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US President Trump said Iran is talking to the US about making a deal right now and very friendly talks are ongoing, while he added they will end Iran's nuclear threat very quickly and that Iran is behaving again.
US President Trump said Iran wanted to meet and that "we're meeting," while he added there is a chance a deal could be reached.
APAC stocks were mostly negative amid a tech bloodbath and competition concerns following reports yesterday that China had started mass production of domestically developed DUV lithography equipment.
DXY traded little changed, 10yr UST futures traded range-bound, and Crude futures remained subdued overnight.
European equity futures indicate a flat cash market open, with Euro Stoxx 50 futures little changed after the cash market closed flat on Monday.
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SNAPSHOT

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IRAN CONFLICT

US President Trump said Iran is talking to the US about making a deal right now and very friendly talks are ongoing, while he added they will end Iran's nuclear threat very quickly and that Iran is behaving again.
US President Trump said Iran wanted to meet and that "we're meeting," while he added there is 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 that he had not discussed the Abraham Accords with Saudi Arabia.
US officials said that sanctions may damage Iran more than bombing and the Trump administration is said to focus on economic pressure to force an Iran deal, according to Axios.
Pakistani intelligence officials believe 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.
Oman's Foreign Minister held calls with counterparts from Iran, Saudi Arabia, Qatar, Kuwait and Egypt to discuss efforts to reduce tensions, while talks were focused on pursuing practical, fair and sustainable understandings through political and diplomatic channels, ensuring safe navigation through the Strait of Hormuz, and restoring the uninterrupted flow of trade and global supply chains, according to Iran International.
Iranian and Omani negotiators are 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 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.
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.
Yemeni Foreign Minister Designate said the government wants a peaceful resolution to conflict with the Houthis, but added they are prepared for escalation if Houthis continue to push them, while the official stated that Houthis are emboldened by a lack of serious international reaction to attacks on shipping and want to copy the Iranian Hormuz model in Bab Al-Mandeb.
Islamic Resistance of Iraq warned that every foolish move by the Saudis will be met with a decisive response, while it stated that the Saudi regime claims that Iraq is the source of attacks on some of its oil facilities are baseless claims, and are an attempt to justify the inability to respond effectively to Yemen’s attacks on their deep infrastructure.
More than seven explosions were heard in Erbil, northern Iraq, with the headquarters of separatists rocked, while the US consulate in Erbil was also reportedly targeted, according to IRIB.
Iran will maintain its special regime for passage of Russian vessels through the Strait of Hormuz, according to TASS.
US-led talks between Israel and Lebanon will take place in Rome on August 4th-6th, according to a State Department official, who noted significant momentum in the Israel-Lebanon peace track, while talks are to focus on redeployment and border issues in Lebanon.

US TRADE

EQUITIES

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

US Trade Representative Greer said in a Fox News interview that new Section 301 tariffs shouldn't cause economic effects they are not already facing and that tariff rates are comparable to previous tariffs, while he added talks with Mexico are focused on ensuring balanced trade.
US reportedly probes Chinese factories in Vietnam, stoking new levy fears.

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, and 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 is close to finalising its voluntary framework for AI companies to submit their most advanced models to the government before releasing them to the public, according to The Information.
US Senate voted to advance Trump nominee Clayton for Director of National Intelligence role.

APAC TRADE

EQUITIES

APAC stocks were mostly negative amid a tech bloodbath and competition concerns following reports that China had started mass production of domestically developed DUV lithography equipment, which had pressured ASML shares and the Nasdaq yesterday.
ASX 200 bucked the trend as strength in telecoms and the consumer sectors offset the weakness in miners, materials and resources.
Nikkei 225 briefly fell beneath the 62,000 level amid the tech-related losses, with Kioxia heavily pressured.
KOSPI triggered a circuit breaker with double-digit declines seen in Samsung Electronics and SK Hynix.
Hang Seng and Shanghai Comp were lower but with downside limited in Hong Kong amid the mixed performance among the local tech bluechips, while the mainland was subdued as trade frictions lingered with the US reportedly probing Chinese factories in Vietnam.
US equity futures remained subdued but with losses only marginal compared to the sell-off seen in Asia.
European equity futures indicate a flat cash market open, with Euro Stoxx 50 futures little changed after the cash market closed flat on Monday.

FX

DXY traded little changed after the dollar kept afloat yesterday despite oil prices tumbling lower. The 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. Money markets are pricing around a 40% chance of a hike this week, while Citadel Securities thinks the Fed could surprise by hiking, which would bolster Chair Warsh's credibility in the inflation fight.
EUR/USD languished near the prior day's trough after failing to sustain a return to the 1.1400 handle, despite hawkish comments from ECB's Kazimir, who affirmed support for a hike in September.
GBP/USD attempted to nurse losses after sliding beneath the 1.3300 handle, but with the recovery limited ahead of the central bank announcements this week, including from the BoE meeting, where policymakers are likely to keep rates on hold, while the vote split will provide a better gauge of sentiment amongst members, with expectations for a 7-2 split.
USD/JPY lacked direction and remained at the 163.00 handle following its recent indecisive performance and with little impact seen following Japanese PM Takaichi’s announcement that Japan must exit excessively tight fiscal policy and will submit a bill to lower the 8% sales tax on food once lawmakers reach an agreement.
Antipodeans were range-bound amid a quiet calendar and as participants await this week's risk events.
PBoC set USD/CNY mid-point at 6.7928 vs exp. 6.7730 (prev. 6.7911)

FIXED INCOME

10yr UST futures traded range-bound and took a breather after climbing across the curve as oil prices tumbled, while there were mixed results from the prior day's two Treasury note auctions as the 2-year auction was strong, stopping through the when-issued yield by 0.5bps, while the 5-year was soft.
Bund futures held on to energy-facilitated spoils but with prices overnight around the 125.00 level.
10yr JGB futures eked mild gains amid a quiet calendar and a liquidity auction for long-end JGBs.

COMMODITIES

Crude futures remained subdued after slumping due to the pause in strikes between the US and Iran, while President Trump commented that Iran is talking to the US about making a deal and very friendly talks are ongoing.
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.
Spot gold continued its pullback from the USD 4,100/oz level as metals were hit alongside the risk-off tone.
Copper futures faded the prior day's gains as risk sentiment was spooked alongside the sell-off in semiconductor stocks.

CRYPTO

Bitcoin retreated but prices remained above the USD 63,000 level.

NOTABLE ASIA-PAC HEADLINES

RBA Governor Bullock said the board is ready to hike the cash rate further if needed, while she noted the key question is if tightening already delivered is enough to slow inflation. Bullock also commented that policy works with a lag, meaning the full impact of this year's rate increases has yet to emerge.

GEOPOLITICS

MIDDLE EAST

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

RUSSIA-UKRAINE

US Senate is expected to start voting on Russia sanctions bill as soon as Tuesday, during Ukrainian President Zelensky's visit.

OTHER

US diplomats walked out of a UN Security Council meeting after France publicly criticised the Trump administration's human rights record.
US Treasury Department removed 84 targets from sanctions list, including a North Korean firm previously designated for supporting Pyongyang's nuclear missile programmes, while the move is part of a modernisation initiative to eliminate outdated targets, according to Yonhap.

EU/UK

DATA RECAP

UK BRC Shop Price Inflation (Jul) 0.9% vs. Exp. 1.2% (Prev. 1.2%)