• Source reports suggest Turkey is ready to release Pastor Brunson but the US is offering nothing in return
• TRY struggling alongside European equities as EM worries return
• Looking ahead, highlights include, Canadian CPI, Uni. of Michigan and Baker Hughes

ASIA

Asian equity markets were mostly higher as the region tracked the performance on Wall St where all majors gained as sentiment was buoyed by trade optimism from the announcement of upcoming US-China trade talks. ASX 200 (+0.1%) and Nikkei 225 (+0.4%) were both higher although the former somewhat lagged after having stalled at fresh highs last seen in over a decade, while gains in Japanese exporters were contained by a stable currency. Hang Seng (+0.4%) and Shanghai Comp. (-1.3%) both initially conformed to the positive risk tone amid the trade-related hopes, continued PBoC liquidity efforts and as Hong Kong-heavyweight Tencent also rebounded from post-earnings losses, although the Shanghai Comp. eventually gave back its gains and then some, as sentiment deteriorated across the mainland. Finally, 10yr JGBs saw mild gains as prices rebounded from the prior day’s weakness and with the BoJ also in the market under its bond buying programme.

PBoC injected CNY 90bln via 7-day reverse repos for a net weekly injection of CNY 130bln vs. neutral last week. (Newswires)

PBoC set CNY mid-point at 6.8894 (Prev. 6.8946)

RBA's Ellis said if things turn out broadly as they expect, it is more likely that the next move in the cash rate will be up than down. (Newswires)

US is seeking to pressure China to lift CNY in talks, according to sources .The article was published on Thursday nights but as major newswires published the comment traders picked up on it and broad based USD weakness was observed. (NYT)

EU/UK/US

UK Business Secretary Clark states the European Commission will cause significant and lasting economic harm to millions of families across the continent if it rejects Britain’s Brexit plan. (Times)

EU HICP Final YY Jul 2.1% vs. Exp. 2.1% (Prev. 2.1%)

EU HICP ex Tobacco YY Jul 2.1% (Prev. 1.9%)

EU HICP ex Food & Energy YY Jul 1.3% vs. Exp. 1.3% (Prev. 1.3%)

EU HICP ex Food ,Energy, Alcohol & Tobacco Final YY Jul 1.1% vs. Exp. 1.1% (Prev. 1.1%)

GEOPOLITICAL

US President Trump stated that Turkey has taken advantage of US for many years and are now holding US pastor, while he added the US will not pay anything for the release an innocent man but are cutting back on Turkey. (Twitter)

Turkey is ready to release Pastor Brunson but the US is offering nothing in return. (Middle East Eye)

US administration official said President Trump and Russian President Putin agreed in principle that Iran should exit Syria, although the official added that Russia sees this as a difficult task. (Newswires)

US Pentagon report stated China has been expanding fleet of long-range bombers during last 3 years and are 'likely' training for missions which target the US. (CNN)

EQUITIES

European equities have started the day marginally lower (Euro Stoxx 50 -0.3%) as we approach the week’s end. The AEX is currently the underperforming bourse, with losses lead by Vopak (-7.0%) (whom are also at the foot of the Stoxx 600) after missing expectations on all of net profit, EBITDA and revenue.

AP Moeller Maersk (+4.7%) also reported earnings, wherein revenues came in above least years results. The co. also confirmed source reports it is looking to spin-off it’s drilling unit and list it on the NASDAQ so as to focus on their transport business.

Air France appointed the Ex-COO of Air Canada last night, Ben Smith, as CEO. Despite opening higher Air France shares reversed course amid protests from French unions about the Canadian’s appointment, and are currently down 4.0%.

FIXED INCOME

It’s been gradual, but no less compelling given another EM run and renewed weakness in the Try and Rub among others. The extended rebound in 10 year EU benchmarks also has technical backing, as Bunds breached Thursday’s Eurex session best (163.67) having cleared interim chart resistance round 163.58 (declining trend-line), and now posting marginal new high for the week at 163.88 (vs. 163.82 previously) for a 39 tick advance on the day. Meanwhile, Gilts have cleared 124.00, at 124.07 (+36 ticks) and 124.27 beckons, as US Treasuries latch on to the safe-haven rally that could really gather steam into the weekend given risk-paring tendencies and positioning on Fridays.

FX

DXY - Some downside deviation from the relatively tight range around 96.500 that has been prevalent since the Try-led EM exodus subsided amidst reports (albeit dated) that the US will urge China to revalue the Yuan during trade negotiations scheduled for next week. The index dipped just under 96.300 amidst broad Usd declines, but still restrained trade overall.

TRY/YUAN - The Lira maintained enough recovery momentum to trade a fraction above 5.7500 vs the Dollar, but stopped short of Thursday’s circa 5.7000 high that is very close to a key Fib level and in volatile conditions reversed to hit 6.0000+ levels. Meanwhile, the PBoC halted a run of daily Cny depreciations via the official mid-point fix to leave the offshore Cnh off recent lows and also bolstered by the provision of 7 day liquidity.

NZD/AUD - Highlighting the considerably improved risk tone, the Kiwi is making a more concerted effort to form a base at 0.6600 vs its US counterpart, while the Aud has extended above 0.7250 again, though still unable to reach 0.7300 with technical resistance just a head of the big figure and the RBA reiterating no rush or rationale to raise rates anytime soon (Governor Low overnight and message rammed home by Ellis earlier today).

EUR/JPY - The next best G10s, as the single currency revisits 1.1400 vs the Greenback where big option expiries run off today (1.9 bn from the big figure to 1.1410) and Usd/Jpy retreats from 111.00 again and also eyes hefty expiry interest, with 2.2 bn at the 110.50 strike.

CAD/CHF/GBP - All mildly firmer vs the Usd, with the Loonie pivoting around 1.3150 ahead of Canadian CPI data later and wary of option-related flows as well given 1.8 bn between 1.3145-50. The Franc is also within recent ranges and contained from 0.9945-80, while Cable is holding above 1.2700 and just failed to re-test residual stops at 1.2750. 

COMMODITIES

Oil prices are up this Friday but are still set to end the week in the red for the third week in a row. WTI and Brent are both up ~0.25% on the day as energy specific news flow remains light.

In the metals scope, Gold is up marginally off the back of USD weakness and testing the USD1180/OZ level to the upside, but is still set for its largest weekly fall in 15 months. Precious metals are slightly in the green with all of silver (+0.2%), platinum (+0.4%) and palladium (+0.1%) up on the day.

Source: RANsquawk