US stocks finished mixed with most indices in the green after a pause of US/Iran strikes, although tech weakness dragged the Nasdaq lower - Newsquawk Daily Asia-Pac Market Open

• US stocks saw two-way price action, with the initial optimism in equities fading as the session progressed. Sentiment was initially supported by the US and Iran pausing strikes against each other over the weekend, which saw oil prices tumble. Crude hit its lows during the European morning as US equity futures traded around their peaks, although both moves began to retrace as US participants arrived. The downside in equities was concentrated in tech, with the Nasdaq closing lower while the S&P 500 was broadly flat and the Russell 2000 and Dow gained. The equal-weight S&P 500 (RSP) also outperformed, highlighting positive underlying breadth. Nvidia (NVDA) was weighed on by reports that the company is in talks with OpenAI to guarantee USD 250bln in financing for a data centre, while ASML (ASML) fell following reports that China has begun mass production of domestically developed DUV lithography equipment. The sharp decline in oil prices supported T-notes across the curve as some of the recent inflation concerns eased, although the Treasury move was considerably more contained than that seen in crude ahead of Wednesday's FOMC decision. Treasury supply was mixed, with the 2-year auction stopping through the when-issued yield by 0.5bps, while the subsequent 5-year auction tailed by 0.9bps.
• USD kept afloat despite oil prices tumbling lower. The welcome move lower in crude prices wasn't met with a proportionate move lower in US yields and FX, likely as expectations of a hawkish Fed at this week's meeting have remained, even when taking into account the positive geopolitical developments over the weekend. For now, the US and Iran have paused direct strikes on each other, with US President Trump today noting they are having deep talks with Iran. However, risks remain from Houthis' strikes on the Saudis, as well as risks to shipowners after an oil tanker blew up over the weekend after hitting a mine in the Strait of Hormuz.
• Looking ahead, highlights include BoJ Core CPI, Comments from RBA Governor Bullock, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include BoJ Core CPI, Comments from RBA Governor Bullock, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump said Iran is talking to the US about making a deal right now and very friendly talks are ongoing.
• US President Trump said Iran wanted to meet and that "we're meeting," while he added there was a chance a deal could be reached and that Iran had requested a meeting through surrogates. Trump stated there was plenty of time on Iran, talks were going well, and "we'll see what happens," as well as noted there was a good chance something would happen. Trump also said there was a chance the US would become involved if there were problems with the Houthis and noted he had not discussed the Abraham Accords with Saudi Arabia.
• US President Trump told Axios he decided to pause US strikes on Iran to give negotiations another chance, but stressed he could order a return to expanded military operations if diplomacy failed.
• Pakistani intelligence officials believed US President Trump could order a ground offensive in Iran, according to dpa via Yahoo Finance. At least two officials said Trump was believed to be planning a limited ground assault to cut off Iran's coastal region before any peace deal, despite domestic pressure and warnings from generals against such a move. One official said there were "so many signs" he was planning it, citing troop deployments, military movements and rhetoric.
• Regional sources said negotiations between Oman and Iran had made progress, but no agreement had been reached regarding the Strait of Hormuz, according to Axios. One proposal would allow Iran, Oman and other regional countries to collect "reasonable service fees" for maritime security, environmental protection and other services. Furthermore, one source pointed to the Strait of Malacca, where Malaysia, Indonesia and Singapore charge vessels for specific services rather than a blanket transit fee, as a possible model.
• Iran's Supreme Leader called on Hezbollah to continue armed resistance against Israel until Israeli forces completely withdrew from Lebanon, according to Tasnim.
• Iranian Deputy Foreign Minister Gharibabadi said the Iranian delegation had neither insisted on nor requested the continuation of negotiations, and had rejected a proposal to keep the southern shipping route open while talks with Oman continued.
• Iranian Foreign Ministry spokesperson said some countries in the region continued to be involved in the conflict and needed to stop, adding discussions with Oman regarding the Strait of Hormuz had been positive.
• Iranian Foreign Ministry spokesperson said Iran had not requested the resumption of talks with the US and that intermediaries were conveying messages to Washington, while the spokesperson also said Kuwait had effectively made its territory available to the US.
• Iran's Central Headquarters warned against the continued US blockade and warned that this US action is considered an extension of war in the region.
• Iranian and Omani negotiators were attempting to reach an agreement to restart shipping through the Strait of Hormuz, which would then allow Tehran and Washington to resume talks on ending the war, according to Bloomberg. Omani negotiators were reportedly optimistic an announcement signalling progress could be made in the coming days, although sources cautioned there was no guarantee given the volatile situation. Furthermore, one proposal involved reopening the Strait's middle passage, although it was believed to contain sea mines laid by Iran.
• Saudi Arabia's Defence Ministry said it intercepted drones launched from Iraqi territory that attempted to target oil facilities in the Eastern Province and Riyadh regions, according to Al Hadath. The ministry affirmed the Kingdom's legitimate right to defend itself, and it reserved the right to respond, while it stated the attacks had been launched from Iraq by Iran-affiliated militias.
• Yemeni Houthis claimed responsibility for the drones that targeted Saudi oil infrastructure.
• Iranian media reported explosions in Jordan, while Jordan's army said it had downed two drones.
• Israeli Channel 12, citing sources, reported that Prime Minister Netanyahu would present President Trump with updated intelligence on Iran's progress towards acquiring a nuclear weapon.
• Israel targeted the Ali Al Taher Heights in southern Lebanon with artillery fire, according to Fars citing Syrian sources.

US TRADE

• US stocks saw two-way price action, with the initial optimism in equities fading as the session progressed. Sentiment was initially supported by the US and Iran pausing strikes against each other over the weekend, which saw oil prices tumble. Crude hit its lows during the European morning as US equity futures traded around their peaks, although both moves began to retrace as US participants arrived. The downside in equities was concentrated in tech, with the Nasdaq closing lower while the S&P 500 was broadly flat and the Russell 2000 and Dow gained. The equal-weight S&P 500 (RSP) also outperformed, highlighting positive underlying breadth. Nvidia (NVDA) was weighed on by reports that the company is in talks with OpenAI to guarantee USD 250bln in financing for a data centre, while ASML (ASML) fell following reports that China has begun mass production of domestically developed DUV lithography equipment. The sharp decline in oil prices supported T-notes across the curve as some of the recent inflation concerns eased, although the Treasury move was considerably more contained than that seen in crude ahead of Wednesday's FOMC decision. Treasury supply was mixed, with the 2-year auction stopping through the when-issued yield by 0.5bps, while the subsequent 5-year auction tailed by 0.9bps.
• SPX +0.02% at 7,413, NDX -0.32% at 28,039, DJI +0.51% at 52,215, RUT +0.62% at 2,948.
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TARIFFS/TRADE

• China's MOFCOM called on the US to correct its approach and withdraw unilateral tariff measures imposed under Section 301 investigations. MOFCOM also said it opposed the politicisation and weaponisation of technology and trade issues following reports the US was preparing to investigate Chinese AI firms, while it added that many US AI companies had distilled Chinese models during training and development.

NOTABLE HEADLINES

• US President Trump said he had read a very good inflation report the other day, adding that costs were falling rapidly and prices would decline significantly once the war ended. Trump stated that Fed Chair Warsh was great but has a board, and that Warsh would do the right thing, while he knows what Warsh wants. Trump also reiterated that interest rates should be lowered.
• US Treasury Secretary Bessent said President Trump's tax cuts had delivered substantial relief to hardworking Americans and provided greater tax certainty and relief for low- and middle-income households.
• US President Trump's administration was set to launch a global partnership with more than 20 allies to accelerate the development of secure 6G wireless networks in an effort to counter China's influence, according to Politico.

DATA RECAP

• US Dallas Fed Manufacturing Index (Jul) 1.3 (Prev. 0.0)
• US Durable Goods Orders (Jun) M/M 0.3% vs. Exp. 1.6% (Prev. -4.5%)

FX

• USD kept afloat despite oil prices tumbling lower. The welcome move lower in crude prices wasn't met with a proportionate move lower in US yields and FX, likely as expectations of a hawkish Fed at this week's meeting have remained, even when taking into account the positive geopolitical developments over the weekend. For now, the US and Iran have paused direct strikes on each other, with US President Trump today noting they are having deep talks with Iran. However, risks remain from Houthis' strikes on the Saudis, as well as risks to shipowners after an oil tanker blew up over the weekend after hitting a mine in the Strait of Hormuz.
• EUR was ultimately flat on the day after failing to sustain the initial return to the 1.1400 handle, despite hawkish comments from ECB's Kazimir, who affirmed support for a hike in September.
• GBP lagged ahead of the BoE meeting this week, where policymakers are expected to keep rates on hold. The vote split will provide a better gauge of sentiment amongst members; consensus expects a 7-2 split.
• JPY traded indecisively with little impact seen following Japanese PM Takaichi’s press conference, where she commented that Japan must exit excessively tight fiscal policy, boost domestic investment, and put the economy on a growth path, while she said they will submit a bill for lowering the 8% sales tax on food once a meeting among lawmakers to debate the issue reaches an agreement.
• SNB expects to keep its policy rate at 0% until the end of 2027, according to Bloomberg citing sources. The view was reportedly based on current inflation forecasts, assuming no new shocks and taking into account recent FX moves, before beginning to raise rates thereafter.

FIXED INCOME

• T-notes rose across the curve as oil prices tumbled in the wake of the US and Iran pausing strikes over the weekend.

COMMODITIES

• Oil prices began the week significantly lower following the pause of strikes between the US and Iran.
• US President Trump said Venezuela has been doing a great job and that the US has a thousand-year supply of gasoline, while China doesn't.
• Abqaiq oil processing facility in eastern Saudi Arabia was reportedly set on fire in drone and missile attacks, according to Tasnim.
• Kazakhstan cut oil production to 1mln BPD on Sunday, less than half its June average, due to the closure of the CPC export terminal, according to a source.

GEOPOLITICAL

MIDDLE EAST

• Israeli forces advanced into Syrian territory from the western outskirts of Daraa, according to Fars citing Syrian sources.

RUSSIA-UKRAINE

• Ukraine's Foreign Minister said Iran's threats were baseless and that Tehran's regime was directly complicit in Russia's aggression against Ukraine by fuelling the war. The minister added Iran's statements were an attempt to divert attention from Russian attacks on civilian shipping in the Black Sea.

ASIA-PAC

NOTABLE HEADLINES

• China had started mass production of domestically developed DUV lithography equipment, marking another advance for its domestic semiconductor manufacturing industry, according to The Information.
• Japanese Prime Minister Takaichi said Japan had not yet met the conditions required for the government to declare an end to deflation. Takaichi also commented that Japan must exit excessively tight fiscal policy, boost domestic investment, and put the economy on a growth path. Furthermore, she said they are breaking away from years of excessive austerity and will seek to increase tax revenue by expanding GDP, while they won't resort to reckless fiscal spending and will submit a bill for lowering the 8% sales tax on food once a meeting among lawmakers to debate the issue reaches an agreement.

EU/UK

NOTABLE HEADLINES

• UK PM Burnham said he would seek cross-party talks on social care reform and would neither change nor abolish stamp duty on property purchases in the next Budget.
• UK Government moved to rule out two policy ideas floated in recent days, confirming Prime Minister Burnham would neither abolish council tax nor scrap stamp duty.
• ECB's Kazimir said second-round inflation effects were costly to reverse and the ECB had to act before they became visible, while he added that at least one more rate hike was needed as part of a measured response to inflation risks. He also stated a rate increase would be warranted even if inflation improved somewhat, while stronger and more persistent price pressures would require further tightening over coming quarters than currently expected. Furthermore, Kazimir said incoming data and geopolitical developments would have to be very convincing for him not to support another rate hike in September, noting the ECB had not surprised markets now and should not surprise them in September.

DATA RECAP

• German Ifo Current Conditions (Jul) 86.5 (Prev. 87.0)
• German Ifo Expectations (Jul) 86.7 (Prev. 84.1)
• German Ifo Business Climate (Jul) 86.6 vs. Exp. 86.1 (Prev. 85.6)