• APAC stocks traded mixed with price action choppy as participants reflected on encouraging Chinese trade data and hawkish Fed repricing.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +0.6% after the cash market closed with losses of 0.8% on Friday.
• Fed’s Bowman (voter) said the Fed should consider more 75bps rate hikes at coming meetings.
• DXY is contained after Friday's gains, AUD outperforms G10 FX, JPY lags, EUR/USD sits on a 1.01 handle.
• Looking ahead, highlights include EZ Sentix, Earnings from BioNTech, Barrick Gold, Porsche SE & Siemens Energy.

US TRADE

• US indices finished mixed on Friday, albeit off lows. The main focus of the session was the 20bps move higher in front-end Treasury yields following the strong NFP jobs data for July and the highest earnings growth since March which saw a dramatic hawkish repricing of Fed expectations in which 75bps September FOMC hike implied probability rose to 70% from 40% before the data.
• SPX -0.17% at 4,145, NDX -0.78% at 13,208, DJIA +0.23% at 32,803, RUT +0.81% at 1,922
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed’s Bowman (voter) said the Fed should consider more 75bps rate hikes at coming meetings in order to bring high inflation back down to the central bank's target and that she will let the data guide her on how big rate hikes need to be at coming policy meetings, according to Reuters.
• Fed’s Daly (2024 voter) said the “Fed is far from done yet” on lowering inflation and that they need to leave their minds open, while she suggested that a 50bps hike is not the only option on the table, according to Bloomberg.
• US Senate voted to pass the USD 430bln climate change, tax and drug pricing bill with the bill sent to the House. US President Biden stated shortly after that the House should pass the bill ASAP and that he looks forward to signing it, while House Speaker Pelosi said the House will return and move swiftly to send the bill to President Biden’s desk, according to Reuters.
• White House said it is in active talks with top Democrat lawmakers on how to push the bill to ban assault weapons through the Senate, according to Reuters.
• Elon Musk tweeted that if Twitter (TWTR) simply provides their method of sampling of 100 accounts and how they're confirmed to be real, the deal should proceed on original terms.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said there can be no talks with Ukraine or its international partners if Russia proceeds with referendums in occupied areas of Ukraine. Zelensky also held a call with European Council President Michel in which he urged for a stronger international response to Russian ‘nuclear terror’ after the new shelling of the Zaporizhzhia nuclear power plant, according to Reuters.
• Ukrainian state nuclear power company said a worker was wounded at the Zaporizhzhia nuclear power plant due to new shelling by Russian forces on Saturday, according to Reuters.
• UK military intelligence said on Saturday that Russia is almost certainly massing forces in southern Ukraine in anticipation of a counteroffensive by Ukraine or in preparation for a possible assault with convoys of tanks, trucks and artillery continuing to move away from Donbas toward the southwest. UK military intelligence added that Russia’s war is about to enter a new phase and the most fighting is shifting to a nearly 350km front stretching from near Zaporizhzhia to Kherson.
• IAEA chief Grossi said he is extremely concerned about the shelling at the Zaporizhzhia nuclear power plant which ‘underlines the very real risk of a nuclear disaster’, according to a statement cited by Reuters.
• UN Secretary-General Guterres said the risk of a nuclear confrontation is back after decades, while he added that any attack on a nuclear plant is a 'suicidal thing', according to Reuters.
• A foreign-flagged ship arrived in the Ukrainian port to be loaded with grain for the first time since the start of the war, according to the Ukrainian Infrastructure Minister via Facebook.
• The west is increasingly alarmed regarding deepening ties between Turkish President Erdogan and Russian President Putin, while officials have raised the prospect of punitive retaliation if Turkey helps Russia avoid sanctions, according to FT.

OTHER

• Iran’s Foreign Minister said nuclear weapons have no place in Tehran’s doctrine and said the IAEA should distance itself from ‘non-constructive political issues’ and solve remaining safeguard issues with Iran technically. Iran’s Foreign Minister also stated that the success of the Vienna nuclear talks depends on Washington’s flexibility and urged for a ‘realistic response’ from the US to Tehran’s proposals to revive the nuclear agreement, according to Reuters citing state media.
• There were mixed messages from Iran nuclear talks in Vienna as Russia’s envoy to Iranian nuclear talks Ulyanov expressed optimism regarding talks in which he said that they are moving in the right direction and the number of unresolved issues is minimal, while US envoy Malley was quoted as voicing disappointment, according to Iran International.
• Israeli’s Defence Ministry said three mortar bombs hit the Israeli-Gaza border crossing which caused damage but there were no reports of casualties. It was later reported that a Gaza truce would take effect on Sunday evening although the ceasefire was broken minutes after, according to Reuters and AFP News Agency.

APAC TRADE

EQUITIES

• APAC stocks traded mixed with price action choppy as participants reflected on the encouraging Chinese trade data and post-NFP hawkish pricing of Fed rate hike expectations, with sentiment also clouded by geopolitical risks related to China’s military drills near Taiwan and renewed shelling of Ukraine's Zaporizhzhia nuclear plant.
• ASX 200 traded indecisively around the 7,000 level as weakness in the consumer-related sectors was offset by a strong mining industry, with OZ Minerals the biggest gainer after it rejected an indicative proposal from BHP.
• Nikkei 225 pared opening losses although the upside was capped amid the ongoing deluge of earnings including SoftBank which is scheduled to announce its results later today and with a cabinet reshuffle set for later this week.
• Hang Seng and Shanghai Comp were varied with the mainland indecisive as mostly stronger than expected Chinese trade data, including a record surplus in July, was counterbalanced by COVID woes after Sanya in the Hainan province was placed on lockdown which has trapped tens of thousands of tourists.
• US equity futures were lacklustre after recent hawkish market rate pricing and Fed speak. ES Unch.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +0.6% after the cash market closed with losses of 0.8% on Friday.

FX

• DXY took a breather following last Friday’s gains where the blockbuster NFP jobs data and firmer-than-expected wages data spurred hawkish market pricing for the next Fed meeting.
• EUR/USD was rangebound but off Friday’s lows with nearby support around 1.0150.
• GBP/USD lacked any major catalysts although further talks are set for today to avert a planned eight-day strike by dockers at Felixstowe which is the UK’s largest container port.
• USD/JPY remained afloat at the 135.00 handle after strong US data widened US-Japan yield differentials.
• Antipodeans were positive although NZD/USD faded most of its gains after softer than previous New Zealand inflation expectations.

FIXED INCOME

• 10yr UST futures were contained after Friday’s sell-off while rhetoric from Fed officials over the weekend was also hawkish-leaning.
• Bund futures were off Friday’s lows although the recovery was minimal with price action stuck around 156.00.
• 10yr JGBs languished with the BoJ only in the market under its fixed rate buying operations which haven’t resulted in any take-up recently.

COMMODITIES

• Crude recouped opening losses in which WTI rebounded off support at the USD 88/bbl level amid increased geopolitical concerns in Ukraine after Russian troops renewed their shelling of the Zaporizhzhia nuclear plant and following mixed rhetoric from officials in Vienna regarding talks on the Iran nuclear deal.
• Spot gold traded sideways after its post-NFP drop and with US CPI data set for Wednesday.
• Chinese gold reserves fell to USD 109.84bln at end-July from USD 113.82bln M/M, according to the PBoC.
• Copper was rangebound as the recent strong data from US and China was counterbalanced by hawkish Fed expectations and China's COVID woes.

CRYPTO

• Bitcoin eked marginal gains above the 23,000 level but with upside amid the tentative overnight mood.

NOTABLE APAC HEADLINES

• Chinese Foreign Minister Wang said China’s actions toward Taiwan are just, appropriate and legal with the actions aimed at safeguarding China’s sovereignty and territorial integrity, while he added that Taiwan is not part of the US and is China’s territory, according to Reuters.
• China confirmed it will extend military drills around Taiwan for Monday, according to Bloomberg.
• China’s military will conduct "regular" drills from now on at the eastern side of the median line of the Taiwan Strait, according to Reuters citing Chinese state television.
• Taiwan’s Premier Su said China ‘arrogantly’ used military actions to disrupt regional peace and stability, while he added that they appeal to the Chinese government not to flex its military muscles everywhere and hamper regional peace, according to Reuters.
• Taiwan’s Defence Ministry said it detected 66 Chinese aircraft conducting activities in the Taiwan Strait as of 5pm local time on Sunday. It was also reported that Taiwan said Chinese aircraft and warships practised attacking Taiwan on Saturday in retaliation for US House Speaker Pelosi’s recent visit, according to Reuters.
• Taiwan’s transport ministry said transit flights gradually resumed on Sunday near China’s military drill zones 1-6 and said they will continue to direct flights and ships away from China military zone No. 7 off Taiwan’s eastern coast until Monday morning, according to Reuters.
• US Secretary of State Blinken said China’s actions on Taiwan were moving away from a practice of resolving issues peacefully to coercion and towards using force, while he said the change to the status quo that has prevailed is coming from China and not the US. Blinken also said that the US seeks to work closely with Philippines President Marcos and reaffirmed that an attack on the Philippines in the South China Sea would invoke the defence treaty, according to Reuters.
• White House said China’s activity around the Taiwan Strait is a significant escalation in China’s efforts to change the status quo, while it added that the actions are ‘provocative, irresponsible and raise the risk of miscalculation’, according to Reuters.
• China’s Embassy in Australia said it hopes that Australia will treat relations with China seriously and be prudent on Taiwan-related issues, while it hopes Australia will avoid being led by others and avoid creating new trouble for China-Australia ties, according to Reuters.
• Chinese authorities locked down the southern coastal city of Sanya during the weekend after a highly infectious Omicron strain was detected in the Hainan province, according to FT.
• China’s aviation regulator shortened the suspension time for inbound flights on routes found to have COVID-19 cases in which flights on a route with an identified COVID case will be suspended for a week if 4% of passengers test positive and will be suspended for two weeks if 8% of passengers test positive, according to Reuters.
• Hong Kong Chief Executive John Lee announced that the hotel quarantine will be reduced to 3 days from 7, with arrivals to be subject to a 3 + 4 format in which the 4 days will be home monitoring.
• Japanese PM Kishida said he will reshuffle the cabinet in the week ahead to address issues including COVID-19, inflation and Taiwan affairs, according to Reuters.

DATA RECAP

• Chinese Trade Balance (USD)(Jul) 101.26B vs. Exp. 90.0B (Prev. 97.94B)
• Chinese Exports YY (USD)(Jul) 18.0% vs. Exp. 15.0% (Prev. 17.9%)
• Chinese Imports YY (USD)(Jul) 2.3% vs. Exp. 3.7% (Prev. 1.0%)
• Chinese Trade Balance (CNY)(Jul) 682.7B vs. Exp. 600.0B (Prev. 650.1B)
• Chinese Exports YY (CNY)(Jul) 23.9% vs. Exp. 19.6% (Prev. 22.0%)
• Chinese Imports YY (CNY)(Jul) 7.4% vs. Exp. 5.7% (Prev. 4.8%)
• New Zealand 1yr Inflation Expectations (Q3) 4.9% (Prev. 4.9%)
• New Zealand 2yr Inflation Expectations (Q3) 3.1% (Prev. 3.3%)

EU/UK

NOTABLE HEADLINES

• UK Tory party leadership frontrunner Truss is under pressure to promise more to poor households facing a cost of living crisis this autumn after she expressed her preference to reduce taxes over ‘handouts’, according to FT.
• UK government plan to cut as many as 91k civil servant jobs over 3 years will require deep cuts to public services and cost at least GBP 1bln in redundancy payments, according to a Whitehall review cited by FT.
• UK government is to conduct a review of the foreign takeover of the National Grid’s gas transmission business amid increased concerns regarding energy security, according to FT.
• Italy’s centrist Azione party is to abandon the centre-left alliance with the Democratic Party just days after agreeing to an alliance to join forces in an effort to prevent a right-wing landslide, according to Bloomberg.
• Moody’s has cut its outlook on Italy to Negative from Stable, affirms BAA3 rating; risks to credit profile have been accumulating more recently due to the economic impact of Russia/Ukraine and domestic politics. Under baseline scenario, Italian debt to continue declining in 2022.