• European bourses mostly higher with tech names outperforming their peers following yesterday’s Nasdaq gains
• GBP/USD hits 10-month lows, now eyeing 1.30 to the downside as UK inflation figures fall short of expectations
• Looking ahead, highlights include, UK and EZ CPI, US building permits, housing starts, DoEs and Fed’s Powell

ASIA

Asian equity markets traded with a positive tone as momentum rolled over from US where all majors gained and the Nasdaq posted fresh record highs on tech outperformance, with sentiment also underpinned after upbeat comments from Fed Chair Powell. ASX 200 (+0.7%) and Nikkei 225 (+0.4%) were higher with Australia led by miners including BHP after the industry giant posted strong Q4 iron ore production numbers, while Japanese exporters were lifted by favourable currency moves in which USD/JPY briefly rose above 113.00 for the first time since January. Hang Seng (-0.2%) and Shanghai Comp. (-0.4%) bucked the trend  despite the PBoC conducting a 3rd consecutive daily net injection via reverse repos with losses spurred by continued weakness in blue chip energy names, while Xiaomi shares surged amid reports HKEX agreed with mainland exchanges on changes to Stock Connect inclusions which will ultimately allow shares with weighted voting rights to be included for Southbound trade. Finally, 10yr JGBs were uneventful as focus was centred on riskier assets, and after an enhanced liquidity auction for longer bonds also failed to spur price action despite a higher b/c than previous.

PBoC injected CNY 60bln via 7-day and CNY 20bln via 14-day reverse repos for a net daily injection of CNY 80bln. (Newswires)

PBoC set CNY mid-point at 6.6935 (Prev. 6.6821)

HKEX agreed with mainland exchanges on adjusting inclusion for the stock connect in which weighted voting rights shares will have an initial special ability trading period and then be permitted for Southbound trade. (Newswires)

EU/UK/US

Fed's George (Non-Voter, Hawk) stated the US economy is in excellent condition and that monetary policy remains accommodative. Fed’s George also stated that gradual rate hikes are required and uncertainty remains regarding speed and distance of Fed rate hikes. (Newswires)

The EU are to initiate steel-related safeguard measures to curb imports as of July 19th. (Newswires)

Alphabet’s (GOOGL) Google are to be fined EUR 4.3bln by the EU regarding Android, according to reports. (Newswires)

UK CPI YY Jun 2.4% vs. Exp. 2.6% (Prev. 2.4%)

UK CPI MM Jun 0.0% vs. Exp. 0.2% (Prev. 0.4%)

UK Core CPI YY Jun 1.9% vs. Exp. 2.2% (Prev. 2.1%)

EU CPI Final YY Jun 2.0% vs. Exp. 2.0% (Prev. 2.0%)

EU CPI Final MM Jun 0.1% vs. Exp. 0.1% (Prev. 0.5%)

EU HICP ex Food & Energy YY Jun 1.2% vs. Exp. 1.2% (Prev. 1.2%)

EU HICP ex Food, Energy, Alcohol & Tobacco Final YY Jun 0.9% vs. Exp. 1.0% (Prev. 1.0%)

EQUITIES

European equities kicked off the session on an optimistic note (Eurostoxx 50 +0.5%) as the tech sector is boosted by NASDAQ’s record close and earnings from ASML (+6.4%), dragging counterparts higher in sympathy. European auto names are supported by reports Europe is exploring dialogue with US President Trump regarding a reduction in US auto tariffs. Earnings have been dominating the morning with the likes of Novartis (+2.2%), Akzo Nobel (+0.9%), UbiSoft (+6.3%) reporting. BHP (+3.0%) currently stands at the top of the FTSE 100 after reporting positive Q2 production. Elsewhere, Italian banks fell to the foot of the Italian benchmark after UK clearing house LCH raise the margin call on BTPs.

FIXED INCOME

Core bonds are off best levels, but still firm on a mixture of positive factors including data and Brexit in the case of UK debt alongside more general cautious positioning amidst ongoing global trade concerns, and for Bunds some FTQ/safe-haven premium on Italian bond underperformance. Gilts have eased back from their Liffe session high and just ahead of key 123.88 Fib resistance, while their German peer is straddling 163.00 and US Treasuries are relatively side-lined just a tick or so either side of unchanged within narrow overnight ranges ahead of Fed chair Powell to and any potential tweaks to Tuesday’s 1st semi-annual testimony. Back to Eurex, not much reaction to a comfortable 30 year German auction. 

FX

GBP - No let-up in the negatives for the Pound as broadly softer than forecast headline and pipeline UK inflation prints compound losses made on the back of ongoing political instability and Brexit divisions within Whitehall. Cable has now lost hold of another big figure (1.3100) and tested bids just ahead of 1.3000 before some consolidation/short covering (with perhaps circa 2 bn option expiries at the strike for tomorrow also being defended), while Eur/Gbp has breached psychological resistance at 0.8900.

DXY - Back above 95.000 in wake of supportive vibes from Fed Chair Powell on Tuesday, but the broad Usd also benefiting from the demise of rival currencies amidst further posturing and positioning in global trade wars. Note, the CNY and CNH have both fallen further below levels that previously sparked official intervention, partly by design via PBoC fixing.

AUD/CAD/NZD - All conceding ground vs their US counterpart, with former retreating to sub-0.7350 following a very weak Aussie leading index overnight (sub-zero reading), the Loonie breaking down through 1.3200 support that had been holding, with another downturn in oil prices hardy helping and the Kiwi revisiting 0.6750 having failed to sustain momentum at 0.6800+ recently.

EUR - Also a victim of the buoyant Greenback and divergent yield/CB trends, with the single currency seriously testing 1.1600 bids after dipping through near term technical support around 1.1613.

CHF/JPY - Both holding up relatively well vs other G10s, but still significantly softer vs the Usd as the Franc drops back under parity and the Jpy eyes ytd lows through 113.00 (113.39, but 200 WMA circa 113.29 capping for now).

COMMODITIES

Commodities are mostly subdued, in tandem with overnight price action, WTI flirts around USD 67.50/bbl while Brent is below USD 71.50/bbl, weighed on by last night’s API’s printed a surprise build in crude inventories. Metals are lower today (Gold -0.4%), pressured by the firmer USD. Elsewhere, while copper's attempts to nurse losses were somewhat futile alongside broad subdued tone across the complex.

US API Weekly Crude Stocks (9 Jul) +0.629M vs. Exp. -3.600M (Prev. -6.795M)

Citi raised long-term copper price forecast to USD 7500/ton from USD 7000/ton, while it stated that trade war is a long-term buying opportunity for copper and said to prepare for a decade of copper on steroids. (Newswires)