Asian equities trade lower in the final trading session of the week with underperformance in the ASX (-1.5%)

FX markets saw the USD-index languish near its worst levels in over a year and below 94.00

Looking ahead, highlights include regional and national German CPI, US GDP and Fed’s Kashkari

ASIA

Asia equity markets traded negative across the board following the indecisive tone on Wall St. where tech stocks underperformed as the Nasdaq Comp pulled back from record levels, while data releases also proved to be uninspiring. ASX 200 (-1.5%) was the laggard amid broad-based weakness and profit taking in commodity stocks, while Nikkei 225 (-0.6%) was pressured by a firmer JPY, with weaker than expected Retail Sales and mostly inline inflation data also keeping sentiment tame. Furthermore, Toshiba shares fell off a cliff with losses of over 10% amid several negative news reports for the Co. Shanghai Comp. (Unch.) and Hang Seng (-0.6%) also conformed to the downbeat tone in the region, although downside in the mainland was stemmed after another respectable liquidity operation by the PBoC. 10yr JGBs failed to benefit from the risk averse tone and the BoJ’s Rinban announcement for over JPY 1tln of government debt, as demand remained subdued following weakness in USTs amid heavy corporate supply.

PBoC injected CNY 100bln in 7-day reverse repos and CNY 40bln in 14-day reverse repos, for a weekly net injection of CNY 280bln vs. Prev. CNY 510bln injection last week. (Newswires)

PBoC set CNY mid-point at 6.7373 (Prev. 6.7307)

BoJ Summary of Opinions from July 19th-20th stated year on year change in CPI is likely to increase gradually towards 2% with the inflation target likely to be reached by around fiscal 2019. Furthermore, there was an opinion that the range of the target level of 10yr JGB yields should not be interpreted too strictly, while there was an opinion that it is appropriate to set the new target of JGB purchases at a yearly pace of roughly JPY 45tln and then reduce the pace of purchases in an orderly and incremental manner. (Newswires)

Japanese National CPI (Jun) Y/Y 0.4% vs. Exp. 0.4% (Prev. 0.4%). (Newswires)

Japanese National CPI Ex-Fresh Food (Jun) Y/Y 0.4% vs. Exp. 0.4% (Prev. 0.4%)

EUROPE/UK

UK GfK Consumer Confidence (Jul) -12 vs. Exp. -11 (Prev. -10). (Newswires)

FX

Price action across the major FX pairs was muted in which the USD-index languished near its worst levels in over a year and below 94.00. Elsewhere, the risk-averse tone continued to spur flows into safe-haven JPY which saw USD/JPY test a break below the 111.00 handle, while CHF further weakened as USD/CHF tripped stops tspanough prior session highs and the 0.9700 level alongside an advance in EUR/CHF above 1.1300 to its highest since January 2015.

COMMODITIES

Copper prices declined in tandem with the risk-off sentiment in markets, whilst gold traded range-bound after a pull-back from 6-week highs in the prior session. Elsewhere, WTI saw mild profit taking in which prices retreated back below USD 49/bbl.

US

US treasuries declined with the curve steepening amid heavy corporate supply and a 7y note auction. The 7y auction rounded off this week’s trio of supply and was relatively well received with the bid to cover rising to 2.54x and dealers taking their lowest chunk of 7y issuance since April. AT&T came to market with a USD 22.5bln 7-part offering, including longer end maturities which weighed on the long end. 5s30s steepened to over 108bps, the steepest level since early June. Sep’17 10y T-note futures settled at 125.26+, down 6 ticks.

US House of Representatives passes defense spending bill, which included funding for the border wall. (Newswires)

The US Senate has given final approval to bolstering sanctions on Russia and curbing President Trump’s ability to lift them. (Newswires)

Republican leaders suggest that the proposed border-adjusted tax won’t be part of negotiations on how to reform the U.S. tax code. (Newswires)

Senate has rejected the 'skinny' amendment to the healthcare bill. (CSPAN TV)