• European equities are largely mixed and trading without direction amidst the fresh US-China tariff action
• FOMC minutes have given the flagging Usd a fillip, along with indirect props from rival currencies that are succumbing to more selling pressure
• Looking ahead, highlights include ECB Minutes, US flash PMIs, US New Home Sales, and US-China trade talks in Washington

ASIA

Asia-Pac stock markets traded subdued with the region cautious amid political turmoil in Australia and as the 2nd round of Trump tariffs on China took effect. ASX 200 (-0.3%) was negative as a mega-storm brewed on the political front with PM Turnbull’s future in office highly doubtful after 3 cabinet members resigned including Finance Minister Cormann who advised the PM, no longer has party support, although losses in the index have been stemmed as participants reacted to a slew of earnings and with miners underpinned by recent strength in commodities. Elsewhere, Nikkei 225 (+0.2%) remained afloat on the back of a weaker JPY, while Shanghai Comp. (+0.3%) and Hang Seng (-0.5%) were jittery as the 2nd round of US tariffs on China took effect today and after the PBoC refrained from liquidity operations again. Finally, 10yr JGBs were relatively unchanged with only minimal gains seen from the cautious risk tone in the region and with demand also subdued amid weaker results at the enhanced liquidity auction for longer-dated bonds.

US tariffs of 25% on additional USD 16bln of Chinese goods took effect. There were also comments from China Commerce Ministry that it resolutely opposes the latest US tariffs and will file a complaint to WTO, while Mofcom added it will continue to fight back against US. (Newswires)

PBoC skipped open market operations for a net daily drain of CNY 40bln. (Newswires)

PBoC set CNY mid-point at 6.8367 (Prev. 6.8271)

GEOPOLITICAL

Turkish President Erdogan spokesman stated there is rule of law in Turkey and the case regarding Pastor Brunson is an ongoing legal issue, while the spokesman also stated Turkey has no intention of beginning an economic war but cannot stay silent. (Newswires)

CENTRAL BANKS

ECB's Weidmann (Hawkish) says it is time to end expansionary monetary policy, and ending QE is just the first step, while he added normalization will be gradual, to take a "few" years, and must avoid delay. In regards to trade, he said trade war could be "severely detrimental" to global economy. (Newswires)

Russian Central Bank says has enough tools to prevent threats to financial stability and has decided not to purchase foreign currency from now until end of September. (Newswires)

US

US President Trump’s former Lawyer Michael Cohen was said to have told lawmakers last year that he did not know whether US President Trump knew of the meeting with Russian officials in Trump Tower. (Axios)

EU/UK

UK Brexit Minister Raab says he is confident a good Brexit deal is within sight; getting a good deal is by far the most likely outcome, while adding there will be risks and challenges in no-deal scenario but also opportunities; making good progress on outstanding separation issue. (Sky News)

German Chancellor Merkel has reportedly set her sights on backing a German head for the European Commission rather than backing Weidmann for head of the post-Draghi ECB. (Handelsblatt)

EU Markit Services Flash PMI (Aug) 54.4 vs. Exp. 54.4 (Prev. 54.2)

EU Markit Manufacturing Flash PMI (Aug) 54.6 vs. Exp. 55.1 (Prev. 55.1)

EU Markit Composite Flash PMI (Aug) 54.4 vs. Exp. 54.5 (Prev. 54.3)

EQUITIES

European equities are largely mixed and trading without direction amidst the fresh US-China tariff action. The IT sector is mimicking the outperformance seen on Wall Street and is currently the leading sector.

Ryanair (+6.6%) is currently leading the gains in the Stoxx 600 (alongside Sunrise amid an upgrade in EBITDA guidance) as the co. reached an agreement with the Irish pilots union after 22 hours of deliberation. 

Individual equity losses in Europe are driven by the general weakness in the EM scope, which is weighing on companies with exposure to the affected countries, such as Deutsche Bank (-2.3%) and Raiffeisen Bank (-3.05%), while Continental (-2.7%) fails to recover from yesterday’s losses.

FX

DXY - FOMC minutes have given the flagging Usd a fillip, along with indirect props from rival currencies that are succumbing to more selling pressure due to specific/independent bearish factors. Thus, the index and Dollar overall have rebounded, with the former reclaiming 95.000+ status and almost up to 95.500 again.

AUD - No respite for the Aud that is back on the rack after a fleeting rebound to around 0.7350 vs its US counterpart and sub-0.7300 on the latest political machinations down under. Indeed, the Aud is also extending losses relative to the NZD, with the cross down towards 1.0900 even though the Kiwi is back below 0.6700 vs the Usd.

GBP/EUR/CAD - All falling foul of the latest Greenback revival, with Cable only just holding above 1.2850 and the single currency losing more ground after setting another recovery top above 1.1600, but respecting decent chart resistance between the big figure and 1.1650 again. Meanwhile, the Loonie has acknowledged less encouraging NAFTA vibes (in terms of likely deal timing not progress towards an agreement), like the Peso, with Usd/Cad bouncing ahead of its 100 DMA (1.2986) towards 1.3050.

JPY/CHF - Relative outperformance vs the Usd above 111.00 and 0.9850 respectively as EM peers continue to wilt, while the former is also resisting some technical levels and befitting from supportive flows with 110.95 representing the 55 DMA and offers layered from 111.00 onwards. Note also, decent option expiry interest from 110.95-111.00 (1.3 bn) is capping the pair, and the same could be weighing on Eur/Usd given 1.1 bn rolling off at 1.1600, plus 2.3 bn at the 1.1625 strike.

EM - The usual suspects are being flogged again, but with the Rub and Zar really seeing the brunt of investor angst on US sanctions – Rouble and Rand both around 1% or more weaker vs the Greenback, before the former got a reprieve from CBR’s attempt to curb FX volatility while Axios reported comments from Cohen last year, that he did not know of the meeting with Russian Officials. Zar was initially pressured on US scrutiny of South Africa’s farm and land seizures, which all contributed to the tailwinds overnight for the greenback, there were reports South Africa's Presidency will seek clarification from US Embassy on Trump's tweet regarding land reform policy. Elsewhere, Usd/Cnh firmer after reports of Chinese banks selling Yuan vs Dollars on a forward basis and an uptick in the Cny fix after some retracement of late from the PBoC.

FIXED INCOME

Bunds and Gilts have recovered from another bout of selling and fresh session lows, at 162.95 and 123.25 (-5 and -7 ticks vs +23 and +16 ticks at one stage), but trade remains choppy amidst the start of position rolls and fluid headlines on Brexit, EM FX etc. Meanwhile, US Treasuries have pared overnight gains within tight ranges post-Fed minutes and ahead of a busy Thursday agenda ahead (claims, PMIs, new home sales etc).

COMMODITIES

Commodities are pressured amid the recent dollar strength after the FOMC minutes cemented rate hike expectations. WTI and Brent Oct’ 18 futures trade lower by 0.2% and 0.4% respectively after the US benchmark rose over 3% yesterday. News flow has been light for the complex thus far, however, it is worth noting the ongoing trade disputes may potentially dampen global demand. Meanwhile, sources initially reported the Saudi Aramco IPO listing has been halted, but Saudi Energy Minister later denied these reports. Elsewhere, precious and base metals also feel the effect of the aforementioned dollar strength with gold below USD 1190/oz.