US stocks declined as yields rebounded, while Walmart posted its slowest sales growth in six years and guidance disappointed - Newsquawk Daily Asia-Pac Market Open

• US stocks were lower on Thursday, with the Russell and Dow underperforming; the latter was weighed by Walmart (WMT), which slumped following its earnings report and weak guidance. Indices closed lower across the board with negative breadth, as the equal-weight S&P 500 (RSP) fell around 0.7%. Sectors were also predominantly lower, with Health Care, Consumer Staples and Consumer Discretionary lagging. Health Care gave back some of Wednesday's MRNA/MRK-induced gains, while Staples were weighed on by WMT. Energy and Real Estate were the only sectors to close in the green. Crude prices were firmer amid reports that the Houthis are preparing to enter a new phase of escalation against Saudi Arabia. Meanwhile, Iranian Supreme Leader adviser Rezaei said the best response to Trump's escalation of economic warfare would be to withdraw from the Nuclear Non-Proliferation Treaty, which legally commits Iran to maintaining a peaceful nuclear programme. US President Trump also reportedly told his team that the chances of reaching a deal with Iran are slim and ordered a freeze on talks for several weeks.
• USD was slightly firmer, although it lagged the notable reversal in long-end US Treasury yields. Behind the mixed action in fixed income and FX could be reduced USD attractiveness from a yield standpoint, given the US Treasury’s apparent preference to cap the recent rise in yields, while its major peers have signalled no similar restraint. Meanwhile, US data showed continued stability in the labour market with initial claims still hovering around 200k; continuing claims rose but remained well within YTD ranges. Philly Fed beat, in what was a strong manufacturing report, helped by significantly improved expectations of future business conditions. Elsewhere, Fed speak saw Daly note that policy is in a good place to keep watching the data, whilst Musalem maintained the view that hiking rates now could save more aggressive action later and noted Super El Niño might be the next supply shock.
• Looking ahead, highlights include New Zealand Trade Data, Australian Flash PMIs, Japanese National CPI & Flash PMIs.

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LOOKING AHEAD

• Highlights include New Zealand Trade Data, Australian Flash PMIs, Japanese National CPI & Flash PMIs.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump told his negotiating team that the chances of an agreement with Iran have become slim, while Trump ordered a freeze on negotiations with Iran for several weeks, with the possibility of extending them, according to Al Arabiya citing sources.
• US Treasury Secretary Bessent said there will be a press conference on Monday to discuss actions on Iran and stated the US has control of the Strait of Hormuz. He also commented that maximum economic pressure means likely not a kinetic restart and it will be coordinated economic isolation.
• Senior White House official said there’s no talk about military escalation against Iran at this point, and the president is focused primarily on strangling Iran economically, while the official indicated that this means Treasury Secretary Bessent is more involved in the war than Defense Secretary Hegseth at this point.
• US issued Iran-related designations and targeted Hezbollah with fresh sanctions, emphasising ties to the Iranian government. US OFAC also issued a Russia general license, while it issued counterterrorist sanctions and counternarcotic designations on Cuba.
• US administration believes Iran-Oman discussions broke down weeks ago, according to Semafor citing an official source.
• Iran’s Foreign Ministry said new US sanctions target innocent Iranian citizens and amount to economic terrorism.
• Iran's Foreign Minister Araghchi said insisting on failed policies will only lead to more failures and to hostility from Iranians.
• Iranian Supreme Leader adviser Rezaei said, "The best response to Trump's escalation of economic warfare is to withdraw from the NPT [Nuclear Non-Proliferation Treaty]."
• Iranian senior lawmaker Azizi warned foreign forces to leave the region "before it's too late".
• Qatar said its efforts are currently focused on mediating between the US and Iran.
• UKMTO said it received a report of an incident 136NM east of Mukalla, Yemen.
• Yemeni sources report that Houthis are preparing to enter a new phase of escalation against Saudi Arabia, according to Tasnim. It was later reported that Yemen’s Houthis said they attacked “sensitive” Saudi targets at Najran Airport and Aramco facilities in Najran, although there has been no immediate confirmation from Saudi Arabia and no date was mentioned, according to Telegram.

US TRADE

• US stocks were lower on Thursday, with the Russell and Dow underperforming; the latter was weighed by Walmart (WMT), which slumped following its earnings report and weak guidance. Indices closed lower across the board with negative breadth, as the equal-weight S&P 500 (RSP) fell around 0.7%. Sectors were also predominantly lower, with Health Care, Consumer Staples and Consumer Discretionary lagging. Health Care gave back some of Wednesday's MRNA/MRK-induced gains, while Staples were weighed on by WMT. Energy and Real Estate were the only sectors to close in the green. Crude prices were firmer amid reports that the Houthis are preparing to enter a new phase of escalation against Saudi Arabia. Meanwhile, Iranian Supreme Leader adviser Rezaei said the best response to Trump's escalation of economic warfare would be to withdraw from the Nuclear Non-Proliferation Treaty, which legally commits Iran to maintaining a peaceful nuclear programme. US President Trump also reportedly told his team that the chances of reaching a deal with Iran are slim and ordered a freeze on talks for several weeks.
• SPX -0.87% at 7,641, NDX -0.72% at 29,213, DJI -1.32% at 52,764, RUT -1.34% at 2,992.
• Click here for a detailed summary.

TARIFFS/TRADE

• China's MOFCOM urged the US to withdraw Section 232-related tariffs.
• China and Switzerland agreed a free-trade agreement, removing tariffs.
• China is restricting or delaying exports to Taiwan of key materials used in optics and semiconductor manufacturing, with germanium- and quartz-based materials, as well as some magnets affected, according to sources.
• Canadian PM Carney spoke with Mexican President Sheinbaum, while both sides discussed the importance of renewing the USMCA as soon as possible.
• Canadian Minister responsible for US trade said both sides are continuing to hold talks on a possible deal, while he added they are very close to a deal and continue to make progress.

NOTABLE HEADLINES

• Fed's Daly (2027 voter) said a rise in long-term bond yields is a global issue, which reduces its usefulness as a signal for the Fed, while she made the case that the short end is reacting to the data, and yields show the market understands the Fed's reaction function. Daly said the modal outlook expects inflation pressures to fade, but she noted there could be further shocks in the future that could change that situation. Furthermore, she noted policy is in a good place, she is watching markets, and reiterated that she was supportive of the July hold.
• Fed's Musalem (2028 voter) said strong growth and investment are influencing the bond market, while he noted inflation expectations are anchored and that strong growth in investment is influencing the bond market. Musalem stated the number one concern among businesses is inflation, and given current Fed rates, he sees a lower probability of getting inflation to 2%. Furthermore, he said monetary policy is neutral or accommodative right now, while financial conditions are pretty accommodative, and that hiking rates now could save more aggressive action later.
• US Treasury Secretary Bessent said, on the buyback announcement, "we are trying to signal this is a thinly traded area in the market", noting sizes could be more than USD 4bln. He also commented that the US has a big toolkit and responded, "we will see", when asked about a reversal in yields. Furthermore, he said there is nothing magic about the USD 40tln figure and that they can grow their way out of the debt burden.
• NY Governor Hochul said have no plans to raise taxes in the coming year, but plans could change if federal aid to the state is cut, according to NYT.

DATA RECAP

• US Philadelphia Fed Manufacturing Index (Aug) 47.4 vs. Exp. 25 (Prev. 41.4)
• US Philly Fed New Orders (Aug) 30.1 (Prev. 37.0)
• US Philly Fed Prices Paid (Aug) 40.90 (Prev. 53.90)
• US Initial Jobless Claims (Aug/15) 206.0K vs. Exp. 210K (Prev. 212.0K)
• US Continuing Jobless Claims (Aug/08) 1799.0K vs. Exp. 1790K (Prev. 1781.0K)

FX

• USD was slightly firmer, although it lagged the notable reversal in long-end US Treasury yields. Behind the mixed action in fixed income and FX could be reduced USD attractiveness from a yield standpoint, given the US Treasury’s apparent preference to cap the recent rise in yields, while its major peers have signalled no similar restraint. Meanwhile, US data showed continued stability in the labour market with initial claims still hovering around 200k; continuing claims rose but remained well within YTD ranges. Philly Fed beat, in what was a strong manufacturing report, helped by significantly improved expectations of future business conditions. Elsewhere, Fed speak saw Daly note that policy is in a good place to keep watching the data, whilst Musalem maintained the view that hiking rates now could save more aggressive action later and noted Super El Niño might be the next supply shock.
• EUR was ultimately flat on the day after reversing early strength and with few pertinent catalysts.
• GBP mildly strengthened and reclaimed the 1.3600 status, while attention turns to UK Retail Sales.
• JPY was amongst the laggards as higher US yields dented carry-trade prospects, with currency-specific news flow light for the havens, with the yen also not helped by the continued rise in oil prices.
• Riksbank maintained its rate at 1.75% as expected, and it assesses the probability of a rate increase later this year remains, while it noted considerable uncertainty and that developments call for vigilance.

FIXED INCOME

• T-notes settled lower and Treasury yields rose as the long end briefly pared the post-buyback rally.

COMMODITIES

• Oil prices were firmer as US/Iran relations showed no sign of improving.
• US EPA said in consultation with DOE, it expands gasoline supply to lower prices at the pump.
• Chinese state-run refiners have reportedly bought a combined 10mln barrels of Saudi crude in a tender, while it was reported that Saudi Aramco sold at least 4mln bbls of crude loading outside Hormuz to China.

GEOPOLITICAL

RUSSIA-UKRAINE

• Russia said it hit two cargo vessels in Ukraine's Chornomorsk.

OTHER

• North Korea fired an unidentified projectile suspected to be a ballistic missile towards the East Sea, while the missile landed outside of Japan's Exclusive Economic Zone.
• North Korea's Kim Yo-jong said South Korea’s description of drill reduction is “nothing but a lame excuse”.

ASIA-PAC

NOTABLE HEADLINES

• Shanghai Futures Exchange said it is to further expand the scope of commodity futures and options trading available to qualified foreign investors from September 10th.
• BoK named Kwon Min-Swoo as Senior Deputy Governor.
• South Korea’s Finance Ministry will hold a market review meeting on Friday at 08:00KST/00:00BST.

EU/UK

NOTABLE HEADLINES

• UK PM Burnham reportedly plans GBP 13bln boost to foreign aid, making tax rises more likely, according to iPaper.
• Britain's largest banks have fired a renewed warning to the government against hiking taxes on the industry as UK Chancellor Healey prepares to deliver his inaugural Budget in October, according to Sky News.

DATA RECAP

• German PPI (Jul MM) 1.1% vs. Exp. 0.7% (Prev. -0.3%)
• German PPI (Jul YY) 3.0% vs. Exp. 2.7% (Prev. 1.8%)