• Fed's Waller (voter, dovish dissenter) said the time has come to move policy to a more neutral stance and he would support a 25bps cut at the September meeting and anticipates additional rate cuts over the next 3–6 months.
• European bourses underperform on ongoing political uncertainty, UK banks hit on tax worries; US equity futures are lower into US PCE.
• Choppy trade in the USD as markets await Fed's Cook's hearing; GBP underperforms.
• Bonds are broadly lower; Bunds saw modest upticks on German Retails Sales and softer-than-expected French CPI.
• Crude declines alongside sentiment, while gold awaits PCE.
• Looking ahead, highlights include German CPI, US PCE (Jul), University of Michigan Final (Aug), Atlanta Fed GDP & Canadian GDP (Q2).

EUROPEAN TRADE

TARIFFS/TRADE

• Canada does not expect US President Trump to drop all his tariffs on the country, according to officials cited by FT.
• Brazil's Vice President Alckmin said they plan to end negotiations for a complementary trade agreement with Mexico next June and plan to sign a complementary trade agreement with Mexico in August 2026.
• Japanese trade negotiator Akazawa said he will visit the US as soon as necessary arrangements have been made, while he added that he may need to visit the US at least one more time before a presidential executive order is issued.
• Indian Trade Minister says India is to look to new markets, including Australia; India is considering steps to boost domestic demand and support exporters hit by unilateral action by a country; India is taking steps to diversify exports.
• China increases soybean purchases from Argentina and Uruguay due to ongoing US trade tensions, according to Reuters sources; says China has yet to book US soybean imports for Q4

EQUITIES

• European bourses began the session on the back foot despite stateside gains on Thursday. A slew of European data points had little impact on price action, which held a negative bias throughout the day.
• European sectors began the session mixed, though sectors have since slipped nearly entirely in the red as the risk tone deteriorated. Energy and Industrials prove resilient to the downbeat tone, with German Chancellor’s remarks on Thursday helping defence stocks. Merz said there would be no meeting between Russian President Putin and Ukrainian President Zelensky. Banks are the clear underperformers after the think-tank IPPR, recommended the Treasury should hit commercial banks with a new windfall tax on profits to raise up to GBP 8bln.
• US equity futures are trading lower but faring better than stocks across the Atlantic. NQ underperforms following outperformance on Thursday, while ES and RTY are a little more resilient into PCE, the latter outperforms.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news
• Click for a detailed summary

FX

• DXY is choppy after softening on Thursday alongside a lower yield environment and despite the several encouraging data releases stateside, including the upward revisions to headline US GDP and GDP Sales for Q2, while Core PCE Prices were revised lower and jobless claims fell. DXY currently resides in a narrow 97.85-98.04 parameter at the time of writing, with the 50 DMA seen at 95.58.
• EUR/USD gradually eased back from Thursday's peak, with the single currency thwarted by resistance near the 1.1700 level. In terms of data this morning, German retail sales fell by -1.5% M/M in July (exp. -0.4%), which saw a tick higher in Bund futures, while German import prices fell by -0.4% M/M in July (exp. -0.3%). French prelim HICP printed 0.8% Y/Y in August (exp. 0.9%, prev. 0.9%), resulting in fleeting EUR downside; Spain's HICP printed 2.7% Y/Y (exp. 2.7%, prev. 2.7%), but notable that the Core Spanish CPI saw an uptick to 2.4% from 2.3% - little EUR movement. Back to Germany, state CPIs printed in line with what is expected from the mainland metric at 13:00 BST - an uptick in the Y/Y and a downtick in the M/M. Furthermore, ECB SCE saw consumers keep inflation expectations stable. EUR/USD resides in the 1.1657-1.1682 range at the time of writing after briefly dipping under its 50 DMA 1.1661.
• JPY lacks direction as participants digested several data releases from Japan, which were ultimately mixed, whilst macro newsflow remained light in the European morning. The mixed bag of data releases included Tokyo CPI, which mostly matched estimates, and the Unemployment Rate surprisingly declined, although Industrial Production and Retail Sales disappointed. USD/JPY trades on either side of its 50 DMA (146.99) in a current 146.77-147.19 range.
• GBP/USD fell further below the 1.3500 focal point, with Sterling lagging despite light pertinent catalysts for the UK, although there were reports yesterday that PM Starmer plans a cabinet shake-up and is expected to appoint a new economic advisor ahead of the Autumn Budget. Some focus also on the UK think tank IPPR (widely described as left-wing), which recommended that Chancellor Rachel Reeves impose a windfall tax on commercial banks to reclaim profits earned from taxpayer-backed deposits at the Bank of England. A senior banker, speaking with the FT, said, “Politically it is an easy target… No one likes banks, they are seen as a whipping boy for the government”.
• Antipodeans remained afloat after recent advances, and as the PBoC continued to strengthen the yuan reference rate setting.
• PBoC set USD/CNY mid-point at 7.1030 vs exp. 7.1274 (Prev. 7.1063).
• Click for a detailed summary

FIXED INCOME

• USTs are lower by a handful of ticks in what has been a quiet and rangebound trade overnight. Currently trading in a 112-13+ to 112-18+ range, as traders now turn their attention to the US PCE later today at 13:30 BST/08:30 EDT. Headline PCE is expected to rise by +0.2% M/M (prev. +0.3%), with the annual rate unchanged at 2.6% Y/Y; the core PCE rate is seen rising +0.3% M/M (prev. 0.3%).
• Bunds are ever so slightly on the back foot, as European traders finally have some key data to digest, by way of Retail Sales/inflation metrics. Nonetheless, moves have been relatively contained so far. German Retail Sales sparked some modest upticks in Bunds and then took another leg higher on the softer-than-expected French inflation metrics - high for the day at 129.77. No real move on German Unemployment or Spanish/Italian/German State CPIs.
• Gilts are also trading on the back foot and are marginally underperforming vs peers. Currently trading in a 90.61 to 90.75 range; from a yield perspective, UK 10y is currently trading around 4.72%, still a little off the touted “danger zone” of 4.80% for the Chancellor’s budget. On that, a UK think tank IPPR (widely described as left-wing) recommended that Chancellor Rachel Reeves impose a windfall tax on commercial banks to reclaim profits earned from taxpayer-backed deposits at the Bank of England. A senior banker, speaking with the FT, said, “Politically it is an easy target… No one likes banks; they are seen as a whipping boy for the government”.
• Click for a detailed summary

COMMODITIES

• Crude futures are taking a breather after gaining yesterday, owing to geopolitics on what was otherwise a choppy performance, with the benchmarks rising on Thursday as German Chancellor Merz said there will be no meeting between Russian President Putin and Ukrainian President Zelensky. b currently resides in a 64.03-64.41/bbl range while Brent sits in a USD 68.03-68.39/bbl range.
• Spot gold faded some of the prior day's advances after ascending above USD 3,400/oz amid a softer dollar and yields.
• Mixed trade across base metals amid a choppy dollar and tentative mood across markets. 3M LME copper resides in a USD 9,839.00-9,924.00/t.
• Click for a detailed summary

NOTABLE DATA RECAP

• German State CPIs: Y/Y mostly ticked higher whilst the M/M figure edged a little lower; this is in line with expectations for the Mainland figures.
• German Retail Sales YY Real (Jul) 1.9% vs. Exp. 2.6% (Prev. 4.9%); Retail Sales MM Real (Jul) -1.5% vs. Exp. -0.4% (Prev. 1.0%)
• German Import Prices YY (Jul) -1.4% vs. Exp. -1.2% (Prev. -1.4%); Import Prices MM (Jul) -0.4% vs. Exp. -0.3%
• German Unemployment Rate SA (Aug) 6.3% vs. Exp. 6.3% (Prev. 6.3%); Unemployment Chg SA (Aug) -9.0k vs. Exp. 10.0k (Prev. 2.0k); Unemployment Total NSA (Aug) 3.025M (Prev. 2.979M); Unemployment Total SA (Aug) 2.957M (Prev. 2.97M)
• French CPI (EU Norm) Prelim YY (Aug) 0.8% vs. Exp. 0.9% (Prev. 0.9%)
• French GDP QQ Final (Q2) 0.3% vs. Exp. 0.3% (Prev. 0.3%)
• French Consumer Spending MM (Jul) -0.3% vs. Exp. -0.2% (Prev. 0.6%, Rev. 0.4%)
• Spanish HICP Flash MM (Aug) 0.0% vs. Exp. 0.1% (Prev. -0.3%); Core CPI YY (Aug) 2.4% (prev. 2.3%); HICP Flash YY (Aug) 2.7% vs. Exp. 2.7% (Prev. 2.7%)
• Spanish Retail Sales YY (Jul) 4.7% (Prev. 6.2%)
• Italian CPI (EU Norm) Prelim YY (Aug) 1.7% vs. Exp. 1.8% (Prev. 1.7%); CPI (EU Norm) Prelim MM (Aug) -0.2% vs. Exp. -0.1% (Prev. -1.0%); Consumer Price Prelim YY (Aug) 1.6% vs. Exp. 1.7% (Prev. 1.7%); Consumer Price Prelim MM (Aug) 0.1% vs. Exp. 0.2% (Prev. 0.4%)

NOTABLE EUROPEAN HEADLINES

• ECB SCE: Consumers keep inflation expectations stable 1yr: 2.6% (prev. 2.6%). 3yr: 2.5% (prev. 2.4%). 5yr: 2.1% (prev. 2.1%).
• ECB's de Guindos says "The US-EU trade agreement was the best outcome achievable among a series of difficult negotiations for Europe. In other words, it can be seen as the lesser evil.", via Econostream X
• German Job Agency Head says the nation has reached a bottoming out of the Labour market.

NOTABLE US HEADLINES

• Fed's Waller (voter, dovish dissenter) said the time has come to move policy to a more neutral stance, and he would support a 25bps cut at the September meeting, and anticipates additional rate cuts over the next 3–6 months. Waller said he does not believe a bigger September cut is needed unless the August jobs report shows substantial weakening and inflation stays well contained, while Waller added that he wanted a rate cut in July and feels more strongly about it now.
• FHFA Director Pulte sent a new criminal referral against Fed's Cook, according to Bloomberg.
• US VP Vance said interest rates are too high and the Fed is not doing its job, according to a Fox News interview.
• Bank of America weekly flow data shows USD 19.7bln into bonds, USD 16.6bln into stocks, USD 6.8bln into cash, USD 3.1bln into crypto, USD 1.4bln to gold.

GEOPOLITICS

MIDDLE EAST

• Iran's Foreign Minister Araghchi said France, Germany and the UK have no legal jurisdiction to trigger automatic re-imposition of sanctions on Iran, while he added Iran is ready to resume diplomatic negotiations over its nuclear program, provided that other parties demonstrate seriousness and goodwill. Furthermore, he said in a letter to the EU foreign policy chief that any E3 efforts to revive UN Security Council resolutions that were terminated under Resolution 2231 are invalid and ineffective.
• Deputy Russian UN Envoy said E3 move on Iran at UN has no legal bearing and does not think the Security Council should act on the E3 move, while Russia and China have not yet requested a UN Security Council vote on their draft resolution.

RUSSIA-UKRAINE

• European leaders are said to be mulling a 40-kilometre buffer zone between the Russian and Ukrainian frontlines as part of a peace deal, according to POLITICO. Officials disagree how deep the actual zone could be and it’s unclear Kyiv would accept the plan as it would likely come with territorial concessions. The US is seemingly not involved in these discussions. French and British forces will likely make up the core of the foreign troop presence.
• Russia says Western proposals for Ukraine security are aimed at containing Russia and drawing Ukraine into NATO's orbit Russia says this will increase risk of military conflict. Russia says there must be one concept of security guarantees, reflecting Russia's concerns. Russia says West is trying to turn Ukraine into a 'strategic provocateur' on its border.

OTHER

• Venezuela's UN envoy said Venezuela complained in a letter to UN chief Guterres about a US naval build up, while the envoy added that the US naval deployment violates the UN charter and Venezuela does not constitute a threat to anyone. Furthermore, the envoy said the real threat to regional stability is the US military and nuclear weapons presence in the Caribbean. It was later reported that Venezuela's President Maduro said there's no way the US can enter Venezuela, and that Venezuela has support from China, Russia, and India.

CRYPTO

• Bitcoin is on the backfoot and trades shy of the USD 109k mark; Ethereum underperforms around USD 4.3k.
• Binance says all futures trading is temporarily unavailable.
• Eric Trump says the Trump family loves and believes in the Bitcoin Community (BTC), BTC to hit USD 1mln valuation.

APAC TRADE

• APAC stocks were ultimately mixed heading into month-end and as participants digested a slew of data and earnings.
• ASX 200 traded rangebound as strength in tech and energy was offset by losses in real estate, healthcare, industrials and financials, while stock headlines in Australia continued to be dominated by a busy earnings slate.
• Nikkei 225 weakened after a slew of data releases, which were ultimately mixed, although Industrial Production and Retail Sales disappointed.
• Hang Seng and Shanghai Comp gained following another substantial liquidity injection by the PBoC of around CNY 783bln and with Beijing authorities recently vowing support measures, while the spotlight is also on incoming earnings, including from Alibaba and Chinese banks.

NOTABLE ASIA-PAC HEADLINES

• China state planner spokesperson said they are aware that household consumption capability and confidence need to be improved, and aware that company competition has intensified. The spokesperson added that China will study further increasing support from the central government to reduce funding pressure for local governments for people’s livelihood projects and will investigate dumping cases, misleading promotions, and improve governance of disorderly competition. Furthermore, China is to push for reducing R&D costs for AI innovation and will innovate methods to subsidise AI product purchases.
• Chinese Foreign Minister Wang Yi held a phone call with Brazil's Foreign Minister and said China is willing to strengthen strategic mutual trust with Brazil and strengthen mutual support, while he added that China is willing to strengthen coordination with Brazil and work with BRICS countries to resist unilateralism and bullying.
• Industrial and Commercial Bank (1398 HK) H1 (CNY): Net Income 168.1bln (prev. 171.1bln Y/Y), NII 313.6bln (prev. 314bln Y/Y).
• Agricultural Bank of China (601288 CN) H1 (CNY): net 139.94bln (+2.7% Y/Y), net fee income 51.44bln.
• Bank of Communications (3328 HK) H1 (CNY): Net Income 46bln, NII 85.3bln.
• Bank of China (601988 CH) H1 (CNY): Net Income 117.59bln, -0.9% Y/Y, NIM 214.81bln.
• TSMC (TSM) reportedly plans major supply chain overhaul, targeting high-margin and China-exposed suppliers, according to DigiTimes Asia.
• Alibaba (BABA) Q1 2025 (USD): Revenue 34.6bln (exp. 34.3bln), EPS 2.06 (exp. 2.13); notes new highs in monthly active customers and daily order volume; to increase cloud adoption for AI. Alibaba (BABA) has developed a new AI chip to help fill China's void, according to WSJ sources.

DATA RECAP

• Japanese Industrial Production MM (Jul P) -1.6% vs. Exp. -1.0% (Prev. 2.1%)
• Japanese Industrial Production YY (Jul P) -0.9% vs. Exp. -0.6% (Prev. 4.4%)
• Japanese Retail Sales YY (Jul) 0.3% vs. Exp. 1.8% (Prev. 2.0%, Rev. 1.9%)
• Japanese Unemployment Rate (Jul) 2.3% vs. Exp. 2.5% (Prev. 2.5%)
• Tokyo CPY YY (Aug) 2.6% vs Exp. 2.6% (Prev. 2.9%)
• Tokyo CPY Ex. Fresh Food YY (Aug) 2.5% vs Exp. 2.5% (Prev. 2.9%)
• Tokyo CPY Ex. Fresh Food & Energy YY (Aug) 3.0% vs Exp. 3.1% (Prev. 3.1%)