• APAC stocks traded mostly lower following the weak handover from global counterparts and following a surprise contraction in Chinese Caixin Manufacturing PMI.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.9% after the cash market closed down by 1.3% yesterday.
• DXY is firmer and on a 109 handle, EUR/USD hovers around parity, GBP/USD is sub-1.16 and USD/JPY is at its highest level since 1998.
• US and allies are to set out a plan on Friday to limit the price of Russian oil without increasing global oil prices, according to WSJ.
• Looking ahead, highlights include EZ, UK & US Manufacturing PMIs, German Retail Sales, Swiss CPI, EZ Unemployment, US ISM Manufacturing, Construction Spending, Speech from Fed's Bostic, Supply from Spain, France & UK.

US TRADE

• US stocks extended their declines into month-end with sentiment not helped by the inflationary headwinds from Europe and mixed data releases in the US, while the losses were widespread with the majority of sectors closing in the red and tech was pressured as hardware names suffered following the guidance slash from Seagate Technologies (STX).
• SPX -0.78% at 3,954, NDX -0.57% at 12,272, DJIA -0.88% at 31,511, RUT -0.62% at 1,844.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Logan (2023 voter) said the number one priority is to restore price stability, according to Reuters.

GEOPOLITICS

CHINA -TAIWAN

• Global Times' Hu Xijin warned Taiwan to never shoot down drones from the mainland and that they probably belonged to civilian hobbyists but added once they’re shot down, there will be an explosion of public opinion and that the PLA is bound to retaliate against a certain target of the Taiwan side.
• Germany's defence chief said Germany will expand its military presence in the Indo-Pacific by sending more warships and joining drills with allies.

OTHER

• US President Biden and Israeli PM Lapid had a phone call to discuss the Iran nuclear deal and a senior Israeli official said it was made clear that whether there is a nuclear deal or not, Israel will protect itself against Iran with no limitations, according to Axios.
• White House said US President Biden underscored the US commitment to never allow Iran to acquire a nuclear weapon.
• Iran began enriching Uranium with the second of the three cascades of advanced IR-6 centrifuges recently installed at the underground Natanz plant, according to an IAEA report seen by Reuters, it is also enriching uranium to up to 5%.

APAC TRADE

EQUITIES

• APAC stocks traded mostly lower following the weak handover from global counterparts amid the higher yield environment and following a surprise contraction in Chinese Caixin Manufacturing PMI data.
• ASX 200 was dragged lower by the mining-related sectors after recent declines in underlying commodity prices.
• Nikkei 225 retreated beneath the 28k alongside the broader risk aversion with further currency weakness and an upgrade to Japanese PMI data doing little to inspire a turnaround.
• Hang Seng and Shanghai Comp were subdued after weak factory activity data from China and with Meituan among the worst performers in Hong Kong after reports its shareholder Tencent is planning about USD 14.5bln of divestments from its equity portfolio including a partial divestment of its stake in Meituan, while the mainland was cushioned after further policy support pledges by China’s cabinet.
• US equity futures remained pressured with Nasdaq futures underperforming on higher yields. ES -0.6%.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.9% after the cash market closed down by 1.3% yesterday.

FX

• DXY was firmer and climbed above the 109.00 level amid the risk aversion and higher yields.
• EUR/USD remained above parity but faded the post-inflation gains which had spurred calls from Goldman Sachs, Credit Suisse and Bank of America for a 75bps hike by the ECB next week.
• GBP/USD retreated to beneath 1.1600 and printed its lowest level in two and a half years.
• USD/JPY was boosted by widening yield differentials and climbed to its highest since 1998.
• Antipodeans were lacklustre amid the subdued risk tone, recent declines in commodities and disappointing Chinese Caixin PMI data.

FIXED INCOME

• 10yr UST futures were subdued as recent hawkish central bank rhetoric reverberated across yields.
• Bund futures extended on the prior day’s declines after the record high inflation data from the Eurozone spurred calls for a more aggressive rate move next week.
• 10yr JGBs futures suffered spillover selling from global counterparts and with prices not helped by the mixed results at the latest 10yr JGB auction.

COMMODITIES

• Crude was subdued amid the risk aversion and recent optimism from EU's Borrell of reaching an Iran deal in 'days', but with downside stemmed overnight by a tighter oil market outlook from OPEC+.
• OPEC+ panel tightened the oil market outlook for this year and next in which it cut the estimate for 2022 surplus in half to 400k BPD and flipped the forecast for 2023 to a deficit of 300k BPD, according to Bloomberg. It was also reported that OPEC+ JTC revised the 2022 oil surplus forecast to 0.4mln bpd from an earlier 0.9mln due to underproduction by its members.
• US Treasury Secretary Yellen and UK Chancellor Zahawi discussed efforts regarding a price cap on Russian oil to lower global energy prices and restrict Russia's revenue, according to the US Treasury Department. It was separately reported that US and allies are to set out a plan on Friday to limit the price of Russian oil with a strategy that aims to cut Russian energy revenues without increasing global oil prices, according to WSJ.
• Kazakhstan's Kashagan oil output was around 100k BPD on August 29th-30th, which is four times beneath normal output levels and is still reduced amid maintenance, according to Reuters sources.
• Spot gold marginally extended on losses amid the firmer greenback and higher yields.
• Copper remained pressured amid weakness across the commodities complex and disappointing factory activity data from China.

CRYPTO

• Bitcoin was indecisive and eventually returned to flat territory around the 20,000 level.

NOTABLE APAC HEADLINES

• China's city of Chengdu will conduct mass COVID testing from September 1st-4th and the city government said all residents will stay at home from this evening, according to Reuters.
• UN Human Rights Office issued its assessment of human rights concerns in Xinjiang in which it stated that China's government has committed serious human rights violations in Xinjiang and recommended China take prompt steps to release all those detained in training centres, prisons or detention facilities, according to Reuters and AFP.
• Chinese mission in Geneva said it expresses strong dissatisfaction regarding the UN report on Xinjiang and firmly opposes the report, while it added that the so-called assessment was a farce planned by the US, western nations and anti-China forces, according to Reuters.

DATA RECAP

• Chinese Caixin Manufacturing PMI Final (Aug) 49.5 vs. Exp. 50.2 (Prev. 50.4)
• Australian Capital Expenditure (Q2) -0.3% vs. Exp. 1.5% (Prev. -0.3%)
• Australian Private Capital Expenditure 2022-2023 (AUD)(Est. 3) 146.4B (Prev. 130.5B)

EU/UK

NOTABLE HEADLINES

• UK reportedly plans to cap renewables' profits to counter power price surge.
• Citi/YouGov Poll found that UK public inflation expectations for 1yr ahead rose to 6.3% from 6.1% and inflation expectations for 5-10yrs increased to 4.8% from 3.8%.
• ECB's Villeroy said the next rate move must be carried out with determination but in an orderly and predictable way, while he added that inflation is spreading through the economy including to services which justifies the ECB's mobilisation.