MNI US OPEN - China Again Asks Funds to Avoid Net Equity Sales

NEWS

US-CHINA (Washington Post): Stable U.S.-China Ties ‘profoundly Important,’ Commerce Secretary Says
U.S. Commerce Secretary Gina Raimondo said Monday it was "profoundly important" that the United States and China had a stable economic relationship, grounded in "direct, open and practical" communication. Raimondo met her Chinese counterpart, Wang Wentao, in Beijing after arriving in the Chinese capital Sunday night, becoming the latest in a string of senior Biden administration officials to try to reset the relationship between the world's two economic superpowers.

US/TURKEY (BBG): Turkey, US Joint Military Drills Come Amid Thaw in Relations
Turkey and the US held their largest joint military exercises in at least seven years, a sign of improving ties as President Recep Tayyip Erdogan seeks another meeting with Joe Biden next month. The past week’s drills, along with a visit from a bipartisan Congressional delegation, show both sides seeking to rebuild their longtime alliance, said three Turkish officials who spoke on condition of anonymity. Turkey is seeking to arrange a meeting between Erdogan and the U.S. president on the sidelines of the G-20 Summit in New Delhi, following one in Lithuania last month, said the officials, asking not to be identified because of the sensitivity of the matter.

FRANCE (BBG): France’s Le Maire Sees No Interest Cuts in Short-, Medium-Term
Interest rates will not be cut in the short or medium term given the current rate of inflation, France Finance Minister Bruno Le Maire said on France Inter radio Monday. “It is not up to me to take decisions on monetary policies but I simply want to say clearly to all economic actors and the French people listening to us that there will not be interest rate cuts in the coming months,” he said

AUSTRALIA/LNG (BBG): Australian LNG Strike Threat Remains Focus Amid Chevron Dispute
The threat of strikes at some Australian liquefied natural gas plants remains in focus amid pay disputes between Chevron Corp. and union officials, as unions endorsed action at the company’s Gorgon and Wheatstone facilities. Strikes aren’t guaranteed, and the unions must give Chevron seven working days notice before beginning industrial action. Outages at Chevron’s two facilities would threaten about 5% of global LNG supply.

CHINA (BBG): China Asks Some Funds to Avoid Net Equity Sales to Boost Market
Chinese authorities asked some mutual funds to avoid selling equities on a net basis a day after financial regulators announced a slew of measures to “invigorate capital markets and boost investor confidence.” Stock exchanges issued the so-called window guidance to several large mutual fund houses, telling them to refrain for a day from selling more onshore shares than they purchased, according to the people who asked not to be identified discussing private information.

BRICS (BBG): UAE Sees Ties With West Unbroken After Invitation From BRICS
Joining the BRICS bloc of emerging economies by the United Arab Emirates won’t come to the detriment of its ties with western nations, a top UAE official said, amid concern that China and Russia are expanding the group to counterbalance US and European influence. The UAE is looking to its membership as an opportunity to develop trade and plans to commit more capital to the New Development Bank, the lender created by BRICS that the Gulf state joined two years ago, Economy Minister Abdulla bin Touq Al Marri said in a Bloomberg Television interview.

DATA

AUSTRALIA (MNI): Aussie Retail Trade Grows Over July
Australian retail turnover rose 0.5% in July 2023, up from the 0.8% decline noted over June, according to Australian Bureau of Statistics data released today. Underlying growth in retail turnover, however, remained subdued, said Ben Dorber, head of retail statistics at the ABS. “In trend terms, retail turnover was unchanged in July and up only 1.9% compared to July 2022, despite considerable price growth over the year.”

EGBs: Curves A Little Flatter As ECB Pricing Ticks Higher

The combination of the light uptick in crude oil futures, late Friday ECB speak and firmer regional equity benchmarks has applied modest pressure to EGBs this morning, with participants selling into any rallies.

• Chinese equity gyrations, outlined elsewhere, have generated the bulk of the macro interest thus far. Sharp opening gains derived from policymaker support were swiftly sold into at the index level, although the CSI 300 was still ~1.2% firmer on the day.
• Softer than expected Eurozone money supply data did little for EGBS.
• EGB futures leak to session lows at typing, with both Bund and BTP futures operating just above Friday’s lows.
• The majority of EGB curves bear flatten at the margin, with a light uptick in ECB-dated OIS helping that dynamic.
• Spreads vs. 10-Year Bunds are little changed to a touch tighter on the day, with light outperformance for peripherals noted as CDS indices tighten and regional equities firm (outweighing the light firming in ECB-dated OIS pricing).
• Comments from ECB’s Nagel & Holzmann headline the regional docket during the remainder of the day.
• Participants await impending supply from the EU.
• Liquidity is thinned by a national holiday in the UK.

US TSYS: Futures Look To EGBs With Cash Closed Until NY Hours

TYU3 looks to EGBs for direction, with moves in benchmark European paper limiting any rallies linked to Chinese equities moving to worst levels of the day into the mainland equity close (albeit still finishing comfortably higher at the index level).

• TYU3 is +0-00+ at 109-14+, sitting in the middle of a 0-09 range, with roll activity boosting volume.
• Cash Tsys are closed in London hours (they were open in Asia) as the UK observes a public holiday, they will re-open for NY dealing.
• The Tsy futures curve has twist flattened a touch vs. Friday’s settlement levels.
• Macro headline flow outside of Chinese equity matters has been somewhat limited.
• Terminal policy rate pricing on the FOMC-dated OIS strip shows at 5.49% (come December), with 33bp of cuts then priced through June ’24, building a little on Friday’s hawkish adjustment.
• Dallas Fed manufacturing activity data and comments from Fed’s Barr (although the topic is banking services) headline the NY docket.

FOREX: UK Holiday Thins Price Action, But CNH Remains Weak

• Currency markets are muted ahead of the Monday NY crossover, with the UK market holiday keeping volumes and activity light. The single currency is modestly outperforming to keep EUR top of the pack, however a set of sizeable strikes effectively top-and-tail the Friday spot range in EUR/USD, helping to define price action so far.
• The greenback is mixed, but off the European morning lows, aided by GBP/USD fading toward Friday's 1.2548 ahead of the crossover. NOK is among the poorest performers, keeping USD/NOK pinned to fresh multi-month highs as markets reverse the July downleg. 10.8299 marks the next major upside level.
• Chinese markets remain a point of focus, with further headlines crossing this morning to suggest the authorities have requested funds to avoid net equity sales to boost index prices for a second consecutive week. The headlines have failed to contain CNH weakness, pushing USD/CNH through the Friday high to narrow the gap with 7.3361, the Monday high.
• Datapoints are few and far between Monday, keeping focus on the speaker schedule as ECB's Nagel, Holzmann and Fed's Barr are all set to speak. Risk events pick up later in the week, with nonfarm payrolls the market focus on Friday.

EQUITIES: European Equities Higher, FTSE-100 Closed for Bank Holiday

A sharp sell-off last Thursday in the E-mini S&P contract reinforces a bearish theme and signals the end of the recent corrective bounce between Aug 18 - 24. Attention is on support at 4350.00, the Aug 18 low and bear trigger. A bearish trend condition in Eurostoxx 50 futures remains intact and last Thursday’s sharp sell-off reinforces this theme. The move lower signals the end of the recent corrective bounce between Aug 18 - 24.

• Japan's NIKKEI closed higher by 545.71 pts or +1.73% at 32169.99 and the TOPIX ended 33.41 pts higher or +1.47% at 2299.81.
• Elsewhere, in China the SHANGHAI closed higher by 34.561 pts or +1.13% at 3098.636 and the HANG SENG ended 172.6 pts higher or +0.96% at 18128.98.
• Cash markets in Europe are generally positive, with the EuroStoxx50 higher by 0.8%, while Germany's DAX gains 0.6% and France's CAC-40 rises 0.8%. The FTSE-100 remains closed for the August bank holiday.
• Dow Jones mini up 77 pts or +0.22% at 34458, S&P 500 mini up 6.75 pts or +0.15% at 4421, NASDAQ mini up 33.75 pts or +0.23% at 15010.25.

COMMODITIES: Crude in Minor Positive Territory, But Gold Trend Remains Bearish

The outlook in Gold remains bearish, however, a short-term correction resulted in a recovery last week. The yellow metal has breached resistance at the 20-day EMA and attention turns to the 50-day EMA, at $1930.8. The uptrend in WTI futures remains intact and recent weakness is considered corrective. Last Wednesday’s move lower resulted in a print below support at $78.33, the Aug 3 low. A clear break of this level would highlight a stronger bear cycle.

• WTI Crude up $0.4 or +0.5% at $80.26
• Natural Gas up $0.06 or +2.52% at $2.605
• Gold spot down $0.67 or -0.04% at $1913.92
• Copper up $0.35 or +0.09% at $378.95
• Silver down $0.07 or -0.27% at $24.144
• Platinum down $1.08 or -0.11% at $946.87