• European bourses are pressured with fresh drivers light and price action continuing from subdued APAC trade
• Stateside, futures are more constructive with the NQ leading despite yield upside given last week’s pressure
• DXY is bid to the detriment of G10 peers with havens lagging as yields lift
• Debt dips with Central Bank speak taking centre stage; Bowman said more hikes likely while Williams said we are pretty close to peak rate
• Commodities in the red given the overall tone and USD strength
• Looking ahead, highlights include Speeches from BoE’s Pill, Fed’s Bostic, Harker & Bowman.

EUROPEAN TRADE

EQUITIES

• European bourses are under modest pressure with the overall tone relatively indecisive with a summer feel to markets, Euro Stoxx 50 -0.3%.
• Sectors are mixed but with the breadth relatively narrow and individual stock specifics somewhat limited.
• Stateside, futures are in the green and feature some slight outperformance in the NQ after marked pressure last week; ES +0.3%, NQ +0.4%.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• A firm start to the week for the broader Dollar and index following Friday’s post-NFP selloff which, at the time, was attributed to unwind of the acute bond selloff earlier last week.
• Antipodeans are the relative outperformers but are essentially unchanged with the AUD within Friday's 0.6540-6609 boundaries and NZD on either side of 0.6100.
• Havens are lagging as USTs/EGBs retreat and yield-differentials become unfavourable while the EUR was unreactive to better-then-expected Sentix after another soft German release.
• PBoC set USD/CNY mid-point at 7.1380 vs exp. 7.1656 (prev. 7.1418)
• Click here for more detail.
• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Core benchmarks have come under modest pressure throughout the European morning with specific catalysts light and well within Friday’s boundaries thus far ahead of US supply.
• USTs pressured by remarks from Fed's Bowman who remarked that more US hikes will likely be needed. More recently, little reaction to a lengthy release from Fed's Williams who expressed little preference on September and remarked they are pretty close to the peak rate.
• Bunds are at the low-end of 131.85-132.39 parameters, a range that eclipsed Friday’s peak by a handful of ticks but still has some way to go before last week’s/Friday’s 131.12 trough.
• Gilts are directionally in-fitting with the above but with magnitudes slightly more pronounced as the benchmark posts downside of circa. 45 ticks.
• Click here for more detail.

COMMODITIES

• Crude benchmarks are in the red with WTI Sep'23 below USD 82.00/bbl and Brent sub-85.50/bbl, action which comes on the back of the pressured risk sentiment.
• Spot gold and base metals are under USD-induced pressure with limited fundamental drivers in play at this point.
• Saudi Arabia set September Arab light crude OSP to Asia at + USD 3.50/bbl vs Oman/Dubai and to Northwest Europe at USD + 5.80/bbl vs ICE Brent, while it set light crude OSP to the US at + USD 7.25/bbl vs ASCI, according to Reuters.
• Saudi Aramco CEO says their mid-to-long term view remains unchanged; Aramco also intends to increase gas production capacity to meet domestic demand growth; despite economic headwinds, they see positive signals that global demand remains resilient. China's demand has been stronger than expected. Chinese demand is expected to grow and support the current market recovery. Seeing signs of recovery of the economy in H2, still room for aviation recovery further.
• Thai Commerce Minister says there is no need to ban Thai rice exports; Thai rice exports to benefit from India's rice export ban.
• Click here for more detail.

NOTABLE US HEADLINES

• Fed’s Bowman (voter) said more US rate hikes will likely be needed and that they should remain willing to raise the federal funds rate at a future meeting if incoming data indicate progress on inflation has stalled, while she added that monetary policy is not on a preset course, according to Reuters.
• Fed's Williams (voter) "don’t have any preference of what we need to do at a future meeting, because I think it’s going to really going to be driven by the progress we’re making in managing those goals and managing those risks" when asked on September. "I think we’ve got monetary policy in a good place, it is definitely restrictive...". Adds, "the debate is really about: Do we need to do another rate increase? Or not?" adds "Now, that could change, depending on the data. I think we’re pretty close to what a peak rate would be.". "... how long will we need to keep policy in a restrictive stance, and what does that mean." Click here for the full release via NY Times.
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• City of London is urging the BoE to delay bank capital rules until mid-2025 with bankers arguing that regulatory divergence would affect the UK’s ability to compete with the US, according to FT.
• UK businesses urge PM Sunak to reverse the increase in visa fees for skilled workers and warned that the additional costs of hiring from overseas would hamper efforts to plug staff shortages, according to FT.
• European companies reportedly suffered a EUR 100bln hit from Russian operations in which energy and utility groups reported over half of the combined losses, according to an analysis by FT on the direct impact of the Ukrainian war.
• EU Foreign Affairs Minister Borrell says he has discussed with China's Foreign Minister Yi the upcoming strategic dialogue within Beijing in preparation for the EU-China summit, exchanged views on Niger and the Jeddah meeting re. Ukraine.

DATA RECAP

• EU Sentix Index (Aug 2023) -18.9 vs. Exp. -24.3 (Prev. -22.5)
• German Industrial Output MM (Jun 2023) -1.5% vs. Exp. -0.5% (Prev. -0.2%); YY SA (Jun) -1.83% (Prev. 0.82%, Rev. 0.10%)
• Swiss Unemployment Rate Adjusted (Jul 2023) 2.1% vs. Exp. 2.0% (Prev. 2.0%); Unadjusted 1.9% vs. Exp. 1.9% (Prev. 1.9%)
• UK Halifax House Prices MM (Jul 2023) -0.3% (Prev. -0.1%); YY (Jul) -2.40% (Prev. -2.60%); expects UK house prices to continue to fall into next year.

GEOPOLITICS

• Ukrainian intelligence source said a sea drone struck a Russian tanker in a joint operation between Ukraine’s security service and navy, according to Reuters.
• Russian Defence Ministry said it struck Ukrainian air bases in Rivne, according to Broadcaster Geo Media. Russia’s Defence Ministry also said Russia scrambled a Su-30 jet due to a US reconnaissance drone over the Black Sea, according to Ifax.
• Russian Deputy Foreign Minister said Russia has the military and technical capabilities to eliminate threats to security in the Black Sea, according to TASS.
• Russian Foreign Ministry spokeswoman said Russia strongly condemns a Ukrainian ‘terrorist attack’ on a Russian civilian vessel in the Kerch Strait and that Russia will respond to Ukraine’s ‘terrorist attacks’, according to TASS.
• Moscow’s Mayor said a Ukrainian drone was destroyed by air defences on approach to Moscow, according to Ifax. It was separately reported that Moscow’s Vnukova Airport suspended flights although no reason was given, according to TASS.
• Participants in the Jeddah meeting regarding the Ukrainian conflict underlined the importance of continuing consultations to build common ground that will pave the way for peace, according to the statement by Saudi Arabia cited by Reuters. Furthermore, Ukraine’s allies were buoyed by the ‘constructive’ China signals with Beijing positive on engaging in future negotiations on finding a resolution to the war, according to FT.
• Turkey’s Foreign Minister discussed the Black Sea Grain initiative during a phone call with US Secretary of State Blinken, according to a Turkish Foreign Ministry source.
• Explosions were heard over the vicinity of Syria's Damascus as Syrian air defences confronted Israeli aggression which resulted in the deaths of four Syrian soldiers according to state TV.
• UK’s government is split regarding listing Iran’s Revolutionary Guard as terrorists, according to FT.
• North Korean leader Kim gave field guidance at a major munitions factory, while he inspected factory manufacturing engines for strategic cruise missiles and unmanned aerial vehicles, according to KCNA.

APAC TRADE

• APAC stocks began the week mostly negative following on from last Friday's late retreat on Wall St as Apple shares extended on their losses post-earnings and as the regional bourses reacted to the weaker NFP and firmer-than-expected US hourly earnings.
• ASX 200 was marginally lower amid weakness in healthcare, financials and tech heading into a busy week of earnings including Australia's largest lender CBA which is set to report on Wednesday.
• Nikkei 225 initially suffered from early selling after it gapped beneath the 32,000 level at the open but then staged a recovery and returned to above the aforementioned key psychological level.
• Hang Seng and Shanghai Comp conformed to the subdued mood with mixed fortunes in Chinese developers clouding over the gains in energy and with participants cautious heading into upcoming key releases including the trade data on Tuesday followed by inflation figures on Wednesday.
• Chinese FX Reserves (Monthly) (Jul 2023) 3.204Trl vs. Exp. 3.2Trl (Prev. 3.193Trl).

NOTABLE ASIA-PAC HEADLINES

• China’s biggest mutual funds are nearing government limits on offshore investment as they seek higher returns abroad amid slower domestic growth, according to FT.
• EU trade chief Dombrovskis is to push China on barriers to exports and hopes to address very unbalanced ties after a surge in Chinese imports, according to FT.
• The Philippines condemned China’s Coast Guard for firing a water cannon at its vessels in the disputed South China Seas which it said was illegal and dangerous, while China said it took necessary controls against Philippines boats which ‘illegally’ entered its waters according to AFP. Furthermore, the US Embassy in the Philippines said that they stand with Philippine allies in the face of dangerous actions by China’s Coast Guard and maritime militia to obstruct a Philippine resupply mission, while Global Times’s Hu Xijin tweeted that the more US supports it, the more determined the Chinese Coast Guard will be to drive away Philippine vessels that illegally intrude.
• BoJ Summary of Opinions from the July meeting stated the Bank needs to patiently continue with monetary easing toward achieving the price stability target and in order to achieve the price stability target of 2% in a sustainable and stable manner, it is necessary for the Bank to keep supporting the momentum for wage hikes through the continuation of monetary easing. Furthermore, it was stated that given that there are increasingly significant upside and downside risks to the outlook for prices, it is appropriate for the Bank to conduct yield curve control with greater flexibility in order to respond to these risks.