MNI EUROPEAN OPEN: Australia Locks Down Capital, New Zealand Eyes 2022 Reopening

EXECUTIVE SUMMARY

• FED'S GEORGE: TIME HAS COME TO DIAL BACK FED MONETARY STIMULUS (BBG)
• FED'S DALY: TAPERING OF ASSETS PURCHASES COULD START AS SOON AS THIS YEAR (FT)
• HOUSE DEM MODERATES LAY OUT BATTLE LINES AS PELOSI STANDS FIRM (Politico)
• YELLEN WEIGHS VISIT TO CHINA, HER FIRST AS TREASURY SECRETARY (BBG)
• ACT ENTERS SNAP SEVEN-DAY LOCKDOWN, NEW ZEALAND LOOKS TO REOPEN BORDER IN 2022
• U.S. CALLS ON OPEC AND ITS ALLIES TO PUMP MORE OIL (RTRS)

Fig. 1: Australia/New Zealand 2-Year Swap Spread

Source: MNI - Market News/Bloomberg

UK

CORONAVIRUS: Fully vaccinated people in England will no longer be legally required to self-isolate upon contact with a positive Covid case from Monday, and will instead be advised to take a PCR test – in a marked shift from rules that have led to more than 14m instructions to stay at home. Ministers have confirmed that the legal requirement to isolate will be replaced with non-binding advice to take a test for the double-jabbed, as well as those 18 and under. And those who do come into contact with the infected will not be told to isolate while waiting for their results. For people who do test positive, isolation will continue. (Guardian)

CORONAVIRUS: Fewer than one-in-five office workers in the U.K. have returned to city center workplaces since restrictions were relaxed, reflecting both summer vacations and a reluctance to commute. Just 18% of people in the U.K.'s 31 largest cities have returned to their normal workplace, the Center for Cities research group said, citing analysis of mobile phone location data. Daytime worker footfall fell by 1% during the final week of July when most Covid-19 rules were dropped. The group doesn't expect footfall to pick up before September. (BBG)

POLITICS: Labour called on Wednesday for Boris Johnson to sack Ben Elliot, Conservative co-chair, after revelations that he discussed with foreign ambassadors a plan to grant a Tory donor a role in the party's Middle East relations without disclosing that the donor was also his paying client. The Financial Times reported that Elliot communicated with Saudi Arabian and Bahraini diplomats about proposals by Mohamed Amersi to form a group to oversee the Conservative party's Middle East relations. (FT)

POLITICS: The Conservative donor who hired the Prime Minister's wife to work in a senior role at his charity had months earlier launched a secret lobbying campaign of the Government which failed, The Telegraph can disclose. Damian Aspinall hired Carrie Johnson to be director of communications at the Aspinall Foundation months after a senior figure from the organisation asked Lord Goldsmith for government backing to buy a game reserve in South Africa. The request had been unsuccessful. Mr Aspinall also contacted the environment minister about enhanced financial support for zoos which were struggling financially during the pandemic. Following the intervention, the Government did bring in extra support for the sector, but the conservationist's charities did not directly receive any money, The Telegraph understands. (Telegraph)

UK/US: US authorities are growing increasingly frustrated with Prince Andrew's failure to cooperate into their probe into the network surrounding convicted sex offender Jeffrey Epstein, exacerbating tensions between Washington and London, The Independent understands. People familiar with authorities' investigations into Mr Epstein's business affairs told The Independent that the lack of information-sharing had caused diplomatic strain, with US law enforcement and diplomats raising the matter with their British counterparts. (Independent)

UK/RUSSIA: A British embassy worker in Berlin has been arrested on suspicion of taking a cash bribe to pass sensitive documents to a Russian intelligence agency. Germany's highest prosecutor said that the 57-year-old man, identified only as David S, was "strongly suspected" of having worked for the Russians since at least last November. The suspect, who is a security guard, has been monitored by MI5 and German intelligence for months, The Times understands. (Times)

EUROPE

EU/CHINA: MNI SOURCES: New EU Trade Laws Seen Aggravating China Tensions

• Rising tensions in EU-China relations are set to ratchet higher this autumn as the European Commission prepares a raft of legislative instruments aimed at many of China's trade and investment policies, as well as targeting Beijing's record on human rights, EU sources say - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

GERMANY: German Finance Minister Olaf Scholz, who is running as chancellor candidate for the Social Democrats, sees himself on the path to become Angela Merkel's successor as his center-left party gains ground in the polls. "The trend is now in favor of the SPD," Scholz said Wednesday evening in an interview with broadcaster Welt. "We're seeing new momentum. Not only my personal ratings are very good and still getting better, but also those of the SPD are now going up." (BBG)

GERMANY/RUSSIA: German Finance Minister Olaf Scholz said he would push for a new strategy towards dealing with Russia and other eastern European countries if he were to become chancellor in Germany's upcoming general election in September. "We need a new policy towards the east that revitalizes the principle of the OSCE and CSCE, but as a principle of the European Union," he told DW in an exclusive interview. He said there should be a return to the "mutual principles" for security and human rights in Europe agreed within the Organization for Security and Co-operation in Europe (OSCE and its former title as the CSCE) — the intergovernmental organization that enables dialogue between western and eastern countries in Europe. "I also say that Russia and other countries need to accept that European integration will continue," he told DW. "If we want to ensure joint security in Europe, then it's about the European Union and Russia." (Deutsche Welle)

ITALY: A temperature of 48.8°C was registered in the province of Siracusa on Wednesday by Sicily's SIAS agency in what looks set to be a new European record. (ANSA)

NORWAY: Norway, Western Europe's largest oil and gas producer, remains politically committed to supporting its petroleum industry despite rising global pressures to halt oil and gas activity due to global warming, the country's deputy energy minister, Tony Christian Tiller, has said in an interview. In the run-up to parliamentary polls on Sept. 13, Tiller, who serves in Conservative premier Erna Solberg's center-right coalition, acknowledged that climate change concerns were real, but said he saw a "consensus" on oil and gas in Norway and little desire to cave in to pressures seen in the UK and elsewhere to scrap the industry. (Platt's)

POLAND: Poland's ruling party pushed through a controversial media law that would force Discovery Inc. to sell control of the country's biggest independent broadcaster, ratcheting up a conflict with the U.S. and further undermining media freedom in the European Union's largest eastern member. In a day of political drama, parliament's lower chamber finally voted 228 to 216 late on Wednesday to approve the legislation. It's ostensibly to protect broadcasters from takeovers though targets the American owner of Poland's largest private television network. The bill now goes to the Senate. The move has been criticized by U.S. senators, the State Department and the EU as an attempt to muzzle independent media. The governing coalition also collapsed before the vote after Prime Minister Mateusz Morawiecki fired his deputy, Jaroslaw Gowin, the leader of a smaller party and an increasingly vocal opponent of the Law & Justice leadership. (BBG)

US

FED: Federal Reserve Bank of Kansas City President Esther George said the central bank needs to move ahead with reducing monetary stimulus, citing expectations for continued labor-market gains. "Now, with the recovery underway, a transition from extraordinary monetary policy accommodation to more neutral settings must follow," George said in the text of a virtual speech to the National Association for Business Economics Wednesday. "Today's tight economy as I described earlier certainly does not call for a tight monetary policy, but it does signal that the time has come to dial back the settings." (BBG)

FED: The Federal Reserve could start dialling back its ultra-accommodative monetary stimulus by the end of the year, given the strength of the economic rebound, according to a top official at the US central bank. In an interview with the Financial Times, Mary Daly, president of the San Francisco Fed, expressed confidence that the robust recovery in household and business activity from the depths of the Covid-19 collapse would continue to gather momentum as more people returned to the workforce and consumer spending remained buoyant, setting the stage for a policy pivot in the coming months. "I remain very optimistic and positive about the fall and ongoing improvements in the key variables we care about," she said on Wednesday. "That for me means it's appropriate to start discussing dialling back the level of accommodation that we're giving the economy on a regular basis, and the starting point for that is of course asset purchases. (FT)

FISCAL: Speaker Nancy Pelosi told her caucus Wednesday she would not waver from her two-pronged strategy to deliver President Joe Biden's main domestic priorities, bringing the House closer to a standoff between Democrats' leadership and their most vulnerable members. The California Democrat reiterated in no uncertain terms during a call with members that she would only bring the Senate's bipartisan infrastructure deal to the floor after the upper chamber finishes the party's $3.5 trillion social spending package. Her approach shrugs off a growing pressure campaign from moderates, who are urging Pelosi to take up the Senate infrastructure bill more quickly so that they can sell it to voters back home. But without a separate party-line measure containing the rest of the party's priorities, Pelosi told Democrats, she wouldn't have the votes to pass either bill. "I'm not freelancing. This is the consensus of the caucus," Pelosi told her members on the call, according to several people listening. "The votes in the House and Senate depend on us having both bills." At least six of [Democratic] centrists say privately they are willing to block consideration of the Democrats' budget blueprint as a last-ditch move to stall the $3.5 trillion bill, according to two people familiar with the discussions. None of those Democrats would speak publicly about their plans, though they argue their influence is only growing with their party five seats away from losing the House. (Politico)

FISCAL: President Biden on Wednesday sought to tamp down concerns about adding to the national debt or increasing inflation as he made the case for enacting a multitrillion-dollar spending plan that would invest in health care, education, home care and child care, among other sectors. Biden delivered a speech outlining the basics of his "Build Back Better" plan hours after Senate Democrats approved a $3.5 trillion budget blueprint that includes the basic spending plan Democrats will seek to enact in the coming weeks through the reconciliation process, meaning they will not need a single GOP vote. (Hill)

CORONAVIRUS: The Food and Drug Administration will update its emergency use authorization for the Pfizer and Moderna coronavirus vaccines as early as Thursday to allow immunocompromised people to get a third dose, a source familiar with the matter told Axios. (Axios)

CORONAVIRUS: The Centers for Disease Control and Prevention urged all pregnant women Wednesday to get the COVID-19 vaccine as hospitals in hot spots around the U.S. see disturbing numbers of unvaccinated mothers-to-be seriously ill with the virus. Expectant women run a higher risk of severe illness and pregnancy complications from the coronavirus, including perhaps miscarriages and stillbirths. But their vaccination rates are low, with only about 23% having received at least one dose, according to CDC data. "The vaccines are safe and effective, and it has never been more urgent to increase vaccinations as we face the highly transmissible delta variant and see severe outcomes from COVID-19 among unvaccinated pregnant people," CDC Director Dr. Rochelle Walensky said in a statement. (AP)

CORONAVIRUS: Top Republicans are battling school districts in their own states' urban, heavily Democratic areas over whether students should be required to mask up as they head back to school — reigniting ideological divides over mandates even as the latest coronavirus surge ravages the reddest, most unvaccinated parts of the nation. (AP)

CORONAVIRUS: The New York Stock Exchange will require evidence of a full Covid-19 vaccination for anyone wishing to access the trading floor, joining a host of other US companies that have announced vaccine mandates for employees returning to their offices. (FT)

POLITICS: Redistricting season officially kicks off with the release of detailed population data from the U.S. Census Bureau that will be used to redraw voting districts nationwide — potentially helping determine control of the U.S. House in the 2022 elections and providing an electoral edge for the next decade. The new data being released Thursday will show which counties, cities and neighborhoods gained or lost the most people in the 2020 census. That will serve as the building block to redraw 429 U.S. House districts in 44 states and 7,383 state legislative districts across the U.S. The official goal is to ensure each district has roughly the same number of people. (AP)

POLITICS: A federal judge on Wednesday narrowed a House subpoena for former President Trump's personal financial records, ruling that the congressional inquiry was overly intrusive but may proceed with a more limited scope. (Hill)

ECONOMY: An enormous wildfire raging across Northern California for nearly a month has burned down another 550 homes, fire officials said on Wednesday, becoming one of the most destructive in state history. (RTRS)

OTHER

U.S./CHINA: Janet Yellen is weighing a trip to China in the coming months that would be her first as U.S. Treasury secretary, people familiar with the matter said, as the Biden administration engages in a broad review of policy toward the Asian power and the tariffs on imported goods enacted under former President Donald Trump. The Treasury Department's discussions on a possible Yellen visit are in the early stages and no decision has been made, with considerations including travel risks stemming from the delta variant of the coronavirus, the people said on the condition of anonymity because the deliberations are private. If the trip goes ahead, she would likely meet with Vice Premier Liu He -- regarded as China's top economic official -- and would be the highest-ranking Biden appointee to visit the country. In response to a request for comment, Treasury spokeswoman Lily Adams said: "There are no plans for Secretary Yellen to travel to China in the fall." (BBG)

BOJ: MNI: BOJ Worried On Exports, Output On SE Asia Covid-19 Rates

• Bank of Japan officials will likely revise their near-term optimistic view on exports and production on additional supply restrictions caused by the closure of automobile plants in Southeast Asia because of the spread of Covid-19, MNI understands - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

• The Bank of Japan will likely revise down the median forecast for the inflation rate this fiscal year to near zero percent from+0.6% made in July due to lower mobile phone charge caused by a base year change, MNI understands - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

JAPAN: The Japanese government and organizers are planning to hold Paralympic games withoutspectators for events located in prefectures covered by virus state of emergency, NTV reports citing an unidentifiedperson. (BBG)

AUSTRALIA: The ACT will enter a seven day lockdown from 5pm tonight (Thursday). This decision is a result of a positive COVID-19 case in the territory who has been infectious whilst in the community, and positive wastewater detections. We currently do not know the source of the infection. This is by far the most serious public health risk the ACT has faced in the past 12 months, and that's why the ACT is introducing a strict lockdown in response to this positive case. (Canberra Times)

AUSTRALIA: The Commonwealth and Victorian governments have announced a $367 million joint support package for 100,000 Melbourne businesses hit by Victoria's extended lockdown. The funding will add $271 million to the existing business assistance program and a special hospitality and venue fund. (Sydney Morning Herald)

NEW ZEALAND: The Government has announced a sweeping reset of its Covid-19 approach, with a sped-up vaccine programme and border opening trials this year. Everyone aged 16 or over will be eligible for their first vaccine dose from September 1 but will wait twice as long between doses, as the Government doubles the time between doses from three to six weeks. And vaccinated workers will be able to participate in a pilot scheme from October where they can travel overseas and then self-isolate at home, rather than going into managed isolation. The Government will then look to broaden out quarantine-free travel for vaccinated Kiwis from the first quarter of 2022, with different "risk pathways" based on how dangerous a country is. (Stuff)

SOUTH KOREA: The potential economic fallout of the fourth wave of the pandemic will be "inevitable" starting in August amid concerns that the recent virus resurgence will likely slow the economic recovery, South Korea's top economic policymaker said Thursday. Finance Minister Hong Nam-ki said the government will make efforts to minimize the economic shocks from the latest flare-up in COVID-19 cases. (Yonhap)

BRAZIL: Brazil's Senate on Wednesday approved a bill authorizing the president to temporarily break patents for vaccines and their ingredients in health or public emergencies, such as the coronavirus pandemic. (RTRS)

RUSSIA: Russian authorities have levied new criminal charges against imprisoned opposition leader Alexei Navalny, part of a government crackdown on the corruption fighter and his beleaguered team ahead of Russia's upcoming parliamentary election. (AP)

ISRAEL: Israel is set to approve construction of new homes for Jewish settlers in the occupied West Bank but in a rare step will also grant permits for Palestinian housing construction, an Israeli security official said on Wednesday. (RTRS)

TURKEY: Turkey is moving towards a vaccine mandate for teachers, students and their families as the rate of inoculation slows and infections surge. Fahrettin Koca, the country's health minister, said "face-to-face education is a must" and the government will implement measures so that teachers, eligible students and the families they live with receive their shots. Those who remain unvaccinated, especially parents, may have to show negative Covid-19 test results, he said. (FT)

TURKEY: Turkish President Recep Tayyip Erdogan said Wednesday he may receive the leader of the militant Taliban group to discuss the deteriorating security situation in Afghanistan. Erdogan, speaking in an interview with CNNTurk television, said he discussed ways with the leadership of Qatar on Wednesday on how to stop the advance of the Taliban and how the two countries can take a step toward "peace." (BBG)

AFGHANISTAN: Taliban fighters could isolate Afghanistan's capital in 30 days and possibly take it over in 90, a U.S. defence official cited U.S. intelligence as saying, as the resurgent militants made more advances across the country. The official, speaking to Reuters on condition of anonymity on Wednesday, said the new assessment of how long Kabul could stand was a result of the Taliban's rapid gains as U.S.-led foreign forces leave. "But this is not a foregone conclusion," the official added, saying that the Afghan security forces could reverse the momentum by putting up more resistance. (RTRS)

LIBYA: Libya's presidential elections this year were meant to be a key marker in the oil-rich North African state's return to stability after years of civil war. Instead, they risk unleashing more chaos as outside powers try to leverage their preferred candidates into place. A decade after the NATO-led overthrow of Muammar Qaddafi, the installation of a government of national unity has brought a fragile cease-fire to Libya, with the Dec. 24 elections the next step in the stabilization process. Now, however, President Vladimir Putin is challenging the U.S. and Europe as well as rising regional power Turkey with a bid to elevate into power the ex-dictator's son, Saif al-Islam Qaddafi, according to three people in Moscow with knowledge of the efforts. (BBG)

EQUITIES: Autonomous driving startup Pony.ai has put on hold plans to go public in New York through a merger with a blank-check firm at a $12 billion valuation, after it failed to gain assurances from Beijing that it would not become a target of a crackdown against Chinese technology companies, people familiar with the matter said. (RTRS)

OIL: U.S. President Joe Biden's administration on Wednesday urged OPEC and its allies to boost oil output to tackle rising gasoline prices that they see as a threat to the global economic recovery. The request reflects the White House's willingness to engage major world oil producers for more supply to help industry and consumers, even as it seeks the mantle of global leadership in the fight against climate change and discourages drilling at home. Biden's national security adviser Jake Sullivan criticized big drilling nations, including Saudi Arabia, for what he said were insufficient crude production levels in the aftermath of the global COVID-19 pandemic. (RTRS)

CHINA

PBOC: The PBOC's trial policy announced on Tuesday, which cancels the mandatory ratings on offering debt instruments by the non-financial companies starting Aug. 11, showed the central bank's resolve in reining in unqualified external rating agencies, widely criticized by the financial industry for inaccuracies, the 21st Century Business Herald reported citing industry insiders. Regulatory authorities have issued a series of policies to make credit rating agencies accountable to the market, which may cause the agencies to lose as much as 40% of their revenues, the newspaper said citing an industry insider. Normally, debt financing instruments issued by non-financial enterprises have to be rated by a bond rating agency registered in China. (MNI)

PBOC: China's central bank is facing mounting calls to cut interest rates as fresh coronavirus outbreaks threaten to upend the recovery in the world's second-largest economy. Economists affiliated with the government see scope for lower interest rates, arguing that Beijing's success in curbing debt growth means the central bank can ease policy without fueling financial risks. Their views contrast with global investment banks, who mostly see the People's Bank of China keeping policy interest rates steady this year. (BBG)

ECONOMY: China's July manufacturing investment is likely to have kept a strong momentum, while infrastructure investment may also have improved, the Economic Information Daily reported citing forecasts by securities firms and banks. Industrial output may have expanded 7.8% y/y in July, or 6.3% when compounded over the last two years compared with 2019, the newspaper said citing Chief Economist Li Chao of Zheshang Securities. July's retail sales are forecast to grow 11.9%, or 5.2% if averaged over the last two years, the daily cited Chief Analyst Zhang Yu of Huachuang Securities Research. The impact from the Covid-19 outbreaks in July was likely to be limited, Zhang was cited as saying. (MNI)

ECONOMY: China is instructing local authorities to "buy Chinese" products under procurement guidelines covering such high-tech items as X-ray machines and weather instruments as it pushes foreign suppliers to shift to local production, Nikkei has learned. The local content rules, issued as part of auditing policies in May by China's finance and industry ministries, apply to 315 items in 41 categories. These are grouped into four quota levels between 25% and 100%, though whether this is on a volume or value basis is unclear. The new barriers, which were never officially announced, could cause headaches for foreign suppliers, and are likely to add fuel to the trade tensions between China and the U.S. Local authorities accounted for more than 90% of the 3.3 trillion yuan ($509 billion at current rates) in government purchasing across China during 2019, official data shows. (Nikkei)

LOANS: A slowdown in Chinese companies' longer-term loans for the first time this year signaled a weakening demand for financing by the manufacturing sector, even as the government continued to pump more credit to sustain the economy, the Securities Times reported citing analysts. The increase in new corporate medium and long-term loans in July was CNY103.1 billion less than that in the same period last year, the newspaper said. Aggregate financing in July dropped, reflecting a crackdown on off-balance sheet financing and weaker government bond financing, the newspaper said citing Wen Bin, the chief researcher with Minsheng Bank. However, China's money supply, credit, and social financing data may rebound in August due to the boost from the PBOC's RRR cut announced in July, and as macro policies tilt to easing to stabilize growth, the newspaper said citing analyst Wang Qing of Golden Credit Rating. (MNI)

EQUITIES: China's banking and insurance watchdog is stepping up scrutiny of the nation's insurance technology platforms, widening a regulatory dragnet that has roiled global investors. The regulator has ordered companies and local agencies to curb improper marketing and pricing practices, and step up user privacy protection, according to a notice seen by Bloomberg News. It encouraged companies to address these issues voluntarily and said those that failed to comply would face "severe punishment." (BBG)

OVERNIGHT DATA

JAPAN JUL PPI +5.6% Y/Y; MEDIAN +5.0%; JUN +5.0%
JAPAN JUL PPI +1.1% M/M; MEDIAN +0.5%; JUN +0.6%

JAPAN JUL TOKYO AVG OFFICE VACANCIES 6.28; JUN 6.19

AUSTRALIA AUG CONSUMER INFLATION EXPECTATIONS +3.3% Y/Y; JUL +3.7%

NEW ZEALAND Q3 2-YEAR INFLATION EXPECTATIONS +2.27% Y/Y; Q2 +2.05%

NEW ZEALAND JUL REINZ HOUSE SALES -11.7% Y/Y; JUN +6.2%

NEW ZEALAND JUL FOOD PRICE INDEX +1.3% M/M; JUN +1.4%

SOUTH KOREA JUN MONEY SUPPLY L +0.8% M/M; MAY -0.5%
SOUTH KOREA JUN MONEY SUPPLY M2 +0.8% M/M; MAY +0.6%

UK JUL RICS HOUSE PRICE BALANCE 79%; MEDIAN 76%; JUN 82%

CHINA MARKETS

PBOC INJECTS CNY10BN VIA OMOS THURS; LIQUIDITY UNCHANGED

The People's Bank of China (PBOC) injected CNY10 billion via 7-day reverse repos with the rate unchanged at 2.2% on Thursday. The operation left liquidity unchanged given it netted off CNY10 billion reverse repos maturing today, according to Wind Information.

• The operation aims to keep liquidity reasonable and ample, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2000% at 09:24 am local time from the close of 2.1254% on Wednesday.
• The CFETS-NEX money-market sentiment index closed at 35 on Wednesday vs 39 on Tuesday.

PBOC SETS YUAN CENTRAL PARITY AT 6.4754 THURS VS 6.4831

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.4754 on Thursday, compared with the 6.4831 set on Wednesday.

MARKETS