• European bourses opened lower but have clambered back to the unchanged mark; US futures remain on the backfoot.
• DXY is flat, GBP digests hot UK CPI, NZD lags after the RBNZ delivered a dovish 25bps cut.
• RBNZ lowered the OCR by 25bps as expected, cut its OCR forecasts across the projection horizon and voted on the options of either a 25bps or 50bps reduction.
• USTs underperform into 20yr auction, Bunds bid on German Producer Prices, Gilts initially lagged on CPI but now firmer.
• Looking ahead, highlights include FOMC Minutes, Speakers including Fed’s Bostic, Waller and reported Fed Chair candidate Zervos, Supply from the US, Earnings from Target.

TARIFFS/TRADE

• US Treasury Secretary Bessent said the US has had very good talks with China and that China is the biggest revenue line in terms of tariff income, while he added that the status quo on China is working very well.
• Mexico will propose reinstating a North American Steel Committee to improve trade ties with the US, according to Bloomberg.
• Russian Embassy in India said INR payments being accepted by all Russian businesses; open to doing all oil trade INR too.

EUROPEAN TRADE

EQUITIES

• European bourses (STOXX 600 -0.2%) are trading on the backfoot in a reversal of some of Tuesday's upside and following on from the tech-led selling pressure seen Stateside. Stocks have been attempting to clamber higher as the morning progressed, with a few indices now holding around the unchanged mark.
• European sectors are overall mixed with a slightly defensive tilt given the current risk environment. Food, Beverage and Tobacco sits at the top of the leaderboard with Nestle (+1.2%) leading some of the upside, other sectors outperforming include Utilities, Telecoms and Insurance. To the downside, Basic Resource names lag.
• US equity futures (ES -0.2%, NQ -0.2%, RTY -0.1%) are extending their move lower after major indices finished mostly lower yesterday with the declines led by the mega-cap tech stocks which resulted in the underperformance of the Nasdaq. The FT cited the tech weakness to a MIT paper questioning returns from new technology and noted that “95 per cent of organisations are getting zero return” from their investments in gen AI".
• McDonald's (MCD) is to lower combo meal prices by 15%, according to WSJ; will offer USD 5 and USD 8 specials.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news
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FX

• After two sessions of gains, the USD rally has paused for breath. There hasn't been a clear driver for the upside seen at the start of the week with the macro narrative relatively unaltered heading into Powell's Jackson Hole speech on Friday. FOMC minutes are due later today. However, they will likely be deemed as stale in some quarters given the aforementioned August jobs report hit just a few days after the meeting. Fed's Bostic and Waller are due on today's speaker slate. Note, the subject matter for the latter is on Blockchain payments. DXY has ventured as high as 98.44 with the next upside target coming via the 12th August peak at 98.62.
• EUR is marginally softer vs. the USD with it remaining the case that there has not been a great deal of incremental macro newsflow from the Eurozone. Remarks from ECB President Lagarde failed to engineer a move in the EUR today with the policy chief noting that recent trade deals have alleviated but not eliminated uncertainty. EUR/USD sits in close proximity to its 50DMA at 1.1644 and towards the bottom end of Tuesday's 1.1639-93 range.
• JPY is flat vs. the USD with no material follow-through from mixed data in which Machinery Tools topped forecasts but trade data mostly disappointed and showed Japanese Exports suffered the largest decline in four years. That being said, the drop-off in exports could prompt some concern from those on the BoJ who expect a negative growth hit from the trade conflict with the US. USD/JPY currently sits towards the mid-point of yesterday's 147.44-148.11 range.
• GBP is mildly firmer vs. the USD in the wake of hotter-than-expected UK inflation metrics, which saw headline Y/Y CPI advance to 3.8% from 3.6% (Exp. 3.7%) and services jump to 5.0% from 4.7% (Exp. 4.7%). The ONS has attributed some of this to the timing of school holidays, which has triggered a surge in airfares. However, given the outcome of the most recent BoE rate decision, which saw a higher-than-expected level of hawkish dissent, markets will likely further cement expectations that the BoE will slow down the current quarterly cadence of rate cuts. Cable has hit a 1.3509 peak but is still some way off Tuesday's best at 1.3519.
• NZD is the standout laggard across the majors following the RBNZ rate decision, which saw the Bank cut the OCR by 25bps to 3.00%, as widely expected, while it also lowered its OCR forecasts across the projection horizon and revealed it had voted on the options of either a 25bps or 50bps cut at the meeting; 2 members backed a 50bps move.
• SEK is a touch softer vs. the EUR in the wake of the Riksbank rate decision, which saw policymakers stand pat on policy as expected. The decision to do so was predicated on the board's balancing act in managing weak growth vs. above target inflation. That being said, the Bank still judges that there is still some probability of a further interest rate cut this year, in line with the June forecast. EUR/SEK is currently above its 200DMA at 11.1771 with upside capped by the 11.20 mark.
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FIXED INCOME

• USTs are flat and underperforming vs peers, after trading with a slight downward bias overnight. Nothing specifically driving the underperformance, but perhaps some cooling from the upside seen in the prior session, where stocks took a beating. Some of the pressure could also be in part due to some positioning heading into a 20yr supply later. In terms of price action today, USTs were initially on the backfoot but global fixed income has caught a slight bid to trade in a 111-20 to 111-24 range. Auction aside, focus will be on commentary from the Fed’s Waller, Bostic and the reported Fed Chair candidate Zervos, who is to speak on CNBC.
• Bunds are outperforming vs peers today, with the bulk of the day’s action occurring at 07:00 BST. On that, there was some significant two-way movement in Bund futures as traders reacted to the UK CPI report (hotter-than-expected; details in Gilt section) and German Producer Prices (softer-than-expected). Elsewhere, no real move to commentary via ECB President Lagarde, who noted that projections show growth is expected to slow in Q3. Bunds traded towards highs at 129.35 into a dual tranche German auction, which had little follow through to price action.
• Gilts are firmer today, initially gapping higher at the cash open in catch-up to the strength seen in USTs in the prior session, but then saw some two-way action as traders digested the UK’s hot inflation report. Delving into the UK CPI report, it held a hawkish skew, with both Core and Headline figures incrementally higher, edging higher than the prior, more than expected. The accompanying commentary provided some reasoning, pinning the uptick on the “timing of this year’s school holidays”. Gilts are currently trading towards the upper end of a 90.43 to 90.88 range.
• Germany sells EUR 0.747bln vs exp. EUR 1.0bln 2.50% 2046 and EUR 1.15bln vs exp. EUR 1.5bln 2.50% 2054 Bund
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COMMODITIES

• Crude is firmer today as the complex attempts to trim some of the prior day's losses, induced by geopolitics as renewed efforts are made to temper down the Russia-Ukraine conflict. This morning, the Russian Embassy in India said despite political situation, approximately same level of oil will be imported by India. As a reminder, Washington slapped India with a 25% penalty linked to oil purchases. Brent sits in a USD 65.81-66.57/bbl range.
• Spot gold languishes just above the prior day's trough as participants await Fed policy clues from the incoming FOMC Minutes and Fed Chair Powell's speech at Jackson Hole. Price action this morning sees the precious metals complex eking mild gains, with spot gold still trading under its 50 DMA (~3,348/oz) in a USD 3,311.56-3,327.61/oz range.
• Flat/mixed trade across base metals amid quiet newsflow and ahead of FOMC minutes. Copper futures lacked demand following the recent selling pressure and amid the mixed overnight risk appetite. 3M LME copper prices reside in a USD 9,684.75-9,729.00/t range.
• US Private Inventory Data (bbls): Crude -2.4mln (exp. -1.8mln), Distillate +0.5mln (exp. +0.9mln), Gasoline +1.0mln (exp. -0.9mln), Cushing -0.1mln.
• Norway Prelim July Production: oil 1.958mln BPD (prev. 1.675mln BPD in June); gas 10.2bcm (prev. 8.8bcm).
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NOTABLE EUROPEAN HEADLINES

• ECB's Lagarde said recent trade deals have alleviated but not eliminated uncertainty; EZ economy has proven resilient in the face of challenging global environment. Notes that projections show growth is expected to slow in Q3. ECB will factor the implications of the EU-US trade deal for the Euro area economy into the September projections, will guide decisions over the coming months. Europe should aim to deepen its trade ties with other jurisdictions outside of the US, leveraging the strengths of its export-oriented economy.
• UK Chancellor Reeves is drawing up plans to hit owners of high-value properties with capital gains tax when they sell their homes as she seeks to fill a GBP 40bln hole in the public finances, according to The Times.
• UK ONS said average UK House Prices increased 3.7% in the 12 months to June 2025 (vs 3.3% Y/Y).
• Riksbank maintains its rate at 2.00% as expected; still some probability of a further interest rate cut this year, in line with the June forecast. COMMENTARY: Developments in inflation and economic activity during the summer have deviated somewhat from the forecast in June, the Executive Board assesses that the outlook remains largely the same. Economic activity is weak. New information indicates that growth is still low. Households are still cautious with regard to their spending, and the labour market is not yet showing any clear sign of improving. Uncertainty regarding international developments also remains high, not least given US economic policy, the war in Ukraine and developments in the Middle East.
• Riksbank Governor Thedeen said it is far from certain that central bank will cut going forward, but there is a certain likelihood.

NOTABLE DATA RECAP

• UK CPI YY (Jul) 3.8% vs. Exp. 3.7% (Prev. 3.6%)
• UK CPI MM (Jul) 0.1% vs. Exp. -0.1% (Prev. 0.3%)
• UK Core CPI YY (Jul) 3.8% vs. Exp. 3.7% (Prev. 3.7%)
• UK Core CPI MM (Jul) 0.2% vs. Exp. 0.1% (Prev. 0.4%)
• UK CPI Services YY (Jul) 5.0% vs. Exp. 4.8% (Prev. 4.7%)
• UK CPI Services MM (Jul) 0.7% vs. Exp. 0.6% (Prev. 0.6%)
• UK RPIX YY (Jul) 4.7% (Prev. 4.3%)
• UK RPI-X (Retail Prices) MM (Jul) 0.4% (Prev. 0.4%)
• UK RPI Index (Jul) 406.2 (Prev. 404.5)
• UK RPI YY (Jul) 4.8% vs. Exp. 4.5% (Prev. 4.4%)
• UK RPI MM (Jul) 0.4% vs. Exp. 0.1% (Prev. 0.4%)
• German Producer Prices YY (Jul) -1.5% vs. Exp. -1.3% (Prev. -1.3%)
• German Producer Prices MM (Jul) -0.1% vs. Exp. 0.1% (Prev. 0.1%)
• EU HICP Final MM (Jul) 0.0% (Prev. 0.3%); YY (Jul) 2.0% vs. Exp. 2.0% (Prev. 2.0%)

NOTABLE US HEADLINES

• US President Trump posted "Could somebody please inform Jerome “Too Late” Powell that he is hurting the Housing Industry, very badly? People can’t get a Mortgage because of him. There is no Inflation, and every sign is pointing to a major Rate Cut. “Too Late” is a disaster!"
• US Treasury Secretary Bessent is reportedly betting the crypto industry will become a crucial buyer of Treasuries in the coming years as Washington seeks to shore up demand for a deluge of new US government debt, according to FT.
• US is looking into taking equity stakes in chip makers in exchange for CHIPS Act funding, similar to the Intel (INTC) plan, according to two sources cited by Reuters.
• Shipments of phones within China -9.3% Y/Y at 22.6mln handsets in June (prev. -21.8% Y/Y at 23.72mln in May), via CAICT; shipments of foreign phones incl. Apple (AAPL) iPhones within China -31.3% at 1.97mln (prev. 9.7% at 4.54mln in May).

GEOPOLITICS

MIDDLE EAST

• "Israel's Defense Minister Israel Katz has approved the IDF’s operational plan for an assault on Gaza City"; "As part of the new plan, the necessary reserve call-up orders will be issued to carry out the offensive.", via Stein on X.
• Syrian Foreign Affairs Minister Al-Shaibani discussed de-escalation talks in Paris with the Israeli delegation and discussed "Strengthening stability in southern Syria", according to Al-Hadath citing SANA.
• Iranian Foreign Minister said Tehran cannot completely cut ties with the IAEA, according to IRNA.

RUSSIA-UKRAINE

• US President Trump said he wants to see what goes on when Zelensky and Putin meet, while he added they are in the process of setting the meeting up. Trump also said he gets along with Russian President Putin which is a good thing and commented that two nuclear powers getting along is a good thing.
• White House official said US President Trump and Hungarian PM Orban discussed on Monday Ukraine's EU accession talks and Budapest as a potential venue for the Zelensky-Putin meeting.
• US Special Envoy Witkoff said progress was made on how to achieve a peace deal, according to a Fox News Interview.
• There was no violation of Polish airspace overnight, according to local press.

OTHER

• North Korean leader Kim's sister said South Korea cannot be a diplomatic counterpart to North Korea and South Korean President Lee cannot turn the tide of history, while she also stated that relations between the two Koreas will never return to the way South Korea wants, according to Yonhap and KCNA.
• Russian Embassy in India said Russian President Putin and Indian PM Modi are to meet in Delhi by year-end, no date finalised.

CRYPTO

• Bitcoin continues to dip lower and trades around USD 114k; Ethereum also on the backfoot and sits just above USD 4.2k.

APAC TRADE

• APAC stocks traded mixed after a lacklustre performance stateside, where mega-cap tech led the declines amid AI-related concerns, while the region digested earnings and central bank updates including the RBNZ's dovish rate cut.
• ASX 200 was led higher by outperformance in the top-weighted financials sector and with strength also seen in defensives, while participants also reflected on a slew of earnings updates.
• Nikkei 225 retreated beneath the 43,000 level amid continued profit taking from recent record highs and after mixed data in which Machinery Tools topped forecasts but trade data mostly disappointed and showed Japanese Exports suffered the largest decline in four years.
• Hang Seng and Shanghai Comp were varied as participants digested earnings releases including from Xiaomi and XPeng, while there was a lack of surprises from China's benchmark Loan Prime Rates which were maintained at the current levels, although the PBoC continued with its firm liquidity efforts via 7-day reverse repo operations.

NOTABLE ASIA-PAC HEADLINES

• Chinese Loan Prime Rate 1Y (Aug) 3.00% vs. Exp. 3.00% (Prev. 3.00%)
• Chinese Loan Prime Rate 5Y (Aug) 3.50% vs. Exp. 3.50% (Prev. 3.50%)
• Chinese Foreign Minister Wang Yi said regarding a meeting with Indian PM Modi that after comprehensive and in-depth communication, China and India reached an agreement to restart dialogue mechanisms in various fields.
• India’s Foreign Ministry said India and China agreed to resume direct flight connectivity between the Chinese mainland and India at the earliest, while they agreed to the re-opening of border trade through the three designated trading points. Furthermore, they agreed to facilitate trade and investment flows between the two countries through concrete measures.
• RBNZ cut the OCR by 25bps to 3.00%, as expected, while it lowered OCR projections and stated if medium-term inflation pressures continue to ease as expected, there is scope to lower the OCR further. RBNZ stated that with spare capacity in the economy and declining domestic inflation pressure, headline inflation is expected to return to around the 2% target midpoint by mid-2026, and further data on the speed of New Zealand’s economic recovery will influence the future path of the OCR. RBNZ lowered the Official Cash Rate projection for December 2025 to 2.71% (prev. 2.92%) and to 2.59% in September 2026 (prev. 2.90%). The RBNZ Minutes revealed that the rate decision was made by a majority of 4 votes to 2 and the committee discussed three policy options: keeping the OCR on hold at 3.25%, cutting the OCR by 25bps to 3% or cutting by 50bps to 2.75%, but voted on the options of either reducing the OCR by 25bps or reducing the OCR by 50bps, while the case for lowering the OCR by 25bps was based on the upside and downside risks around the central projection being broadly balanced. Furthermore, RBNZ Governor Hawkesby said during the Q&A that the next two meetings are live but no decisions have been made, as well as stated that the OCR projection troughs at 2.5% and is consistent with further cuts, while whether they go faster or slower on cuts is up to the data.
• Baidu (9888 HK) Q2 (USD): EPS 1.90 (exp. 1.74), Revenue 4.57bln (exp. 4.60bln); AI cloud business continued to deliver robust growth.

DATA RECAP

• Japanese Machinery Orders MM (Jun) 3.0% vs. Exp. -1.0% (Prev. -0.6%)
• Japanese Machinery Orders YY (Jun) 7.6% vs. Exp. 5.0% (Prev. 4.4%)
• Japanese Trade Balance Total Yen (Jul) -117.5B vs. Exp. 196.2B (Prev. 153.1B, Rev. 152.1B)
• Japanese Exports YY (Jul) -2.6% vs. Exp. -2.1% (Prev. -0.5%)
• Japanese Imports YY (Jul) -7.5% vs. Exp. -10.4% (Prev. 0.2%, Rev. 0.3%)