• Major bourses in Europe kicked off the session with modest broad-based gains before trimming gains amid a cautious tone; stateside performance more subdued
• Crude benchmarks under pronounced pressure amid constructive Iranian nuclear deal updates; Iran to update before end of session
• DXY has been picking up to the detriment of peers across the board as the tone turns more cautions, Antipodeans lag amid poor China data
• Yuan hit on data and unexpected PBoC action
• Rhine river down to 32cm at Kaub with similar issues reported in China and the Sichuan province to shut industry to ensure power supply
• Looking ahead, highlights include US NY Fed Manufacturing, Speech from Fed’s Waller.

As of 11:15BST/06:15ET

LOOKING AHEAD

• US NY Fed Manufacturing, Speech from Fed’s Waller.
• Click here for the Week Ahead preview.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian Defence Ministry said their forces have taken full control of Pisky village in Ukraine’s Donetsk region and have destroyed an ammo depo and HIMARS rocket system near Kramatorsk, according to Interfax. However, the Ukrainian military later stated that fierce fighting continues at Pisky village.
• Russian Foreign Ministry warned that the possible seizure of Russian assets by the US in favour of Ukraine will complete the destruction of Russia-US relations, while it was reported late on Friday that Russia told the US that diplomatic relations would be badly damaged and could even be broken off if Russia is declared a state sponsor of terrorism, according to TASS.
• US Secretary of State Blinken said that they are concerned about reports of British, Swedish and Croatian nationals being charged by illegitimate authorities in Eastern Ukraine, while he also said that Russia and its proxies have an obligation to respect international humanitarian law including the rights and protections afforded to prisoners of war.
• Several major Wall Street banks have begun offering facilitating trades in Russian debt after guidelines from the Treasury last month that allowed US holders to wind down their positions, according to Reuters
• "Russian forces have suggested a ceasefire around the embattled Zaporizhzhya nuclear power plant in southern Ukraine", according to dpa.

CHINA-TAIWAN

• A delegation of US lawmakers led by Democratic Senator Markey arrived in Taiwan on Sunday and are said to have sought to reaffirm US support for Taiwan, as well as encourage stability and peace across the Taiwan Strait.
• China’s PLA Eastern Theater Command is likely to conduct strong and powerful military operations in the waters and airspaces around Taiwan as a countermeasure to the latest US lawmakers’ visit to Taiwan, according to Global Times.
• Taiwan said 13 Chinese air force planes crossed the Taiwan Strait median line on Saturday and 11 PLA aircraft crossed the median line or entered Taiwan's air defence identification zone on Sunday, according to Reuters.

IRAN

• Iran says we have to let go on some nuclear demand to gain others; Iran to inform the EU of its response to a nuclear deal text tonight, via Bloomberg; says there is a plan B if talks fail, response will be made by midnight tonight, via Reuters. Further nuclear talks will be needed if the US refuses to show flexibility. Deal can be concluded if the US agrees to three remaining issues. Newsflow which saw a pronounced extension of pressure in crude, WTI Sep'22 and Brent Oct'22 to fresh session lows circa. USD 3/bbl below the morning's initial pricing.
• Iranian Foreign Minister says "We exchange messages with Washington on three issues, and we have informed them of our readiness for compromise", via Al Jazeera and a failure to revive the deal would not be the end of the world, via Reuters/Al Jazeera.
• Prior to this, an Iranian Foreign Ministry spokesperson says significant progress was made in the last round of talks held in Vienna. Consultations over the EU draft are ongoing. Ground is prepared for an agreement, provided Iran's red lines are met, via Tehran Times. An update which sent crude to fresh session lows in an immediate reaction

For reference, earlier in the session reports included:

• Tehran Times journalist tweets "My hearings: Through a Qatari mediation, Iran has accepted the EU proposal, and an agreement will soon be signed.".
• Russia’s chief negotiator in Iranian nuclear talks Ulyanov said an agreement may be reached as early as next week but added that “If amendments, objections appear it is difficult to project further developments now. We have to wait for the beginning of next week”, according to TASS.
• The terms of the EU's Iranian Nuclear deal draft "make it sound like the Biden administration is prepared to make greater concessions", according to Politico.

OTHER

• Israel was reported to have conducted an attack on targets in the vicinity of Syria’s port city of Tartous. Furthermore, explosions were heard and Syrian air defences confronted the “hostile targets” over Tartous, while the Syrian military said three military men were killed and three others were injured following the attack, according to Reuters.
• Author Salman Rushdie was stabbed several times on Friday at a conference near Buffalo New York and was rushed to hospital, while a Hezbollah official said the group does not know anything about the attack and VICE World News separately reported that the suspect had been in contact with Iran's Revolutionary Guard.
• EU called for Serbia and Kosovo abandon their war rhetoric as the EU and NATO prepare to hold crisis talks with the rivals this week in an effort to avoid fresh conflict in the Balkans, according to FT.
• Russian President Putin told North Korean leader Kim in a letter that Russia and North Korea will expand bilateral ties, according to KCNA.

EUROPEAN TRADE

EQUITIES

• Major bourses in Europe kicked off the session with modest broad-based gains before trimming gains amid a cautious tone.
• US equity futures have been subdued since the resumption of trade following the gains on Wall Street on Friday, and with retailers such as Walmart set to round off the Q2 earnings season whilst FOMC minutes are due on Wednesday.
• Regional sectors are now mixed (vs mostly positive at the open), with the theme more of a defensive one as Healthcare, Personal Goods, Food & Beverages, and Utilities among the top performers
• German gas levy set at 2.419cents/kWh, via Trading Hub Europe. Additionally, German Finance Ministry spokesperson said there is no response yet from the EU commission on the proposed VAT exemption for gas levy.
• Panasonic (6752 JT) is to boost its EV battery output for Tesla (TSLA) by 10%, according to Nikkei.
• Click here for more detail.

FX

• Dollar back in favour as safe haven with Yuan down on disappointing Chinese data and unexpected PBoC easing, DXY up to 106.340 from 105.540 low, USD/CNH tops 6.7850 and USD/CNY through 6.7700 from 6.7410 midpoint fix.
• Yen holds up better than others irrespective of sub-forecast Japanese GDP, USD/JPY mostly sub-133.50.
• High beta and commodity currencies hit hardest, while Euro, Franc and Sterling also retreat vs Greenback
• NZD/USD sub-0.6400, AUD/USD under 0.7050, USD/CAD over 1.2900, EUR/USD below 1.0200, USD/CHF 0.9460 and Cable close to 1.2050.
• Norwegian Crown undermined by slide in Brent to extent that wider trade surplus shrugged off, but Turkish Lira unable to benefit from cheaper oil as budget deficit blows out, EUR/NOK nearer 9.9000 than 9.9800, UDY/TRY nearer 18.0000 than 17.9000.
• Click herefor more detail.

Notable FX Expiries, NY Cut:

• Click here for more detail.

FIXED INCOME

• Bonds bounce strongly from early lows amidst China-related risk aversion and holiday-thinned turnover.
• Bunds top 156.00 from just above round number below, Gilts reach 116.66 from 115.94 and T-note nearer 119-16 top than 119-04+ bottom.
• UK STIRs contracts underperform as poll predicts another 50bp BoE hike before reversion to 25bp and then pause.
• Click here for more detail.

COMMODITIES

• Crude markets have been selling off since the start of European trade alongside constructive developments on the Iranian Nuclear deal front.
• The firmer Dollar has hit the metals market - spot gold back under USD 1,800/oz, LME copper has been extending on losses back under USD 8,000/t.
• Saudi Aramco’s CEO said they are working to increase production from multiple energy sources and they will invest in the reliable energy and petrochemicals that the world needs, while he added that global oil demand is healthy in which he expects the recovery in oil demand to continue for the rest of the decade and said that global spare capacity is under 2mln bpd and declining fast. Saudi Aramco’s CEO also stated that Saudi oil production capacity increase will come gradually with a limited increase in 2024 and in 2025 they should go to 12.3mln bpd, as well as noted that they are confident in their ability to ramp up to 12mln bpd whenever there is a call from the government or Energy Ministry, according to Reuters.
• Ukrainian state gas transit operator said Gazprom booked transit capacity of 41.82mcm for August 15th (prev. 40.81mcm on August 14th), according to Reuters.
• Iran set September Iranian light crude prices to Asia at Oman/Dubai + USD 9.50/bbl, according to the National Iranian Oil Company.
• The damaged pipeline at the Louisiana port has been repaired, according to a port spokesman cited by Reuters.
• Germany’s top network regulator warned that Germany must cut gas use by 20% to avoid winter rationing, according to FT.
• Click here for more detail.

NOTABLE HEADLINES

• BoE Governor Bailey told Chancellor Zahawi that he would be "open to a review" of the Bank's mandate, following Liz Truss's criticism of its approach to inflation, according to The Telegraph.
• Reuters poll showed 30 out of 51 economists expect the BoE to hike rates by 50bps to 2.25% next month and the remaining 21 economists expect a 25bps increase.
• UK Treasury plans a government-backed lending scheme for suppliers which would reduce energy bills for households by an extra GBP 400 this winter, according to The Times.
• Two of the biggest UK energy suppliers are calling for a special fund that would allow the industry to freeze customers’ bills for two years and spread the cost of the gas-price crisis over a decade or more, according to The Times. It was also reported that UK energy suppliers called for the UK government to scrap levies and charges on bills, according to FT.

NOTABLE DATA

• UK Rightmove House Prices MM (Aug) -1.3% (Prev. 0.4%), Rightmove said the dip was broadly in line with the summer price trends of the past decade and would probably recover. (Newswires)

NOTABLE US HEADLINES

• Wells Fargo (WFC) is planning to reduce its vast mortgage empire which is the largest amongst US banks, according to Bloomberg.

APAC TRADE

• APAC stocks were mixed with markets focused on China, as the PBoC’s surprise 10bps rate cuts to its 1-year MLF rate and 7-day Reverse Repo was overshadowed by the latest activity data from China in which both Industrial Production and Retail Sales fell short of market expectations.
• ASX 200 was positive with upside led by tech and miners amid a busy schedule of earnings this week and with Bluescope Steel firmly higher after its FY net more than doubled.
• Nikkei 225 outperformed and was unfazed by the Japanese GDP data for Q2 which printed weaker-than-expected but returned to expansion territory.
• Hang Seng and Shanghai Comp swung between gains and losses with early support after the PBoC delivered surprise 10bps rate cuts for the 1-year MLF and 7-day Reverse Repo rates, although Chinese stocks then slipped back into the red after disappointing Chinese activity data

NOTABLE APAC HEADLINES

• PBoC injected CNY 400bln vs CNY 600bln maturing via 1-year MLF with the rate cut by 10bps to 2.75% (exp. 2.85%), while it conducted CNY 2bln of 7-day reverse repos with the rate cut by 10bps to 2.10%.
• China’s local COVID-19 cases topped 2,000 on Friday despite the recent tighter restrictions and lockdowns, according to Bloomberg.
• Shanghai extended the weekly COVID-19 testing requirement until end-September, although it was also reported that Shanghai announced primary schools, middle schools, kindergartens and nurseries will be permitted to reopen on September 1st, according to a statement cited by Reuters.
• China's stats bureau said China's economy continued a recovery trend in July but the foundation for a recovery is not solid and said the momentum of China's economic recovery slowed in July, while it added that the economy remains resilient despite facing difficulties and they expect China's economy to continue to recover, according to Reuters.
• "Rivers in multiple provinces, regions across China have dried up due to persistently high temperature and far below average amount of rainfall, posing threat to drinking water resources and agriculture productions", according to Global Times.
• China's Sichuan province order industrial plants to shut down between Aug 15-20th to ensure residential power supply, according to a document cited by Reuters.

DATA RECAP

• Chinese Industrial Output YY (Jul) 3.8% vs. Exp. 4.6% (Prev. 3.9%)
• Chinese Retail Sales YY (Jul) 2.7% vs. Exp. 5.0% (Prev. 3.1%)
• Chinese Urban Investment (YTD)YY (Jul) 5.7% vs. Exp. 6.2% (Prev. 6.1%)
• Chinese House Prices YY (Jul) -0.9% (Prev. -0.5%)
• Japanese GDP QQ (Q2) 0.5% vs. Exp. 0.6% (Prev. -0.1%); QQ Annualised (Q2) 2.2% vs. Exp. 2.5% (Prev. -0.5%)