- US Treasury Secretary Bessent said they will implement unprecedented measures on Iran and are conducting a maximum pressure campaign against Iran.
- UKMTO said a tanker was struck by a drone while transiting outbound through the Strait of Hormuz. This comes following comments by UAE's ADNOC saying two of its vessels were attacked on Thursday.
- US equity futures are muted amid light volume in the summer period.
- DXY weakens despite firmer energy prices (Brent +0.9%).
- Fixed income benchmarks continue to fall; Gilts are unreactive as Farage wins the Clacton by-election.
- Looking ahead, highlights include US Retail Sales (Jul), University of Michigan Prelim. (Aug), Atlanta Fed GDP (Q3), Fitch Credit Rating update on the UK.
As of 10:10BST / 05:10EDT
EUROPEAN TRADEEQUITIES
- European bourses are broadly softer across the board, outside of the DAX 40 given the gains in SAP (see more below). Over in Asia, memory chip names (Kioxia +3.8%, SK Hynix +3.3%) climbed in Asia-Pac trade after Sandisk gave a positive outlook at its investor day. Sandisk said it expects revenue growth in the mid-to-high teens between 2028-30 and also plans to return 100% of excess cash to shareholders.
- Sectors are mixed. Tech is the sector outperformer, followed by Media and Insurance. To the downside is Utilities, while Basic Resources and Health Care also underperform.
- US equity futures are essentially flat across the board. Focus was on Applied Materials earnings after-hours. Shares are falling pre-market by over 5% as lofty investor expectations overshadowed solid quarterly results, an above-consensus outlook, and continued strength in AI-related semiconductor equipment demand.
- Click for the sessions European pre-market equity newsflow
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FX
- DXY gradually weakened throughout the morning to a 99.70 base, despite higher energy prices (Brent +1.5%), which are typically constructive for the USD. Weakness in the Buck likely comes as participants digest the July series of data, which contained dovish components. CPI/PPI were in-line and soft, respectively, while the payrolls figure will likely give food for Fed doves. Today, USD is set to digest US Retail Sales and the UoM survey.
- USD/JPY -0.2% and continues choppy action, this time after another BoJ source said the Bank was set to raise interest rates as soon as September; this saw the pair slip 17 pips to a 159.15 base, a level which is being tested at the time of writing. Currently, markets assign a c. 80% probability of such action in September. More pertinently, Bloomberg sources on Thursday said the Takaichi government is said to support faster BoJ rate hikes. The piece also said the bank could raise rates in either September or October; the timing of the latest source potentially the reason why this JPY strength has stuck.
- Kiwi is rebounding vs the USD after losses following Thursday's soft inflation expectations survey; action which has entirely faded with the pair ~0.2% higher than pre-data. NZD/USD +0.4%, once again above all significant DMAs.
- NOK is the G10 outperformer, strength which is likely a function of oil prices despite the Norges Bank hold on Thursday raising questions over the removal of the tightening bias from the statement in September. Brent Oct’26 is firmer by 1.5%, after rising throughout the EU morning without a clear catalyst. NOK/SEK sees continues support above 1.00, while USD/NOK broke out of recent ranges
FIXED INCOME
- USTs continue to fall further from Thursday's peak of 109-03+, after failing to hold above the current range highs of 109-01. The 30-year auction was soft, showing a 0.4bp tail, below-average bid-to-cover and above-average dealer allocation, all pointing to weaker demand despite the considerably higher outright yield on offer. Following the auction, analysts at TD Securities said this is problematic for the Treasury as it must fund the government at more expensive levels. Looking ahead, US Retail sales is on the docket.
- Gilts opened lower and trades at the lower end of its 86.90-87.26 range, given the steady climb in energy prices. On the political front, Reform leader Farage won the Clacton by-election as expected. Following the count, More in Common's Tryl told Politico that despite that impressive raw vote total by Farage, the vote share was at the lower end of expectations, which shows that his opponents are highly motivated to turn out. Focus now turns to the outcome of the Parliamentary investigation into Farage over recent donations.
- Bunds continue to trade counter to energy prices, currently trading at the bottom end of its 124.72-125.01 range. A light docket ahead in Europe, given the summer period.
- Australia sells AUD 1bln November 2032 bonds, b/c 3.75, avg. yield 4.6868%.
COMMODITIES
- Crude futures have been grinding higher throughout the European morning despite the lack of a clear driver. Overnight, US Treasury Secretary Bessent said they will implement unprecedented measures on Iran and are conducting a maximum pressure campaign against Iran. Meanwhile, this morning, Iranian Foreign Ministry spokesman Baghaei said a possible agreement with Oman on a new shipping route through the Strait of Hormuz will not, by itself, mean the strategic waterway will reopen. Furthermore, UKMTO says a tanker was struck by a drone while transiting outbound through the Strait of Hormuz, possibly following comments by ADNOC stating that two of its vessels attacked while transiting the Strait of Hormuz on Thursday.
- There have also been a couple of headlines regarding Russia/Ukraine/NATO: NATO HQ confirmed allied jets were scrambled after a drone entered Latvian airspace. Russia's Foreign Minister Lavrov said an immediate ceasefire in Ukraine is not possible.
- WTI Sept and Brent Oct futures have been edging higher since European players entered the market. Brent trades towards the top end of a USD 86.20-88.60/bbl range at the time of writing whilst WTI sits towards the upper end of a USD 80.71-82.99/bbl range. Dutch TTF is firmer by almost 2% intraday and north of EUR 61.50/MWh.
- Metals are flat/mixed amid a lack of drivers and in what is seemingly a summer lull. Spot gold resides towards the middle of a USD 4,322-4,363/oz range after dipping under yesterday’s 4,343/oz low. Spot silver ekes mild gains and resides towards the top end of a USD 63.51-64.73/oz range after briefly falling under yesterday’s USD 64.22/oz low. 3M LME copper remains above USD 14k/t in a USD 14,045.20- 14,125.28/t range.
- US VP Vance said goal one is to keep oil and gasoline affordable for the US.
- China's State Planner said domestic gasoline and diesel retail price caps will be cut by CNY 230/T and CNY 220/T, respectively; effective on August 14.
- Ukrainian official said if a ceasefire is implemented in the Black Sea region, Ukraine could restore grain exports through its seaports within one month.
TRADE/TARIFFS
- US President Trump signed a proclamation imposing tariffs on drones and components, which imposes 100% tariffs on certain-sized drones and a 25% tariff on smaller-sized drones. 10% tariffs will be imposed on drones from the UK and 15% tariffs on drones from the EU, Japan, Liechtenstein, South Korea, Switzerland and Taiwan. Tariffs will take effect 21 days after signing, while for components of drones that are not particularly sensitive, the tariffs will take effect 180 days after signing.
- Australian PM Albanese said he spoke with US President Trump and reviewed advancements under the AUKUS defence agreement, while he added that the AUKUS initiative continues full steam ahead. Albanese said he raised the issue of tariffs with Trump and urged him to consider full exemption, while he added that Trump would consider Australia's request.
- Brazil began analysing the reciprocity process on US tariffs, while it was notifying the US about the process and requesting that diplomatic consultations be held.
NOTABLE EUROPEAN HEADLINES
- Reform UK leader Farage won the Clacton by-election with 22,293 votes.
NOTABLE EUROPEAN DATA RECAP
- Swiss GDP Growth Rate Flash (Q2) Q/Q 1.5% vs. Exp. 0.3% (Prev. 0.4%).
- European GDP Growth Rate 2nd Est (Q2 QQ) 0.4% vs. Exp. 0.4% (Prev. 0.0%).
- European GDP Growth Rate 2nd Est (Q2 YY) 1.0% vs. Exp. 1% (Prev. 0.5%).
- European Employment Change Prel (Q2 QQ) 0.1% vs. Exp. 0.1% (Prev. 0.1%).
- European Employment Change Prel (Q2 YY) 0.5% vs. Exp. 0.6% (Prev. 0.5%).
- French HICP Final (Jul YY) 2.4% vs. Exp. 2.4% (Prev. 2.0%).
- French HICP Final (Jul MM) 0.6% vs. Exp. 0.6% (Prev. -0.3%).
- German Wholesale Prices (Jul MM) 0.2% vs. Exp. 0.4% (Prev. -0.7%).
- German Wholesale Prices (Jul YY) 5.3% (Prev. 4.9%).
CENTRAL BANKS
- Fed's Goolsbee (2027 voter) said they have been getting a little bit better readings on inflation, which he hopes will continue and noted that a lot of inflation drivers were from tariffs, oil and things they hope to be one-time increases. Furthermore, he stated that if they can get some of that into the rearview mirror, they can get inflation heading back to 2%, and that the US economy is steady.
- The BoJ is reportedly set to raise interest rates as soon as September and also considering accelerating subsequent hikes, according to reports.
- RBA's Harper will depart from the monetary policy board, and Melinda Cilento has been named as a part-time member of the RBA board.
NOTABLE US HEADLINES
- Fitch affirmed the US at AA+, outlook stable, while it stated that the US rating is supported by a large economy, high per capita income, dynamic business environment and exceptional financing flexibility. However, it also commented that labour demand has weakened and job creation has dropped significantly in 2026, while it expects inflation to move towards the target by year-end 2028.
- US White House deputy national security adviser Andy Baker will leave the administration in coming weeks, Axios reported.
GEOPOLITICS
MIDDLE EAST
- US VP Vance said the US has a lot of tools at its disposal for Iran.
- US Treasury Secretary Bessent said they will implement unprecedented measures on Iran and are conducting a maximum pressure campaign against Iran, targeting its bank accounts and digital currencies worldwide, while the pressure campaign caused the collapse of the Iranian banking sector. Bessent added that measures against Iran will be a combination of economic isolation and blockade in the Strait of Hormuz, and he expects more announcements on Iran next week. Furthermore, he said they will take actions unprecedented in the history of economic isolation of a country and will prevent anything from entering or leaving Iranian ports.
- Iranian Foreign Ministry spokesman Baghaei said a possible agreement with Oman on a new shipping route through the Strait of Hormuz will not, by itself, mean the strategic waterway will reopen, Press TV reported.
- UAE's ADNOC said two of its vessels attacked while transiting the Strait of Hormuz on Thursday. Following this, UKMTO said a tanker was struck by a drone while transiting outbound through the Strait of Hormuz.
- US CENTCOM commander and Saudi Crown Prince MBS discuss mutual defence cooperation and efforts to de-escalate regional tensions, according to Saudi State News Agency.
- US President Trump's son-in-law Jared Kushner is to visit Israel next week for consultations on the situation in Gaza, according to Axios
- Airstrikes hit separatist militant group in Erbil, Iraq, according to Tehran Times.
RUSSIA-UKRAINE
- Russia's Foreign Minister Lavrov said an immediate ceasefire in Ukraine is not possible, IFX reported.
- Drones hit area around Russian Baltic seaport of Ust-Luga, according to the regional governor.
- Latvia issued an air threat alert in areas bordering Russia and Belarus, while NATO fighter jets shot down a drone over northeastern Latvia. It was also reported that Finland restricted aviation and maritime traffic in eastern Gulf of Finland.
OTHER
- North Korea condemned US-South Korean military drills and said the military exercises are more provocative than last year, while it added that US-Japan-South Korea military cooperation is turning into a nuclear alliance. Furthermore, North Korea vowed to respond to a new level of threat with a new level of deterrent and will continue to expand nuclear deterrence, according to KCNA.
- Japanese Regional Coast Guard said four Chinese ships intruded into Japanese territorial waters, Kyodo reported.
CRYPTO
- Bitcoin has resumed this week's selloff and has returned below the USD 63k mark.
APAC TRADE
- APAC stocks traded mixed as the region only partially sustained the positive handover from Wall Street, where the S&P 500 hit a fresh record high, and the Nasdaq outperformed on tech strength, as softer PPI data further added to the case for the Fed to refrain from hiking rates in September. Nonetheless, the positive momentum began to wane overnight with little fresh major catalysts and after US President Trump signed a proclamation imposing tariffs on drones and components.
- ASX 200 was pressured as the strength in tech was overshadowed by losses in the heavy industries, including miners, materials, resources and industrials, while participants also digested earnings releases.
- Nikkei 225 gained and briefly reclaimed the 69,000 level before paring some of the advances, while participants continue to second-guess whether the BoJ will speed up the pace of rate increases.
- KOSPI outperformed on tech momentum, but is off earlier highs with resistance at the 7,000 level.
- Hang Seng and Shanghai Comp were subdued amid a slew of earnings releases including from SMIC and JD.com, with the latter pressured despite beating on the top and bottom lines, while sentiment was also not helped by trade-related frictions with the US to impose tariffs of up to 100% on drones, which seems to be aimed at China and DJI, which holds around an 80% share of the global drone market.
NOTABLE ASIA-PAC HEADLINES
- PBoC keeps 7-day reverse repo operation volume at zero, while it injects CNY 349bln via overnight reverse repos.
- Taiwan raises 2026 GDP forecast to +11.05% (prev. +9.64%).
- Hong Kong revises 2026 GDP forecast to 3.5-4.5% (prev. 2.5-3.5%).
NOTABLE APAC DATA RECAP
- Chinese New Yuan Loans (Jul) -340.0 vs. Exp. 45 (Prev. 1610.0).
- Chinese Total Social Financing (Jul) 1410.0 vs. Exp. 1200 (Prev. 3360.0).
- Chinese M2 Money Supply (Jul YY) 7.7% vs. Exp. 7.9% (Prev. 8.0%).
- Hong Kong GDP Growth Rate Final (Q2 YY) 4.3% vs. Exp. 4.3% (Prev. 4.3%).
- Hong Kong GDP Growth Rate Final (Q2 QQ) -0.6% vs. Exp. -0.6% (Prev. -0.6%).
- South Korean Export Prices (Jul YY) 49.1% (Prev. 48.7%).
- South Korean Import Prices (Jul YY) 18.7% (Prev. 20.9%).
