• European bourses are lower given the risk tone post-China trade, banking names lag after an Italian windfall tax
• Stateside, futures are also in the red and feature continued underperformance in the RTY
• Given the tone after downbeat Chinese trade the DXY continues to lift with Antipodeans lagging
• Bunds surpassed last week’s best after a strong Bobl auction with the complex bid on the tone ahead of US 3yr supply & Fed speak
• Commodities are broadly pressured given the above factors though spot gold is somewhat cushioned by its haven allure
• Looking ahead, highlights include US Trade, US IBD/TIPP Economic Optimism. Speakers incl. Fed's Harker & Barkin. Supply from the US. Earnings from Eli Lilly.

EUROPEAN TRADE

EQUITIES

• European bourses are lower across the board, Euro Stoxx 50 -1.20%, risk tone hit by Chinese trade and reports around a property developer.
• Within Europe, the FTSE MIB -2.2% lags following Italy approving a 40% windfall tax on banks, pressuring the broader banking index, -2.7%.
• Elsewhere, sectors are more mixed; Banking lags as mentioned while Basic Resources are dented by the trade data and a poorly-received update from Glencore.
• Stateside, futures are in the red, ES -0.5% and feature continued modest underperformance in the RTY -0.8%. Elsewhere, the risk tone around banks was soured further by Moody's downgrading several US banks.
• United Parcel Service Inc (UPS) Q2 2023 (USD): Adj. EPS 2.54 (exp. 2.50), Revenue 22.1bln (exp. 23.1bln).
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• Click here and here for a recap of the main European equity updates.

FX

• A firm session thus far for the DXY, to a 102.47 peak irrespective of downside in yields in what is seemingly a flight to safety against the backdrop of the soured risk sentiment.
• Antipodeans are the marked laggards in early European hours amid the aforementioned downbeat risk tone and concerning Chinese trade data, whilst Australia also saw a decline in consumer confidence and sentiment data overnight.
• Traditional havens are softer on the back of the firmer Dollar, but losses are cushioned by the haven statuses, whilst a decline in US yields could also be providing some padding against the Buck.
• EUR and GBP are subdued given the USD's upside, single currency saw little reaction to the latest consumer expectation survey while drivers for GBP have been limited and action largely USD-driven.
• The NOK is among the G10 laggards given its sensitivity to risk.
• PBoC set USD/CNY mid-point at 7.1565 vs exp. 7.1869 (prev. 7.1380)
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Core benchmarks are firmer across the board given the deterioration in broader risk sentiment that took hold during APAC trade.
• Bund lifted to a 133.17 peak following a particularly strong Bobl auction, surpassing the July 31st/August 1st virtual double-top at 133.05/06. A move which brings into play 133.34 and thereafter 133.92, from the 28th and 27th of July respectively.
• A slight widening of the BTP-Bund yield spread to just above the 170bp mark, incrementally higher than the last few weeks but shy of the mid-July wides at circa. 175bp.
• Gilts are similarly bid with their own specifics light and action seemingly a function of the broader risk tone and aforementioned factors.
• Stateside, the picture is much the same as EGBs and Gilts with Treasuries posting gains of circa. 15 ticks in relative proximity to the high point of 110.31 to 111.18+ parameters, ahead of Fed speak and 3yr supply.
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COMMODITIES

• WTI and Brent futures are on the backfoot as a function of a firmer Dollar, broader risk aversion, and headwinds from downbeat Chinese trade data.
• Spot gold is subdued by the Buck and trades under its 50 DMA (USD 1,944.27/oz) around the USD 1,932/oz mark in a relatively tight USD 1,938-30/oz intraday range; yellow metal hit by the USD, but somewhat cushioned by the overall tone given its haven allure.
• Base metals have continued to dip following the commencement of the European session, initial pressure from APAC factors was further fanned by the release from Glencore. Though, internal commentary noted of a more positive macro backdrop in H2 and above-average real-term prices ahead.
• UBS retains a positive outlook for oil prices and forecasts Brent at USD 90/bbl by end-2023; Oil demand is set to breach 103mln BPD in August for the first time, due to China, India and the Middle East. See a market deficit of circa. 2mln BPD in July and August, vs around 0.7mln BPD in June.
• Turkey imposed a 20% extra fee for some gold imports, according to the Official Gazette.
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NOTABLE US HEADLINES

• Moody's cut the ratings of 10 US banks by one notch and placed some larger banks on review for potential downgrades including BNY Mellon (BK), US Bancorp (USB), State Street (STT) and Truist Financial (TFC), according to Reuters.
• China's Auto Industry Body CPCA says Tesla (TSLA) exported 32,862 China-made vehicles in July (vs 19,468 in June).
• US NFIB Business Optimism Index (Jul 2023) 91.9 (Prev. 91.0)
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• BoE's Pill said inflation remains much too high and they have seen a lot of news on inflation persistence. Pill added that there are risks on both sides on UK inflation and risks that the UK hasn't raised rates enough but also noted that a lot of rate hikes have yet to hit the economy.
• Barclaycard UK July consumer spending rose 4.0% Y/Y vs. prev. 5.4% growth in June, while it noted that supermarket spending growth slowed sharply, according to Reuters.
• Italy's Deputy PM said the Cabinet approved a 40% windfall tax on banks, limited to 2023. Subsequently, it was reported that Italy expects to collect last than EUR 3bln from windfall tax on banks, according to Reuters citing sources. Note, Italian banks have been under marked pressure in European trade, SX7E -2.7%
• ECB Consumer Inflation Expectations survey (Jun) - 12-months ahead 3.4% (prev. 3.9%); 3-year ahead 2.3% (prev. 2.5%)

DATA RECAP

• UK BRC Total Sales YY (Jul) 1.5% (Prev. 4.9%); Retail Sales YY (Jul 2023) 1.8% (Prev. 4.2%)
• UK BBA Mortgage Rate (Jul 2023) 7.68% (Prev. 7.54%)

GEOPOLITICS

• Japan ruling LDP's Aso said in Taipei that 'we' are moving from peacetime to times of turbulence and believe that issues that were hidden beneath the surface are coming to the fore, while he added that Taiwan is an important partner and friend. Furthermore, Aso said Japan has continued to say that peace in the Taiwan Strait is important for regional stability and the most important thing is to make sure war doesn't break out in the Taiwan Strait.
• Polish Defence Ministry to send additional troops to Belarus border following request from border guard, according to PAP.
• Economic Community of West African States (ECOWAS) plans to mobilise 25,000 troops for possible intervention in Niger, according to Al Arabiya citing French Press.

APAC TRADE

• APAC stocks traded mixed after the early optimism following the positive lead from Wall St was soured as Chinese markets entered the fray, while the region also digested disappointing Chinese trade data.
• ASX 200 traded rangebound after mixed consumer sentiment and business confidence surveys.
• Nikkei 225 was initially lifted by a weaker currency and earnings release but then wiped out nearly all of its gains as markets were spooked by selling in Chinese stocks.
• Hang Seng and Shanghai Comp spooked markets as they entered the fray with the Hong Kong benchmark heavily pressured as tech and property stocks lead the broad declines across sectors, while sentiment was also not helped by the wider-than-expected contraction in Chinese exports and imports data.

NOTABLE ASIA-PAC HEADLINES

• China's Ambassador to the Philippines said the Philippines took unilateral actions to undermine the existing management status quo on Second Thomas Shoal and China had no choice but to make necessary responses. Furthermore, China hopes the Philippines meets China halfway and said third-party forces will not help the situation, while China is waiting for feedback from the Philippine side and hopes to start talks ASAP, according to Reuters.
• Major Chinese property developer Country Garden Holdings (2007 HK) said it has not paid two USD bond coupons due Aug 6th worth some USD 22.5mln, according to Reuters.

DATA RECAP

• Chinese Trade Balance (USD)(Jul) 80.6B vs. Exp. 70.6B (Prev. 70.6B)
• Chinese Exports YY (Jul) -14.5% vs. Exp. -12.5% (Prev. -12.4%); Imports YY (Jul) -12.4% vs. Exp. -5.0% (Prev. -6.8%)
• Chinese Trade Balance (CNY)(Jul) 575.7B (Prev. 491.3B)
• Chinese Exports YY (CNY)(Jul) -9.2% (Prev. -8.3%); Imports YY (CNY)(Jul) -6.9% (Prev. -2.6%)
• Japanese Overall Labour Cash Earnings (Jun) 2.3% vs. Exp. 3.0% (Prev. 2.5%)
• Japanese All Household Spending MM (Jun 2023) 0.9% vs. Exp. 0.3% (Prev. -1.1%); YY (Jun 2023) -4.2% vs. Exp. -4.1% (Prev. -4.0%)
• Australian Westpac Consumer Confidence Index (Aug) 81.0 (Prev. 81.3); Sentiment (Aug 2023) -0.4% (Prev. 2.7%)
• Australian NAB Business Confidence (Jul) 2.0 (Prev. 0.0, Rev. -1.0); Conditions (Jul) 10.0 (Prev. 9.0, Rev. 11.0)