UKRAINE: Cabinet Reshuffle Could Be Finalised Tomorrow

Little net reaction in front-end ECB-implied rates to the latest report from Handelsblatt, which says the EC is prepared to accept a flat 10% US tariff rate under certain conditions. Such an outcome would be broadly in line with the baseline tariff assumptions in the ECB’s June projections. These projections were also conditioned on a market curve that had another 25bp cut priced in - consistent with current OIS market pricing. 

• From the June projections: “The baseline assumes…US tariffs for goods imports would increase from almost zero by 10 percentage points for all countries – except China, for which these would increase by about 20 percentage points to an effective tariff rate of approximately 40% (when measured for both goods and services). Additionally, it is assumed that the EU does not retaliate, while China retaliates symmetrically”.
• In an interview with Reuters released this morning, VP de Guindos noted that “The final outcome in trade negotiations is by far the most relevant factor of uncertainty that we considered in our projections, which are the basis for our monetary policy decisions”.

Equity Option Expiry in Notional Term for Friday:

• SPX: $3.41bn vs $3.31T last Wednesday.
• NDX: $121.13bn vs $117.51bn.
• Amazon: $20.72bn vs $19.66bn.
• Apple: $24.99bn vs $24.26bn.
• SX5E: €325.63bn vs €328.50bn.
• SX7E: €21.19bn vs €21.16bn.
• DAX: €85.30bn vs €83.88bn.
• UKX: £26.71bn vs £26.25bn.

Adding:

• CAC: €4.51bn.
• Lloyds: £3.05bn.

FX Exchange traded Option, covers the July and August RBA meeting, looking for AUD strength:

• AUDUSD (5th Sep) b65.50c, bought for 1.32 in 1.2k.