Europe primed for a firm after strong US lead; NZD rebounds, USD weaker - Newsquawk EU Market Open

• US Treasury Secretary Bessent said they will implement unprecedented measures on Iran and are conducting a maximum pressure campaign against Iran.
• Crude futures struggled for direction following the prior day's choppy performance amid light headline newsflow and a lack of major geopolitical developments.
• 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.
• DXY marginally softened overnight; 10yr UST futures took a breather after recent bull steepening on softer-than-expected PPI data.
• European equity futures indicate a mildly positive cash market open with Euro Stoxx 50 futures up 0.3%.
• Looking ahead, highlights include German Wholesale Prices (Jul), French Inflation Final (Jul), EU GDP 2nd Estimate (Q2), Trade Balance (Jun), US Retail Sales (Jul), University of Michigan Prelim. (Aug), Atlanta Fed GDP (Q3), Fitch Credit Rating update on the UK.

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LOOKING AHEAD

• Highlights include German Wholesale Prices (Jul), French Inflation Final (Jul), EU GDP 2nd Estimate (Q2), Trade Balance (Jun), US Retail Sales (Jul), University of Michigan Prelim. (Aug), Atlanta Fed GDP (Q3), Fitch Credit Rating update on the UK.
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IRAN CONFLICT

• US VP Vance said the US has a lot of tools at its disposal for Iran and goal is to keep oil and gasoline affordable for the US.
• 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.
• US military has lost roughly 25% of its Reaper drones as the Iran war depletes the arsenal, according to The Washington Post. However, it was separately reported that CENTCOM announced efforts to establish the first-ever multi-domain, multinational attack drone task force.
• US President Trump's son-in-law Jared Kushner is to visit Israel next week for consultations on the situation in Gaza, while Kushner is also expected to travel to Cairo next week for talks with Egyptian, Qatari and Turkish mediators, according to a source familiar cited by Axios's Ravid
• Israeli helicopter dropped explosives at an area of the community in the Al-Mansouri district of Tyre in southern Lebanon, according to Al Mayadeen.
• Lebanon's Information Minister said Lebanon remains committed to negotiations with Israel.
• Britain, Italy, Switzerland and Indonesia have been shortlisted to potentially verify Hezbollah's disarmament in southern Lebanon, according to sources.
• US CENTCOM commander and Saudi Crown Prince MBS discussed mutual defence cooperation and efforts to de-escalate regional tensions, according to Saudi State News Agency.
• UAE's ADNOC said two of its vessels were attacked while transiting the Strait of Hormuz on Thursday.
• Yemen government forces were repelling a Houthi attack on the Al-Barah front, east of Mocha.

US TRADE

EQUITIES

• US stocks gained with all major indices in the green and outperformance seen in tech, while the S&P 500 printed a fresh all-time high, as a cooler-than-expected US PPI added to the case for a hold at the next FOMC confab, with money markets pricing a roughly 60% chance for the FOMC to refrain from lifting rates. Nonetheless, it was a very quiet day of newsflow, with not too many market-moving headlines. Sectors were generally higher, led by Communications, Real Estate, and Technology, with Software (IGV) underpinned in response to reports that Silver Lake is in talks to buy Workday (WDAY), while Dell (DELL) and HP (HPQ) were firmer after China’s Lenovo beat Q1 revenue estimates.
• SPX +0.65% at 7,799, NDX +1.15% at 30,084, DJI +0.13% at 53,845, RUT +0.24% at 3,053.
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TARIFFS/TRADE

• US President Trump posted “BIG WIN today at the U.S. Court of International Trade on one of the most DESPICABLE loopholes in American Trade Policy — The so-called “de minimis” exemption”.
• 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, while it imposes 10% tariffs 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 HEADLINES

• 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.
• NY Fed said the desk plans to conduct approximately USD 17bln in reinvestment purchases, while there are no reserve management purchases between August 14th and September 14th.
• White House said President Trump signed a national security presidential memorandum to fix critical long-term issues in Navy shipbuilding and ship repair programs, while the Trump memo directs the Pentagon to pursue more direct investments in the American shipbuilding industrial base based on the Finland model. Furthermore, it directs the Defence Secretary to replace advanced electromagnetic aircraft launch systems and advanced weapons elevators with traditional steam and hydraulic systems during construction of CVN 81.
• 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.

APAC TRADE

EQUITIES

• 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.
• US equity futures were range-bound following the prior day's advances.
• European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.3% after the cash market closed with gains of 0.2% on Thursday.

FX

• DXY marginally softened overnight but ultimately held up against its major peers yesterday despite a decline in 2yr yields as the softer-than-expected PPI data spurred further bets for the Fed to remain on hold in September. There were also several comments from Fed speakers, but they did little to shift the dial as Hammack reiterated calls for rate hikes and Barkin remained uncertain on the future path of policy, while Goolsbee stated they have been getting a little bit better readings on inflation, which he hopes will continue.
• EUR/USD eked slight gains but was confined within tight parameters amid quiet macro drivers and with participants awaiting looming data including the latest EU Employment and GDP figures.
• GBP/USD kept afloat, albeit with upside limited after the recent choppy performance and failure to sustain the 1.3500 status despite the recent stronger-than-expected UK GDP data.
• USD/JPY was rangebound in the absence of any tier-1 data releases and following the recent bounce off support around the 159.00 level, while there were some comments from Japan's former top FX diplomat Furusawa, who said the BoJ likely wants to eventually raise rates to around 1.50%-1.75%, and that US-Japan coordinated action in the FX market could occur again if the yen returns to pre-intervention levels.
• Antipodeans marginally edged higher with outperformance in NZD/USD after it continued its rebound from the lows seen following yesterday's softer inflation expectations.
• PBoC set USD/CNY mid-point at 6.7878 vs exp. 6.7413 (prev. 6.7888)

FIXED INCOME

• 10yr UST futures took a breather after recent bull steepening as softer-than-expected PPI data further supported the case for the Fed to keep rates unchanged at the September FOMC meeting.
• Bund futures held on to most of the prior day's spoils, but are off this week's best levels and have reverted to beneath the 125.00 focal point, while participants now await German WPI and EU GDP data.
• 10yr JGB futures remained afloat after recent gains in global peers but with the upside capped overnight in the absence of tier-1 data and amid an enhanced liquidity auction for longer-dated JGBs.

COMMODITIES

• Crude futures struggled for direction following the prior day's choppy performance amid light headline newsflow and a lack of major geopolitical developments.
• US Energy Secretary Wright said the US is talking and coordinating with every ship and knows how many ships transit in and out of Hormuz daily, according to a Fox News interview. Wright said 8mln-9mln barrels of oil transit through Hormuz daily and that Iran is trying to hold the world economy hostage, but noted that the US's ability to escort and bring products is growing.
• Spot gold continued to trickle lower after failing to sustain the USD 4,400/oz level and with recent profit-taking seen from a 2-month high.
• Copper futures were subdued amid the overall mixed risk appetite.

CRYPTO

• Bitcoin traded indecisively with prices contained by resistance around the USD 63,500 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC kept the 7-day reverse repo operation volume at zero, but injected CNY 349bln via overnight reverse repos.
• 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.

DATA RECAP

GEOPOLITICS

RUSSIA-UKRAINE

• Drones hit an area around the Russian Baltic seaport of Ust-Luga, according to the 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 deterrent, according to KCNA.
• Japan is considering countermeasures after Russian President Putin's visit to a disputed island, according to NHK.

EU/UK

NOTABLE HEADLINES

• Reform UK leader Farage won the Clacton by-election with 22,293 votes.