Europe primed for a weaker open as the US and Iran exchange fire - Newsquawk EU Market Open

• US attacked two missile launchers of the IRGC on Larak Island on Sunday, which were said to be on standby to launch missiles with sea mines toward the Strait of Hormuz.
• Iran's Revolutionary Guards later announced that they retaliated with missiles and drones against two US bases in Jordan and warned that any attack against them will be met with a more devastating response.
• Crude futures gapped higher at the open amid the geopolitical escalation in the Middle East; FX and Fixed Income did not react to the rise in oil.
• APAC stocks were mostly lower heading into month-end; European equity futures indicate a lower cash market open.
• Looking ahead, highlights include German Inflation Flash (Aug). Supply from the EU; UK Summer Bank Holiday (desk remains open as usual).

Newsquawk in 3 steps:

1. Subscribe to the free premarket movers reports

2. Listen to this report in the market open podcast (available on Apple and Spotify)

3. Trial Newsquawk’s premium real-time audio news squawk box for 7 days

LOOKING AHEAD

• Highlights include German Inflation Flash (Aug). Supply from the EU.
• Holiday: UK Summer Bank Holiday; desk remains open as usual.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US attacked two missile launchers of the IRGC on Larak Island on Sunday, which were said to be on standby to launch missiles with sea mines toward the Strait of Hormuz, while there were later reports of explosions heard near Larak Island.
• US Central Command said IRGC claims of US aggression in the Strait of Hormuz are false, but added the US conducted limited precise action against IRGC minelaying forces that posed an imminent threat in the Strait of Hormuz.
• Iran’s Revolutionary Guards warned the US strike on Larak Island would be met with a response and punishment, while it said several soldiers and civilians were killed and wounded in the assault.
• Iran's Revolutionary Guards later announced that they retaliated with missiles and drones against two US bases in Jordan and warned that any attack against them will be met with a more devastating response, although a US official cited by Fox News stated no major damage in Iranian attacks on US forces in Jordan and that all missiles were intercepted.
• Iran's Press TV noted reports of Iran firing missiles towards US vessels in the Strait of Hormuz, and there were reports of explosions heard in the UAE and in Qatar, while Iran's army later said it launched tens of drones at the Al Minhad air base in the UAE.
• IRGC said a supertanker caught fire and was halted after being struck by two naval mines in the Strait of Hormuz, while it added that the tanker was attempting to pass illegally through the Strait of Hormuz and that ships must comply with its rules for passage. IRGC separately announced that it shot down a US MQ-9 drone over the Strait of Hormuz.
• Iran's Foreign Ministry said it will respond decisively to any further enemy military aggression, and stated that the US and parties supporting its military actions bear full responsibility for consequences of escalation.
• US President Trump reiterated in a pre-recorded Fox News interview that Iran cannot have a nuclear weapon and said the Iran blockade has been unbelievable, while he also commented that the US had to intervene in the Middle East to prevent Iran from using a nuclear weapon against Israel and other countries in the region and possibly against the US.
• US President Trump posted a generated video with the caption "Kharg Island being blown to smithereens!!!"
• US Treasury Secretary Bessent said the US Treasury plans to impose more Iran secondary sanctions every week, starting with banks. He also stated that they are telling banks it's not okay to have Iranian money and to aid the Iranian regime, and they will probably just sanction a bank outright next time, after the US imposed curbs on an Egyptian bank's United Arab Emirates branches.
• Iranian President Pezeshkian said they are not looking for war, but will give a decisive response to the aggressors, while he added that instability and unrest in the region are not in the interest of any countries and will create challenges for everyone.
• Iran's President said on Friday that Iran is ready for cooperation and understanding with regional countries, including Saudi Arabia and the UAE, while it is to open its route if four commitments are met. He also stated that Iran is to increase gasoline prices, and that exports and imports have decreased by up to 35% because of US sanctions and the blockade.
• UAE’s central bank will investigate Banque Misr after the US Treasury Department moved to cut off the Egyptian bank’s UAE branches from the US financial system as part of sanctions against Iran.

US TRADE

EQUITIES

• US stocks were on the backfoot on Friday as the major gainers the previous day pared initial strength, while Marvell earnings also weighed on indices, after earnings were considered disappointing given lower-than-expected gross margin guidance and the deferral of longer-term fiscal guidance. Attention was on Fed Chair Warsh's speech at Jackson Hole, which proved to be hawkish and pressured cyclical-exposed names. Warsh outlined that inflation remains a greater concern than employment, even in light of better-than-expected inflation figures through summer, while he noted the Fed has more work to do unless progress towards its 2% inflation target resumes, and stated the Fed’s predominant focus now should be on prices and that the July FOMC expressed readiness to act as circumstances might require. In response, the dollar saw broad-based strength, the Treasury curve flattened, and spot gold was weighed by the renewed Fed rate hike bets, with Barclays and SocGen anticipating hikes in September and December. At the same time as Warsh's speech, the prelim NFP annual revision was -79k, and UoM final revisions were slightly better than expected, with the 1yr inflation expectation ticking down; price action was determined by Warsh.
• SPX -0.25% at 7,711, NDX -0.70% at 29,433, DJI -0.02% at 53,564, RUT -1.39% at 2,972.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump posted “Canadian businesses are pouring into the United States. We want to make our own cars, etc. That’s what’s going to happen. Canada has been ripping us off for years — NO LONGER!”. Trump separately posted “Let all Canadian Companies that are doing business with America move to the United States, immediately. Many of them are Companies that moved out years ago due to stupid U.S. Leadership. When you move back, there are no TARIFFS!”
• US President Trump posted "For many years, the USA has been losing more than 60 Billion Dollars a year with Canada. Why??? Our long ago stolen businesses are now coming back to America in order to avoid paying tariffs".
• Ontario Premier Ford ridiculed US President Trump's order changing the name of Lake Ontario to Lake America, but expressed optimism that Canada and the US would eventually overcome differences on trade and tariffs.
• US Treasury Secretary Bessent said the G20 should re-examine trade terms with China and that current exports from China are unsustainable, while he added the world can't have China with a USD 1.2tln trade surplus.
• Vietnam Deputy PM Nguyen reiterated to USTR Greer that Vietnam is ready for open and constructive trade talks with the US.

NOTABLE HEADLINES

• Fed's Goolsbee (2027 Voter) said on Friday that he agreed with Fed Chair Warsh about details of the economy and agreed that inflation is the main issue right now. Goolsbee also stated that it is clear that inflation from overheated demand is hard to address, while he added that inflation has continued for longer than expected.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower heading into month-end and after recent hawkish comments from Fed Chair Warsh at Jackson Hole, while tensions in the Middle East escalated over the weekend after the US and Iran resumed strikes for the first time in over a month.
• ASX 200 saw mixed price action and was initially kept afloat amid strength in the top-weighted financials sector and with gains also seen in energy, utility and consumer industries, although upside was limited and eventually reversed following disappointing Private Sector Credit and Company Profits data.
• Nikkei 225 gapped lower at the open to below the 66,000 level, although it was off today's worst levels as participants also reflected on stronger-than-expected Japanese Industrial Production and Retail Sales data.
• KOSPI retreated amid weakness in its tech heavyweights and with a report noting that day traders are abandoning Korean chip leveraged ETFs in large numbers, with leveraged ETFs targeting twice the daily returns of chipmakers Samsung Electronics and SK Hynix, on course for their first monthly outflow.
• Hang Seng and Shanghai Comp were subdued, with risk appetite not helped by the latest official PMI data, in which headline Manufacturing topped forecasts, but Non-Manufacturing disappointed and both remained in contraction territory.
• US equity futures mildly declined amid headwinds from Fed Chair Warsh's recent hawkish comments and the geopolitical escalation in the Middle East.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.4% after the cash market closed with gains of 1.0% on Friday.

FX

• DXY marginally softened in a slight pullback from last Friday's peak after rallying on hawkish comments from Fed Chair Warsh at Jackson Hole, in which he noted that inflation remains a greater concern than employment and that the Fed has more work to do unless progress towards its 2% inflation target resumes. Nonetheless, weekend drivers for the US were relatively quiet aside from the geopolitical escalation in the Middle East after the US struck missile launchers on Larak Island and Iran retaliated on US bases in Jordan.
• EUR/USD bounced off a weekly low although the rebound was limited with the single currency remaining beneath the 1.1600 handle, while recent pertinent headlines include comments from ECB's Kocher on Friday who noted threats to price stability, and it was also reported that Iceland rejected EU accession talks in a referendum on Saturday.
• GBP/USD attempted to nurse some losses, although price action was contained with participants in the world's largest FX trading hub away on Monday for the UK Summer Bank Holiday.
• USD/JPY trickled lower as the dollar pared some of the Jackson Hole strength and following the better-than-expected Japanese Industrial Production and Retail Sales data.
• Antipodeans attempted to recoup some lost ground but with efforts limited by disappointing data for Australia, weaker Business Confidence in New Zealand, and a continued contraction in Chinese official PMIs.
• PBoC set USD/CNY mid-point at 6.7828 vs exp. 6.7344 (prev. 6.7811).

FIXED INCOME

• 10yr UST futures attempted to nurse some of last Friday's losses after sliding on Fed Chair Warsh's keynote address at Jackson Hole and with little fresh from the US outside of geopolitics over the weekend, while participants look ahead to key jobs data later in the week.
• Bund futures were lacklustre after the prior week's fluctuations and as German inflation data looms.
• 10yr JGB futures traded subdued after recent declines in global peers and stronger-than-expected Industrial Production and Retail Sales data from Japan, but with further downside was stemmed, with price action stuck around the 126.00 level.

COMMODITIES

• Crude futures gapped higher at the open amid the geopolitical escalation in the Middle East after the US struck Iranian missile launchers on Larak Island on Sunday, which were said to be on standby to launch missiles with sea mines toward the Strait of Hormuz, while Iran retaliated against US bases in Jordan with missiles and drones, although there was no major damage, with the missiles intercepted.
• US President Trump announced on Friday that the US will take majority control over a large amount of Venezuela’s oil wealth, while Trump posted on Sunday that one of the things he will do with Venezuelan oil is to fill up the strategic national reserves and blamed former President Biden for emptying the reserve.
• Venezuelan President Rodriguez said an energy agreement with the US would remain in place for 25 years, target an increase in crude output to 1.5mln bpd and preserve the country’s sovereignty over its natural resources. It was separately reported by The Wall Street Journal that the US will take a 35% passive stake in Venezuelan mogul Alejandro Betancourt’s oil venture North American Blue Energy Partners.
• Eni (ENI IM) is working with Venezuelan authorities to aid the country's energy sector revival.
• Iraq’s Kurdistan region said oil output resumed at up to 230k bpd following drone strikes, while Iraq’s Oil Ministry said the Kurdistan region’s oil exports to Turkey’s Ceyhan port are around 150k bpd.
• Iraqi sources reported an explosion at the Dura refinery south of Baghdad, with heavy smoke rising, according to Fars News Agency.
• Russia extended its diesel exports ban until September 30th amid intensified Ukrainian attacks on Russian refineries.
• Spot gold remained pressured after slumping on Friday as the dollar and yields climbed following hawkish rhetoric from Fed Chair Warsh at the Jackson Hole Symposium.
• Copper futures initially extended recent declines amid the mostly negative risk sentiment and with demand also not helped after Chinese PMI data remained in contraction territory, but then gradually rebounded later in the session.

CRYPTO

• Bitcoin was choppy overnight with early momentum thwarted by resistance around the USD 78k level.

NOTABLE ASIA-PAC HEADLINES

• Chinese chipmaker CXMT (688825 CH) sued the US Department of Defense as it seeks to be removed from the blacklist of companies linked to the Chinese military.
• South Korean President Lee nominated Lee Hyoung-il as the new finance minister and Kang Shin-chul as defence minister.
• BoK warned that the semiconductor boom could reignite inflation if corporate and household income gains translate into consumption.
• Day traders are reportedly abandoning Korean chip leveraged ETFs in large numbers, as leveraged ETFs targeting twice the daily returns of chipmakers Samsung Electronics and SK Hynix have seen their trading value collapse to 4% of the June peak and are on course for their first monthly outflow.

DATA RECAP

• Chinese NBS Manufacturing PMI (Aug) 49.8 vs. Exp. 49.7 (Prev. 49.2)
• Chinese NBS Non-Manufacturing PMI (Aug) 49.0 vs. Exp. 49.5 (Prev. 49.0)
• Chinese NBS Composite PMI (Aug) 49.5 (Prev. 49.3)
• Japanese Industrial Production Prel (Jul MM) 0.1% vs. Exp. -0.6% (Prev. 1.9%)
• Japanese Retail Sales (Jul YY) 4% vs. Exp. 3% (Prev. 0.6%)
• Australian Private Sector Credit (Jul MM) 0.6% vs. Exp. 0.7% (Prev. 0.8%)
• Australian Company Gross Profits (Q2 QQ) 1.8% vs. Exp. 2% (Prev. -1.3%)

GEOPOLITICS

RUSSIA-UKRAINE

• Russia’s Defence Ministry said Russian troops captured three villages in Ukraine’s Donetsk and Sumy regions.
• At least 37 people were killed in a village west of Kyiv following a Russian strike on a warehouse.
• Ukraine said Russia is readying for a potential new ground offensive towards Kyiv and Chernihiv, while it was also reported that air raid sirens and explosions were heard in Kyiv on Sunday.
• Ukrainian President Zelensky was reported on Friday to want Ukraine to launch 1k long-range drones at Russia per day.
• A missile hit Russia’s Belgorod on Sunday, which damaged a logistics facility housing an Ozon sorting centre and delivery hub, while the regional governor said the Ukrainian attack injured 16 people.

OTHER

• US has threatened to oppose Britain’s sovereignty over the Falkland Islands if PM Burnham does not increase defence spending, according to The Telegraph.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said on Friday that they are seeing quite subdued second-round effects so far and can watch this situation for now, but cannot promise that muted second-round effects will continue.
• ECB's Kocher said on Friday that it is important how long-lived inflation proves to be and there are threats to price stability, while he added there's alertness and no complacency.
• French PM Lecornu warned that France needs to pass a budget ahead of presidential elections next year or risk political and financial instability.
• Iceland rejected EU accession talks in a referendum by 52.8% vs 47.2% of votes.
• Germany's largest pension system overhaul in over two decades is set to hand hundreds of billions of euros in retirement savings to global asset managers at the expense of insurers, according to FT.
• German Finance Minister Klingbeil plans to advocate for ending economically damaging conflict, including tariff disputes and wars in Iran and Ukraine during G20 talks in North Carolina.
• S&P affirmed Portugal A+; Outlook Positive, citing resilient economic growth, while Fitch affirmed France at A+; Outlook Stable