Weekend News Round Up - Newsquawk Asia-Pac Market Open

• US stocks and Treasuries were firmer to end the week, while the Dollar saw weakness after Fed Chair Powell completed his dovish pivot at Jackson Hole.
• Fed Chair Powell said “The time has come for policy to adjust”; Have made a 'good deal of progress' toward the goal of price stability while avoiding sharp increases in unemployment.
• The Dollar Index slipped markedly on Friday following the text release from Fed Chair Powell at Jackson Hole, who noted the time has come for policy to adjust.
• Treasuries were firmer on Friday and driven higher in the wake of a dovish Powell in which there was a notable dovish reaction.
• Over the weekend, Lebanon's Hezbollah launched hundreds of rockets and drones at Israel early on Sunday. Meanwhile, Israel's military said it struck Lebanon with around 100 jets to thwart a larger attack.
• Looking ahead, highlights include a lack of notable releases, UK Market Holiday.

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SNAPSHOT

US TRADE

• US stocks and Treasuries were firmer to end the week, while the Dollar saw weakness after Fed Chair Powell completed his dovish pivot at Jackson Hole. All sectors closed in the green with Real Estate and Consumer Discretionary sitting atop the pile with Consumer Staples and Utilities lagging, albeit still slightly firmer.
• SPX +1.15% at 5,635, NDX +1.17% at 19,721, DJIA +1.14% at 41,175, RUT +3.19% at 2,219
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed Chair Powell said “The time has come for policy to adjust”; Have made a 'good deal of progress' toward the goal of price stability while avoiding sharp increases in unemployment. On the labour market, Powell noted the labour market cooling 'unmistakable,' no longer overheated - "We do not seek or welcome further labour market cooling". He added - "We will do everything we can" to support a strong labour market as we make further progress toward price stability". He added inflation has declined significantly, 'now much closer' to goal. “My confidence has grown' that inflation is on sustainable path back to 2%”. Powell noted the balance of risks to mandates has changed, and upside risks to inflation have diminished, downside risks to employment have increased. Timing and pace of rate cuts will depend on data, outlook, balance of risks. Policy rate level gives 'ample room' to respond to risks, including unwelcome further weakening in labour market
• POWELL ANALYSIS: Powell's comments continued to indicate that a September rate cut is coming, as he said “the time has come for policy to adjust”, with traders on the lookout for clarity regarding the magnitude of the cut. On the labour market, the Chair said "We do not seek or welcome further labour market cooling", which once again shows the importance of the US jobs report on 6th September which will seemingly dictate the size of the move by the Fed, as WSJ's Timiraos noted earlier in the wake that a report as week as July might lead to a larger than 25bps cut. Powell continued to note how the Fed’s attention has shifted within its dual mandate, as it stated "the balance of risks to our mandates has changed and upside risks to inflation have diminished, downside risks to employment have increased." Lastly, the Chair reiterated data-dependency noting that "timing and pace of rate cuts will depend on data, outlook, balance of risks". In reaction, markets saw a broad-based dovish reaction, with upside in Treasuries and stocks alongside downside in the Dollar. Note, Fed money-market pricing was little changed with still 32bps for September and 97bps by year-end.
• Fed Bostic (2024 voter) said we are on the cusp of a turning point in Fed policy; reiterates Fed language regarding risks to both sides of the mandate; close to being ready to cut rates; policy has had its effect.
• Fed's Harker (2026 voter) said 25bps or 50bps doesn't matter so much, but have to commit to the process. Don't see large outsize risk of labour deterioration. Reiterates looking at the totality of data. Neutral rate is somewhere around 3%. Contacts urging Fed not to stop and start rate cuts; jobless rate will not peak above 5%, in our view.
• Fed's Goolsbee (2025, Voter) supports Fed's new focus on the job market and inflation is on a path to 2%, according to CNBC. He said policy is now at its tightest point of the entire hike cycle. He added the Fed forecasts show widespread support for rate cuts, and the current Fed funds rate is set for different economic conditions. He wants to be careful about the employment side of the mandate, and noted that by almost all measures the job market is cooling. Goolsbee does not like to offer firm guidance about Fed rate decisions and he does not think inflation will get stuck above 2%. He tries to resist committing himself on monetary policy, and historically rate cutting has been a process. He wants to hit the golden path of 2% inflation without a recession. Goolsbee reiterated Powell's rate comments were clear and definitive, according to Fox Business, and said there is every reason to think Fed forecasts of rate cuts will happen, while he has gotten warning signs of the job market. Goolsbee also reiterated the comments on Bloomberg TV.
• WSJ's Timiraos posted on X, "While Powell was forceful in laying out the Fed’s goals, he offered no specifics about the precise way officials will deliver them to retain maximum discretion". “He entirely avoided certain coded words like ‘gradual’ and ‘methodical’ that some colleagues in recent days had used to describe their expectation for a series of traditional quarter-point rate cuts. In doing so, Powell’s silence kept the door open to larger rate cuts if the labour market shows signs of greater weakness in the weeks ahead.”
• Canada Industrial Relations Board (CIRB) imposed binding arbitration on Teamsters Union, CN, and CPKC railways, according to Teamsters cited by Reuters. Canada Industrial Relations Board halts work stoppages at CN and CP railways.
• Canada Labour Minister Mackinnon said the CIRB has issued a decision to impose final and binding arbitration in negotiations between CN Rail, CPKC, and Teamsters Canada Rail Conference, and he expects that railway companies and employees will resume at the earliest opportunity, according to a post on X.
• Canadian National Railway said it had received an order from CIRB imposing binding arbitration between the company and Teamsters Canada Rail Conference. This means that the strike notice recently issued to CN by the Teamsters is now voided.CN Rail added that CIRB has also ordered that no further labour stoppage, including lockout or strike, can occur during the arbitration process, and will comply with the order, which also extends the current collective agreement until a new agreement is signed between the parties.

DATA RECAP

• US Build Permits R Chg MM (Jul) -3.3% (Prev. -4.0%)
• US Build Permits R Num (Jul) 1.406M (Prev. 1.396M)
• US New Home Sales-Units (Jul) 0.739M vs. Exp. 0.625M (Prev. 0.617M, Rev. 0.668M)
• US New Home Sales Chg MM (Jul) 10.6% (Prev. -0.6%, Rev. 0.3%)
• Canadian Retail Sales Ex-Autos MM (Jun) 0.3% vs. Exp. -0.2% (Prev. -1.3%, Rev. -1.2%)
• Canadian Retail Sales MM (Jun) -0.3% vs. Exp. -0.3% (Prev. -0.8%)

FX

• The Dollar Index slipped markedly following the text release from Fed Chair Powell at Jackson Hole, who noted the time has come for policy to adjust, and on the labour market that the Fed "does not seek or welcome further labour market cooling", which once again shows the importance of the US jobs report on 6th September.
• G10 FX strength resumed on Friday with all constituents in the green, and most prominent in the Aussie, Kiwi, and Yen.
• The Euro benefitted from Powell's remarks, sending EUR/USD to a high of 1.1200, with the 2023 high of 1.1275 in view.
• Haven FX, like their G10 peers, rallied on the Dollar weakness and bid US Treasuries, with the Yen outperforming the CHF.
• EM FX primarily strengthened against the Buck on Friday, except for the TRY, which finished at a new all-time low and was weighed on by the rising oil prices.

FIXED INCOME

• Treasuries were firmer on Friday and driven higher in the wake of a dovish Powell in which there was a notable dovish reaction, with T-Notes rising to a high of 113-26, vs. ~113+10+ prior to Powell's speech. Meanwhile, Fed pricing has seen a dovish shift, though only a modest one, with 34bps for Sep. (prev. 31bps) and 103bps by end-2024 (prev. 96bps). Through the rest of the US session Treasuries came slightly off the highs, but hovered around the earlier peaks.

COMMODITIES

• The crude complex ended the day with notable gains, as the weaker Dollar aided in addition to geopolitical weekend risk.
• China's Securities Regulator has approved the Shanghai Futures Exchange launch of nickel, lead, tin and alumina options contracts.

GEOPOLITICAL

MIDDLE EAST

• Lebanon's Hezbollah launched hundreds of rockets and drones at Israel early on Sunday. Meanwhile, Israel's military said it struck Lebanon with around 100 jets to thwart a larger attack. The event was framed as in one of the biggest clashes in more than 10 months. Three deaths were confirmed in Lebanon and one death in Israel, both sides indicated appetite avoid further escalation, but warned that there could be more strikes to come, according to Reuters.- Hezbollah said it completed the 'first phase' of its response to Israel's killing of a top commander last month and hit 11 Israeli military sites on Sunday, firing more than 320 Katyusha rockets, according to Reuters. Hezbollah said it began the attack on Israel with a large number of drones in response to the top commander's killing in a Beirut suburb last month, and it will take “some time” to complete its response to the top commander's killing.
• Israeli PM Netanyahu said the military intercepted all the drones that Hezbollah launched at a strategic target in central Israel, and the attacks are 'not the end of the story.' Netanyahu added the the country has taken the first step towards returning its residents in the north safely to their homes, according to Reuters.
• Hezbollah leader Nasrallah said the group will assess the impact of Sunday’s operation; if results are not seen to be enough, "we will respond another time". Group said its military operation was completed as planned, with precision, and decided not to respond to the killing of a top commander by targeting civilian areas. Response was delayed for several reasons, including mass Israeli and US military mobilization. Hezbollah said it wanted to target military sites close to Tel Aviv, and targeted a military intelligence base 110 km into Israeli territory, 1.5 km away from Tel Aviv. The group said for the first time, it sent drones to Israel from the Bekaa region, while the group said it had no intention to use precision missiles today, but may use them in the near future.
• Israel's Foreign Minister said Israel does not seek a full-scale war but will act according to developments on the ground, according to Reuters.
• Hamas' armed wing said it fired a rocket at Tel Aviv, according to Reuters.
• Jordan warned the escalation in Lebanon and its 'dangerous repercussions' could lead to regional war, according to Reuters.
• US President Biden asked Israeli PM Netanyahu to pull Israeli troops from part of the Egypt-Gaza border, according to Axios.
• Gaza talks in Cairo ended without agreement, according to Reuters citing Egyptian sources. "Axios quotes US official: Gaza talks will continue in the coming days through working groups to address issues and remaining details", reported by Sky News Arabia.
• On Sunday, Hamas said that it rejects the new Israeli conditions put forward in Gaza ceasefire talk, according to Reuters.
• Iranian Foreign Minister said Iran is "not afraid of escalation, but we do not seek it, unlike Israel", according to Al Jazeera, adding that their retaliation "will be decisive and well calculated".

RUSSIA-UKRAINE

• Ukrainian President Zelenskiy said negotiations are ongoing with Saudi Arabia, Qatar, Turkey, and Switzerland about a second summit on peace, according to Reuters. He added Ukraine’s operation in Russia’s Kursk region is difficult but he views its progress positively.
• Russia and Ukraine exchange 115 prisoners each, according to RIA. Russia said Ukraine has returned servicemen captured in the Kursk region.

SOUTH CHINA SEA

• Philippines' South China Sea Task Force said Chinese Coast Guard vessels 'made close perilous manoeuvres that resulted in ramming' and deployed water cannons against Manila's fisheries vessel, leading to engine failure, and added that fisheries vessel was 'targeted by People's Liberation Army Navy ship and multiple China Coast Guard ships' to block the mission.
• China says it 'took control measures' towards the Philippine vessel near the Sabina Shoal, and added that Philippine's vessel 'illegally' entered waters near Sabina Shoal in the South China Sea. China said the Philippine vessel has been continuously approaching Chinese Coast Guard ships in a dangerous manner, according to Reuters.
• Philippines South China Sea Task Force said a Chinese fighter jet 'engaged in irresponsible and dangerous manoeuvres, deploying flares multiple times at a dangerously close distance', according to Reuters.

US-CHINA

• Chinese Commerce Ministry said it strongly opposes the US adding Chinese entities to the export control list over Russia-related issues, and the action disrupts international trade order and hinders normal economic exchanges. Commerce Ministry said it will take necessary measures to resolutely safeguard the legitimate rights of Chinese companies.
• US National Security Advisor Sullivan to visit China this week for a meeting with Chinese Foreign Minister Yi, via Axios citing source; meeting expected to lay the groundwork for a possible final meeting between President's Biden and Xi later in the year.
• US National Security Advisor Sullivan to visit China between August 27th-29th, meeting Chinese diplomat Yi. Visit does not indicate any change in the US' approach to China. Will push on a resumption of theatre-level military-to-military talks with China. Expect to raise concerns around China's increased military, diplomatic and economy pressures against Taiwan.

OTHER

• Chinese President Xi is to visit Russia in October, according to RIA citing the Chinese envoy.
• North Korea said it will continue to strengthen strategic power to control security challenges posed by the reorientation of US nuclear strategy, according to KCNA.

ASIA-PAC

NOTABLE HEADLINES

• Japan Trade Minister Saito said he has resolved to run in ruling LDP leadership election, via Jiji
• Japanese former Defence Minister Shigeru Ishiba says he will run in the ruling LDP leadership race on September 27th, according to Reuters.
• IMF Chief Economist said there is scope for the BoJ to further normalize monetary policy, raising interest rates gradually for some time, according to Reuters.

DATA RECAP

• Indian Bank Loan Growth w/e 13.6% (Prev. 13.7%)
• Indian FX Reserves, USD w/e 674.66B (Prev. 670.12B)
• Indian Deposit Growth w/e 10.9% (Prev. 10.6%)

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey says market events like those of two weeks ago or so will happen; the test is not whether they happen but whether they trigger wider instability. Thinks we are now seeing a revision down in its assessment intrinsic inflation persistence, "but this is not something we can take for granted". Inflation expectations appear to be better anchored. The second round inflation effects appear to be smaller than expected. It appears that the economic costs of bringing down persistent inflation – costs in terms of lower output and higher unemployment – could be less than in the past. Policy setting will need to remain restrictive for sufficiently long. Course will therefore be a steady one.
• Broad ECB support is beginning to form over a September rate cut, move is not a done deal, via Reuters citing sources; inflation developing as expected, growth weak, wage pressures easing.
• ECB's Centeno said the ECB always looks at the totality of data; September is an easy decision. Need better coordination between fiscal and monetary policy. Europe's economy is not growing.
• ECB's Rehn said disinflation and weak economy support a September cut; downtrend in inflation is on track, via Bloomberg TV. He said they have to be open to what rate decision they do, and do not want to commit themselves to what they do at this stage, when asked about a 50bps cut. Rehn highlighted data-dependency and said the Euro has indirect effect and don't target FX rate.
• ECB's Chief Economist Lane said the return to the 2% inflation target is not yet secure. "The monetary stance will have to remain in restrictive territory for as long as needed to shepherd the disinflation process towards a timely return to the target", Lane said. Lane also warned that keeping rates high for too low could deliver below-target inflation.
• EUROPEAN CLOSES: DAX: +0.77% at 18,636, FTSE 100: +0.48% at 8,328, CAC 40: +0.70% at 7,577, Euro Stoxx 50: +0.46% at 4,908, AEX: +0.02% at 909, IBEX 35: +1.09% at 11,278, FTSE MIB: +1.02% at 33,650, SMI: +0.38% at 12,352, PSI: +0.80% at 6,698.