• APAC stocks were mostly higher as the region took impetus from the gains stateside where the S&P 500 and Nasdaq closed at record highs.
• US Treasury Secretary Bessent said will need to see months, if not a year, of progress on fentanyl flows before Chinese tariffs come down.
• US Treasury Secretary Bessent stated that the Fed should think about a 50bp cut in September.
• European equity futures indicate a positive cash market open with Euro Stoxx 50 future up 0.4% after the cash market closed with gains of 0.1% on Tuesday.
• DXY has stabilised after yesterday's selling pressure, EUR/USD ran out of steam ahead of 1.17, Cable has reclaimed 1.35.
• Looking ahead, highlights include German Final CPI (Jul), Spanish Final CPI (Jul), IEA OMR, BoC Minutes, US President Trump is to meet with E3 and Ukraine, speakers include Treasury Secretary Bessent, Fed’s Bakin, Goolsbee & Bostic, supply from Germany.

SNAPSHOT

US TRADE

EQUITIES

• US stocks were bid on Tuesday while the Dollar was sold and T-notes steepened in response to a "not as bad as feared" CPI in the face of Trump's tariffs, keeping a September rate cut on the table following the weak July jobs report. Outperformance was led by the Russell 2000 which rose almost 3% and the majority of sectors were in the green, with notable outperformance in Communication and tech stocks, while Real Estate, Consumer Staples and Health Care lagged. T-notes steepened, with the front-end bid and the long-end sold after the CPI data, while T-notes hit lows after Trump announced he is considering suing Fed Chair Powell over the Fed renovations, raising more concerns over Fed independence and boosting the term premium.
• SPX +1.13% at 6,446, NDX +1.33% at 23,839, DJI +1.10% at 4,4459, RUT +2.99% at 2,283.
• Click here for a detailed summary.

TARIFFS/TRADE

• US Treasury Secretary Bessent said he will meet again with Chinese officials in the next two or three months and that they are solving several variables with China, while he added they will need to see months, if not a year, of progress on fentanyl flows before Chinese tariffs come down. Furthermore, he said India has been a bit recalcitrant in trade negotiations.
• White House said perhaps the chip deal could expand to other companies.
• Brazil's President Lula said he will sign an executive order on Wednesday creating a BRL 30bln credit line for firms affected by tariffs and plans to help Brazilian exporters will include support through Brazilian government purchases, while he noted that they initiated a WTO dispute over US tariffs and will see what they can do in terms of reciprocity. Lula said they cannot be dependent on the dollar and Brazil does not want to interfere with the dollar but noted they can have a currency for trade within BRICS which is an idea that should be tested. Furthermore, he said they are open to discuss ethanol with the US.
• China is to hit Canadian Canola with nearly 76% tariffs as trade row escalates, while the levy would be a blow for Canada’s agricultural sector as canola represents the biggest cash crop for farmers, according to WSJ.
• Canada's government said Canada is deeply disappointed with China's preliminary anti-dumping duties on Canadian canola imports and it remains ready to engage in constructive dialogue with Chinese officials to address their respective trade concerns.

NOTABLE HEADLINES

• US Treasury Secretary Bessent said he is hopeful Miran can be confirmed for the Fed seat before the September meeting and stated that the Fed should think about a 50bp cut in September, while he said they are casting a wide net for Fed Governor opening and President Trump has a very open mind and even considered re-appointing Janet Yellen as Fed Chair, according to a Fox Business interview.
• Fed's Barkin (2027 voter) said there are many signs that consumers with low and moderate incomes are more stretched today than a few years ago, which could curb spending and lessen the inflationary impact of tariffs. Furthermore, Barkin thinks they will see the consumer absorb some price increases on some items that they find to be absolute essentials but thinks consumers may not absorb price increases in other places where they decide to trade down or defer purchases.
• White House said US President Trump is considering a lawsuit against Fed Chair Powell, while it also stated that the plan is for the BLS to continue putting out monthly reports.

APAC TRADE

EQUITIES

• APAC stocks were mostly higher as the region took impetus from the gains stateside where CPI data was not as hot as feared and kept a September Fed rate cut on the table.
• ASX 200 bucked the trend and was dragged lower by underperformance in Utilities and the top-weighted Financial sector, with the latter suffering amid losses in CBA post-earnings.
• Nikkei 225 continued its advances and rallied to fresh record highs above the USD 43,000 level, while the somewhat varied PPI data from Japan had little influence on price action.
• Hang Seng and Shanghai Comp were underpinned alongside the mostly upbeat mood across the Asia-Pac region and with a briefing by Chinese officials on supporting consumption, while China had announced on Tuesday to provide interest subsidies for qualifying personal consumption loans in the country's latest effort to boost consumption.
• US equity futures (ES U/C, NQ +0.1%) plateaued overnight after advancing in the aftermath of the US inflation report.
• European equity futures indicate a positive cash market open with Euro Stoxx 50 future up 0.4% after the cash market closed with gains of 0.1% on Tuesday.

FX

• DXY got some slight reprieve from the prior day's selling that was triggered by the US inflation report which was largely deemed as "not hot enough" to prevent a September rate cut by the Fed, while the greenback had been further pressured following comments from US President Trump who said he is considering a lawsuit against Fed Chair Powell.
• EUR/USD held on to recent data-spurred gains against the buck but is off this week's best levels after hitting resistance just shy of the 1.1700 handle.
• GBP/USD took a breather following its return to the 1.3500 territory with recent momentum facilitated by data releases from both sides of the pond including the latest UK jobs data.
• USD/JPY rebounded from a brief slide beneath the 148.00 level with the recovery helped by another record-setting session for Japanese stocks.
• Antipodeans remained afloat in rangebound trade amid the mostly positive risk appetite and with a lack of major deviations in Australian wage growth data.

FIXED INCOME

• 10yr UST futures lacked direction following the knee-jerk whipsawing and curve steepening seen in the aftermath of the US inflation data which kept a September Fed rate cut on the cards, while there were some comments from Treasury Secretary Bessent who suggested the Fed should contemplate a 50bp cut at next month's meeting.
• Bund futures regained some composure after slipping yesterday to a floor around the 129.00 level but with the rebound limited ahead of today's EUR 5bln Bund issuance.
• 10yr JGB futures conformed to the subdued performance in global peers with prices not helped by the somewhat in-line/mixed PPI data from Japan and a weak 5yr JGB auction which resulted in the lowest bid-to-cover since March 2020.

COMMODITIES

• Crude futures languished near this week's trough after declining as participants awaited the upcoming Trump/Putin meeting in Alaska on Friday, while demand was not helped by a bearish private sector crude inventory data and it was also reported that the first vessel to load crude bound for the US, after the new license, had docked at Venezuela's José port.
• US Private Inventory Data (bbls): Crude +1.5mln (exp. -0.3mln), Distillates +0.3mln (exp. +0.7mln), Cushing -0.6mln.
• EIA STEO sees world oil demand for 2025 at 103.7mln B PD (prev. 103.5mln BPD) and 2026 world oil demand at 104.9mln BPD (prev. 104.6mln BPD).
• Spot gold lacked direction following the choppy reaction in the precious metal to the ultimately mixed US CPI data.
• Copper futures mildly pulled back from the prior day's highs and faded some of its risk-fuelled advances.

CRYPTO

• Bitcoin marginally retreated overnight following an early pullback from above the USD 120k level.

NOTABLE ASIA-PAC HEADLINES

• China's Vice Finance Minister said they will support domestic consumption to become a major driving force for the economy, while a Mofcom official said service consumption has big growth potential and supporting service consumption will help expand domestic demand and employment. Furthermore, a PBoC official said they will guide financial institutions to increase credit issuance to the service consumption sector and to streamline the approval process of consumer loans.

DATA RECAP

• Japanese Corp Goods Price MM (Jul) 0.2% vs. Exp. 0.2% (Prev. -0.2%, Rev. -0.1%)
• Japanese Corp Goods Price YY (Jul) 2.6% vs. Exp. 2.5% (Prev. 2.9%)
• Australian Wage Price Index QQ (Q2) 0.8% vs. Exp. 0.8% (Prev. 0.9%)
• Australian Wage Price Index YY (Q2) 3.4% vs. Exp. 3.3% (Prev. 3.4%)

GEOPOLITICS

MIDDLE EAST

• Israel considers sending a high-level delegation to Doha later this week for meetings with senior Qatari officials as part of efforts to resume negotiations on a Gaza hostage and ceasefire deal, according to Axios citing sources.
• Hamas said a delegation of the Hamas leadership headed by Khalil al-Haya arrived in Cairo for talks with Egyptian officials, while talks in Cairo will focus on ways to stop the war and bring aid to Gaza, according to Sky News Arabia and Al Hadath.
• France, Germany and the UK are willing to reimpose sanctions on Iran with the E3 telling the UN it is ready to trigger snapback mechanisms if Tehran doesn't resume nuclear talks, according to FT

RUSSIA-UKRAINE

• Ukrainian President Zelensky said he understood that Russia wants Ukraine to pull out of Donbas and will not advance in other directions in exchange. However, he stated Ukraine will not pull out of Donbas as such a move would open the way for Russia to attack Dnipropetrovsk, Zaporizhzhia, and Kharkiv.
• White House said the Trump-Putin meeting will be one-on-one, while it also stated that the meeting is a listening exercise for President Trump and perhaps there are plans for Trump to travel to Russia in the future.
• US Secretary of Interior Burgum said President Trump targets Russia's oil customers and will shut down Russian oil earnings, according to Fox Business.
• Russian President Putin held a phone call with North Korean leader Kim and updated him on talks with US President Trump, while it was also reported that Kim and Putin pledged deeper cooperation and Putin expressed appreciation for North Korea's help in liberating the Russian Kursk region.
• Russian Foreign Minister Lavrov held a telephone call with US Secretary of State Rubio and they discussed preparations for the Alaska summit between Trump and Putin, according to TASS citing the Russian Foreign Ministry.