- Equities are mostly, but modestly firmer, taking positive leads from a constructive APAC session.
- Dollar is flat, Antipodeans outperform whilst traditional haven FX lags.
- Bonds are incrementally softer and have traded sideways for much of the session.
- Crude outperforms amid the heightened geopolitical tensions, XAU edges towards USD 2450/oz.
- Looking ahead, highlights include Indian CPI & US NY Fed SCE.
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EUROPEAN TRADE
EQUITIES
- European equities, Stoxx 600 (+0.3%) have started the week on a mostly firmer footing, taking positive leads from a constructive APAC session.
- European sectors hold a strong positive bias. Insurance takes the top spot, propped up by post-earning strength in Hannover Re. Basic Resources and Energy are both higher, given the strength in underlying commodity prices.
- US Equity Futures (ES +0.2%, NQ +0.3%, RTY -0.1%) are mixed, with the ES and NQ very modestly firmer, benefiting from the generally positive risk tone.
- Click for the sessions European pre-market equity newsflow
- Click for the additional news
- Click for a detailed summary
FX
- DXY is trading relatively flat and within tight ranges of 103.12-24, in what has been a catalyst thin session thus far. This week's focus is on US inflation data, followed by Retail Sales.
- EUR is choppy but within tight ranges and largely moving at the whim of the buck in the absence of any further catalysts. EUR/USD remains within Friday's 1.0908-1.0931 parameter.
- GBP/USD experienced early upticks as EUR/GBP briefly dipped under 0.8550 (to 0.8544 low) in turn propping up GBP/USD which found resistance just shy of its 50 DMA (1.2784), with the pair's current range between 1.2748-1.2782 range. Overnight, BoE's Mann said UK wage growth is still a concern for inflation.
- JPY is the marked laggard with Japanese players away overnight on Mountain Day holiday. Traditional haven FX are hit despite the geopolitical uncertainty. Price action in the JPY has been gradual and contained to within Friday's range between 146.26-147.81.
- Antipodeans outperform, benefitting from the overall risk tone and strength in the metals complex. NZD/USD is back above the 0.6000 level ahead of the RBNZ meeting where there are mixed views on whether the central bank will cut rates or not.
- PBoC set USD/CNY mid-point at 7.1458 vs exp. 7.1777 (prev. 7.1449)
- Click for a detailed summary
- Click for NY OpEx Details
FIXED INCOME
- USTs are subdued after hitting a high of 113-05 last Friday, leading to a slight pullback. Price action has been fairly rangebound, given the lack of pertinent newsflow, so attention remains firmly on US CPI mid-week. Currently trading around 112'25.
- Bunds are modestly softer with the broader bond complex inching lower since the uneventful APAC trade, with some potential follow-through from the upticks in oil and gas prices on yields.
- Gilts are slightly lower but still comfortably above the Aug 8 low of 99.20. The UK docket is quiet today. Overnight, BoE's Mann said UK wage growth is still a concern for inflation and goods and services prices were set to rise again.
- Click for a detailed summary
COMMODITIES
- Crude is firmer intraday and inching higher amid geopolitical uncertainty over Iran and Lebanon's response against Israel to the assassinations of the Hamas leader and Hezbollah commander, with the risk of the response sparking a region-wide war.
- Natural Gas is firmly in the green amid broader energy upside. Dutch TTF holds north of EUR 40/MWh and closer to EUR 41/MWh as the Ukrainian offensive within Russia widens, with Russian authorities suggesting the situation in the Belovsky border region in Kursk is very tense.
- Metals are firmer across the board with precious metals buoyed by geopolitical angst and base metals held up by the broader risk tone alongside some fears of sluggish global growth abating. Spot gold topped last week's high to trade in a current USD 2,423.67-2,442.70/oz range at the time of writing.
- Iran’s President nominated Mohsen Paknezhad as Oil Minister and Abbas Aragchi as Foreign Minister.
- OPEC Monthly Oil Market Report to be published at 11:45BST / 06:45EDT
- Click for a detailed summary
NOTABLE DATA RECAP
- German Wholesale Price Index YY (Jul) -0.1% (Prev. -0.6%); MM (Jul) 0.3% (Prev. -0.3%)
- Czech CPI YY (Jul) 2.2% vs. Exp. 2.0% (Prev. 2.0%); CPI MM (Jul) 0.7% vs. Exp. 0.5% (Prev. -0.3%)
NOTABLE EUROPEAN HEADLINES
- BoE's Mann said UK wage growth is still a concern for inflation and goods and services prices were set to rise again, while she added that wage pressures in the economy could take years to dissipate. Furthermore, Mann said she moved down from ten to seven on a scale of “hawkishness” since the start of the year as price pressures eased, according to FT.
- Fitch affirmed Netherlands at AAA: Outlook Stable, while it affirmed Finland at AA+; Outlook Revised to Negative.
NOTABLE US HEADLINES
- Fed’s Bowman (voter) said it will become appropriate to gradually lower the policy rate if inflation continues to move towards 2%, while she is not confident inflation will decline as it did in H2 last year and noted progress on inflation in May and June is welcome but inflation is still uncomfortably above the Fed's 2% goal. Bowman also said the September meeting will have additional economic data and a wider view of financial conditions’ impact on the outlook, as well as noted they need to be patient and still see some upside risks to inflation.
- US VP Harris said she will work to raise the minimum wage and eliminate taxes on tips for service and hospitality workers.
- US-China working group set to meet in China this week, according to New York Times.
GEOPOLITICS
- "IDF Radio: The final decision on the direct attack has not yet been made and is in the hands of the Iranian leader... The Iranian attack, if carried out, will be limited and will not lead to a wide regional war", Via Ashaq News. "Israeli Army Radio: Iran is close to deciding to launch a direct attack from its territory towards Israel"
- Israel conducted an air strike which killed nearly 100 in a Gaza school refuge, according to civil defence officials cited by Reuters. It was also reported that Israel ordered a major evacuation in Gaza’s Khan Younis.
- Israeli media reported that at least 30 rockets were fired by Hezbollah towards Israel of which some were intercepted by air defences, while no casualties were reported from the rocket shelling on the city of Nahariya and its suburbs.
- Israeli intelligence believes Iran has decided to attack Israel directly and may do so within days, according to Axios’s Ravid. It was also reported that Israeli Defence Minister Gallant spoke to US counterpart Austin and told him Iranian military preparations suggest Iran is getting ready for a large-scale attack, while Israeli intelligence assessment indicated an Iran attack may precede ceasefire talks scheduled for Thursday. Furthermore, Israel's military intelligence and air force raised the alert level amid the threat from Iran.
- US Defence Secretary Austin told Israeli counterpart Gallant he ordered the USS Abraham Lincoln carrier strike group to accelerate its transit to the Middle East, while he also ordered the USS Georgia guided missile submarine to the Central Command region.
- Iran’s Revolutionary Guards held a military drill in West Iran, according to IRNA.
- Hamas asked mediators to present a plan based on past talks instead of engaging in new negotiations, according to a statement.
- Several US and coalition personnel suffered minor injuries in an attack in Syria on Friday, according to a US official cited by Reuters.
OTHER
- IAEA said its experts witnessed a strong dark smoke coming from the northern area of the Zaporizhzhia nuclear plant following multiple explosions but added that there was no safety impact reported.
- Ukrainian President Zelensky said Russia started a fire on the premises of the Zaporizhzhia nuclear plant in southern Ukraine but added that radiation indicators are normal. It was also reported that the Russian management of the Zaporizhzhia nuclear plant accused Ukraine of causing a fire near the cooling towers of the Zaporizhzhia nuclear plant by shelling the nearby city of Enerhodar although it noted that the fire had no impact on its plant and its safe use.
- Main fire at the Russian-controlled Zaporizhzhia power plant in Ukraine had been extinguished, while Russian and Ukrainian authorities said in separate statements that one of the cooling towers at the power plant was damaged, according to Reuters. Furthermore, Russian President Putin ordered tighter security at strategic facilities in Zaporizhzhia including the nuclear plant.
- Ukrainian President Zelensky said Russia conducted nearly 2,000 cross-border strikes on Ukraine’s Sumy region from the Kursk region this summer and such strikes deserve a fair response from Ukraine. Zelensky also commented that Russian forces used a North Korean missile in a strike on the Kyiv region which killed two people, while the Ukrainian military said it destroyed 53 attack drones launched by Russia during a strike over the weekend.
- Russia’s Kursk region governor ordered a faster evacuation of civilians in areas at risk of Ukraine’s attack and announced that thirteen people were injured from a downed Ukrainian missile in Russia’s Kursk city, while it was reported that Russia’s air defence systems destroyed 14 Ukraine-launched drones and four missiles over the Kursk region.
- Belarusian President Lukashenko said Belarus’s air forces were put on high alert after Ukraine violated Belarus’s air space and Belarus destroyed objects thought to be Ukrainian drones that had entered their air space.
- Philippine military said a Chinese air force aircraft executed a dangerous manoeuvre and dropped flares in the path of a Philippine air force aircraft in the South China Sea shoal. Furthermore, the Philippines presidential office said the action of the Chinese aircraft was unjustified, illegal and reckless, while President Marcos strongly condemned the air incident at Scarborough Shoal.
CRYPTO
- Bitcoin continues to slip and sinks below USD 58.5k, whilst Ethereum remains above USD 2.5k.
APAC TRADE
- APAC stocks began the week mostly higher following last Friday's gains on Wall St and light macro newsflow over the weekend, but with gains capped amid an indecisive mood in China and holiday closure in Japan for Mountain Day.
- ASX 200 advanced with the upside led by outperformance in Consumer Discretionary, Tech, Telecoms and Financials.
- Hang Seng and Shanghai Comp. were indecisive as lingering economic concerns offset the PBoC's liquidity efforts.
NOTABLE ASIA-PAC HEADLINES
- PBoC’s low carbon financing scheme which provides financial institutions with low-cost loans targeting carbon emission cuts was extended to the end of 2027, according to the State Council.
- RBA Deputy Governor Hauser said economic forecasts are subject to huge uncertainty and assume inflation stickiness due to weaker supply and labour market tightness, while he added there is risk consumption could rise more strongly, in part due to an increase in wealth and it is uncertain how far and fast the savings rate might rise.
- Chinese brokers curb bond trading amid warnings of a rally, via Bloomberg; at least four brokerages have started fresh measures to cut back trading on government bonds since last week.
