• European bourses are pressured, Euro Stoxx 50 -0.5%, but well off post-open lows amid a gradual pick-up in sentiment
• Stateside, futures are directionally in-fitting but with magnitudes less pronounced with earnings season underway from Tuesday; ES -0.4%
• USD is bid and in proximity to Friday’s 107.79 best (107.75) thus far, with peers pressured and JPY lagging amid BoJ remarks
• Antipodeans slip on the China COVID situation as Shanghai announces more “high risk” areas, overnight updates on this hit APAC sentiment & commodities
• Core debt has been choppy, as the Bund tests 151.00 at best and leads peers
• Looking ahead, highlights include US Employment Trends, EZ Finance Ministers Meeting, Speech from Fed's Williams & US Supply

As of 11:25BST/06:25ET

LOOKING AHEAD

• US Employment Trends, EZ Finance Ministers Meeting, Speech from Fed's Williams & US Supply.
• Click here for the Week Ahead preview.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian Defence Minister Reznikov said that President Zelenskiy 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.
• Nord Stream 1 commences its 10-day maintenance period, via Reuters citing the operator.

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.

EUROPEAN TRADE

CENTRAL BANKS

• 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.
• BoJ's Osaka Branch Manager says rapid, short-term moves in FX, as seen recently, are undesirable, via Reuters; Nagoya Branch manager says output, exports in central Japan region stalling as automakers still unable to resume scheduled production plans.
• Riksbank Minutes (June): Riksbank needs to prevent high inflation becoming entrenched in price- and wage-setting, and to ensure that inflation returns to the target; Governor Ingves says he is not sure that an interest-rate level of two per cent is enough to bring inflation down to our target.

EQUITIES

• European bourses are pressured, Euro Stoxx 50 -0.5%, but will off post-open lows amid a gradual pick-up in sentiment.
• Pressure seeped in from APAC trade amid further China-COVID concerns amid a relatively limited docket to start the week.
• Stateside, futures are directionally in-fitting but with magnitudes less pronounced with earnings season underway from Tuesday; ES -0.4%.
• Toyota (7203 JP) announces additional adjustments to its domestic production for July; volume affected by the adjustment will be around 4000 units, global production plan to remain unchanged, via Reuters.
• Click here for more detail.

FX

• Buck firmly bid after strong US jobs report and pre-CPI on Wednesday that could set seal on another 75bp Fed hike this month, DXY towards top of 107.670-070 range vs last Friday's 107.790 high.
• Aussie undermined by rising Covid case count in China’s Shanghai, AUD/USD loses grip of 0.6800 handle
• Yen drops to fresh lows against Greenback after BoJ Governor Kuroda reiterates dovish policy stance amidst signs of slowing Japanese growth, USD/JPY reaches 137.28 before waning.
• Euro weak due to heightened concerns that Russia may cut all gas and oil supplies, EUR/USD eyes bids ahead of 1.0100.
• Pound down awaiting Conservative Party leadership contest and comments from BoE Governor Bailey, Cable under 1.2000 and losing traction around 1.1950.
• Hawkish Riksbank minutes help Swedish Crown avoid risk aversion, but Norwegian Krona declines irrespective of stronger than forecast headline inflation; EUR/SEK sub-10.7000, EUR/NOK over 10.3200.
• Yuan soft as Shanghai raises more areas to high-risk level; USD/CNH and USD/CNY nearer 6.7140 peaks than troughs below 6.6900 and 6.7000 respectively.
• Click here for more detail.

Notable FX Expiries, NY Cut:

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FIXED INCOME

• Debt regains poise after post-NFP slide, with Bunds leading the way between 151.00-149.75 parameters
• Gilts lag within 114.94-33 range awaiting Conservative leadership contest and comments from BoE Governor Bailey
• 10 year T-note firm inside 118-00+/117-18+ bounds ahead of USD 43bln 3 year auction
• Click here for more detail.

COMMODITIES

• Crude benchmarks are curtailed amid the COVID situation with broader developments limited and heavily focused on Nord Stream.
• 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.
• JPMorgan (JPM) sees crude prices in the low USD 100s in H2 2022, falling to high USD 90s in 2023.
• Spot gold remains relatively resilient, torn between the downbeat risk tone and the USD's modest advances; attention on the metal's reaction if DXY surpasses Friday's best.
• Copper pulls back as Los Bambas returns to full output and on the China readacross.
• Click here for more detail.

NOTABLE HEADLINES

• 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.
• 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.
• 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 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.

NOTABLE US 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.
• Click here for the US Early Morning note.

CRYPTO

• Bitcoin continues to pivot the USD 20k mark.

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.

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.
• An official from China's Shanghai says authorities have classified additional areas as high risk areas.
• 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%); 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%); YY (May) 7.4% vs. Exp. 5.8% (Prev. 19.0%)