MNI US OPEN - Markets Primed for Powell

NEWS

FED (MNI): Fed Kicks Off Jackson Hole Confab On 'Constraints'
Federal Reserve officials and their counterparts from around the world have gathered in Jackson Hole, Wyoming for the Kansas City Fed's two-day annual Jackson Hole Monetary Policy Symposium to discuss "Reassessing Constraints on the Economy and Policy." Chair Jerome Powell will give a speech at 10 a.m. ET Friday, to be livestreamed on YouTube, while the rest of the conference is private and by invitation only.

UK (MNI): Rising UK Energy Costs Challenge BOE, Stats Office
UK household energy prices will rise sharply from October 1, when the next pricing readjustment under the regulated pricing caps kicks in. Earlier Friday, Ofgem, announced an increase in the cap to GBP3,549 from the current GBP1,971. At present, that increase will confirm Bank of England fears and drive a sharp increase in consumer price inflation in Q4, pushing headline price rises in excess of 13% y/y. However, the actual rate may yet be mitigated lower, depending on how any further financial aid to households by the government -- and how the current planned payments -- are treated by the Office for National Statistics.

UK-FRANCE (MNI): PM Frontrunner: 'Jury's Out' On Macron; Causes International Blowback
At a hustings held as part of the Conservative party leadership contest, frontrunner to become the next UK PM, Foreign Secretary Liz Truss was asked as part of a series of quickfire questions, 'President Macron; friend or foe?', to which she answered 'the jury's out'. Germany's ambassador to the UK, speaking to the BBC, stated that, "I would say that the relationship with France is of crucial importance for the United Kingdom, so my recommendation would be really to look for a relationship that is as close as possible."

CHINA (MNI): China Fiscal Stimulus Tap Flows, But Cautiously
China has around two trillion yuan potentially available to add more fiscal stimulus to its monetary easing and shore up the economy including this week's announcements, but analysts expect a cautious and calibrated approach to further fiscal injections that reflect concern about mounting debt levels. They note that additional issuance of investment project-backed special bonds in the second half of this year could potentially reach as much as CNY1.55 trillion - as Beijing continues to see infrastructure development as the main growth driver this year.

COMMODITIES (BBG): India Likely to Curb Some Rice Exports in Risk to Global Supply
India will likely restrict some rice exports as its domestic supply is under threat, according to people with knowledge of the matter, a move that could add to the chaos in global food markets and worsen hunger.

DATA

ITALY AUG BUSINESS CONFIDENCE 109.4 (MNI)

ITALY AUG CONSUMER CONFIDENCE 98.3 (MNI)

SWEDEN JUL UNEMPLOYMENT 6.4% (MNI)

GERMANY SEP GFK CONSUMER CONFIDENCE -36.5 (FCST -32.0); AUG -30.9r (MNI)

JAPAN DATA: Japan Tokyo August CPI Quickened; +2.6% Y/Y

• The core consumer price index (excluding fresh food) in the Tokyo area, a leading indicator of the national average, rose for the 13th month by 2.6% in August, faster than the 2.3% growth registered in July.
• Energy costs increased 25.6% y/y, accelerating from last 23.5% y/y increase.
• Processed food prices edged up 3.8% y/y, quicker than last 3.6% y/y growth.
• Prices for household durable goods increased 4.2% y/y, down from the previous 4.3% y/y increase.
• The core-core CPI (excluding fresh food and energy) -- a key indicator of the underlying trend of inflation -- edged up 1.4% y/y in August, up from 1.2% y/y growth registered in July.

BOND SUMMARY: All the attention turns towards Fed Powell

• EGBs and Bund trade within yesterday's range this morning, although futures have pared some of yesterday's afternoon gains.
• Small support in Bund move up to 150.32.
• BTP/Bund spread has consolidated some of the tightening seen this week, and is now 8bps wider and testing the August high at 230.92bps, now at 229.9bps at the time of typing.
• Gilt remains in a fairly tight range (111.16/111.54, low/high), and spread continues to dominate, ahead of Monday UK Bank holiday.
• Roll pace for Gilt runs at 78% completion, first notice is on the 30th August.
• Gilt/Bund spread is again tighter this morning, by 3bps, after the spread failed to break 133.16bps the March and 2022 high this week.
• The spread is now at 126.6bps.
• US Treasuries trade mostly close to inline with Europe, and the Tnote/Bund spread is still finding some support at 170.83bps, the August low, now 1.4bp wider at 172.4.
• US Yields: 2y +0.6bp , 5y +4.3bp , 10y +5.4bp , 30y +4.7bp.
• Curves: 2/10s: steeper (+4.4bp); 10/30s: flatter (-0.7bp).
• Looking ahead, US Wholesale Inventories, PCE Core deflator, and Final reading for Michigan are the notable Data.
• All attention is of course on Powell at 15.00BST/10.00ET.

FX SUMMARY: USD Steadies Ahead of Powell's Jackson Hole Appearance

• Following Thursday's downtick, the greenback is firmer ahead of the NY crossover, with the single currency following suit. This week's spell of USD weakness has proved short-lived so far, keeping the USD uptrend in tact for now. 109.27 remains the recovery high and the first upside target. A break above here opens 109.294 and the best levels for the dollar since 2002.
• Sentiment is steadier, although the e-mini S&P is in minor negative territory on the day. Nonetheless, stocks hold the bulk of the gains posted off the mid-week low, helping aid USD/JPY to briefly trade back above the Y137.00 handle.
• In a minor reversal of Thursday's strength, NZD and AUD trade on the backfoot, although the AUD/USD recovery posted from the August low of $0.6856 remains largely intact for now. Progress through yesterday's $0.6991 opens the 100-dma above at $0.7028.
• All eyes turn to the Jackson Hole Policy Symposium that officially began late yesterday. The headline event comes at 1500BST/1000ET, with Fed Chair Powell making his address. Markets will be on watch for any policy signals ahead of September's FOMC meeting, for which markets remain split over a 50 or a 75bps rate hike.

EQUITIES: US Futures Edge Off Thursday High

• Japan's NIKKEI closed up 162.37 pts or +0.57% at 28641.38 and the TOPIX ended 2.99 pts higher or +0.15% at 1979.59. Elsewhere, China's SHANGHAI closed down 10.025 pts or -0.31% at 3236.223 and the HANG SENG ended 201.66 pts higher or +1.01% at 20170.04.
• Germany's DAX trades down 3.22 pts or -0.02% at 13267.92, FTSE 100 up 11.68 pts or +0.16% at 7490.52, CAC 40 up 3.3 pts or +0.05% at 6384.86 and Euro Stoxx 50 up 5.21 pts or +0.14% at 3679.75.
• Meanwhile, the Dow Jones mini sits lower by 70 pts or -0.21% at 33201, S&P 500 mini down 13 pts or -0.31% at 4187.75, NASDAQ mini down 58.75 pts or -0.45% at 13097.25.

COMMODITIES: Core Energy Higher, Partially Reversing Thursday Loss

• WTI Crude up $0.61 or +0.66% at $93.35
• Natural Gas up $0.18 or +1.9% at $9.567
• Gold spot down $7.58 or -0.43% at $1751.07
• Copper up $2.5 or +0.68% at $372.3
• Silver down $0.03 or -0.14% at $19.2004
• Platinum down $7.35 or -0.83% at $879.36