• APAC stocks fell despite better-than-expected Chinese activity data as the region took its cue from the losses in the US.
• Chinese IP and Retail Sales exceeded expectations. NBS said the economy continued a recovery trend in August.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -0.8% after the cash market closed down by 0.7% yesterday.
• DXY was choppy on a 109 handle, EUR/USD continued to move above and below parity, GBP/USD is firmly below 1.15. 
• Looking ahead, highlights include UK Retail Sales, EU Final CPI, US University of Michigan Prelim., Quad Witching, Speeches from ECB's Lagarde & Villeroy.

US TRADE

• US stocks were subdued alongside selling in bonds and commodities as markets continued to adjust to a more aggressive Fed path heading into next week's FOMC and in the wake of the August CPI data, while a slew of mixed data releases did little to inspire a turnaround for stocks.
• SPX -1.14% at 3,900, NDX -1.71% at 11,927, DJIA -0.56% at 30,961, RUT -0.72% at 1,825.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Atlanta Fed GDPNow Model for Q3 fell to 0.5% (prev. 1.3%) following recent data releases.

GEOPOLITICS

RUSSIA-UKRAINE

• US Commerce Department said the US expanded existing sanctions against Russia and Belarus and imposed further export controls on industrial and commercial items that support Russian and Belarusian aggression against Ukraine.
• White House authorised an additional USD 600mln of military assistance to Ukraine.
• Twitter sources noted a blackout from explosions in Russia's Belgorod region although there were conflicting reports of the cause with some suggesting shelling by Ukraine forces and others calling it a false flag operation by Russia.

OTHER

• Kyrgyz border guard service said Tajik forces opened fire on several outposts, according to Reuters. It was also reported that the Kyrgyzstan Border Service said Tajikistan was using heavy military equipment in clashes at the Kyrgyz-Tajik border, according to TASS

APAC TRADE

EQUITIES

• APAC stocks fell despite better-than-expected Chinese activity data as the region took its cue from the losses in the US after mixed data and as markets continued to adjust to a more aggressive Fed rate path.
• ASX 200 was pressured as energy and miners led the broad retreat after recent losses in commodity prices.
• Nikkei 225 suffered from the downbeat mood and with the 10yr JGB yield stuck at the top of the BoJ’s target.
• Hang Seng and Shanghai Comp conformed to the risk aversion with the latest Industrial Production and Retail Sales data failing to spur risk appetite despite both surpassing estimates.
• US equity futures remained subdued (e-mini S&P -0.7%) with further headwinds following bearish after-market updates from GE and FedEx in which the latter reported disappointing preliminary Q1 earnings and withdrew its FY23 guidance.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -0.8% after the cash market closed down by 0.7% yesterday.

FX

• DXY remained choppy overnight after the recent mixed data releases from the US but with downside stemmed amid the risk aversion and as participants second guess the Fed’s future policies ahead of next week’s FOMC.
• EUR/USD traded rangebound in which price action continued to oscillate back and forth of parity.
• GBP/USD was lacklustre after its recent slip beneath 1.1500 and with the focus shifting to UK Retail Sales.
• USD/JPY price action was indecisive amid a continuation of the familiar jawboning by Japanese officials.
• Antipodeans nursed some of their recent losses with AUD slightly helped after RBA Governor Lowe flagged further rate increases, while NAB adjusted its call to a 50bps hike next month from a prev. 25bps view.
• PBoC set USD/CNY mid-point at 6.9305 vs exp. 6.9228 (prev. 6.9101), while China is reportedly to test extending onshore USD/CNY trading from today.

FIXED INCOME

• 10yr UST futures traded flat near the prior day’s lows after recent curve flattening which lifted the 2yr yield to its highest since 2007 as markets braced for next week’s FOMC and digested expectations of a more aggressive Fed rate path.
• Bund futures remained subdued with an early attempted rebound thwarted by resistance around 143.00.
• 10yr JGBs futures were contained with the BoJ only in the market under its fixed rate operations as the Japanese 10yr yield hovered at the upper limit of the BoJ’s target.

COMMODITIES

• Crude remained subdued after yesterday's losses with better than expected Chinese activity data overshadowed by the downbeat risk mood and ongoing global recession fears.
• Qatar sells November-loading Al-Shaheen at USD 4.50-5.50/bbl above Dubai quotes, according to Reuters.
• Brazil's President said they are negotiating with Russia and Arab countries for diesel supply, according to Reuters.
• Germany is reportedly working on a takeover of Uniper (UN01 GY) and two other gas companies.
• Spot gold traded sideways with price action contained amid an indecisive dollar.
• Copper languished near the prior day's lows amid the broad risk aversion.

CRYPTO

• Bitcoin was choppy overnight after it recently slipped beneath the 20,000 level.

NOTABLE APAC HEADLINES

• Chinese NBS said China is to coordinate economic development and COVID control, while it added that the economy continued a recovery trend in August and some factors exceeded expectations but also noted that the recovery in domestic demand still lags behind the recovery in production and that the property market faces downward pressure despite some positive changes. China's stats bureau also commented that the economy was affected by COVID flare-ups in August but the flare-ups impact was limited and that policies to stabilise growth are gaining traction although noted that China's economy faces more difficulties this year than in 2020.
• Japanese Finance Minister Suzuki reiterated it is important for FX to move stably reflecting economic fundamentals and that sharp FX moves are undesirable, while he is concerned about sharp, one-sided JPY weakening and they will take necessary action without ruling out any options if sharp yen moves persist.
• RBA Governor Lowe said the RBA is committed to returning inflation to the 2-3% target range over time and is seeking to do this in a way that keeps the economy on an even keel, while the Board expects further increases will be required to bring inflation back to target but they are not on a pre-set path. Lowe stated that with inflation as high as it is, they need to make sure that inflation returns to target in a reasonable time and will do what is necessary to make sure that higher inflation does not become entrenched. Furthermore, Lowe said at some point will not need to hike by 50bps and they are getting closer to that point, while they will consider hiking by 25bps or 50bps at the next meeting but also stated that rates are still too low right now.

DATA RECAP

• Chinese Industrial Production YY (Aug) 4.2% vs. Exp. 3.8% (Prev. 3.8%)
• Chinese Retail Sales YY (Aug) 5.4% vs. Exp. 3.5% (Prev. 2.7%)
• Chinese House Prices YY (Aug) -1.3% (Prev. -0.9%)

EU/UK

NOTABLE HEADLINES

• London's Heathrow Airport cancelled several flights and altered about 15% of its schedule on Monday to avoid noise in the skies during the Queen's state funeral.
• ECB's Villeroy said any French recession will be "limited and temporary with a sharp rebound in 2024", while the French Central Bank raised its 2022 GDP growth forecast to 2.6% (prev. 2.3%) but cut 2023 GDP forecast to between -0.5% to +0.8% (prev. +1.2%).
• German Finance Minister Lindner said the main concern is inflation could lose its anchoring and that it will gallop permanently which they cannot get under control, while he added that the government can only promise a shock absorber, according to local press.
• Hungary has offered more concessions to Brussels to avoid EU funding cuts over the rule of law dispute, according to the FT.