• APAC stocks took impetus from their global counterparts after softer-than-expected US CPI propelled stocks on Wall St (S&P 500 +2.1%)
• European equity futures are indicative of a marginally higher open with the Euro Stoxx 50 future +0.4% after the cash market closed higher by 0.9% yesterday
• DXY has clawed back some of its post-CPI losses, EUR/USD is back on a 1.02 handle, JPY lags G10 FX
• Fed's Daly and Kashkari suggested it is too soon to declare victory on inflation
• Looking ahead, highlights include US IJC & PPI, IEA OMR, OPEC MOMR, Banxico Policy Announcement, Speech from Fed's Daly, Supply from the US

US TRADE

• US stocks rallied and the S&P 500 reclaimed the 4200 level for the first time since May after cooler-than-expected CPI data spurred a dovish reaction across asset classes and saw market pricing for the Fed lean towards a 50bps hike in September rather than 75bps as was priced in before the release.
• SPX +2.10% at 4,209, NDX +2.85% at 13,378, DJIA +1.63% at 33,309, RUT +2.91% at 1,964.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed's Kashkari (2023 voter) said he is happy to see inflation surprised to the downside but added the Fed is far away from declaring victory on inflation and the latest data does not change his rate hike path in which he expects rates at 3.9% by year-end and 4.4% by end of next year. Kashkari also commented that they may be in a recession in the near future but the risk of a recession would not deter him from doing what is needed and they are going to get inflation down to 2%. Furthermore, he added that they may be in a high-pressure regime consistent with inflation higher than 2% which would mean the Fed needs to do more work.
• Fed's Daly said (2024 voter) it is too early to declare victory on inflation fight and pointed to price increases remaining far too high but signalled initial support for smaller rate hikes, while she noted that a 50bps hike in September is her baseline and maintained that rates should increase to just under 3.5% by year-end, according to FT.
• Fed is likely to want further evidence of inflation slowing down, according to WSJ's Nick Timiraos.
• US House Speaker Pelosi said the House will pass the inflation reduction act on Friday, according to Reuters.
• US Treasury Secretary Yellen told the IRS Commissioner that additional IRS resources from Inflation Reduction Act should not be used to increase audits on taxpayers making below USD 400k and said that contrary to misinformation by critics, households earning 400k and below will not see an increase in the chances that they are audited, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelenskiy said Ukraine needs to consider how to cause as many Russian losses as possible to shorten the war, according to Reuters.
• Senior UN official said they are expecting a large rise in applications for ships to export Ukraine grain and anticipate the number of ships going into Ukraine to pick up grain will grow in the near future as deals are made.

OTHER

• North Korean leader Kim's sister said leader Kim recovered from suspected COVID-19 and had experienced a high fever, while she added that the COVID outbreak resulted from enemies in South Korea who sent anti-North leaflets. Furthermore, she said South Korea continues to commit crimes against humanity by sending anti-North leaflets and that strong retaliation must be taken to respond to South Korea's crimes with its puppet regime an unchangeable main enemy, according to KCNA.
• South Korea expressed regret over North Korea's groundless claim over the COVID outbreak and threats, according to Yonhap.

APAC TRADE

EQUITIES

• APAC stocks took impetus from their global counterparts after softer-than-expected US CPI data spurred a dovish reaction across asset classes and unwound some of the hawkish Fed market pricing.
• ASX 200 reclaimed the 7,000 level with the tech and mining-related sectors leading the gains in the index, while financials are also positive as participants digest earnings results and updates from AMP and QBE Insurance.
• KOSPI strengthened despite the increase in COVID cases to a 4-month high and the recent devastating floods in Seoul, with strength in index heavyweight Samsung Electronics after it introduced its latest line-up of foldable smartphones and other key products.
• Hang Seng and Shanghai Comp were higher with Hong Kong lifted by tech and property stocks, although advances in the mainland were initially contained following a jump in COVID infections and with the Biden administration said to have currently set aside the option of scrapping some China tariffs or investigating adding more.
• US equity futures marginally extended on gains after the S&P 500 topped 4,200 for the first time since May. ES +0.2%.
• European equity futures are indicative of a marginally higher open with the Euro Stoxx 50 future +0.4% after the cash market closed higher by 0.9% yesterday.

FX

• DXY nursed some of the losses seen in the aftermath of the softer-than-expected CPI data with rhetoric from Fed officials remaining hawkish with both Daly and Kashkari suggesting it is too soon to declare victory on inflation.
• EUR/USD gradually faded some of the post-CPI gains and retreated back below the 1.0300 handle.
• GBP/USD failed to sustain the 1.2200 status despite comments from BoE's Pill who noted that wage growth is running too fast and that he doesn't expect a return of QE for at least a few years.
• USD/JPY marginally benefitted from the partial recovery in the buck but with price action muted by the absence of Japanese participants.
• Antipodeans were rangebound amid the lack of tier-1 data releases from the region and the uninspired mood across commodities.

FIXED INCOME

• 10yr UST futures continued to retrace the knee-jerk spike from the softer-than-expected US CPI data despite the unwinding of hawkish Fed expectations and a strong US 10yr auction.
• Bund futures suffered a similar fate to their US counterparts and continued to trickle lower after failing to hold above the 157.00 level.

COMMODITIES

• Crude was indecisive after yesterday's fluctuations whereby support from the broader risk sentiment was partially offset by the resumption of Druzhba pipeline flows and mixed inventory data.
• Spot gold remained lacklustre after fully reversing the initial gains from the US CPI data.
• Copper prodded post-CPI highs but with upside capped as the dollar nursed some of its recent losses.

CRYPTO

• Bitcoin extended on gains amid the heightened risk appetite and climbed above the 24,000 level.

NOTABLE APAC HEADLINES

• US President Biden's administration is rethinking potential tariff moves after China's response to Pelosi's Taiwan trip and set aside the option of scrapping some tariffs on China or investigating adding more, for now, while President Biden has not yet made a decision on tariffs, according to sources cited by Reuters.
• Taiwan's Foreign Ministry responded to China's recent white paper on Taiwan and stated that Taiwan firmly rejects 'one country, two systems' and said that only Taiwan's people can decide its future, according to Reuters.
• US House Speaker Pelosi said they will not allow China to isolate Taiwan.
• China reported 700 (prev. 444) new coronavirus cases in the mainland for August 10th and 1,466 (prev. 650) new asymptomatic cases, while China's Sanya city reported 1,254 (prev. 410) new COVID cases on August 10th and China’s city of Yiwu imposed a city-wide lockdown for three days due to COVID, according to Reuters.

DATA RECAP

• Singapore GDP QQ (Q2 F) -0.2% vs. Exp. 0.0% (Prev. 0.7%)
• Singapore GDP YY (Q2 F) 4.4% vs. Exp. 4.8% (Prev. 3.7%)

EU/UK

NOTABLE HEADLINES

• BoE's Chief Economist Pill said wage growth is running too fast at present and pricing pass-through from companies is too high, while he said that rising interest rates will only have an effect around the end of 2023 and the threat of inflation psychology is much more acute in the UK and Europe than the US. Furthermore, BoE's Pill said he does not see the return of QE for at least the next few years.

DATA RECAP

• UK RICS Housing Survey* (Jul) 63 vs. Exp. 60.0 (Prev. 65.0)