• European bourses & US futures continue to slump in an extension of Wednesday’s price action with yields on the up
• EGBs/USTs continue to drop and have made new lows below the post-Refunding/Fitch trough, Gilts pressured further pre-BoE
• Further upside for the USD with JPY outperforming on haven action while EUR & GBP slip
• Commodities are in-fitting with the above risk tone and accompanying USD strength; complex is conscious of punchy rhetoric from Poland
• Looking ahead, highlights include US IJC, Factory Orders, ISM Services, BoE Policy Announcement, BoE's Bailey, Fed's Barkin, Bostic & Goolsbee. Earnings from ConocoPhillips, Regeneron Pharmaceuticals, Apple, Kellogg Co, Moderna, Amazon,com, Warner Bros Discovery & Airbnb.

EUROPEAN TRADE

EQUITIES

• European bourses and US futures continue to slump in an extension of Wednesday's price action as yields continue to rise; Euro Stoxx 50 -0.8% & ES -0.3%
• Sectors in Europe are lower across the board with marked underperformance in Tech as Infineon -7.7% slumps post-earnings given two-way commentary and below-forecast Q4 guidance. Autos also stalling on BMW while Travel & Leisure is affected by Lufthansa.
• Stateside, given the marked yield action the NQ -0.4% is the incremental underperformer with attention on data points before numerous blockbuster earnings, incl. Apple and Amazon after-hours.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Another session of gains thus far the Buck, driven by an upside in bond yields as debt futures continue to trundle lower in a continuation of recent price action. DXY found overnight support around 102.50 before edging higher in early European trade to a 102.84 high at the time of writing.
• JPY now stands as the outperforming currency amid haven flows following overnight weakness sparked by another unscheduled BoJ JGB purchase operation.
• EUR and GBP are both softer against the Dollar with the Single Currency digesting the Final PMIs for July while the Sterling gears up the Bank of England policy decision.
• Antipodeans are all modestly softer on the day amid the firmer Dollar and broader risk aversion, but losses are stemmed by the overnight Chinese Caixin Services PMI which topped forecasts, whilst Australian Trade Balance printed at a slightly wider surplus than expected, although Imports and Exports both contracted.
• PBoC set USD/CNY mid-point at 7.1495 vs exp. 7.1933 (prev. 7.1368)
• Brazil Central Bank cut the Selic rate by 50bps to 13.25% (exp. 25bps cut) with the decision not unanimous. BCB stated the current scenario demands serenity and moderation in the conduct of monetary policy and if the expected scenario is confirmed, the committee unanimously expects rate cuts of the same magnitude in coming meetings, while it considered a 25bps cut but concluded a 50bps cut was appropriate due to the improvement in inflation dynamics.
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• In short, a continuation of Wednesday’s post-Fitch/Refunding price action with catalysts since somewhat light as we count down to the BoE.
• EGBs and USTs are lower across the board and have dropped markedly below the prior sessions’ troughs.
• JGBs buck the trend and are modestly firmer after another unscheduled BoJ purchase overnight, which came much later in the session than normal and is the second such operation since the YCC tweak.
• BoJ offered to buy JPY 100bln in 1yr-3yr JGBs and offers to buy JPY 300bln in 5yr-10yr JGBs in an unscheduled operation.
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COMMODITIES

• WTI and Brent futures are subdued as risk sentiment remains on the backfoot whilst the Dollar is underpinned.
• Spot gold remains heavy amid the recent gains in the Dollar, with the yellow metal extending losses under USD 1,950/oz following yesterday’s fall below the psychological level.
• Base metals are subdued but not to a great extent following the recent selloff in the complex, with the downside possibly cushioned by the rosier Chinese Caixin Services PMI overnight.
• Saudi Arabia and Kuwait reaffirmed they jointly own rights to natural resources in the Durra Gas field and renewed calls for Iran to negotiate over the demarcation of borders, according to Saudi's Foreign Ministry.
• Chile Codelco copper production fell 7.39% Y/Y in June to 120.3k tonnes, while Escondida copper mine production rose 8.7% Y/Y to 111.4k tonnes in June.
• Ukraine's PM says Ukraine is considering the possibility of insuring ships and companies going via a "grain corridor", according to Interfax-Ukraine.
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NOTABLE US HEADLINES

• White House Economic Adviser Bernstein said they view the Fitch rating downgrade as problematic and said US Treasury debt remains the safest in the world.
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• ECB's Panetta says monetary policy may operate not just by increasing rates but also by keeping the prevailing level of policy rate for longer. With policy rates now firmly in restrictive territory, setting and communicating the direction of monetary policy has become more complex. The risks to inflation are becoming balanced. Supply chain pressures have substantially abated compared with last year. It is possible that the transmission of our monetary policy might be even stronger than the staff projections indicate.. Adds, will decide in September whether we should pause or not.

DATA RECAP

• Swiss CPI YY (Jul 2023) 1.6% vs. Exp. 1.6% (Prev. 1.7%); MM (Jul 2023) -0.1% vs. Exp. -0.2% (Prev. 0.1%)
• EU Producer Prices YY (Jun 2023) -3.4% vs. Exp. -3.1% (Prev. -1.5%); MM (Jun 2023) -0.4% vs. Exp. -0.2% (Prev. -1.9%)
• EU HCOB Services Final PMI (Jul) 50.9 vs. Exp. 51.1 (Prev. 51.1); Composite Final PMI (Jul) 48.6 vs. Exp. 48.9 (Prev. 48.9)
• German HCOB Composite Final PMI (Jul) 48.5 vs. Exp. 48.3 (Prev. 48.3)
• German HCOB Services PMI (Jul) 52.3 vs. Exp. 52 (Prev. 52); "They are all the more problematic as Germany’s services output price inflation even went back up in July."
• UK S&P Global/CIPS Services PMI Final (Jul) 51.5 vs. Exp. 51.5 (Prev. 51.5); Composite PMI Final (Jul) 50.8 vs. Exp. 50.7 (Prev. 50.7)

GEOPOLITICS

• Ukrainian military warned of drone attacks around Kyiv and said anti-aircraft units were in operation, while explosions were also reported, according to Reuters.
• Russian Defence Ministry said navigation is restricted in Kerch Strait and that movement in the Kerch Strait is also limited for aircraft, according to TASS.
• Polish PM says Wagner's forces are moving towards NATO's eastern flank to destabilize, according to Al Arabiya.

CRYPTO

• Bitcoin is contained and has been moving either side of the USD 29k mark with specifics somewhat light as we count down to a busier US agenda.

APAC TRADE

• APAC stocks mostly followed suit to the weakness in global peers including on Wall St where stocks and bonds were pressured by the US rating downgrade, AMD earnings and hot ADP data, albeit with some of the losses were stemmed in Asia as participants digested Chinese Caixin Services and Composite PMI figures.
• ASX 200 was dragged lower by losses in tech after the underperformance of their US counterparts, with sentiment not helped by softer monthly exports and a continued contraction in quarterly retail trade.
• Nikkei 225 underperformed as yields edged higher and with newsflow dominated by earnings.
• Hang Seng and Shanghai Comp were choppy and briefly clawed back opening losses in the aftermath of somewhat mixed Chinese Caixin Services and Composite PMI data.

NOTABLE ASIA-PAC HEADLINES

• China's Foreign Ministry said China is willing to maintain communications regarding the US inviting Chinese Foreign Minister Wang Yi for a visit, according to Reuters.
• US House Committee opened an investigation into the suspected Chinese hacking of State Department and Commerce Department emails.
• Japanese Chief Cabinet Secretary Matsuno said he hopes the BoJ works closely with the government and guides policy appropriately to stably and sustainably hit the 2% price target, while he added the government is closely watching FX moves and their impact on Japan's economy and prices, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Jul) 54.1 vs. Exp. 52.5 (Prev. 53.9); Composite PMI (Jul) 51.9 (Prev. 52.5)
• Australian Trade Balance (AUD)(Jun) 11.3B vs. Exp. 11.0B (Prev. 11.8B)
• Australian Exports MM (Jun) -2.0% (Prev. 4.0%); Imports MM (Jun) -4.0% (Prev. 2.0%)
• Australian Retail Trade (Q2) -0.5% (Prev. -0.6%)