• European bourses are firmer across the board but diverging with their US peers currently
• USD regains poise with Antipodeans fading and EUR noting OpEx; Scandis lead on CPI & Minutes
• Core fixed benchmarks are lower despite fleeting bounces ahead of data & several speakers
• Crude benchmarks remain softer post-Chinese CPI, base metals in-fitting while spot gold is more contained
• Yellen said the US & China made some progress at the bilateral meeting
• Looking ahead, highlights include Chinese M2, NY Fed SCE; Speeches from BoE's Bailey, Fed’s Barr, Daly, Mester & Bostic.

EUROPEAN TRADE

EQUITIES

• European bourses are modestly firmer, with specific catalysts limited but the action diverges with US futures with a number of potential factors in play, Euro Stoxx 50 +0.4%.
• Stateside, futures by contrast are softer across the board, ES -0.2%, with fresh fundamentals light after numerous weekend developments.
• In terms of the divergence between Europe and the US, this could be spurred by any one of a number of factors which include: US-China talks, Citi note, upcoming data (US CPI) and the commencement of Q2 earnings season, among others.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Greenback regains poise after post-NFP retreat, DXY forming a base above 102.000.
• Aussie fades ahead of 0.6900 vs Buck and drifts away from option expiry interest in sympathy with Yuan in reaction to sub-forecast Chinese CPI and PPI; AUD/USD probes 0.6650, USD/CNY and USD/CNH 7.2300+ and circa 7.2400 respectively.
• Euro flanked by expiries between 1.0920 and 1.0970-80, Sterling most afloat on a 1.2800 handle awaiting BoE Governor Bailey and Yen holding bulk of its recovery gains above 142.50 where a Fib is in close proximity.
• NOK propped up after another hawkish CPI-ATE print while the SEK benefits from overall-hawkish June Minutes.
• PBoC set USD/CNY mid-point at 7.1926 vs exp. 7.2132 (prev. 7.2098)
• Click here for more detail.
• Click here for the notable option expiries.

FIXED INCOME

• Debt still in a downward spiral after firmer, but short-lived bounces.
• Bunds just off a new 130.76 Eurex low having popped to 131.25 vs last Friday's 131.12 close.
• Gilts towards base of 92.33-76 Liffe range and T-note soft within 110-21+/13 confines awaiting some data, NY Fed SCE and several Fed speakers.
• Click here for more detail.

COMMODITIES

• WTI and Brent futures are softer intraday with industrial sentiment dampened by the Chinese inflation data overnight.
• Spot gold is flat around USD 1,925/oz and within recent ranges, as traders keep the powder dry for the US inflation metrics mid-week alongside the slew of central bank speakers scattered throughout the week.
• Base metals are mostly subdued but off worse levels, as sentiment in the complex was hit by the softer-than-expected Chinese inflation metrics which underscored a sluggish recovery.
• Kuwait’s Oil Minister said Kuwait and Saudi Arabia have exclusive rights in the Durra Gas Field and that Iran should unilaterally demarcate its maritime borders in accordance with international law, according to Reuters citing comments to Al Ekhbariya TV.
• TotalEnergies (TTE FP) announces the commencement of production in the Absheron Gas field in Azerbaijan, site has production capacity of 4mln cubic metres of gas/day and 12k BPD of condensate.
• Click here for more detail.

NOTABLE US HEADLINES

• US Treasury Secretary Yellen said it is too early to rule out a US recession and that inflation remains too high.
• International Brotherhood of Teamsters said striking Amazon (AMZN) delivery drivers and dispatchers from Palmdale, California extended the picket line to the Amazon warehouse in Massachusetts.
• Click here for the US Early Morning Note.

EUROPEAN DATA RECAP

• Norwegian Core Inflation YY (Jun) 7.0% vs. Exp. 6.6% (Prev. 6.7%); Consumer Price Index YY (Jun) 6.4% vs. Exp. 6.2% (Prev. 6.7%)
• EU Sentix Index (Jul) -22.5 vs. Exp. -18.0 (Prev. -17.0).

NOTABLE EUROPEAN HEADLINES

• BoE Governor Bailey rejected calls to raise the inflation target to above 2% and warned that a change in the target would “unpick expectations”, according to Bloomberg.
• UK Treasury said Mansion House reforms will simplify the rules for buying and selling shares, as well as improve research facilities.
• ECB’s Centeno sees inflation slowing with core prices to follow, while he noted that inflation will be well below 3% by year-end and that all indicators say inflation has peaked.
• ECB’s Villeroy said Eurozone rates will soon reach their high point but it will be more of a high plateau than a peak, while he added that raising the central bank’s inflation target is not a good idea, according to Reuters.
• Riksbank Minutes (June): Although inflation has continued to fall since the Monetary Policy meeting in April, it is still far too high and far from the target of 2% Overall, the Minutes had a hawkish-skew. Click here for more detail.
• Dutch PM Rutte will not be running for a fifth term in office.

CRYPTO

• Bitcoin is under modest pressure from the stronger USD, though with action relatively contained and BTC is currently holding above the USD 30k mark after a fleeting loss of the level earlier to a USD 29.96k trough. Most recently, fleeting upside was seemingly spurred by the Standard Chartered call for Bitcoin to rise to circa. USD 50k by end-2023 and possibly to USD 120k by end-2024.

GEOPOLITICS

US-CHINA

• US President Biden said he told Chinese President Xi earlier this year that he should be careful to observe what happened with Russia as China relies on Western investment and that since Russia went into Ukraine, 600 American corporations have pulled out of Russia. Furthermore, Biden said a Ukraine NATO membership vote would be premature and he doesn’t think Ukraine is ready to join NATO yet.
• US Treasury Secretary Yellen said the US and China have significant disagreements and they must be communicated clearly and directly, while she noted they made some progress and that the objective of her visit was to establish and deepen ties to the new Chinese economic team and reduce the risk of misunderstanding. Yellen added that bilateral meetings with Chinese officials were direct, substantive and productive with ties put on a super footing but noted that she raised serious concerns about China’s unfair economic practices and uptick in coercive action against US firms. Furthermore, she warned that Chinese firms must avoid providing Russia with material support or help in evading sanctions and said if the US moves ahead with curbs on outbound investment, it would be done in a transparent, narrowly targeted way with a rule-making process.
• US Treasury Secretary Yellen had a candid, in-depth, pragmatic and constructive exchange with Chinese Vice Premier He Lifeng in which China expressed concerns about US sanctions and restrictions against China, while China believes that generalising national security is not conducive to normal economic and trade exchanges. Yellen also met with PBoC Party Secretary Pan Gongsheng on Friday in which they discussed global macroeconomic and financial developments including the disproportionate impact of recent economic shocks on low-income countries, while she emphasised the importance of the US and China working together on global challenges.
• Chinese Finance Ministry said regarding US Treasury Secretary Yellen's visit that they ask the US to take practical actions in response to China's major economic concerns about US economic sanctions and crackdown, while the Chinese side once again reiterated its concerns on the lifting of tariffs on China and the cessation of suppression of Chinese enterprises. Furthermore, it stated that China and the US agreed to keep high-level exchanges and all-level communications in the economic area, according to Reuters.

RUSSIA-UKRAINE

• US President Biden held a call with Turkish President Erdogan in which they discussed a range of issues and expressed their commitment to continue supporting Ukraine, while President Biden conveyed his desire to welcome Sweden into NATO as soon as possible and they agreed to meet at the NATO summit in Vilnius. In relevant news, US Secretary of State Blinken emphasised to Turkish Foreign Minister Fidan that now is the time for Sweden to formally join the NATO alliance, according to Reuters.
• US and Germany are reportedly under intense pressure from other allies to show greater support for Ukraine’s eventual membership in NATO and have backed a form of words for the NATO summit’s concluding statement that does not fully endorse a pathway to NATO membership, according to FT.
• White House National Security Adviser Sullivan said Ukraine’s written assurance mentions they will not use cluster munitions on Russian territory or in populated areas, according to Reuters.
• UK PM Sunak commented on US plans to supply Ukraine with cluster munitions in which he stated the UK is part of a convention which prohibits the production or use of cluster munitions and discourages their use, according to Reuters.
• Russian embassy in the US alleged that the White House 'confesses to war crimes' by sending cluster munitions to Ukraine, according to RIA.
• Ukrainian President Zelensky returned from a visit to Turkey and brought back five former commanders of Ukraine’s garrison in Mariupol despite a prisoner exchange last year under which the men were meant to remain in Turkey, according to The Guardian. It was also reported that the Kremlin said Ankara violated agreements on the detention of Ukrainian Azov fighters and said they were not informed of the release, according to RIA.
• Russian Foreign Minister Lavrov discussed Ukraine and the Black Sea grain deal in a phone call with Turkish Foreign Minister Fidan, while they also discussed the return of Ukrainian military commanders to Ukraine, according to Reuters.

OTHER

• North Korea said it denounces the US move to introduce a nuclear-powered submarine in waters near the Korean peninsula and the US move creates a dangerous situation that takes military tension in the region close to nuclear conflict, while North Korea claimed US spy planes recently intruded its airspace and said there is no guarantee that a US spy plane will not be shot down, according to KCNA.
• Chinese President Xi and Solomon Islands PM formally announced a strategic partnership.

APAC TRADE

• APAC stocks were mostly positive albeit with gains capped for many of the regional bourses as participants digested softer-than-expected inflation data from China.
• ASX 200 gave back early gains with price action rangebound as the gains in the commodity-related sectors are offset by losses in industrials, real estate and consumer stocks.
• Nikkei 225 spent most of the session extending on last week’s slump before rebounding in late trade.
• Hang Seng and Shanghai Comp traded higher with the Hong Kong benchmark boosted by the tech sector amid hopes that China could be nearing the end of the tech crackdown. Conversely, the gains in the mainland were capped after the latest Chinese inflation data missed estimates with zero consumer inflation in the mainland and a deeper contraction in factory gate prices, while there were recent comments from Treasury Secretary Yellen that they made some progress during her trip to Beijing and that ties were put on a super footing, although expectations had been pre-set at a low level.

NOTABLE ASIA-PAC HEADLINES

• China’s regulator supports mutual fund managers to reasonably lower fund product fees and said they will optimise the mutual fund fee scheme and steadily lower industry comprehensive fee rates.
• South Korean regulator has reportedly asked major commercial banks to prepare USD 4bln financing for potential support to credit unions facing customer withdrawals, according to Reuters sources. Click here for more detail & analysis.
• Kaisa (1638 HK) has been hit by a wind-up petition from hedge fund Broad Peak Investment Advisors, via FT; adds, citing an investor, the case is being watched by offshore bondholders to see how the onshore claim impacts international restructuring process.
• BoJ Nagoya Branch Manager says has not received any calls from firms to review BoJ's ultra easy policy.
• China's cyberspace regulator has issued a notice to strengthen management on "self media"; will regulate sources of information.

DATA RECAP

• Chinese CPI MM (Jun) -0.2% vs. Exp. 0.0% (Prev. -0.2%); YY (Jun) 0.0% vs. Exp. 0.2% (Prev. 0.2%)
• Chinese PPI YY (Jun) -5.4% vs. Exp. -5.0% (Prev. -4.6%)