• European bourses are in the green, with sentiment inching higher in pre-CPI trade
• Stateside, futures are taking impetus from the above and recouping some of Wednesday’s pressure
• DXY lags in the FX space with CHF taking advantage while JPY lags on yield dynamics, EUR & GBP both bid
• Core fixed benchmarks are in the red with US yields higher across the curve but action remains limited
• Commodities hold a positive bias given the tone and USD downside, incrementally encouraging updates re. TTF/LNG supply
• Looking ahead, highlights include US CPI, IJC, Chinese M2 Money Supply, New Zealand PMI (Manufacturing), Banxico Policy Announcement, Speeches from Fed's Harker & Bostic, Supply from US.

EUROPEAN TRADE

EQUITIES

• European bourses are in the green, Euro Stoxx 50 +0.7%, as sentiment inches higher with macro drivers thin; FTSE 100 lags given a large amount of ex-dividend trade.
• Sectors are primarily bid with only Health Care in the red as Novo Nordisk trims recent gains post-earnings; Insurance outperforms following Allianz and Zurich Insurance with Luxury also bolstered as China continues to reopen.
• Stateside, futures are in the green as they take impetus from European action and attempt to recover some of the losses felt on Wednesday, ES +0.6%.
• Action has been relatively contained for US futures after they staged a recovery in APAC hours with drivers since light and the clock counting down to CPI, Fed speak and supply.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• A soft morning thus far for the broader Dollar and index despite the firming in bond yields seen after the European cash close yesterday.
• A clear divergence is seen between the traditional havens, with the CHF taking advantage of the receding Dollar whilst the JPY is hampered by recent yield dynamics.
• JPY remains on the back foot and on course for a fourth consecutive session of losses. The pair briefly topped 144.00 overnight to a 144.11 high before trimming upside, with an intraday low print at 143.64.
• Antipodeans are taking advantage of the softer Dollar alongside the constructive risk mood, albeit they are still some way off WTD bests. The Loonie lags with no obvious fresh fundamental driver this morning.
• The Single Currency currently stands as the second-best G10 performer as the Dollar resides around session lows in the run-up to CPI, with fresh newsflow also quiet in summer trading. On that note, amid the quieter condition, it’s worth being aware of large EUR/USD option expiries.
• PBoC set USD/CNY mid-point at 7.1576 vs exp. 7.2023 (prev. 7.1588)
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Core benchmarks are in the red, a deterioration that has been very steady in nature and largely a function of the improved but still somewhat tentative risk tone pre-CPI.
• Bunds are the incremental laggards trading lower to the tune of 40 ticks but just off of the 132.36 trough. A low below Wednesday’s 132.57 base but someway shy of the WTD 131.33 base that was printed on Monday.
• As mentioned, newsflow for the UK/Gilts has been equally dearth aside from the RICS survey that shows continued pressure for the housing market on the back of the ongoing tightening cycle.
• USTs are in the red with yields bid across the curve but overall action is very limited in summer conditions and ahead of US CPI. Currently, USTs are at the mid-point of 111.06+ to 111.12+ parameters.
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COMMODITIES

• WTI and Brent front-month futures hold a positive bias amid the softer Dollar and constructive risk tone in the run-up to US CPI.
• There hasn’t been much by way of crude-specific news, but some sectoral support may be felt with the recent rise in LNG prices.
• Spot gold is modestly firmer amid the softer Dollar but price action is limited ahead of the US CPI report, with the current intraday range between 1,9414.91-21.31/oz.
• Unions representing workers at Woodside and Chevron LNG sites have applied for "protected ballot orders"; FT citing a source reports that a move to vote on action will likely occur early next week unless a resolution is agreed. Elsewhere, Eneos exec. says they are not aware of any significant impact from possible strikes at Australian LNG facilities.
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NOTABLE US HEADLINES

• Alibaba Group Holding Ltd (BABA) Q2 2023 (USD): EPS 2.40 (exp. 2.03), Revenue 32.292bln (exp. 31.17bln). +3.8% post-earnings
• Click here for the US CPI primer.
• Click here for the US Early Morning note.

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak is reportedly facing increasing calls from the Cabinet to put leaving the European Convention on Human Rights at the centre of the Tory election campaign if migrant deportation flights to Rwanda are blocked, according to The Telegraph.
• Lloyds of London underwriters are leading insurers in raising rates and cutting cover over Taiwan risks, via Reuters citing sources; some insurers are imposing exclusions on Taiwan in political risk or political violence policies.
• ECB Economic Bulletin: Inflation continues to decline but is still expected to remain too high for too long. The Governing Council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner.
• Norges Bank survey of bank lending: Broadly unchanged credit demand and credit standards.

DATA RECAP

• UK RICS Housing Survey (Jul) -53 vs. Exp. -50 (Prev. -46, Rev. -48)
• Norwegian Core Inflation (CPI-ATE) YY (Jul 2023) 6.4% vs. Exp. 6.3% (Prev. 7.0%); CPI YY (Jul 2023) 5.4% vs. Exp. 5.7% (Prev. 6.4%)

GEOPOLITICS

• Russian Defence Ministry said 11 Ukrainian drones were downed near Sevastopol, according to RIA. It was separately reported that Russian air defence systems shot down two military drones heading towards Moscow.
• North Korean leader Kim convened a military meeting and vowed to step up preparation for war, while he called for war drills to be conducted to efficiently operate new weapons, according to Yonhap.
• Belarusian Security Council says they will take measures to respond to the militarization of Poland and the Baltic states, according to Al Arabiya.

CRYPTO

• US SEC plans to appeal the court ruling in its lawsuit against Ripple Labs.

APAC TRADE

• APAC stocks were mixed with the regional bourses mostly rangebound amid a slew of earnings releases and with the mood tentative ahead of incoming US inflation data, while participants also reflected on US efforts to restrict investment in some Chinese tech.
• ASX 200 was rangebound with notable outperformance in the energy sector with oil prices at a 9-month high and following the recent surge in gas prices amid disruption concerns with strike action planned for Australian LNG, although Woodside Energy has since provided some optimism on the bargaining process in which it noted that positive progress is being made and an in-principle agreement was reached on a number of issues.
• Nikkei 225 benefitted from yen weakness but was initially choppy after mixed PPI data and with newsflow in Japan dominated by earnings releases which provided the catalysts for the biggest individual stock movers.
• Hang Seng and Shanghai Comp were pressured after US President Biden’s executive order to ban some new investments in ‘narrow subsets’ of Chinese sensitive technologies such as semiconductors and microelectronics, quantum information technologies and certain AI systems, which drew criticism from China.

NOTABLE ASIA-PAC HEADLINES

• US President Biden signed an executive order to regulate future US investments in a narrow set of technologies in China, Hong Kong and Macau, while the order is a 'narrow and targeted action' to complement existing export controls and inbound investment screening. Furthermore, US actions will focus on protecting the most critical technologies for military advancement, including semiconductors, quantum computing and certain artificial intelligence, according to Reuters.
• There were earlier reports that the White House will detail plans restricting some US investments in China in which the regulations will only affect future investments, not current ones, according to a person briefed on the executive order. Restrictions are expected to be implemented next year after multiple rounds of public comment including an initial 45-day comment period on the proposed rulemaking.
• China's MOFCOM said China is gravely concerned about the US order on foreign investment reviews and reserves the right to take measures, while it hopes the US will respect the law of the market economy and the principle of fair competition, according to Reuters.
• China's Ministry of Foreign Affairs said China filed a diplomatic complaint against the US regarding the investment curbs, according to Bloomberg.
• Chinese Embassy in the US said China is very disappointed the US went ahead with new investment restrictions and it opposes the US overuse of national security on trade, while it added that China will firmly safeguard its rights and interests, according to Reuters.
• China’s internet giants rush to order USD 5bln of Nvidia (NVDA) chips to power AI ambitions amid concerns over impending US export controls, according to FT sources.
• China Culture and Tourism Bureau released a third list of destination countries for Chinese group tourism including Japan, Australia, Germany, UK and US, while China also permitted group tours to South Korea.
• RBI kept the Repurchase Rate unchanged at 6.50%, as expected, while it maintained its stance of remaining focused on the withdrawal of accommodation which 5 out of 6 MPC members voted for. RBI Governor Das said the Indian economy is exuding enhanced strength and they made significant progress in controlling inflation but added that the MPC is prepared to act if the situation warrants and it remains resolute in its commitment to align inflation to the 4% target. Incremental Cash Reserve Ratio will be reviewed on September 8th. Existing Cash Reserve Ratio remains unchanged at 4.50%.

DATA RECAP

• Japanese PPI MM (Jul) 0.1% vs. Exp. 0.2% (Prev. -0.2%); YY (Jul) 3.6% vs. Exp. 3.5% (Prev. 4.1%)
• Chinese July vehicle sales -1.4% Y/Y (prev. +4.8% in June), according to the Industry Association; Jan-July +7.9% Y/Y (prev. -2% last year).