• European bourses and US futures are modestly firmer but the overall tone is tentative pre-Jackson Hole
• USD is bid but rangebound pre-Powell while EUR lags after dovish-leaning ECB sources, AUD outperforms as base metals lift
• Core benchmarks continue to pullback with Bunds entirely paring knee-jerk upside to sources
• ECB sources report momentum is growing for a pause as recession fears increase, via Reuters
• Crude benchmarks are grinding higher awaiting LNG updates while base metals derive upside from Chinese property support
• Looking ahead, highlights include US UoM Survey. Jackson Hole: Fed’s Powell, Mester, Harker, Goolsbee & ECB’s Lagarde

EUROPEAN TRADE

EQUITIES

• European bourses are modestly firmer, Euro Stoxx 50 +0.4%, with the overall tone a tentative one ahead of Jackson Hole.
• Limited equity reaction was seen to German Ifo, GDP revisions or an ECB sources piece that had a dovish headline message.
• Sectors are primarily in the green with outperformance in Energy and Basic Resources while Health Care languishes in the red.
• Stateside, futures are more contained than their above peers but retain a similar positive skew, ES +0.2% as attention turns to Chair Powell.
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• Click here and here for a recap of the main European equity updates.

FX

• Greenback elevated before Fed Chair Powell emerges from Jackson Hole with the DXY holding above 104.000.
• Euro lags after losing 200 DMA and 1.0800+ status vs Dollar even before dovish-leaning ECB sources and downbeat German Ifo survey.
• Yen back below 146.00 as yields remain lofty and Tokyo CPI metrics come in mostly softer than expected.
• Kiwi faces stronger AUD/NZD headwinds as Aussie derives support from base metals.
• NZD/USD towards the bottom of the 0.5928-0.5895 range and AUD/USD vice-versa between 0.6427-03 parameters.
• Pound flounders sub-1.2600 against Buck irrespective of improvement in UK consumer confidence per GfK.
• PBoC set USD/CNY mid-point at 7.1883 vs exp. 7.2923 (prev. 7.1886)
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FIXED INCOME

• Deeper retreat in debt before Fed Chair Powell and ECB President Lagarde deliver remarks at the JH symposium.
• Bunds back down towards 132.20 low from 132.57 peak set post-ECB sources and Ifo survey.
• Gilts and T-note both depressed within 94.48-24 and 109-20/12+ respective ranges.
• BTPs remain under par and sub-115.00 in the wake of a mixed 2-year Italian auction.
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COMMODITIES

• Crude benchmarks are trending higher despite the modest USD upside and tentative tone overall, action which comes in relatively limited specific fundamentals as we await developments around Australian LNG.
• Currently, the benchmarks are towards session highs with WTI Oct'23 above USD 80.00/bbl and Brent Oct'23 around USD 84.50/bbl.
• Spot gold is little changed given the incrementally firmer USD and tentative tone overall while spot silver has resumed its advance with technicals assisting.
• Base metals benefit from the latest support measures out of China, targeting the property sector.
• Offshore Alliance members at Woodside Energy (WDS AT) endorsed the in-principle agreement.
• Chevron (CVX) says it has not received any notice of intent to strike from Australian LNG unions.
• China's Industry Ministry said it aims to increase the output of 10 non-ferrous metals by 5% in 2023-2024 and will promote companies cooperating in overseas iron ore exploration, especially in neighbouring countries.
• Trader sources cited by Reuters suggest rising prices of a popular Russian crude sold in China are set to peak soon as independent refiners are likely to switch to cheaper Iranian crude as Iran boosts exports to four-and-a-half-year highs.
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NOTABLE US HEADLINES

• Former US President Trump was booked on election subversion charges at the Fulton County, Georgia jail and was released on a USD 200k bond.
• India is considering a new policy to reduce EV import taxes for companies also producing locally, according to Reuters sources; after Tesla (TSLA) pushed for a policy change.
• Click here for the US Early Morning Note.

NOTABLE EUROPEAN HEADLINES

• ECB's Nagel it is much too early to think about a rate-hike pause, while he stated they have to be stubborn on policy and more stubborn than inflation, according to an interview with Bloomberg TV.
• ECB's Vujcic said the Eurozone economy is basically stagnating and inflation has most likely peaked, while he added that it is to be seen whether rates are restrictive enough, according to an interview on Bloomberg TV.
• Momentum is growing for a pause in ECB rate hikes as recession fears increase, debate still open, via Reuters citing sources; Policymakers agree that any decision to pause would need to make clear the job is not done and future hikes could still be needed. Several of the sources said they saw chances evenly split between hike/pause, smaller number saw a pause as more likely. Re. August Flash PMIs, several policymakers cautioned against reading too much into such surveys as there is a growing gap between hard data and sentiment readings. All sources agreed that even in the scenario of a pause, ECB would need to make clear its job was not done and more policy tightening could still be needed. Those arguing for tightening want solid evidence that inflation is heading back to target without the risk of getting stuck above 2%, say a meaningful decline in underlying inflation would be needed for a pause.
• UK Ofgem Energy Price Cap (GBP): 1923 (prev. 2074), -7.3% for dual-fuel households, for the October-December. The first time the average energy bill has gone below 2k since April 2022.

NOTABLE EUROPEAN DATA

• German GDP Detailed QQ SA (Q2 2023) 0.0% vs. Exp. 0.0% (Prev. 0.0%); YY NSA (Q2 2023) -0.6% vs. Exp. -0.6% (Prev. -0.6%)
• German Ifo Business Climate New (Aug) 85.7 vs. Exp. 86.7 (Prev. 87.3, Rev. 87.4); Current Conditions 89 vs. Exp. 90 (Prev. 91.3, Rev. 91.4); Expectations 82.6 vs. Exp. 83.8 (Prev. 83.5, Rev. 83.6)
• UK GfK Consumer Confidence (Aug) -25 vs. Exp. -29 (Prev. -30)

GEOPOLITICS

• White House said US President Biden and Ukrainian President Zelensky discussed the start of training Ukrainian fighter pilots and the expedited approval of other nations to transfer their F-16s, according to Reuters.
• Russian military said it intercepted a Ukrainian S-200 missile over Russian territory, while the Russian Defence Ministry said a Ukrainian attack on Crimea involving 42 drones was thwarted, according to Reuters and AFP.
• Taiwan Defence Ministry said 13 Chinese military aircraft entered Taiwan's 'response zone' and 5 Chinese naval ships engaged in combat readiness patrols on Friday morning, according to Reuters.

CRYPTO

• In a similar vein to the above price action, BTC is contained in narrow parameters with specific catalysts light as we await Central Bank impetus from the ECB and Fed.
• JPM sees limited downside for crypto markets in the near term, via CoinDesk.

APAC TRADE

• APAC stocks traded lower following the weak handover from global counterparts after the Nvidia-related euphoria wore off and with markets bracing for Fed Chair Powell's speech at Jackson Hole.
• ASX 200 was pressured by heavy losses in tech and the commodity sectors, while consumer stocks showed some resilience after stronger earnings from Wesfarmers.
• Nikkei 225 fell by as much as 2% after it gapped below 32,000 with tech stocks hit by the broad sector recoil.
• Hang Seng and Shanghai Comp declined with NetEase and Meituan among the worst performers in Hong Kong as the widespread tech selling clouded over their earnings results, while losses in the mainland were limited following a firm liquidity injection by the PBoC and after the securities regulator met with financial industry firms and urged longer-term funds to help steady the stock market.

NOTABLE ASIA-PAC HEADLINES

• PBoC was said to ask some banks to limit southbound bond connect investments with the guidance said to be aimed at outflows and limiting yuan offshore supply, according to Reuters sources.
• China reportedly plans to cut stamp duty on domestic stock trading by up to 50%, via Reuters citing sources; could be announced as soon as Friday.
• China is issuing nationwide guidance on the easing of mortgage rules; issuing detailed rules for conditions to qualify for first-home mortgage rates.
• Reuters polls shows 55% of economists say the BoJ will not start unwinding ultra-easy policy until at least July 2024, while 73% of economists think BoJ will end YCC control in 2024 (prev. 50%) and 41% expect BoJ to end NIRP in 2024 (prev. 54%)

DATA RECAP

• Tokyo CPI YY (Aug) 2.9% vs. Exp. 3.0% (Prev. 3.2%); Ex. Fresh Food YY (Aug) 2.8% vs. Exp. 2.9% (Prev. 3.0%); Ex. Fresh Food & Energy YY (Aug) 4.0% vs. Exp. 4.0% (Prev. 4.0%)
• Japanese Services PPI YY (Jul) 1.7% vs Exp. 1.3% (Prev. 1.2%)