Europe primed for a flat open as Oil and Yields take a breather - Newsquawk EU Market Open

• US President Trump is waiting for Iran to cave to his economic pressure, but Tehran may be willing to wait even longer, according to POLITICO.
• Iranian Foreign Minister Araghchi said Tehran rejected ceasefire proposals and said that the war must end, not pause.
• US President Trump posted that he has paused the 50% tariffs on Canada, due to kick in on August 19th, for a three-day period; Canadian PM Carney confirmed the pause until the end of August 21st.
• APAC stocks were mostly lower following the tech-led declines stateside; European equity futures indicate a slightly lower cash market open.
• Crude futures edged higher amid the ongoing stalemate regarding the Strait of Hormuz; bond yields eased.
• Looking ahead, highlights include UK Inflation (Jul), EU Inflation Final (Jul), and FOMC Minutes (Jul). Comments from ECB's Lagarde. Supply from Germany and the US. Earnings from Lowe's.

As of 06:20BST/01:20EDT

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LOOKING AHEAD

• Highlights Highlights include UK Inflation (Jul), EU Inflation Final (Jul), FOMC Minutes (Jul). Comments from ECB's Lagarde. Supply from Germany & US, Earnings from Lowe's.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump is waiting for Iran to cave to his economic pressure, but Tehran may be willing to wait even longer, according to POLITICO.
• US President Trump told top administration envoys to halt their conversations with Iran, while White House officials have recently communicated to political allies that they are shifting their strategy — going from “hammer Iran ASAP” to “strangle them” over time, according to CNN.
• US Secretary of State Rubio and UAE's National Security Advisor discussed topics including Lebanon and Iran, according to the State Department.
• Iran has weighed attacking US military targets in Europe if US President Trump escalates the war, according to people close to the regime cited by FT.
• Iranian Foreign Minister Araghchi said Tehran rejected ceasefire proposals and said that the war must end, not pause.
• Iranian Parliamentary Speaker Ghalibaf commented, "Americans think squeezing Iran harder will win concessions that were never part of the agreement. Bessent and Hegseth are way out of their league. Stop waiting for the clown crew to pull a rabbit out of their hat and clean up the mess you made."
• Iranian Foreign Ministry spokesman Baghaei dismissed UAE claims that Iran launched missiles, while he cited false flag operations in warning against 'baseless' accusations.
• UAE's Defence Ministry said it detected two ballistic missiles launched from Iran with one missile falling outside territorial waters and the second falling inside, while it is ready to deal with any threats.
• UAE's Foreign Ministry said all trade, commercial exchanges and financial transactions with Iran have been halted until further notice.
• French Foreign Minister announced that France will expel two Iranian diplomatic staff in response to Iran detaining and questioning two French embassy employees for hours.
• Israeli airstrikes hit areas near Kafrman, southern Lebanon.

US TRADE

EQUITIES

• US stocks were pressured on Tuesday, with the Nasdaq leading the downside amid pronounced weakness in Technology as semiconductor and memory names were particularly hard hit as US yields remained elevated. Industrials and Materials also lagged, while Energy, Health Care and Consumer Staples outperformed. The recent backup in long-end yields has been weighing on broader market sentiment, particularly after the 30-year rose to its highest level in around 19 years on Monday. Higher long-term borrowing costs may be reducing the attractiveness of debt-backed financing for hyperscaler capex, potentially weighing on the outlook for AI infrastructure spending and, in turn, demand for semiconductors. Higher yields also present a valuation headwind for growth stocks more broadly. The Vanguard S&P 500 Growth ETF (VOOG) fell over 1%, while the Semiconductor ETF (SOXX) dropped around 5% and the Memory ETF (DRAM) tumbled over 8%. In terms of data, US Import and Export Prices were cooler than expected, adding to the string of softer July inflation reports ahead of the PCE report due later this month. The weekly ADP Employment Change remained subdued at around 9.5k vs the prior week's 8.25k. On housing, starts declined 12%, below expectations, while the more forward-looking Building Permits rose 5%, topping forecasts. Industrial and Manufacturing Production were broadly in line. In the wake of the data, the Atlanta Fed GDPNow estimate for Q3 was revised down to 4.0% from 4.3%.
• SPX -0.66% at 7,694, NDX -1.68% at 29,491, DJI -0.22% at 53,344, RUT -1.24% at 3,020.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump posted, "I have paused the 50% tariffs against Canada that was scheduled to kick in tomorrow morning for a three day period, based on the fact that Canada and the U.S.A., subject to finalization of documents, have reached a DEAL! The great Keystone XL Pipeline, long ago killed by Sleepy Joe Biden, may be awoken from the grave!"
• US Trade Representative Greer said the deal with Canada will include comprehensive market access for all American goods, economic security commitments and digital trade alignment.
• Canadian PM Carney said the US agreed to postpone implementation of its 50% tariffs on a range of Canadian goods under Section 338 of the US Tariff Act of 1930 until the end of August 21st. Furthermore, the PM's Office stated substantial progress has been made with the US, although there is important work still to be done, while Canada has engaged in intensive discussions with the US to address outstanding trade issues over the last number of weeks.
• Mexico reportedly weighs tougher trade rules for China.

NOTABLE HEADLINES

• White House plans to host an event with President Trump today that will include various tech leaders, though prediction market companies were not invited, according to Axios citing sources.
• US President Trump is to select White House adviser Heidi Overton to run the FDA.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower following the tech-led declines stateside, as yields remained elevated and oil continued to edge higher amid the ongoing geopolitical stalemate.
• ASX 200 retreated amid a deluge of earnings and with RBA Deputy Governor Hauser sticking to the hawkish script, while Australian wage data matched estimates and spurred little reaction.
• Nikkei 225 failed to benefit from stronger-than-expected Machinery Orders data and was pressured by the tech weakness, despite yields pulling back from multi-decade highs.
• KOSPI underperformed amid pressure in the tech heavyweights, while sentiment was also not helped by strained US-South Korea ties after US President Trump reduced the joint drills with South Korea and is said to be pushing for a meeting with North Korean leader Kim as soon as this fall.
• Hang Seng and Shanghai Comp were ultimately mixed, with the Hong Kong benchmark kept afloat as participants digested earnings releases including from Baidu and Xiaomi, while the mainland conformed to the broad downbeat mood with notable losses seen in the ChiNext Nasdaq-style board.
• US equity futures remained subdued after the recent tech underperformance.
• European equity futures indicate a slightly lower cash market open, with Euro Stoxx 50 futures down 0.2% after the cash market closed with losses of 1.0% on Tuesday.

FX

• DXY marginally softened and gave up ground to the loonie after US President Trump announced a three-day pause of the 50% tariffs on Canada that were due to kick in today, as Canada and the US have reached a deal, subject to finalisation of documents. Elsewhere, there were few fresh catalysts for the dollar with headlines mostly centred around geopolitics, while participants await today's FOMC Minutes release.
• EUR/USD eked out slight gains against the dollar, but remained confined within a tight range at the 1.1500 handle following a recent choppy mood and after comments from ECB's Lane did little to shift the dial.
• GBP/USD lacked direction following recent disappointing jobs data from the UK, including a higher-than-expected Unemployment Rate, while participants now await the latest inflation metrics.
• USD/JPY slightly pulled back amid a softer dollar and following stronger-than-expected Machinery Orders data from Japan, although price action was limited to within the 159.00 territory.
• Antipodeans languished around this week's lows with little reaction seen to the firmer-than-expected PPI data from New Zealand and hawkish comments from RBA's Deputy Governor Hauser, who noted that inflation is too high and that they will have to raise rates again if it doesn't come down.
• PBoC set USD/CNY mid-point at 6.7854 vs exp. 6.7421 (prev. 6.7905).

FIXED INCOME

• 10yr UST futures marginally extended on gains after recent flattening, but with yields remaining elevated, while attention shifts to FOMC Minutes.
• Bund futures moved off the prior day's lows but with the rebound limited amid higher energy prices and looming supply, with a EUR 6bln Bund issuance scheduled today.
• 10yr JGB futures extended its rebound from support beneath the 126.00 level as yields pulled back, despite the higher oil prices and stronger-than-expected Machinery Orders data.

COMMODITIES

• Crude futures edged higher amid the ongoing stalemate regarding the Strait of Hormuz, with Trump recently commenting that there are no talks or conversations going on, or scheduled, with Iran and that the naval blockade remains in full force and effect. Trump was also reported to have told envoys to halt their conversations with Iran as the US shifts its strategy from “hammer Iran ASAP” to “strangle them” over time.
• US Private Weekly Inventory Data (bbls) Crude -0.3mln (prev. +9.1mln), Gasoline +1.1mln (prev. -1.5mln), Distillate -2.8mln (prev. -0.6mln), Cushing -1.4mln (prev. +0.4mln)
• Several independent US oil producers were expected to sign production contracts with Venezuela’s state-run PDVSA on Tuesday, according to POLITICO.
• Syria's petroleum company said an explosion occurred at the gas export pipeline at the Al-Jabsah gas plant, leading to a halt of pumping through the pipeline, while the explosion was said to be the result of a deliberate act of sabotage based on initial investigations.
• Russian President Putin said Russia is discussing with Myanmar the construction of oil refineries, production and exploration of hydrocarbons, including on the shelf, while he stated relations between Russia and Myanmar continue to strengthen and gain concrete content. Putin also noted good prospects for organising the export of Russian LNG to Myanmar, including transit supplies, as well as the establishment of cooperation with Myanmar in the field of space and manned spaceflight.
• Russia will reroute Kazakh oil exports from Ust-Luga to Novorossiysk to free up Baltic port capacity for additional Russian crude shipments, according to source reports.
• Spot gold nursed some of the prior day's losses, but with the recovery limited ahead of FOMC Minutes.
• Copper futures were subdued amid the mostly negative risk sentiment across global markets.

CRYPTO

• Bitcoin steadily retreated overnight but remained above the USD 64,000 level.

NOTABLE ASIA-PAC HEADLINES

• China eased limits on NVIDIA (NVDA) H200 chips as the AI race escalates, with Beijing permitting small shipments to help leading tech groups in a drive to catch up with US rivals, while ByteDance and Tencent (700 HK) have each received about 10,000 H200 processors in recent weeks, according to FT.
• RBA Deputy Governor Hauser said inflation is too high and that monetary policy needs to bring inflation down and needs to reduce demand in the economy. Hauser stated he is not seeing a recession, just a slowdown, although he is worried about inflation and upside risk to inflation, as well as noted that if inflation doesn't come down, they will have to raise rates again.

DATA RECAP

• Japanese Machinery Orders (Jun MM) 9.7% vs. Exp. 7.8% (Prev. -12.4%)
• Japanese Machinery Orders (Jun YY) 16.9% vs. Exp. 10.8% (Prev. -1.9%)

GEOPOLITICS

MIDDLE EAST

• Israeli PM's Office said Israel and Syria have agreed to maintain the status quo on security matters, which Syria was about to violate by allowing Turkish forces to deploy at an air base near Aleppo. Israel has repeatedly warned Syria that such a deployment would pose a threat to its security, while it added that Syria has chosen to ignore these warnings and Israel will not tolerate threats to its security, according to Axios.
• It was earlier reported that the US is to downplay hopes for a trade deal with Canada on Tuesday, although US President Trump and Canadian PM Carney were expected to speak again on Tuesday, according to people familiar with the matter.

RUSSIA-UKRAINE

• Russian Foreign Minister Lavrov said Russia has the right to regard direct involvement of British missile forces in strikes against Russia as participation in the conflict, according to Interfax.

OTHER

• US President Trump is pushing for a meeting with North Korean leader Kim as soon as this fall, according to WSJ citing US officials
• South Korean Joint Chiefs of Staff said the military drill schedule and scale will be adjusted, with South Korea‑US exercises cut to  August 17th‑21st, while a Pentagon official stated that the US military substantially reduced its exercise with South Korea, with exercises to conclude one week early.
• North Korea denounced US-South Korea joint military drills and said the exercise of its right to self-defence will continue to completely neutralise enemies' military threat.

EU/UK

NOTABLE HEADLINES

• UK PM Burnham said No. 10 North will take over responsibility for economic growth from the Treasury as part of a transfer of power, according to The Times.
• UK PM Burnham launches a national drive to offer rough sleepers a bed this winter in a 'moral mission' to end rough sleeping, according to The Mirror.