• Asian equity markets were mostly negative as the region failed to take impetus from the gains on Wall St where all majors edged higher
• The greenback extended on gains which pressured its counterparts across the board. Turkey has raised tariffs on imported goods from the US
• Looking ahead, highlights include UK inflation, US retail sales, industrial production, DoEs

ASIA

Asian equity markets were mostly negative as the region failed to take impetus from the gains on Wall St where all majors edged higher as Turkey and EM contagion concerns subsided. Nikkei 225 (-0.9%) weakened amid profit taking following the prior day’s gains of over 2%, while ASX 200 (+0.1%) remained afloat on technical buying as the index reclaimed the 6300 level but with upside capped by losses in financials as Australia’s largest lender CBA suffered on criminal misconduct allegations. Elsewhere, Shanghai Comp. (-1.3%) saw hefty losses and the Hang Seng (-1.5%) declined to its lowest in around a year in a continuation of the recent underperformance as Tencent and tech names remained pressured, while the PBoC skipped reverse repo operations for a 19th consecutive occasion and although it later announced CNY 383bln in 1yr MLF loans, this was still lower than its previous MLF operation of CNY 502bln in late July. Finally, 10yr JGBs were marginally higher with only minimal support seen amid the profit taking seen in Japanese stocks and BoJ’s presence in the market in which the central bank kept its purchase amounts unchanged.

PBoC refrained from reverse repos but announced to lend CNY 383bln through 1yr Medium-term Lending Facility. (Newswires)
PBoC set CNY mid-point at 6.8856 (Prev. 6.8695)

Chinese House Prices (Jul) Y/Y 5.8% (Prev. 5.0%). (Newswires)

FX

The greenback extended on gains which pressured its counterparts across the board with EUR/USD firmly below 1.1400 and with GBP/USD at its weakest in 14 months in which it briefly broke through 1.2700 to the downside. Elsewhere, AUD/USD and NZD/USD were subdued following the declines across the commodities complex and due to their high-beta characteristics amid the backdrop of the subdued risk tone. In addition, CNY was also pressured in which USD/CNY climbed above 6.9000 for the first time since May last year amid the broad USD strength and after the PBoC continued to weaken the reference rate.

COMMODITIES

Commodities were lower across the board with WTI crude futures back below USD 67/bbl following yesterday’s pullback which was exacerbated by a surprise build in headline API crude inventories. Elsewhere, the metals complex was also pressured in which copper underperformed on a firmer greenback and risk averse tone which dragged LME prices below USD 6000/ton to its weakest in over a year, while gold also extended on losses amid the broad flows into the greenback.

US API Weekly Crude Stocks (10 Aug) +3.66M vs. Exp. -2.50M (Prev. -6.00M). (Newswires)

GEOPOLITICAL

US Secretary of State Pompeo stated the US remains in close cooperation with South Korea to ensure the final denuclearisation of North Korea. In related news, there were also comments from South Korean President Moon that a 3rd inter-Korean summit would be another step towards peace treaty and denuclearization of the peninsula. (Twitter/Newswires)

US Secretary of State spokesperson Nauert said talks are ongoing with Turkey for the release of Pastor Brunson. However, there were also comments from a US official that nothing has developed on the Pastor Brunson case and who warned of more actions on Turkey if he is not freed. (Newswires)

Turkey raised tariffs on imported goods including cars, alcohol and tobacco from the US, while Turkish Vice President Oktay stated that they increased tariffs on some US imports as a response to the US administration's deliberate attacks on the Turkish economy. (Newswires/Official Gazette)
 

US

The Treasury complex followed its European peers on Tuesday and remained subdued amid a slightly less risk-averse tone as the situation in Turkey appears less threatening than previous days. The yield curve saw some modest bear-flattening for most of the morning US session with 2yr yield higher by c.2bps and 30yr yield by c.1bps. US 10YR T-notes settled 4+ ticks lower at 120-03+.