• European indices are largely flat [Euro Stoxx 50 +0.1%] as US earnings season gets underway
• China’s Foreign Ministry says it is misleading to suggest China requires a US trade deal as the economy is slowing
• Looking ahead, highlights include, US Import/Export Prices, Retail Sales, Industrial Production, Manufacturing Output & Business Inventories, EC President Voting, Fed Discount Rate Minutes
• Speakers: Fed’s Powell, Evans, Bowman, Bostic & Kaplan, BoE’s Carney
• 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 (+0.2%) 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)

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)

US

China Foreign Ministry say it is misleading to suggest that China requires a trade deal with the US due to the economy slowing, in response to US President Trump tweeting on China's slowing GDP, saying many companies want to leave China for non-tariff countries. (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)

ECB's Villeroy (Dovish) says the ECB must not be market dependent, this also includes relying too much on inflation expectations on market based measures, at the next ECB meeting (24th-25th July), policymakers will asses real economic data and will act appropriately when required. (Newswires)

UK Avg Wk Earnings 3M YY May 3.4% vs. Exp. 3.1% (Prev. 3.1%, Rev. 3.2%)

- UK Avg Earnings (Ex-Bonus) May 3.6% vs. Exp. 3.5% (Prev. 3.4%)

- UK Claimant Count Unem Chng Jun 38.0k vs. Exp. 22.8k (Prev. 23.2k, Rev. 24.5k)

- UK ILO Unemployment Rate May 3.8% vs. Exp. 3.8% (Prev. 3.8%)

German ZEW Economic Sentiment Jul -24.5 vs. Exp. -22.3 (Prev. -21.1)

- German ZEW Current Conditions Jul -1.1 vs. Exp. 5.0 (Prev. 7.8)

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)

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)

- Subsequently, Turkish Foreign Ministry says there is no need to take EU steps on Turkey too seriously. (Newswires)

EQUITIES

Major indices are relatively flat [Eurostoxx 50 +0.1%] following on from a mixed Asia-Pac handover and heading into key US data, earning seasons and a slew of Central Bank speakers. Sectors are mixed with some mild underperformance seen in energy names following yesterday’s decline in the complex. In terms of individual movers, Burberry (+12.0%) dominates the Stoxx 600 after sales growth topped estimates in Q1, whilst earnings also supported Yara (+3.6%) shares. On the flip side, Telenor (-5.4%) plumbed the depths despite an upgrade at DNB Markets as the Co’s Q2 adj. EBITDA fell short of expectations. Elsewhere, Daimler (-1.0%) and Fiat Chrysler (-3.6%) shares moved accordingly to initiations at Goldman Sachs. Other notable movers include Bayer (+1.5%) which received some reprieve after a US reduced damages award against Co. in Roundup case to USD 25.3mln vs. Prev. USD 80mln, and added that the original punitive damages award was too high. Finally, AMS (-1.0%) shares slipped, albeit they have since recovered off of lows, after the Co. called off takeover talks with Osram Licht (+0.1%) as it did not see “sufficient basis” to continue discussions. As a reminder, today will see the release of earnings from three DJIA companies; Johnson & Johnson (3.34% weighting), JP Morgan (2.82% weighting) and Goldman Sachs (5.24% weighting), for a full schedule please visit the Daily US Earnings Estimates on the Research Suite.

FX

GBP/EUR - Sterling continues to slide amidst the ongoing race to become new Tory leader/PM and pick-up the Brexit baton, with little support coming from firmer than expected AHE metrics that could feed into inflation and underpin consumption. Indeed, Cable only managed a fleeting and feeble bounce in wake of the UK data before resuming its decline through 1.2500 towards 1.2450 and the recent low where stops are said to be waiting before more at 1.2425. Moreover, Eur/Gbp is firmly back above 0.9000 and testing half year peaks of 0.9025 even though the single currently is soft vs a broadly perky Dollar (DXY back over 97.000) and extending below 1.1250 and several DMAs, like the 100 and 50 markers at 1.1253 and 1.1243 respectively. Note, decent, but not quite 1 bn option expiry interest at 1.1250 may yet cushion Eur/Usd into the NY cut after a rather downbeat German ZEW survey.

NZD/AUD - Conversely, the Kiwi remains underpinned on the 0.6700 handle vs its US counterpart, just above the 200 DMA (0.6718) and close to 1.0450 against the Aussie following in line NZ CPI prints for Q2 overnight, while Aud/Usd has pulled up ahead of 0.7050 on the back of RBA minutes underlining data (jobs primarily) dependency in terms of future policy moves after 50 bp worth of easing in June and July.

CHF/JPY/CAD - The Franc, Yen and Loonie are all still narrowly mixed vs the Greenback, with Usd/Chf, Usd/Jpy and Usd/Cad pivoting 0.9850, 108.00 and 1.3050 respectively and eyeing US data for more direction (retail sales and ip) in the absence of anything scheduled independently, or a raft of Fed speakers ahead of the pre-July FOMC blackout period.

EM - The Lira remains relatively resistant in the face of EU sanctions and Turkish macro developments may be providing a buffer as quarterly unemployment fell markedly and the budget balance revealed a slightly narrower shortfall. Usd/Try is hovering close to the base of a 5.7230-7040 range.

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%)

FX Option Expiries:

- EUR/USD: 1.1180-95 (1.8BLN), 1.1215 (380M), 1.1235-45 (600M), 1.1250 (888M), 1.1310 (588M), 1.1380-1.1400 (1BLN)

- GBP/USD: 1.2500 (515M), 1.2605-15 (433M)

FIXED INCOME

It remains too early to tell, but the signs are encouraging for Bunds and Gilts in terms of maintaining their recovery mojo from the depths of recent lows. Indeed, after opening and/or early wobbles the 10 year benchmarks have both extended rebounds through upside technical hurdles on the way to intraday highs of 172.68 and 131.07 respectively (+35 and +23 ticks on the day). UK debt is lagging somewhat in wake of frothy wage metrics and long end issuance, while German/Eurozone bonds have no doubt taken on board another pretty bleak survey via ZEW. However, US Treasuries have not really piggy-backed gains ahead of some key data and lots of Fed speak, plus earnings and API.

COMMODITIES

WTI and Brent futures are little changed thus far amid the tentative tone ahead of the aforementioned risk events. Albeit, the energy complex has held on to most of yesterday’s losses with the former resting just below the 60/bbl mark whilst the latter hovers south of 67/bbl. Over in the Gulf, crude producers and refiners have started restoring operations after the passing of storm Barry, albeit 69% of output still remains locked, down from the 73% output curb on Sunday. Elsewhere, gold remains within a tight range ahead of key US data. Meanwhile, China iron ore futures surged as much as 4.6% to a record high on upbeat demand prospects and in a follow-through of the China industrial output beat. Subsequently, China's Dalian Commodity Exchange says transaction fees for iron ore futures will be adjusted as of July 18.

NHC have most recently stated that Barry has turned into a post-tropical cyclone and that flash flooding is still likely. (Newswires)

Crude loading at Iraq's Basra oil export terminal resume following a fire, according to officials. (Newswires)

Indonesian oil lifting is seen at 754k BPD, according to the Finance Ministry. (Newswires)

China Refined copper output (June) 804k Tonnes, +11.8%., China Statistics Bureau. (Newswires)