• APAC stocks were mostly positive as the region shrugged off the weak lead from Wall St; US equity futures eked marginal gains overnight
• DXY lacked firm direction after the prior day’s choppy price action, EUR/USD was contained, and USD/JPY saw a rebound
• 10yr USTs marginally weakened, Bunds were lower, and 10yr JGBs traded sideways
• Crude futures were choppy, spot gold was rangebound, and copper was indecisive
• RBNZ hiked the OCR by 50bps to 2.50% and the BoK raised its Base Rate by 50bps to 2.25%, both as expected
• Looking ahead, highlights include UK GDP, EZ Industrial Production, US CPI, BoC Policy Announcement, IEA OMR, Speeches from BoC's Macklem & Rogers, Supply from Italy, Germany & US

• Click here for the Week Ahead preview

US TRADE

• US stocks finished lower after a failed recovery attempt, while catalysts were light in the US session ahead of Wednesday's key CPI release.
• SPX -0.86% at 3,821, NDX -0.97% at 11,744, DJIA -0.62% at 30,981, RUT -0.41% at 1,724.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (2024 voter) expects inflation to come down but not immediately or predictably, while he has seen early signals of supply easing in freight costs and reports of easier hiring. Furthermore, Barkin stated that the pace of Fed policy may be making markets 'skittish' and he is reserving judgement on a 50bps or 75bps hike until the July meeting.
• White House Memo noted the economy appears to be transitioning to a period of slower job and economic growth, while it noted that gasoline prices can be expected to decline in the weeks ahead and that US economic data, including the June jobs report, are not consistent with a recession in Q1 or Q2.
• US CDC will no longer require air passengers travelling to the US to show a negative COVID-19 test or documentation of recovery from COVID-19 before boarding a flight, according to Reuters.
• IMF cut US 2022 GDP growth forecast to 2.3% from 2.9% and cut 2023 GDP growth forecast to 1.0% from 1.7%, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• German Deputy Finance Minister said that Germany will be off Russian coal by August 1st and off Russian oil in December, according to Reuters.

OTHER

• China's military said it monitored and drove away a US destroyer which entered the South China Sea Paracel Islands, while it added that the actions of the US military seriously violated China's sovereignty and security. Furthermore, the US military stated that USS Benfold asserted navigational rights and freedoms near the Paracel Islands consistent with international law, according to Reuters.
• Venezuela detained at least three Americans earlier this year accused of attempting to enter the country illegally, according to sources cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks were mostly positive as the region shrugged off the weak lead from Wall St but with upside capped amid central bank rate hikes and ahead of upcoming key risk events including Chinese trade and US CPI data.
• ASX 200 traded indecisively as strength in tech was offset by losses in energy after the recent slump in oil prices.
• Nikkei 225 was underpinned by a weaker currency but with gains limited after a ramp-up in Tokyo COVID cases.
• Hang Seng and Shanghai Comp. gained but with the mainland choppy ahead of Chinese trade data, while Hong Kong tech stocks were bolstered after China approved 67 domestic games in July.
• US equity futures eked marginal gains with a non-committal tone as markets await the US inflation numbers.
• European equity futures are indicative of a lower open with Eurostoxx 50 -0.5% after the cash market closed with gains of 0.4% yesterday.

FX

• DXY lacked firm direction after the prior day’s choppy price action and with participants awaiting US CPI data which is expected to accelerate further from the 40-year high in May.
• EUR/USD was contained overnight after the single currency just about held off from reaching parity yesterday.
• GBP/USD made another attempt at the 1.1900 handle, while there were recent comments from BoE Governor Bailey that inflation should come down rapidly next year and that options other than 25bps are on the table.
• USD/JPY rebounded from yesterday's retreat and just about returned to the 137.00 territory.
• Antipodeans were somewhat varied with NZD/USD indecisive after the RBNZ hiked rates by 50bps as expected, while it agreed to maintain the approach of briskly lifting the OCR but also noted medium-term downside risks to economic activity.

FIXED INCOME

• 10yr USTs marginally weakened after pulling back from yesterday’s peak and with price action not helped by a disappointing 10yr auction stateside.
• Bunds were lower but held on to the majority of the prior day’s gains which were spurred by weaker than expected German ZEW data.
• 10yr JGBs traded rangebound with prices kept afloat amid the BoJ’s presence in the market for over JPY 1tln of JGBs on top of its daily fixed-rate operations.

COMMODITIES

• Crude futures were choppy with both oil benchmarks beneath the USD 100/bbl level after the prior day's slump amid COVID and growth concerns.
• US Private Inventory Data (bbls): Crude +4.7mln (exp. -0.2mln), Gasoline +2.9mln (exp. -0.4mln), Distillates +3.2mln (exp. +1.6mln), Cushing +0.3mln.
• EIA STEO stated US 2022 crude output is seen rising 720k BPD to 11.91mln BPD (prev. +730k BPD forecast in June), while US 2023 crude output is seen rising 860k BPD to 12.77mln BPD (prev. +1.05mln BPD).
• Libya's Government of National Unity decided to replace the NOC chairman and board, according to a government source. NOC later announced the lifting of the force majeure on exports from the Brega and Zueitina oil terminals, while it added that negotiations were conducted to allow exports from Es Sider port and resume output at the Al Waha and Mellita fields, according to Reuters.
• Spot gold was rangebound overnight alongside the uneventful dollar headings into the US CPI data.
• Copper lacked firm direction with participants tentative ahead of the upcoming risk events.

CRYPTO

• Bitcoin nursed some losses overnight after the prior day's decline to beneath the 20,000 level.

NOTABLE APAC HEADLINES

• China's Customs said foreign trade is expected to achieve stable growth and that trade growth in May and June reversed the declining trend, but noted that foreign trade faces instabilities and uncertain factors, according to Reuters.
• BoK raised its Base Rate by 50bps to 2.25%, as expected, with the decision made unanimously. BoK stated that South Korea's 2022 growth will moderate further from an earlier projection and inflation will remain high for some time, as well as noted that inflation will surpass the May forecast for the entire of 2022 and that core inflation is to be higher than 4% for a considerable period. Furthermore, BoK Governor Rhee said more policy tightening of 25bps looks appropriate going forward should current inflation continue for the time being and that it is reasonable to expect rates at 2.75%-3.00% by year-end.
• RBNZ hiked the OCR by 50bps to 2.50%, as expected, and said it remains appropriate to continue to tighten policy, while it will tighten conditions at a pace to maintain price stability and support maximum sustainable employment. RBNZ added the Committee is resolute in its commitment to ensuring price inflation returns to the 1%-3% target range and it agreed to lift the OCR to a level where it is confident consumer price inflation will settle within the target range but added that once aggregate supply and demand are more balanced, the OCR can return to a lower and more neutral level. Furthermore, the Committee agreed to maintain the approach of briskly lifting the OCR and remained comfortable with the projected path of the OCR it outlined in May, as well as noted that there are near-term upside risks to consumer prices and also medium-term downside risks to economic activity.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said it is still the case that UK businesses are focused on the difficulty of hiring and that a pick-up in pay is still largely being driven by one-off bonuses rather than a higher base rate. Bailey added that inflation should come down rapidly next year and said options other than 25bps are on the table, according to Reuters.
• UK government said it will allow a confidence vote by the opposition Labour party if they change the wording of the motion, according to Reuters.
• UK lawmakers are to push ahead with legislation to tear up the post-Brexit trade deal today, according to FT.
• Former UK Chancellor Sunak vowed to run the economy like former PM Margaret Thatcher if he becomes the next PM, according to The Telegraph.
• Network Rail offered workers at two unions pay hikes in a bid to avert further crippling strikes, according to FT.