• European bourses & US futures are contained ahead of earnings and data
• Within Europe, pre-market action was dominated by Q2 updates with Novartis’ results lifting its sector & the SMI
• DXY remains pressured but has found support around Friday’s trough with EUR, GBP & JPY appreciating
• Fixed income has extended its recovery rally heading towards MTD peaks, though Gilts off best after weak issuance
• USD and risk supports gold while crude remains rangebound with catalysts light
• Looking ahead, highlights include US Retail Sales, Business Inventories & Industrial Production, Canadian CPI & New Zealand CPI, Speeches from Fed's Barr. Earnings from Morgan Stanley & Bank of America.

EUROPEAN TRADE

EQUITIES

• European benchmarks are in close proximity to the unchanged mark, after a particularly busy European pre-market ahead of key US earnings, Euro Stoxx 50 +0.1%.
• Sectors are mostly in the green, with Healthcare outperforming after Novartis and the SMI also bolstered in turn; conversely, Telecom names lag amid marked pressure in Tele2.
• Stateside, futures are similarly contained ahead of earnings and data, ES U/C; thus far, impulses have been limited given we are in the Fed blackout period now.
• Synchrony Financial (SYF) Q2 2023 (USD): EPS 1.32 (exp. 1.24), Revenue 4.12bln (exp. 4.12bln). +0.5% in pre-market trade
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Buck fades after brief post-Empire State bounce, but DXY finds support ahead of 99.500 and last Friday's low.
• Euro extends gains on 1.1200 handle vs Dollar to probe Fib resistance at 1.1271 before knock-back from ECB's Knot.
• Yen rebounds sharply against Greenback from 138.92 to 138.10 as US Treasury yields retreat, Pound retests 1.3100 on the eve of UK CPI, but Loonie loses 1.3200+ status approaching Canadian inflation data.
• Aussie flanked by option expiries at 0.6800 and 0.6850, Kiwi loses momentum and grip of 0.6300 ahead of NZ Q2 CPI.
• PBoC set USD/CNY mid-point at 7.1453 vs exp. 7.1704 (prev. 7.1326)
• Click here for more detail.
• Click here for the notable option expiries, NY cut.

FIXED INCOME

• Debt extends recovery rally towards or through current m-t-d highs.
• Bunds pull up just shy of 134.00 between 133.97-08 parameters, Gilts reach 95.72 from a 95.20 Liffe low and T-note tops 113-00 within a 113-02+/112-19 + range ahead of tier one US and Canadian data.
• 2053 UK sale came with lengthy tail, but new German Schatz well received.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are little changed this morning despite a choppy start to the week on Monday with catalysts thin thus far.
• Spot gold is deriving some incremental support from the softer USD and tentative risk tone, though action is very much in a holding pattern before US earnings and data thereafter.
• Base metals are pressured in a continuation of the China story and despite a number of support measures being flagged in APAC trade for the region.
• Kazakhstan's KazMunayGas says all three oil refineries are operating normally, following the power outage at the beginning of July, via Tass.
• Click here for more detail.

NOTABLE US HEADLINES

• 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.
• Samsung Electronics (005380 KS) is reportedly likely to make Tesla's (TSLA) next-gen FSD chips to be used in their Level-5 autonomous driving vehicles, via Korean Economic Daily. Industry officials add "Now, Tesla plans to work with both TSMC and Samsung, or could switch to Samsung from TSMC altogether, for mass production of the fifth-generation auto chips" but that “Splitting next-generation chip production between the two is more likely though,”
• Click here for the US Early Morning Note.

NOTABLE EUROPEAN 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.
• ECB's Knot, re. a hike in July, describes this as a necessity. Hikes beyond July are possible, not a certainty. Could have hit an inflation plateau, via Bloomberg TV.

CRYPTO

• Bitcoin is a touch firmer but has slipped below the USD 30k mark despite the softer USD with catalysts light and the tone very much one of anticipation ahead of earnings and data.

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.
• 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.

APAC TRADE

• 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.

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 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.
• 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.