After a week of relentless FX volatility, spilling over out of China and into all other countries, and asset products, it was as if the market decided to take a time-out overnight, assisted by the PBOC which after three days of record devaluations finally revalued the Yuan stronger fractionally by 0.05% to 6.3975. And then, as a parting gift perhaps, just as the market was about to close again, the Chinese central bank intervened sending the Onshore Yuan, spiking to a level of 6.3912 as of this writing, notably stronger than the official fixing for the second day in a row. In fact the biggest news out of China overnight is that contrary to expectations, the PBOC once again "added" to its gold holdings, boosting its official gold by 610,000 ounces, or 19 tons, to 1,677 tones (more detail in a subsequent post). But while the Chinese FX market was positive docile overnight, leading to a modest 0.27% bounce in Chinese stocks, other Asian countries are starting to feel the Asian Currency Crisis of 1997 deja vu effect, most notably Malaysia, whose Ringit plummeted overnight on a series of bad economic and liquidity news (more on that shortly), which in turn is forcing the question: who gets hammered next, and next, and next, and so on. Asian equity markets were more subdued and traded mixed following a subdued Wall Street close, while the PBoC strengthened the CNY for the first time in 4-days, however the change was significantly less than the prior devaluations from the central bank. Shanghai Comp (+0.3%) outperformed with gains in all 10 sectors and is on course for its best week in since June. Elsewhere, Nikkei 225 (-0.4%) and the ASX 200 (-0.6%) amid underperformance in the energy complex after oil prices fell to 6-years lows. US futures have been trading close to the flatline for most of the session, and were near their worst levels, down 5 points, moments ago reflecting what may be a delayed reaction to many of the high-beta story stocks crashing yesterday, and the failure of AAPL's buyback to lift the stock into the close, more than the macro news which has been generally bullish for strongs, between the Greek 3rd bailout vote, to Europe's sudden economic slowdown (suggesting further QE may be just over the horizon). As is typical of a Friday, the final trading session of the week has been somewhat of a calmer affair than others seen this week. European equities trade mixed with reports that the Greek Parliament have voted in favour of the proposed third Greek bailout package. This all comes in the run up to the Eurogroup meeting today at 1400BST which is expected to deliver a similar verdict to that of the Greek's themselves. In terms of sector specific moves, buying has been relatively broad-based with the only notable laggard being energy names amid the recent selling pressure in WTI and Brent crude futures. Elsewhere, fixed income markets trade in a relatively rangebound manner. In FX markets, the USD-index (+0.2%) trades modestly higher and is subsequently providing some weight on its major counterparts. Elsewhere, NZD has been notably sluggish in the wake of disappointing NZ retail sales ex inflation which printed its slowest increase since Q3 2013 (0.10% vs. Exp. 0.50% Prey. 2.70%). In the energy complex, both WTI and Brent crude futures trade modestly lower after WTI overnight broke below YTD lows to trade at its lowest level in 6-years and is on for a 7th W/W fall. In metals markets . Gold extended on losses overnight as the USD index saw mild gains and remained near yesterday's lows amid a quiet overnight session and lack of key events to drive price action. However, the precious metal still remain on course for its first weekly gain in around 2 months after this week's PBoC devaluation raised concerns and dampened prospects of a sooner Fed rate lift off. In summary: European shares pare earlier gains to trade little-changed with real estate and basic resources sectors outperforming and oil & gas, telcos underperforming. Asian stocks were mixed as the yuan halted a three-day decline after China’s central bank raised its reference rate for first time since Tuesday’s devaluation. Malaysian ringgit fell most since 1998 as central bank governor says will need to rebuild FX reserves. Greek lawmakers approve rescue package after an all-night session. Turkish lira falls, country looks set for its second general election this year. Euro-zone, French, German, Italian 2Q GDP growth below estimates. Oil heads for seventh weekly drop. The Swiss and Italian markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. Greek 10yr bond yields fall; Portuguese yields decline. Commodities decline, with wheat, corn underperforming and natural gas outperforming. U.S. industrial production, capacity utilization, Michigan confidence, PPI, due later Market Wrap S&P 500 futures down 0.2% to 2077.3 Stoxx 600 up 0.2% to 387.6 US 10Yr yield down 1bps to 2.18% German 10Yr yield down 1bps to 0.63% MSCI Asia Pacific down 0.2% to 138.2 Gold spot up 0.2% to $1116.9/oz17 out of 19 Stoxx 600 sectors rise; real estate, basic resources outperform, oil & gas, telcos underperformEurostoxx 50 +0%, FTSE 100 +0.1%, CAC 40 +0.1%, DAX +0.2%, IBEX +0.1%, FTSEMIB +0.2%, SMI +0.5% Asian stocks fall with the Sensex outperforming and the ASX underperforming; MSCI Asia Pacific down 0.2% to 138.2 Nikkei 225 down 0.4%, Hang Seng down 0.1%, Kospi closed, Shanghai Composite up 0.3%, ASX down 0.6%, Sensex up 1.7% Euro down 0.14% to $1.1134 Dollar Index up 0.02% to 96.47 Italian 10Yr yield down 3bps to 1.76% Spanish 10Yr yield down 3bps to 1.93% French 10Yr yield down 1bps to 0.94% S&P GSCI Index down 0.2% to 365 Brent Futures down 0.1% to $49.2/bbl, WTI Futures down 0.4% to $42.1/bbl LME 3m Copper down 0.3% to $5172/MT LME 3m Nickel up 0.7% to $10525/MT Wheat futures down 0.7% to 505.5 USd/bu Bulletin Headline Summary from Bloomberg and RanSquawk In what has been a quiet session thus far, European equities trade mixed while Greece approve the third bailoutThe PBoC refrained from devaluing the CNY overnight and actually lifted the reference point by 0.05%Looking ahead, today sees the release of US PPI, Industrial Production and Univ. of Michigan data. Treasuries gain, little changed on the week as global stocks mixed, oil extends declines; EM currencies fall as fallout from China’s decision to weaken yuan continues. Euro-area economic growth unexpectedly slowed last quarter, rising 0.3% vs 0.4% estimate, as expansion in Germany, France and Italy fell short of estimates Greek legislators approved bailout package after all-night debate in Athens; PM Tsipras had to rely on opposition votes for deal that includes sweeping economic reforms and budget cuts mandated by Greece’s creditor institutions The yuan halted a three-day slide after China’s central bank raised its reference rate for the first time since Tuesday’s devaluation and said it will intervene to prevent excessive swings China’s benchmark stock index capped its biggest weekly gain in two months, led by commodity companies After riding a market boom to return almost 6x global industry average in the first five months of this year, Greater China- focused hedge funds crashed to earth with the stock rout in July, their worst month since September 2011 Goldman agreed to acquire an online banking unit from General Electric Co. that has about $16b of deposits, giving the Wall Street firm access to a cheap source of funding Puerto Rico is at risk of running out of cash to fund day- to- day operations and must raise $400m through a bank loan or a sale of short-term securities by November, Victor Suarez, Governor Alejandro Garcia Padilla’s chief of staff, said Aug. 10 in San Juan $8.95b IG priced yesterday, $1.7b high yield. BofAML Corporate Master Index holds at YTD wide +164; YTD low 129. High Yield Master II OAS +37 to 604, new YTD wide; YTD low 438 Sovereign 10Y bond yields mostly lower. Asian, European stocks mixed, U.S. equity-index futures decline. Crude oil and copper lower, gold gains US Event Calendar 8:30am: PPI Final Demand m/m, July, est. 0.1% (prior 0.4%) PPI Ex Food and Energy m/m, July, est. 0.1% (prior 0.3%) PPI Ex Food, Energy, Trade m/m, July, est. 0.1% (prior 0.3%) PPI Final Demand y/y, July, est. -0.9% (prior -0.7%) PPI Ex Food and Energy y/y, July, est. 0.5% (prior 0.8%) PPI Ex Food, Energy, Trade y/y, July, est. 0.7% (prior 0.7%) 9:15am: Industrial Production, July, est. 0.3% (prior 0.3%, revised 0.2%) Capacity Utilization, July, est. 78% (prior 78.4%, revised 77.8%) Manufacturing (SIC) Production, July, est. 0.4% (prior 0%) 10:00am: U. of Mich. Sentiment, Aug P, est. 93.5 (prior 93.1) U. of Mich. Current Conditions, Aug P est. 106.5, (prior 107.2) U. of Mich. Expectations, Aug P, est. 86 (prior 84.1) U. of Mich. 1 Yr Inflation, Aug P (prior 2.8%) U. of Mich. 5-10 Yr Inflation, Aug P (prior 2.8%) DB's Jim Reid concludes the overnight recap This morning market conditions are almost calm enough to let the roof down. The Yuan has managed to halt a three-day retreat after the PBoC’s fixing strengthened 0.05% versus the previous day's set. The onshore Yuan is little changed (-0.03%) as a result, while the more freely traded offshore Yuan is +0.25% stronger this morning. Despite that, there’s been some more significant weakness in the Asia FX market where the Korean Won (-0.31%), NZ Dollar (-0.54%), Indonesian Rupiah (-0.11%) and most notably the Malaysian Ringgit (-1.16%) have tumbled, the latter at one stage falling over 2%. It’s a bit more mixed in equity markets this morning. China bourses have edged higher, led by the Shenzhen (+1.22%), while the Shanghai Comp is up 0.83%. There’s also been a rise for the Kospi (+0.40%) and Hang Seng (+0.16%) however the Nikkei (-0.39%) and ASX (-0.46%) are a tad weaker as we go to print. 10y Treasury yields meanwhile have fallen 1.6bps and Asia credit markets are generally unchanged. So it feels like calm has broken out over the last 36 hours and the PBoC’s soothing words yesterday did seem to help support a better tone for the most part in markets. Despite this, lasting damage has been done and it’s interesting to look at some of the more notable price movers since the start of the first fixing change for the Yuan this week. Based on Monday's and Thursday's closing levels, over the period we’ve seen the onshore Yuan devalue 3.04% and the offshore Yuan fall 4.01%, both at the weakest levels since 2011. Despite a slight recovery yesterday, that’s resulted in a reasonable sell-off across the Asia FX space with the Taiwanese Dollar (-1.81%), Malaysian Ringgit (-1.88%), Indonesian Rupiah (-1.60%), Korean Won (-0.91%) and Aussie Dollar (-0.71%) in particular some of the notable movers. Some of the more China sensitive commodity markets have also been hard hit. WTI has dropped -6.07% in the period, while Brent has fallen -2.36%. Aluminum is -2.78% weaker and Copper has tumbled -2.34%. Gold is unsurprisingly one of the few outliers, bouncing +0.96%. In equity markets meanwhile, we’ve seen a slight rise for the Shanghai Comp (+0.67%) although in truth it’s traded with little conviction, while other bourses in Asia have dropped including the Nikkei (-1.02%), Hang Seng (-2.05%) and Kospi (-0.98%). Some of the more impressive price moves has been in European equities, particularly the more core markets. The Stoxx 600 is down -3.28% over the period, while the DAX and CAC have tumbled -5.09% and -4.01% respectively. The peripherals are also down, but the moves less exaggerated with the IBEX and FTSE MIB -3.22% and -2.55% respectively. In the US the S&P 500 has been pretty choppy, but is down -0.99% this week still. Despite the rebound yesterday, the moves have had a clear impact across the majority of markets. It doesn't feel like the full ramifications will be known for some time. US Treasuries have also seen some reasonable moves this week, however for the large part yields are now more or less at where we were at Monday’s close. The benchmark 10y closed Monday at 2.228% and struck a low in yield intraday on Wednesday at 2.0432%. Yields have since moved higher and yesterday, despite the pressure from Oil we saw yields finish 3.7bps higher at 2.186%, so just 4bps off Monday’s closing level. Fed Funds contracts are largely the same with the Dec15 and Dec16 contracts 2bps and 5bps down from Monday. Meanwhile, with the probability of a September move now at 50%, that’s back more or less at where we were on Monday (48%) after a roundabout trip which saw the probability fall as low as 40%. Even though European equities have been one of the biggest fallers after this week's events, they bounced yesterday after the better tone filtered through from the Asian session. The Stoxx 600 closed +0.97% while the DAX and CAC ended +0.82% and +1.25% respectively. It was a slightly better session in European credit also where Crossover closed 3bps tighter, although it did pare some more notable moves tighter intraday. Coming off the late rally on Wednesday, US equities seemed to run out of steam a little bit and once again failed to trade with conviction either way. Instead, price action looked more typical of a summer lull as the S&P 500 (-0.13%) closed a touch lower, while the Dow (+0.03%) finished just about in positive territory. Oil markets resumed their decline once again, with WTI (-2.47%) plummeting to close at $42.23/bbl, the lowest settlement now in six and a half years and this morning its hovering dangerously close to $42 in the Asia session with the latest bearish twist coming on the back of Genscape data showing a midweek build-up in inventories at the Cushing delivery point in the US. Also in the US yesterday’s retail sales probably helped support some of the move higher in yields yesterday. Despite the July headline (+0.6% mom) and ex auto and gas (+0.4% mom) readings printing in line with expectations, it was the upward revisions which garnered more of the attention as we saw the June headline reading revised up 0.3pps and the May reading revised up 0.2pps. Retail control was +0.3% mom during July, but again there was a cumulative 0.4pps added to the prior two months. Business inventories for June (+0.8% mom vs. +0.3%) was better than expected, while the import price index (-0.9% mom vs. -1.2% expected) also surprised to the upside but saw the annualized rate tick down to a weak -10.4% yoy from -9.9% previously. Initial jobless claims were more or less in line (274k vs. 270k) with last week. Meanwhile, the Atlanta Fed GDPNow model for Q3 was revised even lower to 0.7% from an already low 0.9%. The latest revision came about as a result of the latest wholesale trade data released on Tuesday, which was enough to offset a slight rise from the Wednesday monthly budget statement and yesterday’s retail sales report. Over in Europe yesterday there was no change to the final July CPI print for Germany at +0.2% mom, with the annualized rate also staying at a lowly +0.2% yoy. CPI in France met expectations at -0.4% mom for the month, while the reading was slightly better than expected in Spain (-0.9% mom vs. -1.0 expected). There was some focus on Greece’s Q2 GDP report yesterday with the +0.8% qoq print a notable beat after expectations of a -0.5% contraction, while there was also a 0.2ppt upward revision for Q1 to flat. It’s hard to see Q3 looking anywhere as near as optimistic however given the capital controls, bank closures and associated turmoil. Elsewhere, in the ECB minutes yesterday the Central Bank noted that ‘while recent market volatility had not materially changed the assessment of the economic outlook, continued elevated uncertainty called for alertness and a readiness to respond, if necessary’. The minutes also cited that ‘the recovery in the euro area was expected to remain moderate and gradual, which was considered disappointing’. Back to Greece quickly, with a Eurogroup Finance Ministers meeting scheduled for later to sign off on the latest deal, the Greek parliament are due to vote this morning ahead of the meeting. Opposition pressure continues to come in the form of the far-left faction of Syriza after a tense parliamentary debate late last night where the rebel’s leader, Lafazanis, said in a statement that ‘the fight against the new bailout starts today, by mobilizing people in every corner of the country’. Meanwhile the FT is running a story suggesting that the Creditors overseeing the bailout package have expressed ‘serious concerns’ over the sustainability of Greece’s debt load, aligning their views more closely with that of the IMF. The article suggests that this will likely heighten pressure on Germany to back debt relief when such a discussion will likely come to fruition in the autumn. Before we take a look at the day ahead, a quick sentimental note as today marks the last trading day for a US Treasury note with a 10% coupon. The 10.625% coupon bond is due to mature tomorrow, having initially been issued back in August 1985 as a 30-year bond. At the time it was issued, Ronald Reagan was the US President, Fed Chair Volcker was dampening inflation fears and the Fed Funds rate was at 8%! I wonder when we'll see the next 10% coupon Government bond issued in a G7 country. Onto today’s calendar now, there’s plenty of data for us to get through this morning in Europe with Q2 GDP reports for the Euro area, Germany, France and Italy as well as the final July CPI reading for the Euro area. UK construction output data is also expected while the Eurogroup meeting on Greece will be closely watched. There’s plenty of data to get through this afternoon in the US also, starting with the July PPI report before we get industrial production, capacity utilization, manufacturing production and the University of Michigan consumer sentiment print for August.