MNI EUROPEAN OPEN: Brent Above $80.00

EXECUTIVE SUMMARY

• FED'S POWELL TO TESTIFY GROWTH STRONG DESPITE HEADWINDS (MNI)
• FED'S BRAINARD BRAINARD: MAY SOON REACH SUBSTANTIAL JOB PROGRESS (MNI)
• FED'S BOSTIC: WILL ALLOW LABOR MARKETS TO 'RUN THEIR COURSE' (RTRS)
• DALLAS FED PRESIDENT KAPLAN TO RETIRE EARLY, CITING TRADING DISCLOSURE 'DISTRACTION' (CNBC)
• ECB'S DE COS: CAN'T RUSH STIMULUS REMOVAL GIVEN UNCERTAINTIES (BBG)
• BRENT FUTURES BREACH $80.00

Fig. 1: WTI & Brent Crude Oil Futures

Source: MNI - Market News/Bloomberg

UK

ECONOMY: Fuel prices have reached their highest level in eight years after more panic buying left some retailers reporting 90 per cent of their stations had run dry. As queues of drivers waited hours at forecourts across the country and businesses were urged to let employees work from home, the RAC revealed that the average price of a litre of petrol across the UK increased from 135.87p on Friday to 136.59p on Sunday. (The Times)

POLITICS: The U.K.'s main opposition party is gearing up for a potential general election as early as next year as strategists increasingly think Prime Minister Boris Johnson might go to the polls before voters feel the impact of higher taxes. Labour leader Keir Starmer has been told by senior advisers that the party should be prepared for a snap election next spring, one senior party figure said on condition of anonymity. It comes after Johnson announced a 1.25% tax rise on workers and businesses, which will come into effect next April, to help pay for the ailing National Health Service. He will also be under growing scrutiny next year when the public inquiry into the government's handling of the coronavirus pandemic gets underway. Britain recorded the highest death toll in Western Europe. (BBG)

EUROPE

ECB: The European Central Bank needs to be careful in removing monetary stimulus given lingering market uncertainties, Governing Council member Pablo Hernandez de Cos said. "Given the uncertainties is important that we don't rush the removal of stimulus," de Cos said at an event in Valencia on Monday. Says ECB hasn't discussed the possibility of tapering. Monetary policy isn't aimed at supporting fiscal policy, seeks to fulfill price stability mandate. Euro area needs to advance on banking and capital markets unions. De Cos says Spain to need a fiscal consolidation program that could take years. (BBG)

ECB: MNI INSIGHT: Any Fresh TLTRO Less Generous, No Cliff-Edge Fears

• Any fresh rounds of cheap loans to banks via the European Central Bank's TLTRO scheme are likely to be less generous, MNI understands. While targeted longer-term refinancing operations, which in their most recent iteration have been provided at 50 basis points below the deposit rate, or -1% to access funds for lending to eligible businesses, have been essential to maintaining the flow of credit to the economy during the pandemic, some officials would prefer banks to be less dependant on central bank credit. The ECB's main refinancing operations, providing loans at 0%, would also provide a fallback in the absence of further TLTROs, according to this reasoning, which crosses the eurozone's usual north-south divide - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

PORTUGAL: Portugal posts Jan.-Aug. budget deficit of EU6.88b, widening by EU550m from the same period in 2020, Finance Ministry says in an emailed statement. (BBG)

U.S.

FED: MNI: Fed's Powell to Testify Growth Strong Despite Headwinds

• The U.S. economy and labor market are making steady progress despite concerns related to the pandemic that have slowed the recovery's pace, Federal Reserve Chair Jerome Powell will tell Congress Tuesday. "Since we last met, the economy has continued to strengthen," Powell said in prepared testimony before the U.S. Senate Banking Committee. "Real gross domestic product rose at a robust pace in the first half of the year, and growth is widely expected to continue at a strong pace in the second half." Powell did not directly address the outlook for monetary policy, nor did he discuss a recent controversy over stock market trades linked to regional Fed presidents, two of whom announced their retirement on Monday. The Chair said the rise in Covid cases has slowed the recovery's pace, but added labor market conditions are still improving - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: MNI: Williams Says Fed QE Taper May Soon Be Warranted

• New York Fed President John Williams said Monday the central bank could start paring back its monthly USD120 billion QE program "soon" if there is further good progress on job creation. "Assuming the economy continues to improve as I anticipate, a moderation in the pace of asset purchases may soon be warranted," Williams, the vice chair of the FOMC, said in prepared remarks. His view echoes the language used in the FOMC statement issued last week and comments from Chair Jerome Powell. "It's clear that we have made substantial further progress on achieving our inflation goal," he said referring to the Fed's criteria for tapering QE. "There has also been very good progress toward maximum employment." But Williams stressed that a reduction in bond purchases does not mean a signal for rate hikes is imminent. "There is still a long way to go before reaching maximum employment, and over time it should become clearer whether we have reached 2% inflation on a sustained basis" - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: MNI: Brainard Says US May Soon Reach Substantial Job Progress

• The Federal Reserve is nearing the point where the labor market justifies reducing its USD120 billion monthly QE program but remains a long way from lifting interest rates, Governor Lael Brainard said Monday. "Employment is still a bit short of the mark on what I consider to be substantial further progress. But if progress continues as I hope, it may soon meet the mark," she said in a prepared speech to the National Association for Business Economics. Brainard also downplayed the idea that the next job report will be make-or-break for a decision on tapering because the figures are distorted amid school closures and other pressures related to Covid. "As a result of Delta, the September labor report may be weaker and less informative of underlying economic momentum than I had hoped," she said. Excluding Covid disruptions to participation, unemployment is 7.5%, she estimated - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: MNI BRIEF: Evans Brings Forward Fed Rate Liftoff View to 2023

• Chicago President Charles Evans on Monday brought forward his preference for a Federal Reserve rate liftoff to 2023 from 2024, calling for a gradual tightening from there as inflation looks set to hold around 2%. "The economy will be on a stronger footing and hopefully we'll be looking at an environment where we can be looking to remove" some rate stimulus, he told reporters, adding the key is making sure the public buys into the Fed's longer-term inflation goals. "In that eventuality, raising rates in late 2023 is appropriate. And it's a very gradual increase." Tapering asset purchases can likely go ahead as long as coming job reports "continue to be in line with good momentum" to establishing a "vibrant labor market" next year, Evans said. Officials never intended to keep up QE until maximum employment was reached, he said - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

FED: The Federal Reserve's "highest priority" is to make sure millions of Americans now out of a job can get back to work, Minneapolis Federal Reserve Bank President Neel Kashkari said in a speech taped Friday and released Monday. "Putting Americans back to work...to me that's our highest priority," Kashkari said at the Community Foundations Leading Change Fall Forum, adding that "of course" the Fed will pay close attention to inflation and keep that in check. Recent high readings of inflation do not signal permanently higher inflation, he said: "We don't want to overreact to short-term price movements." (RTRS)

FED: Dallas Federal Reserve President Robert Kaplan became the second regional central bank leader to resign Monday, saying he was stepping down early following a recent controversy over stock market trades he made. Kaplan's early retirement follows an announcement earlier in the day from Boston Fed President Eric Rosengren, who said he will leave as well but cited health concerns and not the issue over his investment portfolio activity. "The Federal Reserve is approaching a critical point in our economic recovery as it deliberates the future path of monetary policy. Unfortunately, the recent focus on my financial disclosure risks becoming a distraction to the Federal Reserve's execution of that vital work," Kaplan said in a statement. His retirement takes effect Oct. 8. The resignations come a day before Fed Chair Jerome Powell is to spend two days on Capitol Hill updating legislators on the Fed's efforts to combat the economic impact of the Covid-19 pandemic. (CNBC)

FED: Atlanta Federal Reserve Bank President Raphael Bostic on Monday reiterated the U.S. central bank's commitment to making sure every American who wants a job can have one. "Without clear data demonstrating that an inflationary problem has arrived and is likely to last, we will allow labor markets to run their course, which can further our pursuit of long-run maximum employment," Bostic said in an essay released late in the day. Though recent data shows inflation has been rising, long-run expectations remain "reasonably" near the Fed's 2% goal. "I am not convinced we are staring down a lengthy bout of troublesome, fundamental price inflation," he said. (RTRS)

FISCAL: Senate Republicans on Monday voted down the House-passed bill to fund the government through Dec. 3 and raise the debt limit. Congress is just 72 hours away from a potential shutdown, so now comes Democrats' Plan B. Democratic leadership is expected strip the short-term funding bill of language about raising the debt limit — the part that Republicans' reject — in order to pass a bill before federal agencies close down on Friday. (Axios)

FISCAL: The White House and U.S. Democrats are weighing attaching or strengthening income caps to a number of key agenda items, including electric vehicle rebates and free community college, to shrink the $3.5 trillion reconciliation bill and pacify spending hawks, according to two officials familiar with the discussions. (RTRS)

CORONAVIRUS: Centers for Disease Control and Prevention Director Dr. Rochelle Walensky clarified her comments regarding Covid-19 booster shots after she told the Atlantic on Monday that she plans on getting a Covid booster shot, but wants to make sure those who are at higher risk get them first. "I am not at all concerned about supply," said Walensky on CNBC's "The News with Shepard Smith." "I do know that here have been some queues in the pharmacies as people have been wanting to get their booster right away, so I merely indicated that I didn't want to be in a rush above those who are over the age of 65 who might be more at risk than I am, and I'll wait a week or two, and I will absolutely get mine." (CNBC)

CORONAVIRUS: The veteran official leading the pandemic response at the Centers for Disease Control and Prevention is stepping aside, according to three people with knowledge of the matter. Henry Walke, who has overseen the CDC's Covid-19 response for more than a year, will be replaced by Barbara Mahon, the deputy chief of the agency's enteric-disease branch, those sources said. Walke will remain at the agency as director of the CDC's Division of Preparedness and Emerging Infections. (POLITICO)

CORONAVIRUS: New York Mayor Bill de Blasio vowed to fight for a vaccine requirement for school workers and said 90% of teachers and 97% of principals have received their first shot. The city's school system was temporarily blocked by a judge from enforcing a mandate forcing teachers and other staff to get vaccinated by Monday. A federal appeals court is expected to hold a hearing Wednesday. Groups representing teachers and administrators argued that a mandate would result in employee shortages that would endanger student safety and said the district had no plan to redeploy substitutes and central office employees to cover absent teachers and other workers. (BBG)

OTHER

GLOBAL TRADE: The global chip shortage will become less severe in the second half of 2022, AMD CEO Lisa Su said on Monday, though she warned that the first half of the year will be "likely tight." Chipmakers are still catching up to demand following severe supply chain bottlenecks created by the pandemic. But manufacturing plants that were planned last year will likely start producing chips in the coming months, helping to alleviate shortages for PC parts and other microchips, Su said. "We've always gone through cycles of ups and downs, where demand has exceeded supply, or vice versa," Su said at the Code Conference in Beverly Hills, California. "This time, it's different." (CNBC)

GLOBAL TRADE: A disagreement among European Union countries means a pivotal trade meeting with the U.S. this week will be narrower in scope than originally planned and the contents of a joint statement outlining the results are still up in the air. During a meeting of EU ambassadors on Monday, France wouldn't agree to the draft conclusions for the trade and technology council meeting with the U.S. planned for Sept. 29 in Pittsburgh, according to officials familiar with the talks. (BBG)

U.S./CHINA: China has let go two Americans who have been banned from leaving the country since 2018 and allowed them to return to the U.S. following a Justice Department deal with a Chinese-technology company executive, according to people familiar with the situation. The exit from China of Victor Liu and Cynthia Liu over the weekend coincides with a deal last week with U.S. authorities that freed a top Chinese executive and the almost simultaneous departure from China of Canadian prisoners. (WSJ)

JAPAN: The state of emergency in Tokyo is being lifted for the first time in more than two months, as new cases in Japan fell to 2,129 on Sunday compared with levels above 25,000 in mid-August. The country's vaccination program has also proceeded steadily, with more than 57% of the population fully immunized, putting Japan just ahead of the U.S. Restrictions on restaurants and bars will be gradually lifted, Suga told reporters Monday. (BBG)

JAPAN: Over 120 ruling Liberal Democratic Party lawmakers plan to back former party policy chief Fumio Kishida in the LDP presidential election, putting him ahead of the pack in with 30% parliamentary support, a Nikkei/TV Tokyo survey on Monday found. (Nikkei)

JAPAN: Japan must coordinate its monetary and fiscal policy in order to reach the Bank of Japan's 2% inflation target, Finance Minister Taro Aso tells reporters. Aso says its difficult to reach 2% with just monetary policy, after being asked of his appraisal of BOJ governor Haruhiko Kuroda's track record so far. It's difficult to see inflation without a rise in consumption. Aso also says it may take time for demand to return after Japan's state of emergency lifts at the end of the month, and that pent-up demand may not emerge too easily. (BBG)

BOJ: MNI BRIEF: BOJ Minutes: Recovery Delay, Slowing China A Worry

• A few Bank of Japan board members expressed the view that the timing of a full-fledged recovery in the economy was likely to be somewhat delayed compared to the forecast shown in the April 2021 Outlook Report, reflecting the impact of the recent resurgence of COVID-19, the minutes of the July 15-16 meeting meeting released on Tuesday showed - on MNI MainWire and email now, for more details please contact sales@marketnews.com.

AUSTRALIA: Australia will introduce at-home testing for Covid-19 from Nov. 1, as cases in Victoria surged past those in New South Wales, the country's most populous state, for the first time since July. Regulatory agency Therapeutic Goods Administration recommended the at-home testing, Health Minister Greg Hunt said Tuesday. Some 76.7% of Australians have now received their first dose of a Covid vaccine, he added. (BBG)

AUSTRALIA: Treasurer Josh Frydenberg has given the green light for regulators to crack down on high-debt home loans to reduce financial risks from record-low interest rates and surging property prices. Financial regulators are working on plans to potentially clamp down on a jump in high debt-to-income ratios among new borrowers, a trend exacerbated by ultra-low mortgage rates enabling home buyers to borrow larger amounts. More than one in five home buyers are now borrowing more than six times their incomes, a risk that could be felt if interest rates jump or people lose their jobs. The number of new residential mortgage loans where debt is at least six times greater than income jumped to 22 per cent of new loans in the June quarter, from 16 per cent a year earlier, according data from the Australian Prudential Regulation Authority. (AFR)

NEW ZEALAND: Tax changes affecting property investors detailed by the Government on Tuesday are likely to reap $1 billion over the four years they are phased-in, Revenue Minister David Parker says. But Parker rejected an assessment from the National Party that the newly-fleshed out interest deductibility rules would inevitably push up rents. The rule changes will lower the returns that many landlords can earn from rental properties for any given rent. "Over the first four years we're expecting a decrease of tax deductions totalling $1b," Parker said. (Stuff NZ)

NORTH KOREA: Japan's government said a projectile launched by North Korea on Tuesday may have been a ballistic missile, a move that goes against United Nations resolutions on Kim Jong Un's regime. Kyodo News reported the Japanese Defense Ministry's initial conclusion, following earlier reports -- citing South Korea's Joint Chiefs of Staff -- that North Korea fired a projectile into waters off its east coast. The launch comes after a test earlier this month of two short-range ballistic missiles from a train. That was North Korea's first test of ballistic missiles since March, and followed what Pyongyang said was a test of new, long-range cruise missiles a few days earlier. (BBG)

ASIA: The East Asia and Pacific region's recovery has been undermined by the spread of the COVID-19 Delta variant, which is likely slowing economic growth and increasing inequality in the region, the World Bank said on Monday. Economic activity began to slow in the second quarter of 2021, and growth forecasts have been downgraded for most countries in the region, according to the World Bank's East Asia and Pacific Fall 2021 Economic Update. While China's economy is projected to expand by 8.5%, the rest of the region is forecast to grow at 2.5%, nearly 2 percentage points less than forecast in April 2021, the World Bank said. (RTRS)

SOUTH AFRICA: The South African National Treasury's succession planning is sufficient to ensure the exit of key personnel doesn't disrupt plans to return public finances to a sustainable path, its top civil servant said. Tshepiso Moahloli, the head of assets and liability management and the most high-profile woman at the Treasury, last week became the latest senior official to resign -- as new Finance Minister Enoch Godongwana prepares to deliver the medium-term budget. Her departure follows that of Roy Havemann, Catherine MacLeod, Ian Stuart and Khetha Dlamini, all senior Treasury staff who regularly interacted with investors. While investors have no doubt about the skills and qualifications of the Treasury's staff, they are concerned there aren't enough experienced individuals to replace departing veterans like Stuart and fill other vacancies, said two economists who closely follow its personnel changes. (BBG)

SOUTH AFRICA: South Africa can't afford to implement a basic income grant, South Africa's biggest business organization said, wading into an argument that has divided the ruling African National Congress. The country should instead consider an "unemployment insurance type product," Business Unity South Africa said in a statement Monday. Even then it should only be put in place if labor market reforms are enacted to boost employment, the fiscal deficit does not widen as a consequence and payments are to those in need and are not universal, the group said. With the impact of the Covid-19 pandemic pushing South African unemployment to a record, calls for a basic grant to be implemented have increased. (BBG)

TURKEY/RATINGS: The Central Bank of Turkey's (CBRT) 100bp rate cut and change in policy guidance will increase the challenge of bringing inflation under control and highlights the weak credibility of monetary policy, Fitch Ratings says. The decision also risks undermining the recent partial recovery of Turkey's international reserve position. (Fitch)

BRAZIL: Brazil's Economy Minister Paulo Guedes on Monday said that ambitious privatizations should advance in the next ten years, including the sale of state-run oil company Petrobras PETR4.SA and lender Banco do Brasil to private investors. However, Guedes said during an online event hosted by the International Chamber of Commerce that privatizations rely heavily on political agreements. Bolsonaro has said he opposes the privatization of those two huge state-controlled companies. Guedes also criticized the polarized climate in Brazil ahead of the 2022 presidential election: "There's an election every four years... You can't try to hold the election in the middle of a pandemic," he said. "We're in the middle of a pandemic and people are climbing up on cadavers to do their politics."

OIL: Libyan undersecretary of the oil and gas ministry, Rifaat Al-Abbar, has resigned, according to a statement he posted on his Facebook page. Al-Abbar cited personal reasons for the resignation. (BBG)

CHINA

PROPERTY: Chinese developer Sunac China says it didn't submit request to the government of eastern city of Shaoxing for policy support, according to a company statement. Sunac China says construction and operations at its property projects are normal nationwide. (BBG)

PROPERTY: China may not further tighten its housing policies, with some local governments may even marginally relax restrictions given that the cooling housing market has placed developers in financial trouble and raised concerns about increasing risks, the Securities Times reported citing analysts. The government is expected to release some loosening on home sales around November, so to stabilize the operation of developers, as it should still guard against the possibility of further cooldown of the market in Q4, the newspaper said citing Yan Yuejin, research director at E-House Research Institute. Housing hotspots will continue with purchasing limits, while cities that saw falling home prices may welcome some policy boost, as some local governments including Guilin and Shenyang have recently moved to strictly control large home price cuts, the newspaper said citing analysts. (MNI)

ENERGY: At least 20 Chinese provinces and regions making up more than 66% of the country's gross domestic product have announced some form of power cuts, mostly targeted at heavy industrial users. The reasons are two-fold -- record high coal prices are causing power generators to trim output despite soaring demand, while some areas have pro-actively halted electricity flows to meet emissions and energy intensity goals. (BBG)

ENERGY: The situation of tight supply is expected to ease gradually due to measures by authorities to ensure power production and avoid cuts, the official Economic Information Daily says in a front-page report, citing unnamed industry experts. Experts call for policies to deal with overly-rapid rises in energy prices, with an aim to give more financial incentives to power producers. Recent electricity shortage in northeast China and other provinces like Guangdong are due to various factors, including increases in coal prices as well as rising power demand spurred by economic recovery. (BBG)

ENERGY: Chinese authorities should avoid taking the extreme measure of forcibly cutting electricity supply to achieving unrealistic emission-reduction goals while sacrificing businesses' normal operations, which can hurt the hard earned economic recovery, the Economic Daily said in an editorial. The forced electricity outage in China's many regions including the Northeast highlighted the difficulty of choosing meeting its carbon-neutral goals and energy-powered economic growth, the newspaper said. The government should use consistent and predicable policies to curb excess consumption and pollution while striving to meet businesses' energy needs, it said. (MNI)

POLICY: China's State Council Information Office Tuesday issued a white paper to document the country's journey to moderate prosperity in all respects, or Xiaokang. The white paper, titled "China's Epic Journey from Poverty to Prosperity," said the realization of moderate prosperity in all respects, as declared in July, marks a critical step towards national rejuvenation for the country. "Achieving moderate prosperity fulfills a long-cherished dream of the Chinese nation," it said. The document hailed the unremitting hard work by the Communist Party of China (CPC) and the Chinese people and looked into what China has achieved in realizing prosperity through all-round development for all. "To realize moderate prosperity has required great perseverance, and represents a notable achievement on the part of the CPC and the people," it said. (Xinhua)

POLICY: The news that China's disciplinary watchdog will send inspectors into the country's financial regulators and its top state-owned financial institutions to look for signs of corruption, negligence and disloyalty could soon be keeping some Chinese bankers awake at nights. In the coming weeks, disciplinary officials will be parachuted into China's top 25 financial institutions to ask questions, review complaints and reports, knock on doors and open files and locked cupboards. This would be like sending hundreds of FBI agents and federal prosecutors onto Wall Street to look for dirty deals. The inspection is seen as routine as Communist Party cadres in China's state financial system are subject to the same scrutiny, but this inspection could also be special as the collusion of money and power comes under special attention to answer many unanswered questions. (SCMP)

FISCAL: China should increase the intensity of its proactive fiscal policy suport by stimulating effective investment demand especially boosting infrastructure investment growth, so to stabilize the economic growth in Q4 and next year, the China Securities Journal reported citing analysts. The monthly growth rate of real estate investment dropped to nearly zero in August, while exports may slow with the end of the U.S. large-scale fiscal stimulus and improved overseas pandemics, the newspaper said citing CICC Chief Analyst Chen Jianheng. The Chinese government should speed up fiscal spending, especially the issuance and use of local government special bonds to accelerate the construction of major projects, and next year's quota of such infrastructure-back special bonds should also be partly front-loaded, the newspaper said citing Wang Yiming, a member of the Monetary Policy Committee of the People's Bank of China. (MNI)

OVERNIGHT DATA

CHINA AUG INDUSTRIAL COMPANIES' PROFIT +10.1% Y/Y; JUL +16.4%

AUSTRALIA AUG RETAIL SALES -1.7% M/M; MEDIAN -2.5%; JUL -2.7%

AUSTRALIA ANZ-ROY MORGAN WEEKLY CONSUMER CONFIDENCE 103.7; PREV 103.3

Consumer confidence gained 0.4% nationally last week, even as Melbourne recorded its highest number of daily cases amidst anti-lockdown protests and tremors from a nearby 6.0 magnitude earthquake. Given the circumstances, sentiment in Melbourne held up quite well with a decline of just 0.9%. Confidence remained practically unchanged in Sydney with a rise of just 0.1% as daily cases started to descend. A more striking development this week is the rise in weekly inflation expectations to 4.8%. This has pushed the four week moving average to 4.7%, its highest level since 2014 - not long after the survey started collecting weekly data on inflation expectations. High inflation expectations at a time of weak wage growth could drag on overall consumer confidence if people start to worry about the cost of living. (ANZ)

SOUTH KOREA SEP CONSUMER CONFIDENCE 103.8; AUG 102.5

CHINA MARKETS

PBOC INJECTS NET CNY100 BLN VIA OMOS TUESDAY

The People's Bank of China (PBOC) injected CNY100 billion via 14-day reverse repos with the rate unchanged at 2.35% on Tuesday. The operations lead to a net injection of CNY100 billion as no reverse repos maturing today, according to Wind Information.

• The operation aims to keep liquidity stable by the end of the quarter, the PBOC said on its website.
• The 7-day weighted average interbank repo rate for depository institutions (DR007) increased to 2.2090% at 09:23 am local time from the close of 1.9232% on Monday.
• The CFETS-NEX money-market sentiment index closed at 52 on Monday vs 43 on Sunday.

CHINA SETS YUAN CENTRAL PARITY AT 6.4608 TUES VS 6.4695 MON

The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 6.4608 on Tuesday, compared with the 6.4695 set on Monday.

MARKETS

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