EU Market Open: Europe primed for a lower open amid weak APAC lead and continued Oil strength

US President Trump reiterated US control of the Strait of Hormuz, and that Iran wants to make a deal, but also stated that Iran won't make the deal he thinks is necessary and he is not seeking an extension of the Iran MoU.
An understanding to extend the ceasefire between the US and Iran under the Islamabad MoU has been reached and agreed in principle, according to Pakistani journalist Anas Malick.
US President Trump said he doesn't think Oman behaves very well, while he said they would handle them very easily.
UKMTO said it received a report of an incident in the Strait of Hormuz, where a vessel was struck by an unknown projectile while conducting an outbound transit of the Strait of Hormuz.
APAC stocks mostly declined following the weak lead from Wall Street, Crude futures were kept afloat, European equity futures indicate a lower cash market open.
Looking ahead, highlights include UK Jobs Report (Jun), Average Earnings (Jun), EU/German ZEW Economic Sentiment Index (Aug), US ADP Employment Change Weekly, Import/Export Prices (Jul), Housing Starts (Jul), Industrial/Manufacturing Production (Jul), Atlanta Fed GDP (Q3). Comments from ECB's Lane. Supply from UK. Earnings from Home Depot & Baidu.

As of 06:20BST/01:20EDT

LOOKING AHEAD

Highlights include UK Jobs Report (Jun), Average Earnings (Jun), EU/German ZEW Economic Sentiment Index (Aug), US ADP Employment Change Weekly, Import/Export Prices (Jul), Housing Starts (Jul), Industrial/Manufacturing Production (Jul), Atlanta Fed GDP (Q3). Comments from ECB's Lane. Supply from UK. Earnings from Home Depot & Baidu.
Click for the Newsquawk Week Ahead.

IRAN CONFLICT

An understanding to extend the ceasefire between the US and Iran under the Islamabad MoU has been reached and agreed in principle, according to Pakistani journalist Anas Malick.
US President Trump said he doesn't think Oman behaves very well, while he said they would handle them very easily when asked regarding the threat to Oman. Trump reiterated US control of the Strait of Hormuz, and that Iran wants to make a deal, but also stated that Iran won't make the deal he thinks is necessary and he is not seeking an extension of the Iran MoU.
US special envoy Kushner said conversations between the US and different areas of Iran’s government are more robust than they have ever been, but they are not there yet on an understanding. However, he noted positive and active discussions and that Trump will be patient.
Turkish President Erdogan held a call with US President Trump in which they discussed bilateral ties, Iran and Gaza conflicts, as well as the Pakistan and Saudi defence pact. Erdogan told Trump it is important to continue talks with Iran and take advantage of diplomacy, with Turkey ready to contribute, while he also stated Israel was attacking Palestinians in Gaza when the second phase of the peace plan was supposed to take effect. Furthermore, a Turkish diplomatic source said Turkey's Foreign Minister discussed efforts to open the Strait of Hormuz and continue the US-Iran ceasefire in a call with his Iranian counterpart.
UKMTO said it received a report of an incident in the Strait of Hormuz, where a vessel was struck by an unknown projectile while conducting an outbound transit of the Strait of Hormuz, causing damage to the engine room and a crew casualty.
Strait of Hormuz vessel crossings remained slow, with six vessels transiting on Monday, according to preliminary data.
Maritime navigation data showed that an oil tanker belonging to an Emirati company was stopped, whilst passing through the Strait of Hormuz.
UAE's Foreign Minister discussed the latest regional developments during a phone call with Kuwait's Foreign Minister.
There was no agreement between Israeli PM Netanyahu and US Envoy Kushner regarding the continuation of the assassinations, while Netanyahu made it clear that he would continue, according to i24news citing sources.
Board of Peace is considering abandoning its phased framework for Hamas’s disarmament amid Israeli pushback to the US-controlled body’s original plan, according to a source directly familiar with the negotiations cited by The Times of Israel.
Israeli warplanes targeted the areas of Mansouri and Deir Saryan in southern Lebanon, according to Fars News Agency.
Lebanese media reported intermittent Israeli shelling on the high ground of Jabal al-Rafie on the outskirts of Nabatieh al-Fawqa in southern Lebanon, according to Sky News Arabia.

US TRADE

EQUITIES

US stocks ended the first session of the week in the red as US-Iran newsflow dominated the tape, in otherwise a light session of headlines in typical summer trading conditions. Recapping, sources said the 60-day period between Iran and the US has been extended, while a Senior Iranian official said Iran has decided to shift its policy from defensive to a 'fully offensive' one, and Trump stated there are ongoing back channels with the IRGC, which the IRGC denied. As such, slight risk-off price action was seen, as Treasuries weakened and oil gained, settling at highs. Given this, sectors were exclusively in the red, aside from Energy, with Communication Services and Consumer Staples the laggards; there was no tier 1 US data or Fed speak, as earnings season begins to wind down. Despite saying that, it is the retailers this week, with Home Depot (HD) the highlight tomorrow. On the stock-specific front, there was little new, but the memory ETF DRAM and memory names rallied once again, helped by US Commerce Secretary Lutnick noting the Trump administration opposes Apple (AAPL) using Chinese memory chips. Once again, the calendar for scheduled risk events this week is light, with FOMC Minutes on Wednesday the highlight.
SPX -0.52% at 7,745, NDX -0.17% at 29,995, DJI -0.51% at 53,465, RUT -0.35% at 3,058.
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TARIFFS/TRADE

US President Trump and Canadian PM Carney spoke late on Monday after several days of trade negotiations between the countries, according to a Bloomberg reporter citing sources
US and Canada were discussing a possible reduction in US auto tariffs to 15% after some value content deductions from 25% currently, according to reports, citing sources.

APAC TRADE

EQUITIES

APAC stocks mostly declined following the weak lead from Wall Street, where all major indices declined amid higher oil prices and yields due to ongoing geopolitical uncertainty following the expiry of the US-Iran MoU and with Trump rejecting a truce extension, while he also threatened to bomb US ally Oman.
ASX 200 eked out slight gains amid a slew of earnings, as results from BHP and CSL helped keep the index afloat, although gains were capped by weakness in telecoms, financials and the consumer sectors.
Nikkei 225 retreated beneath the 68,000 level with underperformance in Japan amid upside in yields, higher oil prices, fears of a faster pace of BoJ rate hikes, and the recent weak GDP data.
KOSPI initially rallied on return from the long weekend, but then faltered as the early tech resilience waned, and with some suggesting that US President Trump's decision to reduce military drills with South Korea could partly be due to frustration regarding the pace of South Korea's investment pledge.
Hang Seng and Shanghai Comp were subdued following the recent disappointing economic data, in which Industrial Production and Retail Sales missed forecasts, although the downside in the mainland was somewhat cushioned after China's MOFCOM and eight other ministries announced measures to boost consumption in lower-tier cities and counties.
US equity futures extended on the prior day's losses as overnight sentiment gradually deteriorated.
European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.4% after the cash market closed with losses of 0.1% on Monday.

FX

DXY eked slight gains in uneventful trade, with price action kept to within tight ranges amid a lack of major fresh catalysts and with updates centred around geopolitics, which resulted in higher crude prices. The main developments included the expiry of the US-Iran MoU, and with US President Trump rejecting an extension, while he also threatened to bomb US ally Oman if it 'gets in the way'.
EUR/USD struggled for direction after it faded most of yesterday's initial advances and failed to sustain the 1.1600 handle, with the single currency not helped by the absence of drivers from the bloc.
GBP/USD traded little changed after the recent choppy performance and as the attention turns to incoming data releases beginning with UK employment and average earnings data scheduled today.
USD/JPY breached through the prior day's best levels, but remained at the 159.00 handle, amid a sparse overnight calendar and with no tier-1 releases scheduled during the Asia-Pac session.
Antipodeans conformed to the humdrum mood across the FX, with price action also not helped by the predominantly negative risk sentiment.

FIXED INCOME

10yr UST futures were lacklustre following the prior day's curve steepening in quiet trade and with very few catalysts outside of geopolitics, while attention turns to the FOMC Minutes midweek.
Bund futures remained subdued and prodded the 124.00 level to the downside after recent gains in energy prices and with German ZEW data scheduled today.
10yr JGB futures nursed some losses and returned to flat territory, with some mild support seen following a stronger-than-previous 5yr JGB auction.

COMMODITIES

Crude futures were kept afloat after gaining yesterday as the US-Iran MoU expired and with Trump rejecting a truce extension, while Trump also threatened to bomb US ally Oman if it 'gets in the way'. Furthermore, Iran decided to shift its policy from defensive to a 'fully offensive' one and is said to have set a deadline of a few weeks for implementation of the MoU by the US, while UKMTO announced a ship was targeted in the Strait of Hormuz, resulting in engine damage and crew casualty.
US Energy Secretary Wright said the SPR still has 300mln barrels in it and will be at a higher level by the end of the Iran conflict than before.
Spot gold pulled back following the prior day's advances and returned to beneath the USD 4,400/oz level, while the dollar traded indecisively as participants await the FOMC Minutes on Wednesday.
Copper futures were subdued amid the subdued risk sentiment and recent weak Chinese data.

CRYPTO

Bitcoin gradually retreated throughout the session to test the USD 64,000 level to the downside.

NOTABLE ASIA-PAC HEADLINES

China’s MOFCOM and eight other ministries issued guidance aimed at boosting consumption in lower-tier cities and counties, with fiscal support a key focus. Measures include upgrading retail channels, encouraging new consumption formats, improving local service efficiency and expanding eldercare, childcare, education, healthcare and sports facilities, while eligible personal consumer loans and loans to service-sector operators may receive fiscal interest subsidies.

DATA RECAP

Australian Westpac Consumer Confidence Index (Aug) 88.9 (Prev. 83.9)
Australian Westpac Consumer Confidence Change (Aug) 6.0% (Prev. 4.1%)

GEOPOLITICS

RUSSIA-UKRAINE

Moscow's Mayor said Russia shot down 180 drones in the Moscow region overnight.
Russian Foreign Minister Lavrov said Russia and North Korea are fighting to establish a new, righteous world order, according to KCNA.

EU/UK

NOTABLE HEADLINES

UK examines the economic hit from consumers' loss of access to frontier AI, according to FT.
UK is heading for a clash with Brussels over a new youth mobility scheme, according to FT.
French President Macron commented that the military spending bill will be enacted on Tuesday and that they would have doubled the budget of their armed forces, which will benefit from EUR 36bln of new investments from 2026 to 2030.