• APAC stocks gained with risk appetite spurred after last Friday's firm gains on Wall St.
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.6% after the cash market closed with gains of 2.4% on Friday.
• DXY sits sub-108, EUR/USD remains north of parity, USD/JPY bounced off support at 138.
• US President Biden's Middle Eastern trip failed to secure any major Saudi commitments.
• Looking ahead, highlights include a speech from BoE’s Saunders, Earnings from Bank of America, IBM, Goldman Sachs & Charles Schwab

US TRADE

• US stocks caught a bid on Friday with earnings season now underway, while there were several data points to digest including better than expected Retail Sales, NY Fed Manufacturing and University of Michigan Sentiment.
• SPX +1.85% at 3,860, NDX +1.83% at 11,983, DJIA +2.15% at 31,288, RUT +1.95 % at 1,740.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed officials signalled they are likely to increase rates by 75bps at the July meeting and noted that although policymakers left the door open for a 100bps increase, some have simultaneously poured cold water on the idea in recent interviews and comments, according to WSJ.
• US Treasury Secretary Yellen said she sees huge momentum for moving ahead with a global minimum corporate tax and that the White House is committed to moving forward on it despite opposition from Senator Manchin, according to Reuters. It was also reported that Yellen sees strong consensus among G20 members regarding many issues despite a failure to issue a communique due to differences regarding Russia’s war in Ukraine.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Defence Minister said they ordered units in all areas to step up Ukraine operations to prevent strikes on eastern Ukraine and other Russian-controlled territories, according to Reuters.
• Ukrainian President Zelensky fired the head of the state security service and the prosecutor general, while he stated that more than 60 officials from the prosecutor’s office and state security service were working against Ukraine in occupied territory, according to Reuters.
• UK MoD said Russia is reinforcing its defensive positions across occupied areas in southern Ukraine which includes the movement of manpower, equipment and defensive stores between Mariupol and Zaporizhia, as well as in Kherson.

OTHER

• US President Biden said the US is not going anywhere and will remain an engaged partner in the Middle East and also said he looks forward to seeing what is coming on oil production in the months ahead, according to Reuters.
• Iranian Supreme Leader's top adviser said Tehran will never negotiate its missile programme and regional policy, while he added that Tehran is technically capable of producing a nuclear bomb and warned Tehran will directly respond against Israel if its security is targeted, according to Al Jazeera.
• Tehran accused the US of using ‘Iranophobia’ to create tension during US President Biden’s visit to the Middle East, according to Reuters citing Iranian state media.
• Saudi Arabia’s Foreign Minister said they are not aware of any discussions on a Gulf-Israeli defence alliance and that the kingdom is not involved in any such talks, while he added that the recent overflight decision has nothing to do with establishing diplomatic ties with Israel and is not a precursor to further steps, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks gained with risk appetite spurred after last Friday's firm gains on Wall St. and renewed China support pledges helped markets shrug off China's COVID woes.
• ASX 200 was underpinned amid M&A activity and with Australia reinstating quarantined-support payments.
• Nikkei 225 was closed as Japan observed the Marine Day holiday.
• Hang Seng and Shanghai Comp. outperformed regional counterparts after PBoC Governor Yi pledged to increase the implementation of prudent monetary policy to provide stronger support for the real economy and with the property sector underpinned after the CBIRC asked lenders to provide credit to eligible developers so they can complete unfinished residential properties.
• US equity futures marginally gained as markets continued to reduce pricing of a 100bps Fed hike; ES +0.4%.
• European equity futures are indicative of a higher open with Eurostoxx 50 +0.6% after the cash market closed with gains of 2.4% on Friday.

FX

• DXY was rangebound beneath the 108 level alongside the positive risk tone.
• EUR/USD briefly reclaimed the 1.0100 handle but with gains capped amid headwinds from the political uncertainty in Italy where the League and Forza Italia parties said they can no longer govern with 5-Star.
• GBP/USD benefitted from the lacklustre mood in the buck but failed to sustain an early foray above 1.1900.
• USD/JPY was subdued amid the absence of bidders in Tokyo although bounced off support at the 138.00 level.
• Antipodeans traded higher with NZD/USD initially leading the advances after firmer than expected CPI data which prompted upward revisions by ASB Bank and ANZ Bank to upgrade their peak OCR forecasts, although resistance at 0.6200 saw NZD/USD pare nearly all its advances.
• Czech central bank’s Dedek said it is appropriate today to use FX intervention to prevent the crown from weakening and the aim is not to strengthen the currency, while he added that they are far from the point they would start to feel reserves are getting dangerously low, according to Lidove Noviny.

FIXED INCOME

• 10yr USTs were underpinned after a recent WSJ report downplayed the prospects for a 100bps rate hike with officials said to have signalled the likelihood of the Fed hiking by 75bps at next week’s meeting, while yields were uneventful and inversion remained prominent.
• Bunds initially eked marginal gains and climbed back above the 153.00 level but with upside capped amid a lack of fresh catalysts and ahead of this week’s ECB meeting.

COMMODITIES

• Crude futures were initially pressured amid the China COVID woes but then clawed back losses amid the risk-on mood and given that US President Biden's Middle Eastern trip failed to secure any major Saudi commitments.
• Saudi Arabia’s Crown Prince MBS said adopting unrealistic policies toward energy sources will lead to inflation and he called on Iran to cooperate with the region, according to Reuters. Saudi's Crown Prince also said that they have an immediate capacity to increase production to 12mln bpd and with investments, production can go to 13mln bpd after which the kingdom will not have any additional capacity to increase production.
• Saudi Foreign Minister said that they listen to their partners and friends across the world especially consumer countries but added that at the end of the day, OPEC+ follows the market situation and will supply energy as needed, according to Bloomberg.
• US senior envoy for energy security Hochstein said he expects gas prices to decline further towards USD 4/gallon and is confident there will be a few more steps in the coming weeks from OPEC in terms of oil supply, according to Reuters.
• Energy Intel’s Bakr stated that we are in a situation where capacity is limited which is why the UAE and Saudi Arabia want to remain cautious about how and when it is used.
• Top German energy regulator said natgas inventories are nearly 65% full but not enough to get through the winter without Russian gas, according to Bild am Sonntag.
• Libya’s Oil Minister said Libya has resumed oil exports, according to Al Jazeera. It was also reported that the NOC said its board will not cooperate with any illegal dismissal decisions made by an outgoing administration.
• South Africa’s largest fuel producer Sasol declared a force majeure on the supply of petroleum products due to delays in deliveries of crude to the Natref refinery, while the outage means all refineries in the country are shut, according to Bloomberg.
• Iran set August Iranian light crude price to Asia at Oman/Dubai + USD 8.90/bbl, according to Reuters sources.
• Spot gold conformed to the gains across the commodities complex which also follows last week's rebound from support at USD 1700/oz.
• Copper gained with prices underpinned by the positive risk appetite and after further China support pledges.

CRYPTO

• Bitcoin was higher amid the constructive mood which lifted prices above the 21,000 level.

NOTABLE APAC HEADLINES

• PBoC Governor Yi said China’s economy faces downward pressure due to COVID and external shocks, while he added that the central bank will increase the implementation of prudent monetary policy to provide stronger support for the real economy, according to a PBoC statement cited by Reuters.
• China reported 580 local cases on Saturday which was the highest since May 23rd. It was also reported that Shanghai said that the situation in the city remained severe. It was also reported that Shanghai is planning to conduct district-wide testing in 9 COVID-impacted districts and other smaller scope areas from Wednesday-Friday, while China's Tianjin is also planning massive COVID tests, according to Bloomberg and Reuters.
• Macau will extend its lockdown of businesses and casino closures to July 22nd, according to Reuters.
• US State Department approved a possible USD 108mln military sale to Taiwan, according to Reuters.
• HKMA said they need to regulate decentralised finance platforms sooner rather than later, while RBA Governor Lowe commented that it is likely better for retail digital currency tokens to be issued by regulated private sector companies than central banks, according to Reuters.
• Japanese daily COVID infection cases surpassed 110k on Saturday which was a record high, according to Jiji news agency.
• Japanese Finance Minister Suzuki reiterated sharp volatility is seen in the FX market and that they must watch moves with a strong sense of urgency, while he also noted that G20 affirmed their agreement on FX and that many countries including Japan, strongly condemned Russia’s invasion of Ukraine, according to Reuters.
• South Korean Finance Minister Choo said they are to exempt taxes on income from Korean treasury bonds to attract foreign investment, according to Reuters.
• RBNZ announced a new standing repurchase facility which will permit eligible counterparties to lend NZD through the standing repurchase facility from July 20th and will be remunerated at the OCR -15bps, while the RBNZ will deliver to counterparty nominal New Zealand government bonds as collateral in exchange for depositing NZD, according to Reuters.

DATA RECAP

• New Zealand CPI QQ (Q2) 1.7% vs. Exp. 1.5% (Prev. 1.8%)
• New Zealand CPI YY (Q2) 7.3% vs. Exp. 7.1% (Prev. 6.9%)
• RBNZ Sectoral Factor Model Inflation Index (Q2) 4.8% (Prev. 4.2%, Rev. 4.6%)

EU/UK

NOTABLE HEADLINES

• UK PM Johnson’s allies are stepping up their attacks against former Chancellor Sunak and accused him of going soft on Northern Ireland’s post-Brexit trade regime, according to FT.
• UK Foreign Secretary Truss signalled she would tighten ministerial scrutiny of the BoE if she becomes the next PM and accused the Bank of failing to tackle inflation, according to FT.
• A poll by JL Partners of more than 4,400 people found that 48% that backed the Tories in 2019 considered former Chancellor Sunak would be a good PM, while 39% thought the same of Foreign Secretary Truss and 33% thought the same of Trade Secretary Mordaunt, according to The Telegraph.
• ConservativeHome survey suggested Trade Secretary Mordaunt would lose in a head-to-head against former Chancellor Sunak (41% vs 43%) and against Foreign Secretary Truss (41% vs 48%), according to The Telegraph.
• Italy’s League and Forza Italia parties said they can no longer govern with the 5-Star Movement which brings the government closer to collapsing ahead of a potential confidence vote on Wednesday, according to Politico.
• European Investment Bank said it will reduce road and infrastructure funding in line with its climate objectives, according to FT.

DATA RECAP

• UK Rightmove House Price Index YY (Jul) 9.3% (Prev. 9.7%)