OIL: Napo Differential Rises with Far East Interest

Reuters reports that Slovakian Prime Minister Robert Fico will meet President Vladimir Putin and Chinese President Xi Jinping during a visit to China this week. Fico will then travel back to Slovakia, where he will meet Ukrainian President Volodymyr Zelenskyy.

• According to an official invite list, Fico is the only leader of an EU member state slated to attend China's V-Day commemorations in Beijing on Sept. 3.
• The Moscow Times reported ahead of Fico’s trip that talks with Putin, “will likely further strain tensions between Bratislava and Brussels,” as Fico is one of the few EU leaders to maintain regular contact with Putin.
• Politico reported on August 18: “Fico has suspended official military assistance to Ukraine, criticized EU sanctions against Russia, rejected NATO membership for Kyiv, and met Vladimir Putin.”
• French Foreign Minister Jean-Noël Barrot told reporters at an EU gathering in Copenhagen on Saturday that Europe will press ahead with initiatives to penalise Moscow for slow-walking the peace process with Zelenskyy.
• Barrot said: “...Putin continues to oppose a high-level meeting with the president of Ukraine, then we will need to force by hardening sanctions — sanctions from the United States, but also European sanctions.”
• In June, a new round of sanctions on Russia’s energy and financial sectors was only possible after Fico agreed to lift a veto threatened in objection to a proposed phase-out of all Russian fossil fuels by the end of 2027.

Gilts have taken cues from wider core global FI markets for much of the day.

• Slightly softer-than-flash final manufacturing PMI data did little for the market, but probably meant that early London lows were not re-tested. Futures last -19 at 90.33.
• The contract breached initial support (90.22), basing at 90.20, but leaving key support at late May lows (90.11) untested.
• Bears remain in technical control.
• Yields are 1.0-2.5bp higher. Curve bear steepens.
• 5s30s is on track for its first close above 150bp in the current cycle. Next upside level is the Feb ’17 high (152.63bp).
• Little change in the very front end of the GBP STIR strip on the day, with SONIA futures +0.5 to -3.5, twist steepening. August lows untested.
• BoE-dated OIS is steady, showing ~9bp of cuts through year-end. We think the November meeting is much more “live” than the 4bp currently discounted by markets.
• Fiscal risks remain front and centre in the UK. Today’s headlines have focused on operational adjustments within the government, with source reports playing down the likelihood of an impending cabinet reshuffle.
• A reminder that the DMO will introduce the new 4.75% Oct-35 gilt via syndication this week. That could come as soon as tomorrow.

• Today is the most notable single move in the EURSEK in a Month, since 1st August ~9 big figures range.
• For now the cross seems to be finding some support at the Psychological 11.0000 level.
• The early chart to watch was the USDSEK, now close to testing the 2025 low.