• Asian equity markets began the week tentative ahead of upcoming slew of key risk events (FOMC, NFP, US-China trade talks) US President Trump said China will probably want to wait on a trade deal and try to delay it until the US election
• UK Cabinet Minister Gove suggested the government will make intensive efforts to get a better agreement but added that we must operate on assumption of a no-deal Brexit
• Looking ahead, today’s calendar sees a lack of tier 1 highlights
• Earnings: Simon Property Group, Baidu, Anadarko Petroleum, Heineken, Sanofi, Ryanair

ASIA-PAC

Asian equity markets began the week tentative as the upcoming slew of key risk events such as the resumption of US-China trade talks, heavy central bank activity including the FOMC and the latest US NFP jobs data, clouded over last Friday’s record highs on Wall St where tech earnings and better than expected US GDP underpinned stocks. As such, ASX 200 (+0.5%) and Nikkei 225 (-0.5%) were mixed with tech and telecoms front-running the gains in Australia to push the benchmark index to record all-time high, while Tokyo sentiment was subdued by a firmer currency and with earnings in focus. Hang Seng (-1.2%) andShanghai Comp. (-0.1%) weakened amid modest expectations regarding the US-China trade talks in Shanghai this week and following a decline in Chinese Industrial Profits, with underperformance in Hong Kong after violent clashes over the weekend in protests that entered an 8th consecutive week. Finally, 10yr JGBs traded flat despite the weakness in Tokyo stocks, with demand for bonds subdued as participants were sidelined ahead of tomorrow’s BoJ policy announcement in which it is expected to maintain its policy settings of QQE with YCC control and NIRP at -0.10%.

PBoC skipped open market operations for a net daily drain of CNY 50bln. (Newswires) PBoC set CNY mid-point at 6.8821 (Prev. 6.8796)

Chinese Industrial Profits (Jun) Y/Y -3.1% (Prev. 1.1%). (Newswires) Chinese Industrial Profits YTD (Jun) Y/Y -2.4% (Prev. -2.3%).

US President Trump said China will probably want to wait on a trade deal and try to delay it until the US election. As a reminder, US and China are to resume face-to-face trade talks in Shanghai this week, although reports noted expectations are modest and that no major breakthrough is anticipated. (Newswires/WSJ)

US is pushing for the WTO for its lenient trade treatment of China and is said to have told USTR Lighthizer to “use all available means” to get the WTO to prevent countries from claiming developing country status if their economic strength means they don’t need beneficial treatment. President Trump also stated that if the WTO does not make "substantial" progress within 90 days, the US will no longer treat certain countries as developing economies. (Associated Press)

Thousands of Hong Kong protesters clashed with police over the weekend in which dozens were arrested as protests regarding the extradition bill continued. (Newswires)

UK/EU

UK Cabinet Minister Gove stated the government will make intensive efforts to get a better Brexit deal, but added we must operate on assumption we will not and that there will be a no-deal Brexit which we must be ready for. (Sunday Times) Further reports suggest that PM Johnson is to launch the largest advertising campaign since WW2 to get Britain ready for a no-deal Brexit, with an unprecedented marketing blitz on billboards, radio and television. (Telegraph) FT reports that UK chancellor of the exchequer, Sajid Javid, is preparing to announce more than GBP 1bln in increased funding for a no-deal Brexit, according to people familiar with the matter. (FT)

Institute for Government (IfG) has warned that there is no such thing as a managed no deal, and that predictions of a clean break from the EU made by hard Brexiteers will not occur. (Guardian)

UK Trade Minister Truss said the main priority is agreeing a FTA with the US and that she will be travelling to the US in the next few weeks for trade discussions, while there separate comments from US President Trump that they are already working on a US-UK free trade deal and that he will spend time with UK PM Johnson. (Newswires/Telegraph)

Confederation of British Industry report stated the EU have taken less action and are just as poorly prepared as the UK to cope with a no-deal Brexit, while it added the impact of crashing out will be felt for years. (FT)

US President Trump tweeted that France placed a digital tax on technology companies and suggested that if anybody taxes them, it should be the US.President Trump added the US will announce a substantial reciprocal action on Macron’s foolishness shortly and separately commented that he might apply a tax on French wine. In related news, a White House official said the French digital tax shows a lack of commitment to the current OECD negotiations and that the White House is looking at all policy tools in addition to the already launched trade investigation in response to the French tax, while USTR Lighthizer was later said to have prepared a 301 action against France after the announcement of its digital tax. (Newswires)

ECB's Nowotny sees rates to be lower in the long-term than they have been historically and states that the ECB should strive for normalization. (Newswires)

Fitch affirmed Czech Republic at AA-; Outlook Stable and affirmed Finland at AA+; Outlook Stable. (Newswires)

FX

DXY slightly pulled back from last Friday’s post-GDP highs to just below the 98.00 level, but with downside limited after reports US President Trump rejected trade adviser Navarro's options for devaluing the USD at a cabinet-level meeting last Friday which ended with the decision not to intervene in the currency. Nonetheless, the greenback’s major counterparts were also lacklustre ahead of this week’s risk events with EUR/USD little changed at the 1.1100 handle and GBP/USD languished at lows last seen in early-2017 amid Brexit fears, with UK Cabinet Minister Gove suggesting the government will make intensive efforts to get a better agreement but added that we must operate on assumption of a no-deal Brexit. Elsewhere, USD/JPY and JPY-crosses were subdued by the risk averse tone and amid reports Japan’s GPIF began hedging overseas bond investments in a move which sources noted could spur other funds to follow suit and weigh on USD/JPY, while antipodeans were lacklustre due to the tentative risk tone with AUD/USD testing support at the 0.6900 level to the downside.

South African President Ramaphosa must place strict limits on a plan to seize land without payment under policies to speed up transfers to the country’s black majority, a panel advising the South African president has said. (FT)

COMMODITIES

Commodities began the week uneventful with WTI crude futures flat as early mild pressure was nullified by support at the USD 56.00/bbl and amid a lack of bearish catalysts for the energy complex with the latest Baker Hughes rig count showing a drop in oil and gas rigs, while the emergency meeting between Iran and world leaders was said to have been constructive although unresolved issues remain and Iran reiterated it will keep paring back its nuclear commitments. Elsewhere, gold prices were kept rangebound as markets await this week’s FOMC in which the Fed are expected to cut rates for the 1st time in over a decade, and copper prices also languished amid the lack of risk appetite.

Baker Hughes (July 26) showed oil rigs -3 at 776, gas rigs -5 at 169, total rigs -8 at 946. (Newswires)

GEOPOLITICS

US President Trump said he is not upset at North Korea's recent missile launches and does not blame Turkey for buying the S-400. (Newswires)

Iranian Official Araqchi said emergency meeting with parties related to 2015 nuclear deal was constructive and unresolved issues remain, while he added Iran will continue to reduce its nuclear commitments if the EU cannot save the deal. (Newswires) 

US

The T-plex traded sideways and a little choppy to end the week, seemingly unphased by the GDP data or by Trump dismissing the use of dollar intervention. The US Q2 GDP saw very mild selling 2.1% (exp. 1.8%), but analysts note algos, CTAs, and real money bought the dip. NEC Director Kudlow announcing Trump’s opposition to dollar intervention kept Treasuries supported. At settlement the curve was little changed. US T-note futures (U9) settled 2 ticks lower at 127-07.

US Supreme Court ruled in favour of the Trump administration to permit it to shift military funds to use to construct the border wall. (Newswires)