• APAC stocks mostly lacked firm direction despite a soft lead from the US after sentiment was dented by the Gazprom NS1 announcement on Friday.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -3.1% after the cash market closed up by 2.5% on Friday.
• DXY is on a firm footing and a 110 handle, EUR/USD has breached 0.99 to the downside, cable is soft ahead of UK PM announcement.
• Russia doesn’t currently support an oil output cut and OPEC+ is likely to keep its output steady when it meets Monday, according to WSJ.
• Looking ahead, highlights include, EZ & UK Composite/Services PMIs (Final), UK Tory Leadership Announcement, OPEC+ Meeting, Speech from BoE’s Mann. US markets closed for Labor Day.

US TRADE

• US stocks finished lower on Friday with initial gains seen after a "goldilocks" jobs report, although sentiment later deteriorated on European energy concerns after Gazprom announced Nord Stream 1 operations would be halted due faults with no timeline for the repair nor the restart of gas supply.
• SPX -1.03% at 3,926, NDX -1.44% at 12,098, DJIA -1.07% at 31,318, RUT -1.09% at 1,802.
• Click here for a detailed summary.

NOTABLE HEADLINES

• California ISO said California faces worsening grid challenges on Monday and Tuesday, while it added that energy demand is approaching record levels with historic heat bearing down on California for the next several days, according to Reuters.

GEOPOLITICS

CHINA-TAIWAN

• US State Department approved a potential USD 1.1bln sale of military equipment to Taiwan including 100 Sidewinder air-to-air missiles and 60 anti-ship missiles, while the White House said the possible sale reflects the assessment of Taiwan’s defence needs and the threat posed to it by China.
• Taiwan Defence Ministry said two Chinese aircraft flew across the Taiwan Strait on Sunday, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks mostly lacked firm direction amid cautiousness ahead of this week's key events including central bank meetings and tier-1 data releases, while better than expected Chinese Caixin Services PMI was offset by China’s COVID-19 lockdowns and ongoing European energy woes.
• ASX 200 was just about kept afloat by strength in the commodity-related sectors with outperformance in energy amid upside in underlying prices.
• Nikkei 225 traded subdued alongside disruptions as the region braced for Typhoon Hinnamnor.
• Hang Seng and Shanghai Comp were mixed with Hong Kong pressured by underperformance in auto and tech stocks, while the mainland was choppy after Chinese Caixin Services PMI topped estimates and following the extension of COVID restrictions in Chengdu and Shenzhen.
• US equity futures were rangebound amid the cautious mood in Asia and Labor Day in the US. ES +0.1%.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -3.1% after the cash market closed up by 2.5% on Friday.

FX

• DXY trades on a firm footing heading into the European open amid the risk aversion in markets. DXY currently sits on a 110 handle with an overnight peak of 110.21; marking a 20yr high.
• EUR/USD remained subdued and breached the 0.9900 level to the downside amid energy supply concerns following the indefinite shutdown of the Nord Stream 1 pipeline.
• GBP/USD slipped beneath the 1.1500 handle with attention shifting to the announcement of the result of the Tory leadership race and the UK’s next PM later today.
• USD/JPY was steady with the pair remaining on a 140.0 handle and JPY-crosses slightly softened with price action driven by base currencies.
• Antipodeans were lacklustre alongside the cautious risk appetite.

FIXED INCOME

• 10yr UST futures were flat with US cash markets closed on Monday for the Labor Day holiday and following on from the recent “goldilocks” jobs report..
• Bund futures remained firm as energy concerns festered in Europe ahead of this week’s ECB meeting.
• 10yr JGBs futures took impetus from the recent gains in their global counterparts and amid the cautious risk mood.

COMMODITIES

• Crude gained from the open amid European energy supply concerns after the indefinite shutdown of the Nord Stream 1 pipeline, while the focus for the complex turns to the OPEC+ meeting later with the group likely to maintain output steady, according to WSJ sources.
• Russia doesn’t currently support an oil output cut and OPEC+ is likely to keep its output steady when it meets Monday, according to people familiar with the matter cited by WSJ. There was also a report by Reuters that sources said OPEC+ is to weigh a rollover or small cut at its meeting on Monday.
• EU energy ministers are to discuss gas price caps at their meeting on September 9th and will discuss emergency liquidity support for companies facing high margin calls, according to a document cited by Reuters.
• German Chancellor Scholz said Russia is not a reliable energy partner and said they will get through this winter, while he added that they will use income from windfall taxes to lower end-consumer prices for gas, oil and coal. Furthermore, they will give EUR 1.5bln towards discounted public transfer offer and said that they had been preparing for a total stop of gas deliveries in December, according to Reuters.
• German network regulator said the Nord Stream 1 defects alleged by the Russian side are not a technical reason for a halt in operations and said the gas situation is tense in which a further deterioration cannot be ruled out, according to Reuters.
• Swedish Financial Stability Council said it agreed on measures to safeguard financial stability and it formally endorsed government proposed measures to provide financial guarantees for power producers trading in electricity derivatives in an effort to prevent a financial crisis, according to Reuters. It was also reported that Finland’s government plans to offer EUR 10bln liquidity guarantees to the energy sector.
• Indonesian government decided to reallocate fuel subsidies with some of the fuel subsidies to be shifted to the social protection budget, while Indonesia’s energy minister announced an increase in Pertamina’s fuel prices, according to Reuters.
• Spot gold traded sideways alongside a rangebound dollar.
• Copper eked marginal gains after spending the entire session nursing opening losses.

CRYPTO

• Bitcoin was marginally lower and fell back beneath the 20,000 level.

NOTABLE APAC HEADLINES

• PBoC set USD/CNY mid-point at 6.8998 vs exp. 6.9153 (prev. 6.8917)
• China's Chengdu will conduct city-wide mass testing on September 5th-7th and will maintain current COVID restrictions for the city aside from two areas with normal life and production to resume in the Xinjin district and Qionglai City, according to Reuters.
• Shenzhen will adopt tiered COVID restriction measures beginning on Monday after it went into a weekend lockdown on Saturday for mass COVID testing, according to Reuters.
• Shanghai’s major container port of Yangshan suspended terminal operation as Typhoon Hinnamnor approaches, according to Bloomberg. However, it was later reported that Shanghai ports will resume operations on Monday evening as the typhoon weakens.
• The email system of a university in Northwest China’s Shaanxi Province which is well-known for its aviation, aerospace and navigation studies, was found to have been attacked by the US NSA, according to Global Times citing a source.

DATA RECAP

• Chinese Caixin Services PMI (Aug) 55.0 vs. Exp. 54.0 (Prev. 55.5)
• Chinese Caixin Composite PMI (Aug) 53.0 (Prev. 54.0)
• Australian Gross Company Profits (Q2) 7.6% vs. Exp. 4.0% (Prev. 10.2%, Rev. 9.8%)
• Australian Business Inventories (Q2) 0.3% vs. Exp. 1.6% (Prev. 3.2%, Rev. 3.6%)

EU/UK

NOTABLE HEADLINES

• UK Tory leadership frontrunner Truss said it is the BoE’s job to control inflation and that all needs to be done to help people in the meantime, according to the BBC. Furthermore, Truss has vowed economic action from Day 1 if she becomes the next PM and pledged a range of measures to address the rising cost of living, according to FT.
• UK Tory leadership frontrunner Truss is considering freezing energy bills for millions of households this winter if she wins the Tory leadership race, according to The Telegraph.
• UK Business Secretary Kwarteng who is tipped to become the next Chancellor of the Exchequer said Truss will be fiscally responsible if she becomes the next PM and will make it her aim to get the UK to 2.5% trend growth, according to FT.
• UK police chiefs are drawing up contingency plans to maintain law and order as the economic squeeze tightens this winter, according to The Sunday Times.
• EU is seeking sweeping powers over businesses during a crisis and wants to be able to force companies to stockpile supplies and break delivery contracts, according to FT.
• Germany is to spend EUR 65bln on its third package which aims to tackle the effects of inflation on consumers and businesses, according to a government document cited by Reuters. It was also reported that Germany is to levy a windfall tax on energy groups to fund the aid package, according to FT.
• Italy’s Economy Minister said the cost of the country’s net energy imports could reach near EUR 100bln this year from EUR 43bln last year and said that the government expects to reduce the debt-to-GDP ratio by a few percentage points this year, according to Reuters.