EU Market Open: Europe set for a lacklustre open despite strong APAC lead; SEK flat ahead of Riksbank

US President Trump announced sweeping economic measures against Iran and threatened consequences for countries or entities supporting Tehran.
US President Trump said Iran negotiations may be at some point, while he reiterated Iran cannot have a nuclear weapon and said oil prices will be a lot lower when this is over.
10yr UST futures marginally extended on the prior day's gains after long-end yields fell in response to the US Treasury announcement yesterday.
FOMC Minutes from the July meeting stated that most participants assessed that higher rates would likely be necessary if inflation did not fall; little reaction seen on the release.
APAC stocks were predominantly higher following a similar positive lead from Wall Street; European equity futures indicate a subdued cash market open.
Looking ahead, highlights include German PPI (Jul), Canadian PPI (Jul), US Initial Jobless Claims (Aug 15), New Zealand Trade Data (Jul), Riksbank Policy Announcement (Aug). Comments from Riksbank's Thedeen. Supply from France, Earnings from Walmart & Alibaba.

As of 06:20BST/01:20EDT

LOOKING AHEAD

Highlights include German PPI (Jul), Canadian PPI (Jul), US Initial Jobless Claims (Aug 15), New Zealand Trade Data (Jul), Riksbank Policy Announcement (Aug). Comments from Riksbank's Thedeen. Supply from France, Earnings from Walmart & Alibaba.
Click for the Newsquawk Week Ahead.

FOMC MINUTES

FOMC Minutes from the July meeting stated that most participants assessed higher rates would likely be necessary if inflation did not fall and most supported keeping interest rates unchanged at the meeting, but several favoured an increase. Various participants said tighter financial conditions over the intermeeting period reflected strong economic growth and expectations for the Fed to adopt a more restrictive stance before long, while a few of the participants who favoured raising rates at the meeting judged doing so would likely help forestall the need for further hikes. Chairman Warsh said six scheduled meetings per year, held roughly every two months, would allow more information to accumulate between meetings, although no decisions were made on the number of meetings and Warsh indicated no change to the 2026 schedule. Furthermore, almost all FOMC members agreed it was appropriate to retain policy statement affirming FOMC 'will deliver price stability', and several participants said price increases over last year were broad based, spanning various categories of goods and services, while Fed staff economic outlook showed the inflation outlook was similar to the one prepared for the June meeting but the economic outlook was 'a touch weaker'.

IRAN CONFLICT

US President Trump posted "No one has given the Islamic Republic of Iran a greater opportunity to make a Deal than me. TRAGICALLY, for them, they have failed to take it. Therefore, today, I am announcing the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY! This will be Economic Warfare and Isolation on an unprecedented scale. Trump added that "ANY country that allows its financial institutions, businesses, airports, or government entities to provide any type of lifeline to Iran will itself face TREMENDOUS Economic Consequences. Oil smuggling, swap lines, cash transfers, exchange houses, ship registries, front companies — It all needs to stop NOW. You know who you are. This will be an ECONOMIC D-DAY".
US President Trump said Iran negotiations may be at some point, while he reiterated Iran cannot have a nuclear weapon and said oil prices will be a lot lower when this is over.
US President Trump said Treasury Secretary Bessent may unveil Iran sanctions this week and that Bessent won’t play games, while he added that the US has very tough sanctions options and is monitoring developments. Trump reiterated that the Strait of Hormuz is currently open with many vessels transiting.
US military has quietly established a shipping corridor in and out of the Strait of Hormuz to transport millions of barrels of oil each day, according to Axios citing two US officials. Officials said about 10mln barrels of oil a day are being transported out of the strait and injected into the global energy market, while the operation was made possible by a recent two-week CENTCOM campaign that degraded Iran's radar and maritime surveillance systems.
Strait of Hormuz shipping traffic remains unchanged amid the US-Iran stalemate, according to Kpler data.
Iran's Foreign Minister Araghchi held talks with Pakistan's Army Chief on regional developments, with the two sides discussing ongoing diplomatic initiatives, potential political solutions and ways to deepen consultation and cooperation, according to journalist Mallick. Furthermore, Pakistan continues to be the main mediator between the US and Iran, as per Iran's Foreign Ministry.
UK added seven new designations under its Iran sanctions regime.
Israeli warplanes attacked the Tal al-Dabsha area northwest of Ali al-Taher Hill in southern Lebanon.

US TRADE

EQUITIES

US stocks were somewhat mixed, with most major indices marginally higher, although the tech-heavy Nasdaq 100 underperformed, while sectors saw an upward bias with Healthcare outperforming and buoyed by Moderna surging in excess of 165% after a cancer breakthrough drug trial with Merck. Nonetheless, the main story on Wednesday was the US Treasury announcing it is increasing, by at least double, the size of liquidity support buyback operations for longer-dated nominal coupon securities, from the current USD 2bln to at least USD 4bln. Following this update, US Treasury yields fell, particularly in the long end, while the Dollar saw notable pressure. Given this, all G10 FX peers gained vs. the Greenback, with the Swissy outperforming. WTI and Brent eked out slight strength as a US/Iran deal seems no closer, although geopolitical newsflow was light on Wednesday. There was no US data or Fed speak, and the latest FOMC Minutes were largely as expected with few shocks (review below). Precious metals surged on the aforementioned news, while crypto saw a rally through the US session.
SPX +0.22% at 7,708, NDX -0.22% at 29,426, DJI +0.22% at 53,468, RUT +0.50% at 3,033.
Click here for a detailed summary.

TARIFFS/TRADE

US President Trump said he thinks they have a deal with Canada that is good for everyone.
USTR Greer said the US has eliminated some of the irritants it had with Canada over the last year.
US is reportedly set to halve tariffs on Canadian steel and aluminium in a trade deal.
US is poised to lower the tariff rate on Canadian autos to 15% from 25%.
Canadian PM Carney said Canada is moving towards a trade deal with the US and significant progress was made in talks, while Canada's LeBlanc said the deal will keep the supply management agricultural system intact.
China's MOFCOM announced anti-dumping duties on enterprises regarding imported polyoxymethylene from the US, EU, Taiwan and Japan, effective August 21st.

NOTABLE HEADLINES

US President Trump said he would really like to see rates come down.
US President Trump said Americans should not be concerned about volatility regarding the bond market.
US Democrats reportedly press Fed Chair Warsh to disclose calls with US President Trump, with four senators said to have asked the Fed chair for a written account after the White House and President Trump gave differing descriptions of recent conversations, according to WSJ.

APAC TRADE

EQUITIES

APAC stocks were predominantly higher following a similar positive lead from Wall Street, where most of the major indices gained as yields and the dollar declined after the US Treasury doubled buybacks of long-term bonds.
ASX 200 marginally gained with outperformance seen in miners and as participants digested a slew of earnings updates, although the upside is capped as financials lagged, and following disappointing jobs data.
Nikkei 225 was underpinned by a rebound in tech, a pullback in yields and stronger-than-expected trade data.
KOSPI led the advances in the region amid upside in the tech heavyweights, with SK Hynix shares up double digits following the announcement of a KRW 40tln share buyback, while there were reports that Samsung Electronics is planning to announce a shareholder return plan topping KRW 100tln.
Hang Seng and Shanghai Comp conformed to the positive mood but with gains capped amid a deluge of earnings updates and as participants await Alibaba's earnings report, while the mainland is also contained after the PBoC kept its 7-day reverse repo operations at zero, and it maintained the benchmark Loan Prime Rates at their current levels for the 15th consecutive month.
US equity futures kept afloat in range-bound trade following the uneventful FOMC Minutes.
European equity futures indicate a subdued cash market open with Euro Stoxx 50 futures down 0.2% after the cash market closed with losses of 0.4% on Wednesday.

FX

DXY got some slight reprieve after weakening yesterday alongside a drop in long-end yields in response to the US Treasury announcing plans to increase the size of liquidity support buyback operations for longer-dated nominal coupon securities by at least double. The announcement marks a signal from the US Treasury of a willingness to step in and ease fears over rising long-end yields; however, given the increase only pertains for the remainder of this refunding quarter, further USD weakness may be limited. Separately, the FOMC Minutes sparked little reaction as they highlighted what Fedspeak has pointed towards in recent weeks, in which most participants assessed higher rates would likely be necessary if inflation did not fall, while Chair Warsh made the case that six scheduled meetings per year instead of eight would allow more information to accumulate between meetings, although no final decision was made.
EUR/USD lingered around the prior day's best levels after gaining a firm footing above the 1.1600 level.
GBP/USD took a breather after benefitting from the dollar's recent demise, while the latest inflation data for the UK was somewhat mixed as the headline printed in line with forecasts and with Core CPI firmer-than-expected.
USD/JPY rebounded from a weekly trough after support held at the 158.00 level and as Japanese yields retreated.
Antipodeans diverged with outperformance in NZD on cross-related flows as AUD was pressured following disappointing jobs data in which headline Employment Change contracted and the Unemployment Rate rose.
PBoC set USD/CNY mid-point at 6.7808 vs exp. 6.7196 (prev. 6.7854).

FIXED INCOME

10yr UST futures marginally extended on the prior day's gains after long-end yields fell in response to the US Treasury announcing plans to increase the size of liquidity support buyback operations for longer-dated nominal coupon securities by at least double. However, gains were capped, with little reaction seen to the FOMC minutes and following a soft US 20yr auction.
Bund futures slightly edged higher following recent choppy trade and with German PPI data scheduled today.
10yr JGB futures extended their rebound as yields continued to ease back from multi-decade highs, despite better-than-expected trade data from Japan and a weaker 20yr JGB auction.

COMMODITIES

Crude futures were kept afloat in rangebound trade amid the ongoing geopolitical uncertainty and with US President Trump announcing that he would conduct "the MOST CRUSHING ECONOMIC OPERATION EVER TAKEN AGAINST ANY COUNTRY! This will be Economic Warfare and Isolation on an unprecedented scale" against Iran, while US officials also claimed that the military has quietly established a shipping corridor in and out of the Strait of Hormuz to transport millions of barrels of oil each day.
Spot gold pulled back overnight and returned to beneath the USD 4,500/oz level, but held on to most of the prior day's spoils after surging yesterday alongside a weaker dollar and softer yields.
Copper futures lacked demand following the recent sideways performance despite the advances in risk assets.

CRYPTO

Bitcoin was choppy overnight and ultimately paused following the prior day's crypto surge in which Bitcoin rallied 7%, and Ethereum rocketed by nearly 15%.

NOTABLE ASIA-PAC HEADLINES

Chinese Loan Prime Rate 1Y 3.0% vs. Exp. 3.0% (Prev. 3.0%)
Chinese Loan Prime Rate 5Y (Aug) 3.5% vs. Exp. 3.5% (Prev. 3.5%)
US President Trump said on Chinese President Xi’s visit that they will probably talk about AI.

DATA RECAP

Japanese Trade Balance (Jul) -634.5B vs. Exp. -680.0B (Prev. -409.9B)
Japanese Exports (Jul YY) 23.2% vs. Exp. 19.9% (Prev. 19.3%)
Japanese Imports (Jul YY) 27.8% vs. Exp. 26.5% (Prev. 25.4%)
Australian Employment Change (Jul) -15.8K vs. Exp. 15K (Prev. 76.3K)
Australian Full Time Employment Change (Jul) 16.3K (Prev. 29.3K)
Australian Unemployment Rate (Jul) 4.5% vs. Exp. 4.4% (Prev. 4.4%)
Australian Participation Rate (Jul) 66.9% vs. Exp. 66.9% (Prev. 67.0%)

GEOPOLITICS

MIDDLE EAST

Syrian Foreign Minister said they tried to reach a security agreement with Israel, but it reneged on its commitments, while they are still interested in reaching an agreement with Israel to de-escalate the situation and negotiations can be resumed if Israel shows genuine political will.
Explosions were reportedly heard in the western Daraa countryside in Syria.

RUSSIA-UKRAINE

Several explosions were heard in central Kyiv, Ukraine, while the Mayor announced that the city was under attack from Russian ballistic missiles.

EU/UK

NOTABLE HEADLINES

UK finally shows signs of productivity boost, while analysts say early signs of tech-driven improvements in productivity growth could herald a sustained strengthening in the UK's economic outlook, according to FT.