Notes/Observations

- Risk on moves build momentum after stocks climb following lower than consensus US July CPI, albeit elevated at 8.5% YoY. US Fed Daly dampened bullish tones by commenting that it is “too early to declare victory on inflation, CPI is still far too high.” Nasdaq officially tipped into a 'bull market' after climbing +20% off lows. Nasdaq100 teases 13,400 handle, with ATH still a way off at 16,764.

-The rotation to risk is based on assumptions of a less hawkish Fed rate hike cycle, with CME Fed Futures showing +60% chance of 50bps hike to the Target Range in Sept, a significant dovish rotation compared to before CPI release. Hopes for a shallower or even paused rate path are reinforced with recent US GDP readings technically tipping the country into a recession.

- European macro news is quiet amid a busy earnings morning as the reporting season begins to taper off. Slight promise for European gas as Turkey Energy Min said Turkey will be able to start using natural gas from a Black Sea discovery in Mar 2023.

- Summer seasonality guides the ebbs and flows of events as low Rhine river levels due to dry weather concern markets, specifically with commodities. Heatwaves across the continent created increased demand oil, as highlighted in IEA's monthly report. Issuances and speakers are quieter as summer pushes financial sector workers onto holiday.

- Asia closed mostly higher with only Nikkei225 underperforming at -0.7% EU indices are mixed. EU bond yields are higher. US futures are in the green. Safe haven: Gold -0.5%, DXY -0.3%; Commodity: Brent +0.8%, WTI +0.8%; Crypto: BTC +6.0%, ETH +11.0%.

Looking ahead, UK GDP tomorrow with heightened focus on the release as the UK struggles in general. Plethora of negative news recently as BOE warned of five consecutive quarter recession, energy price cap increase to further strain consumer pockets, heatwaves restrict household water usage and stress power grids and multiple public sector workforces strike.

Asia

- Focus continues to be on inflation data. US PPI reading on Thursday, markets have increase their bets on a less hawkish Fed next month.

- Recent Fed speak hints inflation may prove stickier despite the surprisingly low July CPI.

Asia

- Australia Aug Consumer Inflation Expectation Survey: 5.9% v 6.3% prior.

- Singapore Final Q2 GDP revised lower; Narrowed its 2022 GDP growth forecast from 3.0-5.0% range to 3.0-4.0%.

- Singapore Central Bank (MAS) Deputy MD Robinson noted that its current policy stance remained appropriate.

- China Yiwu city imposes 3-day citywide lockdown.

Europe

- BOE’s Pill (chief economist) noted that wage growth was running too fast at present time; pricing pass-through from companies was too high. Raising of rates to fight inflation will slow growth but that it is necessary to stabilize the economy over the long term.

Americas

- Fed's Daly stated that was too early to declare victory on inflation, CPI was still far too high; 50bps rate hike in Sept 'baseline'.

- Fed's Kashkari (dove, non-voter) stated that was happier to see inflation surprise to the downside; July CPI data did not change his rate hike path; Idea of rate-cutting early next year was not realistic.

- Fed's Evans (dove, non-voter) noted that did not expect we are finished with rate hike. July inflation report was better than prior months.

- House Speaker Pelosi stated that the House of Representatives would pass the Inflation Reduction Act on Friday (Aug 12th)..

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.09% at 440.28, FTSE -0.05% at 7,503.15, DAX -0.05% at 13,694.73, CAC-40 +0.06% at 6,527.47, IBEX-35 +0.21% at 8,370.25, FTSE MIB +0.44% at 22,802.00, SMI +0.21% at 11,178.32, S&P 500 Futures +0.18%].

Market Focal Points/Key Themes: European indices open generally higher (FTSE 100 notable exception) but faded some of the gains as the session wore on; sectors leading to the upside include consumer discretionary and financials; lagging sectors include real estate and materials; Entain acquires SuperSport; Hill & Smith sells its Galva unit; earnings expected during the upcoming US session include Brookfield, ResMed, Patrizia and Cardinal Health.

Equities

- Consumer discretionary: Entain [ENT.UK] +3.5% (earnings; acquisition).

- Energy: Drax Group [DRX.UK] -5% (UK Business Sec comments).

- Industrials: Siemens [SIE.DE] -1.5% (earnings), ThyssenKrupp [TKA.DE] -1% (earnings), Antofagasta [ANTO.UK] -2% (earnings).

- Utilities: RWE [RWE.DE] -0.5% (earnings).

- Telecom: Deutsche Telekom [DTE.DE] +0.5% (earnings; raises outlook).

Speakers

- German Chancellor Scholz Summer news conference: noted that Germany to continue to support Ukraine with Military aid. Russia's invasion was gravest challenge for Europe.

- Norway Central Bank (Norges) Q2 household lending survey noted that banks reported somewhat higher lending rates and funding costs for both residential mortgage loans and corporate loans.

- Taiwan President Tsai noted that the threat of Chinese military force had not decreased; would firmly defend our sovereignty and national security.

- IEA Monthly Oil Report (OMR) raised its 2022 global oil demand growth from 1.73M bpd to 2.1M bpd while maintaining the 2023 global oil demand growth at 2.1M bpd. Report noted that European heatwaves seen boosting demand for oil; Decline in Russian oil supply was less than previously expected.

Currencies/Fixed income

- Focus continued to be on inflation data with US PPI reading on Thursday. Dealers noted that markets had increase their bets on a less hawkish Fed next month after CPI raised hopes that price rises had reached their zenith. USD price action was softer in quiet trading. Recent Fed speak hinted that inflation might prove stickier despite the surprisingly low July CPI. More inflation data to be released on Thursday with PPI.

- EUR/USD holding above 1.0325 in the session as US CPI data took out much of the fear that the market had of a 75bps Fed hike or even inter-meeting move.

- GBP/USD at 1.2225 ahead of Friday’s release of UK GDP data. BOE chief economist Pill reiterated stance that raising interest rates to fight inflation would slow growth.

Economic data

- (SE) Sweden July PES Unemployment Rate: 3.2% v 3.1% prior.

- (RO) Romania July CPI M/M: 0.9% v 0.4%e; Y/Y: 15.0% v 14.6%e (15th month above target range).

- (TR) Turkey Jun Current Account Balance: -$3.5B v -$3.4Be.

- (HU) Hungary Central Bank left the One Week Deposit Rate unchanged at 10.75% (as expected).

- (IS) Iceland Q2 Unemployment Rate: 4.3% v 4.1% prior.

Fixed income issuance

- None seen.

Looking ahead

- OPEC Monthly Oil Report.

- (DE) Germany Jun Current Account Balance: No est v €2.5B prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa Jun Total Mining Production M/M: 0.4%e v 0.7% prior; Y/Y: -5.0%e v -7.8% prior; Gold Production Y/Y: No est v -38.3% prior; Platinum Production Y/Y: No est v 3.3% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell bonds.

- 05:30 (ZA) South Africa announces details of next bond auction (held on Tuesdays).

- 06:00 (IE) Ireland July CPI M/M: No est v 1.3% prior; Y/Y: No est v 9.1% prior.

- 06:00 (IE) Ireland July CPI EU Harmonized M/M: No est v 1.3% prior; Y/Y: No est v 9.6% prior.

- 06:00 (IL) Israel July Consumer Confidence: No est v 71 prior.

- 06:00 (IL) Israel July Trade Balance: No est v -$3.8B prior.

- 07:00 (MX) Mexico Jun Industrial Production M/M: -0.1%e v +0.1% prior; Y/Y: 3.9%e v 3.3% prior; Manufacturing Production Y/Y: 5.0%e v 6.1% prior.

- 07:00 (ZA) South Africa Jun Manufacturing Production M/M: -0.6%e v -0.2% prior; Y/Y: -3.0%e v -2.3% prior.

- 08:00 (BR) Brazil Jun IBGE Services Volume M/M: 0.4%e v 0.9% prior; Y/Y: 6.2%e v 9.2% prior.

- 08:00 (BR) Brazil CONAB Crop Report.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:30 (US) July PPI Final Demand M/M: 0.2%e v 1.1% prior; Y/Y: 10.4%e v 11.3% prior.

- 08:30 (US) July PPI (ex-food/energy) M/M: 0.4%e v 0.4% prior; Y/Y: 7.7%e v 8.2% prior.

- 08:30 (US) July PPI (ex-food/energy/trade) M/M: 0.4%e v 0.3% prior; Y/Y: 5.9%e v 6.4% prior.

- 08:30 (US) Initial Jobless Claims: 264Ke v 260K prior; Continuing Claims: 1.42Me v 1.416M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 5th: No est v $571.2B prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 13:00 (US) Treasury to sell 30-Year Bonds.

- 14:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to raise Overnight Rate by 75bps to 8.50%.

- 15:00 (AR) Argentina July National CPI M/M: 7.2%e v 5.3% prior; Y/Y: 70.7%e v 64.0% prior.

- 17:00 (KR) South Korea July Export Price Index Y/Y: No est v 23.7% prior; Import Price Index Y/Y: No est v 33.6% prior; Export Price M/M: No est v 1.1% prior; Import Price M/M: No est v 0.5% prior.

- 18:30 (NZ) New Zealand July Manufacturing PMI: No est v 49.7 prior.

- 18:45 (NZ) New Zealand July Food Prices M/M: No est v 1.2% prior.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to raise Reference Rate by 50bps to 6.50%.

- 22:35 (CN) China to sell 10Y Bond.

- 22:35 (CN) China to sell 3-month Bills.

- 23:30 (JP) Japan to sell 3-Month Bills.

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