• European bourses are softer after a mixed cash open and despite a brief foray higher, Euro Stoxx 50 -0.5%, as sentiment remains subdued amid recession/inflation concerns.
• Stateside, futures are lower across the board in-fitting with peers going into a week of Fed speak and inflation data.
• DXY climbed to a fresh YTD high of 114.58 before paring modestly, but remaining firmer, as GBP in particular lifts off worst levels.
• Cable succumbed to a flash crash overnight, with GBP/USD hitting an all-time-low around 1.0350; FX peers hit by broader USD strength
• Gilts have retained some composure after slumping over 200ticks at the commencement of trade; EGBs/USTs downbeat in sympathy
• WTI and Brent November futures remain subdued in early European trade following last week’s recession-induced losses.
• Looking ahead, highlights include Speeches from Fed’s Collins, Bostic & Mester, ECB’s Lagarde, BoE’s Tenreyro, BoJ’s Kuroda & Amamiya, Supply from the US.

As of 11:05BST/06:05ET

LOOKING AHEAD

• Speeches from Fed’s Collins, Bostic & Mester, ECB’s Lagarde, BoE’s Tenreyro, BoJ’s Kuroda & Amamiya, Supply from the US.

CENTRAL BANKS

• 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.
• BoJ's Kuroda says the BoJ will maintain accommodative monetary conditions to support companies, hopes to support a positive economic cycle, long-term inflation expectations have begun to heighten, via Reuters. Intervention from the MoF is an "appropriate" move, does not think gov't intervention and BoJ policy are contradictory. Amamiya says the domestic economy is picking up, must carefully watch how FX moves affect the economy and prices.
• BoJ Governor Kuroda says when he stated that BoJ forward guidance will not change for 2-3yrs, did not refer to guidance on keeping short and long-term rates at present of lower levels via Reuters.
• ECB's de Guindos says Q3 and Q4 point towards growth rates being close to zero within the EZ, the scenario is market by high uncertainty, lower growth and higher inflation.
• ECB's Panetta says ECB is assessing the potential of distributed ledger technology (DLT) and "the extent to which it could improve our services.".
• Capital Economics calls for the BoE to "get on the front foot with a big rate hike". Allianz's El-Erian says, on GBP, the fall is about extra tax cuts and Chancellor Kwarteng could recalibrate this. Alternative, would be for the BoE to hike at an emergency meeting. Adding, he would hike by 100bp.
• BoE publishes key elements of the 2022 annual cyclical scenario stress test; includes a scenario where the Bank Rate is assumed to rise rapidly to a peak of 6% in early 2023 before gradually reduced to sub-3.5%.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian President Putin, in a meeting with Turkish President Erdogan, admitted the possibility of Russia returning to negotiations with Ukraine, via Tass citing Turkish Foreign Ministry.
• 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.

EUROPEAN TRADE

EQUITIES

• European bourses are softer after a mixed cash open and despite a brief foray higher, Euro Stoxx 50 -0.5%, as sentiment remains subdued amid recession/inflation concerns.
• The breakdown features modest outperformance in the FTSE MIB as Italian election results are in-line with expectations.
• Stateside, futures are lower across the board in-fitting with peers going into a week of Fed speak and inflation data.
• Click here for more detail.

FX

• DXY climbed to a fresh YTD high of 114.58 before paring modestly, but remaining firmer, as GBP in particular lifts off worst levels.
• Cable succumbed to a flash crash overnight, with GBP/USD hitting an all-time-low around 1.0350 as participants confidence in the economy slips.
• EUR suffers amid the mentioned USD move but derives relative benefit from GBP, while ECB speakers thus far have added little.
• Antipodeans and CAD weighed on by broader risk and commodity pressure.
• 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.
• 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.
• Click here for more detail.
• Click here for OpEx for the NY Cut.

FIXED INCOME

• Gilts have retained some composure after slumping over 200ticks at the commencement of trade and have settled around halfway between intraday extremes.
• EGBs downbeat in sympathy while BTPs marginally lag core-EGB peers as Italian as-expected election results are digested with BTP-Bund only modestly wider as such.
• Stateside, USTs are pressured in-fitting with peers and also conscious of the week's supply docket getting underway via a 43bln 2yr.
• Click here for more detail.

COMMODITIES

• WTI and Brent November futures remain subdued in early European trade following last week’s recession-induced losses.
• Spot gold trades in tandem with the Buck and sees resistance at around USD 1,650/oz after falling to USD 1,627/oz as a casualty of the Sterling flash crash overnight.
• LME metals are softer across the board with 3M copper futures having a hard time reclaiming USD +7,500/t status with upside capped by the Buck.
• 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.
• Germany is preparing a national electricity price cap to be implemented this fall in the scenario the EU falls to agree on a similar move for the entirety of the bloc, via WSJ citing officials.
• 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.
• Anglo American (AAL LN) tightens copper production guidance for Chile to 560k-580k tonnes of copper (prev. 560k-600k tonnes) due to lower throughput at Los Bronces caused by a combination of water restrictions and a change in ore characteristics, via Reuters.
• Click here for more detail.
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NOTABLE EUROPEAN 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 is 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.. Click here for newsquawk snap analysis.
• 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

• German Ifo Business Climate New (Sep) 84.3 vs. Exp. 87.0 (Prev. 88.5, Rev. 88.6); Current Conditions New (Sep) 94.5 vs. Exp. 96.0 (Prev. 97.5); Expectations New (Sep) 75.2 vs. Exp. 78.7 (Prev. 80.3, Rev. 80.5)
• Ifo: Almost all economic sectors in the minus, the German economy is facing a recession. Price expectations increased again, more than every second company says they are to increase prices.
• UK Rightmove House Prices MM (Sep) 0.7% (Prev. -1.3%)

NOTABLE HEADLINES

• 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.
• Binance will implement a burn mechanism to burn all trading fees on Luna Classic (LUNC) spot and margin trading pairs.

APAC TRADE

• 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.

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.

NOTABLE APAC DATA

• 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)