• European equities accelerated gains (Eurostoxx 50 +0.8%) as sentiment improved across the region amid Friday’s US-China trade developments
• TRY is back under pressure after S&P’s downgrade and no FX Depo auction today, with comments from President Erdogan largely shrugged off
• Looking ahead, highlights include speeches by Fed’s Bostic and ECB’s Weidmann

ASIA

Asian equity markets were mostly higher but with gains contained as the region struggled for direction due to a lack of fresh catalysts and as earnings dominated news flow. ASX 200 (+0.1%) traded positive but with price action kept in a tight range as strength in miners was counterbalanced by weakness in the largest weighted financials sector and consumer staples following disappointing results from Woolworths, while Nikkei 225 (-0.3%) underperformed amid a firmer currency and as some analysts even suggested stealth tapering after the BoJ refrained from buying stocks for 2 days last week. Elsewhere, Hang Seng (+1.4%) and Shanghai Comp. (+1.1%) traded higher but with sentiment in the mainland bourse flimsy as it swung from gains and losses, however the bulls eventually took the upper hand following another firm liquidity effort by the PBoC and continued hopes regarding trade talks. Finally, 10yr JGBs were initially uneventful amid a similar tone across asset classes and a lack of BoJ presence in the bond market, although prices gradually edged higher throughout the session amid the underperformance of stocks in Tokyo which helped 10yr JGBs break above resistance around the 150.50 level.

PBoC injected CNY 120bln via 7-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.8718 (Prev. 6.8894)

US

US Trade Representative Lighthizer will hold a hearing on China tariffs in August, while it was also reported on Friday that US and China trade talks have a plotted road map to resolve trade dispute by November. (Newswires/WSJ)

Fitch affirmed Russia at 'BBB-; Outlook Positive. (Newswires)

TURKEY

US reportedly reject Turkey’s offer of releasing Pastor Brunson in exchange for bank relief. (Newswires)

Turkish President Erdogan reiterated Turkey will not ask for IMF assistance. (Anadolu Agency)

S&P downgraded Turkey from BB- to B+; Outlook Stable and Moody’s also cut Turkey from Ba2 to Ba3; Outlook Negative

UK

UK government is to publish no-deal advice on Thursday, notices will include advice for businesses, citizens and public bodies. Thursday will also see UK Brexit Secretary Raab making a speech in Westminster to outline plans in the case of a no-deal Brexit. (BBC)

UK Cabinet papers showed plans for EU migrants to be given the right to stay in UK in the event of a no-deal amid worries of potential labour shortages. (Telegraph)

UK Tory Brexiteer Jacob Rees-Mogg warned PM May that Eurosceptics will block her plans unless they are changed, while the group are also reported to be devising an alternative proposal to PM May’s Brexit plans. (Independent)

EU

ECB’s Weidmann (Hawk) stated that monetary policy normalization is foreseeable following the latest decisions and that interest rates will increase as a result, although the process will be gradual. (Newswires)

Italy’s populist government are drawing up a plan of up to EUR 80bln to rebuild the country’s rundown infrastructure after the Genoa bridge collapse. Italy's Deputy PM Salvini said all funds raised for infrastructure will be invested. (Telegraph/Newswires)

The Italian cabinet undersecretary Giorgetti has indicated he wanted the ECB to continue buying fresh bonds, including Italian government debt, under its QE programme. (FT)

German Finance Ministry noted that TRY crisis, US tariffs and Brexit are risks to the German economy. (Newswires)

ESM stated that Greece successfully completed its bailout programme. (Newswires)

GEOPOLITICS

Iran says the EU should speed up efforts to keep Tehran in the 2015 multinational nuclear deal. (Newswires)

EQUITIES

European equities kick started the week higher by 0.2% to 0.3% before gains accelerated (Eurostoxx 50 +0.8%) as sentiment improved across the region amid the latest US-China trade developments. On Friday, it was reported US and China have a plotted road map to resolve trade disputes by November. In terms of sectors, material names are outperforming on the back of firmer base metals price actions. Antofagasta (+2.2%) shares are higher after also reporting optimistic numbers while reaffirming CapEx guidance. Elsewhere, Atlantia (-9.0%) shares continue take a beating, the latest reports suggesting the Italian government has begun revoking Autostrade’s licence, also casting doubt over an initial offer of EUR 500mln for compensation and building work from Atlantia.

FX

USD - The broad Dollar and DXY is mildly firmer, but well within established ranges and G10 pairs are narrowly mixed even though risk appetite suggests that a degree of divergence between traditional safe-havens and high beta currencies would better reflect the overall tone.  Hence, the index is relatively lacklustre within 96.300-010 bounds awaiting firmer direction and impulses that could arrive later this week via US-China trade talks, FOMC minutes and/or Jackson Hole.

NZD/EUR/JPY - Highlighting the rather indifferent and conflicting start to the week, the Kiwi, single currency and Jpy are all underperforming at the base of the major pecking order, with the former just about retaining 0.6600+ status, Eur/Usd still struggling to extend rebounds above 1.1400 (topping out ahead of the 200 HMA at 1.1458) and Usd/Jpy continuing to pivot around 110.50 (albeit Eur/Jpy also capped circa 126.50 and under its 200 HMA of 126.82).

CAD/AUD/GBP/CHF - Essentially flat-lining vs the Greenback, but with the Loonie holding near recent highs circa 1.3055 after last Friday’s BoC rate hike boosting Canadian CPI data and eyeing a speech from Governor Wilkins this afternoon, while the Aud straddles 0.7300 again wary of more unsupportive RBA rhetoric in the form of dovish guidance from Governor Lowe who is due to speak later tonight. Elsewhere, Cable is also aimless around a 1.2750 axis awaiting further Brexit developments and the Franc is even more restrained either side of 0.9950.

EM - The Try is back under pressure after S&P’s downgrade and no FX Depo auction today, with comments from President Erdogan largely shrugged off or arguably undermining the Lira if anything, although the US rejecting Turkey’s offer to release Pastor Brunson in exchange for bank aid is probably more of a negative factor. Usd/Try back near 6.1000, in contrast to Usd/Rub around 67.0000 in wke of Fitch affirming Russia and Usd/Zar sub-14.5000 in consolidation after last week’s Rand slump and ahead of SA inflation data and the beginning of testimonies for the capture inquest.

FIXED INCOME

Bunds and Gilts have pared some losses after extending intraday lows to 163.42 and 123.54 on Eurex and Liffe respectively (-1/4 point and -21 ticks on the day), as EU stocks climb higher, Italian BTPs get a boost from comments by Salvini claiming that infrastructure funding is in place, and perhaps less intuitively a relatively firm rebound in US Treasuries. Nothing concrete to support the suggestion, but it would certainly be reasonable and feasible to deduce that the 10 year EU benchmarks have conceded ground to any or all of the above, ie via asset reallocation and/or spread positioning.

COMMODITIES

WTI (Unch) and Brent (+0.4%) trade mixed, with the former eyeing USD 66/bbl to the upside while the latter straddling above USD 72.00/bbl. News flow for crude was light over the weekend, although Iran expressed opposition to Saudi Arabia’s willingness to make up for any shortfall that could arise from US sanctions, in which it told OPEC that no country is allowed to take over the share of other members for production and exports of oil under any circumstances.

Elsewhere, gold (+0.3%) is in the green as it crawls closer to the USD 1190/oz level. London copper rose 1% this morning as hopes for US-Sino trade talks buoyed risk appetite after reports suggested China and Washington are to hold low-level trade talks on August 21st and 22nd, ahead of the new US tariffs on USD 16bln of Chinese goods take effect.

UK union confirmed the offshore oil & gas platform strike has begun at the three platforms Alwyn, Elgin and Dunbar. (Newswires)

China are said to have shifted to Iranian tankers to keep oil flowing amid US sanctions. (Newswires)