• Asian equity markets traded mixed as some of the regional bourses shrugged off the negative lead from Wall St. Chinese bourses underperformed their peers amid disappointing Chinese data
• Tory Brexiteers are said to be planning to challenge PM May by publishing their own blueprint favouring a hard Brexit
• Looking ahead, highlights include German GDP and ZEW Survey, UK jobs data and API weekly crude inventories

ASIA

Asian equity markets traded mixed as some of the regional bourses shrugged off the negative lead from Wall St where the S&P 500 and DJIA declined for a 4th consecutive day amid the Turkey-triggered turmoil, although China underperformed as participants digested weaker than expected data. ASX 200 (+0.8%) and Nikkei 225 (+1.8%) were higher with Australia lifted by a broad positive tone across nearly all sectors and as focus shifted back to earnings, while Japan outperformed as exporters coat-tailed on a rebound in USD/JPY. Elsewhere, Hang Seng (-0.8%) and Shanghai Comp. (-0.5%) underperformed their peers and traded negative amid disappointing data in which Industrial Production, Retail Sales and Fixed Urban Assets all fell short of estimates and the Unemployment Rate also increased. Finally, 10yr JGBs were weaker amid the improved risk appetite in Japan with prices also subdued by the absence of the BoJ’s bond buying program from the market today.

PBoC skipped open market operations for a net neutral daily position. (Newswires)
PBoC set CNY mid-point at 6.8695 (Prev. 6.8629)

Chinese Industrial Production (Jul) Y/Y 6.0% vs. Exp. 6.3% (Prev. 6.0%). (Newswires)
Chinese Retail Sales (Jul) Y/Y 8.8% vs. Exp. 9.1% (Prev. 9.0%)
Chinese Fixed Assets Investment Ex-Rural YTD (Jul) Y/Y Jul 5.5% vs. Exp. 6.0% (Prev. 6.0%)
Chinese Jobless Rate (Jul) 5.1% (Prev. 4.8%)

UK/EU

Tory Brexiteers are said to be planning to challenge PM May by publishing their own blueprint favouring a hard Brexit. The paper is due to be published next month and is expected to have the backing of 60 to 80 Conservative MPs. It is understood the paper is to allow a possible Canadian-style free trade agreement, only if the EU backs down on demands over the Irish border. (Times)

Italy officials stated that any reports which say Finance Minister Tria is resigning are baseless. (Newswires)

Bundesbank’s Wuermeling said ECB has not seen a need for a bank meeting on Turkey risks and suggested not to over dramatize the risk of a Euro area infection. (Newswires)

FX

FX markets have calmed from the prior day’s EM sell-off with the USD index relatively flat above the 96.00 level, while its counterparts struggled for direction in which EUR/USD struggled to hold above 1.1400 and with GBP/USD kept rangebound at the 1.2700 handle. Elsewhere, the improvement in risk-tone helped USD/JPY and JPY-crosses sustain their recovery while commodity-linked currencies also saw mild gains amid the rebound in crude, although upside in AUD was contained by the disappointing Chinese data and softness in CNH after the PBoC continued to weaken the reference rate.

 

COMMODITIES

Commodities were relatively flat with WTI crude futures marginally higher as trade stabilized from the prior day’s volatility in which prices slumped briefly below USD 66/bbl before paring nearly all the losses to reclaim the USD 67/bbl level heading into the settlement. Elsewhere, gold languished and only managed to nurse a miniscule portion of Monday’s USD-induced losses, while copper was indecisive amid similar price action across the complex and the mixed overnight risk tone.  

Escondida copper mine workers union are to extend discussions with the BHP for another day. (Newswires)

GEOPOLITICAL

White House said National Security Adviser Bolton met with Turkish Ambassador Kilic at the White House in which they discussed Pastor Brunson and US-Turkey relations, while the meeting was said to be at the Turkish ambassador's request. In separate news, there were also reports that the US was said to warn Turkey again regarding Pastor Brunson. (Newswires)
 

US

Treasury yields rebounded from the 4-week lows seen in recent. The complex edged lower after the Turkish Central Bank announced liquidity release on Monday contributing to easing some global tensions. The yield curve saw some modest bear-steepening as most of the action was concentrated in the long end of the curve where 30yr yields were higher by c.3bps at settlement. 5s30s and 10s30s widened by c.1.5bps, 2s5s narrowed by c.1bps. US 10YR T-notes settled 4 ticks lower at 120-08.

US President Trump stated during public fundraiser that they will straighten it out with Mexico and Canada. Elsewhere, there were also earlier comments from Canada’s Finance Minister Morneau that the NAFTA framework can be improved to benefit all three parties and added they will have more to say about steel trade soon. (Newswires)