• US stocks closed with losses amid broad risk aversion on the eve of the FOMC; APAC stocks traded lower
• In FX, DXY was quiet but held onto recent gains, EUR/USD was subdued, USD/JPY was rangebound
• 10yr UST futures were lacklustre amid pre-FOMC positioning, Bund futures languished near the prior day's lows
• Russian President Putin is expected to speak at 07:00BST/02:00EDT to announce the annexation of around 15% of Ukrainian land
• Looking ahead, highlights include FOMC Policy Announcement/Press Conference, Speech from ECB's de Guindos, Supply from Germany
• Click here for the Week Ahead preview.

US TRADE

• US stocks were lower amid broad risk aversion on the eve of the FOMC, with several updates weighing on sentiment including hotter than expected German PPI data and with Riksbank delivering a larger than expected hike of 100bps, while geopolitical concerns were also at the forefront of investor minds as separatist regions in Ukraine plan to hold a referendum on September 23rd-27th on joining Russia.
• SPX -1.07% at 3,858, NDX -0.85% at 11,851, DJIA -1.01% at 30,707, RUT -1.40% at 1,788.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US HHS Secretary declared a public health emergency for Puerto Rico after Hurricane Fiona, while NOAA Hurricane Hunter Aircraft finds Fiona strengthening with strong winds and heavy rains over Turks and Caicos, according to Reuters.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian President Putin is expected to speak at 07:00BST/02:00EDT to announce the annexation of around 15% of Ukrainian land, according to the Times and Telegraph.
• Ukrainian President Zelensky said the situation on the front-line clearly shows the initiative belongs to Ukraine and said their positions do not change because of noise or announcements from somewhere when referring to "noisy news from Russia", according to Reuters.
• Ukraine's Presidential office said Russian "Pseudo-referendums" will negate the slightest chance of ending the war through diplomacy, according to liga.net.
• US Secretary of State Blinken tweeted that any Russian sham “referenda” in Ukraine would be illegitimate and an affront to the principles of sovereignty and territorial integrity that are the foundation of the UN Charter, while he added the US and the international community will never recognise Russia's claims to any purportedly-annexed parts of Ukraine.
• White House's Sullivan said the US will never recognise Russia's claims to any annexed parts of Ukraine and will reject the annex unequivocally, while he added they are aware of reports that Russian President Putin may be preparing to enact mobilisation measures and said the mobilisation reflects Russia's struggles in Ukraine.
• US senior US State Department official said the US made it clear there will be increased consequences on Russia if it goes ahead with plans to annex parts of Ukraine, according to Reuters.
• US administration senior official said steps Turkish banks took regarding Russian Mir payments make a lot of sense and that cutting off Mir is one of the best ways to protect a bank from sanctions risk and expects more banks to cut off Mir.
• German Chancellor Scholz said Russian President Putin's war is imperialism and the return of imperialism is not just a disaster for Europe but for the global peace order and that Putin risks not just destroying Ukraine but his own country with his imperial ambitions. Scholz stated this is why they cannot accept a peace dictated by Russia and why Ukraine must be able to fend off Russia, while he added the UN Security Council should be reformed.
• Japanese PM Kishida told the UN General Assembly Russia's invasion of Ukraine tramples on the UN Charter's philosophy and should never be tolerated, while he added the UN's credibility is in danger because of the invasion of Ukraine by a permanent security council member and that it is time to begin text-based negotiations for security council reforms.

CHINA-TAIWAN

• China's Taiwan Affairs Office spokesperson said China is willing to make the utmost effort to strive for peaceful unification, according to Reuters.
• US 7th Fleet destroyer passes through the Taiwan Strait, according to Bloomberg.
• UK and Japan's leaders are resolved to work together to tackle the strategic threat posed by China, while PM Truss condemned China's recent provocations over Taiwan which threatened Japan's special economic zone, according to a Downing Street statement.

APAC TRADE

EQUITIES

• APAC stocks traded lower as the region followed suit to the global risk aversion heading into today’s FOMC policy announcement and amid heightened geopolitical concerns surrounding Ukraine as several separatist regions plan to hold a referendum to join Russia, while Russian President Putin is to address the nation in which many expect him to call for a mobilisation.
• ASX 200 declined with the commodity-related sectors and tech leading the downturn seen across all industries.
• Nikkei 225 was subdued ahead of central bank announcements including the BoJ which began its 2-day meeting.
• Hang Seng and Shanghai Comp were also negative with underperformance in Hong Kong amid tech weakness and with sentiment not helped by the US FCC adding more companies to its national security threat list.
• US equity futures were flat with participants biding their time ahead of Putin's address and the FOMC.
• European equity futures are indicative of a slightly lower open with the Euro Stoxx 50 future -0.3% after the cash market closed down 0.9%, yesterday.

FX

• DXY was quiet but held on to the prior day’s gains amid the risk aversion and as participants await the FOMC.
• EUR/USD remained beneath parity with geopolitical concerns providing a headwind for the single currency.
• GBP/USD was lacklustre ahead of today’s Fed rate announcement and tomorrow’s delayed-BoE meeting.
• USD/JPY traded rangebound as the BoJ began its 2-day policy meeting but remained afloat on expectations of widening policy divergences.
• Antipodeans were subdued by the risk aversion and humdrum mood across the commodities complex.
• PBoC set USD/CNY mid-point at 6.9536 vs exp. 6.9539 (prev. 6.9468).
• BoC's Beaudry said the bank will continue to do whatever is necessary to restore price stability and maintain confidence it can meet the 2% target, while Beaudry thinks August inflation data is still too high but added that the data shows we are headed in the right direction. Beaudry also stated that to avoid de-anchoring and to bring inflation sustainably back to target, some suggested a substantial slowdown or even a recession be engineered.

FIXED INCOME

• 10yr UST futures were lacklustre amid pre-FOMC positioning and with resistance at 114.00.
• Bund futures languished after the selling pressure from the firmer than expected German PPI data.
• 10yr JGB futures were choppy with only brief support from the BoJ's unscheduled purchases.

COMMODITIES

• Crude lacked direction amid the subdued risk appetite and after somewhat mixed private sector inventories.
• US Private Inventory Data (bbls): Crude +1.0mln (exp. +2.2mln), Cushing +0.5mln, Gasoline +3.2mln (exp. -0.4mln), Distillates +1.5mln (exp. +0.4mln).
• Baker Hughes (BKR) said green hydrogen replacing LNG is "highly unlikely", while it sees constraints in natural gas supply for a "period of time" and said sufficient gas in the short term is "really a challenge".
• Spot gold traded sideways amid a steady dollar as participants await the Fed rate decision and dot plots.
• Copper was indecisive with price action contained amid the risk-averse mood ahead of the FOMC.

CRYPTO

• Bitcoin edged marginal gains and traded on both sides of the 19,000 level.

NOTABLE APAC HEADLINES

• Asian Development Bank cut its Developing Asia growth forecast for 2022 to 4.3% from 5.2% and for 2023 to 4.9% from 5.3%, while it cut its China growth forecast for 2022 to 3.35 from 5.0% and for 2023 to 4.5% from 4.8%.
• FCC added China Unicom (762 HK) to its national security threats list.
• North Korean leader Kim sent a message to Chinese President Xi and said that ties with China are to reach a new high stage, according to state media.
• RBA Deputy Governor Bullock said policy is not restrictive as yet and is looking at opportunities to slow hikes at some point, while she noted concerns about the health of China's economy, zero-COVID policy and property market.
• RBA announced its review of the pandemic bond-buying program (BPP) in which it found that it should only be used in extreme circumstances and said it recorded large mark to market losses on BPP bonds in 2021/22, while it plans to hold BPP bonds to maturity and receive face value to offset accounting losses, according to Reuters.

DATA RECAP

• Australian Westpac Leading Index MM (Aug) -0.1% (Prev. -0.2%)
• New Zealand Credit Card Spending YY (Aug) 29.4% (Prev. 4.9%, Rev. 5.1%)

EU/UK

NOTABLE HEADLINES

• UK PM Truss is to tell the UN General Assembly that she will lead a new Britain for a new era and will call on democracies to harness the power of cooperation seen since Russia's invasion of Ukraine "to constrain authoritarianism", according to Downing Street. Furthermore, PM Truss is to tell the UN that Britain will no longer be dependent on those who seek to weaponise the global economy and will argue that the free world must prioritise economic growth and security, according to Reuters and Sky News. Furthermore, PM Truss is to launch a new defence review and call on Russian reparations, according to FT.
• UK PM Truss is to announce plans to cut stamp duty in the mini-budget this week in an effort to drive economic growth, according to The Times.
• French President Macron had his first bilateral talk with UK PM Truss and said he now believes in results.
• ECB President Lagarde said if there was evidence that high inflation risked de-anchoring inflation expectations, then the policy rate that is compatible with the target would lie in restrictive territory.
• ECB SSM member McCaul said the ECB is particularly concerned about banks that are heavily exposed to highly vulnerable corporates with a weak debt servicing capacity.