MNI US MARKETS ANALYSIS - AUD Undermined as RBA, China Backdrop Weighs

US TSYS:  Drifting Lower Ahead Of Factory Orders, Heavy Bill Issuance

• Cash Tsys have drifted lower through early London lows, alongside major German & Gilt counterparts, as US desks start to return from the Labor Day holiday. Yields sit 3.5-4.5bps higher on Friday’s close, led by the belly, ahead of a docket with a data focus on factory orders (greater focus on ISM Services tomorrow) plus heavy bill issuance due to the holiday-shortened week.
• Moves in European/UK paper have been the dominant factor. E-minis bouncing from worst levels may have applied some cross-market pressure, although it is hard to be sure after the early uptick in Tsy yields seemingly applied weight to e-minis.
• TYZ3 trades 11+ ticks lower at 110-07 for session lows, with the Aug 29 low in the contract (109-28+) presenting the next area of support. Volumes are solid at 340k.
• Data: Factory orders/durable goods Jul/Jul final (1000ET)
• Bill issuance: US Tsy to sell $69B 13-week bills and $62B 26-week bills (1130ET), US Tsy to sell $42B 52-week bills and $60B 42-day CMB (1300ET)

STIR FUTURES: Fed Implied Cuts Trimmed Further Ahead Of US Returning From Labor Day

• Fed Funds implied rates have consolidated Friday’s post-payrolls decline for near-term meetings and further extended the net lifting in rates heading later into 2024.
• Cumulative hikes are limited to +1.5bp for Sep and +9.5bp for Nov to a terminal 5.425%, holding the decline off last week’s highs just over 5.50% with the move initiated by the JOLTS miss before payrolls reinforced the case for a soft landing.
• Cuts expectations are trimmed further from Friday’s close, with 44bp from terminal to Jun’24 and 113bp from terminal to Dec’24, although the latter remains off mid- to late-August recent lows of 104bps.
• Fedspeak is slow to get underway after Labor Day before a heavier schedule tomorrow including the Fed’s Beige Book.

Source: Bloomberg

EUROPE ISSUANCE UPDATE

Gilt syndication update:

• GBP5bln of the 4.00% Oct-63 Gilt. Spread set at 2.50% Jul-65 Gilt +9 bps. Orderbook closed in excess of GBP59bln

Austria auction results

• E748mln (E650mln allotted) of the 2.90% Feb-33 RAGB. Avg yield 3.159% (bid-to-cover 1.8x)
• E633mln (E550mln allotted) of the 3.15% Oct-53 RAGB. Avg yield 3.374% (bid-to-cover 1.82x)

• E400mln (E340mln allotted) of the 0.10% Apr-33 ILB. Avg yield 0.19% (bid-to-cover 1.77x)
• E200mln (E180mln allotted) of the 0.10% Apr-46 ILB. Avg yield 0.21% (bid-to-cover 1.03x)

FOREX: AUD Undermined by RBA, Weak Chinese Markets

• The dollar is dominant in early Tuesday trade, with the greenback favoured as US participants return from their Labor Day bank holiday. Markets retain a generally risk-off backdrop, with US equities futures under pressure thanks to the resumption of the climb higher in US yields. The 10y yield has resumed trade and risen back above the 4.20% - weighing on global appetite.
• The resulting USD strength is pressing major pairs lower, with GBP/USD plumbing a new pullback low at 1.2528 to expose 1.2487 and the 200-dma at 1.2422.
• AUD takes up the bottom position in G10, with AUD weaker against all others following the RBA rate decision overnight. The bank kept policy unchanged, with markets reading into the bank's view that the peak in inflation has now passed. Persistent weakness in Chinese markets also undermined the currency, putting AUD/USD within range of key support and the bear trigger of 0.6365.
• The data schedule is topped by US July factory orders, accompanied by the final durable goods orders release. Central bank speakers include ECB's Visco and Schnabel.

OPTIONS: Expiries for Sep04 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0800-10(E640mln), $1.0880-85(E572mln), $1.0910(E524mln), $1.0925-27(E1.3bln)
• USD/JPY: Y142.90($710mln), Y144.50($972mln), Y146.65-75($780mln)

EQUITIES: Chinese Markets Slide, Led by Hang Seng

• The E-mini S&P contract maintains a firmer short-term tone and the contract is holding on to its recent gains. Price has traded above resistance at 4531.67, the base of a bull channel, drawn from the Mar 13 low.
• Eurostoxx 50 futures have pulled back from their recent highs. The contract last week traded above resistance at the 50-day EMA - at 4326.50 today. A resumption of gains would signal scope for a climb towards resistance at 4420.00.

COMMODITIES: Gold and Crude Weighed by Firm Dollar

• A bull cycle in Gold remains in play. Recent gains have resulted in a break of resistance at the 50-day EMA - at $1932.2. This strengthens the current bull leg and signals scope for a stronger recovery.
• The uptrend in WTI futures remains intact and last Friday’s gains reinforce this theme. Key resistance at $84.16, the Aug 10 high, has been cleared. The clear break confirms a resumption of the uptrend and has opened $86.62.