• APAC stocks followed suit to the weak performance across global counterparts as tensions simmered amid Pelosi's potential visit to Taiwan.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 future -0.5% after the cash market closed flat yesterday.
• RBA hiked rates by 50bps as expected, provided little in the way of hawkish surprises in the statement and noted it was not on a pre-set path.
• DXY is a touch softer vs. peers, JPY leads G10 FX whilst AUD lags post-RBA.
• Looking ahead, highlights include Canadian Manufacturing PMI, New Zealand Unemployment, US NY Fed Household Debt & Credit Report, Speeches from Fed's Bullard, Evans & Mester, Supply from the UK.
• Earnings from Generali, Uniper, Siemens Gamesa Renewable, BP, PayPal, Gilead, Uber & Starbucks.

US TRADE

• US stocks began the month in a subdued manner with Pelosi's Taiwan visit stoking geopolitical angst while the US July ISM Manufacturing was mixed.
• SPX -0.29% at 4,118, NDX -0.06% at 12,940, DJIA -0.14% at 32,798, RUT -0.10% at 1,883.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• White House and retailers reportedly discussed price cuts after tariff relief, according to CNBC citing sources.
• US Treasury Department announced quarterly financing estimates in which it is to issue USD 444bln in net marketable debt for the July to September 2022 period which is higher than the May estimate of USD 182bln, while Q3 borrowing estimate assumes a September-end cash balance of USD 650bln.
• California Governor declares a monkeypox emergency to bolster vaccination efforts, according to Reuters.
• Oracle (ORCL) has started to lay off employees in the US as part of its plan to lay off thousands, according to The Information.

GEOPOLITICS

OTHER

• US Secretary of State Blinken said North Korea is preparing to conduct its seventh nuclear test and said that Iran has either been unwilling or unable to accept a deal to return to the nuclear agreement.
• Iran started gas injection into hundreds of centrifuges, according to state press.
• US President Biden held a briefing where he confirmed Al Qaeda leader Zawahiri was killed during a US operation on Saturday, while a senior US official said that Zawahiri's death deals a significant blow to Al Qaeda and that there was a legal basis for the operation against Zawahiri. Furthermore, US Secretary of State Blinken commented that by hosting and sheltering the Al Qaeda leader in Kabul, the Taliban grossly violated the Doha agreement, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks followed suit to the weak performance across global counterparts as tensions simmered amid Pelosi's potential visit to Taiwan.
• ASX 200 was initially pressured ahead of the RBA rate decision where the central bank hiked by 50bp, as expected, although most of the losses in the index were pared amid a lack of any hawkish surprises in the statement and after the central bank noted it was not on a pre-set path.
• Nikkei 225 declined amid a slew of earnings and continued unwinding of the JPY depreciation.
• Hang Seng and Shanghai Comp underperformed due to the ongoing US-China tensions after reports that House Speaker Pelosi will arrive in Taiwan late on Tuesday despite the military threats by China, while losses in Hong Kong were exacerbated by weakness in tech and it was also reported that Chinese leaders said the GDP goal is guidance and not a hard target which doesn't provide much confidence in China's economy.
• US equity futures were subdued amid the ongoing bearish themes and after recent mixed US data releases. ES -0.4%.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 future -0.5% after the cash market closed flat yesterday.

FX

• DXY extended on losses below 106.00 amid US-China tensions and decline in yields, while the recent mixed data releases provided no favours for the greenback.
• EUR/USD marginally benefitted from the dollar weakness although came up short of the 1.0300 handle.
• GBP/USD traded steadily and held on to most of yesterday’s gains with price action stuck near 1.2250.
• USD/JPY were pressured as the risk aversion facilitated a further unwinding of the JPY depreciation.
• Antipodeans were initially contained as participants awaited the RBA rate decision in which the central bank hiked by 50bps, as expected, although the lack of hawkish surprises and the central bank's comments that it was not on a pre-set path spurred a dovish reaction.

FIXED INCOME

• 10yr UST futures remained firmer after the prior day’s bull flattening owing to the geopolitical concerns with yields also lower following recent disinflationary ISM data and declines in oil prices.
• Bund futures climbed amid the risk aversion but with gains capped by resistance around the 159.00 level.
• 10yr JGBs tracked global counterparts higher but were later pressured by weak demand at the 10yr auction.

COMMODITIES

• Crude prices were subdued amid ongoing growth-related headwinds and with a source report noting that Saudis will push for an output increase this week.
• A source with knowledge of last month's meeting between President Biden and Saudi King Salman said the Saudis will push OPEC+ to increase oil production at their meeting on Wednesday and that the Saudi King made the assurance to President Biden during their face-to-face meeting July 16th, according to Fox Business's Lawrence.
• US Senator Manchin "secured a commitment" from President Biden, Senate Majority Leader Schumer and House Speaker Pelosi for completion of the Mountain Valley Pipeline, according to 13NEWS.
• European Commission President von der Leyen warned of an escalation in the energy crisis as the EU continues its stand-off with Russia over the invasion of Ukraine and said that "Since Russia has already completely or partially cut off gas supplies to 12 member countries (of the EU), we must all prepare for the worst situation", according to DPA and El Mundo
• Spot gold was choppy but ultimately kept afloat amid a weaker dollar and haven demand.
• Copper retreated amid geopolitical concerns and recent weak global data release.

CRYPTO

• Bitcoin prices were pressured amid the broad risk aversion and fell below the 23,000 level.

NOTABLE APAC HEADLINES

• Chinese leaders said the GDP goal is guidance and not a hard target, according to Bloomberg.
• US President Biden dispatched senior officials to lay out the risks to Pelosi regarding her planned trip to Taiwan but she decided to go ahead with the visit, according to FT sources.
• US Secretary of State Blinken said the US is looking to Beijing to act responsibly and not engage in escalation if House Speaker Pelosi visits Taiwan, according to Reuters.
• White House spokesperson Kirby said House Speaker Pelosi has not confirmed any travel plans to Taiwan and that they have been clear from the beginning that she will make her own decision on Taiwan, while he reiterated that nothing has changed about US policy on Taiwan and said Pelosi has the right to visit Taiwan, as have other lawmakers. Furthermore, Kirby said that they have indication the Chinese might take some sort of military action as a result of Pelosi's trip to Taiwan, according to a Bloomberg TV interview.
• Several Chinese warplanes flew close to the median line of the Taiwan Strait on Tuesday morning and several Chinese warships have stayed close to the median line of the Taiwan Strait since Monday, according to a source briefed on the matter cited by Reuters. It was also reported that Taiwan's Defence Ministry reinforced its combat alertness level from Tuesday morning to Thursday noon, according to the official Central News Agency citing sources.
• UK MPs are planning a visit to Taiwan as tension with China simmers, according to The Guardian.
• RBA hiked the Cash Rate Target by 50bps to 1.85%, as expected, while it reiterated that the Board expects to take further steps in the process of normalising monetary conditions and is committed to doing what is necessary to ensure that inflation in Australia returns to target over time but noted that it is not on a pre-set path. Furthermore, it reaffirmed its view that inflation is expected to peak later this year and then decline back towards the 2–3% range and noted that a key source of uncertainty continues to be the behaviour of household spending.

DATA RECAP

• Australian Building Approvals MM (Jun) -0.7% vs. Exp. -5.0% (Prev. 9.9%, Rev. 11.2%)
• Australian Home Loans MM (Jun) -4.4% vs Exp. -3.0% (Prev. 1.7%)

EU/UK

NOTABLE HEADLINES

• UK Foreign Secretary Truss suggested she would 'ignore' Scottish First Minister Sturgeon and answered "no, no, no" when questioned regarding the prospect of another independence referendum if she were to become the next PM, according to Sky News.
• Italy's right-wing election frontrunners Brothers of Italy, see room to revamp EU-funded recovery plan, according to a party official.
• France, Italy and Spain asked the European Commission for legislation to ensure big tech companies pay some network costs, according to a document cited by Reuters.