MNI EUROPEAN MARKETS ANALYSIS: Chinese Regulators To Tighten The Screws Further?

BOND SUMMARY: Narrow Ranges, Light Support From Chinese Tech Worry

Another regulatory-driven dip in Chinese tech equity listings provided incremental support for the U.S. Tsy space during overnight dealing. T-Notes +0-01+ at 133-06+ into European hours, sticking within the confines of a narrow 0-04 range, while cash Tsys print little changed to ~1.0bp richer on the day, with some very modest flattening in play. Comments from Philadelphia Fed President Harker ('23 voter) re: tapering had no real impact on the space. Monday's broader docket is quite limited when it comes to notable economic releases, so it will be a case of headline/flow watching.

• A muted Tokyo session has seen JGB futures drift away from overnight cheaps, printing -3 last, while cash JGB trade sees the major benchmarks trade little changed to ~1.0bp richer on the day. Headline flow has been light since the Tokyo re-open, with plenty of speculation surrounding the local political sphere continuing to do the rounds. Local PPI data was marginally softer than expected, while the quarterly BSI survey saw an uptick in the large firm metrics.
• Cash ACGBs played catch up to Friday's overnight moves, steepening as a result, while futures stuck to tight ranges, leaving YM +0.8 and XM -3.2 at typing. Semi-government paper headlined A$ issuance, with corporate and SSA deals also noted.

FOREX: Yuan Slips Amid China's Regulatory Action, Oil-Tied FX Edge Higher

An uptick in crude prices lent a modicum of support to high-beta oil-tied FX, in spite of an FT report pointing to China's plans to break up Ant Group's Alipay and comments from PBOC advisor, who signalled the need to prevent monopolies in the tech sector. The loonie led gains in G10 FX space, ahead of NOK, while most major crosses held relatively tight ranges.

• USD/CNH edged higher today, as chatter surrounding China's regulatory actions provided a mild headwind for the yuan. The PBOC set their central USD/CNY mid-point at CNY6.4497, 5 pips shy of sell-side estimate.
• The global data docket is fairly empty today, while central bank speaker slate features Riksbank's Skingsley.

FOREX OPTIONS: Expiries for Sep13 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1975-85(E1.1bln)
• AUD/USD: $0.7350-60(A$629mln)
• NZD/USD: $0.6990-10(N$697mln), $0.7088(N$705mln)
• USD/CNY: Cny6.4500($580mln)

ASIA FX: Cautious Start To The Week

Most currencies from the Asia EM basket started the week on the back foot.

• CNH: The redback faced some mild pressure after the FT reported that China may extend its regulatory crackdown on Ant Group's Alipay, while a PBOC adviser told the Securities Times that policymakers should ramp up efforts to prevent monopolies in the tech sector.
• KRW: The won underperformed its regional peers after North Korea test-launched a new cruise missile and suggested it could reach targets in Japan. Spot USD/KRW climbed to its highest levels in three weeks.
• IDR: USD/IDR crept higher but remained within the confines of Sep 10 range. The rupiah weakened in tandem with most of its regional peers.
• MYR: The ringgit tread water after a firmer reopen, with local headline flow dominated by political developments. Malaysia's parliament convenes today, with PM Ismail Sabri poised to seal a deal with opposition leaders today.
• PHP: The peso softened ahead of Pres Duterte's announcement on his decision regarding the potential introduction of a new lockdown system in Metro Manila.
• THB: USD/THB approached its 50-DMA after a failed attempt at a clean break above that moving average seen last week.

EQUITIES: Chinese Regulatory Worries Hamper Equities Again

The Hang Seng struggled during Monday's Asia-Pac session, shedding ~2.0% as Chinese tech names were pressured in the wake of press reports pointing to another increase in regulatory scrutiny across several sectors. The likes of Tencent and Alibaba were at the fore in the reports. The move managed to provide some very modest pressure for U.S. e-minis, which ticked away from their early highs, while the remainder of the major Asia-Pac indices traded either side of unchanged.

GOLD: Holding Steady

The defensive tone surrounding the Chinese tech space seemed to provide support for bullion during the first Asia-Pac trading session of the week, although the move has been somewhat limited, with spot continuing to operate within the confines of the recently observed range, leaving an unchanged technical overlay in space. Spot gold last deals a handful of dollars higher on the day, just above $1,790/oz, after an uptick from session lows.

OIL: U.S. Supply Picture Supports Crude

The continued slow restoration of U.S. crude supply in the Gulf of Mexico in the wake of Hurricane Ida supported crude futures in early trade this week, with WTI & Brent adding ~$0.30 to their respective settlement levels as a result. Elsewhere, reports suggested that the oil rich Yemini areas of Rahaba and Mahliyah were retaken by the Houthi group. Positive developments surrounding the IAEA & Iran re: mentoring Iran's centrifuge workshops & uranium mines may have tempered the gains a little, although prospects surrounding the revival of the broader monitoring deal remain unclear. Looking ahead to Monday, OPEC's monthly oil market report will provide some interest for participants.

UP TODAY (Times GMT/Local)