• APAC stocks were mostly negative after the weak performance across global counterparts; US equity futures extended on losses overnight
• DXY remained firm above 108.00 for around its best levels in around two decades; EUR/USD almost hit parity
• 10yr USTs were underpinned, Bunds held on to the prior day’s firm gains, and 10yr JGBs benefitted from haven demand
• Crude futures were pressured by a firmer dollar, the negative risk tone, and China's COVID woes; copper weakened overnight
• White House Press Secretary Jean-Pierre said the US CPI data is expected to be "highly elevated”, citing gas prices
• Looking ahead, highlights include German ZEW, OPEC MOMR, Speeches from Fed's Barkin, BoE's Bailey & Cunliffe, US, UK & German Supply
• Click here for the Week Ahead preview

US TRADE

• US stocks declined amid a global risk-off Monday as the China COVID flare-up and European gas woes were touted catalysts in an otherwise quiet, summer session. All major indices finished lower with the more speculative sectors hit the hardest, while quality and defensives relatively outperformed.
• SPX -1.15% at 3,854, NDX -2.19% at 11,860, DJIA -0.52% at 31,174, RUT -2.11% at 1,732.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bullard (2022 voter, hawk) said the solid US economy can handle rising rates and reiterated support for a 75bps rate hike in July, while he doesn't believe the economy has been in a recession, according to an AP interview.
• Fed's Bostic (2024 voter) is comfortable the economy can withstand a 75bp increase at the next meeting (Jul 26-27) and said current policy remains accommodative, while he added that monthly readings on inflation have not been as encouraging as he would have like, according to Reuters.
• US Treasury Secretary Yellen will tell Japanese Finance Minister Suzuki that the US remains very strong despite inflation and a drop in Q1 GDP, according to a senior Treasury official cited by Reuters.
• US Commerce Secretary Raimondo said the US Chips Act will ultimately pass congress and they made huge progress on compromises in 2 weeks. Raimondo also commented that she is not concerned not dollar strength and is focused on inflation, while she noted that China may reciprocate a potential US tariff easing, according to Reuters.
• White House Press Secretary Jean-Pierre said the US CPI data is expected to be "highly elevated" mainly because gas prices were elevated in June, according to her press conference.
• US is reportedly preparing to extend its COVID health emergency on Friday, according to Bloomberg.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Finance Minister said he supports Gazprom's proposal to sell LNG for roubles, according to a Vedomosti interview cited by Reuters.
• US National Security Adviser Sullivan's information indicates that Iran is preparing to provide Russia with up to several hundred drones and is preparing to train Russian forces to use them, while Sullivan also stated that nothing is on the table regarding lifting the ban of selling weapons to Saudi Arabia, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks were mostly negative after the weak performance across global counterparts as China's COVID flare-up and Europe's energy concerns added to the headwinds for the growth outlook.
• ASX 200 bucked the trend with the index kept afloat by defensives although the upside was capped by weak consumer and business confidence data.
• Nikkei 225 underperformed as the Japanese currency attempted to compose itself from recent rapid depreciation and with automakers pressured after Toyota flagged a potential cut to its output plan citing a chip shortage and COVID impact.
• Hang Seng and Shanghai Comp. were lower amid the ongoing COVD concerns which overshadowed reports that China’s authorities will increase financial support for manufacturers, as well as the recent stronger than expected aggregate financing and loans data.
• US equity futures extended on losses overnight alongside the broad risk aversion in Asia-Pac trade.
• European equity futures are indicative of a lower open with Eurostoxx 50 -0.8% after the cash market closed with losses of 1.0% yesterday.

FX

• DXY remained firm above 108.00 for its best level in around two decades as it benefitted from the risk aversion.
• EUR/USD was pressured by the dollar strength and briefly came to within half a dozen pips of reaching parity.
• GBP/USD languished after the prior day’s losses and as the focus in the UK remained on politics.
• USD/JPY marginally pulled back from Monday’s peak after printing its highest level since 1998.
• Antipodeans lacked firm direction after recent losses and the bout of volatility in commodities.

FIXED INCOME

• 10yr USTs were underpinned amid global growth concerns and after the mostly strong US 3yr auction.
• Bunds held on to the prior day’s firm gains amid the overhang from the uncertainty related to Russian gas supply.
• 10yr JGBs benefitted from haven demand amid the underperformance in Tokyo stocks and despite the mixed 5yr auction results.

COMMODITIES

• Crude futures were pressured by a firmer dollar, the negative risk tone, and China's COVID woes.
• IEA's Birol said the world is in the midst of the first energy crisis and it has not seen the worst of the energy crisis, according to Bloomberg.
• US senior official warned that a failure to implement a proposed price cap on Russian oil with the exemption of purchases below the cap, could see oil prices increase to around USD 140/bbl, while the official added that Treasury Secretary Yellen will speak to Japanese Finance Minister Suzuki on the proposed Russian oil price cap, according to Reuters.
• US Department of Energy announced a contract for 14 companies to purchase crude oil from the SPR with deliveries to take place between August 16th to September 30th, according to Reuters.
• US National Security Adviser Sullivan responded that there is a capacity for further steps that can be taken when questioned about oil output, according to Reuters.
• Venezuela's PDVSA restarted its gasoline-making catalytic cracker at the Amuay refinery (645k BPD) and is currently producing 60k BPD, while the second (out of five) distillation unit is restarting after the first one restarted last week, according to Reuters source.
• Spot gold was indecisive and ultimately contained by a firmer dollar but with turbulence seen as Shanghai commodities trade got underway.
• Copper weakened overnight amid the risk-averse mood and ongoing China lockdown fears.

CRYPTO

• Bitcoin remained lacklustre after prices recently fell beneath the 20,000 level.

NOTABLE APAC HEADLINES

• China is to lockdown Wugang city in Henan for 3 days due to 1 COVID case, according to Bloomberg.
• Japanese Finance Minister Suzuki said they will conduct necessary economic steps taking prices and economy into account, while he added that they are watching the FX market even more closely while working with the BoJ and will take necessary steps against the FX market with FX authorities from other nations, according to Reuters.

DATA RECAP

• Australian Westpac Consumer Confidence Index (Jul) 83.8 (Prev. 86.4)
• Australian NAB Business Confidence* (Jun) 1 (Prev. 6.0)
• Australian NAB Business Condi,tions*(Jun) 13 (Prev. 16.0, Rev. 15)

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said basic fundamentals of the inflation profile that show a sharp fall in inflation for 2023 remain in place, while he added there are a range of things on the table for the August meeting and they should not pre-commit to what they will do.
• UK's new PM nominations will open and close on Tuesday, followed by the first ballot on Wednesday and a second on Thursday, while the new PM is to be announced on September 5th. Furthermore, 20 nominations are needed to get on the first ballot and 30 are needed to get to the second vote.
• UK government is scheduled to announce new City of London reforms next week to make it easier/cheaper for companies to raise money on the stock market, according to FT citing a draft.
• Former UK Chancellor Sunak confirmed his commitment to fiscal discipline and will stand firm on taxes until he has 'gripped inflation', according to FT.
• UK Secretary of State for Digital, Culture, Media and Sport Nadine Dorries and Minister Jacob Rees-Mogg are expected to endorse UK Foreign Secretary Liz Truss for PM, according to a Times reporter.
• UK train drivers at eight companies voted to strike, according to the union.

DATA RECAP

• UK BRC Retail Sales Like-For-Like YY (Jun) -1.3% (Prev. -1.5%)
• UK BRC Total Retail Sales YY (Jun) -1.0% (Prev. -1.1%)
• UK Barclaycard June Consumer Spending rose 6.2% Y/Y and Utility Spending rose 39.6% Y/Y