EU Market Open: Europe primed for firm open after APAC strength; DXY attempts to build on gains into PPI

Pakistan's key mediator has held a second meeting with Iran's Foreign Minister Araghchi and is seeking to extend the 60-day truce, according to an informed source cited by Al Arabiya.
Strait of Hormuz authority rejected US claims and said the waterway remains blocked until Iran's conditions are met, according to Press TV.
Crude futures initially declined but clambered off worst levels, with price action indecisive amid the absence of any major geopolitical updates overnight.
USD/JPY saw a bout of mild pressure late in the session after Bloomberg sources said that the Takaichi government is said to support a faster BoJ rate hike.
APAC stocks were predominantly in the green as the region took its cue from the mild positive handover from Wall Street; European equity futures indicate a positive cash market open.
Looking ahead, highlights include UK GDP (Jun/Q2), Trade Balance (Jun), Swedish/Spanish Inflation Final (Jul), EU Industrial Production (Jun), US Initial Jobless Claims (Aug/08), PPI (Jul), Norges Bank Policy Announcement (Aug). Speakers include Fed's Hammack & Barkin, Norges Bank's Bache. Supply from the US. Earnings from Applied Materials, RWE, Antofagasta & Maersk.

As of 06:20BST/01:20EDT

LOOKING AHEAD

Highlights include UK GDP (Jun/Q2), Trade Balance (Jun), Swedish/Spanish Inflation Final (Jul), EU Industrial Production (Jun), US Initial Jobless Claims (Aug/08), PPI (Jul), Norges Bank Policy Announcement (Aug). Speakers include Fed's Hammack & Barkin, Norges Bank's Bache. Supply from the US. Earnings from Applied Materials, RWE, Antofagasta & Maersk.
Click for the Newsquawk Week Ahead.

IRAN CONFLICT

White House official said US sanctions and a naval blockade have left Iran completely bankrupt, while the official stated President Trump has many tools to pressure Tehran in the coming months, according to Al Jazeera citing media reports.
Strait of Hormuz authority rejected US claims and said the waterway remains blocked until Iran's conditions are met, according to Press TV.
Iranian political and security source told Al-Mayadeen the Strait of Hormuz has not been opened, and Iran has not made any change or even modification to its policy. The source warned against any ship that violates existing Iranian procedures and regulations in the Strait of Hormuz, adding that large ships cannot cross due to existing risks and that any ship failing to comply with Iranian procedures may face technical problems or safety risks. Furthermore, the source reiterated that the Strait of Hormuz is under Iranian control and management.
Iranian Foreign Minister Araghchi posted, "Countries like France should stop lecturing the world about “human rights” and international law. The hypocrisy is blatant and embarrassing. Your backing of Israel’s genocide in Gaza—and aggression against Iran—has destroyed whatever moral high ground you imagined you had."
Iranian Foreign Ministry spokesperson said a foreign ship caused pollution on the coast of Qeshm Island and Iran cannot remain indifferent to pollution on its coast, while he added that every party benefiting from commercial traffic through the Strait of Hormuz must contribute to addressing environmental damage in the Gulf.
Pakistan's Defence Minister met with Iran's ambassador to Islamabad and called for strengthening bilateral cooperation with Iran, according to IRNA.
Pakistan's key mediator, Interior Minister Senator Naqvi, has held a second meeting with Iran's Foreign Minister Araghchi and is seeking to extend the 60-day truce, according to an informed source cited by Al Arabiya. Pakistan is working to keep the diplomatic track open by extending the 60-day period, and mediators need additional time to address outstanding issues between the US and Iran, although the Pakistani mediator is optimistic about extending the 60-day period.
Iraq's PM said they will not allow their territory to be used as a launching pad for any aggression against neighbouring countries.
Arab sources reported drone attacks by Yemeni armed forces on Saudi mercenaries in the port of Al-Mukha, according to Fars.
US President Trump's administration criticised Israeli Defence Minister Katz's remarks about maintaining the occupation of southern Lebanon, stressing the comments contradict commitments Israel made under the framework agreement with the US and Lebanon, according to Axios.
Israeli artillery targeted the vicinity of Ali Al-Tahir Hill in Lebanon, according to Al-Mayadeen.
Israeli security source noted escalation of settler violence in the West Bank and warned the area has become a powder keg that could explode at any moment, according to Haaretz.

US TRADE

EQUITIES

US stocks traded higher on Wednesday, with the Nasdaq outperforming as strong earnings from CoreWeave (CRWV), Lumentum (LITE), Super Micro Computer (SMCI) and Nebius (NBIS) supported the AI trade. The equal-weight S&P 500 (RSP) posted more modest gains, while sectors were predominantly firmer. Real Estate, Technology and Consumer Staples outperformed, while Consumer Discretionary, Materials and Communication Services lagged. The major macro event of the session was the July CPI report, which came in line with expectations. The report saw money markets increase confidence in a September hold, while still maintaining expectations for a 25bps hike by year-end. Overall, the inflation data gives the Fed greater scope to remain patient, particularly following last week's weak July jobs report, although it was not soft enough to eliminate the prospect of further tightening later in the year.
SPX +0.26% at 7,748, NDX +0.74% at 29,743, DJI -0.04% at 53,775, RUT +0.61% at 3,045.
Click here for a detailed summary.

TARIFFS/TRADE

Canada and the US are not ready to make a tariff deal, while Canada is unsatisfied with the latest US offer, according to CBC. It was separately reported that Ottawa weighs a proposal on auto tariffs as it pressures the US for reprieve, according to The Globe and Mail.
Mexico is pressing the US to reduce tariffs on North American autos as part of discussions over reworking the USMCA, according to people familiar with the matter cited by WSJ.

NOTABLE HEADLINES

US President Trump signed a memorandum authorising US law enforcement to use cyber tools to target criminal organisations operating in foreign jurisdictions.
US President Trump announced that White House Press Secretary Leavitt will leave her role at the end of the month so she can spend more time with family.
US Commerce Secretary Lutnick said they will be announcing an Apple (AAPL) Mac mini factory in Texas on Thursday, while he also stated that Ford (F) is bringing more manufacturing and jobs to the US because of tariffs.

APAC TRADE

EQUITIES

APAC stocks were predominantly in the green as the region took its cue from the mild positive handover from Wall Street, where equities were underpinned by earnings, and September rate hike bets were unwound after in-line CPI data.
ASX 200 bucked the trend amid various earnings releases, while RBA Assistant Governor Kent stuck to the hawkish-leaning script in which he noted the possibility of rates increasing further if risks materialise, but acknowledged evidence suggests that monetary policy in Australia is somewhat restrictive, and that the tightening earlier this year is working.
Nikkei 225 rallied amid the tech momentum and following softer-than-expected PPI data for Japan.
KOSPI outperformed as renewed semiconductor strength lifted the index into a technical bull market.
Hang Seng and Shanghai Comp diverged, with sentiment initially dampened in Hong Kong as participants reflected on earnings, including mixed results from Tencent, while gains in the mainland were contained after the PBoC reiterated its support pledges in its quarterly implementation report, but refrained from 7-day reverse repo operations for the third consecutive day.
US equity futures were range-bound overnight as participants await the next market catalysts.
European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.5% after the cash market closed with losses of 0.3% on Wednesday.

FX

DXY traded flat and languished around the 100.00 level after rebounding from the initial pressure seen in reaction to the inline July CPI report, which unwound some September rate hike bets, while the recovery was facilitated by a rebound in the US 2yr yield, as a 25bps hike is still fully priced by year-end. Aside from the CPI data, there was little else to drive price action, and participants now look ahead to today's PPI data.
EUR/USD sat around this week's trough after it ultimately gave up ground in post-CPI whipsawing.
GBP/USD remained lacklustre after retreating beneath the 1.3500 handle and as UK GDP data looms.
USD/JPY took a breather after yesterday's intraday rebound and return to the 159.00 territory, while there was little reaction seen to the softer-than-expected Japanese PPI data, although there was a bout of mild pressure late in the session after a report that the Takaichi government is said to support a faster BoJ rate hike.
Antipodeans weakened after recent price swings and with underperformance in NZD/USD following softer 1yr and 2yr inflation expectations.

FIXED INCOME

10yr UST futures eked slight gains but with upside limited after a choppy reaction to the inline US CPI data, which saw the Treasury curve bull steepen, led by declines in front-end yields, while the latest 10-year note auction was not as strong as the previous but remained better than recent averages, pointing to healthy underlying demand for duration.
Bund futures lacked direction following recent whipsawing and uneventful German CPI data.
10yr JGB futures were subdued after recent fluctuations, while softer-than-expected PPI data did little to spur prices.

COMMODITIES

Crude futures initially declined but clambered off worst levels, with price action indecisive amid the absence of any major geopolitical updates overnight and despite the Strait of Hormuz authority rejecting US claims, stating that the waterway remains blocked until Iran's conditions are met, while some headwinds were seen yesterday following the largest build in weekly EIA crude inventories in more than three years.
Spot gold was choppy with early gains pared after hitting resistance near the USD 4,450/oz level.
Copper futures failed to benefit from the mostly constructive mood and extended on the prior day's retreat amid quiet catalysts.

CRYPTO

Bitcoin eked mild gains with price action choppy and oscillating around USD 63,500.

NOTABLE ASIA-PAC HEADLINES

Japanese PM Takaichi's government is said to support a faster BoJ rate hike, while market sources say the BoJ could raise rates in September or October, according to Bloomberg
RBA's Kent said the Board sets the level of the Cash Rate it judges will achieve low and stable inflation and full employment, while he added that borrowing costs have increased, mortgage payments have risen and conditions in the established housing market have turned down. Kent stated evidence suggests that monetary policy in Australia is somewhat restrictive, and that the tightening earlier this year is working, but also noted the possibility of rates increasing further if risks materialise.

DATA RECAP

Japanese PPI MM (Jul) 0.1% vs. Exp. 0.6% (Prev. 0.4%)
Japanese PPI YY (Jul) 7.2% vs. Exp. 7.4% (Prev. 7.1%)
New Zealand 1-year Inflation Expectations (Q3) 2.6% (Prev. 3.4%)
New Zealand 2-year Inflation Expectations (Q3) 2.3% (Prev. 2.5%)

GEOPOLITICS

MIDDLE EAST

US is on track to withdraw all forces from Iraq by September 30th, ending its military presence there since the 2003 invasion, according to ABC News.

RUSSIA-UKRAINE

Russia hit Ukraine's Izmail port, while port infrastructure was on fire following the attack, according to local authorities.

OTHER

China and Indonesia vessels reportedly wrap up practical maritime drills, including formation manoeuvres and refuelling in waters east of Taiwan.
Japanese Foreign Minister Motegi strongly protested Russian President Putin's visit to disputed Kuril Islands and said that the northern territories are Japan's inherent territory historically and under international law.

EU/UK

NOTABLE HEADLINES

DATA RECAP

UK RICS House Price Balance (Jul) -30 vs Exp. -30 (Prev. -33, Rev. -32)