• APAC stocks traded mostly positive but with gains capped amid geopolitical and growth slowdown concerns
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +0.2% after the cash market closed up 0.6% yesterday
• DXY is firmer but sub-106, EUR/USD stalled near resistance at 1.0250, JPY lags G10 FX and GBP stabilised post-BoE
• RBI hiked the Repurchase Rate by 50bps to 5.40% (exp. hike of 25bps-50bps); further stimulus withdrawal is warranted 
• Looking ahead, highlights include German Industrial Output, US & Canadian Labour Market Reports, Earnings from Allianz, Deutsche Post, LSE & WPP

US TRADE

• US stocks were cautious as participants digested further earnings releases and with external growth concerns brewing after the BoE's sustained recession forecast, while geopolitical risks surrounding China's military drills around Taiwan and the looming US NFP jobs data also contributed to the tentative mood.
• SPX -0.08% at 4,152, NDX +0.44% at 13,311, DJIA -0.26% at 32,727, RUT -0.13% at 1,906.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Mester (2022 voter) reiterated there is still a path to a soft landing, but recession risks have risen. Mester said she doesn't use the yield curve as a strong indicator of where the economy is going and said that given the size of the balance sheet, the Fed should discuss selling some MBS. Mester added she should pencil in going a bit above 4% on interest rates and that they need to raise rates then hold them there for a while until inflation comes back closer to the 2% goal.
• US Senator Sinema agreed to move forward on Senate tax and climate bill in which she agreed to remove the carried interest tax provision, protect manufacturing and boost the clean energy economy in the Senate's budget reconciliation legislation. Furthermore, Senate Majority Leader Schumer said the final version of the reconciliation bill will be published on Saturday and that the agreement preserves major components of the inflation reduction act.
• US declared Monkeypox a public health emergency.

GEOPOLITICS

RUSSIA-UKRAINE

• NATO Chief Stoltenberg said members are working closely with the defence industry to produce more and to deliver more of different types of ammunition, weapons and capabilities to Ukraine, according to Reuters.
• White House's Kirby said if a meeting between US Secretary of State Blinken and Russian Foreign Minister Lavrov does not happen organically, he is sure Blinken will reach out to Lavrov, according to Reuters.
• Turkish Defence Minister said three ships plan to set out from Ukrainian ports on Friday under the grain deal.
• Ukraine is calling for the Black Sea grain deal to extend to other products, according to FT.

OTHER

• White House's Kirby said Iran talks are pretty much complete and that time appears to be running short for Iran to accept the deal, according to Reuters.
• North Korea tested explosive devices and began digging new tunnels at its Punggye-ri nuclear test site, which "paves the way for additional nuclear tests" according to Nikkei citing a UN draft report.

APAC TRADE

EQUITIES

• APAC stocks traded mostly positive but with gains capped amid geopolitical and growth slowdown concerns, while markets also await the upcoming US NFP jobs report.
• ASX 200 was lifted by strength in mining stocks after gains in underlying metal prices although the energy sector lagged due to the recent oil pressure.
• Nikkei 225 surpassed 28k after stronger-than-expected Household Spending and firmer wage growth.
• Hang Seng and Shanghai Comp lacked firm direction with Hong Kong stocks indecisive after Alibaba failed to replicate the strength in its ADRs post-earnings and with sentiment clouded by geopolitical risks.
• US equity futures traded with cautious gains ahead of the key US jobs data. ES +0.2%
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +0.2% after the cash market closed up 0.6% yesterday.

FX

• DXY nursed some of the prior day’s losses but remained beneath the 106.00 level after recently suffering from softer yields and with markets looking ahead to the key US jobs data.
• EUR/USD marginally pulled back from yesterday’s peak after stalling near resistance at 1.0250.
• GBP/USD was uneventful as price action stabilised from yesterday’s post-BoE turbulence.
• USD/JPY lacked firm direction in which the pair swung back and forth of the 133.00 level.
• Antipodeans were rangebound after the RBA’s quarterly Statement on Monetary Policy largely reiterated the comments from its meeting earlier this week.

FIXED INCOME

• 10yr UST futures are rangebound ahead of NFP and after marginally easing off yesterday’s best levels.
• Bund futures held on to its gains with the recently reclaimed 158.00 level providing a floor for prices.
• 10yr JGBs reversed most of their early gains with demand subdued as Japanese stocks edged higher and with the BoJ only in the market under its daily fixed-rate operations

COMMODITIES

• Crude nursed some of its recent losses although the recovery was limited by lingering growth concerns and after a report recently suggested Saudi Arabia and UAE could pump significantly more oil in the case of a winter crisis.
• Spot gold remained near a monthly high but with upside capped by a rebound in the dollar.
• Copper traded higher amid the mostly constructive mood in Asia.

CRYPTO

• Bitcoin prices rebounded from the prior day's losses and reclaimed the 23,000 level.

NOTABLE APAC HEADLINES

• Chinese Premier Li said China can 'live with' slightly lower growth if inflation remains below 3.5%, according to SCMP
• US military postponed its Minuteman III missile test to avoid further angering China and avoid misunderstandings over Taiwan, according to WSJ.
• US House Speaker Pelosi said they had positive meetings in Taiwan about security and governance and that they said from the start that representation is not about changing the status quo, while she added that China will not isolate Taiwan by preventing them from travelling there, according to Reuters.
• White House's Kirby said the US urges China not to overreact and to bring down tensions, while the US is watching China’s exercises near Japan ‘very, very closely’. Kirby also said the US condemns China launching missiles near Taiwan and expects China to continue to react in the coming days, while he added the US is prepared and that Beijing's actions are a significant escalation in its attempt to change the status quo.
• Taiwan's Premier said the "evil neighbour" next door is showing off her power at our door and that China is arbitrarily destroying the world's most frequently used waterway with military drills, while Taiwan's Premier added that China's actions are being condemned by the world.
• Taiwan's Defence Ministry said multiple Chinese navy ships and air force aircraft crossed the Taiwan Strait median line on Friday morning, while it added China's actions are provocative and that the military principle is 'no escalation, no triggering of incident', according to Reuters.
• ASEAN Foreign Ministers' communique stated that they underscored the importance of maintaining unity and centrality, while they reaffirmed shared commitment to maintaining and promoting peace, security and stability in the region. They also reiterated their commitment to keeping markets open for trade and investment, as well as refraining from imposing unnecessary non-tariff measures to ensure supply chain connectivity.
• RBA Statement on Monetary Policy stated that they are ready to do what is necessary to bring inflation back to the 2%-3% band and the board expects to take further steps to normalise policy but is not on a pre-set path. RBA added that inflation pressures are broadly based and that rate increases have been required to create a more sustainable balance of demand and supply. Furthermore, it sees GDP growth of 3.25% at end-2022, 1.75% at end-2023 and 1.75% at end-2024, while it forecasts CPI inflation of 7.75% at end-2022, 4.25% at end-2023 and 3.00% at end-2024.
• RBI hiked the Repurchase Rate by 50bps to 5.40% (exp. hike of 25bps-50bps) and Governor Das stated that a further calibrated withdrawal is warranted to keep inflation expectations anchored. Das also stated that domestic economic activity is showing signs of broadening and that India is expected to be among the fastest growing economies this year with strong and resilient fundamentals but also stated that the domestic economy has been impacted by the global economic situation and that financial markets are uneasy, while he added that CPI inflation has eased from its surge in April but remains uncomfortably high.

DATA RECAP

• Japanese All Household Spending MM* (Jun) 1.5% vs. Exp. 0.2% (Prev. -1.9%)
• Japanese All Household Spending YY* (Jun) 3.5% vs. Exp. 1.5% (Prev. -0.5%)
• Japanese Labour Cash Earnings YY (Jun) 2.2% (Prev. 1.0%)

EU/UK

NOTABLE HEADLINES

• Italian PM Draghi approved an economic aid package worth EUR 17bln and is ready to improve anti-inflation measures if needed, while PM Draghi said the government is committed to fully collecting revenues from windfall tax on energy companies, according to Reuters.