• APAC stocks traded somewhat mixed following the holiday lull stateside, RBA hiked by 50bps as expected.
• European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 future -0.2 after the cash market closed down by 1.5% yesterday.
• DXY is back on a 109 handle, GBP is firmer post-Truss victory, EUR/USD hovers around 0.9950, JPY lags G10 FX.
• Crude was choppy overnight although held on to some of the prior day's gains amid European energy woes and after OPEC+ announced a 100k bpd cut to output for October.
• Looking ahead, highlights include EZ and UK Construction PMI, US ISM Services PMI, Supply from UK & Germany.

US TRADE

• US stocks markets were closed for Labor Day

NOTABLE HEADLINES

• California ISO said forecasted loads are currently very high with Tuesday showing peak demand at a record 51,145 megawatts and it is projecting supply deficiencies of 400 - 3,400 megawatts between 17:00-21:00 local time on Tuesday, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• IAEA said Ukraine informed it that a backup power line between Zaporizhzhia nuclear power plant and a nearby power station was deliberately disconnected to extinguish a fire but the line was not damaged and the nuclear plant continues to receive the electricity it needs for safety from its sole operating reactor. IAEA said that it will issue a report about nuclear safety, security and safeguards situation in Ukraine on Tuesday.
• Ukrainian President Zelensky said he hopes IAEA findings on the Zaporizhzhia plant will be objective and said new Russian shelling of the plant shows Moscow doesn’t care about IAEA opinion, while he added the new power cut from the station to grid means for a second time that the plant was a step away from radiation catastrophe, according to Reuters.
• Russia is reportedly buying artillery from North Korea as global sanctions have hampered the Russian military’s supply lines, according to US intelligence cited by NYT.
• US President Biden responded 'no' when asked if Russia should be designated a state sponsor of terrorism, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded somewhat mixed following the holiday lull stateside and as participants braced for this week's central bank decisions beginning with an expected 50bps rate increase by the RBA.
• ASX 200 lacked firm direction with strength in the energy and tech sectors offset by mixed data releases and an unsurprising 50bps rate increase by the RBA.
• Nikkei 225 was contained following disappointing household spending and softer wage growth data.
• Hang Seng and Shanghai Comp were mixed with Hong Kong pressured as losses in tech overshadowed the strength in property names, while the mainland was underpinned after further support pledges by Chinese authorities and with the PBoC cutting its FX RRR which is seen as a measure to stem the recent currency depreciation.
• US equity futures were steady with US participants set to return from the holiday weekend. ES +0.3%.
• European equity futures are indicative of a slightly softer open with the Euro Stoxx 50 future -0.2 after the cash market closed down by 1.5% yesterday.

FX

• DXY was lacklustre following the holiday-thinned conditions on Monday and with early selling pressure seen as Asia trade got underway which benefitted the greenback's major peers.
• EUR/USD faded most of its early gains and remained below parity as energy concerns lingered.
• GBP/USD strengthened and briefly tested 1.1600 to the upside with incoming UK PM Truss lining up a GBP 130bln plan to freeze energy bills.
• USD/JPY was choppy at the 140.00 handle amid the indecisive mood and disappointing data.
• Antipodeans retraced some of their initial advances heading into the RBA rate decision which then spurred a choppy reaction after the central bank hiked rates by 50bps as expected and reaffirmed its guidance that it expects to increase rates further in the months ahead but is not on a preset path.

FIXED INCOME

• 10yr UST futures nursed some of their recent declines after price action was hampered amid the closure of cash trade for Labor Day.
• Bund futures failed to make any meaningful comeback from yesterday’s selling pressure heading closer to the ECB meeting on Thursday.
• 10yr JGBs futures clawed back Monday’s after-hour losses following soft data releases, but with upside capped following mixed results at the 30yr auction.

COMMODITIES

• Crude was choppy overnight although held on to some of the prior day's gains amid European energy woes and after OPEC+ announced a 100k bpd cut to output for October.
• The European Commission’s energy agency recommends member states agree on “emergency wholesale price cap” measures on gas, according to a document seen by the FT.
• White House said US President Biden is determined to take every step necessary to shore up energy supplies and lower energy prices.
• Russian Energy Minister said Russia will reduce its output of gas by around 7% this year and will most likely cut oil output by around 2% this year, according to TASS. Russian Energy Minister also stated that Russia will respond to price caps on Russian oil by shipping more oil to Asia, while Russia and its partners are considering setting up their own insurer to facilitate oil trade. Furthermore, nothing has been decided on the Nord Stream 1 pipeline resumption and said they are waiting, according to Reuters.
• Gazprom said it received a warning from Russian authorities related to an oil leak at the Portovaya Compressor Station pumping gas through the Nord Stream pipeline and that it has become a hazardous production facility. Gazprom added that Siemens Energy said that the oil leak can only be fixed by a special repair company, while Gazprom's Deputy CEO later stated that the Nord Stream 1 will not be launched until Siemens Energy repairs faulted equipment, according to Reuters.
• Citi Research said European TTF prices could average USD 65/mmbtu or EUR 222/MWh in Q4 2022 and Q1 2023, while it added that the bull case amid a cold winter and further Russian supply cut could lift prices to USD 120/mmbtu. Citi also stated that there looks to be a high likelihood of Nord Stream 1 exports staying at zero for longer or at some minimal levels, according to Reuters.
• Iran’s petroleum minister said current market conditions require careful considerations and global energy markets need an increase in the supply of oil and gas from Iran, while the minister added that the stability and continuity of OPEC+ cooperation greatly help world consumers in the current energy crisis, according to SHANA.
• Spot gold surged amid early dollar weakness but then pulled back as the buck recovered.
• Copper remained firm overnight and marginally extended to the prior day's best levels.

CRYPTO

• Bitcoin was lacklustre and failed to sustain a brief reclaim of the 20,000 level.

NOTABLE APAC HEADLINES

• PBoC set USD/CNY mid-point at 6.9096 vs exp. 6.9304 (prev. 6.8998)
• Japanese Finance Minister Suzuki confirmed fund requests from ministries for FY23 reached JPY 110tln and said they will decide on a fuel subsidy extension based on prices and other factors.
• RBA hiked rates by 50bps to 2.35%, as expected. RBA reiterated that the board is committed to doing what is necessary to ensure inflation returns to the target and it expects to increase rates further in the months ahead but is not on a preset path. Furthermore, it stated that the size and timing of future interest rate increases will be guided by the incoming data and the Board's assessment of the outlook for inflation and the labour market, while it noted that the Australian economy is continuing to grow solidly and national income is being boosted by a record level of the terms of trade.

DATA RECAP

• Australian Current Account Balance (AUD)(Q2) 18.3B vs. Exp. 20.8B (Prev. 7.5B)
• Australian Net Exports Contribution (Q2) 1.0% vs. Exp. 0.9% (Prev. -1.7%)
• Japanese All Household Spending MM (Jul) -1.4% vs. Exp. -0.6% (Prev. 1.5%)
• Japanese All Household Spending YY (Jul) 3.4% vs. Exp. 4.2% (Prev. 3.5%)
• Japanese Total Cash Earnings YY (Jul) 1.8% (Prev. 2.2%)

EU/UK

NOTABLE HEADLINES

• BoE's Mann said a fast and forceful approach to tightening, potentially followed by a hold or reversal is better than a gradualist approach, while she added that a 75bps rate hike by the BoE is an important question and that they must ensure inflation expectations do not drift further from the target.
• Incoming UK PM Truss is considering freezing energy bills until the next election (expected 2024), according to The Telegraph. It was later reported that Truss is lining up a GBP 130bln plan to freeze energy bills, according to Bloomberg.
• Barclaycard UK consumer spending rose 4.7% Y/Y in August, which was the weakest increase since March 2021.
• Portugal’s government announced a new EUR 2.4bln anti-inflation package for families which includes a reduction on VAT on electricity to 6% from 13%, one-off subsidies for low-income families and an extra payment of half a monthly pension for all pensioners, according to Reuters.

DATA RECAP

• UK BRC Retail Sales Like-For-Like YY (Aug) 0.5% (Prev. 1.6%)
• UK BRC Total Retail Sales YY (Aug) 1.0% (Prev. 2.3%)