• Asian equity markets were mixed with the region indecisive following modest gains on Wall St
• US Treasury Secretary Mnuchin has stated that he and USTR Lighthizer could visit China for further talks if progress is made
• EU is reportedly mulling potential concessions it could offer to avoid a no-deal Brexit
• Looking ahead, highlights include UK Jobs, German ZEW US Import/Export Prices, Retail Sales, Industrial Production, Manufacturing Output & Business Inventories, EC President Voting, Fed Discount Rate Minutes and supply from the UK
• Speakers: Fed’s Powell, Evans, Bowman, Bostic & Kaplan, BoE’s Carney & ECB’s de Galhau
• Earnings: JP Morgan, Goldman Sachs, Wells Fargo, J&J, Kinder Morgan & Charles Schwab

ASIA-PAC

Asian equity markets were mixed with the region indecisive following modest gains on Wall St where all major indices notched fresh record highs before pulling back on cautiousness heading into earnings season. ASX 200 (Unch.) was choppy as weakness across energy and financials offset the upside in mining names including Rio Tinto, in which record high iron ore prices in China helped shares in the industry giant shrug off a decline in Q2 production and shipments. Nikkei 225 (-0.7%) underperformed on return from the extended weekend as it reacted to the recent downside in USD/JPY, while Hang Seng (-0.1%) and Shanghai Comp. (+0.1%) were lacklustre as markets digested a slew of corporate earnings and guidance announcements but with downside also stemmed after the PBoC injected liquidity via open market operations following a 3-week hiatus. Finally, 10yr JGBs were marginally higher following the recent upside in T-notes and amid the cautious overnight risk sentiment, while the BoJ were also present in the market for 5yr-10yr JGBs.

PBoC injected CNY 160bln via 7-day reverse repos. (Newswires) PBoC set CNY mid-point at 6.8710 (Prev. 6.8677)

US Treasury Secretary Mnuchin said he expects to have another call with his Chinese counterpart on trade this week and that there is a "good chance" he and USTR Lighthizer could visit China for further talks if progress is made. (Newswires)

South Korean Foreign Ministry official said US indicated it is willing to play a suitable role in trying to ease Japan and South Korea tensions, while it was later reported that South Korea, Japan and US officials will meet in Washington DC on July 26th. (Newswires)

UK/EU

Last week’s meeting of chief Brexit negotiators was said to be one of the most difficult according to EU officials that anticipate discussions could turn more hostile under the next British government, while reports added the EU is mulling potential concessions it could offer to avoid a no-deal Brexit. (Newswires)

FX

DXY remained firm and eyed a retest of the 97.00 level to the upside after the prior day’s gains, partially spurred by better than expected NY Fed Manufacturing data. As such, EUR/USD languished near 1.1250 where there is a notable option expiry for today’s New York cut, while GBP/USD was stuck at the prior day’s lows and within close proximity to the 1.2500 level. Of note for GBP, the Brexit negotiators’ meeting last week was said to be one of the most difficult with officials poising themselves for more hostile talks under the next UK government, and a recent note from Deutsche Bank suggested the probability of a ‘no-deal’ Brexit is at 45%. USD/JPY was range-bound after having failed to sustain an early reclaim of the 108.00 handle and antipodeans were also relatively uneventful with only a muted reaction seen in AUD/USD from the RBA minutes which stated the board will adjust policy if needed to support growth and suggested the central bank will likely be data dependent, while NZD/USDgradually benefitted after Q2 CPI data printed inline with expectations.

RBA minutes from July 2nd meeting stated that the board will adjust policy if needed to support growth and that the board will observe the labour market closely, with an improvement needed to spur growth. Minutes noted that spare capacity will likely stay in the labour market for some time and lower interest rates will keep AUD weaker than would otherwise be the case, while it added that risks from trade disputes remained high and that inflation is subdued in developed countries. (Newswires)

New Zealand CPI (Q2) Q/Q 0.6% vs. Exp. 0.6% (Prev. 0.1%). (Newswires) New Zealand CPI (Q2) Y/Y 1.7% vs. Exp. 1.7% (Prev. 1.5%) 

COMMODITIES

Commodities were flat amid a tentative risk tone which provided respite for WTIcrude futures from yesterday’s pressures amid reports producers were returning workforce personnel to platforms after Barry proved to be less damaging than anticipated, and with the selling exacerbated as stops were tripped through USD 60.00. Nonetheless, price action has since quietened overnight with participants looking ahead to the latest inventory reports beginning with the APIs later, while NHC also announced that Barry has turned into a post-tropical cyclone. Elsewhere, gold was flat with the precious metal restricted by a sturdy greenback and copper also proceeded sideways due to the cautious risk tone which saw prices fail to take impetus from the fresh record highs in Chinese iron prices.

US Gulf of Mexico crude oil production cut by 69% (Prev. 73%) due to tropical storm Barry, while the NHC later stated that Barry has turned into a post-tropical cyclone and that flash flooding is still likely. (Newswires)

GEOPOLITICS

North Korea released full text of its new constitution in which it affirmed that North Korea is a nuclear state, according to South Korea press reports. (Newswires)

UN said that all Yemeni warring sides have agreed on a mechanism and new measure to reinforce a ceasefire and de-escalation, which will be put in place as soon as possible. (Newswires)

Iran Foreign Minister Zarif said sanctions relief must precede talks. In related news, EU's Foreign Policy Chief Mogherini stated that none of the signatories of the Iran deal have signalled an intention to invoke a dispute mechanism for the time being and that none of the parties believe Iran's breaches are significant non-compliance, while she added the Iran deal is not in good health but is still alive although she cannot say if it is in its last hours. (Newswires)

EU Council said it suspended high-level dialogue with Turkey for the time-being due to the country’s continued illegal drilling activities in Cypriot territorial waters. (Newswires)

US

The T-plex saw some downward pressure following mixed Chinese data overnight however losses were pared back throughout the rest of the session, volume on Monday was weak ahead of key data points such as US retail sales on Tuesday and a slew of fed speak later in the week as we head towards the blackout period. Analysts noted some large block buys providing momentum, with 8.3k in TUU9 at 107.113 and 14.4k in TYU9 at 127’01. At settlement the curve had flattened, with the 30-year yield down by c. 2.5bps, and the 2s/30s contracted by just over 2bps. US T-note futures (U9) settled 2 ticks higher at 127-05+.

US President Trump said if the USMCA deal does not pass congress he has a better plan, while there were comments from White House Adviser Navarro that President Trump will sign an order which looks to increase the domestic content threshold for domestic made iron and steel. (Newswires)

US Treasury Secretary Mnuchin said he urged congress to raise the debt ceiling before the recess and that he does not expect a government shutdown. Furthermore, Mnuchin added that productive discussions were held with congressional leaders on the debt ceiling. (Newswires)

White House formally nominated Mark Esper for the US Defense Secretary position. (Newswires)