US stocks mostly declined amid continued tech weakness and after hawkish-leaning FOMC Minutes - Newsquawk Asia-Pac Market Open

• US stocks saw two-way price action on Wednesday but ultimately closed mixed with a downward bias as recent big-tech weakness continued to weigh on indices, while the equal-weight S&P was marginally lower. Elsewhere, T-notes were firmer for a lot of the session but ultimately settled little changed with initial upside led by the front-end after US President Trump called on Fed Governor Cook to resign and reports suggested he is considering firing her amid alleged mortgage fraud. However, the upside then faded into the FOMC Minutes, which leaned hawkish, with the majority of participants more concerned about risks to inflation over the labour market, although the minutes do not incorporate the latest NFP data with chunky two-month revisions.
• USD marginally softened as it took a breather from recent strength, but with the downside stemmed by hawkish FOMC Minutes from the July meeting that took place before the July NFP (and US CPI/PPI), which marked the third month of slowing jobs growth, while members' views on inflation sparked a hawkish reaction as a majority of participants judged the upside risk to inflation as the greater of these two risks. Several participants also commented that the current target range for the FFR may not be far above its neutral level, a view that Fed's Schmid (2025 voter) and Hammack (2026 voter) have floated recently. Nonetheless, the buck faced headwinds from continued questions over Fed independence after FHFA Director Pulte sparked the concern with a letter to AG Bondi concerning possible mortgage fraud committed by Fed Governor Cook, while President Trump thereafter called for Cook's resignation and was reported to be considering firing Cook if she doesn't resign.
• Looking ahead, highlights include New Zealand Trade Data, Australian & Japanese Flash PMIs, Supply from Japan.

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LOOKING AHEAD

• Highlights include New Zealand Trade Data, Australian & Japanese Flash PMIs, Supply from Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks saw two-way price action on Wednesday but ultimately closed mixed with a downward bias as recent big-tech weakness continued to weigh on indices, while the equal-weight S&P was marginally lower. Elsewhere, T-notes were firmer for a lot of the session but ultimately settled little changed with initial upside led by the front-end after US President Trump called on Fed Governor Cook to resign and reports suggested he is considering firing her amid alleged mortgage fraud. However, the upside then faded into the FOMC Minutes, which leaned hawkish, with the majority of participants more concerned about risks to inflation over the labour market, although the minutes do not incorporate the latest NFP data with chunky two-month revisions.
• SPX -0.24% at 6,396, NDX -0.58% at 23,250, DJI +0.04% at 44,938, RUT -0.32% at 2,269.
• Click here for a detailed summary.

FOMC MINUTES

• FOMC Minutes stated that almost all participants viewed it as appropriate to maintain the benchmark interest rate in the 4.25-4.5% range, as well as noted that it would take time to have more clarity on the magnitude and persistence of higher tariffs' effects on inflation. Regarding the balance of risks, participants assessed that the downside risk to employment had meaningfully increased. However, a majority judged that upside risks to inflation were the greater risk when compared to the labour market, while several viewed the two risks as roughly balanced, and a couple considered the downside risk to employment the more salient risk. Several participants, drawing on information provided by business contacts or business surveys, expected that many companies would increasingly have to pass through tariff costs to end-customers over time. However, a few participants reported that business contacts and survey respondents described a mix of strategies as being undertaken to avoid fully passing on tariff costs to customers. Furthermore, several participants commented that the current target range for the federal funds rate may not be far above its neutral level; among the considerations cited in support of this assessment was the likelihood that broader financial conditions were either neutral or supportive of stronger economic activity.

TARIFFS/TRADE

• German Economy Ministry said there is no clarity yet on the details of US tariffs.
• China initiated a WTO dispute against Canada over surcharges and quotas on steel and aluminium imports.
• China deepens energy trade with Russia, making it a top source of crude oil imports amid suspension of US purchases, while an analyst suggested halted US crude imports could serve as a bargaining tool for Beijing, according to SCMP.

NOTABLE HEADLINES

• US President Trump told aides he is considering attempting to fire Fed Governor Cook after one of his housing officials accused her of mortgage fraud, according to sources via WSJ.
• Fed Chair Candidate Zervos said the balance sheet is no longer a kicker for the economy and Fed policies are very restrictive, while he added that inflation is coming down and wouldn't over-emphasise the Fed September meeting.
• WSJ's Timiraos wrote "The Fed minutes suggest broad support for last month's decision to hold rates steady. They imply that had it not been for the crummy payroll revisions two days after the meeting, a rate cut in September could very much be in doubt."

FX

• USD marginally softened as it took a breather from recent strength, but with the downside stemmed by hawkish FOMC Minutes from the July meeting that took place before the July NFP (and US CPI/PPI), which marked the third month of slowing jobs growth, while members' views on inflation sparked a hawkish reaction as a majority of participants judged the upside risk to inflation as the greater of these two risks. Several participants also commented that the current target range for the FFR may not be far above its neutral level, a view that Fed's Schmid (2025 voter) and Hammack (2026 voter) have floated recently. Nonetheless, the buck faced headwinds from continued questions over Fed independence after FHFA Director Pulte sparked the concern with a letter to AG Bondi concerning possible mortgage fraud committed by Fed Governor Cook, while President Trump thereafter called for Cook's resignation and was reported to be considering firing Cook if she doesn't resign.
• EUR was ultimately flat on the day with little reaction in the single currency following comments from ECB's Lagarde who said recent trade deals have alleviated but not eliminated uncertainty and the Eurozone economy has proven resilient in the face of a challenging global environment.
• GBP weakened on the day despite early support from the hotter-than-expected UK CPI data, with the initial moves faded as participants looked through the report. A surge in airfares triggered the larger-than-expected services CPI reading, with ONS attributing some of this to the timing of school holidays, while ING's Economist James Smith wrote that the rise in services inflation, largely driven by airfares, is a component the BoE is less concerned about when it comes to overall inflationary pressure and "The BoE is more concerned about food inflation, which hasn't changed much".
• JPY strengthened and USD/JPY briefly tested the 147.00 level to the downside which coincided with the early pressure in stocks.
• Swedish Riksbank maintained its rate at 2.00%, as expected, while it said there is still some probability of a further interest rate cut this year, in line with the June forecast.

FIXED INCOME

• T-notes saw two-way price action as Trump called on Fed Governor Cook to resign, while the FOMC Minutes leaned hawkish.

COMMODITIES

• Oil prices gained with the upside driven by bullish weekly EIA crude inventory data which showed a much larger-than-expected draw.
• US EIA Weekly Crude Stocks w/e -6.014M vs. Exp. -1.759M (Prev. 3.036M).
• Chile's Codelco estimates copper output for the El Teniente mine at 316k tonnes this year.

GEOPOLITICAL

MIDDLE EAST

• Israeli PM Netanyahu ordered a reduction in timelines for taking control of Hamas strongholds and defeating the group, according to the PM’s office.
• Israeli military spokesman said after a clash with Hamas, that Israel entered the first stage of its planned attack on Gaza City and Israeli forces already have a hold on the outskirts of Gaza City.
• Iran's Foreign Minister said they have not reached the point of maturity where "effective" nuclear talks with the US can take place.

RUSSIA-UKRAINE

• Chair of NATO Military Committee said there was a great candid discussion among NATO chiefs of defence and confirmed their support for Ukraine. It was later reported that a Western official said a small group of military leaders are continuing discussions in Washington to work out options for security guarantees for Ukraine.
• Russian Foreign Minister Lavrov said they are in favour of a security guarantee for Ukraine that is reliable. Lavrov also said they didn't hear any constructive ideas from Europeans at their meetings with US President Trump and only saw the EU's attempts to aggressively escalate the Ukraine situation, while he accused the EU of attempting clumsily to influence Trump’s stance on Ukraine.
• UK government announced new sanctions targeting Russian evasion tactics and cryptocurrency networks such as Grinex and Meer exchanges behind the RUB-backed token A7A5. It was separately reported that Russia introduced retaliatory sanctions against 21 British and Western nationals.

OTHER

• North Korea has a heavily fortified, covert military base that could house its newest long-range ballistic missiles, which are potentially capable of striking the US mainland, according to a new report cited by the WSJ.

ASIA-PAC

NOTABLE HEADLINES

• China considers allowing yuan-backed stablecoins for the first time to boost currency internationalisation, while Chinese authorities are expected to approve a roadmap for further yuan internationalisation later this month, according to Reuters sources.
• Leading municipalities in China are reportedly seeking to achieve at least 70% self-sufficiency in AI chips by 2027 and are looking to redraw a national supply chain dominated by Nvidia (NVDA), according to Nikkei.
• White House sources are saying new White House TikTok account does not indicate progress in Trump-China talks over TikTok, according to Fox's Gasparino.

EU/UK

NOTABLE HEADLINES

• ECB's Lagarde said recent trade deals have alleviated but not eliminated uncertainty and the Eurozone economy has proven resilient in the face of a challenging global environment. Furthermore, Lagarde noted that projections show growth is expected to slow in Q3, while she added the ECB will factor the implications of the EU-US trade deal for the Euro area economy into the September projections, and will guide decisions over the coming months.

DATA RECAP

• UK CPI YY (Jul) 3.8% vs. Exp. 3.7% (Prev. 3.6%)
• UK Core CPI YY (Jul) 3.8% vs. Exp. 3.7% (Prev. 3.7%)
• German Producer Prices MM (Jul) -0.1% vs. Exp. 0.1% (Prev. 0.1%)
• German Producer Prices YY (Jul) -1.5% vs. Exp. -1.3% (Prev. -1.3%)
• EU HICP Final YY (Jul) 2.0% vs. Exp. 2.0% (Prev. 2.0%)