• European bourses remain firmer across the board, Euro Stoxx 50 +0.4%, as the region shrugs-off Final Manufacturing PMIs and a mixed APAC handover
• US futures are under pressure in a continuation of downbeat APAC trade amid poor Chinese PMIs and with multiple key risk events looming for the week, ES -0.2%
• DXY continues to slip as activity-currencies climb with RBA due Tuesday and the JPY revival resilient; Yuan hit on respective PMIs
• Core debt consolidates, BTPs outperform and the US yield curve is relatively steady directionally
• Crude benchmarks are pressured in a resumption of Friday's action after modest overnight consolidation as the complex looks towards OPEC+.
• House Speaker Pelosi's official itinerary does not mention Taiwan; however, Reports have mentioned August 2nd and 4th
• Looking ahead, highlights include US Final Manufacturing PMIs, US ISM Manufacturing PMI, Earnings from AXA

As of 11:05BST/06:05ET

LOOKING AHEAD

• US Final Manufacturing PMIs, US ISM Manufacturing PMI, Earnings from AXA.
• Click here for the Week Ahead preview

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky announced the government decided to conduct a mandatory evacuation of areas in Donetsk that Russia does not control and said that hundreds of thousands of civilians in the combat zone need to leave, according to reports in Reuters and Evening Standard.
• Ukrainian President Zelensky said Ukraine’s harvest could be half the usual amount this year due to the Russian invasion, according to Reuters. It was separately reported that the first Ukrainian grain ship is scheduled to depart this Monday, according to CNN.
• UK military intelligence said it is likely that Ukraine successfully repelled small-scale Russian assaults from the long-established front line near Donetsk and said that Russia is highly likely to prepare for referendums on joining Russia in newly occupied territories in southern Ukraine, while it was separately reported that MI6 chief Moore said Russia is running out of steam in Ukraine, according to Reuters.
• Russia invited UN and Red Cross experts to probe the deaths of dozens of Ukrainian prisoners in a jail controlled by Moscow-backed separatists, while the International Committee of the Red Cross condemned the attack on the Olenivka penal facility and said parties must do everything to determine the facts behind the attack but added it is not its role to carry out public investigations into war crimes and that it has not received official confirmation granting access to the site or POWs affected by the attack, according to Reuters.
• Russian President Putin said the Russian navy will receive new hypersonic Zircon cruise missiles in the next few months and that the area of their deployment would be dependent on Russian interests, according to Reuters.
• Russia's Kremlin says they have little ability to change the situation with Nord Stream 1 (NS1) equipment; says NS1 issues need fast maintenance, via Reuters.

OTHER

• Iran said it responded to the EU proposal aimed at salvaging the nuclear deal and is seeking a swift conclusion to negotiations, according to Reuters citing a tweet from Iran’s top nuclear negotiator.
• US is mulling sanctions that could target a UAE-based businessman and a network of companies suspected of aiding exports of Iranian oil, according to WSJ.
• Global Time's Hu Xijin tweets "The PLA has clearly been well prepared. If (US House Speaker Pelosi) dares to stop in Taiwan, it will be the moment to ignite the powder keg of the situation in the Taiwan Straits.".
• Unfamiliar/unconfirmed source - US House Speaker Pelosi is arriving to Taipei, Taiwan, tomorrow night, according to TVBS' Tingting Liu.

EUROPEAN TRADE

CENTRAL BANKS

• BoK said it sees small incremental rate increases as appropriate going forward as long as inflation and growth trends do not deviate much from expected paths, according to Yonhap. Furthermore, BoK Governor Rhee said inflation will most likely exceed 6% for a few months and it is desirable to raise rates by 25bps instead of 50bps
• ECB Bulletin pre-release: The recent increase in energy prices constitutes a significant supply shock, which could therefore also have an impact on the potential output of the euro area economy.
• HKMA buys HKD 2.669bln from market, as the HKD hits the weak end of the trading range, via Reuters.

EQUITIES

• European bourses remain firmer across the board, Euro Stoxx 50 +0.4%, as the region shrugs-off Final Manufacturing PMIs and a mixed APAC handover given Friday's strong Wall St. performance.
• However, US futures are underpressure in a continuation of downbeat APAC trade amid poor Chinese PMIs and with multiple key risk events looming for the week, ES -0.2%.
• In Europe, sectors are mixed with the breadth of performance narrow ex-banks given pronounced upside in HSBC, +6.0%, post-earnings; note, HSBC accounts for 18% of the Europe Stoxx 600 Banking sector.
• Click here for more detail.

FX

• DXY down to deeper cycle low sub-105.500 as Yen revival continues and activity currencies climb, USD/JPY retesting underlying bids and support into 132.00 including next layer of Japanese importer buying interest.
• Aussie up in anticipation of RBA and Kiwi ahead of NZ jobs data, AUD/NZD and NZD/USD firmly back above 0.7000 and 0.6300 respectively.
• Euro eyes recent peaks and Sterling probes stops around last Friday’s high, EUR/USD touches 1.0270 and Cable tops 1.2250 .
• Yuan softer in wake of weaker than expected Chinese PMIs, but Rand remains bid irrespective of inflation contractionary SA PMI as Gold underpins, USD/CNH and USD/CNY 6.7600+ and 6.7500+, USD/ZAR under 16.5000.
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Notable FX Expiries, NY Cut:

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FIXED INCOME

• Debt continues to consolidate and retrace from new corrective peaks, but curves remain steeper.
• Bunds and Gilts sub-par within 157.74-156.74 and 118.22-117.72 respective ranges, T-notes flattish between 121-07+/120-28 parameters.
• BTPs bid and sharply outperform ahead of Italy's snap elections and into month bereft of issuance.
• 10 year bond tops 127.50 from 126.40 low just 7 ticks above prior close.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are pressured in a resumption of Friday's action after modest overnight consolidation as the complex looks towards OPEC+.
• Currently, benchmarks are firmer by over USD 1.50/bbl; while Dutch TTF remains around the EUR 200/MWh mark as Russia put the onus on others re. Nord Stream 1.
• Spot gold is firmer, deriving upside from the pressure seen in the USD though the magnitude of the yellow metal's move perhaps capped by the generally constructive European tone.
• OPEC Secretary General Al-Ghais said OPEC is not in competition with Russia and that Russia is a big main player in the world energy map with its membership in OPEC+ vital for the success of the agreement. Al-Ghais added OPEC doesn’t control oil prices but practices tuning markets in terms of supply and demand, while he added that the recent rise in prices is not just related to the Ukraine crisis but is also due to lack of spare production capacity. Furthermore, he said the current state of the global oil market is very volatile and that the most important factor to affect oil prices by year-end is the lack of investments in the sector, according to an interview with Al Rai newspaper cited by Reuters.
• Libya’s Unity government oil minister said oil production is at 1.2mln bpd, according to Reuters.
• Gazprom said it is halting gas supplies to Latvia and accused it of violating conditions, while Latvia said that it doesn’t expect Gazprom’s decision to have any major impact, according to Reuters.
• European governments have eased back on efforts to curb trade in Russian oil in which they are delaying a plan to shut Moscow out of the vital Lloyd’s of London maritime insurance market and will permit some international shipments amid fears of rising crude prices and tighter global energy supplies, according to FT.
• The first ship with grain left the port of Odessa, according to CNN Türk; subsequently, Ukrainian Infrastructure minister says if the grain deal works in full, they will start consultations to open the port of Mykolaiv, via Reuters.
• Part of the damaged Beirut port silos collapsed following a weeks-long fire, according to Al Jazeera
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NOTABLE HEADLINES

• UK business groups warned of an ‘iceberg’ of business rates next spring with business rates set to increase by up to GBP 3bln amid soaring inflation and have urged the government to intervene to avoid sinking British businesses, according to FT.
• Former UK Chancellor Sunak vowed to lower the basic rate of income tax by 20% by 2029 if he becomes the next UK PM, according to Reuters. It was separately reported that current Chancellor Zahawi formally endorsed Liz Truss to be the next Tory party leader, according to The Telegraph.
• German Engineering orders -2% in April-June period Y/Y (Domestic -8%; foreign orders +1%); June level -9% Y/Y (Domestic -11%, Foreign orders -8%), according to VDMA.

DATA RECAP

• UK S&P Global/CIPS Manufacturing PMI Final (Jul) 52.1 vs. Exp. 52.2 (Prev. 52.2)
• EU S&P Global Manufacturing Final PMI (Jul) 49.8 vs. Exp. 49.6 (Prev. 49.6)
• EU Unemployment Rate (Jun) 6.6% vs. Exp. 6.6% (Prev. 6.6%)
• German Retail Sales MM Real (Jun) -1.6% vs. Exp. 0.2% (Prev. 0.6%, Rev. 1.2%); YY Real (Jun) -8.8% vs. Exp. -8.0% (Prev. -3.6%, Rev. 1.1%)
• Citi/YouGov UK Inflation Expectations (July): 5-10yrs ahead 3.8% (4.0% in June); One-year: 6.0% (6.1% in June)

NOTABLE US HEADLINES

• Fed’s Kashkari (2023 Voter) said on Friday that he was surprised by markets’ interpretation that the Fed would soon begin to back off and said that 50bps rate hikes at upcoming meetings seem reasonable, while he added that continued higher core inflation could push him to think a 75bps move would be needed and said he doesn’t know what the bond market is looking at reaching the conclusion that Fed may even begin to cut rates next year, according to The New York Times. Kashkari also stated that the US economy is a long way from 2% inflation and that they keep getting surprised on inflation prints, while he also noted that whether or not the US is technically in a recession doesn’t change his analysis, according to CBS.
• White House physician said US President Biden tested positive again for COVID during the weekend after testing negative a few days beforehand but added that President Biden is experiencing no symptoms and feels well, while it is believed that the positive test is a ‘rebound positivity’ which is experienced by some COVID patients, according to The Hill and Reuters. White House also stated that President Biden will isolate until he tests negative and has cancelled trips to Delaware and Michigan.
• US Senator Manchin defended Democrat plans for a 15% minimum corporate tax rate and limit ‘carried interest’ as part of an energy, climate and social spending bill valued at USD 369bln, according to FT.
• At least 26 people were killed amid floods in eastern Kentucky and the death toll is expected to continue increasing, according to the state governor cited by Reuters.
• Click here for the US Early Morning note.

APAC TRADE

• APAC stocks were choppy as momentum from last week’s earnings-inspired euphoria on Wall St was partially offset by disappointing Chinese PMI data and cautiousness ahead of upcoming risk events including central bank rate decisions, NFP jobs data and US House Speaker Pelosi’s trip to Asia.
• ASX 200 was kept afloat by strength in energy and utilities after the competition regulator’s interim gas report forecast Australia’s east coast could face a shortfall of 56PJ in 2023, while the latest domestic manufacturing PMI data remained in expansion territory.
• Nikkei 225 was also positive with the biggest movers driven by recent earnings releases and reports also noted that Japan’s panel is expected to seek a record increase of at least JPY 30 to minimum wages.
• Hang Seng and Shanghai Comp were initially pressured after Chinese PMI data missed expectations in which the official manufacturing reading printed at a surprise contraction, with sentiment also not helped by US-China tensions as the world second-guesses whether or not US House Speaker Pelosi will defy China’s warnings regarding visiting Taiwan during her Asia trip. However, the mood in Chinese stocks gradually improved and retraced the majority of losses.

NOTABLE APAC HEADLINES

• US House Speaker Pelosi’s official itinerary for her trip to Asia was released which did not mention Taiwan, while Radio France Internationale’s Chinese website quoted sources that stated Pelosi will fly to Taiwan via Clark Air Base in the Philippines on August 4th, according to Dimsum Daily HK.
• China held live-fire drills off the coast opposite Taiwan and its air force said it will resolutely safeguard national sovereignty and territorial integrity regarding Taiwan, according to Associated Press and Chinese state media.
• A senior official in Beijing said the atmosphere of last week’s Biden-Xi telephone conversation was the worst among the five talks between the leaders and President Xi was said to have showed the toughest attitude he has ever shown to any world leader, while the most important topic in the conversation was China-US relations especially the 'Taiwan Question'. Furthermore, the official believes the probability of US House Speaker Pelosi's visit to Taiwan is low, as President Xi’s tough position on Taiwan will push President Biden to put more pressure on Pelosi to bypass Taiwan on this trip and the official warned that an accidental military conflict around the island of Taiwan cannot be ruled out if Pelosi insists on visiting Taiwan, according to SGH Macro Advisors.
• Macau is to permit dine-in services and will reopen gyms, bars and beauty parlours beginning this Tuesday, according to Bloomberg.
• US, South Korea and Japan will begin joint ballistic missile defence exercises in waters off Hawaii this week, according to Yonhap.
• "China is willing to boost China-New Zealand comprehensive strategic partnership to yield more results based on the principle of mutual respect and mutual benefit while appropriately handling differences," according to the Chinese Foreign Minister via Global Times.

DATA RECAP

• Chinese NBS Manufacturing PMI (Jul) 49.0 vs. Exp. 50.4 (Prev. 50.2); Non-Manufacturing PMI (Jul) 53.8 vs Exp. 54.0 (Prev. 54.7)
• Chinese NBS Composite PMI (Jul) 52.5 (Prev. 54.1); Caixin Manufacturing PMI Final (Jul) 50.4 vs. Exp. 51.5 (Prev. 51.7)