• Initial upside faded as broader price action took another hawkish turn amid inflation data, Euro Stoxx 50 -1.0%
• Stateside, futures are mixed around the unchanged mark, ES -0.1%, though are similarly well off best levels with data and Fed speak due.
• DXY bid but shy of YTD peak, EUR lags despite HICP with peers generally under modest pressure ex-AUD
• Core benchmarks experienced a fairly contained start to the session, though this proved to be shortlived and pronounced action occurred on inflation releases; Gilts lag post-ONS
• WTI and Brent futures resumed selling off in tandem with the broader risk-mood, Dutch TTF bid after Tuesday's pressure
• OPEC+ JTC upgrades 2022 oil market surplus forecast by 100k BPD to 900k BPD, via Reuters citing a report
• Looking ahead, highlights include Canadian GDP, US ADP & Chicago PMI, Speeches from Fed's Mester & Bostic.

As of 11:15BST/06:15ET

LOOKING AHEAD

• Canadian GDP, US ADP & Chicago PMI, Speeches from Fed's Mester & Bostic.
• Click here for the Week Ahead preview.

GEOPOLITICS

RUSSIA-UKRAINE

• IAEA convoy has set off from Kyiv towards the Zaporizhzhia nuclear power plant, according to a witness cited by Reuters; subsequent updates indicate the mission should arrive on Thursday.
• Kremlin spokesperson says there are "signals" about a resumption of New Start Treaty discussions with the US but there has not been any significant progress.
• Nord Stream 1 physical flows at 119.9k kWh/H (prev. 115k kWh/H) between 00:00-10:00BST. Note, flows have been at 0 throughout the morning, given the commencement of three days of maintenance.
• Russia remains committed to its gas supply commitments but cannot meet them due to sanctions, according to Ifax citing a Kremlin spokesperson.
• German Network Regulator (on Nord Stream 1 maintenance) tells Reuters that the body cannot "technically understand" the new maintenance by Russia.

CHINA -TAIWAN

• Taiwan's Defence Ministry said China's military continues high-intensity patrols near Taiwan, while it added that Taiwan will exercise the right to self-defence and counter-attack if PLA forces enter air and sea territory within 12 nautical miles of Taiwan or if any Chinese drones pose a threat to security and do not leave after warnings, according to Reuters.

EUROPEAN TRADE

CENTRAL BANKS

• BoJ's Nakagawa says the central bank decided to maintain easy policy bias in July, and hopes to discuss at the September meeting whether it should continue doing so based on data. Must remain vigilant to downward economic pressure from pandemic.
• BoJ is to conduct fixed-rate purchase operations for the cheapest-to-deliver 357th JGB notes for an extended period of time as of September 1st.
• ECB's Rehn says the economic outlook has darkened, normalisation of monetary policy progressing consistently. Rates will increase in September, will be necessary to hike further at future gatherings.
• Riksbank's Bremen says it is of the utmost importance to defend the inflation target as anchor for price setting and wage formation; adds inflation is too high. Inflation outcomes have been higher than expected recently, inflation risks are on the upside. Does not rule out a 50bps or 75bps hike at the 20th September meeting.
• Norges Bank Currency Purchases (Sep) NOK 3.5bln (prev. NOK 1.5bln)

EQUITIES

• Initial upside faded as broader price action took another hawkish turn amid inflation data, Euro Stoxx 50 -1.0%.
• Stateside, futures are mixed around the unchanged mark, ES -0.2%, though are similarly well off best levels with data and Fed speak due.
• Click here for more detail.

FX

• A session of gains for the DXY with upside spurred by haven bids, as the broader market sentiment deteriorated shortly after the European cash open.
• EUR/USD sits as one of the laggards with minimal immediate reaction seen in wake of hotter-than-expected August flash CPI for the EZ, although the upside for the pair may be capped by Nord Stream 1 jitters.
• The antipodeans are mixed as AUD leads the gains as the outperforming G10 peer on the back of better-than-expected Chinese official PMI metrics; Petro-currencies are softer as the slide in crude oil resumes.
• The JPY remains somewhat resilient in the face of the USD strength, likely amid the risk aversion across the market.
• Click herefor more detail.

Notable FX Expiries, NY Cut:

• Click here for more detail.

FIXED INCOME

• Core benchmarks experienced a fairly contained start to the session, though this proved to be shortlived and pronounced action occurred on inflation release.
• Bunds remain sub-147.50, though off worst, as initial French-CPI induced upside was reversed following hot Italian and subsequent EZ-wide Flash August HICP; market pricing for 75bp remains just above 50%.
• Gilts are the standout laggard as on the ONS treats the Energy Support as a fiscal transfer, thus Ofgem Energy adj. will be fully reflecting in CPI; Gilts sub-130 ticks in wake.
• USTs are directionally downbeat but comparably contained in terms of magnitudes, ADP and Fed's Bostic/Mester due.
• Click here for more detail.

COMMODITIES

• WTI and Brent futures resumed selling off in tandem with the broader risk-mood.
• Dutch TTF futures are on a firmer footing today following yesterday’s near-10% slump.
• Spot gold is pressured by the firmer Dollar and approaches USD 1,700/oz to the downside.
• 3M LME copper has been extending on gains with a boost from the above-forecast Chinese PMI metrics, but the contract remains under USD 8,000/t.
• OPEC+ JTC upgrades 2022 oil market surplus forecast by 100k BPD to 900k BPD, according to a report via Reuters; sees market surplus rising to 1.4mln BPD in November from 0.6mln BPD in October.
• OPEC+ JTC report says rising energy costs "may lead to a more significant reduction in consumptions towards year-end", via Reuters.
• US Private Inventory Data (bbls): Crude +0.6mln (exp. -1.5mln), Cushing -0.6mln, Gasoline -3.4mln (exp. -1.2mln), Distillates -1.7mln (exp. -1.0mln).
• Oman crude OSP calculated at USD 97.00bbl for October vs. USD 103.21bbl in September, according to DME data.
• Click here for more detail.

NOTABLE HEADLINES

• UK's ONS rules that energy bill rebate does not directly affect inflation statistics directly; "concluded that payments under the scheme should be classified as a current transfer paid by central government to the households sector." i.e. the payment is being treated as a fiscal transfer as opposed to a price adjustment.
• UK government could reportedly fast-track nuclear power projects to help ease the energy crisis, according to The Telegraph.
• UK government is considering caps on rent to protect social housing tenants as part of a wider effort to ease the soaring costs of living, according to FT.
• Former UK Chancellor Sunak warned that Foreign Secretary Truss's campaign promises could increase inflation and borrowing costs, according to FT.
• German Economy Minister Habeck said they would reject the idea of 'capping' energy prices; Finance Minister Lindner says the hurdle to an excess profit tax is high (re. energy); Chancellor Scholz says the early steps on energy means we will get through the winter period, will take measures to ensure energy prices "do not go through the roof".

NOTABLE DATA

• EU HICP Flash YY (Aug) 9.1% vs. Exp. 9.0% (Prev. 8.9%); X F&E Flash YY (Aug) 5.5% vs. Exp. 5.1% (Prev. 5.1%)
• X F,E,A&T Flash YY (Aug) 4.3% vs. Exp. 4.1% (Prev. 4.0%)
• French CPI (EU Norm) Prelim YY (Aug) 6.5% vs. Exp. 6.7% (Prev. 6.8%); Italian CPI (EU Norm) Prelim YY (Aug) 9.0% vs. Exp. 8.3% (Prev. 8.4%)

NOTABLE US HEADLINES

• White House Press Secretary said the White House expects jobs numbers to cool a bit.
• US President Biden approved the Mississippi emergency declaration amid the water crisis and ordered federal assistance to supplement state response efforts, according to the White House.
• California ISO said excessive heat beginning on Wednesday will stress the energy grid and consumer conservation is likely needed in the weekend to avert power outages, according to Reuters.
• Click here for the US Early Morning Note.

CRYPTO

• Bitcoin has managed to reclaim USD 20k after slipping to a USD 19.7k low, overall the crypto remains in fairly tight sub-1k parameters.

APAC TRADE

• APAC stocks were mostly negative following the losses across global counterparts owing to recent hawkish central bank rhetoric and with geopolitical concerns stoked after Taiwan fired warning shots at a Chinese drone.
• ASX 200 was subdued by weakness in commodity-related stocks with the energy sector the worst hit after the recent slump in oil prices, while a surprise contraction in Construction Work added to the headwinds and feeds into next week’s GDP release.
• Nikkei 225 declined but held above 28k after encouraging Industrial Production and Retail Sales.
• Hang Seng and Shanghai Comp were pressured amid a heavy slate of earnings releases and with US regulators said to have selected a number of US-listed Chinese companies for audit inspections including Alibaba, while participants also reacted to the Chinese PMI data in which the headline Manufacturing PMI topped estimates but remained in contraction territory.

NOTABLE APAC HEADLINES

• Japanese PM Kishida said he has fully recovered from COVID-19 and returned to normal duty. Kishida added that they will begin administering Omicron variant targeted vaccines earlier than planned, while he announced to increase the daily upper limit of entrants to Japan to 50k on September 7th and will look into further loosening of border controls.
• South Korean vice-Finance Minister says they received "positive signs" during talks with FTSE Russell, FX environment has not emerged as a hurdle in discussions. Possibility is high for S. Korea's inclusion to the FTSE's WGBI watch-list in September.

DATA RECAP

• Chinese NBS Manufacturing PMI (Aug) 49.4 vs. Exp. 49.2 (Prev. 49.0); Non-Manufacturing PMI (Aug) 52.6 vs Exp. 52.2 (Prev. 53.8)
• Chinese Composite PMI (Aug) 51.7 (Prev. 52.5)
• Japanese Industrial Production Prelim. (Jul P) 1.0% vs. Exp. -0.5% (Prev. 9.2%); Retail Sales YY (Jul) 2.4% vs. Exp. 1.9% (Prev. 1.5%)
• Australian Construction Work Done (Q2) -3.8% vs. Exp. 0.9% (Prev. -0.9%)