• European bourses are firmer across the board as the initially cautious tone amid soft-Ifo and weekend developments dissipated amid USD-downside and constructive Kremlin remarks
• US futures also modestly bid into the busiest Q2 earnings week and pre-FOMC
• USD is under pressure on the risk tone with EUR underpinned by Kazaks despite Ifo while antipodeans lead the way
• Core debt has seen pronounced two-way action amid the above factors; currently, modestly softer with US yields steeper pre-2yr
• Crude began on the backfoot but has benefited from the Kremlin re. Nord Stream with Ags bid after Odessa strikes
• Looking ahead, highlights include US National Activity Index, US Dallas Fed, and supply from the US.

As of 11:15BST/06:15ET

LOOKING AHEAD

• US National Activity Index, US Dallas Fed, supply from the US.
• Click here for the Week Ahead preview

GEOPOLITICS

RUSSIA-UKRAINE

• The Ukrainian port of Odesa was hit by a series of Russian missile strikes, according to Sky News. Russian Defence Minister said a Ukrainian warship and US-supplied anti-ship missiles were destroyed in the Odesa port attack, according to Reuters.
• US Secretary of State Blinken said Russia breached the grain deal commitments with the attack on Odesa port, via Reuters.
• Russian Kremlin says Odessa port strikes were strikes on military targets, won't affect grain exports.
• Russian Kremlin says the repaired turbine delivered from Canada will soon be installed at Nord Stream 1, still equipment to be repaired which Siemens Energy (ENR GY) is aware of.
• EU countries are reportedly attempting to water down the Commission's plans to cut gas demand by 15% from next month, according to the FT citing sources and a draft proposal. One proposal suggests compulsory targets should take into account each state’s dependency on Russian gas and storage. Plans will be discussed on Monday before an emergency Energy Ministers' meeting on Tuesday, according to the FT.
• White House Defense Department spokesman said the US DoD is making preliminary explorations into the feasibility of potentially providing fighter jets for Ukraine, and said providing jets to Ukraine is not something that would be executed in the near term, according to Reuters.
• Ukraine President Zelensky said roughly 10mln tonnes of last year's grain harvest will be exported after the deal is signed with Russia, according to Reuters.
• Ukrainian Presidential Advisor said if its ports are open, then Ukraine could transfer 60mln tonnes of grain over 8-9 months, but it will take 20-24 months to export the same amount if ports do not work, via Reuters.
• Siemens (SIE GY) on Sunday transferred a Canadian export license to Gazprom that allows turbines for the Nord Stream gas pipeline to be repaired and transported. The pipeline part may be en route to Russia by midweek but there is no guarantee that the arrival of the turbine will boost gas flows, according to Bloomberg.

OTHER

• French President Macron expressed disappointment to his Iranian counterpart about the lack of progress in nuclear talks, according to the Elysee Palace cited by Reuters.
• Turkish Foreign Ministry has summoned Sweden to convey a "strong reaction" over "terrorist propaganda" in Sweden, according to Reuters. This comes in the context of Sweden's NATO ascension
• China has strengthened its warning to the US about House Speaker Pelosi's visit to Taiwan, according to the FT. Sources suggest private rhetoric in China suggested a possible military response. Note, this is in-fitting with rhetoric seen via Global Times last week.
• US Deputy Secretary of State Sherman and US Ambassador to Australia Kennedy plan to visit the Solomon Islands next month, according to Reuters sources. Note, China has recently signed a new security agreement with the Solomon Islands, which caused concern among officials in the US, Australia and New Zealand.
• South Korean and US defence chiefs will be holding talks this week to discuss security on the Korean Peninsula and deterrence against evolving North Korean threats, according to Yonhap.

EUROPEAN TRADE

CENTRAL BANKS

• ECB's Lagarde said the ECB will raise rates for as long as it takes to bring inflation back to target, according to an interview via Funke Mediengruppe.
• ECB's Nagel said it is better to start with a bigger hike and is confident that ECB's TPI would survive legal challenges, according to Handelsblatt. He added that future rate hikes are to depend on data, and we still see positive growth in 2022 and 2023. He said TPI is to be used in exceptional circumstances.
• ECB's Holzmann said the ECB may accept a "light recession" if the outlook for CPI rises, according to an interview via ORF. Holzmann said the ECB is to consider the economic situation before another big hike and said economic growth is slowing and that has brought in caution.
• ECB's Kazaks says large interest rate hikes may not be over; too weak EUR is a "problem". The hike in September needs to be quite "significant" and should be open to larger hikes.
• BoJ's Takata (new member) says the BoJ is able to keep monetary policy easy, but are facing new challenges such as dwindling bank margin and impact on market function.
• BoJ's Tamura (new member) says Japan may soon see positive cycle commence, with wages increasing with inflation. If this occurred, exit from easy policy would become focus of discussions.

EQUITIES

• European bourses are firmer across the board as the initially cautious tone amid soft-Ifo and weekend developments dissipated amid USD-downside and constructive Kremlin remarks; Euro Stoxx 50 +0.3%.
• US futures are modestly firmer, ES +0.5%, as we kick off the busiest week of earnings for Q2 and in the run-up to the FOMC.
• Tesla (TSLA) discloses a USD 170mln impairment loss resulting from changes to the carrying value of Bitcoin during H1 (ending June 30th). Increases FY22-24 CapEx to USD 6-8bln/yr (prev. 5-7bln).
• Click here for more detail.

FX

• DXY down again ahead of the Fed on Wednesday as risk appetite recovers broadly, index slips further from 107.00 to 106.240.
• Euro underpinned by hawkish ECB commentary and supportive Russian gas supply vibe to the extent that bleak German Ifo survey findings are shrugged off, USD/USD probes 1.0250 where hefty option expiry interest sits (1.86bln).
• Aussie derives traction from spike in iron ore prices, AUD/USD through 0.6950 and towards circa 1bln option expiries at 0.7000 strike.
• Franc and Yen underperform as bond yields rebound firmly from recent lows, USD/CHF around 0.9625 and USD/JPY 136.00+ vs Friday lows of 0.9600 and 135.57.
• Yuan welcomes PBoC notice of recovery in support of cultural and tourism sectors plus reports of Chinese real estate fund, USD/CNH and USD/CNY both sub-6.7500 compared to highs at 7.7667 and 6.7577 respectively.
• Lira laments deterioration in Turkish manufacturing confidence, USD/TRY just shy of 17.8400.
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Notable FX Expiries, NY Cut:

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FIXED INCOME

• Debt futures flip then flop in choppy fashion amidst hawkish ECB rhetoric and encouraging news from Russia on EU gas supplies.
• Bunds rebound to 154.86 before retreat to 153.78, Gilts recoil from 117.48 to 117.02 and 10 year T-note within a 120-02+/119-21 range
• Downbeat German Ifo survey and mixed UK CBI industrial orders vs business optimism largely ignored
• 2 year note supply looms and may be interesting as a gauge of investor demand ahead of the Fed
• Click here for more detail.

COMMODITIES

• Crude benchmarks began the session on the back foot, amidst the generally cautious APAC mode where participants were digesting multiple updates including Russia/Ukraine, Nord Stream, China/US and reiterations from Biden.
• However, a seeming USD-driven move lifted the benchmarks back towards session highs amid a concerted risk move following Kremlin commentary.
• US President Biden said gasoline prices are still too high and is working to make sure gasoline prices move with oil prices and said companies should use profits to boost output, according to Reuters.
• LME will not ban Nornickel's metal as the Russian firm is not under UK sanctions, according to Reuters sources.
• Chicago wheat, corn and soybean futures rose at the open, possibly on the back of reports that the Ukrainian port of Odessa was hit by Russian missiles less than 24 hours after the signing of the grains agreement in Turkey.
• Malaysia's Commodities Minister said crude palm oil prices are likely to remain weak for most of Q3 2022 as Jakarta lifts the exports levy; but prices are expected to be higher in Q4 amid the resumption of Indonesia's palm oil export levy, via Reuters.
• Spot gold has found support from the declining USD, lifting to USD 1733.70/oz, though upside is capped by the broader risk tone with the yellow metal yet to test Friday’s USD 1738.99/oz best.
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NOTABLE EUROPEAN HEADLINES

• Italy's far-right Brothers of Italy party is reportedly struggling to find ministerial candidates, according to The Times.
• A survey by DIHK of 3,500 firms in Germany found that 16% are scaling back production or partially pausing business operations amid high energy prices, via Reuters.
• Fitch affirmed Hungary at "BBB"; outlook Stable; affirmed Ireland at "AA"; outlook stable.

NOTABLE US HEADLINES

• US President Biden's physician said the president's COVID symptoms continue to improve significantly, according to Reuters.
• Google (GOOG) co-founder Brin reportedly told his advisers to sell his personal investments in Tesla (TSLA) CEO Musk’s companies in recent months after learning that he had a brief affair with his wife, according to WSJ. Elon Musk denied the report, via Twitter.
• Click here for the US Early Morning note.

DATA RECAP

• German Ifo Business Climate New (Jul) 88.6 vs. Exp. 90.2 (Prev. 92.3, Rev. 92.2); Current Conditions New (Jul) 97.7 vs. Exp. 98.0 (Prev. 99.3, Rev. 99.4); Expectations New (Jul) 80.3 vs. Exp. 83.0 (Prev. 85.8, Rev. 85.5)
• UK CBI Trends - Orders (Jul) 8 (Prev. 18.0).

CRYPTO

• Bitcoin remains under pressure and is yet to convincingly reclaims the USD 22k mark, after slipping to USD 21.75k overnight.

APAC TRADE

• APAC stocks traded mostly lower with the tech sector in the region hit following the Stateside sectoral performance.
• ASX 200 saw the gains in its Metals & Mining sector offset by a selloff in Tech.
• Nikkei 225 underperformed following the JPY strength seen on Friday, whilst the KOSPI outpaced peers.
• Hang Seng was lower following reports China is said to be mulling categorising US-listed Chinese firms into three groups based on the sensitivity of data held by the firms, but the property sector outperformed amid reports that China is planning to set up a real estate fund.
• Shanghai Comp was also softer but monkeypox-related stocks soared after the WHO declared monkeypox a global health emergency.

NOTABLE APAC HEADLINES

• China is reportedly imposing COVID "closed loops" on major Shenzhen companies which include Foxconn (2354 TW), BYD (1211 HK), CNOOC (0833 HK) and Huawei (002502 SZ), via Bloomberg.
• China is said to be mulling categorising US-listed Chinese firms into three groups based on the sensitivity of data held by the firms, according to FT sources.
• Neither the EU nor China believes that conditions are ripe for the implementation of the China-EU Comprehensive Investment Agreement, according to Chinese sources cited by SGH Macro.
• China reportedly plans to set up a real estate fund worth up to USD 44bln, according to REDD cited by Reuters.
• Hong Kong is reportedly planning to cut hotel quarantine times, according to Sing Tao Daily.
• The Sakurajima volcano on Japan's western major island of Kyushu has erupted with the alert level raised to 5 - the highest, according to Sky News. No damage has been reported but volcanic stones could be seen raining down up to 1.5 miles away from the site, according to NHK.
• China’s securities regulator said in a statement it has not researched a plan for a three-tiered system to help Chinese companies avoid US delisting, according to CNBC.