• European indices [Euro Stoxx 50 -1.0%] are firmly in negative territory, though the FTSE 100 once again outperforms as Sterling remains subdued and post BP earnings
• Both FX and Fixed markets remain little changed (ex-Cable) ahead of this week’s risk events
• China's Communist Party's Politburo reiterates that China is to maintain prudent monetary policy, neither too tight nor too loose and will implement proactive fiscal policy
• Looking ahead, highlights include, US PCE and Consumer Confidence, US & China Trade Negotiators meeting in China
• Earnings: Apple, P&G, Mastercard, T-Mobile, Amgen, Altria, L’Oreal, Orange

ASIA-PAC

Asian equity indices shrugged off the lacklustre lead from their global peers and traded higher across the board, but with gains mostly modest as there was not much in terms of fresh catalysts and as markets look ahead to the looming risk events. ASX 200 (+0.3%) gained from the open with continued strength in telecoms leading the index to unprecedented highs, while the Nikkei 225 (+0.4%) ignored disappointing Industrial Production data and what has so far been a predominantly softer earnings season, with early outperformance fuelled by recent currency weakness although BoJ disappointment later saw some of the gains pared. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (+0.4%)conformed to the mild optimism despite further liquidity inaction by the PBoC as focus turned to the resumption of US-China trade talks in Shanghai today. Finally, 10yr JGBs traded sideways with price action indecisive heading into today’s BoJ policy conclusion where the central bank kept policy settings unchanged as expected but also maintained its forward guidance which disappointed some outside calls for a potential dovish tweak.

PBoC skipped open market operations for a net neutral daily position. (Newswires) PBoC set CNY mid-point at 6.8862 (Prev. 6.8821)

Chinese President Xi reportedly faces increasing pressure to make significant progress in US-China trade talks ahead of the annual leadership gathering next month. (Nikkei)

- China President Xi says economy is in a good situation overall, hopes everyone recognises China's economic situation; adds domestic conditions are having profound and complicated changes; according to china state media. (Newswires)

China's Communist Party's Politburo reiterates that China is to maintain prudent monetary policy, neither too tight nor too loose and will implement proactive fiscal policy, will effectively cope with trade frictions; China’s economy is facing increased downward pressure. (Newswires)

BoJ kept all monetary policy settings unchanged as expected with NIRP held at -0.1% and 10yr JGB yield target at around 0% with the decision made by vote of 7-2 in which Kataoka and Harada dissented again. BoJ also maintained its forward guidance on keeping rates at extremely low rates at least through to Spring 2020 and added that it will ease without hesitation if momentum to reaching the price goal is lost, while it reduced FY19/20 Real GDP forecast to 0.7% from 0.8% and cut FY19/20 Core CPI forecast to 1.0% from 1.1%. (Newswires)

BoJ Governor Kuroda: expects it to take time to achieve the 2% inflation target, won't hesitate to ease more to pre-empt risks from a hurting economy and the Bank's new language on readiness is intended to clarify policy stance.

- pledge to take easing steps if momentum to deceive the price target is lost, rather than considering easing; cannot say that prices are losing momentum at present

- Still many means to ease policy, basic stance is to use current policy in topping up stimulus

Japanese Industrial Production (Jun P) M/M -3.6% vs. Exp. -2.0% (Prev. 2.0%). (Newswires) Japanese Industrial Production (Jun P) Y/Y -4.1% vs. Exp. -2.0% (Prev. -2.1%)

US Trade Representative Lighthizer said US businesses face unfair trade barriers in Vietnam and that Vietnam must take action to reduce unsustainable trade deficit. (Newswires)

US

US Treasury Secretary Mnuchin reportedly told colleagues House Speaker Pelosi assured him she will bring up USMCA for a vote by October, although Pelosi's office was said to have denied she gave any assurances on timing for a vote. (Axios)

GEOPOLITICS

Iran Navy Commander Khanzadi said they will expand military ties with Russia and announced an agreement for joint naval exercise in the Indian Ocean, Arabian Sea, the Strait of Hormuz and the Persian Gulf. (Newswires) 

UK/EU

German Saxony State CPI YY Jul 1.6% (Prev. 1.8%)

- German Saxony State CPI MM Jul 0.4% (Prev. 0.5%)

EQUITIES

European equities are firmly in negative territory this morning [Euro Stoxx 50 -1.0%]; however, once again the FTSE 100 (U/C) is the notable outperformer continuing to be buoyed by the weak sterling performance and also benefitting from BP (+2.6%) post earnings where adj. net beat on Exp. and Co. stated that at the mid-point of their 5yr plan they are on target. Unsurprisingly, sectors are all in the red with Energy names outperforming on the aforementioned BP release, with the Co. compromising around 15% of the sector. Other notable movers include Centrica (-13.0%) at the bottom of the Stoxx 600 as both revenue and adj. operating profit missed on the prior figures, though the Co. did caveat this by stating they expect earnings to be weighted towards H2. Separately, Bayer (-3.9%) are also in the red after Q2 revenue missed on Exp. and even though the Co. confirmed outlook this did come with a warning that the outlook is becoming increasingly ambitious for them to achieve. Finally, both Fresenius SE (-2.8%) and Fresenius Medical Care (-6.3%) are under-pressure post earnings with focus being on the Co. anticipating net income growth as flat and as some metrics came in softer than their priors for Q2 respectively. 

Nintendo (7974 JP) Q1 recurring profits JPY 22.23bln, -49.3%. operating profit JPY 27.43bln, -10.2%. (Newswires)

Huawei - H1 revenue CNY 401.2bln, +23.2%. Carrier business group revenue of CNY 146.5bln for H1. Co. shipped 118mln units in the period, and have signed 50 5G contracts to date, Chairman says key component supply is yet to resume, but a small amount of non-essential supply has resumed. (Newswires)

FX

DXY - The broad Dollar and Index remains cautious as US-China talks are underway and as participants gear up for tomorrow’s FOMC meeting, with money markets currently pricing in a 78% chance of a 25bps cut and 22% for a 50bps cut to the Fed Fund Rate. DXY had earlier eclipsed yesterday’s high (98.17), ahead of the YTD peak at 98.37. Looking ahead on the docket, US PCE could influence a short-term move in the Buck, although sentiment for the currency is largely constrained to trade talks in Shanghai and positioning ahead of the Fed. 

GBP - More torment for the Pound as further no-deal woes engulf investor sentiment with the latest reports from the Telegraph further solidifying PM Johnson’s hard-line stance. Cable downside was exacerbated during Asia-Pac hours in which the pair retreated below the 1.2200 level for the first time since March 2017 to a current intraday low of 1.2121 (vs. 1.2217 at the open), albeit the pair saw a small bounce in recent trade as the Buck drifted off highs and potentially on some short covering. To the downside, technicians will be eyeing the following levels for support: 1.2110 (March 17 low), 1.2085 (Jan 17 low), 1.2000 (psychological) and 1.1841 (Flash crash low).

JPY - Firmer on the day in the aftermath of the BoJ Policy Decision in which the Central Bank failed to satisfy some dovish calls by holding its NIRP at -10bps and its 10yr JGB yield target at around 0% whilst maintaining its forward guidance. The vote split also showed no change from the prior meeting (7-2) despite the recent sources suggesting divergence between board members on the timing of easing. USD/JPY currently hovers closer to the bottom of its 108.50-94 range ahead of tis 50 DMA at 108.35. Moreover, today’s NY cut sees 764mln expiring at strike 108.15-25 and around 860mln at 108.00.

EUR, AUD, NZD - All largely unchanged intraday and mostly moving at the whim of the Buck, albeit the EUR is again somewhat cushioned by its EUR/GBP cross. EUR/USD remains just under the 1.1150 level and was overall little impacted by slightly cooler Y/Y German state CPIs, which is in-fitting with the National forecast due to be release at 1300BST. Elsewhere, the Antipodeans await developments from US-Sino talks with little to report on a domestic front. AUD/USD and NZD/USD remain within tight ranges (0.6887-6907 and 0.6619-34 respectively), with the latter hovering around its 50DMA (0.6624).

Australian Building Approvals (Jun) M/M -1.2% vs. Exp. -1.0% (Prev. 0.7%, Rev. 0.3%). (Newswires) Australian Building Approvals (Jun) Y/Y -25.6% vs. Exp. -24.3% (Prev. -19.6%)

Swedish GDP YY 1.4% vs. Exp. 1.9%

- Swedish GDP QQ -0.1% vs. Exp. 0.3%

Major FX Option Expiries

- USD/CAD: 1.3090-1.3100 (850M), 1.1315-25 (466M), 1.3150-55 (1.1BLN)   

- USD/JPY: 108.00 (867M), 108.15-25 (764M), 108.75 (614M)

Turkish Finance Minister says the government will support debt restructuring between banks, and that Turkey will register positive growth in 2019 close to the target level; and the economic activity normalisation will continue more strongly in 2020. (Newswires)

FIXED INCOME

Another largely quiet day for bonds thus far, as markets continue to look ahead to the weeks major risk events with the Fed due to tomorrow. Today has at least provided some data impetus from Germany with the state CPI’s largely printing modestly lower than their priors thus far ahead of the mainland release at 13:00 BST today where the expectations may now be slightly too strong. However, little to no reaction was seen in the Bund which currently trades to the middle of the days narrow 14 tick range (174.40-54) at 174.49. Elsewhere, supply from both Italy and Germany with neither notable enough to inspire a move, for reference BTPs are a touch softer today but similarly to their core counterpart trade within a slim range. It’s worth highlighting that European stocks have experienced a sell off this morning following a number of poor earnings from heavyweight names such as Bayer, a sell off which has not generated any upside across the fixed complex. Finally, and painting a similar pattern, USTs are relatively unchanged though we do get the PCE release later on today which may garner increased focus ahead of tomorrow’s FOMC meeting.

COMMODITIES

Brent and WTI prices are firmer this morning, and currently trade just below the USD 64.50/bbl and USD 57.50/bbl marks respectively. This positivity is in-spite of a quiet session of newsflow for the complex, though today does see the resumption of US-China trade talks which alongside the ongoing geopolitical tension. Additionally, markets are likely looking ahead to today’s API release in which participants expect a headline crude draw of 2.5mln. Elsewhere, gold is flat in a tight range as the yellow metal awaits this week’s main events. Finally, copper trades lacklustre and is back below 2.7/lb amid cautious ahead of trade developments.