• European indices [Euro Stoxx 50 +1.3%] are firmer this morning defying the mixed Asia-Pac handover
• RBNZ and RBI cut rates by 50bp and 35bp respectively, adding further fuel to the global growth narrative
• Fixed continues to make ground with -60bps Bund yield ahead and Gold is inching closer to the USD 1500/oz mark
• Looking ahead, highlights include, Canadian Ivey PMI, Fed’s Evans, RBA’s Bullock & supply from the US
• Earnings: CVS & Fox

ASIA-PAC

Asian equity markets traded mixed as the region observed caution despite the gains on Wall St. where stocks rebounded from their worst performance of 2019. ASX 200 (+0.6%) was initially indecisive as early gains were nearly wiped out by weakness in energy following a 2% drop in oil and with financials subdued after its largest lender CBA reported a decline in FY profits. However, Australia stocks were then boosted in late trade alongside outperformance in NZX 50 (+1.8%)after the RBNZ over-delivered with a surprise 50bps cut, while Nikkei 225 (-0.4%) was pressured as exporters digested a firmer currency and earnings updates. Hang Seng (U/C) and Shanghai Comp. (-0.3%) were lacklustre as trade concerns lingered and after the PBoC weakened the CNY reference rate to within a whisker of the 7.0000 ‘line in the sand’ level, although losses in the mainland were contained amid reports that China is to revise quota rules for farm product import tariffs in which it will remove soybean oil, rapeseed oil and palm oil import quotas. Finally, 10yr JGBs were underpinned as cautiousness spurred safe-haven demand and with global yields declining amid what some view as an ongoing race to the bottom among some of the world’s major central banks.

PBoC skipped open market operations. (Newswires)

PBoC sets CNY mid-point at 6.9996 (Prev. 6.9683)

China state banks were said to be active in the onshore forwards markets in which they conducted significant amounts of buy-sell swaps which helps lower supply of USD which the market can access to short-sell CNY, according to sources. (Newswires)

China is to revise quota rules for farm product import tariffs in which China MOFCOM confirmed it is to remove soybean oil, rapeseed oil and palm oil import quotas. (Newswires)

China's FX Regulator says the country's improving momentum and resilient real economy will support the stabilisation of FX reserves, fall in July reserves were due to changes in FX rates and asset prices. (Newswires)

BoJ Summary of Opinions from July 29th-30th meeting stated that although it will take time to reach price goal, it is necessary to persistently continue with the current powerful monetary easing as the momentum toward 2% inflation is maintained. BoJ also noted that if overseas economies deteriorate further and this has a negative impact on Japan's economic activity and prices, the Bank should respond swiftly while a monetary and fiscal policy mix is being pursued, but noted that it is necessary to consider the pros and cons of various easing measures. (Newswires)

China Foreign FX Reserves Jul (USD) 3.104tln vs. Exp. 3.105tln (Prev. 3.119tln), Gold reserves 88.876bln (Prev. 87.268bln). (Newswires)

GEOPOLITICS

Turkish Defence Ministry says talks with the US on a safe zone in Syria were positive and constructive. (Newswires)

UK/EU

Remain MPs are plotting to drag the Queen into a political crisis by demanding that she remove PM Johnson if he refuses to step down in the event he loses a confidence vote in Parliament. (Telegraph) Furthermore, The Times reports that Nicola Sturgeon, the Scottish first minister and SNP leader, opened the door to a “progressive alliance” with Labour if the two parties were able to form a majority after a general election and Labour would not stand in the way of a second referendum on Scottish Independence. (Times)

Irish Finance Minister Donohoe said he and UK Chancellor Javid had a productive meeting in which Javid reaffirmed the position of PM Johnson on the Withdrawal Agreement, while he added that most of the discussions were about avoiding a hard border in Northern Ireland. (Newswires)

Italian Senate rejects the 5 Star motion against TAV rail plan, according to ANSA. (Newswires)

EQUITIES

European equities have extended on opening gains [Eurostoxx 50 +1.3%] following on from a cautious Asia-Pac handover in which the antipodean indices cheered a deeper-than-forecast RBNZ OCR cut whilst upside Japan and China were capped by a firmer JPY and ongoing trade concerns.  Major EU bourses are retracing recent losses with gains led by the DAX (+1.2%) as heavyweight Bayer (+6.0%) rallies on the back of its 60% stake sale in Currenta for EUR 1.17bln. The transaction also includes the minority shareholder Lanxess (+4.7%) who is poised to sell its 40% share for around EUR 700mln. Sector wise, healthcare names are lagging with the sector pressured by Novartis (-0.2%) after the US FDA stated that some data from early testing of its Zolgensma treatment was manipulated. Novartis opened lower by 2% before trimming losses. Other individual movers include UniCredit  (-4.0%), Commerzbank (-4.7%) and ABN AMRO (-3.2%) post-earnings, in which the former cut its FY 19 revenue forecast and the latter stated it sees a bleaker margin ahead.

Softbank (9984 JT) reports Q1 net profit +257.6% Y/Y to JPY 1.12tln. Operating profit -3.7% Y/Y to JPY 688.82bln. Pre-tax profit +194% Y/Y to JPY 1.68tln

Walt Disney Co (DIS) Q2 19 (USD): EPS 1.35 ex items (exp. 1.76), Revenue 20.3bln (exp. 21.51bln). Co. fell by 4.6% in aftermarket trade

FX

NZD/AUD/INR/THB - The Kiwi is trying to claw back some lost ground, but remains the outright G10 underperformer in wake of the RBNZ’s shock decision to slash the OCR by 50 bp overnight against forecasts for -25 bp, and with Governor Orr indicating that there is more to come in post-policy meeting commentary. In fact, NIRP is not out of the realms of possibility as the Bank strives to hit its dual inflation and jobs target. Nzd/Usd slumped to lows around 0.6379 at one stage, but has subsequently reclaimed 0.6400+ status with key Fib support (0.6367) holding for now, while Aud/Nzd has rebounded further from sub-1.0300 levels to almost 1.0500 as Aud/Usd contains knock-on losses to circa 0.6678 even though RBA easing probability for September has risen in response to the more aggressive/pre-emptive RBNZ action. On that note, remarks from RBA’s Bullock later today may be pertinent. Conversely, the Rupee has strengthened in wake of an above consensus 35 bp reduction in benchmark rates from the RBI, and perhaps the vote split with 2 dissents for -25 bp plus the fact that the Bank has already administered 75 bp worth easing via 3 successive moves is being deemed as enough for now, even though the bias remains accommodative. Usd/Inr now circa 70.8000 within 71.000-70.5910 parameters in contrast to Usd/Thb nearer the top of a 30.9200-6900 range after a surprise ¼ point BoT rate cut and pledge to use other measures to curb Baht strength.

JPY - Bucking broader trends again, and back on a firmer footing against the Dollar, as US Treasury yields retreat sharply from Tuesday’s fleeting retracement highs and the PBoC nudged the official Usd/CNY nearer 7.0000 to rekindle US-China trade concerns that seemed to abate a tad yesterday. Usd/Jpy is slipping back from just shy of 106.50 as the DXY continues to pivot 97.500 by virtue of greater gains vs riskier currency counterparts more than anything else as GOLD looks poised to breach Usd1500/oz amidst the escalation of trade wars and transition to conflicts of FX interests.

CHF/GBP/EUR/CAD - All weaker vs the Greenback, or handing back recent gains, with the Franc approaching 0.9800 vs nearly 0.9700 and underlying safe-haven demand offset by prospects of SNB intervention at any time if the Chf appreciates too much. Indeed, Eur/Chf has also bounced further from recent lows between 1.0925-50 confines even though Eur/Usd remains top heavy on the 1.1200 handle amidst increasingly soft/negative Eurozone bond yields. Elsewhere, Cable is also struggling to maintain recovery momentum through 1.2200 and 0.9200 in Eur/Gbp cross terms amidst ongoing Brexit no deal/UK political risk, while the Loonie is straddling 1.3300 ahead of Canadian Ivey PMI prints.

EM - Notwithstanding the wider swings in risk sentiment and specific factors impacting individual currencies and assets, the Lira revival continues, and the latest reversal in Usd/Try looks rather technical as key support ahead of 5.5000 has now given way.

RBNZ cut the Official Cash Rate by 50bps to 1.00% which was deeper than the Exp. 25bps cut. RBNZ said the OCR cut was necessary to support employment and inflation policy remit, while it added the cut demonstrates commitment to meeting the inflation target and that the committee agreed larger initial stimulus would best ensure reaching inflation and employment objectives. Members also noted that estimates of neutral level of rates have continued to fall and that balance of risks to reaching their objectives are tilted to the downside. Furthermore, RBNZ Governor Orr said at the press conference that today's action does not rule out any future action and that it is easily within the realms of possibility we may have to use negative interest rates but added that today's cut reduces the risk of using negative rates. (Newswires)

Indian Repo Rate N/A 5.40% vs. Exp. 5.5% (Prev. 5.75%); Reverse Repo Rate N/A 5.15% vs. Exp. 5.25% (Prev. 5.5%); Cash Reserve Ratio* N/A 4.00% vs. Exp. 4.0% (Prev. 4.0%).

- Bank maintains its accommodative monetary policy stance, All members voted unanimously to cut rates and keep stance unchanged; 4 members voted for a 35bps cut while 2 voted for a 25bps cut.

- Revised 2019/20 GDP growth to 6.9% vs. Prev. 7.0%. Headline inflation expected at 3.1% in Q2 FY20; 3.5-3.7% in H2 FY20; adding that inflation is expected to remain within target over a 12-month timeline

- Impact of monetary policy easing since February is anticipated to support economic activity ahead

FIXED INCOME

Fixed continues to drive higher this morning, with Bunds and Gilts making more headway (highs of 177.44 and 134.77 respectively) in catch-up trade after the late Tuesday squeeze in US Treasuries that continued overnight. Note, even a somewhat disappointing German 5 year placement was largely disregarded or only briefly acknowledged, as the global bond rally rumbles on after a pause and bout of consolidation yesterday. To recap, debt bulls have been driven by the global narrative (trade/currency wars) and fuelled further by surprise cuts in terms of magnitude from both the RBNZ and RBI today, while the BoT defied steady expectations and eased 25 bp as well. Returning to the German 10yr, which has surpassed one of the aforementioned technical levels, leaving just 177.50 and the -60 bp yield untouched, for now at least. Looking ahead the US data slate is uninspiring, though comments from Fed’s Evans at 14:30 BST will be closely watched for any September FOMC clues, particularly in light of the deteriorating US-China relations. Supply may also be pivotal given the 2nd of this week's Treasury auctions in the form of Usd27 bln 10s and the cash equivalent close to fresh 1.65% lows.

COMMODITIES

A day of respite thus far for the energy market following this month’s losses of almost 10%, pressured by the global oil demand outlook as the US-China saga intensifies. Yesterday saw the first of the monthly oil reports, the EIA STEO cut its 2019 global oil demand growth forecast by 70k BPD to a 1.0mln BPD Y/Y increase, albeit its 2020 forecast was raised slightly by 30k BPD. Investors will be keeping an eye on the IEA (Aug 6) and OPEC (Aug 16) Monthly reports for some harmony on the short-term global oil demand outlook. On the supply side, the weekly API crude stocks data showed a larger-than-forecast draw (-3.4mln vs. Exp. -2.8mln), the release did little to sway prices but may have underpinned the benchmarks in anticipation for today’s DoE data to confirm the drawdown (headline crude Exp. -2.845mln). Elsewhere, spot gold is inching closer to the key 1500/oz level with futures having already topped the level amid safe-haven inflows as US/China developments, global growth outlook and easing by global Central Banks. Spot gold printed a fresh 6yr peak at 1491/oz during early EU trade. Meanwhile, copper prices have rebounded off worst levels, albeit remain contained near 2yr lows with some support derived from news that Glencore is planning to shut its Mutanda cobalt and copper mine (which produced almost 200k tonnes of copper last year) by the end of 2019 due to lower cobalt prices impacting the economic viability of the project. Finally, Dalian iron ore prices extended its slide for a fifth session amid rising supply and weakening demand.