US EARLY MORNING: US equity futures are trading with slight gains; China fell into deflation in July; quiet docket ahead before Thursday's US CPI data

US PRE-MARKETS: US equity futures are trading with modest gains, Treasury yields are mixed, the Dollar Index is a little beneath neutral, while crude futures are trading slightly in the green despite a larger than expected build reported by the API - the more widely followed DoE data will be released later. Overnight the focus was on China's inflation data which showed the nation fell into deflation in July, and continues the tone of soft economic releases out of the world's second largest economy, and that is leading to growing expectations of further government support ahead (see our analysis, below). The data slate for Wednesday is quiet, and that may allow traders to begin focussing on the US inflation data that is due on Thursday. There is also 10yr supply from Germany, the UK as well as the US today - the upsized sale of 3yr notes on Tuesday was well-received at these higher yield levels.

CHINA INFLATION: China consumer prices fell at a rate of -0.3% Y/Y in July (exp. -0.4%, prev. 0.0%), slipping into deflation for the first time since February 2021. CPI came in at +0.2% M/M (exp. -0.1%, prev. -0.2%), largely led by a 26% Y/Y decline in pork prices in July. Core CPI rose +0.8% Y/Y (prev. 0.4%), while PPI printed -4.4% Y/Y (exp. -4.1%, prev. -5.4%). The data underscores weak domestic demand with the expected post-COVID rebound in consumer spending failing to materialise. analysts have suggested that the data further fuels calls for more government support measures, particularly given the weaker trade data earlier this week, and further tensions within the property sector. Some have touted possible rate and RRR cuts later this year. (See full analysis here)

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09 Aug 2023 - 09:30- Fixed IncomeData- Source: Newsquawk

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