• European bourses are under pressure amid continued hawkish pricing, but off lows as yields ease from highs, Euro Stoxx 50 -1.4%.
• Stateside, a similar picture to fixed with action in-fitting directionally but steadier in terms of magnitudes ahead of data, ES -07%; NQ -1.1% lags given elevated yields.
• DXY around 109.00 having recovered from fresh lows in wake of Russian-driven Yuan appreciation, peers softer across the board ex-CAD & CHF
• Core benchmarks are under pronounced pressure once more with yields across the board at fresh near-term peaks
• Crude resumes downward price action with focus on potential energy price caps
• Taiwan's Defense Command said it has shot down an unknown civilian drone near Kinmen
• Looking ahead, highlights include US Manufacturing PMIs, US ISM Manufacturing, Construction Spending, Speech from Fed's Bostic.

As of 11:10BST/06:10ET

LOOKING AHEAD

• US Manufacturing PMIs, US ISM Manufacturing, Construction Spending, Speech from Fed's Bostic.
• Click here for the Week Ahead preview.

GEOPOLITICS

CHINA -TAIWAN

• Taiwan's Defense Command said it has shot down an unknown civilian drone near Kinmen after the usual protocol to repel the drone fail to achieve the goal, via DW News' Yang. Following initial reports that Taiwan's Defence Ministry shot down a unidentified drone in Kinmen - NOTE: newswire correction to the original headline from "Chinese" to "unidentified" drone
• China Global Times' Hu Xijin tweets "The drone that was reportedly shot down definitely does not belong to PLA...ut the shooting down will raise the Straits situation to the level of using opening fire to resolve issue".
• Taiwanese Defence Ministry report notes that Taiwanese military is facing a "severe challenge" from China's reputed crossing of the Taiwanese Strait median line. China is modifying its attack plans on Taiwan in lieu of the Russian invasion of Ukraine. China continues to strengthen its combat preparedness for an attack on Taiwan.

UKRAINE

• Russian Defence Ministry says Ukrainian forces attempted to attack the Zaporizhzhia nuclear plant, via Ria.
• IAEA mission is on the way to the Zaporizhzhia nuclear plant; subsequently, an IAEA spokesperson says its mission to the nuclear power plant has been delayed for around three hours on the Ukraine-held side of the front line.

EUROPEAN TRADE

CENTRAL BANKS

• Fed's Logan (2023 voter) said the number one priority is to restore price stability, according to Reuters.
• Japan's Chief Secretary Matsuno provides no comment on every day-to-day FX moves, watching moves with a high sense of urgency; desirable for currencies to move stably, reflecting economic fundamentals.

EQUITIES

• European bourses are underpressure amid continued hawkish pricing, but off lows as yields ease from highs, Euro Stoxx 50 -1.4%.
• Stateside, a similar picture to fixed with action in-fitting directionally but steadier in terms of magnitudes ahead of data, ES -07%; NQ -1.1% lags given elevated yields.
• Click here for more detail.

FX

• DXY sits around USD 109.00 after seeing fresh lows amid Yuan appreciation.
• EUR, GBP AUD, NZD, JPY are all softer vs the USD to similar magnitudes.
• CAD and CHF are the G10 outliers, with the latter supported after Swiss CPI and the former hit by softer oil prices.
• Click herefor more detail.

Notable FX Expiries, NY Cut:

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FIXED INCOME

• Core benchmarks are under pronounced pressure once more with yields across the board at fresh near-term peaks
• Pressure occurring despite geopolitical tensions as hawkish ECB pricing continues to increase, ~85% chance of a 75bp hike.
• Though, following the passing of hefty European/UK issuance, the magnitude of this downside has eased.
• USTs are directionally in-fitting but more contained overall awaiting ISM Manufacturing today and then NFP on Friday.
• Click here for more detail.

COMMODITIES

• WTI and Brent futures have resumed downward action following an APAC session of consolidation.
• Spot gold is meandering just north of USD 1,700/oz after testing the figure to the downside.
• Base metals are lower across the board following the downbeat Chinese manufacturing PMI overnight alongside news of stricter Chinese lockdowns in some regions
• 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.
• OPEC+ JTC acknowledges the relevance of the Saudi Energy Minister's comments on volatility and thin liquidity of crude markets, via Reuters citing a document.
• EU Commission President von der Leyen will outline ideas on an energy price cap in more detail in a speech on September 14th.
• Four people killed in overnight clashes in Iraq's Basra, according to security officials cited by Reuters.
• Click here for more detail.

NOTABLE HEADLINES

• Russia is said to be mulling as much as USD 70bln in "friendly" currencies, according to Bloomberg sources; this is in order to slow the RUB surge "before shifting to a longer-term strategy of selling its holdings of the Chinese currency".

NOTABLE DATA

• German Retail Sales YY Real (Jul) -2.6% vs. Exp. -6.5% (Prev. -8.8%); MM Real* (Jul) 1.9% (Prev. -1.6%)
• UK Nationwide House Price YY (Aug) 10.0% vs. Exp. 8.9% (Prev. 11.0%); MM (Aug) 0.8% vs. Exp. 0.1% (Prev. 0.1%, Rev. 0.2%)
• EU S&P Global Manufacturing Final PMI (Aug) 49.6 vs. Exp. 49.7 (Prev. 49.7)
• UK S&P GLBL/CIPS Manufacturing PMI Final (Aug) 47.3 vs. Exp. 46.0 (Prev. 46.0)

NOTABLE US HEADLINES

• Click here for the US Early Morning Note.

CRYPTO

• Bitcoin remains underpressure and below the USD 20k mark, fairly in-fitting with its Ethereum peer in residing at the bottom-end of very narrow ranges.

APAC TRADE

• 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.

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.
• Hong Kong will push ahead with a proposal that will allow more residents to travel to mainland China after completing a quarantine period locally, according to SCMP citing sources.
• 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.
• Hong Kong officials are targeting a conclusion to hotel COVID quarantines in November.
• Macau gov't intends to gradually reopen the city to foreign travellers, via 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%); Private Capital Expenditure 2022-2023 (AUD)(Est. 3) 146.4B (Prev. 130.5B)