APAC stocks mostly higher, JPY & CHF slightly softer as risk-tone improves - Europe Market Open

• APAC stocks began the week mostly higher following last Friday's gains on Wall St and light macro newsflow over the weekend; Japanese markets were closed for Mountain Day.
• European equity futures indicate a firmer open with Euro Stoxx 50 futures up 0.5% after the cash market finished with gains of 0.1% on Friday.
• 10-year UST futures lacked direction amid light catalysts and with overnight cash treasuries shut due to the Tokyo closure.
• BoE's Mann said UK wage growth is still a concern for inflation and goods and services prices were set to rise again; Mann said she moved down from ten to seven on a scale of “hawkishness”.
• Israeli Defence Minister Gallant said Iranian military preparations suggest Iran is getting ready for a large-scale attack; may precede ceasefire talks scheduled for Thursday.
• Looking ahead, highlights include Indian CPI, German Retail Sales & US NY Fed SCE.

12th August 2024

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US TRADE

EQUITIES

• US stocks finished mostly higher on Friday in which the major indices were led by outperformance in the Nasdaq although the small-cap Russell 2000 index lagged and closed in the red, while the majority of sectors were in the green with outperformance in Communication Services, Technology, and Real Estate. Furthermore, treasuries bull flattened and the dollar was pressured although the DXY remained above the 103.00 level as the attention shifted to the upcoming week's US CPI release.
• SPX +0.47% at 5,344, NDX +0.54% at 18,513, DJIA +0.13% at 39,498, RUT -0.17% at 2,081.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed’s Bowman (voter) said it will become appropriate to gradually lower the policy rate if inflation continues to move towards 2%, while she is not confident inflation will decline as it did in H2 last year and noted progress on inflation in May and June is welcome but inflation is still uncomfortably above the Fed's 2% goal. Bowman also said the September meeting will have additional economic data and a wider view of financial conditions’ impact on the outlook, as well as noted they need to be patient and still see some upside risks to inflation.
• US VP Harris said she will work to raise the minimum wage and eliminate taxes on tips for service and hospitality workers.

APAC TRADE

EQUITIES

• APAC stocks began the week mostly higher following last Friday's gains on Wall St and light macro newsflow over the weekend, but with gains capped amid an indecisive mood in China and holiday closure in Japan for Mountain Day.
• ASX 200 advanced with the upside led by outperformance in Consumer Discretionary, Tech, Telecoms and Financials.
• Hang Seng and Shanghai Comp. were indecisive as lingering economic concerns offset the PBoC's liquidity efforts.
• US equity futures traded sideways in the absence of major catalysts and as markets await US inflation data.
• European equity futures indicate a firmer open with Euro Stoxx 50 futures up 0.5% after the cash market finished with gains of 0.1% on Friday.

FX

• DXY was little changed as participants look ahead to the US inflation data scheduled this week, while recent comments from Fed's Bowman provided very little incrementally in which she noted it will become appropriate to gradually lower rates if inflation continues to move towards 2%.
• EUR/USD pared the initial marginal gains with price action rangebound slightly above the 1.0900 level.
• GBP/USD struggled to find direction after last week's choppy mood and amid the absence of fresh catalysts.
• USD/JPY reclaimed the 147.00 handle but with further upside capped as Japanese participants were away for holiday, while former BoJ board member Sakurai said the BoJ will not be able to hike again this year citing market turmoil and low probability of a rapid economic recovery.
• Antipodeans were underpinned in quiet newsflow with NZD/USD back above the 0.6000 level ahead of the RBNZ meeting where there are mixed views on whether the central bank will cut rates or not, while the NZIER Shadow Board was also split but the majority recommended a cut.
• PBoC set USD/CNY mid-point at 7.1458 vs exp. 7.1777 (prev. 7.1449)

FIXED INCOME

• 10-year UST futures lacked direction amid light catalysts and with overnight cash treasuries shut due to the Tokyo closure.
• Bund futures traded uneventfully with price action stuck around the 134.50 level ahead of German WPI data.

COMMODITIES

• Crude futures remained afloat after last week's rally and as geopolitical risks lingered with Israeli intelligence suggesting that Iran may conduct a direct attack on Israel within days.
• Iran’s President nominated Mohsen Paknezhad as Oil Minister and Abbas Aragchi as Foreign Minister.
• Spot gold was rangebound amid a lack of fresh drivers and as markets await US CPI data scheduled midweek.
• Copper futures were indecisive amid the choppy performance seen in its largest buyer, China.

CRYPTO

• Bitcoin traded indecisively after failing to sustain an early advance above the USD 59,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC’s low carbon financing scheme which provides financial institutions with low-cost loans targeting carbon emission cuts was extended to the end of 2027, according to the State Council.
• RBA Deputy Governor Hauser said economic forecasts are subject to huge uncertainty and assume inflation stickiness due to weaker supply and labour market tightness, while he added there is risk consumption could rise more strongly, in part due to an increase in wealth and it is uncertain how far and fast the savings rate might rise.

GEOPOLITICAL

MIDDLE EAST

• Israel conducted an air strike which killed nearly 100 in a Gaza school refuge, according to civil defence officials cited by Reuters. It was also reported that Israel ordered a major evacuation in Gaza’s Khan Younis.
• Israeli media reported that at least 30 rockets were fired by Hezbollah towards Israel of which some were intercepted by air defences, while no casualties were reported from the rocket shelling on the city of Nahariya and its suburbs.
• Israeli intelligence believes Iran has decided to attack Israel directly and may do so within days, according to Axios’s Ravid. It was also reported that Israeli Defence Minister Gallant spoke to US counterpart Austin and told him Iranian military preparations suggest Iran is getting ready for a large-scale attack, while Israeli intelligence assessment indicated an Iran attack may precede ceasefire talks scheduled for Thursday. Furthermore, Israel's military intelligence and air force raised the alert level amid the threat from Iran.
• US Defence Secretary Austin told Israeli counterpart Gallant he ordered the USS Abraham Lincoln carrier strike group to accelerate its transit to the Middle East, while he also ordered the USS Georgia guided missile submarine to the Central Command region.
• Iran’s Revolutionary Guards held a military drill in West Iran, according to IRNA.
• Hamas asked mediators to present a plan based on past talks instead of engaging in new negotiations, according to a statement.
• Several US and coalition personnel suffered minor injuries in an attack in Syria on Friday, according to a US official cited by Reuters.

OTHER

• IAEA said its experts witnessed a strong dark smoke coming from the northern area of the Zaporizhzhia nuclear plant following multiple explosions but added that there was no safety impact reported.
• Ukrainian President Zelensky said Russia started a fire on the premises of the Zaporizhzhia nuclear plant in southern Ukraine but added that radiation indicators are normal. It was also reported that the Russian management of the Zaporizhzhia nuclear plant accused Ukraine of causing a fire near the cooling towers of the Zaporizhzhia nuclear plant by shelling the nearby city of Enerhodar although it noted that the fire had no impact on its plant and its safe use.
• Main fire at the Russian-controlled Zaporizhzhia power plant in Ukraine had been extinguished, while Russian and Ukrainian authorities said in separate statements that one of the cooling towers at the power plant was damaged, according to Reuters. Furthermore, Russian President Putin ordered tighter security at strategic facilities in Zaporizhzhia including the nuclear plant.
• Ukrainian President Zelensky said Russia conducted nearly 2,000 cross-border strikes on Ukraine’s Sumy region from the Kursk region this summer and such strikes deserve a fair response from Ukraine. Zelensky also commented that Russian forces used a North Korean missile in a strike on the Kyiv region which killed two people, while the Ukrainian military said it destroyed 53 attack drones launched by Russia during a strike over the weekend.
• Russia’s Kursk region governor ordered a faster evacuation of civilians in areas at risk of Ukraine’s attack and announced that thirteen people were injured from a downed Ukrainian missile in Russia’s Kursk city, while it was reported that Russia’s air defence systems destroyed 14 Ukraine-launched drones and four missiles over the Kursk region.
• Belarusian President Lukashenko said Belarus’s air forces were put on high alert after Ukraine violated Belarus’s air space and Belarus destroyed objects thought to be Ukrainian drones that had entered their air space.
• Philippine military said a Chinese air force aircraft executed a dangerous manoeuvre and dropped flares in the path of a Philippine air force aircraft in the South China Sea shoal. Furthermore, the Philippines presidential office said the action of the Chinese aircraft was unjustified, illegal and reckless, while President Marcos strongly condemned the air incident at Scarborough Shoal.

EU/UK

NOTABLE HEADLINES

• BoE's Mann said UK wage growth is still a concern for inflation and goods and services prices were set to rise again, while she added that wage pressures in the economy could take years to dissipate. Furthermore, Mann said she moved down from ten to seven on a scale of “hawkishness” since the start of the year as price pressures eased, according to FT.
• Fitch affirmed Netherlands at AAA: Outlook Stable, while it affirmed Finland at AA+; Outlook Revised to Negative.