• APAC stocks were pressured amid spillover selling from Wall St owing to the higher yield environment; SPX -0.41%, NDX -0.72%.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 future -1% after the cash market closed up by 0.3% yesterday.
• DXY remains firm, EUR/USD sits sub-0.99, GBP/USD is back on a 1.14 handle and JPY has gone as high as 144.38.
• Crude extended on yesterday's losses with pressure from a stronger dollar and negative risk tone.
• Looking ahead, highlights include German Industrial Output, EZ Q2 Final Employment, BoC Rate Decision, Fed Beige Book, EIA STEO, Speeches from BoE's Bailey, Pill, Mann, Tenreyro, Fed's Barkin, Mester, Brainard & Barr.

US TRADE

• US stocks were pressured as US participants returned from the Labor Day holiday, continuing from the selling pressures last week in anticipation of hawkish central bank activity and ongoing energy woes throughout Europe, with sentiment dampened by surging yields after stronger than expected US ISM Services data and a deluge of corporate issuances.
• SPX -0.41% at 3,908, NDX -0.72% at 12,011, DJIA -0.55% at 31,145, RUT -0.96% at 1,792.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (2024 voter) warned that rates must stay high until inflation eases and said the Fed would need to tighten policy further so that real interest rates sit above zero, according to FT.
• California ISO initially raised its energy emergency alert for rolling blackouts from level 1 to level 2, but later issued an energy emergency alert level 3 amid low electricity supplies due to record heat and demand, while it added that the grid operator can now order rotating power outages if necessary.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukraine seeks a corridor to evacuate civilians near the Zaporizhzhia nuclear plant, according to WSJ.
• Hungary backed down from the threat to block the rollover of individual sanctions on Russians over delisting demands and the issue will now be addressed in November/December ahead of the January sanctions rollover, according to WSJ's Norman.

OTHER

• White House said if Iran is prepared to comply with the 2015 JCPOA deal then the US is prepared to do the same and is ready for all scenarios whether or not a return to the nuclear deal is achieved.
• US military is to carry out a routine ICBM test on Wednesday and has notified Russia in advance, according to the Pentagon.

APAC TRADE

EQUITIES

• APAC stocks were pressured amid spillover selling from Wall St owing to the higher yield environment and as participants digested the latest Chinese trade data.
• ASX 200 weakened from the open with the index dragged lower by the energy and mining-related sectors and with somewhat mixed GDP data not doing much to spur risk appetite.
• Nikkei 225 declined despite a further weakening in the JPY as the recent rapid currency depreciation raised further questions surrounding the BoJ’s dovish resolve.
• Hang Seng and Shanghai Comp were subdued amid the ongoing COVID woes and following the softer than expected Chinese trade data in which all metrics missed forecasts.
• US equity futures remained subdued and prodded yesterday's with the Emini S&P (-0.3%) beneath 3,900.
• European equity futures are indicative of a softer open with the Euro Stoxx 50 future -1% after the cash market closed up by 0.3% yesterday.

FX

• DXY further extended on its 20yr highs with upside fuelled by gains in yields and strong ISM data.
• EUR/USD declined beneath the 0.9900 handle with the single currency subdued by the ongoing energy concerns in Europe.
• GBP/USD eventually gave way to the firmer greenback and retreated to a sub-1.1500 level.
• USD/JPY printed a fresh 24-year high which spurred the familiar FX rhetoric from Japan’s officials, although former MOF FX head Watanabe spoke against FX intervention and doesn't think the BoJ will raise rates just to stem the yen's declines.
• Antipodeans were subdued after recent commodity selling and with AUD/USD constrained after the mixed GDP data, while NZD/USD underperformed to test the 0.6000 level where support held.

FIXED INCOME

• 10yr UST futures languished near the prior day’s lows with recent selling pressure due to a deluge of corporate issuances and stronger than expected ISM data, while US yields remained firmer across the curve with the 30yr Treasury yield at its highest since 2014.
• Bund futures were lacklustre after yesterday’s initial momentum eventually faded as global yields climbed.
• 10yr JGBs futures tracked the recent declines in counterparts but were off their lows amid the BoJ's presence in the market for JPY 1.65tln of JGBs under the regular Rinban operations and had upped its purchases in the 5yr-10yr maturities.

COMMODITIES

• Crude extended on yesterday's losses with pressure from a stronger dollar and negative risk tone, while the recent cut to Saudi OSPs for October was also detrimental to oil prices.
• US Deputy Treasury Secretary Adeyemo said India is considering joining the Russian price cap plan, according to Bloomberg TV. Adeyemo also stated that they want to work with financial services providers to design a Russian oil price cap compliance regime that is as simple as possible and hopes China and India will join the price cap coalition.
• Norway is open to talks with European partners on potential long-term gas agreements and price caps, according to the Norwegian PM via an FT interview.
• Spot gold was marginally and slipped beneath the USD 1700/oz level amid a firmer dollar.
• Copper declined owing to the downbeat mood and miss on Chinese trade data.
• EU and the US increased Russian aluminium and nickel imports since the Ukraine war with EU imports of Russian aluminium imports up by 13% in the March to June period and US shipments of Russian nickel surged 70% in the March to June period, according to trade data cited by Reuters.

CRYPTO

• Bitcoin weakened alongside the subdued tone and fell beneath the 19,000 level.

NOTABLE APAC HEADLINES

• PBoC set USD/CNY mid-point at 6.9160 vs exp. 6.9686 (prev. 6.9096)
• Japanese Chief Cabinet Secretary Matsuno believes relaxation of border control measures could be an advantage with the weak JPY, while they are concerned by recent rapid, one-sided currency moves and are ready to take appropriate action on FX market moves if necessary, according to Reuters.
• Japan's former MOF FX head Watanabe said there is no need for Japan to intervene in the currency market to stem the yen's declines and that Japan intervening solo in the FX market would be meaningless as current FX moves are driven by broad dollar gains, while he noted that intervening solo would be a waste of money as markets would know Tokyo has limited to how much reserves it can tap to continue with such actions. Wakatabe also stated that USD/JPY is overshooting somewhat now and may briefly reach 145 later this month but such increases likely won't last long, while he doesn't think the BoJ will raise rates just to stem JPY's declines.

DATA RECAP

• Chinese Trade Balance USD (Aug) 79.39B vs. Exp. 92.7B (Prev. 101.26B)
• Chinese Exports YY* (Aug) 7.1% vs. Exp. 12.8% (Prev. 18.0%)
• Chinese Imports YY* (Aug) 0.3% vs. Exp. 1.1% (Prev. 2.3%)
• Chinese Trade Balance (CNY)(Aug) 535.9B vs Exp. 661.9B (Prev. 682.7B)
• Chinese Exports YY (CNY)(Aug) 11.8% vs Exp. 18.5% (Prev. 23.9%)
• Chinese Imports YY (CNY)(Aug) 4.6% vs Exp. 6.3% (Prev. 7.4%)
• Australian Real GDP QQ SA (Q2) 0.9% vs. Exp. 1.0% (Prev. 0.8%)
• Australian Real GDP YY SA (Q2) 3.6% vs. Exp. 3.5% (Prev. 3.3%)

EU/UK

NOTABLE HEADLINES

• UK PM Truss said she will cut taxes to reward hard work and will take action on energy bills this week.
• UK PM Truss spoke with US President Biden with Truss said to be looking forward to working with Biden to tackle shared challenges, particularly extreme economic problems from Russian President Putin's war, while they discussed domestic issues and agreed on the importance of protecting the Good Friday Agreement, according to Downing Street.
• UK PM Truss will not activate the emergency Article 16 override provision in the Northern Ireland protocol in the coming weeks and pulling away from an early confrontation with the EU over Brexit, according to FT citing the PM's allies.