• APAC stocks took impetus from last Friday’s gains on Wall Street in a holiday-thinned start to the week.
• Russian forces have withdrawn from key towns in Eastern Ukraine as the Ukrainian counter-attack has made further progress. 
• European equity futures are indicative of a firmer open with the Euro Stoxx 50 future +0.6% after the cash market closed up by 1.6% on Friday.
• DXY is near unchanged, EUR is firmer on a 1.00 handle, Cable sits on a 1.16 handle and USD/JPY went as low as 142.34 overnight.
• Looking ahead, highlights include UK Monthly GDP, ECB Survey of Analysts, Speeches from ECB’s Schnabel & de Guindos, Supply from the US.

US TRADE

• US stocks finished higher on Friday following the gains in Asia and Europe, while tech/duration led the advances with a weaker dollar supportive for the equity complex.
• SPX +1.53% at 4,067, NDX +2.04% at 12,573, DJIA +1.19% at 32,151, RUT +1.95% at 1,882.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US Treasury Secretary Yellen said the Fed will require skill and luck to bring inflation down while maintaining labour market strength, while she noted that food and energy prices are having a negative impact but the labour market is strong, according to CNN.
• Fed's Waller (voter) said he supports another significant hike in two weeks and said if inflation suddenly slows, rates may peak under 4% but rates could peak well above 4% if prices don't cool.
• Fed's George (2022 voter) said the path of rate hikes and predictable adjustments based on data could improve market functioning and facilitate balance sheet runoff. George added she favours "steadiness and purposefulness over speed" regarding rate hikes and that the case for continuing to remove policy accommodation is clear cut.
• Fed's Mester (2022 voter) reiterated on Friday that one inflation report is not enough to change the Fed's views on the outlook and she sees rates rising above 4% by early 2023, while she added that the Fed will not meet its inflation target before 2024.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian forces have withdrawn from key towns in Eastern Ukraine as the Ukrainian counter-attack has made further progress, according to the BBC
• Ukrainian President Zelensky said he spoke with French President Macron and called for the demilitarisation of the Zaporizhzhia nuclear power plant, while Zelensky separately commented that Ukrainian forces liberated around 2,000 square kilometres of territory since its counter-offensive began, according to Reuters.
• Ukrainian Defence Minister Reznikov said Kyiv needs to secure territory it recaptured from a possible counter-attack by Russia after its lightning offensive had gone far "better than expected", according to FT.
• French President Macron told Russian President Putin that Russian military operations in Ukraine should stop immediately and that the main cause of risk at the Zaporizhzhia nuclear power plant was the presence of Russian forces. Macron also said that Russian troops should remove heavy and light weapons from the plant and asked Putin to ensure the UN-brokered deal on grains was implemented to ensure exports go to those most in need, according to the Elysee.
• Russia will pull out forces from the Ukrainian towns of Balakliia and Izium to step up military efforts to liberate the Donbas region, according to the Russian Defence Ministry cited by TASS.
• Russia’s Defence Ministry said Russian forces are hitting Ukrainian targets in the Kharkiv region, according to RIA. Furthermore, the Governor of the Ukrainian region of Kharkiv reported blackouts and water cuts after Russian attacks hit critical infrastructure, according to Reuters. There were also comments from the Governor of the Dnipropetrovsk region that Russia hit energy infrastructure and caused blackouts, while the Sumy region Governor earlier stated that power levels dropped and that Russian attacks on energy infrastructure are possible, according to Reuters.
• IAEA said that the backup power line for the Zaporizhzhia nuclear power plant was restored which provides the plant with the electricity needed to cool its reactors, according to Reuters.

CHINA-TAIWAN

• Taiwan said 3 Chinese aircraft crossed the Taiwan Strait median line on Sunday, according to Reuters.
• Lithuania is expected to open its first representative office in Taiwan this week amid increasing tensions with Beijing, according to SCMP.
• China's NPC Standing Committee Chairman Li Zhanshu said China is willing to enhance cooperation with the Russian State Duma & Federation Council, strengthen legislative exchange in governance anti-interference, anti-sanction and anti-jurisdiction. Furthermore, Li thanked Russia for its position on US House Speaker Pelosi's 'illegal visit to Taiwan and its support for China's territorial integrity', while the Russian side repeated its condemnation regarding Pelosi's visit and said Russia firmly adheres to the one-China policy, according to Global Times.

OTHER

• France, Britain and Germany said Iran’s latest responses to the EU raised serious doubts about its intentions to return to the nuclear deal and that Iran’s position is incompatible with international obligations. Furthermore, the E3 said given Iran’s failure to conclude the deal on the table, they will consult with international partners on how to respond to Iran’s continued nuclear escalation and absence of cooperation with the IAEA, while Iran rejected the statement by France, Britain and Germany as unconstructive, according to Reuters.
• Greek PM Mitsotakis said Turkish President Erdogan’s recent statements are unacceptable after the latter accused Greece of occupying demilitarised islands in the Aegean Sea and said that Turkey was ready to do what is necessary when the time came, while Mitsotakis said he is always open to meeting with Erdogan, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks took impetus from last Friday’s gains on Wall Street in a holiday-thinned start to the week.
• ASX 200 traded higher with the mining-related sectors and tech resuming their recent outperformance, while the top-weighted financials sector was also kept afloat as the major banks increased mortgage rates after last week’s RBA rate hike.
• Nikkei 225 rose above 28,500 as Japan mulls steps to open its borders including scrapping its daily limit of 50k arrivals of overseas visitors by October and waiving visa requirements.
• Hang Seng, Shanghai Comp and KOSPI were closed for the Mid-Autumn Festival.
• US equity futures were rangebound and took a breather after Friday's advances. ES Unch.
• European equity futures are indicative of a firmer open with the Euro Stoxx 50 future +0.6% after the cash market closed up by 1.6% on Friday.

FX

• DXY was initially pressured after its recent pullback and the positive risk tone, although pared losses given that the Fed rhetoric remained hawkish prior to the blackout period which began on Saturday.
• EUR/USD traded firmer after hawkish central bank rhetoric in which ECB’s Nagel said further clear ECB steps are needed if inflation lingers and sources also noted that ECB governors see an increasing risk that rates will need to reach 2% or more to curb inflation.
• GBP/USD rose above 1.1600 amid early dollar weakness but gave back most of the gains, while participants will have to wait till next week for the BoE meeting which was delayed after the Queen’s death.
• USD/JPY eventually shrugged off the early indecision and reclaimed the 143.00 handle to the upside.
• Antipodeans were sideways for most of the session amid a lack of data releases, as well as the absence of Chinese participants and a PBoC fix.

FIXED INCOME

• 10yr UST futures remained lacklustre with yields steady ahead of Tuesday’s CPI data and as the positive mood in stocks contributed to the lack of haven demand.
• Bund futures were subdued following the recent hawkish ECB rhetoric and sources report.
• 10yr JGBs futures failed to sustain initial gains amid the subdued performance of global counterparts and with the BoJ only present in the market under its fixed rate operations.

COMMODITIES

• Crude pulled back after last Friday's gains and with China lockdown concerns overshadowing the geopolitical headlines in Ukraine and Iranian nuclear deal frictions.
• NOC said Libya's oil output rose to 1.21mln bpd from 1.16mln bpd last week, according to Reuters.
• US Treasury Secretary Yellen said that oil prices could spike when the EU cuts buying of Russian oil in the winter, according to CNN.
• Gazprom said continues shipping gas to Europe via Ukraine with the level on Sunday maintained at 42.4mln cubic metres, while the Ukraine state gas transit company said Russian natgas nominations at Sudzha was at 36.7mln cubic metres for Monday, according to Reuters.
• Germany is mulling direct intervention in the energy market to avoid a wave of insolvencies amid surging gas prices, according to a key lawmaker from the ruling SPD cited by Reuters.
• Indonesia is under increasing pressure to import Russian oil with President Widodo noting that they are considering all options to curb soaring energy costs, according to FT.
• Spot gold traded rangebound as participants look toward the CPI data on Tuesday.
• Copper was lacklustre amid the holiday closure in its largest purchaser China.
• French Transport Minister said will sign an agreement with Romania that will allow an increase of Ukrainian grain exports to developing countries including to the Mediterranean, according to Reuters.

CRYPTO

• Bitcoin was choppy and failed to sustain an early incursion above the 22,000 level.

NOTABLE APAC HEADLINES

• US is reportedly planning to broaden curbs on sales to China of semiconductors used for AI and chipmaking tools, according to Reuters sources.
• Chinese President Xi will visit Central Asia and meet with Russian President Putin in his first trip outside of China since the pandemic began, according to Reuters.
• PBoC called for efforts to facilitate the broader use of the digital yuan, according to Xinhua.
• Japanese Deputy Chief Cabinet Secretary Kihara said the government must take steps as needed against excessive, one-sided currency moves. Kihara also said they won’t rule out issuing government bonds to fund an expected increase in defence costs and they are ready to consider steps in the not-so-distant future to further open Japan’s borders to overseas visitors including scrapping its daily limit of 50k arrivals of overseas visitors by October, according to Nikkei.
• Japan is eyeing allowing foreign visitors to travel freely without travel agency bookings and waiving visa requirements, with PM Kishida to make the decision as early as this week, according to FNN.

EU/UK

NOTABLE HEADLINES

• British Gas owner Centrica (CNA LN) plans to voluntarily cap profits in an effort to reduce energy bills for households, according to The Guardian.
• EU offers to reduce Northern Ireland border controls, with EU's Sefcovic encouraged by the UK's intention for a negotiated settlement on trade, while the EU could cut customs checks across the Irish Sea to just a few lorries a day. Furthermore, Sefcovic said the border would be 'invisible' under European Commission plans provided that the UK gave the EU real-time data on trade movements, according to FT.
• ECB’s Nagel said further clear ECB steps are needed if inflation lingers and that inflation may peak above 10% in December but ease in 2023, according to Bloomberg citing comments on German radio.
• ECB’s Centeno urged for cautious next steps following the historic rate increase and said officials must avoid ‘going back and forth’ with policy moves, while he added that discussions on QT should wait, according to Bloomberg.
• ECB governors reportedly see an increasing risk that rates will need to reach 2% or more to curb inflation, according to Reuters sources.
• France sent an emergency power alert to neighbours last week asking for them to be ready to send as much electricity as possible after a trading error put French supplies at risk, according to FT.
• Greek PM Mitsotakis said the government will introduce incentives for households to save energy and is planning a EUR 1.8bln program to help people buy or rent a house, while the PM also stated that Greece’s goal to regain investment grade status in 2023 is achievable, according to Reuters.
• Swedish elections results were too close to call in which exit polls initially showed the centre-left parties were expected to narrowly win which would likely give PM Andersson another term, although updates since then have shown a tight race and the rightwing bloc took a slight lead with Sweden Democrats becoming the second largest party, while Moderate Party leader Kristersson said that they won't have a preliminary result until Wednesday.
• S&P raised Portugal’s sovereign rating from BBB to BBB+; Outlook Stable, while S&P affirmed Malta at A-; Outlook Stable.