Asian equities were mostly positive overnight as all-time highs on Wall Street bolstered sentiment

AUD/USD broke below 0.7900 amid downbeat domestic inflation data and comments from RBA’s Lowe

Looking ahead, highlights include UK GDP, US New Home Sales, DoEs and ECB’s Lautenschlaeger

ASIA

Asia equity markets were mostly higher following a record setting day on Wall St. where the S&P 500 and NASDAQ posted fresh all-time highs as earnings buoyed sentiment, with gains led by strength in financials and energy sectors. ASX 200 (+1.0%) outperformed in Asia as the commodity sector shined with copper at 26-month highs and after oil gained over 2% amid a larger than expected drawdown in API crude inventories. Nikkei 225 (+0.5%) was bolstered by a softer JPY, while Shanghai Comp. (-0.4%) and Hang Seng (+0.1%) both initially conformed to the advances after the IMF’s recent upgrade on China growth forecasts and alongside the PBoC’s continued liquidity efforts with a CNY 130bln injection today. However, mainland stocks then pulled back on regulatory concerns. Finally, 10yr JGBs tracked the softness in T-notes with demand also dampened as participants shifted positions into riskier Japanese assets, while today’s Rinban announcement was for a relatively modest JPY 400bln.

PBoC injected CNY 80bln in 7-day reverse repos and CNY 50bln in 28-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.7529 (Prev. 6.7485)

EUROPE/UK

Newsflow from the region remains light overnight.

FX

AUD/USD was in focus as the pair briefly slid below the 0.7900 level after it took a double whammy from lower than expected inflation figures and comments from RBA Governor Lowe who saw no need to conform to the hawkish shift among other central banks. Elsewhere, the USD-index traded flat around 94.00 with price action reserved ahead of the looming FOMC due later today, while USD/JPY held on to recent gains and attempted a reclaim of the 112.00 handle.

RBA Governor Lowe stated there is no need to move in lockstep with other central banks that are tightening and that steady unemployment rate has allowed RBA to be patient. Lowe also commented that a welcome pick up in employment across the country is likely to continue and that weak wage expectations are dragging on consumption. (Newswires)

Australian CPI (Q2) Q/Q 0.2% vs. Exp. 0.4% (Prev. 0.5%). (Newswires)

Australian CPI (Q2) Y/Y 1.9% vs. Exp. 2.2% (Prev. 2.1%)

COMMODITIES

Copper prices rose over 1% overnight to 26-month highs, in a continuation of the upside seen following the recent IMF upgrade to China’s growth forecast. Elsewhere, gold (-0.2%) remained subdued as investors await the FOMC meeting later today, while oil posted it best levels in around 8 weeks with WTI firmly above USD 48/bbl after a larger than expected draw in API crude inventories.

US API Crude Oil Inventory Report (Jul 21) W/W -10200K (Prev. 1628K). (Newswires)

Many oil workers are expected to join an indefinite strike in Venezuela today according to National Director of Federation of Oil Unions. (Newswires)

US

Fixed income markets were under pressure tspanoughout the day as Greece returned to market. A stellar US 2-year auction did little to alleviate the pressure on the treasury complex, as Sep’17 10y T-note futures settled at 125.19+, down 18+ ticks.

US Senate received sufficient votes to proceed on GOP healthcare legislation motion debate, although the plan to repeal and replace Obamacare later failed to get enough votes for approval (43-57). (Newswires)

President Trump says that Yellen is absolutely a contender to remain as Fed chair with Cohn also a potential candidate. (Times)

The House of Representatives has passed legislation to impose new sanctions on Russia, North Korea and Iran. One source of focus is also on new sanctions in response to alleged meddling by Russia in the 2016 US Presidential election. (FT)