detriment of fixed income and safe havens
• Fed’s Daly stated she does not think we are heading for a recession while Fed’s Kashkari believes Fed should use forward guidance now and will argue for cuts in September
• USD is mixed vs. G10 counterparts though is outperforming safe havens on sentiment and Sterling ahead of UK PM Johnson's meeting with German Chancellor Merkel
• Looking ahead, highlights include Canadian CPI, US Existing Home Sales, FOMC & RBI Minutes

ASIA-PAC

Asian equity markets traded subdued as the region conformed to the dampened global risk tone with markets cautious ahead of the looming FOMC minutes and the Jackson Hole Symposium. ASX 200 (-1.0%) underperformed with broad pressure across its sectors. Nikkei 225 (-0.3%) was also lower but with downside stemmed as exporters found some solace from a gradually weakening currency, while Hang Seng (+0.1%) and Shanghai Comp. (Unch.) traded indecisively after the PBoC’s quasi liquidity efforts resulted to another net daily drain and amid ongoing trade uncertainty as US President reiterated he is currently not ready to make a trade deal with China but suggested something will happen maybe sooner later. In addition, reports noted that outflows from funds focused on China investments recently widened to its highest since early 2017. Finally, 10yr JGBs returned flat as the initial upside from the cautious risk tone later faded after hitting resistance at the 155.00 level and near its record highs, while the BoJ were only in the market today for Treasury Discount Bills.

PBoC injected CNY 60bln via 7-day reverse repos for a net daily drain of CNY 40bln. (Newswires)

PBoC set CNY mid-point at 7.0433 vs. Exp. 7.0468 (Prev. 7.0454)

US Secretary of State Pompeo was said to sound bullish regarding the prospect of trade deal and thinks a US-China deal could be reached by the 2020 election. (Newswires)

The US and Japan are rushing to clear the final hurdles on the way to a partial trade deal that could be finalised as early as September. Japan’s Economy Minister Motegi and USTR will meet in Washington for crunch talks today, according to sources. (FT)

Investors withdrew USD 2.9bln from funds focused on China investment in the month to August 14th which is the largest outflows of its kind in more than 2 years. (FT)

Reports note that out of 14 listed Chinese banks that have reported H1 results, 11 recorded net profit increases of at least 10%. (Newswires)

US

US President Trump postponed a meeting with Denmark PM Frederiksen due to her refusal to discuss purchase of Greenland, while he added the PM was able to save a great deal of expense and effort for both sided by being so direct and that he looks forward to rescheduling sometime in the future. (Twitter)

Fed's Daly (non-voter, dove) said she sees solid domestic momentum that points to a continued economic expansion, while Daly added she doesn’t think were headed to a recession and her support for a cut last month did not reflect concern about an economic downturn. (Newswires).

Fed's Kashkari (non-voter, Dove) says the Fed should use forward guidance now; will argue for cuts at the September meeting, Argues for using forward guidance now, before rates hit the lower bound. At a minimum, we should commit to not raising rates again until core inflation returns to our 2 per cent target on a sustained basis. (Newswires)

GEOPOLITICS

US Special Envoy for North Korea Biegun said US is prepared to restart discussions as soon as North Korea are ready. In related news, a Japanese defence report noted that North Korea has already achieved miniaturization of a nuclear warhead, while there were separate comments from US Marines Commandant Berger that US, Japan and South Korea share common view of North Korea threat, as well as China's long-term threat to stability. (Newswires)

China's Foreign Ministry, when asked about UK Consulate worker in Hong Kong, says the worker is under administrative detention in China for violation of Chinese law. (Newswires)

Venezuela President Maduro said he had authorized secret meetings for months between top officials and the Trump administration. (Newswires)

Japan's Foreign Minister Kono discussed military intelligence pact with South Korea, adds that Japan wants to maintain pact. (Newswires)

Iranian Foreign Minister Zarif says no amount of foreign military presence can prevent insecurity in the Gulf, adds its possible to agree on confidence building measures to ensure freedom of navigation in the Gulf. And if Europe implements its part of the nuclear deal Iran will then revert to it even if the US does not do so. (Newswires)

UK/EU

UK PM Johnson will tell German Chancellor Merkel today that Parliament cannot stop Britain leaving the EU without a deal on October 31. (Times)

German Senior Conservative Roettgen notes that rhetoric from the UK does not change Germany's position on Brexit, there is no room to amend the Withdrawal Agreement as long as there is no solution to the Irish Border problem. (Newswires)

Italy's main opposition PD party is to give its leader Zingaretti the mandate to form a new government, according to a spokesperson. (Newswires) For reference, recent polls indicate that PD are the 2nd largest party in Italy, behind Salvini’s League with 5-Star in 3rd position.

EQUITIES

European equities are higher across the board [Eurostoxx 50 +1.2%] despite a subdued Asia-Pac handover with some citing a possible market squeeze. Market participants note that stocks are driven by a couple factors: 1) Today’s session commenced at a low base as stocks yesterday were pressured by Italian concerns. 2) low volumes heading into key risk events including FOMC/ECB Minutes (full previews available in the Research Suite) and the annual Jackson Hole Symposium, US volumes have also been low. Sectors are all in the green, with underperformance seen in defensive stocks as investors seek riskier equities. Consumer discretionary is the marked outperformer with gains led by Pandora (+13.6%) as its earning-led optimism continues, whilst Fiat Chrysler (+3.5%) and Renault (+4.9%) shares rebounded amid reports on continuing merger talks. In terms of other individual movers, GEA group (+5.1%) rests closer to the top of the Stoxx 600. On the flip side, Alcon (-2.5%) shares fell following earnings after-hours yesterday.

Apple (AAPL) is reportedly in final stages of certifying advanced screens from China's BOE Technology Group for next year's iPhones, thus reducing its reliance on Samsung Electronics (005930 KS), Nikkei reports.

Lowe's Companies Inc (LOW) Q2 19 (USD): EPS 2.15 (exp. 2.00), Revenue 21bln (exp. 20.97bln). Same Store Sales +2.3% (exp. 1.7%). (Newswires)

Target Corp (TGT) Q2 19 (USD): EPS 1.82 (exp. 1.62), Revenue 18.4bln (exp. 18.32bln). Raises FY EPS guidance by 0.15.

FX

USD - The Greenback has waned again, with the DXY fading just ahead of 98.500 and the more significant pinnacle reached at the start of the month when the index scaled fresh ytd highs (98.932). Usd/major pairings remain relatively mixed and rangebound in advance of potentially market-moving and game-changing events to come in the form of FOMC minutes, preliminary PMIs, ECB minutes and then the JC gathering that kicks off tomorrow and runs through to Saturday. In the interim, US existing home sales may provide some impetus as the DXY meanders between 98.302-145.

JPY/NZD/CHF/GBP - Another upturn in broad risk sentiment has pushed the safe-haven Yen, Franc and Gold back down from yesterday’s peaks towards 106.60, through 0.9800 and 1500 respectively, but the Kiwi and Pound have also lost ground against the Buck, with Nzd/Usd retesting 0.6400 and Cable retreating from circa 1.2175 to 1.2130. Note, technical resistance at the 21 DMA (1.2172) and ahead of 1.2200 (1.2197 Fib retracement) could have stymied Sterling again along with more clarification from EU officials that any alternatives to the Irish backstop would be facilitated via the PD not the WA.

AUD/CAD/EUR - The G10 outperformers, or at least holding up better than the rest as the Aussie retains sight of the 0.6800 handle, Loonie pivots 1.3300 and Euro continues to straddle 1.1100, awaiting aforementioned highlights for the week (on paper at least). Aud/Usd remains supported in wake of RBA minutes underlining a wait-and-see approach after recent rate cuts, while Usd/Cad has retreated from Tuesday’s apex amidst a rebound in crude prices and looking for further direction from Canadian CPI data and the single currency is still showing resilience in the face of Eurozone political instability in Italy and Spain.

NOK/SEK - The Scandi Crowns are benefiting from the latest revival in risk appetite and Eur/Nok has topped out ahead of 10.0000 despite weaker than forecast Norwegian unemployment, while Eur/Sek is drifting down from 10.7600+ towards 10.7100 in tandem.

EM - A generally firmer tone across the region, with the Rand drawing encouragement from soft SA inflation even though this may prompt more SARB easing, as Usd/Zar breached key chart support around 15.2800 to probe under 15.2200 before returning to 15.2500 and consolidating.

FX Option Expiries of Note:

- EUR/USD 1.1140 (416M), 1.1150-60 (1.04BLN), 1.1245-50 (1.5BLN)

- USD/JPY 105.50 (575M), 105.70-84 (1.6BLN), 106.00 (900M), 106.75 (775M)

FIXED

Bunds and Gilts have recovered well from tests of technical support levels ahead of 178.00 and 134.00 respectively to revisit earlier Eurex and Liffe intraday highs, with the former seemingly disregarding the new 30 year German offering that was shunned by all but a minority not deterred with the discount against coupon. Or maybe the 10 year debt future has actually benefited from curve displacement and long end underperformance via curve re-positioning in wake of the 2050 launch? Meanwhile, US Treasuries remain weak and the curve steeper albeit off overnight extremes in outright and spread terms, largely shrugging off loud policy calls from Fed uber-dove Kashkari ahead of FOMC minutes and housing data.

COMMODITIES

WTI and Brent prices are firmer amid the improvement in risk appetite coupled with support from a larger-than-forecast drawdown in API crude stocks (-3.5mln vs. Exp. -1.9mln). Elsewhere, reports stated that Canada’s Alberta has decided to extend it current production curbs by a year, until the end of 2020 amid slow pipeline progress. Due to the extension, the base limit will increase to 20k BPD from 10k BPD per producers (effective Oct 1st), thus helping out the smaller producers as the first 20k BPD of production will be exempt from cuts. Turning to geopolitics where Fox News, citing sources, reported that an Iranian oil tanker (Bonita Queen) is heading to Syria and carrying around 600k barrels of crude, which would violate Western Sanctions. This comes just days after Iranian tanker Adrian Darya 1 (formerly Grace 1) was released from Gibraltar after being seized regarding suspected exports to Syria. On today’s docket, participants will be eyeing the widely followed weekly DoE inventory data for an immediate catalyst ahead of the FOMC minutes, with headline crude expected to drawdown of 1.889mln. Elsewhere, gold is lacklustre and trades around the 1500/oz mark amid a seemingly improved risk tone and some potential profit taking ahead of the FOMC minutes later. Meanwhile copper moves in tandem with the current risk sentiment and trades higher on the day, albeit prices remain below 2.6/lb. Finally, Dalian iron ore futures declined to 10-week lows amid the ongoing supply/demand imbalance, with traders citing further downside in light of BHP’s bleak outlook for the base metal.

Canada's Alberta extended oil production curtailments through to end-2020 due to slow pipeline progress and raised the limit from 10k bpd to 20k bpd per producer. (Newswires)