• European equities are largely on the backfoot (Eurostoxx 50 -0.7%) with underperformance in Germany’s DAX
• In FX, the EUR has retreated after another rally above 1.1700 vs the Greenback on broadly benign German state CPI and Spanish inflation data
• Looking ahead, highlights include German national CPI, US PCE price index, Canadian GDP and ECB’s Weidmann

ASIA

Asian equity markets traded mixed as the initial impetus from Wall St where the S&P 500 and Nasdaq posted a 4th consecutive day of records and where sentiment was underpinned by better than expected US GDP data as well as NAFTA optimism, was eventually clouded by weakness in China. ASX 200 (flat) was initially led by outperformance in telecoms on confirmation of the TPG Telecom-Vodafone Hutchison M&A deal although upside in the index was capped by weakness in financials and following disappointing capex data, while Nikkei 225 (+0.1%) gapped above the 23k level at the open which it then failed to sustain. Elsewhere, Shanghai Comp. (-1.1%) and Hang Seng (-0.9%) were subdued amid continued PBoC liquidity inaction and the ongoing US-China trade dispute, while President Trump also blamed China for the difficulties related to North Korea. Finally, 10yr JGBs were lower amid the mild gains in Japan and after the 2yr JGB auction failed to spur demand despite stronger results.

PBoC skipped open market operations for a net neutral daily position. (Newswires)

PBoC set CNY mid-point at 6.8113 (Prev. 6.8072)

Australian Capital Expenditure (Q2) Q/Q -2.5% vs. Exp. 0.6% (Prev. 0.4%). (Newswires)

Australian Private Capital Expenditure Est. 3 (2018-2019) 102.0B (Prev. 87.7B)

Australian Building Approvals (Jul) M/M -5.2% vs. Exp. -2.5% (Prev. 6.4%)

Australian Building Approvals (Jul) Y/Y -5.6% vs. Exp. -3.0% (Prev. 1.6%)

New Zealand ANZ Business Confidence (Aug) -50.3 (Prev. -44.9); 10-year low. (Newswires)

New Zealand ANZ Activity Outlook (Aug) 3.8 (Prev. 3.8)

EU/UK/US

EU is seen mulling a full summit in November to discuss Brexit (Politico)

EU's Chief Negotiator Barnier said he cannot speak about success regarding Brexit, while he added a no-deal Brexit is part of the EU’s planning. (German radio)

French President Macron is prepared to push EU leaders to make a post-Brexit deal with Britain at the upcoming EU summit next month. (Times)

German state CPIs printed slight downticks in the YY rates (with the exception of Bavaria which was unchanged from the prior), so the bias vs. consensus for the national figure could be to the downside.

EU Consumer Confidence Final Jul -1.9 vs. Exp. -1.9 (Prev. -1.9)

EU Industrial Sentiment Jul 5.5 vs. Exp. 5.5 (Prev. 5.8)

EU Services Sentiment Jul 14.7 vs. Exp. 15.1 (Prev. 15.3)

EU Business Climate Jul 1.22 vs. Exp. 1.28 (Prev. 1.29, Rev. 1.30)

EU Economic Sentiment Jul 111.6 vs. Exp. 111.9 (Prev. 112.1)

GEOPOLITICAL

US President Trump tweeted a statement that he feels strongly North Korea is under tremendous pressure from China due to US-China trade dispute but believes his relationship with North Korea leader Kim is very good and warm. (Twitter)

EQUITIES

European equities are largely on the backfoot (Eurostoxx 50 -0.7%). Germany’s DAX 30 (-1.0%) is underperforming its peers with the likes of German auto names, Deutsche Bank, Commerzbank and heavyweight Bayer pressuring the index. Sector wise, telecom names underperform despite Bouygues (+3.16%) taking a spot at the top of the Stoxx 600 following earnings, with the likes of Vodafone and Telecom Italia weighing on the sector. Material names are also a laggard, in-fitting with price action in the base metal complex, while Elekta (-8.8%) shares plummeted on disappointed figures.

FX

GBP - Some loss of momentum on less positive Brexit talk from Germany’s Finance Minister who is unsure whether there will be a withdrawal agreement and doesn’t rule out a disorderly UK departure from the EU, but Sterling remains supported and not too discouraged by weaker than expected mortgage and consumer credit data. Cable is holding around the 1.3000 level vs just shy of 1.3050 at best, while Eur/Gbp has continued its retreat from close to 0.9100 peaks on Wednesday through 0.9000 and testing the 21 DMA around 0.8977.

NZD/AUD - Yet more angst for the antipodean Dollars, but with the Kiwi now the clear underperformer in wake of a sharp deterioration in NZ business sentiment overnight (to worst levels in a decade), with Nzd/Usd only just holding 0.6650 and Aud/Nzd firmly back over 1.0900 to circa 1.0950. Aud/Usd is pivoting 0.7300, but still feeling the squeeze from West Pac’s hike in lending rates and hardly helped by a plunge in Q2 Aussie capex vs forecasts for a modest pick-up in spending.

CAD - The Loonie continues to benefit from NAFTA deal prospects and a possible Friday accord along the lines of the US-Mexico agreement, while firm crude prices are also supportive as Usd/Cad trades within a 1.2935-00 range ahead of Canadian GDP data for Q2.

EUR - The single currency has retreated after another rally above 1.1700 vs the Greenback on broadly benign German state CPI and Spanish inflation data, but remains underpinned at the top of a daily cloud formation between 1.1655-81.

JPY/CHF - Both largely flat vs the Usd amidst mixed individual month end rebalancing signals, with Usd/Jpy easing back from a higher range high towards 111.50 and the Franc meandering either side of 0.9700 in relatively tight confines.

EM - Another day, but more misery for the region’s 2 whipping boys as the Lira and Rand depreciate further – Usd/Try now over 6.6000 and Usd/Zar around 14.6500. Elsewhere, the Peso has pared some of its NAFTA-related gains to trade below 19.0000 vs the Buck, but its Argentine counterpart is sharply underperforming even though several forms of intervention were deployed on Wednesday to try and stop the rot – Usd/Ars closed almost 8% higher yesterday just under 33.8980.

FIXED INCOME

Bunds and Gilts have eased back from fresh recovery highs of 162.49 and 121.96 respectively, and  without even turning to the charts 162.50 and 122.00 are obvious hurdles from a psychological standpoint. However, for the German benchmark there could be a degree of acknowledgement to Italian auctions and a sigh of relief rather than rapture from BTPs that reversed from near 124.00 peaks to just below 123.50 ahead of the results, but are now back in positive territory again, albeit just. Elsewhere, US Treasuries remain relatively unimpressed and pretty flat halfway between overnight session ranges ahead of top-tier data like PCE and weekly claims ahead of next Friday’s NFP, and month end tomorrow.

COMMODITIES

WTI and Brent futures trade higher following the larger than expected draw in DoE crude inventories while concern looms of tightening supply by year-end. According to the WSJ, Iran’s oil exports are expected to drop from 2.7mln BPD in June to 1.5mln BPD in September ahead of US sanctions (coming into effect on November 5th). Otherwise, news flow for the complex has remained light thus far.

Elsewhere, gold is lower on the day, having tested USD 1200/oz to the downside and currently close to the lower end of the range, while copper is on the backfoot amid underperformance in its largest consumer, China.

US President Trump stated that maintaining aluminium tariffs levels is necessary, although he signed a proclamation permitting targeted relief from steel quotas for Argentina, Brazil & South Korea, as well as relief for Argentina on aluminium quotas. (Newswires)

National Union of Metalworkers of South Africa signs wage deal with Eskom. (Newswires)