• APAC stocks traded mostly lower, US equity futures were pressured, and European equity futures are indicative of a lower open
• DXY traded higher amid the mostly risk-averse mood, USD/JPY briefly rose above 137.00 and extended to its highest level since 1998
• 10yr USTs remained subdued, Bunds languished beneath the 150 level, and 10yr JGBs were pressured
• Crude futures were choppy whilst spot gold languished near last week's lows and industrial metals declined
• Shanghai’s COVID-19 cases continued to increase which prompted authorities to declare more high-risk areas
• Elon Musk announced on Friday to terminate the Twitter (TWTR) deal; Twitter is reported to assemble a legal team to sue Musk
• Looking ahead, highlights include Chinese M2, US Employment Trends, Italian Retail Sales, Riksbank Minutes, EZ Finance Ministers Meeting, Speech from Fed's Williams & US Supply
• Click here for the Week Ahead preview

US TRADE

• US stocks were somewhat choppy on NFP day but ultimately settled relatively flat after the headline beating jobs data sparked a typical hawkish reaction as markets started to price in a 75bps hike from the Fed in July with more certainty in which the implied probability rose to around 95% from 75% ahead of the data.
• SPX -0.11% at 3,898, NDX +0.14% at 12,125, DJIA -0.15% at 31,338, RUT -0.01% at 1,769.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fitch affirmed the US at AAA; Outlook revised to Stable from Negative.
• Elon Musk announced on Friday the termination of the Twitter (TWTR) deal because the Co. is in breach of multiple provisions of the agreement, while Twitter is reported to assemble a legal team to sue Musk over the abandoned takeover, according to Reuters and Bloomberg.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian Defence Minister Reznikov said that President Zelensky ordered Ukraine’s military to draw up plans to retake the occupied south of Ukraine and that Ukraine has a million-strong fighting force to recover its territory from Russia, according to The Times.
• Russia could reportedly seize assets of the world's largest companies with 47 of the world's top 200 companies said to be at risk of having assets expropriated, according to an agency set up to monitor businesses operating in Russia cited by The Times.

OTHER

• IAEA said Iran has started enriching uranium with advanced machines at its underground Fordow plant, according to Reuters.
• Iran said the plan by the US and Israel for a joint defence pact with Arab states will only increase tensions as the “entry of foreigners in the region…will be the main cause of tension and regional rift”, according to a foreign ministry spokesperson cited by Reuters.
• South Korea detected that North Korea fired shots from potentially multiple rocket launchers, according to Reuters, while it was also reported that South Korea and the US will begin military drills on August 22nd.

APAC TRADE

EQUITIES

• APAC stocks traded mostly lower as the region digested last Friday’s stronger than expected NFP data in the US, with sentiment also mired by COVID-19 woes in China.
• ASX 200 was led lower by underperformance in tech and the mining-related sectors, while hopes were dashed regarding an immediate improvement in China-Australia ties following the meeting of their foreign ministers.
• Nikkei 225 bucked the trend amid a weaker currency and the ruling coalition’s strong performance at the Upper House elections, but with gains capped after Machinery Orders contracted for the first time in 3 months.
• Hang Seng and Shanghai Comp. traded negative amid COVID concerns after a rise in Shanghai’s COVID-19 cases prompted authorities to declare more high-risk areas and the city also reported its first case of the BA.5 omicron subvariant, as well as two more rounds of mass testing in at least 9 districts. Casino stocks were heavily pressured in Hong Kong after Macau announced to shut all non-essential businesses including casinos, while shares in tech giants Tencent and Alibaba weakened after reports that they were among the companies fined by China’s antitrust watchdog concerning reporting of past transactions.
• US equity futures were pressured alongside the overnight risk-averse mood and lockdown fears in China.
• European equity futures are indicative of a lower open with Eurostoxx 50 -1.3% after the cash market closed up by 0.5% on Friday.

FX

• DXY traded higher amid the mostly risk-averse mood and in the aftermath of last week’s better-than-expected NFP jobs data.
• EUR/USD was pressured against a firmer dollar and with the single currency not helped by energy concerns after France's Le Maire warned there is a strong chance that Moscow will totally halt gas supplies to Europe.
• GBP/USD slipped beneath 1.2000 with the attention in the UK on the race to succeed PM Johnson in which several current and former government ministers declared their candidacies and pledged to cut taxes.
• USD/JPY briefly rose above 137.00 and extended to its highest level since 1998 which also followed dovish reiterations by BoJ Governor Kuroda.
• Antipodeans were softer alongside the predominantly downbeat mood in the region and as China’s lockdown concerns pressured commodities.

FIXED INCOME

• 10yr USTs remained subdued near post-NFP lows.
• Bunds languished beneath the 150 level following recent comments from ECB’s Holzmann who suggested the ECB should raise interest rates by as much as 125bps by September if the inflation outlook doesn’t improve.
• 10yr JGBs were pressured amid the outperformance of Japanese stocks and with the BoJ only in the market for its fixed-rate operations.

COMMODITIES

• Crude futures were choppy with mild pressure amid China's COVID woes although the downside was stemmed and nat gas futures surged at the reopen amid supply concerns after France's Le Maire warned of the potential of Russia completely stopping gas supplies to Europe.
• French Economy and Finance Minister Le Maire warned there is a strong chance that Moscow will totally halt gas supplies to Europe, according to Politico.
• Canada will grant a sanctions waiver to return the repaired Russian turbine to Germany needed for maintenance on the Nord Stream 1 gas pipeline but will expand sanctions against Russia’s energy sector to include industrial manufacturing.
• The US does not expect any specific announcements on oil production at this week’s US-Saudi summit, according to FT sources.
• Spot gold was contained amid a firmer greenback and following the recent NFP beat.
• Copper was pressured amid the mostly negative risk tone, China lockdown fears and with the Las Bambas copper mine back to full output levels.

CRYPTO

• Bitcoin was subdued after slipping back beneath the 21,000 level.

NOTABLE APAC HEADLINES

• Shanghai’s COVID-19 cases continued to increase which prompted authorities to declare more high-risk areas and is fuelling fears that China’s financial hub may tighten movement restrictions again, according to Bloomberg. In relevant news, Shanghai reported its first case of the BA.5 omicron subvariant and authorities ordered two more rounds of mass testing in at least 9 districts.
• Macau will shut all non-essential businesses including casinos this week due to the COVID-19 outbreak, according to Reuters. It was separately reported that Hong Kong is considering a health code system similar to mainland China to fight COVID.
• China’s Foreign Minister Wang said he had a candid and comprehensive exchange with US Secretary of State Blinken, while he called for the US to cancel additional tariffs on China as soon as possible and said the US must not send any wrong signals to Taiwan independence forces, according to Reuters.
• US Secretary of State Blinken stated that the US expects US President Biden and Chinese President Xi will have the opportunity to speak in the weeks ahead, according to Reuters.
• US Commerce Secretary Raimondo said cutting China tariffs will not tame inflation and that many factors are pushing prices higher, according to FT.
• China’s antitrust watchdog fined companies including Alibaba (9988 HK) and Tencent (700 HK) regarding reporting of past deals, according to Bloomberg.
• Japan's ruling coalition is poised to win the majority of seats contested in Sunday's upper house election and is projected to win more than half of the 125 Upper House seats contested with a combined 76 seats and the LDP alone are projected to win 63 seats, according to an NHK exit poll cited by Reuters.
• Japanese PM Kishida said that they must work toward reviving Japan’s economy and they will take steps to address the pain from rising prices, while he added they will focus on putting a new bill that can be discussed in parliament when asked about constitutional revision and noted that they are not considering new COVID-19 restrictions now, according to Reuters.

DATA RECAP

• Chinese CPI MM (Jun) 0.0% vs Exp.-0.1% (Prev. -0.2%)
• Chinese CPI YY (Jun) 2.5% vs Exp. 2.4% (Prev. 2.1%)
• Chinese PPI YY (Jun) 6.1% vs Exp. 6.0% (Prev. 6.4%)
• Japanese Machinery Orders MM (May) -5.6% vs. Exp. -5.5% (Prev. 10.8%)
• Japanese Machinery Orders YY (May) 7.4% vs. Exp. 5.8% (Prev. 19.0%)

EU/UK

NOTABLE HEADLINES

• UK Chancellor Zahawi, Transport Minister Shapps, Foreign Secretary Truss, junior Trade Minister Mordaunt, Tory MPs Jeremy Hunt and Sajid Javid have announced their intentions to run for party leader to replace UK PM Johnson, while Defence Secretary Wallace decided to not run for PM and several have declared the intention to cut taxes as PM, according to The Telegraph, Evening Standard and Reuters.
• Senior Tory party figures are reportedly seeking to narrow the leadership field quickly, according to FT. It was separately reported that only four Tory party leadership candidates are expected to remain by the end of the week under an accelerated timetable being drawn up by the 1922 Committee of backbenchers, according to The Times.
• UK Companies are bracing for a recession this year with multiple companies said to have begun “war gaming” for a recession, according to FT. In other news, local leaders warned that England’s bus networks could shrink by as much as a third as the government’s COVID-19 subsidies end and commercial operators withdraw from unprofitable routes, according to FT.
• ECB’s Holzmann said the central bank should increase interest rates by as much as 125bps by September if the inflation outlook doesn’t improve, according to Bloomberg.
• ECB’s Stournaras said a new tool to avert debt market turmoil as interest rates increase may not need to be deployed if it is powerful enough to persuade investors not to test it, according to Bloomberg.
• Fitch affirmed European Stability Mechanism at AAA; Outlook Stable and affirmed Greece at BB; Outlook Stable, while it cut Turkey from BB- to B+; Outlook Negative.