• Asian stocks were mixed with macro drivers on the light side and after the region failed to sustain the momentum from the positive US close
• In FX, the greenback was rangebound, AUD/USD pressured following softer than expected headline CPI, CNH stabilized despite another weak reference rate setting by the PBoC
• Looking ahead, highlights include German IFO, US New Home Sales, DoEs, supply from Germany and the US, Juncker to meet with Trump and a slew of large cap earnings

ASIA

Asian stocks were mixed with macro drivers on the light side and after the region failed to sustain the momentum from the positive US close where earnings dominated focus. ASX 200 (-0.4%) was negative amid broad weakness across the index aside from the commodity-related sectors, while materials names and continued strength in Japanese banks kept the Nikkei 225 (+0.4%) afloat. Elsewhere, Hang Seng (+0.8%) and Shanghai Comp. (+0.1%) were varied as Hong Kong was led higher by oil names including Sinopec which expects its highest H1 profit since 2013 and with the mainland less decisive following a liquidity drain by the PBoC, while the KOSPI (-0.2%) was dampened on earnings including LG Display. Finally, 10yr JGBs gained overnight and broke above this week’s highs in a continuation of its recent rebound and with the BoJ present in the market for JPY 650bln of JGBs in the belly to super-long end, while reports also noted BoJ watchers viewed the central bank was unlikely to tighten policy before October and some even believed there were prospects of looser policy.

BoJ is seen by experts as unlikely to tighten monetary policy before October despite speculation the bank may act at its upcoming meeting due to the impact of its ultra-loose policy, while reports also noted that some believe further easing is on table to support inflation. (Nikkei)

PBoC skipped open market operations for a net daily drain of CNY 60bln. (Newswires)
PBoC set CNY mid-point at 6.8040 (Prev. 6.7891); weakest fix since 28th June 2017.
 

UK/EU

US President Trump tweeted that the EU is coming to Washington to negotiate a trade deal and he has an idea for both US and EU to drop all tariffs, barriers and subsidies which would be called Free Market & Fair Trade, while Trump added he hopes they do it and the US is ready but thinks they won’t. (Twitter)

The Association of German Chambers of Commerce and Industry chief said US tariffs could cost Germany EUR 5bln. (Newswires)
 

FX

In FX markets, the greenback was rangebound and so too were its major counterparts in which EUR/USD faltered ahead of the 1.1700 handle and with GBP/USD stuck around 1.3150. Antipodeans were the main movers with AUD/USD pressured following softer than expected headline CPI which analysts noted provides scope for the RBA to remain on hold well into next year but with downside stemmed as it was the 1st time in 10 quarters headline inflation moved to within the RBA’s 2%-3% target range. Elsewhere, NZD/USD was also data-driven and eventually gave up the 0.6800 handle after a surprise Trade Deficit and miss on Exports, while CNH stabilized despite another weak reference rate setting by the PBoC.

Australian CPI (Q2) Q/Q 0.4% vs. Exp. 0.5% (Prev. 0.4%). (Newswires)
Australian CPI (Q2) Y/Y 2.1% vs. Exp. 2.2% (Prev. 1.9%)
Australian Trimmed Mean CPI (Q2) Q/Q 0.5% vs. Exp. 0.5% (Prev. 0.5%)
Australian Trimmed Mean CPI (Q2) Y/Y 1.9% vs. Exp. 1.9% (Prev. 1.9%)

New Zealand Trade Balance (NZD)(Jun) M/M -113M vs. Exp. 200M (Prev. 294M, Rev. 208.0M). (Newswires)
New Zealand Trade Balance (NZD)(Jun) Y/Y -4030M vs. Exp. -3681M (Prev. -3598M, Rev. -3680M)
New Zealand Exports (NZD)(Jun) 4.91B vs. Exp. 5.06B (Prev. 5.42B, Rev. 5.35B)
New Zealand Imports (NZD)(Jun) 5.02B vs. Exp. 4.92B (Prev. 5.12B, Rev. 5.15B)
 

COMMODITIES

Commodities were uneventful with WTI crude futures only marginally supported overnight following a wider than expected drawdown in headline API crude inventories, as prices took a breather from the prior session’s gains in which it briefly tested USD 69.00/bbl while Brent outperformed but with upside capped by resistance at USD 74.00/bbl. Elsewhere, gold was kept range-bound by a flat greenback, while copper was also sideways alongside a muted tone across the complex and an indecisive risk tone in mainland China.

US API weekly crude stocks (20 Jul) -3.160M vs. Exp. -2.300M (Prev. +0.629M). (Newswires)

GEOPOLITICAL

US President Trump said we’ll see what happens with Iran but is open to a ‘real deal’, while there were also comments from US Defence Secretary Mattis stated that it is time for Iran to show responsibility and was also said to be concerned about military in the South China Sea. (Newswires)

US

Treasuries ended Tuesday’s session mixed and mostly flat. Most of the action was concentrated in the long end of the curve where yields were lower by c.2bps at settlement. 2s30s and 5s30s narrowed by c.2bps, 2s10s and 5s10s narrowed by c.1bps. The US Treasury sold $35bln in 2yr notes at a high-yield of 2.657%, the highest since July 2008. The bid-to-cover came in at 2.92x, the highest since January. Indirects took the largest share since February whilst directs were awarded the smallest portion since March. US 10YR T-notes futures (U8) settled 2+ ticks higher at 119-180.

US President Trump has told farmers affected by retaliatory tariffs to be patient as they will benefit eventually, while USDA Secretary Perdue confirmed reports that the US is authorising a one-time programme of up to USD 12bln in aid to assist farmers that suffered from tariffs which will kick in on Labor Day and includes direct payment, food purchase and trade promotion programmes. (Newswires)

US House voted to permanently repeal Obamacare medical device tax. (Newswires)

US House Ways and Means Committee Chairman Brady said he wants to lock in tax cuts for the middle class and that he expects the panel to vote on a new tax bill in September. (Newswires)

Mexico incoming Foreign Minister believes NAFTA agreement is possible relatively soon and commented that US President Trump stated in a letter that the 2 countries should increase cooperation. (Newswires)

US President Trump can be heard on tape discussing with his attorney Michael Cohen how to acquire the rights to former Playboy model Karen McDougal’s story about her alleged affair with Trump, in a recording obtained by CNN. (Guardian)