Asian equities kicked the week off in an indecisive tone with focus on Chinese Mfg. PMI and North Korean Tensions

USD-index attempted to nurse recent losses and recover from its lowest level in 15-months, with the greenback notably regaining lost ground against CAD

Looking ahead, highlights include Eurozone CPI, Chicago PMI, Pending Home Sales

ASIA

Asia equity markets traded mixed ahead of this week’s key risk events and as participants digested Chinese Manufacturing PMI and further provocation from North Korea. ASX 200 (+0.7%) was underpinned by commodity names amid strength in the metals complex coupled with WTI crude’s brief reclaim of USD 50/bbl to the upside, while Nikkei 225 (Unch.) was dampened by broad-based JPY strength. Geopolitical concerns pressured the KOSPI (-0.3%) following another North Korean missile test on Friday which it claimed was capable of striking mainland US, while both Hang Seng (+0.8%) and Shanghai Comp. (+0.6%) were positive despite Official Chinese Manufacturing PMI data missing estimates, as the Construction sub-index rose to its highest since December 2013. Finally, 10yr JGBs were flat and failed to benefit from the cautious risk tone in Japan, with demand subdued following a lacklustre BoJ Rinban announcement valued at just only JPY 325bln of JGBs.

PBoC injected CNY 160 bln 7-day reverse repos and CNY 80bln 14-day reverse repos. (Newswires)

PBoC set CNY mid-point at 6.7283 (Prev. 6.7373)

Chinese Official Manufacturing PMI (Jul) 51.4 vs. Exp. 51.5 (Prev. 51.7). (Newswires)

Chinese Non-Manufacturing PMI (Jul) 54.5 (Prev. 54.90)

EUROPE

ECB’S Lautenschlaeger stated it is important to prepare for accommodative policy exit in good time and that unwinding will be a long process. (Newswires)

Fitch affirmed France at AA; outlook stable and affirmed Austria at AA+; outlook stable. Moody’s upgraded Cyprus to Ba3 from B1; outlook remains positive. (Newswires)

UK

UK Lloyds Business Barometer (Jul) M/M 30 (Prev. 30). (Newswires)

UK Chancellor Hammond said the UK will not slash taxes and regulations to undercut European rivals following Brexit. (Times)

The CityAM Shadow MPC voted to keep rates on hold this month amid a backing up of GDP and cooling inflation. (CityAM)

FX

USD-index attempted to nurse recent losses and recover from its lowest level in 15-months, with the greenback notably regaining lost ground against CAD after a 1% decline on Friday. Elsewhere, AUD traded choppy with initial pressure seen amid cross-related flows in which AUD/NZD and AUD/JPY briefly fell below 1.0600 and 88.00 levels respectively. However, a surge in Chinese iron ore prices then provided slight relief for the commodity-linked currency, while USD/JPY extended on downside with the pair edging further away from the 111.00 handle.

COMMODITIES

WTI crude futures mildly extended on last week’s best performance of 2017 and briefly rose above the USD 50/bbl level where it met resistance. Elsewhere, gold prices (-0.1%) saw a mild pull-back as the greenback attempted to recover from its worst levels since April last year, while copper prices rose in tandem with Dalian iron ore prices hitting limit up with gains by around 8% due to China’s Steel Sector PMI at a 14-month high and after the nation’s Construction sub-index PMI rose to its highest since December 2013.

US Baker Hughes Rig Count (Jul 28) W/W 958 (Prev. 950)

US Baker Hughes Oil Rig Count (Jul 28) W/W 766 (Prev. 764)

US Baker Hughes Gas Rig Count (Jul 28) W/W 192 (Prev. 186)

US is could announce oil related sanctions on Venezuela as soon as today in a response to Sunday’s election, according to sources. Sources added that US is considering banning sales of US oil and refined products to Venezuela, but are not expected to include a ban on Venezuelan oil shipments to the US. (Newswires)

US

Treasuries were choppy, with prices declining in the European morning but then getting a lift after the US GDP data. Reports that North Korea had fired an intercontinental ballistic missile and that the US and South Korea had discussed military response options kept prices elevated. Sep’17 10y T-note futures settled at 125.30+, up 4 ticks.

Fed’s Kashkari (Voter, Dove) stated there has been very little sign of inflation picking up and that he is in favour of sspaninking the balance sheet despite his views on inflation. (Newswires)

Reince Priebus was replaced by Secretary of Homeland Security General John Kelly as White House Chief of Staff. (Newswires)