MNI ASIA OPEN: Equities Inch Higher in Wall Street's Absence

NEWS: 

EUROAREA: Eurozone Finance Ministers, ECB, To Discuss Coordination
Eurozone finance ministers will review fiscal and monetary policy coordination in light of much better-than-expected economic developments in talks with the president of the European Central Bank and other ECB chiefs in Ljubjana, Slovenia, this weekend, though the time for discussing the reduction of the bloc's Covid stimulus is still months away, a source close to preparations for the meetings said.

MNI BRIEF: Commission Confirms Sefcovic To Visit NI This Week
EU Commission Vice President Maros Sefcovic will visit Northern Ireland on Thursday and Friday this week, a spokesperson said Monday, confirming MNI's report of last week that he would be paying a visit to the province in order to meet with key political stakeholders as he seeks ways of easing the difficulties around implementation of the Northern Ireland Protocol.

CHINA: Evergrande Highlights China Property Risks
Help will likely be at hand for China Evergrande Group as it moves to untangle a complex debt load of yuan and dollar bonds and commercial paper that has drawn the concern of the People's Bank of China as a company "too big to fail", policy advisors and market analysts told MNI.

GERMANY: SPD Extends Lead In Latest INSA Poll

Latest pre-election opinion poll from INSA shows the centre-left Social Democratic Party (SPD) extending its lead over the centre-right Christian Democratic Union (CDU/CSU) as speculation mounts over potential post-election coalition combinations.

• INSA poll: SPD: 26% (+1), CDU/CSU: 20.5% (+0.5), GRÜNE: 15.5% (-1), FDP: 12.5% (-1), AfD: 11%,LINKE: 6.5% (-0.5), FW: 3% (new). +/- vs. 27-30 Aug. Fieldwork: 3-6 September 2021. Sample size: 2,052
• A large number of potential majority coalitions remain viable, all at present involving three parties. The large number of potential coalitions available post-election is likely to contribute towards a lengthy period of coalition building and negotiation after the election, with the centre-right liberal Free Democrats (FDP) well positioned to act as kingmaker.

Source: dawum.de, MNI. N.b. Charts are a projection from dawum.de and are not necessarily an accurate reflection of how the seat distribution would emerge post-election.

EU-UK: Frost To Announce Extension Of NI Grace Period As Brexit Heats Up Again

UK Cabinet Office minister Lord Frost is expected to deliver a speech in the House of Lords this week outlining the gov'ts plan to extend the grace period on the export of chilled meats from GB to Northern Ireland beyond the end of September according to Denis Staunton in the Irish Times.

• Last week, MNI published an articleciting EU sources stating that expectations were rising that a deal could be reached soon between the EU and UK on the implementation of the Northern Ireland protocol, with European Commission VP Maros Sefcovic expected to visit Northern Ireland during the week.
• Following a summer lull, talks over the NI protocol, ease of trade between the UK and EU, and financial service equivalence are set to come back to the fore of political affairs over the coming days and weeks.

TSY SUMMARY: Treasury futures continue to move lower

Bunds and gilts have reversed some of their losses over the past hour or so but Treasury futures are grinding lower.

• TYZ1 has continued its move lower and at the time of writing has moved through Friday's lows of 133-08 with the next support at 133-07, the September 1 lower. Below here is the 100-dma on the continuation chart at 133-02+ (which has shown to be relevant in the recent past). And then the 132-25+ the low of August 26 is below here. Our technical analyst notes that a key support lies at 132-21+, Aug 11 low. A break of this level is required to signal potential for a deeper pullback and potentially a stronger reversal.
• TY1 futures are down -0-4 today at 133-08+.
• Bund futures are down -0.14 today at 172.15 with 10y Bund yields up 0.3bp at -0.360% and Schatz yields up 0.2bp at -0.719%.
• Gilt futures are up 0.02 today at 128.37 with 10y yields down -0.8bp at 0.707% and 2y yields down -1.4bp at 0.180%.

FOREX: Refinitiv Reported to be Considering Changes to London WMR Fix

Reuters reporting that Refinitiv are considering some changes for the London WMR fix:

• Changes could include lengthening the trading window used in the calculation
• Concerns have arisen that "more nimble hedge funds can spot and trade off large transactions, leaving investors with worse exchange rates."
• Beyond expanding the window, Refinitiv could include sourcing data from more than the current three platforms (Refinitiv Matching, EBS and Currenex) which would make prices more representative
• Refinitiv will publish a white paper this month asking for more feedback on a list of possible improvements

AUSTRALIA: Options Opting for AUD Upside Protection Ahead of RBA

• No surprise to see subdued currency options volumes given the US market holiday, but AUD trading is holding up slightly better ahead of Tuesday's rate decision.
• Solid demand for 0.7600 call options Monday has tilted the put/call ratio in favour of upside protection, which corroborates with the improvement in front-end risk reversals contracts across AUD/USD - including when capturing tomorrow's rate decision. Vols more broadly have inched higher, with 1m implied today rising to the best level in just over a week.
• Market pricing is slightly more even-handed, with implied odds of a 0.5% move higher/lower for AUD/USD by the end of the week at 62.6%/61.5%.
• Focus of Tuesday's meeting falls on the Bank's yet to be implemented taper, which, if it is upheld, will go into play in the coming days.
• Full MNI Preview here: https://roar-assets-auto.rbl.ms/documents/11769/RBA%20Preview%20-%20September%202021.pdf

FOREX: Greenback Holds On To Minor Gains, Dollar Index Snaps Losing Streak

• G10 FX held narrow ranges during the second half of Monday's session, with the US out for Labour Day holiday.
• The dollar index sits in positive territory, up 0.2%, likely to halt a six-day losing streak. The greenback firmed against most other major currencies, erasing Friday's payrolls induced losses.
• GBP, NZD and AUD led underperformance, all retreating around 0.3%, with the Norwegian Krone bucking the trend, marginally higher on the day.
• With EURUSD trading higher Friday on the weaker-than-forecast NFP release, the pair touched but failed to break key resistance at the Jul 30 high of 1.1909. This level remains a key hurdle for bulls and a break would strengthen bullish conditions and given the weighting, could also signal the next move lower for the dollar index. On the downside, the support to watch is 1.1735, Aug 27 low. A break would suggest the recent rally is over.
• Overnight, markets will await the September RBA rate decision/statement. The focus will fall on the decision surrounding the Bank's yet to be implemented tapering move (to A$4bn of bond purchases/week).
• Elsewhere, German ZEW data will be released along with potential comments from Bank of England's Saunders and Mann. Later this week, the BOC and ECB meetings are headline risk events.

FX OPTIONS: Expiries for Sep07 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1840-50(E706mln)
• USD/JPY: Y110.00($639mln), Y110.30-50($708mln), Y111.60($525mln)
• AUD/USD: $0.7410-15(A$663mln)
• USD/CAD: C$1.2540($840mln), C$1.2635-40($984mln)
• USD/CNY: Cny6.40($500mln)

EQUITIES: European Markets Buoyed in Absence of Wall Street Lead

• Continental stock markets took the lead from a solid close across Asia (Nikkei 225 +1.8%, Hang Seng +1.0%) to trade in positive territory across the Monday session. The EuroStoxx50 outperformed, closing higher by 1.0% while peripheral markets in Spain underperformed slightly, but still closed higher by 0.2%.
• Europe's technology and consumer discretionary sectors were the main contributors (countering weakness in real estate and utilities) as the likes of Siemens, Christian Dior and LVMH all seeing strength.
• The e-mini S&P traded positively ahead of the early US close, adding well over 20 points off the post-NFP lows. This puts markets on track for another test of the alltime highs printed on Friday at 4549.50.

COMMODITIES: Oil Markets Ebb Amid Holiday-Thinned Trade

• The energy complex traded in negative territory for much of the Monday session, with the closure of US markets for Labor Day keeping volumes, price action and newsflow relatively muted.
• Nonetheless, a pause in the USD's near-term decline helped weigh on energy markets - particularly oil - with WTI and Brent crude futures edging lower by 0.3-0.5% or so. Declines were modest, with near-term support at $70.42/bbl in Brent futures untroubled for now.
• Despite the more muted trade across energy products, Dalian-listed iron ore futures resumed recent weakness, finishing with losses of 2.5% Monday. Markets closed off the lows of the session, but still managed to print the lowest level of the year for the Jan 22 active contract.