• European bourses & US futures are contained, with Real Estate leading while Base Resource names lag
• FTSE 100 outperforms after cooler-than-expected UK CPI, with Gilts bid, GBP dented and BoE pricing moving in favour of 25bp
• As such, GBP lags to the USD’s benefit while JPY approaches 140.0 and antipodeans lag
• Gilts outperform with an initial sympathy move for USTs and EGBs fading, the latter further after tepid supply
• Crude benefits from refinery action while nat gas continues to slip; spot gold unchanged, base metals dented
• Looking ahead, highlights include US Building Permits/Housing Starts, Speech from BoE's Ramsden, Supply from the US, Earnings from Netflix, Tesla, Goldman Sachs & IBM.

EUROPEAN TRADE

EQUITIES

• European bourses are in proximity to the unchanged mark as opening gains have pared in a relatively quiet second half of the session; Euro Stoxx 50 +0.3%.
• With the exception of the FTSE 100 +1.4% following cooler-than-expected UK CPI and substantial gains in UK equities as a result, particularly housebuilders.
• As such, Real Estate is the outperforming sector while Basic Resources lag given base metals action and after Rio Tinto cut its FY refined copper/alumina guidance.
• Stateside, futures are a touch firmer and hanging onto the majority of Tuesday's RTY & MSFT/Tech driven upside ahead of key earnings incl. Netflix, Tesla & GS.
• ASML (ASML NA) Q2 (EUR): Revenue 6.9bln (exp. 6.73bln), Net Income 1.9bln (exp. 1.82bln), Interim Dividend 1.45/shr, Gross Margin 51.3%. Q3 Outlook: Revenue 6.5-7.0bln (exp. 6.42bln), Gross Margin 50%.
• US DoJ and FTC have proposed merger guidelines which signal a tougher stance against private equity and Tech, via FT. Reminder, the DoJ and FTC heads are both appearing on CNBC 13:30BST/08:30ET.
• UK CMA has provisionally cleared the Broadcom (AVGO) and VMware (VMW) deal; deal unlikely to harm innovation, would not weaken competition.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Pound plunges post-UK inflation data as headline and core CPI slow more than expected, Cable probes Fib at 1.2933 after pulling up shy of 1.3050 and EUR/GBP eyes Fibs just under 0.8700 vs low close to round number below.
• Dollar gathers momentum at the expense of Sterling and other rivals as DXY rebounds further from recent lows to 100.300, Yen extends reversal vs Greenback from 138.77 to 139.79 after BoJ Governor Ueda underscored dovish guidance.
• Aussie labours ahead of employment report and amidst renewed Yuan weakness on Chinese economic jitters, AUD/USD towards base of 0.6820-0.6764 range.
• Euro underpinned by EUR/GBP and EUR/JPY tailwinds, but EUR/USD capped by decent option expiry interest at 1.1250.
• Kiwi loses momentum following brief pop on the back of firmer than forecast NZ Q2 CPI, NZD/USD at lower end of 0.6315-0.6226 bounds.
• PBoC set USD/CNY mid-point at 7.1486 vs exp. 7.1798 (prev. 7.1453)
• Click here for more detail.
• Click here for the notable option expiries, NY cut.

FIXED INCOME

• Gilts gains slowing, but still growing in wake of softer than forecast UK inflation data.
• 10 year bond extends to 97.84 from a 96.64 Liffe low and 95.85 close.
• Bunds fade after less well covered long-dated German supply within a 134.88-01 range and T-note midway between 113-06+/112-22 bounds before US housing metrics and USD 12bln 20 year issuance.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are firmer this morning, detaching themselves somewhat from the tepid equity tone (ex-UK) as market focus continues to centre around upcoming US earnings, with a particularly key after-market docket.
• Elsewhere, nat gas continues to pullback following the resumption of the Nyhamma plant.
• Finally, metals are contained and caught between the tentative tone and the USD’s Sterling-driven resurgence.
• US Energy Inventory Data (bbls): Crude -0.8mln (exp. -2.3mln), Gasoline -2.8mln (exp. -2.1mln), Distillate -0.1mln (exp. -0.1mln), Cushing -3.0mln.
• Click here for more detail.

NOTABLE US HEADLINES

• White House asks pharmacy chains for help pushing drug-cost law with the administration seeking help promoting the Inflation Reduction Act, according to Bloomberg.
• Click here for the US Early Morning Note.

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak is set to delay a decision on whether Britain should rejoin the EU's Horizon science program until after the summer holidays, according to FT.
• ECB is to push banks for weekly liquidity data, according to Bloomberg sources; reflects need for information rather than acute concerns.
• ECB's Nagel says "‘Inflation is a greedy beast. That's why it would be a mistake to ease up on the fight too soon and cut interest rates again prematurely." adding that "practically everyone expects an increase of 25bp" re. July.
• ECB's Simkus says there is a clear need to hike in July, option for a hike should be discussed in September, via Econostream. Would not be surprised if ECB continues to hike in September. The risk of doing too little is still higher than the risk of doing too much.

DATA RECAP

• UK CPI YY (Jun) 7.9% vs. Exp. 8.2% (Prev. 8.7%); All Services CPI: 7.2% (prev. 7.4%); MM (Jun) 0.1% vs. Exp. 0.4% (Prev. 0.7%)
• UK Core CPI YY (Jun) 6.9% vs. Exp. 7.1% (Prev. 7.1%); MM (Jun) 0.2% vs. Exp. 0.4% (Prev. 0.8%)
• UK ONS House Price Index (May) Y/Y 1.9% vs. prev. 3.5% (rev. 3.2%)
• EU HICP Final YY (Jun) 5.5% vs. Exp. 5.5% (Prev. 5.5%); X F&E Final YY (Jun) 6.8% vs. Exp. 6.8% (Prev. 6.8%); X F,E,A&T Final YY (Jun) 5.5% vs. Exp. 5.4% (Prev. 5.4%)

GEOPOLITICS

• US assessed that North Korea's launches do not pose an immediate threat but show the destabilising impact of North Korea's illicit weapons program, according to the US military.
• South Africa claimed it cannot arrest Russian President Putin at a planned BRICS summit in Johannesburg next month as Russia has threatened to “declare war” if the International Criminal Court warrant against its leader is enforced, according to FT.
• US official said Secretary of State Blinken signed a new 120-day waiver to allow Iraq to pay Iran for electricity and that the waiver was expanded to allow Iraq to deposit payments for Iranian electricity into non-Iraqi banks, while it is hoped that the waiver will ease Iran's pressure on Iraq for access to funds which previously only went to restricted accounts in Iraq.

APAC TRADE

• APAC stocks were mixed as the ongoing China economic woes partially offset the constructive lead from Wall St where risk sentiment was underpinned after strong bank earnings results and recent dovish ECB commentary.
• ASX 200 was positive with gains led by the energy sector after the recent upside in oil prices which facilitated the resilience of Woodside Energy despite its quarterly decline in output and revenue, while the mining sector was choppy amid indecision in Rio Tinto due to a mixed quarterly update.
• Nikkei 225 outperformed after recent comments by BoJ Governor Ueda provided the latest hints regarding the unlikelihood of a policy tweak at next week’s monetary policy meeting.
• Hang Seng and Shanghai Comp were lower as Hong Kong suffered from tech losses and with a non-committal tone in the mainland amid ongoing economic woes and recent support efforts.

NOTABLE ASIA-PAC HEADLINES

• China's Industry Ministry said China's industrial sector faces difficulties and challenges such as insufficient demand and declining revenues, while it will formulate plans to stabilise the growth of 10 sectors including auto and steel, according to Reuters.
• US Climate Envoy Kerry said his talks with Chinese officials this week were constructive but complicated with the two sides still dealing with political externalities including Taiwan. Kerry added that they are just reconnecting and trying to re-establish the process they have worked on for years, according to Reuters.
• US Climate Envoy Kerry meets with China's Vice President Han Zheng in Beijing and told him that if they can come together over the next months heading into COP28, they will have an opportunity to make a profound difference on climate change, while he added that the US side pledges to work closely with China in order to help their presidents to be able to produce real results. Furthermore, Han told Kerry that both countries have had close communication and dialogue after Kerry became the special envoy for climate and said China and the US have maintained long-term good communication and exchanges on climate, as well as reached some important consensus'.
• US President Biden's administration formally halted the Wuhan Institute of Virology’s access to US funding due to COVID probe failures, according to Bloomberg.
• China's Commerce Ministry says China's foreign trade faces an extremely severe situation in H2.

DATA RECAP

• New Zealand CPI QQ (Q2) 1.1% vs. Exp. 1.0% (Prev. 1.2%); YY (Q2) 6.0% vs. Exp. 5.9% (Prev. 6.7%)
• RBNZ Sectoral Factor Model Inflation Index (Q2) 5.8% (Prev. 5.7%)