Europe primed for a quiet open despite APAC rally - Newsquawk EU Market Open

• Sources suggested Iranian air defence systems were activated. However, the US said they were not involved, and Iran then denied any explosions at all; Bushehr's officials said they intercepted projectiles.
• Mediators are working to get the US and Iran back at the negotiating table, CNN reported, citing sources, later echoed by Axios.
• Brent is firmer by USD 0.30/bbl, in a narrow range as the magnitude of geopolitical updates slowed throughout the APAC session into Friday.
• APAC bourses were entirely firmer, European futures point to a flat start to the day, while US futures are marginally softer, NQ -0.2%.
• USD remains under pressure, with the JPY the primary beneficiary. Support came from Finance Minister Katayama, who spoke on increasing investment in domestic financial funds.
• Fixed income mixed but broadly contained, taking the lead from energy performance. JGBs outperformed on the above remarks.
• Looking ahead, highlights include German/French Inflation Final (Jun), Norwegian Inflation (Jun), Canadian Jobs Report (Jun), IEA OMR (Jul), Speakers include ECB's Vujcic, Supply from Italy, Earnings from Delta Air Lines and Credit Ratings from Fitch on the Netherlands, Morningstar DBRS on Switzerland and Scope Ratings on Japan.

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IRAN CONFLICT

• Iranian sources reported air defense system activations in the cities of Chabahar in southeastern Iran and Bushehr in southwestern Iran, according to Kann's Roi Kais. This was further confirmed by reporter Stein. However, there have been no explosions on Kharg Island so far.
• A senior American official claimed that the US military did not carry out the attacks on Iran in recent hours, according to N12's Ravid. This was further reported by an Al Arabiya report, citing sources.
• The Iranians denied that there were any explosions at all in the places where explosions were reported, according to the Jerusalem Post.
• Deputy Political and Security Governor of Bushehr said the explosion heard was due to the timely response of the air defense and said a military HQ on outskirts of Bushehr was violated and hit by US-Israeli projectile.
• Iran National Security Commission Spokesperson warned that transportation and oil and gas infrastructure in Saudi Arabia, Kuwait, the UAE, Qatar, Jordan and Bahrain will be legitimate targets of Iran's response to recent attacks, Fars reported.
• A member of the National Security Commission of Iran's parliament said the UAE will pay the price for cooperating with America.
• A US official said the US remains committed to a resolution with Iran and technical discussions are ongoing. A Fox reporter later stated, citing a US official, that the administration is still committed to finding a resolution so technical talks continue to prevent Iran from having a nuclear weapon.
• US CENTCOM said Iran does not control the Strait of Hormuz, and that US forces have helped over 800 commercial vessels and 380mln barrels of crude oil through the Strait of Hormuz since early May.
• Pakistan and Qatar are working to bring the US and Iran back to the negotiating table following the collapse of a fragile ceasefire, according to CNN citing regional sources. Axios then later reported something similar, stating Qatar, Pakistan and other regional mediators are trying to de-escalate tensions between the US and Iran and revive negotiations on a nuclear deal.
• Lebanese media reports of new Israeli drone strikes in southern Lebanon, Tasnim reported.
• Israel is willing to join future US attacks on Iran should Washington seek help after President Trump declared the cease-fire with Tehran “over,” sources in Jerusalem told The Post.
• A US official, on Lebanon-Israel talks, said we have moved to the implementation stage of the framework and the first pilot zone will launch in a matter of days.

US TRADE

EQUITIES

• US stocks closed higher on Thursday, with sector performance mixed, as geopolitical headlines dominated price action. While the US struck multiple Iranian targets overnight and Iran retaliated, risk sentiment improved after President Trump said Iran had reached out to the US and wanted to make a deal, easing concerns over a further escalation that could threaten energy infrastructure.
• SPX +0.81% at 7,544, NDX +1.62% at 29,727, DJI +0.27% at 52,492, RUT +1.22% at 2,993

TARIFFS/TRADE

• US White House announced the adjustment of imports of commercial aircraft, jet engines, and aircraft and engine parts into the US. Stated that no immediate tariffs be imposed under section 232 to address the threatened impairment to the national security.

CENTRAL BANKS

• Fed announced leadership and objectives for monetary policy task forces; each to be co-led by three experts external to the Fed and be supported by Fed staff. Click here to see a detailed breakdown
• BoE Chief Economist Pill said interest rates may need to increase this year to keep rising prices under control. "The speed limit at which you can run the economy is a bit lower than it's been in the past".
• ECB President Lagarde said they need inflation at target in roughly 3 years time.

NOTABLE HEADLINES

• OpenAI and Google (GOOGL) confirmed that they have been supplying AI services to blacklisted Chinese tech giants Alibaba (9988 HK/BABA), Baidu (9888 HK/BIDU) and Tencent (0700 HK), the FT reported.

APAC TRADE

EQUITIES

• Asia-Pac stocks traded entirely in the green, as they followed the tech-led gains seen stateside. Military strikes continued on Thursday, but energy prices and equity markets seemed to have brushed it aside and instead took a stronger liking to President Trump’s comments, in which he said Iran had reached out to the US and wanted to make a deal, easing concerns over a further escalation that could threaten energy infrastructure. To note, the Taiwan markets were closed due to the typhoon, and worries of the typhoon hitting China and Japan.
• ASX 200 initially opened with modest losses but has since reversed and printed modest gains. Metals & Mining topped the sector pile, cutting 4 consecutive days of losses, while Health Care was the sector laggard.
• Nikkei 225 gained, with SUMCO leading the way as it benefited from the semiconductor strength stateside. On the earnings front, Seven & I and Fast Retailing both posted strong earnings and raised their FY guidance; however, shares traded lower after highlighting the effects of a weaker yen.
• KOSPI surged, helped by gains in Samsung Electronics while SK Hynix shares traded choppy ahead of its US ADR listing. The choppiness in SK Hynix comes as investors position themselves for the ADR, with analysts stating that the US ADR may be preferred over its domestic listing, due to US ADRs commonly trading at a premium (typically at a 5-15% premium).
• Shanghai Comp. and Hang Seng. were firmer, with another set of IPOs in Hong Kong, resulting in 15 listings this week. Today, markets were focused on Nexchip Semiconductor. The IPO price was set at HKD 32.30/shr, and shares rose at the open and briefly topped HKD 36/shr but have since come off.
• US equity futures are softer across the board, albeit very modestly. Thursday’s session was another big day of tech announcements; Micron revealed a USD 3bln investment to strengthen US semiconductor supply chains, while Meta unveiled a paid AI developer model.
• European equity futures are indicative of a mixed open with the Euro Stoxx 50 future -0.2% after cash closed +1.3% on Thursday.

FX

• DXY continued to trade on the softer side, trading at the low end of its 100.60-100.94 range. The recent downward pressure came amid comments by Japanese Finance Minister Katayama, which lifted Japanese assets (see JPY below). Geopolitical newsflow has been light, allowing energy prices to rotate in tight ranges and having a limited effect on the USD.
• EUR and GBP extended on from Thursday’s modest gains, as EUR/USD topped the 1.1460 mark while GBP/USD peaked at 1.3450. No specific regional driver for the recent upside; just benefiting from a softer USD.
• USD/JPY slipped back below the 162.00 handle, and traded at the lower end of its 161.28-162.43 range. The recent Yen strength came amid comments by Japanese FinMin Katayama, in which she said the government wants to encourage pension funds, including the GPIF, to increase investment in domestic financial funds. These remarks suggest of a potential shift that would support debt while reducing structural selling on the JPY, as the funds would allocate more to domestic assets and less to overseas products.
• Antipodeans were firmer, with the Kiwi continuing to surge. The RBNZ rate hike was the origin of the recent strength, as markets nearly fully price 2 rate hikes by year-end.
• CNH strengthened after the PBoC set the USD/CNY mid-point at 6.7989 (prev. 6.8036), which was its strongest midpoint since February 2023.

FIXED INCOME

• UST Futures were quiet, trading in a tight 5-tick range, following a rebound in Thursday’s session as energy prices fell. A quiet docket ahead in the US coming into the weekend.
• Bund Futures rose to a peak of 125.61 but came off best levels as JGBs started to pull back. Bunds were unreactive following the ECB minutes, in which it stated that policymakers see core inflation above the 2% target across the entire projection horizon, despite the policy tightening. This signals a hawkish tilt and keeps further rate hikes on the table. Markets fully price in a rate hike in 2026 and a 60% chance of two hikes by year-end.
• JGB Futures outperformed, as it trended from its 126.50 trough to a 127.46 peak. The bid higher came following comments by Japanese Finance Minister Katayama, in which she said the government wants to encourage pension funds, including the GPIF, to increase investment in domestic financial funds. The 10yr yield fell 10bps to 2.775%.
• US sells USD 22bln of 30-year bonds; Stop through 0.3bps.
• Australia sells AUD 900mln 1.75% 2032 AGBs: b/c 3.16x (prev. 4.10x), average yield 4.6189% (prev. 4.1987%).

COMMODITIES

• Crude futures rotated in narrow ranges amid a lack of geopolitical updates thus far in Friday’s session. Despite the recent strikes on US bases in the Gulf and several areas in Iran, worries have eased over further escalation that could involve energy infrastructure. A US official stated late on Thursday that the US remains committed to a resolution with Iran and that technical discussions are ongoing. Furthermore, regional mediators continue to try and de-escalate tensions and revive a nuclear deal. WTI traded in a USD 71.22-72.48/bbl range, while Brent held above USD 76/bbl.
• Precious Metals oscillated in tight ranges, but was helped by the softer dollar. Spot gold traded either side of the USD 4120/oz mark, while spot silver regained USD 60/oz.
• 3M LME Copper reversed earlier losses and regained the USD 13.5k/t handle amid the positive risk tone across Asia-Pac markets.
• QatarEnergy sets August Marine Crude OSP at Oman/Dubai -USD 5/bbl; Land Crude OSP at -USD 4.50/bbl, according to a pricing document.

CRYPTO

• Bitcoin extended higher and looks set to regain the USD 64k handle as Friday progresses.

NOTABLE ASIA-PAC HEADLINES

• Japanese Finance Minister Katayama said they are to pursue steps to promote investment in Japanese assets by GPIF and others. She added that the government wants to speed up discussions on expansion of JGB products targeting households. On markets and policy, she did not comment on specific bond yield levels, stated specific monetary tools are up to the BoJ and will closely monitoring economic indicators and market situations.
• Japan's Economy Minister Kiuchi said the government has consistently communicated its stance of taking policy that heeds to fiscal sustainability. The effect of the weak yen on local inflation is delayed and not necessarily significant. There is no change to government's stance on monetary policy. Policy tool remains the BoJ's decision. Government will not convey to the BoJ its preference on timing, pace and direction of policy changes.

DATA RECAP

• Japanese PPI MoM (Jun) M/M 0.4% vs. Exp. 0.3% (Prev. 0.9%).
• Japanese PPI YoY (Jun) Y/Y 7.1% vs. Exp. 6.8% (Prev. 6.3%).

GEOPOLITICS

RUSSIA-UKRAINE

• Krasnodar task force said a fire has broken out at the Ilsky oil refinery due to the fall of a drone's debris, Interfax reported.
• A fire broke out at two oil product storage facilities due to a UAV attack in the Rostov region, according to the governor. Fires were being pushed out in Taganrog's Seaport but reported no injuries.

EU/UK

NOTABLE HEADLINES

• Andy Burnham gets 322 nominations from Labour MPs for the party leadership.
• UK Chancellor Reeves is to announce a new City "skills compact" that will commit financial firms to retraining thousands of workers for the AI revolution, The Guardian reported.
• BRC said the number of people visiting British shops fell 3.4% in June, due to the heatwave keeping shoppers indoors.