• European risk tone is hampered by mixed China data and subsequent cuts to the nations FY23 growth view by various desks
• Stateside, action is more contained with the docket relatively sparse ahead of Tuesday’s key earnings & with Fed blackout underway
• Crude benchmarks have returned to APAC lows on China & resumption of Libyan production, intersected by marked upside on a since withdrawn alert
• USD is pressured with havens outperforming though antipodeans are the marked underperformers after data and Treasury commentary
• Fixed income has been volatile, benchmarks now at the top-end of parameters with yields lower across the curve
• Looking ahead, highlights include US NY Fed Manufacturing, Speeches from ECB’s Elderson, US Treasury Secretary Yellen.

EUROPEAN TRADE

EQUITIES

• European bourses are pressured following the soft APAC handover given mixed China data and subsequent growth forecast downgrades by various desks, Euro Stoxx 50 -1.20%.
• The FTSE 100 and Energy names saw a bid on a since withdrawn Saudi report, with the complex reverting back to the initial downside following overnight data and the resumption of Libyan activity.
• Consumer discretionary names lag after Richemont's update with a particular focus on the demand impulses from US and China.
• Stateside, futures are little changed but with a slight negative bias given the above, ES -0.1%. The US session is a light one but earnings ramp up again on Tuesday, in the pre-market today the main updates have related to MSFT/ATVI.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• DXY hits resistance at 100.000 again and drifts down towards 99.750.
• Franc bounces off a shorter IMM spec base as USD/CHF eyes 0.8575 from 0.8625 at one stage.
• Yen rebounds towards 138.00 axis amidst softer Treasury yields and Euro forms firmer foothold above 1.1200.
• Kiwi and Aussie underperform within 0.6368-32 and 0.6849-05 ranges vs Buck as NZ performance of services index slips and the Australian Treasury sees substantial economic slowdown.
• Yuan weakens after mixed Chinese data as PBoC sets fix closer to spot and banks cut 2023 GDP forecasts.
• PBoC set USD/CNY mid-point at 7.1326 vs exp. 7.1386 (prev. 7.1318)
• Click here for more detail.
• Click here for the notable option expiries, NY cut.

FIXED INCOME

• Bonds volatile after a relatively muted start as early Gilt weakness waned and prices picked up markedly on a mix of risk, technical and oil-related factors.
• Bunds, Gilts and T-note are now nearer the top of wider 133.41-132.60, 95.39-94.58 and 112-29+/14 respective ranges awaiting more ECB speakers and Empire State survey.
• Click here for more detail.

COMMODITIES

• Marked two-way crude action with initial pressure on Libya's resumption and Chinese data was eroded by a since withdrawn update to Saudi's production, an update which lifted WTI and Brent to session highs. The subsequent withdrawal of the headline has seen the benchmarks return back to their overnight lows.
• Spot gold is contained as the US risk tone remains tentative and the USD struggles for clear direction; base metals are particularly hampered on the updates to and from China on the growth front.
• Libya’s El Sharara oil field and the El Feel oil field resumed production, according to Reuters.
• Kuwait plans to raise oil output from 2.7mln bpd to 3.15mln bpd within four years, according to Reuters.
• Saudi’s Energy Minister said they will continue to guarantee oil supply to Japan and maintain the position as the reliable partner, while he added that Saudi is Japan’s largest oil exporter fulfilling 40% of its total needs and will continue cooperating with Japan in clean hydrogen and recycled carbon fuels, according to state TV.
• Japan is to ensure private sector loans for LNG procurement with Nippon Export & Investment Insurance to receive premiums from private lenders in turn for policies that will cover more than 90% of the loaned amount, with NEXI is to insure a loan by Sumitomo Mitsui Banking Corp (8318 JT) to a unit of LNG importer JERA, according to Nikkei.
• Turkey raised the special consumption tax on oil and gasoline with taxes on petrol increased by about 200%, according to Official Gazette and FT.
• Reuters has withdrawn the Saudi Arabia headline at 10:05BST re. an oil output extension; Reuters clarifies the headline was a repeat of news published on June 4th. For reference, the headline was that Saudi Arabia is to extend its voluntary cut until the end of December 2024, via Reuters citing the Energy Ministry - HEADLINE HAS SINCE BEEN WITHDRAWN BY REUTERS.
• Click here for more detail.

NOTABLE US HEADLINES

• Taiwan's VP/Ruling Party Candidate Lai Ching-teh is to visit the US in August as part of a S. American trip, a trip which will not contain high-profile engagements/locations that could provide prextex for a reaction from Beijing, via FT citing sources.
• Click here for the US Early Morning Note.

EUROPEAN DATA RECAP

• UK Rightmove House Price Index MM (Jul) -0.2% (Prev. 0.0%); YY (Jul) 0.5% (Prev. 1.1%)

NOTABLE EUROPEAN HEADLINES

• German economy may disappoint as sentiment worsens; GDP recovery may be weaker in remainder of 2023 than implied June forecasts; inflation may fall further in coming months, core to stay higher over summer, according to Bundesbank cited by Reuters.
• UK PM Sunak is to appoint a new Defence Secretary after Ben Wallace said he will leave the cabinet at the next reshuffle and will not stand as an MP in the next election, according to FT.
• UK signed a treaty to join the CPTPP Indo-Pacific trade deal but sees chances of reaching a free trade agreement with the US as very low, according to Bloomberg citing Business Secretary Badenoch.
• UK consumer group Which? called for government action on grocery prices and noted that supermarket prices have increased 25.8% in two years, while it noted that some prices have jumped by as much as 175%, according to Reuters.
• Spanish PM Sanchez says there is a window of opportunity to conclude EU-Mercosur deal in H2'23; we expect trade deals with Mexico and Chile to be ratified in H223. Follows on from, Brazilian President Lula says hopes to finish EU-Mercosur agreement this year, it will "open new horizons". Reminder, Spanish elections take place on July 23rd and currently Sanchez is lagging behind People's Party leader Feijoo.

CRYPTO

• National Australia Bank announced new customer protections by blocking some payments made to high-risk cryptocurrency exchanges, according to Reuters.

GEOPOLITICS

• Russian President Putin said Russia reserves the right to mirror actions in the event that cluster munitions are used against Russia and that they have a sufficient stockpile of them, while he also stated that Ukraine’s attempts to break through Russian defences have failed, according to IFX and Reuters.
• Russian-backed Governor of Crimea said Russian air defences and fleet engaged in repelling Ukraine’s drone attacks on Crimea, while the Russian Defence Ministry said it stopped Ukraine’s “terrorist attack” on Crimea’s Sevastopol, according to RIA. It was also reported that the Russian-backed Governor said traffic was stopped on the Crimean bridge due to an "emergency", while Ukrainian media reports explosions were heard on the Crimean bridge to Russia.
• Russia moved to ban Apple (AAPL) iPhones for government officials after claiming they were hacked by the US, according to SCMP. It was also reported that Moscow seized the Russian subsidiaries of Danone (BN FP) and Carlsberg’s (CARLB DC) Baltika, according to FT.
• UN sources said the Black Sea grain deal has not been extended yet but everything is possible, according to TASS.
• China and Russia will start joint air and sea drills in the Sea of Japan, according to Reuters.
• Japan is reportedly being pressed by the US to consider a military role in a Taiwan conflict, according to WSJ.
• White House National Security Adviser Sullivan said the administration remains concerned North Korea will move forward with another intercontinental ballistic missile test, according to Reuters.
• N. Korea says the US' offer of discussions is just a ploy, via KCNA. Follows the US offering to engage in talks without preconditions around the nuclear programme, according to Secretary of State Sullivan.

APAC TRADE

• APAC stocks began the week subdued as participants digested mixed economic growth and activity data from China with conditions also thinned due to the holiday closure in Japan and typhoon disruption in Hong Kong.
• ASX 200 was rangebound with gains in healthcare and tech counterbalanced by losses in consumer and commodity-related industries, while Australian Treasurer Chalmers provided a glum outlook in which he expects a substantial economic slowdown and unemployment to increase as inflation eases.
• KOSPI was constrained by a sombre mood after the deadly floods in South Korea and lingering US concerns that North Korea will move forward with another intercontinental ballistic missile test.
• Shanghai Comp underperformed in the absence of Stock Connect flows owing to the unscheduled closure in Hong Kong and as participants reflected on the mixed bag of tier-1 releases from China which showed economic growth was firmer than expected QQ but disappointed on the YY reading, while Chinese Industrial Production topped estimates in June and Retail Sales missed. Furthermore, the data was seen to be distorted by the effects of the lockdowns in China last year and attention was also on the PBoC which maintained its 1-year MLF rate unchanged at 2.65%, as expected.
• TSMC (2330 TT) may reportedly cut FY23 guidance to a decline of 10% Y/Y from a previous low-to-mid-single digit decline Y/Y, citing weaker than expected demand for traditional servers, high chip inventories and slow demand for non-Apple (AAPL) smartphones, via money.udn.

NOTABLE ASIA-PAC HEADLINES

• PBoC conducted CNY 103bln (CNY 100bln maturing) in 1-year MLF with the rate kept unchanged at 2.65%.
• China's stats bureau said the national economy showed good momentum of recovery in H1 but reiterated that the foundation of the domestic economic recovery is not solid, while it stated that China is confident and capable to achieve economic growth targets.
• US Treasury Secretary Yellen commented at the G20 meeting that her Beijing visit put the US-China relationship on a super footing and is eager to mobilise further action on areas of mutual concern. Yellen said tariffs on China were put in place as there were concerns about unfair trade practices and those concerns remain, while she added that China’s slowdown is significant to the global economy and seems in part a reflection of a consumption slowdown. Furthermore, Yellen said US corporates want to see an environment where they can invest and thrive in China, according to Reuters.
• US Senate Majority leader Schumer said Democrats will amend the defence policy bill to impose sanctions on China and declare a national emergency over fentanyl, while he hopes the China amendment will pass with strong bipartisan support, according to Reuters.
• US climate envoy Kerry arrived in China and commented that it is imperative the US and China make real progress in the little more than 4 months left before COP28.
• New Zealand PM Hipkins said the region is becoming more contested, less predictable and less secure, while he added that China’s rise and how it seeks to exert influence is a major driver of the increasing strategic competition. Furthermore, he stated the relationship with China will continue to require careful management and that New Zealand is stepping up engagement with India as it expands its role and interests in the Indo-Pacific.
• Australian Treasurer Chalmers said he expects a substantial economic slowdown and unemployment to increase as inflation eases, according to Bloomberg.
• China's State Planner Chairman met with Cos in the steel smelting, electronic devices and modern logistics sector; adding, efforts will be made to optimise the development of the private economy.

DATA RECAP

• Chinese GDP QQ SA (Q2) 0.8% vs. Exp. 0.5% (Prev. 2.2%); YY (Q2) 6.3% vs. Exp. 7.3% (Prev. 4.5%)
• Chinese Industrial Production YY (Jun) 4.4% vs. Exp. 2.7% (Prev. 3.5%); Retail Sales YY (Jun) 3.1% vs. Exp. 3.2% (Prev. 12.7%)
• Chinese Urban Investment (YTD)YY (Jun) 3.8% vs. Exp. 3.5% (Prev. 4.0%)
• Chinese House Prices YY (Jun) 0.0% (Prev. 0.1%)

CHINA GDP FORECAST ALTERATIONS

• JP Morgan, Citi and SocGen cut China's FY23 GDP growth forecast to 5.0% (Prev. 5.5%); Morgan Stanley cuts the view to 5.0% (prev. 5.7%)
• Morgan Stanley added the cut is due to weak Q2 growth and delayed stimulus.