• APAC stocks began the new trading month mostly in the red following a downbeat session on Wall St. which saw the S&P 500 close off its worst H1 performance since 1970
• Chinese Caixin Manufacturing PMI data rose to its highest level since May 2021
• European equity futures are indicative of a negative open with Eurostoxx 50 -0.9% after the cash market closed lower by 1.7% yesterday
• DXY remains sub-105, JPY leads G10 FX whilst antipodeans lag, EUR/USD stalled on approach of 1.05
• Looking ahead, highlights include EZ CPI, EZ/UK/US Manufacturing PMIs, US ISM Manufacturing PMI, Speech from ECB’s Panetta

US TRADE

• US stocks declined in which the S&P 500 closed off its worst H1 performance since 1970 as growth concerns were exacerbated after data showed weak consumer spending dynamics in May, which resulted in the Atlanta Fed GDPnow model tracking an economic contraction of 1.0% in Q2 and stoked recession fears.
• SPX -0.88% at 3,785, NDX -1.33% at 11,504, DJIA -0.82% at 30,775, RUT -0.66% at 1,708.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Atlanta Fed GDPnow (Q2) -1.0% (prev. +0.3%)

GEOPOLITICS

RUSSIA-UKRAINE

• Russia will reportedly ban exports of rice from July 1st to December 31st, according to IFX.

OTHER

• US senior official said Iran nuclear deal chances are now worse than they were before the Doha talks, according to Reuters.
• Iran's Ambassador to the UN said Iran has demanded verifiable and objective guarantees from the US that the nuclear deal will not be torpedoed again and it will be in touch with the EU coordinator for the next stage of nuclear talks, while Iran added that its negotiating team is ready to engage constructively again to conclude and reach a deal, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks began the new trading month mostly in the red as the region digested a slew of data releases and amid headwinds from the US where Consumer Spending data disappointed and Atlanta Fed's GDPnow model alluded to a recession.
• ASX 200 was just about kept afloat by resilience in nearly all industries aside from the commodity-related sectors.
• Nikkei 225 fell beneath the 26,000 level after the latest Tankan survey mostly disappointed.
• Shanghai Comp. traded indecisively despite the stronger than expected Caixin Manufacturing PMI data which rose to its highest since May 2021 as sentiment in the mainland was constrained by falling commodity prices, as well as the absence of Hong Kong participants and Stock Connect flows.
• US equity futures continued their downtrend after Wall St suffered its worst H1 performance since 1970; ES -1.0%
• European equity futures are indicative of a negative open with Eurostoxx 50 -0.9% after the cash market closed lower by 1.7% yesterday.

FX

• DXY eventually strengthened but remained beneath the 105 level after the prior day’s losses which coincided with a decline in yields and after a flurry of soft data releases stateside, while price action overnight was spurred by the risk-aversion which pressured cyclical counterparts.
• EUR/USD weakened after stalling on approach to the 1.0500 level and despite recent comments from ECB's Holzmann who would have preferred earlier rate hikes and said reaching the CPI target will take some time.
• GBP/USD continued its pullback from Thursday’s peak. Reports suggest that the UK government is planning to cut VAT to ease the pain from rising prices.
• USD/JPY retreated on haven flows and after a recent narrowing of US-Japan yield differentials.
• Antipodeans underperformed and fell to 2-year lows against the greenback as risk appetite deteriorated and Chinese commodity prices slumped.

FIXED INCOME

• 10yr USTs extended on prior day’s gains after the weak consumer spending data stoked recession fears and with Core PCE prices also softer than expected, while prices caught a second wind in Asia as risk appetite further deteriorated.
• Bunds climbed back above the 149.00 level..
• 10yr JGBs followed suit to the recent gains in global counterparts amid the risk-off mood in Tokyo and after the BoJ maintained its monthly purchase intentions through to September.

COMMODITIES

• Crude futures were choppy with early gains faded due to growth concerns and Chinese commodity selling.
• Libya's NOC announced a force majeure over Es Sider, Ras Lanuf Ports and the El Feel oilfield, while it noted that oil production decreased as daily exports ranged between 365-408k BPD which is a decline of 865k BPD, according to Reuters.
• Italian PM Draghi is confident Italy will reach its year-end target of gas storage filled to 90% of capacity by November, according to Reuters.
• Spot gold marginally softened and approached USD 1800/oz to the downside as the dollar rebounded overnight.
• India raised the basic import tax on gold to 12.5% from 7.5%, according to BQ Prime citing a Gazette notification.
• Copper prices extended on losses amid the recession concerns in the US and cautious mood in Asia.

CRYPTO

• Bitcoin failed to sustain an early rebound and dipped back beneath the 20,000 level.
• EU Parliament said negotiators from the council, parliament and commission reached an agreement on regulation on crypto market assets, according to Reuters.

NOTABLE APAC HEADLINES

• Chinese President Xi said "one country, two systems" has been successful for Hong Kong over the past 25 years and said Hong Kong is a window and a bridge connecting the mainland to the world, while he added that Hong Kong has to defend against interference and focus on development, according to Bloomberg and Reuters.
• Hong Kong's new Chief Executive Lee was sworn in and stated the National Security Law brought stability after chaos, while he added the government will strive to control and manage COVID-19 through scientific methods, according to Reuters.
• UK PM Johnson said China has been failing to comply with its commitments on Hong Kong and the UK intends to do all it can to hold China to account, according to Reuters.
• PBoC injected CNY 10bln via 7-day reverse repos with the rate at 2.10% for a CNY 50bln net daily drain, according to Reuters.

DATA RECAP

• Chinese Caixin Manufacturing PMI (Jun) 51.7 vs. Exp. 50.1 (Prev. 48.1)
• Japanese Tankan Large Manufacturing Index (Q2) 9 vs. Exp. 13 (Prev. 14)
• Japanese Tankan Large Manufacturing Outlook (Q2) 10 vs. Exp. 14 (Prev. 9)
• Japanese Tankan All Big Capex Est (Q2) 18.6% vs. Exp. 8.9% (Prev. 2.2%)
• Tokyo CPI YY (Jun) 2.3% vs. Exp. 2.5% (Prev. 2.4%)
• Tokyo CPI Ex. Fresh Food YY (Jun) 2.1% vs. Exp. 2.1% (Prev. 1.9%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Jun) 1.0% vs. Exp. 1.0% (Prev. 0.9%)

EU/UK

NOTABLE HEADLINES

• UK government is reportedly planning a VAT cut to ease the pain of rising prices, according to The Times.
• ECB's Holzmann said it will take some time to reach the 2% inflation target and he would have preferred earlier moves on interest rates but noted he is just one of the 25 people on the Governing Council, according to Reuters citing a newspaper interview.