• APAC stocks were mostly lower after the region failed to sustain the momentum from Wall St where tech and small caps outperformed.
• US President Biden is weighing new curbs on chips and semiconductor-making devices, according to Bloomberg.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed down by 1.0% yesterday.
• DXY remains sub-100.00, EUR/USD hovers around 1.1250, Cable is eyeing a test of 1.31 to the upside.
• Looking ahead, highlights include US Retail Sales, Business Inventories & Industrial Production, Canadian CPI & New Zealand CPI, Speeches from Fed's Barr, Supply from UK & Germany, Earnings from Novartis, Ocado, Morgan Stanley & Bank of America.

US TRADE

EQUITIES

• US stocks were firmer with gains led by the tech sector after the Nasdaq rebalancing decision lacked the bite that some had feared, while the Russell 2k outperformed the major indices after the improvement in the NY Fed's Empire manufacturing index cushioned the blow from the disappointing Chinese GDP data and supported small caps.
• SPX +0.39% at 4,523, NDX +0.95% at 15,713, DJIA +0.22% at 34,585, RUT +1.04% at 1,951.
• Click here for a detailed summary.

NOTABLE HEADLINES

• NY Fed June SCE credit access survey overall rejection rate for credit applicants increased to 21.8% which is the highest since June 2018 with the increase broad-based across age groups and the highest among those with credit scores below 680.
• US bank regulators are set to impose new capital rules next week with US banks facing tougher mortgage capital rules than Basel standards, according to Bloomberg.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower after the region failed to sustain the momentum from Wall St where tech and small caps outperformed after NY Fed Manufacturing data softened the blow from recent Chinese data.
• ASX 200 was subdued as participants digested the RBA Minutes from the July 4th meeting which noted that the Board agreed some further tightening may be required and will reconsider at the August meeting, while it also noted the economy had slowed considerably and that consumer spending is seen weak in Q2.
• Nikkei 225 initially advanced on return from the long weekend but then suffered a reality check and momentarily faded all of its gains amid weakness in its peers.
• Hang Seng and Shanghai Comp were lower with property stocks leading the declines in Hong Kong after the long-delayed results from the world’s most indebted developer Evergrande which suffered a net loss of CNY 476bln and CNY 105.9bln for 2021 and 2022, respectively. The US-China relationship also remained in focus with amicable comments in talks between US Climate Envoy Kerry and China’s top diplomat Wang Yi, although this was somewhat negated by reports the US aims to propose China investment limits by the end of next month and that President Biden is weighing new curbs on chips and semiconductor-making devices.
• US equity futures traded sideways heading into upcoming data and earnings releases, while a report that US banks are facing tougher mortgage capital rules than Basel standards was largely ignored by futures.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 +0.1% after the cash market closed down by 1.0% yesterday.

FX

• DXY remained lacklustre at a sub-100.00 level with attention now turning to the upcoming data from the US due later including Retail Sales.
• EUR/USD eked marginal gains but with price action contained around the 1.1250 level after recent ECB rhetoric provided little in the way of fresh insight.
• GBP/USD gradually edged higher and looks to make another attempt at reclaiming the 1.3100 status.
• USD/JPY eventually trickled lower following its recent whipsawing through the 139.00 level.
• Antipodeans were choppy with two-way price action seen after the RBA minutes remained hawkish but also provided a bearish tone on the economy.
• PBoC set USD/CNY mid-point at 7.1453 vs exp. 7.1704 (prev. 7.1326)

FIXED INCOME

• 10yr UST futures struggled for direction following the prior day’s choppy performance.
• Bund futures slightly edged higher overnight after bouncing off support near the 133.00 level.
• 10yr JGB futures were kept afloat but with price action indecisive amid a lack of data releases and the absence of additional BoJ purchases.

COMMODITIES

• Crude futures were quiet amid a lack of notable energy-related catalysts and with the rebound from support at the prior day's lows limited by the overhang from recent disappointing Chinese data.
• US total shale regions oil production for August is seen to decline 18k BPD to 9.399mln BPD vs 5.9k BPD rise in July, according to the EIA.
• Spot Gold traded marginally higher alongside a further weakening of the greenback.
• Copper futures were confined to within a tight range amid the mostly risk-averse mood in Asia.

CRYPTO

• Bitcoin traded indecisively although just about held above the USD 30,000 level.
• Binance reduced company employee benefits and warned more cost-cutting could come amid a decline in profit as a result of the current market environment and regulatory climate, according to WSJ citing a letter.

NOTABLE ASIA-PAC HEADLINES

• China published measures to support household consumption which includes home appliances and it told financial companies to enhance household spending support. China stated that authorities will encourage companies to create online service platforms for household consumer services and will kick off household consumer goods promotion.
• China's NDRC said they will deepen SOE reforms, break the institutional barriers restricting private firms from participating in fair market competition and will boost private investment, as well as create a positive development environment for private firms. NDRC added that persistent economic recovery faces risks and challenges including insufficient demand, sluggish momentum and weak confidence, while it will boost household income through various channels and will strive to ensure household income growth is basically in line with economic growth.
• US aims to propose China investment limits by end-August with limits likely to not take effect until 2024, while US outbound investment curbs are focused on AI, chips and quantum computing, according to Bloomberg citing sources familiar with Biden administration's plans.
• US President Biden is weighing new curbs on chips and semiconductor-making devices, while Intel (INTC), Nvidia (NVDA) and Qualcomm (QCOM) CEOs are seeking to ease new restrictions, according to Bloomberg.
• US State Department said Secretary of State Blinken saw the meeting with chip CEOs as an opportunity to share his perspective on the industry and supply chains after his recent trip to China.
• US Climate Envoy Kerry met with China's top diplomat Wang Yi in Beijing and said their hope is that this could be the beginning of a new cooperation to solve the differences between the US and China, while Wang called Kerry 'our old friend' at the meeting in Beijing and Kerry noted that President Biden is very committed to stability in the US-China relationship and to achieve efforts that can make a difference to the world. Kerry also stated that President Biden values his relationship with President Xi and looks forward to being able to move forward and change the dynamics, while he added that they can begin to change the broader relationship through climate talks.
• China's National Meteorological Centre said typhoon Talim made landfall in China's Guangdong with nearly 230k people evacuated as of 17:00 Monday local time and the typhoon is expected to move to the Beibu Gulf in the South China Sea, while the typhoon may make a second landfall in the coastal area of the Guangxi Zhuang autonomous region on Tuesday morning, according to Xinhua.
• RBA Minutes from the July 4th meeting stated that the Board considered holding rates steady or hiking by 25bps and that there was a strong case for both but Board judged arguments for holding steady were stronger, while it agreed some further tightening may be required and would reconsider at the August meeting. RBA stated that the current stance of monetary policy was clearly restrictive and would become more so, as well as noted the economy had slowed considerably with Q2 GDP growth seen around 0.2% Q/Q and consumer spending is seen weak in Q2 although a rebound in the housing market will support consumption.

GEOPOLITICS

• Ukrainian President Zelensky said he agreed with UN Secretary-General Guterres to work together on ensuring Black Sea grain shipments and food security, according to Reuters.
• White House's Kirby said taking grain out to sea by escort is not an option and getting grain out by land is not effective, while he urged for Russia to immediately reverse the decision to end the Black Sea grain deal.
• US Pentagon said it will send additional F-35 and F-16 jets along with a warship to the Middle East to defend US interests and safeguard freedom of navigation.
• Taiwan's VP and ruling party candidate Lai is to visit the US in August as part of a South American trip although the trip will not involve high-profile engagements or locations that could provide a pretext for a reaction from Beijing, according to FT citing sources.
• US Secretary of State Blinken said there's no reason for China to use the transit in the US of Taiwan’s presidential frontrunner Lai as a pretext for provocative action.
• Senior US, Japanese and South Korean officials are to meet in Japan on Thursday to discuss recent developments in North Korea, according to a Japanese Foreign Ministry statement. Furthermore, South Korean President Yoon said the new nuclear consultative group meeting with the US will be a starting point to build strong, effective deterrence against North Korea, according to Reuters.

UK/EU

NOTABLE HEADLINES

• UK food manufacturers reduced prices for the first time in three years last month which increases hopes that record-high grocery inflation could start to slow soon, according to a report in The Times citing data from the Lloyds monthly UK business tracker.
• ECB's Visco said underlying inflation is stubborn and is more complicated, while he also commented that manufacturing is slowing but services such as tourism are booming.
• French President Macron decided to keep Elisabeth Borne as PM despite the fallout from pension reform unrest and riots, according to Reuters.