• European indices are lower [Euro Stoxx 50 -0.5%] as sentiment remains risk off as the geopolitical situation remains tense with dismal German data not helping
• Hong Kong's airport has reportedly suspended all check-ins, following online calls for another day of public assembly
• USD is mixed between G10 counterparts with antipodeans and safe-havens outperforming and EM’s lagging
• Looking ahead, highlights include US CPI & Italian Senate meeting to decide on Confidence Vote timing (17:00BST)

ASIA-PAC

Asian equity markets followed suit from the losses on Wall St with global risk sentiment sapped by the continued overhang from the US-China trade war and after the disruption in Hong Kong where there are growing fears of Chinese intervention. ASX 200 (-0.3%) was subdued but with losses stemmed by strength in tech and mining related sectors, while Nikkei 225 (-1.1%) was among the underperformers as participants returned from the extended weekend and reacted to recent flows to the currency. Chinese markets also traded lower after Chinese Lending/Financing data disappointed and with heavy losses in Hong Kong after its airport was shut by a mass sit-in and although flights have since resumed, hundreds remained cancelled as they try to deal with the back log from the disruption. Furthermore, increased concerns China may intervene as the People's Armed Police were reportedly gathering and heading towards the bordering city of Shenzhen, has added to the pressure for the Hang Seng (-2.1%) which declined to its weakest since early January, while losses in the Shanghai Comp. (-0.6%) were somewhat cushioned after the PBoC set a firmer than expected reference rate and continued its liquidity injections. Singapore’s STI (-0.9%) suffered from a double-whammy in which Q2 GDP missed estimates and the MAS dashed easing hopes by not considering an off-cycle policy meeting. Finally, 10yr JGBs were marginally higher and the 30yr yield dropped to 0.2% for the first time in 3 years amid the risk averse tone and following the bull flattening in the US, although upside was capped amid lack of BoJ presence in the market and given that prices were already at record levels.

PBoC injected CNY 60bln via 7-day reverse repos. (Newswires) PBoC set CNY mid-point at 7.0326 vs. Exp. 7.0421 (Prev. 7.0221); weakest since March 2008.

Singapore GDP (Q2 F) Q/Q -3.3% vs. Exp. -2.9% (Prev. -3.4%). (Newswires) Singapore GDP (Q2 F) Y/Y 0.1% vs. Exp. 0.2% (Prev. 0.1%) Monetary Authority of Singapore said monetary policy is unchanged and it is not considering an off-cycle policy meeting.

South Korea plans to sharply increase budget spending next year for the parts and materials industries, in order to tide these industries over in wake of Japan’s export curds., according to Yonhap citing a top Presidential Official. (Newswires)

PBoC Offical says China are able to navigate all scenarios from US currency manipulation label, shocked that US Treasury Department labelled them as a currency manipulator; reiterated that the Yuan is at an appropriate level. (Newswires)

GEOPOLITICAL

Hong Kong Airport has suspended all check-ins, according to local media. Follows on from Hong Kong’s Airport Authority noticing calls online for public assembly at the airport on Tuesday afternoon. (Newswires)

US

US President Trump has asked Japanese PM Abe to purchase a "huge amount" of US farm goods, according to Kyodo. (Kyodo)

UK/EU

UK PM Johnson believes EU will cave in at the last minute to save Ireland from a no-deal Brexit, according to reports citing a Downing Street source. (The Sun)

The legal bid to stop UK PM Johnson from forcing a no-deal Brexit by suspending parliament will have a full hearing on 6 September, according to Politico's Casalicchio. (Twitter)

ComRes poll showed 54% support PM Johnson delivering the Brexit by any means including suspending Parliament. (Telegraph)

UK MPs are attempting to get the Court of Session in Edinburgh to rule that suspending parliament to force through a no-deal Brexit is “unlawful and unconstitutional”. The move is backed by over 70 MPs and peers including Lib Dem leader Swinson. (BBC)

UK Shadow Home Secretary Abbott has signalled that the Labour Party could be planning a vote of no confidence against PM Johnson once parliament returns in September. Abbott said Labour MPs are in talks with other parties on how best to proceed. (Guardian)

Italian Senate is to meet today at 1700BST to decide when to debate the League no-confidence motion in government, according to PD. (Newswires)

UK Avg Wk Earnings 3M YY Jun 3.7% vs. Exp. 3.7% (Prev. 3.4%, Rev. 3.5%)

- UK Avg Earnings (Ex-Bonus) Jun 3.9% vs. Exp. 3.8% (Prev. 3.6%)

- UK ILO Unemployment Rate Jun 3.9% vs. Exp. 3.8% (Prev. 3.8%)

- UK Employment Change Jun 115k vs. Exp. 65k (Prev. 28k)

German ZEW Economic Sentiment Aug -44.1 vs. Exp. -28.5 (Prev. -24.5); Current Conditions Aug -13.5 vs. Exp. -7.0 (Prev. -1.1)

- ZEW sentiment point to a significant deterioration on the outlook for the German economy

- Most recent escalation in trade disputes, the risk of competitive devaluations and the increased likelihood of a no-deal Brexit place additional pressure on already weak economic growth

- This will most likely put a strain on developments of German exports and industrial production

EQUITIES

European stocks are lower across the board [Eurostoxx 50 -0.70%] following on from a downbeat Asia-Pac handover as global risk sentiment continues to be pressured by the US-China trade overhang and amid growing fears surrounding the violent Hong Kong protests and fears of intervention. Germany’s DAX (-0.9%) underperforms and hit levels last seen at the end of March after falling below a key tech level at 11600 (which was the reversal level during the May rout) with the aid of dismal German ZEW survey data and ahead of German GDP figures tomorrow. Sectors are mostly lower, with some resilience in defensive sectors as investors flock to “safe stocks”, whilst the energy sector outperforms amid the oil sector’s earlier gains, albeit this initial upside has since been retraced. In terms of individual movers, Henkel (-7.0%) rest at the foot of the Stoxx 600 amid a profit warning whilst it also noted that it does not envisage a H2 auto market recovery. Meanwhile, Rolls-Royce (-3.2%) shares continued to fall with today’s downside induced by a Moody’s downgrade to Baa1 from A3.

Exxon Mobil (XOM) is reportedly mulling the sale of some or all of its UK North Sea assets, valued up to USD 2bln, according to sources. (Newswires)

FX

USD - The Dollar remains divergent against G10 currency counterparts, but firm vs EMs as sentiment continues to favour safe-havens amidst ongoing unrest in Hong Kong and other parts of the globe, plus the US-China/EU etc trade conflicts. Hence, the DXY is still anchored around 97.500 and the index taking cues from moves in major basket constituents, like the Euro and Yen ahead of US CPI data.

EUR/GBP - The single currency and Sterling are both holding relatively steady vs the Greenback and thus each other, with Eur/Usd back above 1.1200 despite more dire Eurozone survey news in the shape of the latest ZEW findings for Germany and the bloc as a whole. The Euro is benefiting from its status as a refuge when risk aversion is high, if not rife, but 1.1220 Fib resistance may yet cap the upside having been respected on multiple tests recently. Conversely, the Pound has not really been able to sustain gains/momentum on the back of firmer than forecast UK pay metrics as Cable labours ahead of 1.2100 on persistent no deal Brexit jitters.

AUD/NZD/CAD - Some respite for the Aussie via an uptick in NAB business sentiment overnight and comments from RBA Assistant Governor Kent playing down the prospect of NIRP, as Aud/Usd pares losses from a test of key support towards 0.6770, but the Kiwi appears more vulnerable after relative outperformance or rather resilience yesterday with Nzd/Usd hovering around 0.6450 and Aud/Nzd just under 1.0500. In contrast, the Loonie is lagging either side of 1.3250 after last Friday’s disappointing Canadian jobs update and soft crude prices.

JPY/CHF - The Yen looks ripe for another attempt to breach 105.00 vs the Usd where more hefty option expiries reside and psychological bids/support are propping the headline pair in front of the 104.87 flash crash low, but the Franc has crossed 0.9700 against the Buck and approaching 1.0850 vs the Euro awaiting more Italian political developments alongside any response from the SNB to signs that the Chf is getting too strong.

EM - More broad losses across the region, and the Lira seemingly suffering from a lack of local participation as Turkey observe EID on top of increasingly bearish technical as Usd/Try has broken above the 200 DMA to expose the next significant upside chart level circa 5.6300.

RBA Assistant Governor Kent said lower rates are easing financial conditions in usual way and that recent broad-based easing will support demand, while he also noted the RBA is not targeting unemployment rate with policy and it is unlikely that negative rates are needed in Australia but added some unconventional policies are possible. (Newswires)

Australian NAB Business Confidence (Jul) 4 (Prev. 2). (Newswires) Australian NAB Business Conditions (Jul) 2 (Prev. 3)

Notable FX Expiries:

- USDJPY: 104.00 (746M), 105.00 (1.7B), 105.60 (785M)

FIXED INCOME

Some signs of decoupling or a deviation from inverse-correlations if not a more meaningful breakdown, but Bunds have not derived any additional impetus from a bleak ZEW survey that looks to have leant on the DAX more heavily. Perhaps the core Eurozone bond already priced in the risk of a bad miss vs consensus and was pre-emptive when posting a new 177.84 contract best pre-release, while Gilts are acknowledging the inflationary aspects of strong UK earnings and long end DMO issuance that took some digesting at such low yields. However, US Treasuries remain elevated and the curve compressed as the long end outperforms and 30 year cash teeters only a couple of bps from all time lows ahead of CPI.

COMMODITIES

Marginal losses in the oil complex with WTI and Brent futures choppy, with the former back below 55/bbl (after having visited the level earlier in the session) whilst the latter fell to around 58.50/bbl. News flow for the complex has again been light and the benchmarks seem to be moving off of sentiment/technical factors, with RBC yesterday highlighting that there is limited scope for short covering rallies due to positioning, i.e. speculators seem to have been unwinding long position rather than opening shorts. Nevertheless, participants will be on the lookout for geopolitical/trade developments, whilst Hong Kong also remains on the radar and whether China will intervene amid the rise in violent protests, which is likely to hit sentiment again, especially if US reacts with sanctions/tariffs. Looking at today’s docket, traders will await the weekly API crude data, expected to print a draw of 2.3mln barrels. ING notes that the narrowing of the WTI/Brent Arb (currently 3.6/bbl) could point to another weak of low exports as shown by the prior week’s EIA data. Elsewhere, gold remains on an upward trajectory amid safe-haven demand, with the yellow metal at a fresh 6yr high of 1526.7/oz. Meanwhile, copper is relatively flat on the day. Elsewhere, Dalian iron ore traded in a tight range whilst steel futures rose as much as 3.0% as the pollution curb on steel mills dampens iron ore demand but also disrupts steel supply. GS sees a rebound in iron ore prices as “2019 is on track to post the seaborne market's first deficit in seven years”, and they see a deficit through 2020. Finally, Indonesia’s Minister noted that revisions to mineral ore export rules are currently being drafted. Indonesia initially planned to ban exporting nickel ore by 2022, in an attempt to build up its manufacturing base by using its raw resources but previously noted that bringing the deadline forward from 2022 will disrupt USD 4bln ore exports.

Goldman Sachs said iron ore market remains tight and sees iron ore prices to rebound to USD 115/ton in 3 months, while JPMorgan have a different view and see 2019 iron ore prices at USD 93/ton. (Newswires)