• European bourses are firmer across the board after a relatively constructive APAC handover, Euro Stoxx 50 +0.4%, though off best levels post-ZEW.
• US futures are in contained ranges and pivoting the unchanged mark at this point in time, ES -0.2%; HD and WMT in focus.
• DXY has breached last week's peak to the detriment of peers across the board, with EUR downside exacerbating this amid data.
• Core fixed benchmarks have seen a pullback from Monday's best levels while UK and German supply was well received.
• Crude benchmarks pressure, but off worst levels and well within yesterday's ranges, as the EU receives Iran's response to the JCPOA draft.
• Looking ahead, US Building Permits/Housing Starts, Industrial Production. Earnings from Walmart.

As of 11:20BST/06:20ET

LOOKING AHEAD

• US Building Permits/Housing Starts, Industrial Production. Earnings from Walmart.
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GEOPOLITICS

CHINA-TAIWAN

• China's Taiwan Affairs Office sanctioned seven Taiwanese officials for supporting Taiwan independence, according to state media. Taiwan's Foreign Ministry later stated regarding China's sanctions and stated that they cannot accept threats, while President Tsai separately commented that peace and stability of the Taiwan Strait are critical to the stability of the global supply chain of high-tech products, according to Reuters.

RUSSIA-UKRAINE

• Russian diplomat said it is too dangerous for the IAEA mission to go through Kyiv to visit the Zaporizhzhia nuclear power station and that the IAEA mission cannot deal with the demilitarisation of the plant, according to Reuters.
• Russian Defence Ministry says that Sweden and Finland joining NATO will mean that the nation reviews its defence approaches, via Reuters.

IRAN

• Iran responded to the EU's draft nuclear deal and expects a response in the next two days, according to a source cited by ISNA. It was also reported that an adviser to the Iranian negotiating delegation told Al-Jazeera they are not far from an agreement and chances of reaching a nuclear deal are very high.
• Iran's response to the draft EU JCPOA text will probably fail to satisfy Western parties, particularly the US, according to Iran International; Iran wants further provisions around economic guarantees above the one-year exemption reportedly being offered. Adding that Iran has reportedly accepted the safeguarding proposal.
• EU says it consulting with the US on a way ahead for the Iranian nuclear deal.
• Senior Iranian official says Iran's response to the European proposal is realistic and professional and includes important observations to secure its interests, according to Al Jazeera.

EUROPEAN TRADE

EQUITIES

• European bourses are firmer across the board after a relatively constructive APAC handover, Euro Stoxx 50 +0.4%, though off best levels post-ZEW.
• US futures are in contained ranges and pivoting the unchanged mark at this point in time, ES -0.2%; HD and WMT in focus.
• Home Depot Inc (HD) Q1 2023 (USD): EPS 5.05 (exp. 4.94), Revenue 43.79 (exp. 43.36bln); confirms FY22 guidance.
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FX

• DXY breaches last week’s peak as Treasury yields rebound and Yuan weakens further amidst Chinese growth concerns, index up to 106.860 vs 106.810 on August 8, USD/CNY and USD/CNH approach 6.8000 and 6.8200 respectively.
• Euro stumbles after unexpected deterioration in German ZEW economic sentiment and Pound slips following mixed UK jobs and wage data, EUR/USD down to 1.0125 and Cable low 1.2000 area.
• Yen and Franc retreat as risk sentiment improves and bonds back off, USD/JPY tops 134.00 and USD/CHF above 0.9500.
• Kiwi cautious ahead of RBNZ, but Aussie holds up better post-RBA minutes flagging more hikes, NZD/USD eyes bids into 0.6300 and AUD/USD hovers just under 0.7000.
• Loonie underpinned awaiting Canadian CPI as crude prices stabilise to a degree, USD/CAD straddles 1.2900.
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Notable FX Expiries, NY Cut:

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FIXED INCOME

• Debt futures retreat further from Monday's lofty levels in corrective price action and as broad risk sentiment improves.
• Bunds down to 156.07 having been closer to 157.00, Gilts to 116.52 vs 116.99 earlier and 117+ yesterday, T-notes to 119-19 from almost 120-00.
• UK 2029 and German 2027 supply snapped up amidst given some yield concession.
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COMMODITIES

• Crude benchmarks pressure, but off worst levels and well within yesterday's ranges, as the EU receives Iran's response to the JCPOA draft.
• Initial indications are that a deal is in reach, though, caveats/unknowns remain in focus - particularly the US' response.
• EIA said US oil output from top shale regions in September is due to increase to the highest since March 2020, according to Reuters.
• Iran sets September Iranian light crude OSP to Asia at Oman/Dubai + USD 9.50/bbl, via Reuters.
• Major European zinc smelter (Nyrstar Budel) reportedly to shut due to elevated energy costs, via Bloomberg; will shut as of September 1st.
• Spot gold under modest pressure as the USD lifts, but still near the 50-DMA while base metals recoup from Monday's data-driven pressure.
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NOTABLE HEADLINES

• Czech central banker Frait says the current level of rates at 7% already creates restrictive monetary conditions.
• NBP's Wnorowski says rates could peak between 6-7%.

NOTABLE DATA

• UK ILO Unemployment Rate (Jun) 3.8% vs. Exp. 3.8% (Prev. 3.8%); Claimant Count Unemployment Change (Jul) -10.5k (Prev. -20.0k)
• Average Week Earnings 3M YY (Jun) 5.1% vs. Exp. 4.5% (Prev. 6.2%); (Ex-Bonus) (Jun) 4.7% vs. Exp. 4.5% (Prev. 4.3%)
• German ZEW Economic Sentiment (Aug) -55.3 vs. Exp. -53.8 (Prev. -53.8); Current Conditions (Aug) -47.6 vs. Exp. -48.0 (Prev. -45.8)
• Looks for a further decline in the already weak economic growth in Germany. Still high inflation ad expected additional costs for heating and energy lead to a decrease in profit expectations for the private consumption sector. Expectations for the financial sector are improving due to the supposed further increases in short-term interest rates.
• EU ZEW Survey Expectations (Aug) -54.9 (Prev. -51.1)

NOTABLE US HEADLINES

• US President Biden's administration is making hundreds of thousands more vaccine doses available to support the Monkeypox response in which the HHS noted up to 442k doses will be available for states and jurisdictions to order under accelerated phase 3 of the National Vaccination Strategy, according to Reuters.

APAC TRADE

• APAC stocks were mostly positive as the region followed suit to the gains on Wall Street but with upside limited as economic slowdown concerns lingered.
• ASX 200 traded higher amid a deluge of earnings and with the index led by the mining sector including BHP shares after the industry giant reported a record FY underlying net and dividend.
• Nikkei 225 lacked direction amid the absence of any major fresh macro drivers and alongside a choppy currency.
• Hang Seng and Shanghai Comp were initially kept afloat by support-related optimism with developers encouraged after reports that China is considering issuing government-guaranteed bonds to provide liquidity to certain developers, while PBoC-backed press noted that China needs additional policy stimulus to increase economic growth. However, the Hang Seng later pulled back ahead of the European open to slip below 20k.

NOTABLE APAC HEADLINES

• China's NDRC said macro policies should be strong, reasonable and moderate in expanding demand actively, while it will roll out practical measures to support starting up businesses and job employment, according to Reuters.
• PBoC-backed Financial News front page report stated that China needs additional policy stimulus to increase economic growth, while Securities Times suggested the recent surprise PBoC rate cut could be the first in a series of measures to stabilise growth.
• China is to consider issuing government-guaranteed bonds to provide liquidity to certain developers.
• RBA Minutes from the August 2nd meeting stated the board expects to take further steps in the process of normalising monetary conditions in the months ahead, but is not on a pre-set path and seeks to do this in a way that keeps the economy on an even keel. The minutes also reiterated that members agreed it was appropriate to continue the process of normalising monetary conditions and that inflation was expected to peak later in 2022 and then decline back to the top of the 2%-3% range by the end of 2024.
• Australian Bureau of Statistics will begin publishing a monthly CPI indicator with the first publication on October 26th to coincide with the release of the quarterly CPI data, while it added that quarterly CPI will continue to be the key measure of inflation.
• China is reportedly to enhance policy to increase new births, will boost housing support for those with additional children, via Bloomberg.