• European equities trade mostly on the backfoot as earning season kicks into gear
• Cable slumped through 1.3000 on another UK data miss before stabilising near the round number
• Looking ahead, highlights include Philly Fed, SARB rate decision, Fed’s Quarles, ECB’s Coeure, UK Brexit Secretary Raab meets with EU’s Barnier

ASIA-PAC

Asian bourses were mixed as trade concerns and a weakening CNH clouded over the mostly positive lead from Wall St where earnings remained in focus and the DJIA notched a 5th consecutive gain. ASX 200 (+0.3%) and Nikkei 225 (-0.1%) both opened higher with outperformance in industrials and mining related sectors, while corporate updates also spurred trade. Shanghai Comp. (-0.5%) and Hang Seng (-0.4%) initially gained after further liquidity efforts by the PBoC and with the central bank mulling incentives to bolster lending. However, gains were capped amid the ongoing US-China trade friction including recent comments from NEC Director Kudlow who believes President Xi Jinping is 'holding up' progress on trade talks and is doubtful on the Chinese leader’s intention of following through on trade reforms, while concerns triggered by considerable CNH weakness pushed Chinese bourses past the tipping point and in turn pared gains in Japan. Finally, 10yr JGBs were uneventful with prices flat for most the session although some support was seen in late trade as Japanese stocks wiped out gains, while a reduction in the BoJ’s Rinban purchases of 10yr-25yr and 25yr+ bonds also failed to spur any reaction.

PBoC injected CNY 70bln via 7-day reverse repos and CNY 30bln via 14-day reverse repos, for a net daily injection of CNY 70bln, while the PBoC was also reported to gauged 1yr Medium-term Lending Facility demand for today. (Newswires)

PBoC set CNY mid-point at 6.7066 (Prev. 6.6914)

PBoC is said to mull incentives to improve liquidity in banks, as well as help expand lending and bond investments, while PBoC is also reported to be using its MLF to bolster lending activity among banks. (Newswires)

Australian Employment Change (Jun) 50.9k vs. Exp. 17.0k (Prev. 12.0k, Rev. 13.5k). (Newswires)

Australian Full Time Employment Change (Jun) 41.2k (Prev. -20.6k, Rev. -19.9k)

Australian Unemployment Rate (Jun) 5.4% vs. Exp. 5.4% (Prev. 5.4%)

Australian Participation Rate (Jun) 65.7% vs. Exp. 65.5% (Prev. 65.5%)

US

US President Trump said he holds Russian President Putin responsible for meddling and that he told Putin 'can't have meddling', while Trump also commented he accepts Director of National Intelligence's conclusion that Russia continues to meddle in election. (CBS News/Newswires)

There were also reports that the White House sees a lot of progress on trade talks with Mexico but is continuing both NAFTA tracks including with Canada. (Axios/Newswires)

Mexico’s Economy Minister Guajardo said it is technically possible to reach a NAFTA deal before the next Mexican government takes office on December 1st and that they are still seeking a three country NAFTA deal. Guajado added that he hopes to be in position to sign a deal by the end of November and hopes for an agreement in principal to be announced by the end of August, while he reiterated moving from NAFTA to a bilateral trade agreement with the US would be costly and effectively be similar to starting from scratch. (Newswires)

US began section 232 investigation on uranium imports, while there had been earlier comments from Canadian Foreign Minister Freeland that Canada's Uranium is not a threat to US security. (Newswires)

EU/UK

UK International Trade Secretary Fox has warned the European Union that member states will face stark economic consequences if Britain leaves the bloc without a deal next year. (Times)

UK Retail Sales MM Jun -0.5% vs. Exp. 0.2% (Prev. 1.3%, Rev. 1.4%) (Newswires)

UK Retail Sales YY Jun 2.9% vs. Exp. 3.7% (Prev. 3.9%, Rev. 4.1%)

UK Retail Sales Ex-Fuel YY Jun 3.0% vs. Exp. 3.5% (Prev. 4.4%, Rev. 4.5%)

UK Retail Sales Ex-Fuel MM Jun -0.6% vs. Exp. -0.3% (Prev. 1.3%, Rev. 1.4%)

EU is reportedly mulling tariffs on coal, pharmaceuticals and chemistry goods in retaliation to the US. (WiWo) While the European Trade Commissioner Malmstroem said the removal of car tariffs with the US could only be done as part of a broader trade deal; adding the EU is preparing list of re-balancing measures in case US imposes tariffs on EU cars. She did also state the EU is not going to the US to negotiate trade. (Newswires)

EQUITIES

European equities trade mostly on the backfoot (Eurostoxx 50 -0.2%) after initially trading choppy as earning season kicks into gear. UK’s FTSE 100 outperforms its peers on the back of currency effects amid weak UK retail sales. Energy names outperform, in-fitting with price action in WTI and Brent yesterday, while material names are subdued by the fall in base metals prices.

As mentioned, earnings dominated the morning with the likes of Anglo-Dutch giant Unilever (+0.5%) being a key focus. French advertising group Publicis (-7.2%) fell to the foot of the French benchmark after missing expectations, dragging down FTSE 100 listed WPP (-3.2%) in sympathy. On the flip side, Shell (+1.4%) shares rose to the top of the index after a broker upgrade at Raymond James.

FX

DXY - The index looks on the brink if not braced to test 95.531 ytd peaks after another upbeat rendition of the Fed’s semi-annual testimony from Chair Powell, and as rival currencies continue to underperform on yield divergence alongside ramped up global trade war manoeuvres. As the import tariff spat between the US and China rages on, the YUAN has waned further to 6.7700+ in Cny terms and not far from 6.8000 on an off-shore basis (Cnh), which is viewed by some as the line in the sand for ‘official’ intervention.

NZD/AUD - The Kiwi has lost most ground vs a broadly strong Usd, and the 0.6800 handle that was briefly reclaimed overnight on the coattails of a strong Aud rebound above 0.7400 and just shy of 0.7450 after a stellar Aussie jobs report (headline number blitzed consensus, and mainly due to a 40k+ jump in full-time workers). However, the antipodeans have recoiled to circa 0.6750 and 0.7360, with 2018 lows in sight again.

GBP - Flogged anew after another UK data miss, as the warm weather and World cup boosted the sales of BBQ fodder, but hit non-food items and resulted in a negative overall m/m figure, on top of yesterday’s softer than forecast CPI. Cable slumped through 1.3000 having breached daily support (1.3055) earlier to a fresh ytd base around 1.2985, but has regained big figure status amidst short covering and almost certainly with a mega 2 bn option expiry at the strike in mind.

CAD/CHF/EUR/JPY - All casualties of the resurgent Greenback, and also eyeing round numbers close to key chart levels and/or lows for the year. The Loonie is locked around 1.3200 even though there has been some positive talk around US-Canadian-NAFTA negotiations, with another dump in oil prices perhaps offsetting, while the Franc is back down around parity and single currency pivoting around 1.1600. To recap, 1.1591 is the July low to date. Meanwhile, Usd/Jpy is a fraction above 113.00, with the most recent high around 113.13, a MA at 113.29 and the previous 2018 peak at 113.39.

EM - The rationale is well documented, so suffice to say that EMs are suffering more vs the Usd, with the Rand looking for some potential support from the SARB later.

FIXED INCOME

Unsurprisingly, Gilts led a rebound in core EU bonds on the back of another UK data miss and the 10 year benchmark fleetingly climbed just over par to 123.70, while Bunds revisited their earlier marginally higher Eurex peak at 162.91. However, both are back in negative territory with retail sales notoriously erratic and interestingly odds on an August rate hike from the BoE not materially low circa 68%. Note also, UK debt has supply to digest via 2057 paper. Elsewhere, US Treasuries remain on the back foot after some relatively heavy downside price action during the overnight session and the curve steeper post-Powell 2 and pre-weekly claims, Philly Fed, LEI and $13 bn 10 year TIPs.

COMMODITIES

WTI and Brent crude futures have seen a pullback in European trade from the highs reached yesterday. Gains yesterday were largely fuelled by a covering of shorts post-DoEs, which despite revealing record US production, was accompanied by Cushing stockpiles falling to their lowest levels since 2014. Since then, energy newsflow has remained light with some traders mindful of supply disruptions amid reports that Yemeni rebels struck a Riyadh refinery, causing a fire; Aramco said, however, that operations were not impacted and that the fire was due to an operational incident.

In metals markets, spot gold and silver sit at 1-year lows as the precious metals continue to fall victim to the firmer USD. Copper mirrored the lacklustre tone across most of the commodities complex during the Asia-Pac session as trade tensions lingered and CNH weakness clouded risk sentiment, whilst steel rebar futures hit their highest level in 10 months in Shanghai amid supply concerns. In terms of metals newsflow, Anglo American reported a 6% Y/Y increase in Q2 output whilst upgrading platinum production guidance.