• European bourses kicked off Tuesday’s trade in the green following a mixed APAC session; US equity futures trade higher
• DXY resides north of 109.50, EUR/USD consolidates, JPY further declined on yield differentials; Yuan came under renewed pressure
• Bunds are off recovery highs but remain firm, Gilts have pulled back, 10yr T-note remains depressed awaiting the return of US cash markets
• WTI and Brent futures have declined below the levels seen at the reopening of electronic trade; spot gold is flat and base metals are mostly firmer 
• Looking ahead, highlights include US ISM Services PMI

US Labor Day Recap

• OPEC+ agreed on a 100k BPD cut in October quotas, taking quotas back to August levels. OPEC+ will be on standby and can call for a meeting at any time to further make changes to policy, Energy Intelligence reported. The August decision to increase production by 100k was only intended for the month of September, and not beyond that. OPEC+ decision was 'symbolic' sends the message that the group will intervene whenever necessary to bring stability to the market, according to a Gulf source.
• Liz Truss won the contest to become the next UK Prime Minister, as expected; she said she will deliver tax cuts, and economic growth and will deal with issues regarding long-term energy supply.
• PBoC announced it is to cut Forex RRR by 200bps for financial institutions to 6% from 8%.

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.

IRAN

• Iranian government spokesman says "we have not left the negotiating table to reactivate the nuclear agreement previously and we have no intention of doing so", via Al Jazeera.

CENTRAL BANKS

• ECB's Centeno said monetary policy must be patient, ECB may achieve inflation goal with slow normalisation via Eurofi Magazine.
• ECB's Kazaks said broad of protracted recession could slow rate hikes' ECB will have above the neutral rate if needed via Eurofi Magazine
• ECB's Scicluna said determining when to use Transmission Protection Instrument (TPI) is a major challenge, via Eurofi Magazine.
• ECB's Stournaras sees energy costs moderating and bottle easing; EZ inflation is close to its peak, inflation will start steady deceleration via Eurofi Magazine.
• 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.
• 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.

EUROPEAN TRADE

EQUITIES

• European bourses kicked off Tuesday’s trade in the green following a mixed APAC session, which saw no lead from Wall Street amid the US Labor Day holiday. Sentiment this morning was somewhat choppy and bourses trade off highs.
• Sectors in Europe are mostly firmer and now portraying a mildly anti-defensive/pro-cyclical tilt, with Healthcare, Utilities, Telecoms, and Food & Beverages towards the bottom of the bunch.
• Stateside, US equity futures remain firmer across the board with the NQ narrowly outpacing the ES, YM, and RTY.
• Click here for more detail.

FX

• The Dollar and index lost upward momentum in low-key US holiday trade on Monday, but found underlying bids to keep the latter propped around 109.50
• EUR sees some respite and consolidation on either side of 0.9950 against the USD, whilst several ECB headlines were released in the blackout period, albeit from a monthly publication.
• JPY declined further on yield differentials, with USD/JPY rising above 141.00 and closer to 142.00.
• Yuan came under renewed pressure irrespective of a firmer than forecast onshore midpoint fix, with China's COVID situation continuing to be a headwind.
• Russia's Sberbank said they are beginning to lend the Chinese Yuan, seeing large demand for the currency, according to Reuters.
• Click herefor more detail.

Notable FX Expiries, NY Cut:

• EUR/USD: 0.9900 (792M), 0.9995-1.0000 (1.08BN)
• AUD/USD: 0.6800 (722M), 0.6875 (1.06BN)
• Click here for more detail.

FIXED INCOME

• Bunds are off recovery highs, but remain firm within 145.75-144.74 parameters for the Dec contract
• Gilts have pulled back below parity after rebounding in sympathy to 106.79.
• 10yr T-note remains depressed towards the bottom of a 116-00/27+ range awaiting the return of US cash markets from the long Labor Day weekend
• Click here for more detail.

COMMODITIES

• WTI and Brent futures have declined below the levels seen at the reopening of electronic trade, but divergence is seen in terms of intraday changes between the contracts as the former saw no settlement on account of the US Labor Day holiday.
• Spot gold hovers around recent levels just above USD 1,700/oz - gold sees key support at 1699.1 and 1678.4, whilst resistance levels include 1,729 and 1,745.
• Base metals are mostly firmer with 3M LME copper posting mild gains above USD 7,500/oz but off best levels.
• France's Aluminium Dunkerque is to cut production by one-fifth amid power costs, according to sources cited by Reuters.
• Click here for more detail.

CRYPTO

• Bitcoin has been oscillating under the USD 20,000 mark throughout the European session.

NOTABLE EUROPEAN HEADLINES

• 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. Sky News understands that cost of UK PM Truss energy plan reportedly under GBP 100bln, potentially between GBP 60-70bln; plan not yet signed off.

NOTABLE US 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.
• Biden admin has released plans for USD 50bln investment in chips, NYT reports; The Department of Commerce issued guidelines for companies angling to receive federal funding aimed at bolstering the domestic semiconductor industry.
• Click here for the US Early Morning Note.

APAC TRADE

• 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.

NOTABLE APAC HEADLINES

• PBoC set USD/CNY mid-point at 6.9096 vs exp. 6.9304 (prev. 6.8998)
• China's Shanghai reportedly added one high-risk area and two middle-risk areas Tuesday after report of one local asymptomatic COVID case outside of quarantine.
• 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.
• Japan is poised to shorted its COVID isolation time to seven days, Nikkei reported.

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%)