• Former Trump lawyer Cohen pleaded guilty to violating campaign financing laws at the direction of a 'candidate'
• European equities are trading mostly higher (Eurostoxx 50 +0.3%) but DAX capped by Continental guidance cut
• Looking ahead, highlights include Canadian retail sales, US existing home sales, EIA weekly crude inventories and FOMC minutes

ASIA

Asian equity markets traded mixed with the region indecisive due to the events stateside where the elated mood from the fresh record highs in the S&P 500 eventually deteriorated on political concerns due to legal troubles for President Trump’s former inner circle. This was after Trump’s former campaign manager Manafort was found guilty on 8 counts including tax fraud, while former Trump lawyer Cohen also pleaded guilty at a court hearing and stated he violated campaign financing laws at the direction of a 'candidate' which his lawyer further elaborated on and alleged that Trump directed Cohen to commit a crime. ASX 200 (-0.3%) declined from the open with the index weighed by financials although telecoms outperformed on M&A news with TPG in merger discussions with Vodafone Hutchison Australia, while Nikkei 225 (+0.6%) was also initially pressured but then recovered as auto names cheered recent reports that US auto tariffs could be delayed. Elsewhere, Hang Seng (+0.6%) and Shanghai Comp. (-0.7%) were mixed in which the mainland underperformed after the PBoC refrained from liquidity operations and with both US and China said to be pessimistic heading into trade discussions. Finally, 10yr JGBs saw initial gains as prices tracked the overnight rebound in T-notes and with the BoJ also in the market for JGBs in the belly to super-long end, but then gradually pared throughout the session.

PBoC skipped open market operations. (Newswires)

PBoC set CNY mid-point at 6.8271 (Prev. 6.8360)

US

Former Trump lawyer Cohen pleaded guilty at a court hearing and stated he violated campaign financing laws at the direction of a 'candidate' and acted to influence the election. Furthermore, Cohen’s lawyer Lanny Davis alleged that Trump directed Cohen to commit a crime and said that Cohen is willing to talk to Special Counsel Mueller (Newswires)

Former Trump campaign manager Manafort was found guilty on 8 counts including tax fraud, while a mistrial was declared on 10 other charges after the jury failed to reach a verdict on those counts. (Newswires)

US President Trump said Manafort was a good man and that the Manafort case has nothing to with Russia collusion, while US Republican Senate Majority whip Cornyn also stated that the recent events do not implicate the President at all, particularly on the Russia investigation. (Newswires)

US is said to announce ‘handshake’ NAFTA agreement related to Mexico on Thursday, according to reports in Politico. However, there were later comments from the Canadian government that it has no notification of a NAFTA agreement being imminent, while Mexico was also said to have denied the existence of a NAFTA handshake deal. (Politico/Newswires)

Designated NAFTA negotiator for incoming Mexican President AMLO said NAFTA talks are making good progress and are coming to an end, while he also expects US & Mexican officials to have an agreement on outstanding issues by early next week. In related news, there were also reports that the incoming and outgoing Mexican administrations are said to have differences over inclusion of the energy chapter in the potential NAFTA agreement. (Newswires/WSJ)

GEOPOLITICAL

US National Security Advisor Bolton says US will do "other things" beyond economic sanctions to pressure Iran. (Newswires)

EQUITIES

European equities are trading mostly higher (Eurostoxx 50 +0.3%) with underperformance in Switzerland’s SMI (-0.2%), weighed on by heavyweights Nestle (-0.3%) and Roche (-0.5%). The consumer discretionary sector underperforms amid German-listed Continental downgrading guidance. Company shares fell 13.8% following the announcement, dragging the DAX 30 and the likes of Michelin (-5.3%), Pirelli (-3.8%) and Valeo (-5.8%) in sympathy. 

FX

DXY - Holding above the 95.000 level as Dollar/majors consolidate post-Trump. The index has pulled up just shy of 95.400 from almost 95.000 when the fall-out from US President’s tirade vs Fed tightening and Usd strength (partly due to FOMC hikes, but also Chinese/EU currency manipulation) was more pronounced.

AUD - The clear G10 underperformer as political uncertainty combines with RBA stability on the policy front and the aforementioned general Greenback rebound. Aud/Usd is back below 0.7350 after topping out around 0.7380 on Tuesday, and eying decent option expiry interest at the 0.7375 strike (circa 800 mn) on Thursday. Back to the RBA, Deputy Governor Labelle sees downward pressure on inflation subsiding eventually, but would like to be more confident that CPI will be sustained at target, adding that current accommodative policy will support this outcome, while returning to politics latest reports suggest that Liberal Party members are calling for a leadership meeting later tonight.

GBP/JPY/NZD - Also making way for the partial Usd revival, but to a lesser extent with Cable back down below 1.2900 having run in to offers ahead of key technical resistance around 1.2926-30 and awaiting Brexit Minister Raab’s what to do in the event of ‘no deal’ advice on Thursday. Usd/Jpy hit supply and a chart buffer at 110.50 (100 HMA), while the Kiwi is pivoting 0.6700 with some underlying support from much stronger than expected NZ retail sales data overnight, and cross flows as Aud/Nzd slips back below 1.1000.

CHF/EUR/CAD - Bucking the overall trend and holding gains vs the Dollar as the Franc remains at the upper end of 0.9855-25 parameters, the single currency hovers just under 1.1600 and firmly above its 21 DMA (1.1547) after finding a base just ahead of 1.1500, and the Loonie maintains NAFTA/oil price momentum within a 1.3045-15 range, even though Canada denies knowledge of any official notification that a deal is imminent (in response to response about a handshake agreement between the US and Mexico tomorrow).

EM - Domestic and geopolitical factors still plaguing several nations in the region and currencies, like the Try, Zar, Rub, Brl. Indeed, the Rand only derived fleeting support from SA inflation data that topped estimates on the headline front, albeit with a more benign core. FX pairs as much as 0.7% firmer.

FIXED INCOME

Bunds are underperforming, albeit marginally as pre-German 10 year auction hedges and concession have not really been unwound or reversed in wake of a somewhat mixed reception to the latest offering. Indeed, the benchmark future just dipped to a fresh 163.19 Eurex intraday low (-5 ticks vs +21 ticks at best), while Gilts remain close to their Liffe peak (+14 ticks vs -1 tick at the other ‘extreme’) and US Treasuries also retain the bulk of their overnight gains amidst yet more curve flattening ahead of the latest FOMC minutes, with MBA mortgage apps and existing home sales also on Wednesday’s docket.

COMMODITIES

Following a larger than expected decline in API crude inventories last night, WTI (+1.3%) and Brent (+1.5%) trade on the front foot while concerns continue to linger over the potential repercussions of US oil related sanctions against Iran due to come into effect in November. US National Security Advisor Bolton, in an press conference, stated the US will do “other things” beyond economic sanctions to pressure Iran. Meanwhile, the Kuwaiti Oil Minister said he expects the oil market to remain stable until year-end, adding he expects oil exporters to reach an agreement on the mechanism to monitor oil supply by the end of the year. Elsewhere, spot gold (+0.1%) is relatively uneventful, while copper retreated ahead of US-China trade talks taking place today and tomorrow. 

US API Weekly Crude Stocks (17 Aug) -5.170M vs. Exp. -1.500M (Prev. +3.660M). (Newswires)