MNI ASIA OPEN - JOLTS Miss Ramps Up Focus On NFP

NEWS

FED (MNI): Fed Will Hold For Long, Could Hike More– Hoenig
The Federal Reserve needs to hold peak interest rates for a prolonged time and might hike a bit further to ensure inflation returns to its 2% target, former Kansas City Fed President Thomas Hoenig told MNI. Policymakers lack confidence they have done enough to anchor price expectations after two years of elevated inflation, even following substantial action and a restrictive stance, he said.

FED (MNI): Hawkish Fed Pause In Sept - Trezzi
The Federal Reserve looks set to deliver a hawkish pause at its September meeting and leave open the chance of an interest-rate hike later this year as core inflation lingers above target, former Fed Board and ECB economist Riccardo Trezzi told MNI. Trezzi's Underlying Inflation consultancy sees trend prices running 2.5% to 3%, meaning talk of a rate cut is several quarters away.

FED (MNI): Hoenig 'Totally Opposed' To New Capital Rules
Proposed higher U.S. banking capital requirements are "pure waste and complexity" because they rely on risk-weighted measures that don’t accurately capture financial threats, former FDIC vice chair Thomas Hoenig told MNI.

AUSTRALIA (MNI): MNI INTERVIEW: Fiscal Stance More Restrictive Than Rates - ExRBA
Australian fiscal policy remains contractionary and may do more to increase the country’s unemployment rate and slow the economy over next year than interest rates, which will likely hold circa 4.1%, a former Reserve Bank of Australia board member told MNI.

US (MNI): Biden Announces New Prescription Drug Measures
The White House has released a statement from US President Joe Biden ahead of remarks today where he will announce new measures to lower prescription drug costs by granting Medicare greater authority to negotiate prices. Biden describes the prescription drug plan as, "a key part of Bidenomics"

US (BBG): US Court Paves Way for Spot Bitcoin ETF in Grayscale Ruling
Grayscale Investments LLC moved closer to launching a spot-based Bitcoin exchange-traded fund in the US, a potential watershed moment in the cryptocurrency industry’s quest to tap billions of dollars from everyday investors. A three-judge appeals panel in Washington on Tuesday overturned a decision by the US Securities and Exchange Commission to block the ETF, which would be tied to the spot Bitcoin price. The ruling marks a major legal win for the crypto industry and sent the price of Bitcoin surging by as much as 7%.

UK/EU (MNI): UK Gov't Confirms Widely-Expected Delay To EU Import Border Checks
As was widely expected, the UK gov't has delayed the imposition of post-Brexit checks on EU imports for the fifth time, until January 2024 at the earliest. The gov't had come under significant pressure from both the EU and businesses in the UK to announce its plans swiftly. Concerns that the increased bureaucracy at the border and the as-yet-undefined 'Border Target Operating Model' could push up inflationary pressures, notably on grocery bills, have likely spurred the further delay.

SECURITY (MNI): US To Announce New Ukraine Arms Package Today
White House Press Secretary Karine Jean-Pierre has told reporters that the US will today announce a new security assistance package for Ukraine. According to Jean-Pierre, the new package will include mine clearing equipment, missiles for air defence, ammunition for artillery and HIMAR systems, and nearly 3m small arms munitions.According to the US State Department, the package will be valued at USD$250m and will be filled by presidential drawdown authority.

EU COMMISSION (MNI): Dutch Deputy PM Hoekstra To Replace Timmermans In Climate Role
European Commission President Ursula von der Leyen has confirmed that Dutch Second Deputy Prime Minister and Foreign Minister Wopke Hoekstra will be proposed to the European Parliament and Council for the position of Commissioner for Climate Action. Hoekstra is set to fill the vacated seat of the commissioner from the Netherlands left by First Vice-President of the Commissioner Frans Timmermans, who stepped down in order to run in the upcoming Dutch general election in November.

GLOBAL (WSJ): Saudi Arabia Offering to Resume Financial Support to Palestinians - Sources
Saudi Arabia is offering to resume financial support to the Palestinian Authority, said Saudi officials and former Palestinian officials familiar with the discussions, a sign that the kingdom is making a serious effort to overcome obstacles to establishing diplomatic relations with Israel.

EUROZONE: MNI Eurozone Inflation Preview - August 2023 Progress, But ECB's Job May Not Be Done

• The upcoming round of Eurozone inflation prints for August (Aug 30-31) will arguably play the key role in deciding whether the ECB decides to hike rates at the September meeting (currently just under 50% probability of a 25bp raise, per market pricing).
• Eurozone headline HICP is seen softening to 5.1% Y/Y from 5.3% in August - with core at 5.3% vs 5.5% prior. August flash data in line with consensus is seen providing support for a pause in the ECB deposit rate at 3.75%.
• The more dovish ECB elements may point to a reduction in momentum in inflation in recent months, including in key underlying metrics. PDF LINK HERE: https://roar-assets-auto.rbl.ms/files/55520/Aug202...

US DATA: Job Openings Notably Lower, Quits Rates At Or Below 2019 Average

• Job openings fell to 8.827M (cons 9.5M) in July after a downward revised 9.165M (initial 9.582M).
• The ratio to the number of unemployed fell to 1.51 from 1.54 (initially 1.61) for its lowest since Sep’21.
• Quits rate with a sharp downward move to 2.27% from 2.43% (2019av 2.3)
• This is slightly larger still when just looking at the private sector, with a quits rate falling to 2.50% from 2.71% (2019av 2.6).

DATA

(Other non-JOLTS related data)

US Labor Market Differential Sees Sharp Move Lower After Downward Revision

• The Conference Board consumer confidence index missed in August, at 106.1 (cons 116.0) after downward revised 114.0.
• Importantly ahead of Friday's payrolls report, the labor market differential also fell notably after an equally eye-catching downward revision to July. The differential dropped to 26.2 from 32.4 (initially 37.2), meaning that what was initially the highest since Feb as of July is now the lowest since Apr'21 with the August data.
• The change is two-sided, coming from reductions for "jobs plentiful" (40.3%, -3.4pts) and higher "jobs hard to get" (14.1%, +2.8pts), both the lowest/highest since Apr'21. Last month's original vintage for July data had shown jobs being hard to get as the lowest share since Mar 2022 for one of its lowest on record.

**MNI:US JUN FHFA HPI SA +0.3% V +0.7% MAY; +3.1% Y/Y
US Q2 FHFA HPI Q/Q SA +1.7% V +3.0% Q2 2022

US TSYS: Short-Lived Modest Paring Of Post-Data Gains

• Treasuries have seen a short-lived partial paring of post-data gains, more so at the wings with 5Y through 10Y tenors marginally slower after the strong 7Y auction earlier stopped through by 2bps.
• It still sees large rallies on the day though, with 2YY -11bps and 10YY -8bps, the latter driven in real terms after surprisingly low job openings, quits rate back at pre-pandemic averages and softer than expected consumer confidence including important labor market indicators.
• TYZ3 volumes have overtaken those of TYU3, with the contract trading 22 ticks higher at 110-26+, off earlier highs of 110-29+ but maintaining clearance of the 20-day EMA at 110-20.
• The Fed’s VC for Supervision Barr is still to come on Banking Services at 1500ET but there is otherwise a dearth of scheduled Fedspeak post-Jackson Hole, with Bostic up next on Thu.
• ADP is likely in additional focus tomorrow after today’s soft JOLTS report, along with the second reading of Q2 GDP considering Q3 trackers are willing wild in the case of the Atlanta Fed tracker.

FOREX: Weaker US Data Prompts Broad Greenback Weakness

• Weaker-than-expected US JOLTS and confidence data prompted some sharp greenback weakness on Tuesday, quickly erasing the early gains for the US dollar and prompting eventual 0.5% losses for the USD index on the session.
• Lower core yields have bolstered the Japanese Yen, with USDJPY extending a powerful reversal from earlier cycle highs of 147.37 to 145.77 lows just ahead of the APAC crossover. The pair is now down 0.50% on the session and the first support to watch lies at 144.77, the 20-day EMA.
• EURUSD is moving in lockstep with the broader USD index, also rising a half a percent and approaching last Thursday’s highs around 1.0875 and initial firm resistance at 1.0900, the 20-day EMA.
• Outperforming on the session are the antipodeans with both AUD (+0.67%) and NZD (+0.81%) benefitting from buoyant global equity benchmarks. JPMorgan noted that “this looks to be very much the benign sort of labor market cooling that Fed is targeting”, potentially underpinning the more optimistic price action for stocks on Tuesday.
• Despite Hungary's central bank cutting the overnight deposit rate again by 100bps, the Forint is the best performer on Tuesday, rising 1.2% against the dollar, amid the broader optimism for risk sentiment.
• Australia CPI will highlight the overnight data docket on Wednesday, before Eurozone inflation readings come thick and fast. The greenback and broader currency markets will remain focused on the key data releases due later this week - NFP, Core PCE and ISM.

FX OPTION Expiries for Aug29 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0725-35(E1.0bln), $1.0800(E1.9bln), $1.0825-30(E560mln), $1.0855-65(E550mln), $1.0950-55(E1.4bln)
• USD/JPY: Y145.00($699mln), Y147.00-10($1.4bln)
• GBP/USD: $1.2700-20(Gbp646mln)
• AUD/USD: $0.6400(A$1.3bln)

US STOCKS: Holding Push Towards Resistance, Nasdaq Outperforming

• The S&P e-mini extended gains to a new high of 4502.50 before nudging back below 4500 in another step towards resistance at 4510.13 (former bull channel base drawn from Mar 13).
• SPX sits +1.3%, with gains led by communication services (+2.0%), IT (+2.0%) and consumer discretionary (+1.8%). Apple (+2.0%) and Nvidia (+4.5%) lead the contribution, whilst Tesla sees largest outright increases with +6.4%. Consumer staples (+0.2%) and utilities (+0.3%) lag.
• The performance attributions are consistent with Nasdaq’s outperformance (+1.9%), whilst Dow Jones lags (+0.7%).
• The broader markets backdrop helps, with VIX holding its push through 15 and at lows since Aug 1 whilst 10Y real yields are down 7bps on the day after softer than expected US labor data.

COMMODITIES: Recovery In Crude & Gold Aided By USD Tailwind

• A volatile session for crude but one that is ending with ~1% gains, aided by a tailwind from USD depreciation after weaker than expected US data.
• There are however continued concerns around energy demand in major markets like US and China, whilst signs of lower global oil inventories weigh against increasing supplies from Russia and Iran (the latter including Russian crude shipments at the highest in two months in the week to Aug 27).
• Chinese refiners have a weaker outlook for the recovery in Chinese demand, with Sinopec (China’s biggest refiner) saying Monday that the country’s product demand in the second half would expand at a slower pace than in the first.
• Shell is not shutting any of its offshore production due to Hurricane Idalia, a spokesperson for the company said.
• WTI is +1.1% at $80.95, ultimately taking a step closer to resistance at $81.75 (Aug 21 high).
• Brent is +1.0% at $85.24, moving closer to resistance at $85.68 (Aug 21 high) after which lies the bull trigger at $88.10 (Aug 10 high).
• Gold is +0.8% at $1936.02, directly benefting from the slide in the USD. It has cleared the 50-day EMA ($1930.4) and next opens $1946.8 (Aug 4 high).