• APAC stocks traded mostly negative in a resumption of last week's global stock rout. 
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.7% after the cash market closed down 2.3% on Friday.
• GBP/USD suffered a flash crash to 1.0327, DXY breached 114 to the upside, Italian election had little sway on EUR.
• Italy is on course to appoint a right-wing government led by the Brothers of Italy party; Meloni claimed leadership of the next government.
• Crude traded lower with an early attempt to nurse losses thwarted by resistance at USD 80/bbl for WTI.
• Looking ahead, highlights include German Ifo, Speeches from Fed’s Collins, Bostic & Mester, ECB’s Lagarde, de Guindos & Panetta, BoE’s Tenreyro, BoJ’s Kuroda & Amamiya, Supply from the EU & US.

US TRADE

• US stocks were pressured on Friday with the global macro environment at the forefront of investors' minds following the aggressive UK 'mini-budget' and troubling European PMI surveys which contributed to the surging dollar.
• SPX -1.66% at 3,695, NDX -1.66% at 11,311, DJIA -1.61% at 29,592, RUT -2.48% at 1,679.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed’s Bostic (2024 voter) said inflation is too high and that they need to do all they can to bring it down and said demand is beginning to shrink which will ultimately pay dividends in inflation levels. Bostic also stated that there are scenarios where they can avoid deep pain but there will likely be some job losses, according to Reuters.
• NHC said Tropical Storm Ian is forecast to begin strengthening rapidly and is expected to become a major hurricane mid-week which may reach the west coast of Florida by Friday.

APAC TRADE

EQUITIES

• APAC stocks traded mostly negative in a resumption of last week's global stock rout amid the continued surge in the dollar and higher yields, while there was also FX volatility which saw a flash crash in GBP/USD to a record low.
• ASX 200 was dragged lower amid losses in the commodity-related sectors and with sentiment dampened by the collapse of potential M&A deals involving Ramsay Health-KKR and Link Administration-Dye & Durham.
• Nikkei 225 underperformed with Mazda Motors among the worst hit as it considers exiting Russian operations.
• Hang Seng and Shanghai Comp retraced most of their initial losses with Hong Kong underpinned following the scrapping of hotel quarantine policy and with casinos boosted as Macau is to resume tour groups from China, while the property industry benefits after China Construction Bank formed a CNY 30bln housing rental fund and some Twitter sources also circulated that some China state banks were reportedly ordered to buy stocks to contain selling.
• US equity futures are on the backfoot and extending on Friday's losses; ES -0.7%
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.7% after the cash market closed down 2.3% on Friday.

FX

• DXY briefly rose above 114.00 in a continuation of recent gains and amid turmoil in some of its major counterparts.
• EUR/USD fell to a fresh 20-year low and briefly dipped beneath 0.9600, while the single currency was unaffected by the right-wing coalition's win in the Italian elections which puts Meloni on course to become the country's first female PM.
• GBP/USD suffered a flash crash to print a record low beneath the 1.0400 handle (low of 1.0327) as markets continue to digest Chancellor Kwarteng’s fiscal loosening measures.
• USD/JPY advanced on the back of a firmer dollar and climbed back above the 144.00 level.
• Japanese Finance Minister Suzuki said the government and BoJ share views on concerns about a weak JPY, while he added that FX intervention had a certain effect and there is no change to the stance that they will respond to market moves as needed, according to Reuters.
• Antipodeans remained lacklustre owing to the mostly risk-averse mood, declines in commodity prices and after the PBoC set a weaker-than-expected reference rate which was above the 7.0000 level for the first time since 2020.
• PBoC set USD/CNY mid-point at 7.0298 vs exp. 7.0019 (prev. 6.9920)
• PBoC imposed a 20% risk reserve requirement for FX forward sales from September 28th to rein in yuan weakness.

FIXED INCOME

• 10yr UST futures traded subdued as yields slightly edged higher and following comments over the weekend from Fed’s Bostic that inflation is too high and that they need to do all they can to bring it down.
• Bund futures remained pressured and gradually trickled to beneath the 139.00 level.
• 10yr JGB futures were on the back foot despite the BoJ’s presence in the market for JPY 1.5tln of JGBs on top of its daily fixed-rate operations.

COMMODITIES

• Crude traded lower with an early attempt to nurse losses thwarted by resistance at USD 80/bbl for WTI and amid the firmer greenback.
• Iraq began trial operations at the Karabala oil refinery which has a production capacity of 140k bpd, according to a statement from the Oil Ministry.
• German Chancellor Scholz signed a strategic agreement with UAE’s President on accelerating energy security and industrial growth, while UAE’s ADNOC signed an agreement with Germany’s RWE which includes ADNOC exporting its first LNG cargo to RWE and will conduct trial shipments of low-carbon ammonia to Germany. Furthermore, Chancellor Scholz said while visiting Doha that he talked with the Emir about LNG deliveries and that they want to achieve further progress, according to Reuters.
• Vitol's CEO said at the Asia Pacific Petroleum Conference that Russian gas supply cuts put enormous strain on supply-demand in Europe and that high gas prices are to impact 60%-80% of demand, while Ecopetrol's CEO said they are increasing crude exports to Europe this year to replace Russian supplies and are drilling 600 oil wells this year.
• Spot gold was marginally lower with a bout of pressure seen due to a firmer greenback.
• Copper extended on declines amid the mostly subdued risk appetite.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said fierce battles are taking place along the frontline but there are positive results in some places, according to Reuters.
• Russian Defence Ministry said Ukraine continued to attack the area around the Zaporizhzhia nuclear plant and tried to attack the area using 8 kamikaze drones which were all shot down by Russian forces, according to RIA.
• Russia’s Duma may consider draft bills to include Russian-controlled parts of four Ukrainian regions into Russian territory on Thursday, according to TASS. It was separately reported that Russian President Putin’s address to the Federal Assembly could take place on Friday to formally announce the annexation of occupied Ukrainian territories.
• Russian men of mobilisation age will reportedly be restricted from leaving the country following the end of the referendums in occupied territories in Ukraine and martial law could also be possible at a later date, according to Meduza.
• US National Security Adviser Sullivan said the US would respond decisively to any Russian use of nuclear weapons against Ukraine and warned Moscow of the "catastrophic consequences" it would face, according to Reuters.
• Western capitals are reportedly making contingency plans should Russian President Putin take steps towards acting on his nuclear threats and private warnings have been sent to the Kremlin about potential consequences, according to western officials cited by FT.
• UK PM Truss said Russian President Putin has mobilised more troops because he isn’t winning in Ukraine, while she added that they should not be listening to Russian President Putin’s sabre-rattling and it is important they remain resolute on Ukraine, according to Reuters.
• Chinese Foreign Minister Wang Yi said China supports all efforts conducive to the peaceful resolution of the Ukraine war and said the pressing priority is to facilitate talks for peace, while he added the fundamental solution is to address legitimate security concerns of all parties, according to Reuters.
• Japanese Chief Cabinet Secretary Matsuno said they will ban exports of chemical weapon-related goods to Russia as an additional sanction on Moscow's action in Ukraine, according to Reuters.

CHINA-TAIWAN

• Chinese Foreign Minister Wang Yi told US Secretary of State Blinken that Taiwan is an internal matter and the US has no right in any way to resolve it, while he added that the more rampant Taiwanese independence activities are, the less likely there will be a peaceful settlement. Wang also told Blinken that the US is attempting to undermine China’s sovereignty and territorial integrity. Furthermore, Wang said the US is sending wrong and dangerous signals on Taiwan, while he told the UN that they must combat Taiwan independence separatist activities with the firmest resolve and take forceful steps against external interference, according to Reuters.
• UK PM Truss said she was clear with US President Biden that they will work to reduce strategic dependency on China and will work with allies to make sure Taiwan can defend itself, according to Reuters.
• US and the Philippines are increasing their military cooperation including doubling the number of troops involved in joint exercises next year amid the China threat regarding Taiwan, according to FT.

OTHER

• North Korea fired a suspected ballistic missile towards the Sea of Japan on Sunday which is just days before US military drills and a visit by US Vice President Harris to the region, according to Daily Mail.
• Iranian President Raisi said protestors should be confronted decisively, according to state media. It was also reported that Iran’s Foreign Minister said a peaceful protest is the right of every nation but added that US support for rioters is in conflict with Washington’s message to Iran regarding the need for a nuclear deal and establishing stability in the region, according to ISNA.
• Iran summoned the British and Norwegian ambassadors to Tehran in response to the ‘hostile character’ of London-based Persian language media and the Norwegian parliament speaker’s ‘interventionists stance’ on Iran’s internal affairs, according to Iran’s Foreign Ministry cited by Reuters.

CRYPTO

• Bitcoin was choppy and eked mild gains beneath the 19,000 level.

ASIA

NOTABLE APAC HEADLINES

• PBoC injected CNY 42bln via 7-day reverse repos with the rate kept at 2.00% and CNY 93bln via 14-day reverse repos with the rate kept at 2.15% for a net CNY 133bln injection.
• There were rumours circulating on social media of a coup against Chinese President Xi, although experts and journalists in Beijing dismissed the rumours and said there was no evidence to support them, according to The Print.
• Philippines Stock Exchange announced a trading suspension for Monday amid a typhoon in the capital, according to Reuters.

DATA RECAP

• Japanese Manufacturing PMI (Sep P) 51.0 (Prev. 51.5)
• Japanese Services PMI (Sep P) 51.9 (Prev. 49.5)
• Japanese Composite PMI (Sep P) 50.9 (Prev. 49.4)

EU/UK

NOTABLE HEADLINES

• UK PM Truss said she is determined to make the special relationship with the US even more special and said she agreed with US President Biden that it is vital to protect the Northern Ireland Good Friday Agreement, while she wants to find a way forward with a negotiated solution with the EU, according to Reuters and a CNN interview.
• UK PM Truss is to review visa schemes in an attempt to ease UK labour shortages, according to FT.
• UK Chancellor Kwarteng hinted that more tax cuts are on the way and claimed his tax cuts “favour people right across the income scale” amid accusations they mainly help the rich, according to Evening Standard.
• UK Chancellor Kwarteng said he is focused on growing the economy and the longer term when asked about the market reaction to his statement on Friday. Kwarteng added that he shares ideas with BoE Governor Bailey but added that Bailey is completely independent and Kwarteng is confident the BoE is dealing with inflation, according to Reuters.
• UK opposition Labour Party leader Starmer said they would reintroduce the top rate of income tax at 45% which the government announced to scrap last week, while he added that they will support the government plan to lower the basic rate of income tax to 19%, according to Reuters.
• Italy's right-wing bloc was seen winning the national election with 41%-45% of the votes and the centre-left bloc is seen winning 25.5%-29.5% of the votes, while 5-Star Movement is seen winning 13.5%-17.5%, according to RIA exit poll. It was later reported that Italy's right-wing bloc was seen winning the national election with 43.3% and centre-left bloc is seen winning 25.4%, according to the first projection by LA7 TV based on the actual vote count.
• Italy's Meloni said Italians gave clear backing to a centre-right government led by the Brothers of Italy and said the situation is difficult and needs contribution from everyone. It was separately reported that Italy's Democratic Party conceded in the election and said it will be the main opposition force, while Italy's Meloni claimed leadership of the next Italian government, according to Reuters and AFP.

DATA RECAP

• UK Rightmove House Prices MM (Sep) 0.7% (Prev. -1.3%)