Lack of major US/Japan catalysts allows markets a chance to calm

Notes/observations

- Asia trade was mixed as calmness prevails following extreme volatility in last week, seasonality factors at play for Aug. Analyst reports that only 75% of global carry trade has been unwound, suggesting further volatility and downside momentum is ahead.

- JPMorgan analysts say spot component of the global carry basket suggests 75% of global carry trade has now been unwound; Meanwhile, UBS estimated the cumulative US dollar-yen carry trade size at ~$500B with ~$200B of those positions had been ditched over the past few weeks.

- Weekly jobless claims receiving extra attention with US recession fears one of the main market drivers; Two recruitment firms during last 12 hours provided cautions outlook for jobs market in Q3.

- ZipRecruiter and PageGroup, noting softening in activity levels during last weeks.

- Siemens trimmed outlook for its Industrial unit, joining weak Rockwell Automation outlook yesterday, which is increasing investors' concerns about one of the strongest sectors of Q2 earnings season.

- Upcoming earnings before open: Lilly, Vistra, Plug, Cheniere, Novavax, Cronos, CyberArk, Himax.

- Notable earnings after close: SoundHound, Unity, Paramount, Ginkgo Bioworks, B2Gold, RocketLab.

- Asia closed mixed with Nikkei225 underperforming -0.8%. EU indices are -0.4% to -1.5%. US futures are -0.1% to +0.1%. Gold +0.7%, DXY -0.2%; Commodity: Brent -0.2%, WTI -0.1%; Crypto: BTC -0.3%, ETH -3.9%.

Asia

- India Central Bank (RBI) left the Repurchase Rate unchanged at 6.50% (as expected) for its 9th straight pause in the current tightening cycle, Decision to keep policy steady was not unanimous (4-2) with dissenters seeking a 25bps cut. To stay focused on withdrawal of accommodation; policy must be disinflationary.

- BOJ Summary of Opinions for July noted that given the current environment surrounding prices, it might be time to consider raising the policy interest rate slightly. Level of the neutral rate seems to be at least around 1.00%. Should raise the policy interest rate to the level of the neutral interest rate toward H2 2025 Assuming that the price stability target will be achieved.

- Japan Jun Current Account Balance: ¥1.534T v ¥1.865Te.

- Japan July Bank Lending Y/Y: 3.2% v 3.2% prior.

- RBA Gov Bullock reiterated stance that would not hesitate" to raise rates if needed.

- New Zealand Q3 RBNZ Business Inflation Expectations Survey (2-year): 2.0% v 2.3% prior.

- Japan Fin Min Suzuki: No comment on BOJ Uchida view on rates [from Wed]; closely watching market developments. Closely watching volatile stock moves, but not in phase of making actual action. Reiterated govt stance that monetary policy specifics were up to the BOJ to decide.

Europe

- UK July RICS House Price Balance: -19% v -11%e.

Americas

- Bank of Canada (BoC) Summary of Deliberations Agreed more cuts likely if inflation eases further but not on a predetermined rate path.

- US Jun Consumer Credit: $8.9B v $10.0Be.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 -0.85% at 491.76, FTSE -0.89% at 8,094.01, DAX -0.47% at 17,526.95, CAC-40 -0.95% at 7,197.31, IBEX-35 -0.81% at 10,513.10, FTSE MIB -1.04% at 31,500.00, SMI -1.40% at 11,677.60, S&P 500 Futures -0.07%].

Market focal points/key themes: European indices open generally lower and trended into the red through the early part of the session; among better performing sectors are financials and telecom; sectors leading the way lower include technology and consumer discretionary; on corporate front, shares of Siemens trade slightly lower after company trimmed outlook on Industrial unit and provided negative color on China markets; shares of Rheinmetall trade higher after results; UK CMA raises competition concerns over Barratt’s acquisition of Redrow, providing opportunity to resolve; Entain trades sharply higher in London after earnings; earnings expected in the upcoming US session include Eli Lilly, Gilead, Parker-Hannifin and Datadog.

Equities

- Consumer discretionary: Entain [ENT.UK] +9.5% (earnings), PageGroup [PAGE.UK] -2.5% (earnings; notes softening in activity levels towards the end of H1, particularly in terms of new jobs registered and number of interviews undertaken), Kongsberg Automotive [KOA.NO] -10.0% (earnings; notes US election uncertainty in its markets), Deliveroo [ROO.UK] +8.5% (earnings).

- Materials: CRH plc [CRH.UK] +3.5% (earnings) - Real Estate: Persimmon [PSN.UK] +2.0% (earnings).

- Industrials: Siemens [SIE.DE] -1.0% (earnings; comments on China), Rheinmetall [RHM.DE] +1.0% (earnings) - Technology: ASML [ASML.NL] -2.5% (Tokyo Electron earnings; Xiaomi-backed AI chip maker Black Sesame declines by >30% in debut Hong Kong IPO) - Telecom: Deutsche Telekom [DTE.DE] +1.5% (earnings).

Speakers

- Turkey Central Bank (CBRT) Gov Karahan Quarterly Inflation Report press conference noted it was maintaining a determined stance on monetary policy to ensure continuation of disinflation.

- Turkey Central Bank (CBRT) Quarterly Inflation Report (QIR) maintained end-2024 inflation at 38.0% and maintained end-2025 inflation at 14.0%.

- Japan's southern region of Hyuga-Nada and Miyazaki hit by 7.1 magnitude earthquake with tsunami advisory issued (1 metre wave).

Currencies/fixed income

- USD saw some retracement following a 2-day rally. Focus to be on the weekly claims data after last week’s disappointing payroll report.

- EUR/USD continued to consolidate between the 1.09-1.10 area.

- USD/JPY was back below the 146 level as BOJ Opinion note suggested it might be time to consider raising the policy interest rate slightly. Level of the neutral rate seemed to be at least around 1.00% (**Note: current level is 0.25%).

Economic data

- (NO) Norway Q2 Average Monthly Earnings Y/Y: 5.4% v 6.1% prior.

- (HU) Hungary July CPI M/M: 0.7% v 0.5%e; Y/Y: 4.1% v 4.0%e (annual pace moves above target range for 1st time in 7 months).

- (CZ) Czech July Unemployment Rate: 3.8% v 3.8%e.

- (TW) Taiwan July Trade Balance: $4.8B v $6.9Be; Exports Y/Y: 3.1% v 4.4%e; Imports Y/Y: 16.2% v 9.7%e.

- (IS) Iceland July Preliminary Trade Balance (ISK): -33.9B v -39.2B prior.

- (HU) Hungary July YTD Budget Balance: -2.443T v -2.656T prior.

Fixed income issuance

- None seen.

Looking ahead

- (RO) Romania Central Bank (NBR) Quarterly Inflation Report.

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

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 06:00 (IE) Ireland July CPI M/M: No est v 0.4% prior; Y/Y: No est v 2.2% prior.

- 06:00 (IE) Ireland July CPI EU Harmonized M/M: No est v 0.3% prior; Y/Y (final): No est v 1.5% prelim.

- 06:00 (RO) Romania to sell RON500M in 7.1% July 2034 bonds.

- 07:00 (ZA) South Africa Jun Manufacturing Production M/M: +1.3%e v -3.2% prior; Y/Y: -0.9%e v -0.6% prior.

- 08:00 (MX) Mexico July CPI M/M: 1.0%e v 0.4% prior; Y/Y: 5.5%e v 5.0% prior.

- 08:00 (MX) Mexico July CPI Core M/M: 0.3%e v 0.2% prior; Y/Y: 4.0%e v 4.1% prior.

- 08:00 (CL) Chile July CPI M/M: +0.6%e v -0.1% prior; Y/Y: 4.4%e v 4.2% prior.

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

- 08:30 (US) Initial Jobless Claims: 240Ke v 249K prior; Continuing Claims: 1.87Me v 1.877M prior.

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

- 09:00 (RU) Russia Gold and Forex Reserve w/e Aug 2nd: No est v $606.7B prior.

- 10:00 (US) Jun Final Wholesale Inventories M/M: 0.2%e v 0.2% prelim; Wholesale Trade Sales M/M: 0.3%e v 0.4% prior.

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

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

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

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 25bps to 10.75%.

- 15:00 (AR) Argentina Jun Industrial Production Y/Y: No est v -14.8% prior; Construction Activity Y/Y: No est v -32.6% prior.

- 15:00 (US) Fed’s Barkin.

- 19:00 (PE) Peru Central Bank (BCRP) Interest Rate Decision: Expected to leave Reference Rate unchanged at 5.75%.

- 19:00 (CO) Colombia July CPI M/M: 0.3%e v 0.3% prior; Y/Y: 7.0%e v 7.2% prior.

- 19:00 (CO) Colombia July CPI Core M/M: 0.3%e v 0.3% prior; Y/Y: 7.4%e v 7.6% prior.

- 19:50 (JP) Japan July M3 Money Supply Y/Y: No est v 1.0% prior; M2 Money Supply Y/Y: No est v 1.5% prior.

- 21:30 (CN) China July CPI Y/Y: 0.3%e v 0.2% prior; PPI Y/Y: -0.9%e v -0.8% prior.

- 22:30 (KR) South Korea to sell KRW100B in 10-Year Inflation-Linked Bonds.

- 22:35 (CN China to sell 50-year Bonds (Special).

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