• APAC followed suit, but gains were capped ahead of risk events
• DXY lacked direction after a pullback from 110.00, EUR/USD remained above parity, USD/JPY traded rangebound, and Antipodeans were lacklustre
• 10yr UST futures marginally gained, Bund futures were subdued, and 10yr JGB futures traded indecisively
• Japanese CPI topped forecasts and remained above the BoJ’s target, whilst China’s PBoC maintained its LPRs and set a stronger CNY fix for the 19th day
• Looking ahead, highlights include Canadian CPI, Riksbank Policy Announcement, Speech from ECB's Lagarde and US 20yr Supply.

20th September 2022

• Click here for the Week Ahead preview.

US TRADE

• US stocks closed with gains as the risk tone gradually improved in the US session after holiday-thinned trade in APAC and Europe. There were no clear biases on the US index level, although defensive sectors underperformed, while fundamental catalysts were light.
• SPX +0.69% at 3,900, NDX +0.77% at 11,953, DJIA +0.64% at 31,020, RUT +0.81% at 1,813.
• Click here for a detailed summary.

NOTABLE HEADLINES

• GOP pollsters reportedly countered the White House's midterm optimism and told FBN that the GOP would pick up 25 house seats, while it sees Senate victories in tightening races in Nevada, Pennsylvania, Wisconsin and Georgia, according to FBN's Gasparino.
• World Bank's Malpass said a strong dollar is part of the resilience underpinning US financial markets, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian forces carried out a missile strike which narrowly missed the Pivdennoukrainsk nuclear power plant in southern Ukraine, according to Kyiv officials cited by the FT.
• Donetsk leader Pushilin proposed to fellow Ukraine separatist leader in Luhansk to synchronize efforts which would pave the way for the preparation of referendums on joining Russia.
• IAEA said the power line used to supply the Zaporizhzhia nuclear power plant with electricity from the Ukrainian grid through a nearby thermal power station was disconnected on Sunday, while it still receives electricity for essential safety functions but currently does not have access to back up power from the grid.
• UK is to spend at least GBP 2.3bln on the Ukraine war effort next year, according to FT.

OTHER

• US Secretary of State Blinken hosted Armenian and Azerbaijan foreign ministers for the first direct talks since recent fighting and Blinken encouraged Armenia and Azerbaijan leaders to meet again before month-end, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks followed suit to the improved risk appetite stateside but with the advances capped ahead of this week’s risk events.
• ASX 200 was led higher by strength in the commodity-related sectors and with resilience in nearly all industries aside from healthcare, while the RBA minutes provided little in the way of new information but continued to point to a future slowdown in the hiking cycle.
• Nikkei 225 gained on return from the extended weekend but was off its highs after the mostly firmer-than-expected Japanese inflation data.
• Hang Seng and Shanghai Comp conformed to the upbeat mood with Hong Kong boosted by outperformance in tech stocks and as authorities consider adjusting COVID restrictions, while the advances in the mainland were contained after the PBoC maintained its 1-Year and 5-Year Loan Prime Rates as expected.
• US equity futures were relatively uneventful and marginally added to the prior day's modest gains.
• European equity futures are indicative of a slightly higher open with the Euro Stoxx 50 future +0.3% after the cash market closed flat yesterday

FX

• DXY lacked direction after a recent pullback from 110.00, with the positive risk tone and looming FOMC providing a restraint for the dollar.
• EUR/USD remained above parity but was off today’s highs after hitting resistance at 1.0050.
• GBP/USD was indecisive with UK participants set to return from the holiday closure and with the focus also on this week’s BoE rate decision.
• USD/JPY traded rangebound in the aftermath of the mostly firmer than expected inflation data.
• Antipodeans were lacklustre with AUD/USD largely unaffected by the RBA minutes which reiterated the central bank’s recent statements and continued to point to a future slowing in the hiking cycle.
• PBoC set USD/CNY mid-point at 6.9468 vs exp. 6.9483 (prev. 6.9396).

FIXED INCOME

• 10yr UST futures marginally gained as the 10yr yield slightly eased after it briefly rose above 3.50% for the first time since 2011 ahead of the FOMC.
• Bund futures were lacklustre following Monday’s selling pressure and recent hawkish ECB commentary,
• 10yr JGB futures traded indecisively with the 10yr yield stuck around the BoJ’s 25bps target and with the 20yr yield at its highest since early 2016 following the mostly firmer-than-expected Japanese inflation data.

COMMODITIES

• Crude was little changed and took a breather from recent fluctuations in the absence of any major catalysts.
• US DoE said will sell 10mln bbls of oil from the SPR in November as part of its March plan to deliver 180mln bbls to the market, while the US has already sold 155mln bbls of oil from the SPR and the latest sale will bring that to 165mln.
• Russia's government wants to collect about RUB 1.4tln from raw material exporters next year to cover the budget deficit and proposed to raise the export duty on gas to 50% among other measures, according to Kommersant.
• German utility Co.'s Uniper and RWE are close to long-term LNG deals with Qatar to help replace Russian gas, according to Reuters sources.
• Dutch government is to impose a price cap on energy, according to NOS news.
• Spot gold lacked direction owing to a choppy dollar heading closer to Wednesday's FOMC.
• Copper was mildly underpinned alongside the constructive overnight mood.

CRYPTO

• Bitcoin was pressured after failing to sustain a brief rebound above the 19,500 level.

NOTABLE APAC HEADLINES

• PBoC 1-Year Loan Prime Rate (Sep) 3.65% vs. Exp. 3.65% (Prev. 3.65%)
• PBoC 5-Year Loan Prime Rate (Sep) 4.30% vs. Exp. 4.30% (Prev. 4.30%)
• Hong Kong Chief Executive Lee said they are exploring further adjustments to COVID policy and aim to make an announcement soon with the details to be announced in one go. Lee added they would like to facilitate events for Hong Kong and bring back activities to the city, while they would want to stay connected with the world and allow an orderly opening up.
• Japan's Ministry of Finance said the government is to spend JPY 3.48tln in budget reserves to manage price hikes and COVID-19, while Finance Minister Suzuki said they will create an additional budget in addition to the reserve fund and for the time being, reserve money will be used for essential output. There were also comments from LDP Secretary-General Motegi that a stimulus package of at least JPY 15tln is needed to fill the output gap.
• RBA September meeting minutes stated members saw the case for a slower pace of rate increase as becoming stronger as the level of the Cash Rate increases, while the board expects to increase rates further over months ahead but is not on a pre-set path. RBA Board is committed to doing what is necessary to ensure inflation returns to target over time and members noted that inflation in Australia was at its highest level in several decades which was expected to increase further over the months ahead with inflation expected to peak later this year and then decline back towards the 2-3% target range. Furthermore, the Board acknowledged that monetary policy operates with a lag and interest rates had been increased quite quickly and were getting closer to normal settings.

DATA REAP

• Japanese National CPI YY (Aug) 3.0% vs Exp. 2.6% (Prev. 2.6%)
• Japanese National CPI Ex. Fresh Food YY (Aug) 2.8% vs Exp. 2.7% (Prev. 2.4%)
• Japanese National CPI Ex. Fresh Food & Energy YY (Aug) 1.6% vs Exp. 1.7% (Prev. 1.2%)