• APAC stocks were mixed following the lacklustre lead from global counterparts (SPX -0.26%, NDX -0.07%).
• European equity futures are indicative of soft open with the Euro Stoxx 50 future -0.3% after the cash market closed lower by 0.2% yesterday.
• DXY clawed back some data-inspired losses, JPY leads G10 FX, antipodeans marginally lag. 
• Fed’s Kashkari suggested the FOMC can only relax on rate hikes when there is compelling evidence that inflation is heading towards 2%.
• Looking ahead, highlights include US Durable Goods, Supply from Germany & US.

US TRADE

• US stocks mostly declined as the macro environment was influenced by the disappointing US PMI data which missed across the board and included a chunky decline in the Services PMI to add to the slowdown fears.
• SPX -0.26% at 4,127, NDX -0.07% at 12,881, DJIA -0.47% at 32,909, RUT +0.18% at 1,919.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Discount Rate Minutes stated 2 of 12 Federal Reserve regional banks wanted a 100bps increase in the discount rate ahead of the July 26-27 policy meeting and Kansas City Fed board directors wanted a 50bps hike. Federal Reserve Bank directors reported elevated inflation, tight labour markets and signs of slowing economic activity. Furthermore, several directors noted that residential real estate activity had eased and some directors had observed a sharp drop-off in the number of homeowners refinancing their loans, while the reports on consumer spending were mixed.
• Fed's Kashkari (2023 voter) said inflation is very high and it is the Fed's job to curb it, while he added that they need to get the underlying inflation trend back down to 2% and it is very clear they need to tighten monetary policy. Kashkari also stated that half to two-thirds of US high inflation is driven by supply-side shocks and help is needed on the supply side to get inflation down, with the more help they get from the supply side, the less the Fed has to do and will be better able to avoid a hard landing. Furthermore, he said there is currently no trade-off between employment and inflation mandates and they can only relax on rate hikes when they see compelling evidence inflation is heading toward 2%.
• White House mid-session review forecast fiscal 2022 deficit at 1.032tln (USD -383bln from March forecast) and sees FY23 deficit at USD 1.3trln (USD +146bln from March).

GEOPOLITICS

RUSSIA-UKRAINE

• IAEA said a mission to the Zaporizhzhia nuclear power plant in Ukraine is expected to take place within the next couple of days if ongoing negotiations succeed. In relevant news, Zaporizhzhia regional administration head confirmed that Russian strikes hit the city of Zaporizhzhia in Ukraine, according to Twitter sources.
• US is to announce USD 3bln arms package to Ukraine, according to AP.
• Norway's Defence Ministry said Norway and Britain joined forces to donate Black Hornet micro-drones to Ukraine, according to Reuters.

OTHER

• US military said it conducted strikes in Syria targeting facilities used by groups affiliated with Iran's IRGC, according to Reuters.
• US officials expect to respond to Iran’s comments on a European draft proposal by Wednesday and anticipate another round of negotiations in Vienna to finalize the details of a potential deal will likely be needed, according to Washington Post.
• Iran reportedly dropped another key demand as part of nuclear deal talks regarding its previous demand that the International Atomic Energy Agency had to close its investigation of undeclared nuclear material found at Iranian sites in 2019, according to CNN.

APAC TRADE

EQUITIES

• APAC stocks were mixed and only partially shrugged off the lacklustre lead from global counterparts.
• ASX 200 reclaimed the 7,000 level and was led by the tech and commodity-related sectors although gains were capped amid another busy day of earnings releases.
• Nikkei 225 failed to sustain opening advances following reports that Japan is considering lowering the COVID employment subsidy.
• Hang Seng and Shanghai Comp declined with property names pressured by several bearish factors including weak developer earnings and a default warning by Guangzhou R&F Properties, while China is also reportedly probing real estate executives for possible law violations.
• US equity futures remained subdued after weak PMI data stoked growth concerns; ES -0.2%.
• European equity futures are indicative of soft open with the Euro Stoxx 50 future -0.3% after the cash market closed lower by 0.2% yesterday.

FX

• DXY clawed back some of the data-triggered losses as participants await the Jackson Hole and after recent hawkish comments from Fed’s Kashkari who suggested they can only relax on rate hikes when there is compelling evidence that inflation is heading towards 2%.
• EUR/USD remained subdued and continued its pull back from resistance near parity.
• GBP/USD was lacklustre amid quiet pertinent newsflow but held on to the 1.1800 handle.
• USD/JPY price action was choppy owing to the cautious mood in the region.
• Antipodeans took a back seat to the recovery in the dollar and amid a lack of data releases.

FIXED INCOME

• 10yr UST futures were marginally higher but with price action muted compared to yesterday's fluctuations in which the initial PMI-induced bull-steepening faded after a weak 2yr auction.
• Bund futures futures remained subdued as the recent upside in oil prices and the threat of OPEC output cuts further stoked energy supply and inflationary concerns.
• 10yr JGBs futures were flat and largely ignored the BoJ’s Rinban announcement for nearly JPY 1.5tln of JGBs on top of its daily fixed-rate purchase offers.

COMMODITIES

• Crude plateaued during Asian trade but held on to most of the prior day's spoils after reports that comments by Saudi on output cuts were backed by some OPEC members, while it was also noted that OPEC+ could lean towards an output cut if Iranian supply returns.
• US Private Inventory report (bbls): Crude -5.6mln (exp. -0.9mln), Cushing +0.7mln, Gasoline +0.3mln (exp. -1.5mln), Distillates +1.1mln (exp. +0.6mln)
• Saudi Arabia and its allies are open to oil output cuts to keep prices high and the comments from the Saudi Energy Minister were backed by some OPEC members, while they are reportedly willing to back a production cut in the case of a global recession, according to WSJ.
• Norway's Energy Minister said they expect to maintain the current high level of natural gas output until 2030 and companies are presenting investment plans to help maintain high gas output going forward, according to Reuters.
• Canada and Germany signed a hydrogen alliance deal to accelerate exports of Canadian hydrogen to Germany by 2025, according to Reuters.
• Russia's Kirishi oil refinery, owned by Surgutneftegaz, is due to sharply cut high octane gasoline output in October and November amid maintenance but will boost production of low octane fuel for export, according to Reuters.
• Freeport LNG anticipates initial production can commence in early to mid-November and can ramp up to a sustained level of at least 2BCF per day by end of November.
• Spot gold traded sideways within a tight range.
• Copper marginally declined amid the cautious mood and the rebound in the dollar.
• German aluminium maker Speria is to decide on possible cuts next month with the smelter reportedly considering halving output due to high energy costs, according to Bloomberg.

CRYPTO

• Bitcoin prices weakened overnight after slipping back beneath the 21,500 level.

NOTABLE APAC HEADLINES

• China Securities Times noted that moderate CNY depreciation is positive for export competitiveness and that the widening US-China interest rate spread has a limited impact on CNY.
• Hong Kong is considering a storm level 8 from 18:00 local time 11:00BST/06:00EDT which could result in a market closure on Thursday, according to Bloomberg.
• Japanese PM Kishida announced to relax border rules on COVID and will waive tests for vaccinated passenger arrivals from September 7th, but added there was no decision yet on raising the number of daily arrivals, according to Reuters.

EU/UK

NOTABLE HEADLINES

• Scottish Power CEO proposed to UK Business Secretary Kwarteng capping household energy bills at around GBP 2000/year which would need funding of over GBP 100bln over two years, according to FT citing sources.