EU Market Open: Europe set for flat open despite still-elevated energy benchmarks; US CPI ahead

Iran’s Secretary of the Supreme National Security Council said the Strait of Hormuz would not open until the US accepts Iran's conditions.
Crude futures edged higher amid the ongoing geopolitical uncertainty; spot gold reclaimed USD 4,400/oz to the upside.
APAC stocks traded mixed amid geopolitical uncertainty, earnings releases and as participants await US CPI data; Europe is set for a flat open.
DXY traded little changed as markets await US inflation data over the next couple of days and in the absence of any major fresh catalysts.
10yr UST futures traded little changed following the prior day's rebound despite continued upside in oil.
Looking ahead, highlights include German/Italian CPI Final (Jul), US CPI (Jul), IEA OMR, OPEC MOMR, Supply from UK, Germany & US.

LOOKING AHEAD

Highlights include German/Italian CPI Final (Jul), US CPI (Jul), IEA OMR, OPEC MOMR, Supply from UK, Germany & US.
Click for the Newsquawk Week Ahead.

IRAN CONFLICT

US President Trump said they totally control the Strait of Hormuz, while he said regarding the flight change during the return trip from Turkey in early July that he was following what the Secret Service said and the plane he flew on was at greater risk. Furthermore, Trump said that he doesn't trust Iran.
US military intelligence assessment said Iran’s strategic priority has shifted from its nuclear program to the Strait of Hormuz, NBC reports, citing sources. Military officials also told President Trump that the US could try to take the strait by force but that it would be long, deadly and very costly, with no certainty that the US would win.
Iran’s Secretary of the Supreme National Security Council Razaei said the Strait of Hormuz would not open until the US changed its behaviour and accepted Iran's conditions, while he added that America must end the war, pay Iran's frozen money, and that the war must end across the entire region, including Lebanon and Gaza, as well as other conditions that had been transferred through intermediaries.
IRGC spokesperson warned that if a threat to Iran arose again, hundreds of thousands of miles of energy pipelines, thousands of power plants, all American and non-American systems, as well as global infrastructure connected to the internet, would be at risk.
Israel conducted strikes on southern Lebanon, according to IRIB. Israeli artillery attack reported on eastern Gaza and Al-Bureij camp, according to IRNA.
Explosions were heard in Yemen's Marib city, while Yemen's Houthis said they attacked a Saudi ship carrying military equipment in the Bab el-Mandeb.

US TRADE

EQUITIES

US stocks ended the day with a downside bias, although the Russell 2000 outperformed and saw gains, while sectors were mixed as Utilities and Energy sat at the top of the pile, with the latter supported by rising oil prices, albeit in very choppy trade. Ultimately, the energy space was buoyed after reports that a Saudi ship was targeted near Bab al-Mandab by Yemen's Houthis. Conversely, Communication Services and Consumer Discretionary were the laggards, as the former was hit by Alphabet weakness. Overall newsflow, aside from geopolitics, was sparse as desks await US CPI on Wednesday, which will be key in shaping expectations for the September FOMC meeting.
SPX -0.32% at 7,728, NDX -0.33% at 29,525, DJI -0.34% at 53,797, RUT +0.32% at 3,027.
Click here for a detailed summary.

TARIFFS/TRADE

Canada and US trade officials are mapping out a potential deal to pitch to Trump next week, according to CBC News.

NOTABLE HEADLINES

Fed's Goolsbee (2027 Voter) said labour market indicators showed stability but not strong performance. Goolsbee stated that as long as the consumer remained healthy, the economy would too, while he added that the biggest problem facing the economy right now was inflation.
Fed's Collins (2028 voter) said poor Americans are struggling to make ends meet, while she warned that the Fed may need to raise rates to cool inflation, according to FT.
US President Trump weighs calling for capital gains tax cuts as an effort for a Midterm boost, according to Bloomberg.

APAC TRADE

EQUITIES

APAC stocks traded mixed amid geopolitical uncertainty, earnings releases and as participants await US CPI data.
ASX 200 retreated as attention turned to earnings and with the top-weighted financial sector in the red after CBA posted full-year results, which mildly beat estimates and showed a 7% increase in cash profit, although its CEO warned that economic growth is slowing.
Nikkei 225 was choppy on return from the holiday closure and amid a lack of tier-1 data, while participants continued to reflect on recent currency moves and increased BoJ rate hike expectations.
KOSPI rallied on tech momentum and futures triggered a sidecar, with firm gains seen in both Samsung Electronics and SK Hynix propelling the index higher.
Hang Seng and Shanghai Comp were mixed, with the Hong Kong benchmark pressured as markets await earnings results, including Tencent kicking off Chinese tech earnings, while sentiment was also contained after the PBoC skipped its 7-day Reverse Repo operations for a second consecutive day.
US equity futures were contained following the prior day's negative bias and as CPI data looms.
European equity futures indicate a flat cash market open with Euro Stoxx 50 futures -0.1% after the cash market closed with gains of 0.2% on Tuesday.

FX

DXY traded little changed as markets await US CPI & PPI data over the next couple of days and, in the absence of any major fresh catalysts, while recent Fed comments continued to show that combating inflation is the main Fed priority, with Fed's Goolsbee noting that the biggest problem facing the economy right now was inflation. Elsewhere, optimism over the reopening of the Strait of Hormuz continued to fade following attacks on ships in both key waterways in the region, and after Iran reaffirmed that demands must be met for a reopening of Hormuz.
EUR/USD was lacklustre in the absence of fresh drivers and with the FX space showing signs of the summer doldrums.
GBP/USD struggled for direction after recent oscillations through the 1.3500 level and as the UK data calendar remained extremely quiet ahead of GDP and output data on Thursday.
USD/JPY eked slight gains but with price action contained within a tight range at the 159.00 handle amid a lack of key data and ongoing BoJ September rate hike bets.
Antipodeans were mixed following the two-way moves in AUD/USD in the aftermath of the RBA meeting and press conference, while NZD/USD retested this week's lows.
PBoC set USD/CNY mid-point at 6.7882 vs exp. 6.7430 (prev. 6.7900).

FIXED INCOME

10yr UST futures traded little changed following the prior day's rebound despite continued upside in oil, while price action was contained as participants await the US CPI data and 10yr note auction.
Bund futures mildly pulled back after recent whipsawing and with demand contained by supply.
10yr JGB futures trickled lower amid further BoJ rate hike bets, with money markets now pricing a 59% chance for a hike next month, while the demand was also not helped by a weaker-than-previous 10yr inflation-indexed JGB auction.

COMMODITIES

Crude futures edged higher amid the ongoing geopolitical uncertainty as Iran digs in its heels, with Supreme National Security Council Secretary Razaei stating that the Strait of Hormuz would not open until the US changed its behaviour and accepted Iran's conditions, while there were also recent reports of vessels targeted in the Bab el-Mandeb and Gulf of Oman.
US Private Inventory Data: Crude Oil Stock Change (Aug/07)(bbls) +9.1mln (exp. -0.5mln), Gasoline -1.5mln (exp. -1.6mln), Distillate -0.6mln (exp. -1.6mln), Cushing +1.6mln.
US Energy Secretary said the seven-day average for oil leaving the Strait of Hormuz was currently up to almost 9mln BPD.
EIA STEO sees US oil output to average 13.83mln BPD in August (vs. 13.82mln BPD in July) and 13.77mln BPD in September, while world oil output in 2026 is seen at 100.8mln BPD (Prev. 101.9mln BPD), 2027 at 109.7mln BPD. Furthermore, world oil demand in 2026 is seen at 102.7mln BPD (Prev. 102.8mln BPD) and 2027 at 105.0mln BPD (Prev. 104.8mln BPD).
Spot gold resumed this month's rebound and reclaimed the USD 4,400/oz level, while attention turns to the US CPI report.
Copper futures continued this week's sideways price action amid the mixed risk appetite in stocks.

CRYPTO

Bitcoin eked out marginal gains in quiet trade and remained beneath the USD 64,000 level.

NOTABLE ASIA-PAC HEADLINES

Japanese PM Takaichi may reshuffle the cabinet mid-September at the earliest.
New Zealand PM Luxon said he has the support of the National Party and announced he won a confidence vote on his leadership, while he also commented that they are going back to work.

GEOPOLITICS

MIDDLE EAST

Explosions and gunfire were reportedly heard in the Sayyidah Zainab area located south of Syria's Damascus, according to Mehr News Agency.

RUSSIA-UKRAINE

Ukraine's Air Force said guided bombs were fired at southern Dnipropetrovsk and drones were headed to Sumy from the north. It was separately reported that a shopping centre in Zaporizhzhia was on fire following an enemy air strike, according to Ukraine media.
Ukraine reportedly halted an intense campaign of drone strikes on oil tankers using Russia's critical Black Sea port of Novorossiysk after a request at the end of last month from US VP Vance, according to Ukrainian officials cited by FT.
White House official told Al Jazeera that President Trump remains optimistic about the possibility of reaching a peace agreement between Russia and Ukraine.

OTHER

North Korea fired at least one suspected ballistic missile which fell outside of Japan's EEZ.

EU/UK

NOTABLE HEADLINES

UK PM Burnham said the government was looking at more support for businesses, adding it was facing a difficult financial outlook and would not bring forward any measures that could not be funded. He also said the government was in a position with limited room for manoeuvre on support.
UK PM Burnham admitted in an interview with the BBC that the cost of living help is not enough and hinted at further support. Burnham spoke regarding an overhaul of train fares and "more public control" of energy, water and housing, but did not give details on how he would bring this about, while Burnham said he would like to bring down the cost of doing business and that the government would look at business rates "more broadly".