• APAC stocks mostly followed suit to the weakness in global peers, albeit with some of the losses stemmed in Asia as participants digested Chinese Caixin PMI figures.
• European equity futures are indicative of a marginally softer open with the Euro Stoxx 50 -0.1% after the cash market closed down by 1.6% yesterday.
• DXY remains on the front foot, EUR/USD has moved lower on a 1.09 handle, Cable sits below 1.27 pre-BoE, JPY lags post-BoJ unscheduled bond-buying operation.
• Brazil Central Bank cut the Selic rate by 50bps to 13.25% (exp. 25bps cut) with the decision not unanimous.
• Looking ahead, highlights include German Trade, EZ & UK Services PMI (Final), Swiss CPI, US IJC, Factory Orders, ISM Services, BoE Policy Announcement, BoE's Bailey, ECB's Panetta, Fed's Barkin, Bostic & Goolsbee, Supply from Spain & France.
• Earnings from Adidas, AXA, BMW, Infineon, ING, Lufthansa, Merck, Rolls-Royce, ConocoPhillips, Regeneron Pharmaceuticals, Apple, Kellogg Co, Moderna, Amazon.com, Warner Bros Discovery & Airbnb.

US TRADE

EQUITIES

• US stocks were pressured as markets reflected on Fitch's downgrade of the US sovereign rating and with the Nasdaq the underperformer as semiconductor names suffered post-AMD earnings and amid a rise in longer-dated treasury yields, while hot ADP jobs data emphasised the downside in both stocks and bonds.
• SPX -1.38% at 4,513, NDX -2.21% at 15,370, DJIA -0.98% at 35,282, RUT -1.37% at 1,966.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Kansas City Fed named Jeffrey Schmid as its new President and CEO effective on August 21st.
• White House Economic Adviser Bernstein said they view the Fitch rating downgrade as problematic and said US Treasury debt remains the safest in the world.

APAC TRADE

EQUITIES

• APAC stocks mostly followed suit to the weakness in global peers including on Wall St where stocks and bonds were pressured by the US rating downgrade, AMD earnings and hot ADP data, albeit with some of the losses stemmed in Asia as participants digested Chinese Caixin Services and Composite PMI figures.
• ASX 200 was dragged lower by losses in tech after the underperformance of their US counterparts, with sentiment not helped by softer monthly exports and a continued contraction in quarterly retail trade.
• Nikkei 225 underperformed as yields edged higher and with newsflow dominated by earnings.
• Hang Seng and Shanghai Comp were choppy and briefly clawed back opening losses in the aftermath of somewhat mixed Chinese Caixin Services and Composite PMI data.
• US equity futures were uneventful ahead of a busy day of earnings releases including Apple.
• European equity futures are indicative of a marginally softer open with the Euro Stoxx 50 -0.1% after the cash market closed down by 1.6% yesterday.

FX

• DXY held on to the prior day’s firm gains as it benefitted from higher longer-term yields, the risk-off mood and firm ADP jobs data.
• EUR/USD languished firmly beneath the 1.1000 handle after giving way to the dollar strength.
• GBP/USD traded sideways with participants lacking conviction heading into the BoE rate decision.
• USD/JPY was supported late in the session after the BoJ stepped in with emergency bond purchases.
• Antipodeans were contained after recent losses and amid the downbeat risk sentiment.
• PBoC set USD/CNY mid-point at 7.1495 vs exp. 7.1933 (prev. 7.1368)
• Brazil Central Bank cut the Selic rate by 50bps to 13.25% (exp. 25bps cut) with the decision not unanimous. BCB stated the current scenario demands serenity and moderation in the conduct of monetary policy and if the expected scenario is confirmed, the committee unanimously expects rate cuts of the same magnitude in coming meetings, while it considered a 25bps cut but concluded a 50bps cut was appropriate due to the improvement in inflation dynamics.

FIXED INCOME

• 10yr UST futures remained subdued following the quarterly funding announcement and with recent headwinds from the hot ADP jobs data and US rating downgrade jitters.
• Bund futures were subdued amid a lack of drivers heading into the services PMI data from the bloc.
• 10yr JGB futures were pressured as yields continued to slowly edge higher and after weaker metrics in the 10yr inflation-indexed JGB auction, although prices found some support as the BoJ stepped in with an unscheduled bond-buying operation.

COMMODITIES

• Crude futures were contained as the dollar sustained recent gains and amid the risk-off mood.
• Saudi Arabia and Kuwait reaffirmed they jointly own rights to natural resources in the Durra Gas field and renewed calls for Iran to negotiate over the demarcation of borders, according to Saudi's Foreign Ministry.
• Spot gold failed to make any meaningful recovery after yesterday's losses amid the dollar strength.
• Copper futures were stuck near the prior day's lows after succumbing to global risk aversion.
• Chile Codelco copper production fell 7.39% Y/Y in June to 120.3k tonnes, while Escondida copper mine production rose 8.7% Y/Y to 111.4k tonnes in June.

CRYPTO

• Bitcoin was relatively flat with price action confined to a tight range firmly beneath the USD 30,000 level.
• US prosecutors worry Binance charges could cause a run on the exchange and the DoJ is considering fraud charges against Binance.

NOTABLE ASIA-PAC HEADLINES

• China's Foreign Ministry said China is willing to maintain communications regarding the US inviting Chinese Foreign Minister Wang Yi for a visit, according to Reuters.
• US House Committee opened an investigation into the suspected Chinese hacking of State Department and Commerce Department emails.
• Japanese Chief Cabinet Secretary Matsuno said he hopes the BoJ works closely with the government and guides policy appropriately to stably and sustainably hit the 2% price target, while he added the government is closely watching FX moves and their impact on Japan's economy and prices, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Jul) 54.1 vs. Exp. 52.5 (Prev. 53.9)
• Chinese Caixin Composite PMI (Jul) 51.9 (Prev. 52.5)
• Australian Trade Balance (AUD)(Jun) 11.3B vs. Exp. 11.0B (Prev. 11.8B)
• Australian Exports MM (Jun) -2.0% (Prev. 4.0%)
• Australian Imports MM (Jun) -4.0% (Prev. 2.0%)
• Australian Retail Trade (Q2) -0.5% (Prev. -0.6%)

GEOPOLITICS

• Ukrainian President Zelensky said he hopes a peace summit can be held this autumn.
• Ukrainian military warned of drone attacks around Kyiv and said anti-aircraft units were in operation, while explosions were also reported, according to Reuters.
• Russian Defence Ministry said navigation is restricted in Kerch Strait and that movement in the Kerch Strait is also limited for aircraft, according to TASS.
• US Pentagon top official for Asia spoke with a Chinese Ministry of Foreign Affairs official on Wednesday and discussed defence relations, according to a Pentagon spokesperson.