- APAC stocks mostly slumped following last Friday's continued sell-off on Wall St, while heightened tensions in the Middle East linger.
- MSCI Asia Pacific has wiped out all of 2024 YTD gains; Nikkei 225 fell over 12% and circuit breakers were triggered Japan and South Korea.
- US equity futures were pressured amid the sell-off in Asia; ES -1.9%, NQ -3.7%, YM -0.8%, RTY -3.0%.
- European equity futures indicate a lower open with Euro Stoxx 50 futures down 1.4% after the cash market finished with losses of 2.7% on Friday.
- DXY resumed its decline to beneath the 103.00 level, USD/JPY retreated to a sub-143.00 level, 10-year UST futures extended on last week's firm gains.
- Looking ahead, highlights include EZ/UK/US Final Composite/Services Final PMIs, ISM Services PMI, Comments from Fed’s Daly, Earnings from Infineon.
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US TRADE
EQUITIES
- US stocks sold off on Friday after disappointing NFP jobs data and a surprise increase in the Unemployment Rate to 4.3% from 4.1% added to the fears surrounding US growth, while the dollar was also pressured following the data with money markets now pricing in 115bps of rate cuts this year.
- SPX -1.8% at 5,347, NDX -2.4% at 18,441, DJIA -1.5% at 39,737, RUT -3.5% at 2,109
- Click here for a detailed summary.
NOTABLE HEADLINES
- Fed’s Barkin (2024 voter) said his gut tells him inflation pressures are normalising and the job market is still generally healthy, while he added that the Fed has more data to weigh before its rate decision and he won’t prejudge what the Fed needs to do at the September meeting, according to PBS Program.
- Fed's Goolsbee (2025 voter) said on Friday that jobs data follows the trend of a cooling labour market and noted they had multiple good months of inflation and was broad-based. Furthermore, he said if inflation and the job market continue to cool, the Fed should cut.
- US Republican Presidential Candidate Trump said he agreed with Fox News to debate Kamala Harris on September 4th and said he agreed to conduct a major town hall event that evening if Harris is unwilling or unable to debate on that date.
- Goldman Sachs raised its odds of a US recession by 10ppts to 25% for the next 12 months.
APAC TRADE
EQUITIES
- APAC stocks mostly slumped following last Friday's continued sell-off on Wall St owing to disappointing jobs data which sparked recession concerns, while heightened tensions in the Middle East linger as markets await Iran's retaliation.
- ASX 200 declined with tech, financials and real estate leading the broad retreat seen across all sectors.
- Nikkei 225 continued its aggressive slide and dipped beneath the 33,000 level for the first time since early January, while the index entered into a bear market along with the Topix.
- Hang Seng and Shanghai Comp. showed early resilience with the mainland initially kept afloat after Caixin Services PMI topped forecasts, while China recently laid out its priorities to spur consumer spending and the State Council designated 20 key steps to expand basic consumption. However, the bourses later conformed to global losses.
- US equity futures were pressured amid the sell-off in Asia and concerns the Fed may have missed the opportunity for a soft landing; ES -1.9%, NQ -3.7%, YM -0.8%, RTY -3.0%.
- European equity futures indicate a lower open with Euro Stoxx 50 futures down 1.4% after the cash market finished with losses of 2.7% on Friday.
FX
- DXY resumed its decline to beneath the 103.00 level after last week's post-NFP selling as the slowdown in US jobs growth and rise in the Unemployment Rate sparked economic concerns and recession fears.
- EUR/USD held on to recent gains and breached through Friday's best levels for a firmer footing at the 1.0900 handle.
- GBP/USD lacked direction amid quiet pertinent newsflow and as the pair battles with resistance at the 1.2800 level.
- USD/JPY retreated to a sub-143.00 level amid panic selling as Japanese markets took the brunt of the sell-off in stocks.
- Antipodeans were subdued owing to their high-beta statuses but with the downside cushioned after better-than-expected Chinese Caixin Services PMI data and as the RBA begins its two-day meeting.
FIXED INCOME
- 10-year UST futures extended on last week's firm gains after weak jobs data added to recession fears and boosted rate cut bets with money markets pricing as much as 120bps of cuts this year and around an 80% chance of a 50bp cut in September.
- Bund futures gained with support at the open alongside the selling pressure in risk assets.
- 10-year JGB futures rallied as yields continued to drop and Japan's main stock indices dipped into bear market territory.
COMMODITIES
- Crude futures traded indecisively as tailwinds from the heightened Middle East tensions were offset by the risk-off mood.
- Saudi Arabia raised its official selling price for Asia in September by 20 cents to USD 2.00/bbl above the Oman/Dubai average, while it set the OSP to NW Europe to + USD 1.25/bbl vs ICE Brent and to the US at + USD 4.10/bbl vs ASCI.
- NHC said Tropical Storm Debby is strengthening over the southeastern Gulf of Mexico, while it later stated Debby is likely to strengthen to a hurricane on Sunday night and make landfall in the Florida Big Bend area on Monday which will bring a major flood threat to the southeastern United States.
- Spot gold reversed an early dip and gradually edged higher as the bloodbath in stocks spurred haven demand.
- Copper futures shrugged off the negative mood and were kept afloat given early resilience in mainland China.
CRYPTO
- Bitcoin was heavily pressured amid the global stock sell-off and fell beneath the USD 54,000 level.
NOTABLE ASIA-PAC HEADLINES
- China issued guidelines to promote high-quality development of service consumption, according to Bloomberg. China’s government on Saturday laid out its priorities to spur consumer spending as weak domestic demand continues to weigh on growth in which the State Council designated 20 key steps including exploring the potential to expand basic consumption in areas such as catering, home services and elderly care, according to a statement posted on the central government’s website.
- EU capitals are set to back tariffs on Chinese electric cars with member states likely to support the imposition of proposed tariffs on Chinese EVs in November, according to FT citing the bloc's trade commissioner Dombrovskis.
- BoJ Minutes from the June 13th-14th meeting stated that a few members said import prices are rising due to the recent yen fall, creating upside inflation risk, while a member said cost-push inflation could heighten underlying inflation if it leads to higher inflation expectations and wage increases. Furthermore, one member said the BoJ must raise rates at appropriate timing without delay although another member said a rate hike must be done only after inflation makes a clear rebound and data confirms heightening in inflation expectations, while members agreed recent weak yen pushes up inflation and warrants vigilance in guiding monetary policy.
DATA RECAP
- Chinese Caixin Services PMI (Jul) 52.1 vs. Exp. 51.4 (Prev. 51.2)
- Chinese Caixin Composite PMI (Jul) 51.2 (Prev. 52.8)
GEOPOLITICAL
MIDDLE EAST
- Israel conducted strikes targeting two schools sheltering the displaced near Gaza City which killed at least 25 Palestinians, while the Israeli military said the strikes on Gaza schools targeted militants operating there. Israel also conducted a strike in the West Bank which killed a Hamas commander.
- Israeli PM Netanyahu on Sunday warned "Iran's axis of evil" against attacking Israel amid expectations that Tehran and the militant groups it supports are readying retaliatory strikes, according to dpa.
- Iran-led retaliatory assaults are “expected imminently” and will likely be simultaneous, coming from Hezbollah in Lebanon, the Houthis in Yemen and Iran itself, according to Israeli officials cited by Bloomberg and Iran International.
- Iran’s Revolutionary Guards said the terrorist act of killing Hamas chief Haniyeh was designed and executed by Israel with the support of the criminal US government, while it added that the adventurous and terrorist Zionist regime will decisively receive the response to this crime. Furthermore, the IRGC said Tehran’s revenge will be severe and at the appropriate time, place and manner, according to Reuters.
- US Secretary of State Blinken told his G7 counterparts on a conference call on Sunday that an attack by Iran and Hezbollah against Israel could begin within 24 to 48 hours, according to Walla News.
- IRGC sources told iNews Britain that Iran's response to Israel could come no later than Tuesday or Wednesday.
- Egypt’s Foreign Minister held a call with Iran’s Foreign Minister and stressed that recent developments are unprecedented, very dangerous and threatening to the region’s stability.
- US President Biden will speak to Jordan's King on Monday and will convene the national security team on Monday in the situation room to discuss Middle East developments, according to the White House.
- US Secretary of State Blinken spoke with Iraqi PM Al-Sudani and emphasised the importance of all parties taking steps to calm regional tensions and avoid escalation, while Iraq’s PM told Blinken in the phone call that preventing regional tensions is tied to stopping Israeli aggression on Gaza. It was separately reported that Blinken told G7 ministers that Iran and Hezbollah may attack Israel within the next 24 hours, according to Axios
- White House’s Finer said the US is trying to prepare for any scenario in the Middle East by warning citizens to leave Lebanon and the US is moving an aircraft carrier to the Middle East purely for defensive reasons, while Finer said the overall goal is to turn the temperature down in the region, according to a CBS interview.
- UK Foreign Office said Britain temporarily withdrew the families of officials working at the British embassy in Beirut due to a highly volatile security situation in Lebanon.
- US Central Command forces said they successfully destroyed an Iranian-backed Houthi missile and launcher in the Houthi-controlled area of Yemen. It was separately reported that Yemen’s Houthis said they targeted MV Groton in the Gulf of Aden with ballistic missiles.
OTHER
- Ukrainian President Zelensky announced the arrival of F-16 fighter jets and said they are already in use in Ukraine’s skies, while he said Ukraine does not have enough F-16 pilots or jets and hopes training will be expanded. Furthermore, he plans to discuss at the Ukraine-NATO council the use of neighbouring countries’ aviation for air defence work.- Ukrainian military said it struck a Russian submarine and anti-aircraft system in Crimea, while it also struck Russia’s Morovosk airfield, as well as oil fields and fuel facilities in three Russian regions.
- Russian Defence Ministry said Russian forces captured a settlement in the Donetsk region.
- North Korean leader Kim said they will have a more improved level of nuclear readiness in the near future to respond to any challenges, while he added that stockpiling and improving nuclear weapons is the best way to counter the US, according to KCNA.
- Philippines and German Defence Ministers committed to concluding a broader defence agreement, while the Philippines Defence Minister said they invited German ships to participate in exercises.
EU/UK
NOTABLE HEADLINES
- UK PM Starmer vowed that those responsible for the disorder and chaos that’s spreading across UK towns and cities will be punished for what he described as “far-right thuggery”, according to Bloomberg.
