• European indices are firmer thus far, as risk sentiment remained positive after a upbeat Asia-Pac session following strong Chinese data and a firmer than expected CNY reference rate
• Saudi official says it plans to keep its production below 10mln BPD, committed to do what ever it takes to keep the oil market balanced
• Dollar is generally softer vs. G10 counterparts, with antipodeans outperforming on the China data though NZD has been impacted by dovish comments from RBNZ Hawkesby
• Looking ahead, highlights include, US Initial Jobless Claims & Wholesale Inventory, Canadian Housing Price Index, US 30yr Auction
• Earnings: Viacom, Uber & Activision Blizzard

ASIA-PAC

Asian equity markets gained as a firmer than expected PBoC reference rate setting and Chinese trade data helped the region shake off the initial tentativeness following the tumultuous day on Wall St, where stocks staged a dramatic intraday recovery and although the DJIA closed in the red, it posted its largest rebound YTD. ASX 200 (+0.7%) was initially subdued amid losses in its top weighted financials sector following earnings from AMP Capital and Insurance Australia Group but then conformed to the improved risk tone led by gold miners after the precious metal rallied above USD 1500/oz for the first time since 2013, while Nikkei 225 (+0.4%) was underpinned by currency flows and KOSPI (+0.6%) outperformed after Japan approved some exports of tech materials to South Korea for the first time since curbs were imposed last month. Hang Seng (+0.5%) and Shanghai Comp. (+0.9%) were positive with sentiment underpinned by relief after the PBoC announced the reference rate which was set beyond the 7.0000 level for the first time since 2008 but not as weak as expected, while participants also digested Chinese trade data which topped estimates across the board and still showed a significant, albeit narrower imbalance in US-China trade. Finally, 10yr JGBs were initially lower with mild pressure seen amid the improved risk tone in the region, although prices then returned flat with support seen amid firmer demand at the 10yr inflation-indexed auction.

PBoC skipped open market operations for a net neutral daily position. (Newswires)

PBoC set CNY mid-point at 7.0039 vs. Exp. 7.0205 (Prev. 6.9996)

Chinese Trade Balance (USD)(Jul) 45.1B vs. Exp. 43.20B (Prev. 50.98B). Chinese Exports (USD)(Jul) Y/Y 3.3% vs. Exp. -2.0% (Prev. -1.3%) Chinese Imports (USD)(Jul) Y/Y -5.6% vs. Exp. -9.0% (Prev. -7.3%)

China Trade Surplus with US in July at USD 27.97bln vs. Prev. 29.92bln M/M.

South Korea PM Lee confirmed that Japan has granted export approval of one of the high-tech materials to South Korea for the first time since restrictions were imposed in July, while Japanese Industry Minister Seko warned if improper use of exports to South Korea is discovered, will consider widening the strict examinations beyond the 3 high-tech materials. Furthermore, it was later reported that South Korea is to hold off on plan of removing Japan from its white list. (Newswires)

China's Securities and Regulatory Vice Chairman says the impact of US pressure on China's stock market is weakening. (Newswires)

US

Major banks have given congressional committees investigating US President Trump thousands of pages of documents, which refer to the Presidents potential dealings with Russians., WSJ

- Banks include, Deutsche Bank (DBK GY), CitiGroup (CITI), JPMorgan Chase (JPM) & Wells Fargo (WFC)

GEOPOLITICS

India urges Pakistan to review its diplomatic ties downgrade with New Delhi, according to a government statement. (Newswires)

UK/EU

UK PM Johnson reportedly could call for a general election on November 1st which is one day after the Brexit, to get a boost from Leave supporters as he would be able to tell them he has delivered on the Brexit. (The Sun)

UK Foreign Minister Raab said if the EU believes there can be no changes to the Brexit agreement, "that makes it very hard to see how we can move negotiations forward". In other news, Foreign Minister Raab stated that US President Trump has huge appetite for a free trade agreement with UK, while US Secretary of State Pompeo also said the US is ready to sign a UK-US trade deal after Brexit and that he discussed 5G issues with Raab. (Newswires/Sky News)

Leader of the Opposition Corbyn will go to Buckingham Palace in a taxi to tell the Queen “we’re taking over” if PM Johnson loses a vote of no confidence, Shadow Chancellor McDonnell has said. (Times)

UK RICS Housing Survey (Jul) -9 vs. Exp. -1.0 (Prev. -1.0). (Newswires)

EQUITIES

Major European stocks are higher across the board [Eurostoxx 50 +1.1%], following on from a positive Asia-Pac handover after optimistic Chinese trade data lifted sentiment in the region. Indices are posting broad-based gains, although UK’s FTSE 100 (+0.1%) lags its peers amid a slew of large cap ex-divs. Sectors are also in positive territory, although defensive sectors are somewhat lagging. Looking at individual movers, Adidas (-1.3%) shares opened lower by over 2% as investors for weeks sought an upgrade to guidance, particularly after its rival Puma (+2.5%) raised its sales and profit forecasts recently. Sticking with the DAX, Thyssenkrupp (+3.3%) shares rose despite an EBIT guidance cut as investors shifted focus to its elevator division IPO (expected in FY19/20) and expression of interests for other divisions. Finally, Osram Licht (-6.6%) slumped to the foot of the Stoxx 600 after the Co’s largest shareholder rejected the EUR 3.4bln takeover offer form Bain & Carlyle. It’s also worth noting that Goldman Sachs has downgraded trade sensitive sectors (EU autos and basic resources) in light of the recent developments between US and China, although individual stocks are little swayed by the broker update.

Russian anti-monopoly watchdog has opened an investigation into Apple (AAPL) regarding operating system applications following complaints from Kaspersky Lab , according to RIA

FX

USD - The Dollar is on a softer footing against its G10 rivals, and most EMs amidst another revival in broad risk appetite, prompted in part by Chinese trade data that beat consensus across all key components and offset or appeased concerns over the ongoing incline in the Usd/Cny reference rate. However, the index is still straddling 97.500 and from a technical perspective holding above key Fib support at 97.392 on a closing basis, if not intraday, and it remains to be seen if the latest upturn in sentiment proves more sustainable or transitory like on Tuesday.

AUD/NZD/GBP/CAD - In keeping with the improved risk tone noted above, Aud/Usd has turned full circle and a bit more from midweek session lows towards 0.6800, but unlikely at this stage to reach hefty expiry options residing between 0.6840-50 (1.2 bn), while Nzd/Usd is still underperforming within 0.6468-35 parameters following more dovish RBNZ rhetoric on balance after yesterday’s double-barrelled ½ point OCR cut. Elsewhere, Cable is back around 1.2150 and the Loonie has rebounded through 1.3300 along side crude prices ahead of Canadian house price data.

JPY/EUR/CHF/XAU - The safer-havens are off best levels, but interestingly and perhaps tellingly still relatively bid as the Yen contains losses below 106.00 to circa 106.30 with decent option expiry interest likely to cap further upside in Usd/Jpy given 1 bn running off from 106.45-55. Similarly, the single currency is holding above 1.1200, but also likely to be stymied by expiries as 2.4 bn awaits between 1.1230-40, while the latest ECB monthly bulletin is far from Euro supportive given a downbeat assessment of the Eurozone economy and outlook, albeit largely a repetition of President Draghi’s post-policy meeting text. Elsewhere, the Franc is pivoting 0.9750 and Gold is rangebound either side of Usd1500/oz.

EM - The Rand continues to underperform with Usd/Zar mostly above 15.0000 after recent technical breaks to the upside and with weaker than forecast SA mining data not helping.

RBNZ Assistant Governor Hawkesby said outlook for rates is more balanced after 50bps cut but added there is still some probability OCR will need to be reduced further, while Hawkesby also stated the central bank are watching inflation expectations closely and that unconventional tools are a contingency in the event inflation tanks although they would need to exhaust conventional policy tools first. (Newswires)

Notable FX Expires:

- EUR/USD: 1.1100 (1BLN), 1.1125 (2.8BLN), 1.1160 (500M), 1.1175-85 (600M) 1.1230-40 (2.4BLN), 1.1245-50 (700M), 1.1275-85 (1BLN)

- USD/JPY: 105.00 (1BLN), 105.50 (1BLN), 106.00 (923M), 106.20-25 (650M), 106.45-55 (1BLN), 106.80 (400M), 107.35-40 (800M), 107.50 (2.5BLN

FIXED INCOME

The bond narrative hasn’t changed much for the session thus far, as the markets haven’t received any further updates on the geopolitical/trade front, or much more data/headlines to potentially impact direction. Hence, the 'trend' remains the same after the pullback across the fixed complex, albeit less deep, with some sporadic upward momentum evident via Gilts printing a marginal new Liffe intraday high at 134.15 earlier. Meanwhile, Bunds are still hovering just shy of 177.00 in wake of the ECB’s Economic Bulletin that was largely in-line with the statement after July's policy meeting, but provided no further guidance next month's high stakes convene. Turning to the periphery, BTPs continue to underperform on renewed/heightened political friction and Friday’s Fitch rating call, while Stateside Treasuries are off overnight lows, but still unwinding recent bull-flattening awaiting further US-China developments and with one eye on initial jobless claims before the final auction of the week. On that note, after a softish 2 year sale Wednesday's 10 year results were weak so it will be interesting to see whether long bonds are deemed more attractive given the concession compared to yesterday's yield compression. 

COMMODITIES

A day of consolidation for the oil complex thus far after yesterday’s wave of downside in which the benchmarks declined almost 5% as demand concerns continue to materialise. WTI and Brent prices have rebounded off worst levels and reside around 52.23/bbl and 57.14/bbl respectively at the time of writing (vs. yesterday’s lows of 50.55/bbl and 55.90/bbl). The recent trade-induced sell-off has caught the attention of Saudi officials who are reportedly looking at options to stem the decline in the oil market.  At the moment, no details of potential actions were mentioned, although desks note that anything else other than compliance control and further output cuts could be unrealistic, even then, reaching an OPEC+ consensus on further curbs could prove difficult given the debacle at the June meeting between the producers. Nonetheless, the media reports have seemingly underpinned the benchmarks for now. Elsewhere gold prices are tentative, albeit off its 6-year peak of 1510/oz and back below the psychological figure. Protectionism risk remains in the forefront for the yellow metal with trade sources noting that China expects the 10% levy on Chinese goods to be implemented on September 1 and thereafter be ramped up to 25% as China stands firm. Meanwhile, copper prices are flat on the day amid the cautiousness in the market, although the red metal did receive some short-lived impetus to test 2.60/lb to the upside as Chinese trade data topped estimates across the board, however, iron ore prices failed to benefit from the data amid ongoing supply glut and lower demand concerns. Finally, nickel prices surged over 10% overnight due to speculation that Indonesia could reel in an export ban on nickel ore in a regulatory move, although an official announcement is yet to be made.

Saudi official says it plans to keep its production below 10mln BPD, committed to do what ever it takes to keep the oil market balanced. (Newswires)

Indonesia played down rumours of a nickel import ban and said it is to revoke permits if smelter targets are not met. (Newswires)