• European equities trade mostly negative (Eurostoxx 50 -0.5%, DAX -0.2%)
• GBP resilient in wake of another Government semi U-turn on post-Brexit proposals
• Looking ahead, highlights include, US industrial production, APIs Inventories, Fed’s Powell

ASIA 
Asian equity markets traded mostly lower after a lacklustre lead from the US where energy underperformed amid a slump in crude and Nasdaq futures took a hit after-market on disappointing earnings and subscriber numbers from Netflix. ASX 200 (-0.6%) was negative with the index dragged by losses in energy names following a decline of around 4% in oil due to concerns a supply glut could return and as miners suffered from early weakness in Shanghai metal prices. Conversely, Nikkei 225 (+0.4%) bucked the trend on return from the extended weekend amid JPY weakness, while Shanghai Comp. (-0.6%) and Hang Seng (-1.3%) led the declines despite continued liquidity efforts by the PBoC, amid overhang from trade uncertainties and with energy names pressured. Finally, 10yr JGBs were uneventful with prices subdued amid a positive tone in Tokyo stocks but with downside also restricted amid the BoJ’s presence in the market concentrated in the short end and belly of the curve. 
 
NDRC said China faces large difficulties in achieving stable development during H2 amid shocks from trade tensions but added that China has ample of space to deal with shocks. (Newswires) 
 
PBoC injected CNY 70bln via 7-day and CNY 30bln via 14-day reverse repos for a net daily injection of CNY 90bln. (Newswires) 
 
PBoC set CNY mid-point at 6.6821 (Prev. 6.6758) 
 
Chinese House Prices (Jun) Y/Y 5.0% (Prev. 4.7%). (Newswires) 
 
BREXIT 
The UK government narrowly curbed a defeat on the Custom Bill after compromising with Brexiteers demands. The House of Commons approved (voting 305 to 302) the clause to prevent the UK collecting taxes on behalf of another territory or country, unless this were done on a reciprocal basis. 
Subsequently, Conservative Eurosceptics have declared that they have killed off UK PM May’s Chequers plan by making her adopt changes that will leave it ‘dead on arrival’ in Brussels. (Telegraph) Remain-supporting MPs are said to be furious with May caving to the demands of the Eurosceptics. (Times) 
UK Defence Procurement Minister and Remain advocate Guto Bebb resigned after the government accepted ERG amendments. (Newswires) 
EU/UK/US 
UK Average Earnings (Ex-Bonus) May 2.7% vs. Exp. 2.7% (Prev. 2.8%) (Newswires) UK Average Earnings (+Bonus) May 2.5% vs. Exp. 2.5% (Prev. 2.5%, Rev. 2.6%) UK ILO Unemployment Rate May 4.2% vs. Exp. 4.2% (Prev. 4.2%) UK Claimant Count Unemployment Change Jun 7.8k vs. Exp. -2.1k (Prev. -7.7k, Rev. -3.0k) 
 

EQUITIES 
European equities trade mostly negative (Eurostoxx 50 -0.5%, DAX -0.2%) in what has been a relatively light session thus far in terms of newsflow. European markets have opted to shrug off the broadly softer Asia-Pac lead which saw sentiment hampered by yesterday’s declines in energy prices and slump in Nasdaq futures after Netflix subscriber growth figures fell short of street estimates. 
In terms of sectors, telecom names lag their peers after Orange (-1.4%) were cut to neutral from buy at Citi and Telenor (-1.8%) earnings fell short of market expectations. Material names are seen higher despite ongoing trade concerns as gains in Thyssenkrupp (+8.3%) lift the sector amid news that their Chairman is to leave the Co., following the recent resignation of their CEO. 
Other individual movers include Casino (+3.8%) who are higher following encouraging sales figures which has also pulled Carrefour (+1.5%) higher in sympathy. Royal Mail’s (+2.0%) latest trading update has been welcomed by the market, whilst Tom Tom (+4.7%) shares have headed north after upping their revenue and EPS guidance. 

FIXED INCOME 

A very well received if not strong German 2 year auction has helped core bonds regroup after the earlier downturn that continued in wake of the UK labour report on certain encouraging metrics, like the low unemployment rate. Bunds have rebounded to a marginal new intraday peak at 162.80 and Gilts towards their previous session high of 123.26, while Schatz futures are mid-range and 7 ticks above their previous close. US Treasuries a bit more mixed, but only marginally either side of parity with the curve fractionally steeper ahead of IP data. 

FX 
NZD/AUD - The Kiwi is now head and shoulders above the G10 pack on elevated NZ inflation data, but not the headline measures that were actually a tad softer than expected. Instead, it was the RBNZ’s preferred core or factor model measure that hit a 1.7% y/y 7 year peak that boosted the Nzd to 0.6840 vs the Usd and not far from 1.0860 vs the Aud, which lagged in wake of neutral RBA minutes flagging heightened global trade risks due to hyped up import tariff threats between the US and China amongst others. Aud/Usd remains above 0.7400 on a broadly soft Greenback, but is still wary about option expiries at the strike through this week, with 800 mn falling today. 
CHF/EUR - Both benefiting from the ongoing Dollar retracement off recent peaks (DXY circa 94.300 and drifting further vs 95.243 last week), with the Franc pivoting 0.9950 and single currency consolidating above 1.1700, but capped ahead of 1.1750 after testing resistance around 1.1740 (top of a cloud base). 
GBP - Resilient in wake of another Government semi U-turn on post-Brexit proposals, with Cable rotating around 1.3250 and Eur/Gbp circling 0.8850 following UK labour data showing underlying strength in the jobs market, albeit with wages still not reflecting high levels of employment perhaps. 
CAD/JPY - Relatively flat vs the Usd with the Loonie just off highs in a 1.3110-40 range ahead of Canadian manufacturing sales data, while Usd/Jpy meanders between 112.25-55 with heavy offers layered above 112.50 and markets looking towards US ip data for some further direction. 

COMMODITIES 
WTI and Brent (+0.1% and +0.3% respectively) crude futures trade in close proximity to recent lows as market forces continue to act against the commodity. Prices have been unable to make any meaningful recovery from recent losses which have stemmed from ongoing concerns that a supply glut could return amid reports the US is open to considering waivers on Iran sanctions, Libyan refineries coming back online, as well as recent chatter that the US was mulling dipping into the strategic petroleum reserve. In terms of energy newsflow from today’s session, Libyan sources report that domestic oil output has risen to 650-700k bpd as ports continue to re-open. With this in mind, Goldman Sachs state that they still expect Brent crude to retest USD 80/bbl although it may occur in late 2018 rather than previous forecast of summer, citing US stance on oil. 
In metals markets, spot gold (+0.36%) has seen some modest support from the broadly softer USD with traders mindful of today’s congressional testimony from Fed Chair Powell. Elsewhere, copper is seen higher by around 1% in London trade as LME inventories remain tight, whilst steel prices were seen lower overnight as recent Chinese data poses some concern for the market. Finally, Indian government sources suggest that the nation is still in talks with the US regarding the rolling back of steel tariffs with India ready to impose safeguards if necessary. 
Iran's Foreign Minister Zarif says steps are being taken for the continued sale of oil. (Newswires)