Europe set for quiet open despite firmer energy prices; AUD lags after less-hawkish RBA - Newsquawk EU Market Open

• US President Trump said, regarding potential escalation with Iran, that it is certainly possible and still has the ability to escalate.
• US President Trump, responding to Iran's requests for compensation during the conflict, said he was demanding compensation from Iran.
• RBA maintained rates as expected and kept a hawkish tone, but trimmed its CPI forecasts; AUD saw mild pressure. 
• APAC stocks traded mixed following a lacklustre lead from Wall Street; European equity futures indicate a flat cash market open.
• DXY traded little changed, 10yr UST futures remained subdued, Crude futures held on to the prior day's spoils after rallying by more than 5%.
• Looking ahead, highlights include US ADP Employment Change Weekly, Existing Home Sales (Jul), Comments from RBA's Governor Bullock, Supply from Germany & US, Earnings from Supermicro & CoreWeave.

LOOKING AHEAD

• Highlights include US ADP Employment Change Weekly, Existing Home Sales (Jul), Comments from RBA's Bullock, Supply from Germany & US, Earnings from Supermicro & CoreWeave.
• Click for the Newsquawk Week Ahead.

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

IRAN CONFLICT

• US President Trump, responding to Iran's requests for compensation during the conflict, said he was demanding compensation from Iran for "all of the people that they have killed and gravely wounded with their roadside bombs and many conflicts." He added Iran had never mentioned compensation during their meetings or negotiations and said he had instructed officials to firmly put the issue into any and all future negotiations. Trump also stated that with respect to negotiations, Iran should also be responsible for damages and death caused to the people of Lebanon, Syria, Yemen, and Gaza.
• US President Trump said regarding potential escalation with Iran that it is certainly possible and still has the ability to escalate. Trump also stated the Strait is open now, and the US is the only one that has control, with the entire area mine-swept and control 100%.
• Iranian Foreign Minister Araghchi said the world should hold the US accountable for the Hormuz block, while he stated Hormuz security requires an end to US aggression, according to Fars News Agency.
• Iranian Supreme Leader Khamenei appointed six new military commanders with Major General Ali Abdullahi as Chief of Staff of the Armed Forces, Brigadier General Kiyomars Heydari as Deputy Chief of Staff of the Armed Forces, while Brigadier General Ahmad Vahidi was promoted to Major General and the Commander-in-Chief of the Islamic Revolutionary Guard Corps.
• Iranian Quds Force commander Ismail Qaani arrived in Baghdad to discuss the issue of weapons control in Baghdad. Furthermore, an Iraqi source revealed an upcoming meeting of the Iraqi Shiite Coordination Framework in Baghdad, with the participation of Iranian Parliament Speaker Ghalibaf.
• Israeli forces conducted heavy attacks on Rafah in the southern Gaza Strip, according to SNN.
• Israeli Broadcasting Authority cited sources that stated the next round of negotiations with Lebanon has been delayed due to tensions between the two sides. However, it was separately reported that Lebanon and Israel are expected to hold the next round of talks in early September.
• Hezbollah is trying to sabotage Lebanon-Israel talks, according to a US State Department official.
• Explosions were reported in Yemen's Marib and Mocha, while a Yemen military source said the government forces launched a concentrated attack on militia positions in Harib and Shabwa.

US TRADE

EQUITIES

• US stocks saw modest pressure on Monday amid relatively quiet newsflow, with the Russell 2000 leading the downside while the equal-weight S&P 500 (RSP) finished little changed, pointing to relatively flat underlying breadth. On a sector basis, Energy heavily outperformed as crude prices climbed, while Real Estate, Utilities and Technology lagged. The gains in oil largely reflected continued geopolitical uncertainty in the Middle East as the situation surrounding the Strait of Hormuz remains fluid, with repeated suggestions that progress is being made but little concrete evidence of a breakthrough. US President Trump said the US is only "semi-negotiating" with Iran, while Iran's Supreme National Security Council issued six demands for reopening Hormuz, including full compensation, sanctions relief, the release of frozen assets, an end to the blockade and the withdrawal of US forces from the region. Trump, however, said the US also wants compensation from Iran for damages, potentially complicating negotiations further.
• SPX -0.05% at 7,753, NDX -0.34% at 26,622, DJI -0.11% at 53,976, RUT -0.50% at 3,019.
• Click here for a detailed summary.

TARIFFS/TRADE

• China noted that beef imports from Brazil have hit 90% of their quota, and once the cap is reached, an additional 55% tariff will apply to imports exceeding the quota three days later.

NOTABLE HEADLINES

• Fed's Hammack (Voter, Hawkish dissenter) said the current rate is not meaningfully restricting the economy and would probably need some number of rate hikes, while she has no intention to prejudge the number of rate increases or the final level. Hammack said in general, one 25bps move probably doesn't do a whole lot for the economy, and that now is the time to act, while she cautioned that the longer the Fed waits, the longer it misses its inflation goal of 2% and the harder inflation will be to bring back down. Furthermore, she said markets are a complement for the Fed, not a substitute, and they have to stand behind their words and actions when appropriate, adding that she is going to factor in how markets are performing, and how they're interpreting what the Fed is saying, but ultimately it is not a substitute for taking action when it's necessary.
• US President Trump said he spoke to Fed Chair Warsh a couple of days ago and has spoken to him once since he took over.
• US President Trump said vaccinations for Hepatitis B, Covid-19, and Influenza, among others, are no longer recommended for all children, while he added that child vaccines will still be covered by insurance.

APAC TRADE

EQUITIES

• APAC stocks traded mixed following a lacklustre lead from Wall Street, where risk sentiment was constrained by higher oil prices and yields amid geopolitical uncertainty, while conditions in Asia were thinned due to the Japanese holiday closure.
• ASX 200 gained amid strength in energy and miners following recent upside in underlying commodity prices, but with upside capped after weak NAB business confidence and heading into the RBA which kept rates unchanged as expected and maintained its hawkish tone, although it was slightly less hawkish, with the central bank acknowledging that financial conditions in Australia appear somewhat restrictive and it also trimmed CPI forecasts.
• KOSPI climbed alongside a rebound in tech and with notable gains in Samsung Electronics.
• Hang Seng and Shanghai Comp were lacklustre after the PBoC opted for zero liquidity operations today, although the downside in the mainland was cushioned following prior reports that China issued the first new round of consumption vouchers aimed at boosting spending.
• US equity futures were off yesterday's troughs, but with price action contained amid quiet catalysts.
• European equity futures indicate a flat cash market open with Euro Stoxx 50 futures down U/C after the cash market closed with gains of 0.2% on Monday.

FX

• DXY traded little changed after mildly gaining against nearly all major peers, albeit with price contained amid sparse newsflow and a lack of data, although there were some comments from Fed's Hammack that the current rate is not meaningfully restricting the economy and would probably need some number of rate hikes, but she has no intention to prejudge the number of rate increases or the final level. The rhetoric from the hawkish dissenter did little to shift the dial, while looking ahead, the data remains light today but begins to pick up, and the main highlight this week is the US CPI report on Wednesday.
• EUR/USD lacked direction after marginally softening yesterday, with price action confined to within a narrow range at the 1.1500 handle amid quiet newsflow from the bloc.
• GBP/USD took a breather following the prior day's gains and reclaim of the 1.3500 level, albeit in a choppy fashion, while there was little reaction overnight to the disappointing UK BRC Retail Sales data.
• USD/JPY continued its gradual recovery from post-intervention lows and sits above the 159.00 level despite increasing expectations for a faster pace of BoJ rate increases, with money markets pricing a near coin-flip for a September rate hike after the recent hawkish Summary of Opinions and suggestions that the central bank may be forced to act following the recent Japan-US joint intervention on the yen.
• Antipodeans were range-bound as participants awaited the RBA rate decision, while mild pressure was seen after the central bank kept rates unchanged as expected and kept a hawkish tone, but acknowledged financial conditions in Australia appear somewhat restrictive and it trimmed CPI forecasts.
• PBoC set USD/CNY mid-point at 6.7900 vs exp. 6.7497 (prev. 6.7884)

FIXED INCOME

• 10yr UST futures remained subdued following the prior day's declines as the recent rally in oil lifted yields and stoked inflationary concerns, with demand overnight not helped by the closure of cash treasuries trade due to the Tokyo holiday, while US supply is also scheduled later.
• Bund futures extended beneath the prior day's trough after the recent upside in energy prices and with a EUR 6bln Bobl issuance due today, ahead of tomorrow's EUR 2bln Bund auction.

COMMODITIES

• Crude futures held on to the prior day's spoils after rallying by more than 5% in the absence of a Strait of Hormuz deal and with efforts to reopen the waterway dampened by tit-for-tat demands by Iran and US President Trump for reparations.
• Libya's NOC said the Zawiya oil blending plant was attacked by a drone, although there was no damage or casualties, while the drone attack was the third targeting oil assets in Zawiya over Sunday and Monday. It also warned that it will be forced to declare a force majeure and completely halt operations at Zawiya refinery if the attacks continue. Furthermore, Libyan media later reported that a suicide drone targeted fuel tanks at the Zawiya oil refinery again.
• Spot gold extended on this month's advances to a 2-month high above the USD 4,400/oz level.
• Copper futures kept afloat but with further upside contained as Chinese markets lagged.
• Chile's Codelco copper production fell 4.8% Y/Y to 114,400 tonnes in June, Escondida copper mine production rose 45.8% Y/Y to 111,400 tonnes, and Collahuasi mine copper production rose 1.7% Y/Y to 34,900 tonnes in June, according to Cochilco

CRYPTO

• Bitcoin eked out mild gains and reclaimed the USD 64,000 level.

NOTABLE ASIA-PAC HEADLINES

• RBA kept the Cash Rate unchanged at 4.35%, as expected, with the decision unanimous, while it stated that inflation is still elevated and risks are skewed to the upside, but noted financial conditions appear to be somewhat restrictive and it trimmed its CPI forecasts. RBA stated that the Board will remain attentive to incoming data and the evolving assessment of the outlook and risks when guiding its decisions, while it remains focused on preventing high inflation from becoming entrenched and will continue to do what it considers necessary to return inflation sustainably to target, including raising the Cash Rate further if upside risks materialise. It also stated that inflation remains too high and is not expected to return to around the midpoint of the target range until late 2027, with upside risks to that projection. However, it also stated following three increases since the start of the year, financial conditions are now tighter than previously and the economy appears to be slowing as expected, as well as stated that financial conditions in Australia appear somewhat restrictive and the economy is expected to return to balance in 2027, a little earlier than previously forecast.
• BoJ may consider an additional interest rate increase at its next policy meeting September 17th-18th, following a hike in June, in response to rising risks of higher inflation, according to informed sources cited by Jiji.
• New Zealand's PM Luxon is calling for an urgent in-person meeting with lawmakers on Wednesday to address leadership speculation.

DATA RECAP

• Australian NAB Business Confidence (Jul) -6 (Prev. -5)
• Australian NAB Business Conditions (Jul) 4 (Prev. 3)

GEOPOLITICS

MIDDLE EAST

• US brokered an agreement between the IAEA and the new Syrian government to remove nuclear material from a clandestine facility known as "Site 99," according to Axios citing US and Israeli officials.

RUSSIA-UKRAINE

• Kyiv's mayor noted explosions in Ukraine's capital and that the city was under ballistic attack.

EU/UK

NOTABLE HEADLINES

• UK PM Burnham is to crack down on vape and betting shops in an effort to rejuvenate Britain's high streets, with councils to be given extra powers to curb unwanted retailers and ‘bring town centres back to life’, according to FT

DATA RECAP

• UK BRC Retail Sales Monitor (Jul YY) 1.0% vs. Exp. 1.5% (Prev. 1.7%)