MNI US OPEN - Pelosi Trip to Taiwan in the Balance

NEWS

UK (MNI): Truss Odds-On Favourite As Voting Starts In Conservative Leadership Contest
Betting markets continue to show Foreign Secretary Liz Truss as the odds-on favourite to win the Conservative leadership contest and become the next UK PM. Data from Smarkets gives Truss a 90.9% implied probability of winning the contest, with former Chancellor Rishi Sunak sitting on an implied probability of just 9.1%.

US-CHINA (MNI): Singapore PM-US Should Strive For 'Stable' Relations w/China
Singaporean Foreign Ministry issues presser stating that at a meeting between Speaker of the US House of Representatives Nancy Pelosi (D-CA) and Singaporean Prime Minister Lee Hsien Loong, the latter "highlighted the importance of stable US-China relations for regional peace and security".
With the first leg of the Congressional Delegation (CODEL) trip led by Pelosi underway, it remains unclear whether the group will visit Taiwan. This would be the first visit to Taiwan by a House speaker since then-Speaker Newt Gingrich's brief visit in 1997.

US-CHINA (MNI): China has warned of a 'military response' should the visit go ahead
Liu Tin-ting at Taiwan's TVBS tweets "From my sources, Speaker Pelosi is arriving in Taipei tomorrow night." In a phone call last week, Chinese President Xi Jinping warned US President Joe Biden on any US interference in Taiwan, with the Chinese Foreign Ministry quoting Xi as saying that "Those who play with fire will perish by it...It is hoped that the U.S. will be clear-eyed about this."

RBA (MNI): Lower Inflation Print Could Limit RBA Hike
The Reserve Bank of Australia board meets this week with expectations of a fourth interest rate rise in as many months, although lower than expected inflation data last week could see the central bank stop short of a bigger 75 basis point hike.

RATINGS (MNI): Sovereign rating reviews of note from after-hours on Friday include:

• Fitch affirmed Norway at AAA; Outlook Stable
• Moody's affirmed Finland at Aa1; Outlook Stable
• DBRS Morningstar confirmed Austria at AAA, Stable Trend
• DBRS Morningstar confirmed Estonia at AA (low), Stable Trend
• DBRS Morningstar confirmed Luxembourg at AAA, Stable Trend

GLOBAL TRADE: The first ship to export Ukrainian grain since an agreement was reached for the safe transit of vessels may depart as soon as Monday, a Turkish official said. More than a week after a deal was reached that aimed at releasing millions of tons of Ukrainian grain through three Black Sea ports, no ships have sailed. (BBG)

PMI DATA

• SPAIN JUL MANUFACTURING PMI 48.7 (FCST 50.0); JUN 52.6
• ITALY JUL MANUFACTURING PMI 48.5 (FCST 49.0); JUN 50.9
• FRANCE FINAL JUL MANUF. PMI 49.5r (FLSH 49.6); JUN 51.4
• GERMANY FINAL JUL MANUF. PMI 49.3r (FLSH 49.2); JUN 52.0
• EUROZONE FINAL JUL MANUF. PMI 49.8r (FLSH 49.6); JUN 52.1
• UK JUL FINAL MANUF. PMI 52.1r (FLSH 52.2); JUN 52.8

GERMAN DATA: Retail Sales See Sharpest Fall on Record

GERMANY JUN SA RETAIL SALES -1.6% M/M, -8.8% Y/Y

• German retail trade contracted by -1.6% m/m and -8.8% y/y in June. The year-on-year plunge was again weaker than expectations and the largest recorded since the series began in 1994.
• Food sales fell by -1.6% m/m in June and by -7.2% y/y, and the +11.9% y/y food price inflation remains largely to blame.
• Following Friday's GDP data which saw the German economy stall in Q2.
• The continued effects of supply chain disruptions, concerns regarding the Ukraine war and global inflationary pressures have generated a substantial slowdown for the German economy.
• This data confirms concerns are spilling over into retail demand, with consumer confidence currently sitting at a historic low, underlining the ECB's dilemma as soaring inflation and a sharply slowing economy impinge on policymaking.

BONDS: Paring some of the Month End flow

• EGBs and Bund have unwound some of the month end bids from Friday afternoon.
• Bid in Equities may have been helping, but liquidity remains super thin, as investors await the BoE rate decision this week and ALL EYES on the NFP on Friday.
• This morning's final manufacturing PMIs for core, were revised lower and in contraction territory, besides Germany, revised 1 tenth higher.
• The standout move has been in the BTP, with future rallying throughout the early trading session.
• This looks to be a continuation from last week, after the Italian far right front runner's plans to sticking with the EU budget rules.
• BTP/Bund spread is 6bps tighter, but Greece leads today, 6.9bps tighter against the German 10yr.
• Gilt has traded inline with Europe, and Gilt/Bund spread is just 0.5bp wider.
• UK Final Manufacturing was also revised 1 tenth lower.
• US treasuries are mostly circa flat in the front end (2s, 5s and 10s), but the longer end 20s and 30s are deeper in the red.
• Looking ahead, sees US Final manufacturing PMI and ISM manufacturing and price paid.

FOREX: Greenback Starts Payrolls Week Poorly

• The greenback is softer to kick off the week, with EUR/USD extending gains on the break of the 1.0250 area - levels that the pair had struggled to top across the past two weeks. A break above 1.0278 is the next hurdle, and clearance here would mark a bullish development.
• Data this morning has been mixed, with Spanish and Italian PMIs missing expectations, but German and Eurozone-wide releases topping median expectations.
• GBP/USD is trading back above the 50-dma and at the best levels since late June. A close above this mark would be a bullish development and open the mid-June highs of 1.2406 and the 100-dma further out at 1.2518.
• Equity markets are mixed, with US futures lower, while European indices benefit from strong earnings. JPY is the firmest currency, extending the recent rally to put USD/JPY within range of the Y132.00 handle - a 5% pullback from the mid-July highs.
• July ISM Manufacturing data takes focus going forward, with markets expecting activity to slow to 52.0 from 53.0 for the headline. The employment component could take particular focus ahead of this Friday's payrolls release. There are no major central bank speeches due.

EQUITIES: European equities a little higher, but US futures lower

• Japan's NIKKEI up 191.71 pts or +0.69% at 27993.35 and the TOPIX up 19.8 pts or +1.02% at 1960.11.
• China's SHANGHAI closed up 6.72 pts or +0.21% at 3259.958 and the HANG SENG ended 9.33 pts higher or +0.05% at 20165.84.
• German Dax up 38.11 pts or +0.28% at 13518.73, FTSE 100 up 35.52 pts or +0.48% at 7457.85, CAC 40 up 23.43 pts or +0.36% at 6472.58 and Euro Stoxx 50 up 10 pts or +0.27% at 3717.2.
• Dow Jones mini down 64 pts or -0.2% at 32772, S&P 500 mini down 15.5 pts or -0.38% at 4117.75, NASDAQ mini down 56.5 pts or -0.44% at 12914.5.

COMMODITIES: Crude down 2% but European gas moving higher

• WTI Crude down $2.04 or -2.07% at $96.53
• Natural Gas (NYM) down $0.31 or -3.77% at $7.927
• Natural Gas (ICE Dutch TTF) up $9 or +4.71% at $198.5
• Gold spot up $0.28 or +0.02% at $1766.02
• Copper down $1.15 or -0.32% at $356.15
• Silver down $0.06 or -0.3% at $20.2985
• Platinum up $9.15 or +1.02% at $909.84