• European bourses pare some of Friday's gains; US equity futures are mixed, with the RTY holding afloat.
• USD struggles to recoup Friday's lost ground in a quiet start to the week; JPY underperforms despite hawkish-leaning commentary via BoJ’s Ueda.
• USTs pause for breath following Powell-induced upside, whilst Bunds move lower.
• Crude benchmarks are very modestly firmer with focus on geopolitics; XAU is on the backfoot.
• Holiday: UK Summer Bank Holiday
• Highlights include US National Activity (Jul), Comments from Fed’s Logan.

TARIFFS/TRADE

• US food industry groups are pushing for exemptions from US tariffs and arguing that products from fish to cucumbers cannot be affordably grown at home, according to FT.
• European Commission President Von der Leyen defended the EU-US agreement on tariffs which she said was a 'conscious decision' that avoided a trade war and called it a "good, if not perfect agreement", according to euro news.
• South Korea's President Lee said they will ultimately arrive at a reasonable trade deal with the US and he expects to discuss with US President Trump security and defence costs, as well as tariff negotiations.
• India’s Foreign Minister said trade negotiations are still going on and they have lines to maintain and defend, while he added the lines India cannot cross are the interests of farmers and small producers. Furthermore, he said India buying Russian oil was never brought up before the public announcement of tariffs and issues about buying Russian oil are not being used to target other major users such as China and the EU.
• French President Macron said he had an in-depth discussion on major international crises with South African President Ramaphosa, while they also reviewed economic and trade issues, as well as bilateral cooperation between France and South Africa.

EUROPEAN TRADE

EQUITIES

• European bourses (STOXX 600 -0.2%) have begun the week on the backfoot, as indices pare back some of the Powell-induced strength seen on Friday.
• European sectors opened mostly in the red, only a few remaining afloat including Banks, Media along with Travel & Leisure. At the bottom of the pile is Utilities due to notable losses in Orsted (-17%) after it received an offshore stop-work order from US BOEM.
• US equity futures (ES -0.2%, NQ -0.3%, RTY U/C) are mixed, with the ES and NQ directionally following the losses in Europe, whilst the RTY holds afloat.
• Jefferies raises 2025 year-end target for S&P 500 to 6,600 (prev. saw 5,600, last closed 6,466.91).
• TSMC (2330 TT) has stopped using Chinese chipmaking equipment at its most advanced facilities to mitigate risks of facing US restrictions and subsequent supply chain disruptions, according to Nikkei sources
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FX

• DXY has kicked the week off slightly firmer. Gains, however, are relatively minor compared to the losses seen on Friday post-Powell, where he signalled to a September rate cut. Focus this week will turn to PCE on Thursday. Upside in DXY is currently capped by the 98 mark. If breached, the 50DMA sits at 98.06.
• After venturing as high as 1.1742 on Friday, EUR/USD has slipped below the 1.17 mark as the dollar attempts to atone for recent losses. German IFO data today saw a strong turnout for the expectations component, helping the headline print above the market consensus. That being said, the IFO President noted that "the recovery of the German economy remains weak". EUR/USD has delved as low as 1.1694 thus far with interim support provided by the 50DMA at 1.1650.
• After a strong showing on Friday, the JPY rally against the USD has paused for breath. The JPY has been unable to garner any further support from comments by BoJ governor Ueda, who stated that barring a major negative demand shock, the labour market is expected to remain tight and put pressure on wages. USD/JPY has made its way back onto a 147 handle after delving as low as 146.57 overnight with a current session peak at 147.52.
• GBP is a touch softer vs. the USD with UK market participants way from market. Subsequently, newsflow surrounding the UK is light aside from comments by BoE Governor Bailey, who remarked that the UK faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation since the COVID-19 pandemic. He added that the BoE shifted its focus away from long-term trends in unemployment to looking at levels of labour force participation instead.
• Steady trade for the antipodes with AUD supported by a much firmer-than-expected CNY reference rate setting. For AUD this week, RBA minutes are due on deck tomorrow with monthly CPI set to hit on Wednesday.
• Barclays month-end rebalancing model: weak USD selling against most majors. Neutral vs. EUR and JPY.
• PBoC set USD/CNY mid-point at 7.1161 vs exp. 7.1551 (Prev. 7.1321).
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FIXED INCOME

• USTs are essentially flat and trade in a very narrow 4 tick range (112-01 to 112-05), as US paper takes a breather from Friday’s significant upside following dovish remarks from the Fed Chair. From a yield perspective, there is some mild bear flattening, with the short-end making back some of Friday’s pressure.
• Bunds are trading on the backfoot and currently lower by around 38 ticks, pulling back from the upside seen on Friday. Currently trading towards the bottom-end of a 129.02 to 129.31 range; further downside will see a test of the round 129.00 mark, and below that 128.94 (the lower from Friday). From a yield perspective, the German 10yr is currently higher by 3.7bps at around 2.756%. Focus has been on the ECB over the weekend. Firstly, Reuters reported that ECB rate cut talks may resume after the September pause, should the economy continue to deteriorate. Elsewhere, President Lagarde said Europe’s labour market has remained resilient despite severe inflation shocks and aggressive rate hikes.
• Gilt futures trading is currently shut today on account of the UK’s Bank Holiday.
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COMMODITIES

• The crude complex trades with a modest positive bias on the first trading session of the week. On the geopolitical front, Ukrainian drones attacked an industrial facility in Russia’s Samara region which sparked a fire at Russia’s Novatek Ust-Luga terminal. However, Kazakhstan's energy ministry said the nation's oil exports had not been interrupted by the disruption. Aside from this, energy-specific drivers are light. WTI trades within a USD 63.53-64.03/bbl range, while Brent trades within USD 67.04-67.50/bbl.
• Precious metals trade mixed. Palladium modestly outperforms despite weakness in auto stocks, while gold is softer amid a modestly firmer dollar and a pullback from Fed Chair Powell’s dovish address on Friday. XAU/USD currently trades choppily within a USD 3,405-3,417/oz range, towards the top end of Friday's parameters with a high at 3,425/oz.
• 3M LME trade is closed today amid the UK bank holiday.
• Iraq raised its refining capacity to 1.3mln bpd from 1.1mln bpd in 2024, according to the PM’s office.
• Libya’s NOC said it will host the first Libyan-US energy forum soon.
• Codelco said Chile’s mining regulator authorised the restart of operations at Andes Norte and Diamante divisions of the El Teniente mine.
• Kazakhstan's energy ministry says the nation's oil exports have not been interrupted following a Ukrainian drone strike on Russia's Ust-Luga.
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NOTABLE DATA RECAP

• German Ifo Expectations New (Aug) 91.6 vs. Exp. 90.3 (Prev. 90.7); Ifo Current Conditions New (Aug) 86.4 vs. Exp. 86.7 (Prev. 86.5); Ifo Business Climate New (Aug) 89.0 vs. Exp. 88.3 (Prev. 88.6)

NOTABLE EUROPEAN HEADLINES

• BoE Governor Bailey said at Jackson Hole that the UK faces an "acute challenge" over its weak underlying economic growth and reduced labour force participation since the COVID-19 pandemic, while he said the BoE shifted its focus away from long-term trends in unemployment to looking at levels of labour force participation instead, according to Reuters.
• ECB’s Lagarde said at Jackson Hole that the labour market has weathered recent shocks and proved to be surprisingly resilient in the face of an inflation shock and aggressive interest rate hikes, while she also commented that central bank independence is critically important.
• ECB’s Kazaks said the central bank entered a new monetary-policy phase where officials can focus on monitoring the economy rather than actively intervening to change its course, while he noted there is currently no need to lower rates further as inflation is at the 2% target and recent data has not signalled a marked change in the outlook since the quarterly projections in June, according to Bloomberg.
• ECB’s Rehn said the central bank is in no hurry to cut interest rates further after inflation reached its 2% target and with the economy performing slightly better than thought, according to Bloomberg.
• ECB rate cut talk may resume after a pause in September, should the economy continue to weaken, according to Reuters citing sources.
• German Chancellor Merz said tackling economic woes is tougher than expected and that the US’s 15% tariffs on German exports will be a burden on the German economy, according to Bloomberg.
• Fitch affirmed the UK on Friday at AA-; Outlook Stable but stated that greater global uncertainty and weaker external demand will dampen investment growth.
• Italy’s Deputy PM Tajani said he opposes Italy imposing windfall taxes on banks, while he commented that banks should pay taxes and contribute but should not be surprised or scolded, according to Bloomberg.
• Canadian PM Carney will travel to Poland, Germany and Latvia during August 25th-27th and will meet with German Chancellor Merz, while Carney will be focused on strengthening relationships with European allies and advancing cooperation in key areas.

NOTABLE US HEADLINES

• Fed’s Musalem (2025 voter) said it is reasonable to expect the tariff inflation effect to fade, while he said more data is needed and he will be revising the rate path view all the way up to the September meeting. Musalem said Fed policy is modestly restrictive and the policy rate may warrant adjustment if risks to the job market intensify. Furthermore, he said inflation is above target with risk of persistence and the rate path could include a pause, as well as noted that the next jobs report may or may not be enough to justify a rate cut, depending on what it shows, and he is looking at the whole rate path, not just the rate decision at one meeting.
• US Pentagon plans a military deployment in Chicago as President Trump eyes a crackdown, according to Washington Post.

GEOPOLITICS

MIDDLE EAST

• Israel’s military conducted an attack on the Yemeni capital of Sanaa against targets which included a military compound where the presidential palace is located, two power stations and a fuel storage site.
• Iran’s Supreme Leader said the current situation with the United States was "unsolvable" and that they will stand strongly against the US demand to make Tehran ‘obedient’, according to Reuters citing state media.
• Iran is prepared to significantly lower uranium enrichment to prevent Britain reimposing UN sanctions, according to The Telegraph.

RUSSIA-UKRAINE

• Ukraine’s PM discussed security guarantees with US special representative Kellogg.
• US Pentagon quietly blocked Ukraine’s long-range missile strike on Russia with the US Defense Department withholding approval as the White House sought to entice Moscow to open peace talks, according to WSJ. However, it was later reported that Ukrainian President Zelensky said Ukraine has lately been using its own weapons to hit Russia and does not consult on this with Washington.
• Russia and Ukraine conducted an exchange of POWs in which they swapped 146 POWs each.
• Russia’s Defence Ministry said Russian forces captured Filiia in Ukraine’s Dnipropetrovsk region, according to Interfax.
• Russian air defence forces shot down a Ukrainian drone near the Kursk nuclear power plant and a fire broke out at the plant, although there were no safety threats to people or the plant. However, the Kusk acting Governor separately commented that the Ukrainian drone attack on the nuclear power plant is a threat to nuclear safety.
• Russian air defences downed a drone flying towards Moscow. It was separately reported that Ukrainian drones attacked an industrial facility in Russia’s Samara region and that debris from a destroyed Ukrainian drone attack sparked a fire at Russia’s Novatek Ust-Luga terminal.
• Norway is providing air defences worth NOK 7bln to Ukraine, which will be delivered from Germany to Ukraine, with Norway and Germany funding two patriot systems including missiles.
• Russian defence ministry says its forces captured Zaporizke in eastern Ukraine, via RIA.

OTHER

• North Korean leader Kim oversaw the firing of new air defence missiles, according to KCNA. In relevant news, South Korea confirmed it fired warning shots earlier last week at North Korean soldiers who briefly crossed the border between the two countries, according to the BBC.

CRYPTO

• Bitcoin moves lower and trades around USD 111k, with Ethereum also extending losses to around USD 4.5k.

APAC TRADE

• APAC stocks began the week on the front foot as the region took its opportunity to react to the dovish comments by Fed Chair Powell at Jackson Hole on Friday, in which he signalled the potential for a September rate cut as he noted that the shifting balance of risks may warrant adjusting policy.
• ASX 200 rallied to a fresh record high at the open but gave back a majority of the early gains as participants also digested a slew of earnings releases.
• Nikkei 225 advanced at the open but then lost steam and faded most of the early upward momentum to return to beneath the 43,000 level with headwinds from last Friday's currency strength and with some hawkish-leaning comments from BoJ Governor Ueda at Jackson Hole who expects a tightening job market to push up wages.
• Hang Seng and Shanghai Comp outperformed with the advances in Hong Kong led by property, mining and tech, while the mainland was also lifted after China's State Council called for efforts to bolster overall coordination and refine implementation mechanisms of large-scale equipment upgrades and consumer goods trade-in programs to better leverage their role in boosting domestic demand. Furthermore, participants digested several earnings releases and the PBoC announced last Friday to conduct CNY 600bln of 1-year MLF loans for today.

NOTABLE ASIA-PAC HEADLINES

• BoJ Governor Ueda said at Jackson Hole that barring a major negative demand shock, the labour market is expected to remain tight and put pressure on wages, while he added that competition for workers has increased and more people are switching jobs. Ueda said they will continue to monitor the labour market developments closely and incorporate that into monetary policy. Furthermore, he said wages are now rising and labour shortages have become one of the most pressing economic issues, as well as noted that the demographic shift that began in the 1980s is producing acute labour shortages and persistent upward pressure on wages.
• Japanese PM Ishiba said Japan agreed to strengthen security and economic ties with South Korea, while South Korean President Lee said they agreed on South Korea-Japan relations, which are important in a fast-changing global political landscape.
• Shanghai lifts the home buying limit in the outer suburbs effective August 26th, according to Bloomberg.
• RBNZ opened consultation on New Zealand's capital settings for deposit takers with the review to consider whether current prudential capital requirements are set at the right level, while the central bank proposed to lower the minimum capital requirement to NZD 5mln.
• Fitch affirms India at BBB-; outlook stable.