• European bourses are pressured in a broad China-COVID driven risk move, Euro Stoxx 50 -0.5%; alongside known concerns and a dismal ZEW
• Stateside, futures are lower across the board; NQ choppy amid rate action and post-PEP earnings
• DXY continues to climb while EUR/USD probes parity and the JPY regroups from earlier pressure
• Core debt continues to climb and made further advances on ZEW, US 10yr ahead
• Commodities are pressured given COVID developments and USD action, though spot gold little changed and torn between
• Looking ahead, highlights include OPEC MOMR (12:10BST/07:10ET), EIA STEO Speeches from Fed's Barkin, BoE's Bailey, US Supply.

As of 11:25BST/06:25ET

LOOKING AHEAD

• OPEC MOMR (12:10BST/07:10ET), EIA STEO Speeches from Fed's Barkin, BoE's Bailey, US Supply.
• Click here for the Week Ahead preview.

GEOPOLITICS

• 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.

EUROPEAN TRADE

EQUITIES

• European bourses are pressured in a broad China-COVID driven risk move, Euro Stoxx 50 -0.5%; alongside known concerns and a dismal ZEW.
• Stateside, futures are lower across the board with the NQ somewhat more choppy than peers amid pronounced rate activity this morning and on PEP earnings.
• Back to Europe, sectors are mixed and feature IT as the laggard while Energy is green despite benchmark pricing amid outperformance in EDF.
• PepsiCo Inc (PEP) Q2 2022 (USD): EPS 1.86 (exp. 1.74), Revenue 20.2bln (exp. 19.51bln). FY Revenue view 82.7bln (exp. 82.72bln)
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FX

• Pound underperforms awaiting UK political developments as Labour Party prepares no-confidence motion against Tories; Cable on the cusp of 1.1800, while EUR/GBP rebounds over 0.8450.
• Euro prods parity vs Dollar before and after dire German ZEW survey, while DXY breaches 108.500 amidst broad Buck gains.
• Yen regroups as risk sentiment remains sour and yields retreat further, with Japan’s Finance Minister also raising concern about rapid decline, USD/JPY closer to 137.00 than 137.50+ top and Monday's 137.75 peak.
• Loonie and Nokkie recoil alongside crude prices, but Kiwi holds up better than Aussie ahead of anticipated 50bp RBNZ rate hike on Wednesday, USD/CAD back up near 1.3050, EUR/NOK propped around 10.2600, NZD/USD holding just above 0.6100 and AUD/USD sub-0.6750.
• Yuan breaks below recent range as China’s Covid situation continues to deteriorate - USD/CNH and USD/CNY probe 6.7500 and 6.7350 respectively.
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Notable FX Expiries, NY Cut:

• USD/JPY: 135.00 (565M), 135.55-65 (1.19BN), 137.60-65 (1.34BN), 138.00 (355M)
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FIXED INCOME

• Bonds breach recent resistance levels, with Bunds up to new July highs at 153.48 after a bleak German ZEW survey
• Gilts back on the 116.00 handle from a 115.04 Liffe low awaiting more comments from BoE Governor Bailey and 10 year T-note towards top of 119-03/118-09+ range pre-USD 33bn refunding leg
• DMO's 2032 tap well received and German Schatz covered, but results mixed overall
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COMMODITIES

• WTI and Brent have extended on APAC pressure as the demand-side of the equation remains sensitive to lockdowns with the OPEC MOMR and EIA STEO due.
• Currently, benchmarks are in relative proximity to their respective USD 101.06/bbl and USD 104.35/bbl lows.
• 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.
• China's NDRC says retail prices of gasoline and diesel will be cut by CNY 360/tonne and CNY 345/tonne respectively from July 13th.
• 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.
• Spot gold is relatively resilient despite broader price action, and the yellow metal is torn between COVID-driven haven allure and the USD’s ongoing advances.
• Base metals hit on the above factors and as the locked-down city is important for steel/iron activity.
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NOTABLE HEADLINES

• UK's Heathrow airport is imposing a capacity cap of 100k departing passengers a day, until September 11th. Beleive further action is needed now; cap means some summer journeys will be rescheduled, relocated or cancelled. Asks airline partners to stop the sale of summer tickets in order to limit the passenger impact.
• Former UK Chancellor Sunak confirmed his commitment to fiscal discipline and will stand firm on taxes until he has 'gripped inflation', according to FT.

NOTABLE DATA

• German ZEW Economic Sentiment (Jul) -53.8 vs. Exp. -38.3 (Prev. -28.0); ZEW Survey Expectations (Jul) -51.1 (Prev. -28.0)
• ZEW: current major concerns about energy supply, ECB's announced rate hikes, restrictions in China, led to a deterioration in the outlook; economic situation significantly more negative than in previous month, experts further lower their already unfavourable forecast for the next six months.
• UK BRC Retail Sales Like-For-Like YY (Jun) -1.3% (Prev. -1.5%); 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

NOTABLE US HEADLINES

• US Treasury Secretary Yellen says US, Japan, G7 should have market determined FX rates; FX intervention warranted in only rare and exceptional circumstances; did not discuss FX intervention with Japanese officials. Rate differentials between US and Japan have become quite large, that is a systemic factor that tends to strengthen the USD.
• 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 NFIB Business Optimism Index (Jun) 89.5 (Prev. 93.1)
• Click here for the US Early Morning note.

CRYPTO

• Bitcoin remains pressured and below the USD 20k mark, despite a brief foray circa USD 500 above the figure.

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.

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.
• Japanese Finance Minister told US Treasury Secretary Yellen that Japan is concerned about the rapid JPY weakening recently; watching currency markets with a sense of urgency; agreed to continue consulting in foreign exchange.

DATA RECAP

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