• APAC stocks were mostly lower after the negative performance across global peers (SPX -2.11%, NDX -2.86%).
• European equity futures are indicative of a flat open with the Euro Stoxx 50 future unch. after the cash market closed down 1.7% yesterday.
• DXY reclaimed 112 to the upside, EUR/USD maintained 0.98 status, whilst cable extended recovery gains to breach 1.12 at one stage.
• EU senior diplomat said EU countries are nowhere near a consensus on a gas price cap.
• Looking ahead, highlights include German Retail Sales, EZ CPI (Flash), Unemployment, US PCE Price Index, Russian President Putin, Moody's on Italy, Speeches from Fed's Williams & Brainard, ECB's Elderson & Schnabel.

US TRADE

• US stocks were heavily pressured as bearish themes persisted including global inflationary headwinds, proving Wednesday's recovery to be a dead-cat bounce. The losses were led by the tech-heavy Nasdaq after a downgrade on Apple (AAPL) from Bank of America which added to the tech woes with heavyweights among underperformers, while the defensive sectors such as Utilities and Real Estate also suffered.
• SPX -2.11% at 3,640, NDX -2.86% at 11,164, DJIA -1.54% at 29,225, RUT -2.35% at 1,674.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Mester (2022 voter) said the Fed has a little more work to do on getting rates up and a November rate hike depends on how data evolves, while she does not predict a recession but noted the labour market imbalance is still big. Furthermore, Mester said that the Fed is not at a point of stopping on the rate and is not in restrictive territory.
• Fed's Daly (2024 voter) said a downshift in economic activity and labour is needed to bring down inflation and additional rate increases are necessary and appropriate. Daly also stated that a myriad of risks narrows the path to a smooth landing but does not close it, while she added they have gotten rates to neutral and expect to raise rates further in coming meetings and early next year.
• US government funding bill to avoid partial shutdown received enough votes to pass in the Senate.
• US Department of Education estimated that the Biden-Harris student debt relief is to cost an average of USD 30bln annually over the next decade, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower after the negative performance across global peers amid inflationary headwinds and with risk appetite subdued heading quarter-end, while the region also digested mixed Chinese PMI data.
• ASX 200 declined amid weakness across most sectors and with tech the notable underperformer after the recent upside in yields and with Meta the latest major industry player to announce a hiring freeze.
• Nikkei 225 was pressured and fell below the 26,000 level with better-than-expected Industrial Production and Retail Sales data releases overshadowed by the broad risk aversion.
• Hang Seng and Shanghai Comp were indecisive after the PBoC conducted its largest weekly cash injection in more than 32 months ahead of the week-long closure in the mainland, while participants also digested mixed PMI data in which Official Manufacturing PMI topped forecasts with a surprise return to expansion, but Non-Manufacturing and Composite PMIs slowed and Caixin Manufacturing PMI printed at a wider contraction.
• NIFTY eventually notched mild gains in the aftermath of the RBI rate decision in which it hiked the Repurchase Rate by 50bps to 5.90% as expected via 5-1 split and with the central bank refraining from any major hawkish surprises.
• US equity futures were lacklustre (e-mini S&P -0.1%) after yesterday's losses and as after-hours earnings from Micron and Nike failed to inspire with the former mired by dismal quarterly guidance.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 future unch. after the cash market closed down 1.7% yesterday.

FX

• DXY reclaimed 112.00 status as it nursed some of the prior day’s weakness which was a function of the gains in its transatlantic counterparts and month/quarter-end position squaring with models signalling dollar selling.
• EUR/USD eased off its highs but held on to most of yesterday's gains and the 0.9800 handle after having benefitted in the aftermath of the firmer than expected German CPI data and hawkish ECB rhetoric.
• GBP/USD initially continued to claw back the losses from last week’s mini-budget and breached 1.12 to the upside at one stage.
• USD/JPY traded marginally higher amid the dollar rebound and as yield differentials remained at play.
• Antipodeans were kept range-bound following the mixed Chinese factory activity data.
• PBoC set USD/CNY mid-point at 7.0998 vs exp. 7.0951 (prev. 7.1102).
• China loosened FX restrictions in response to the Fed rate hike and the yuan's fall over the past week, according to people familiar with the matter cited by FT.
• Mexican Central Bank raised its interest rate to 9.25% vs. Exp. 9.25% (Prev. 8.5%) via unanimous decision and lifted inflation expectations across the board.

FIXED INCOME

• 10yr UST futures were subdued following recent data releases including the upward revision to Core PCE Prices and encouraging jobless claims numbers, while prices were also hampered yesterday by further gilt selling.
• Bund futures remained lacklustre and tested the 137.00 level to the downside after the firmer-than-expected German inflation data and some hawkish ECB rhetoric.
• 10yr JGB futures were kept afloat amid the BoJ’s presence in the market for nearly JPY 1.3tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude prices were uneventful amid the subdued risk appetite and as the dollar rebounded, while a senior diplomat also suggested the EU were far from reaching an agreement on a gas price cap.
• EU senior diplomat said EU countries are nowhere near a consensus on a gas price cap and it is difficult to say whether a price cap on Russian gas could be agreed upon, according to Reuters.
• Nord Stream AG said it will start assessing damage to the pipeline as soon as it receives the necessary permits and until damage assessment is completed, it is not possible to predict a timeframe for restoration for the gas transmission infrastructure.
• Chevron (CVX) said there has been no damage to platforms in the Gulf of Mexico due to Hurricane Ian, while it started to redeploy personnel and resume normal operations at two platforms that were shut in.
• Spot gold held on to yesterday's gains as the precious metal benefitted as an inflationary hedge.
• Copper traded sideways overnight with price action contained amid the mixed Chinese PMI data.

GEOPOLITICS

RUSSIA-UKRAINE

• Russian President Putin signed decrees recognising occupied Ukrainian regions of Kherson and Zaporizhzhia as independent territories which is an intermediate step before the regions are formally incorporated into Russia, according to Reuters.
• Russian President Putin told Turkish President Erdogan that it is necessary to fulfil the grain deal including the lifting of barriers for Russian food and fertilizers suppliers, according to the Kremlin. It was also reported that Russian President Putin called the "unprecedented sabotage" against Nord Stream gas pipelines "an act of international terrorism", according to the Kremlin

CRYPTO

• Bitcoin retreated overnight alongside the broad risk aversion and fell below the 19,500 level.

ASIA

NOTABLE APAC HEADLINES

• PBoC injected CNY 128bln via 7-day reverse repos with the rate kept at 2.00% and injected CNY 58bln via 14-day reverse repos with the rate kept at 2.15% for a CNY 184bln net daily injection and a net CNY 868bln weekly injection.
• Japan's Chief Cabinet Secretary Matsuno said they want to compile an extra budget swiftly after the economic package in late October, while they will consider further support for hard-hit consumers and businesses in view of higher energy and food prices, as well as consider steps to promote wage hikes, according to Reuters.
• RBI hiked Repurchase Rate by 50bps to 5.90%, as expected, via 5-1 vote and the Standing Deposit Facility was adjusted to 5.65%. RBI Governor Das said MPC is to remain focused on the withdrawal of accommodation and that the persistence of high inflation necessitates further calibrated withdrawal of monetary accommodation. However, Das noted that the Indian economy continues to be resilient with economic activity stable and overall monetary and liquidity conditions still remain accommodative, while Real GDP growth forecast for 2022/23 was revised lower to 7.0% from 7.2% and 2022/23 CPI was seen at 6.7%.

DATA RECAP

• Chinese NBS Manufacturing PMI* (Sep) 50.1 vs. Exp. 49.6 (Prev. 49.4)
• Chinese NBS Non-Manufacturing PMI* (Sep) 50.6 vs Exp. 52.4 (Prev. 52.6)
• Chinese Composite PMI (Sep) 50.9 (Prev. 51.7)
• Chinese Caixin Manufacturing PMI Final (Sep) 48.1 vs. Exp. 49.5 (Prev. 49.5)
• Japanese Industrial Production MM SA* (Aug P) 2.7% vs. Exp. 0.2% (Prev. 0.8%)
• Japanese Retail Sales YY (Aug) 4.1% vs. Exp. 2.8% (Prev. 2.4%)

EU/UK

NOTABLE HEADLINES

• UK PM Truss to conduct emergency talks with the OBR on Friday after failing to calm markets, according to the Guardian.
• UK cross-party MPs in the Treasury Select Committee called for Chancellor Kwarteng to release a full economic forecast from the OBR by end of October, according to Sky News.
• BoE was reportedly warned about a looming catastrophe n the pensions sector by the next 5 years before it was forced to intervene to prevent a market collapse, according to The Telegraph.
• UK PM Truss has confirmed she will attend next week's European Political Community summit, via BBC.
• ECB's Lane said the central bank is still trying to reach neutral but they are not yet taking a stand on whether that will be enough, while he sees the EZ economy slowing due to the energy shock and said they will not get inflation back to target without normalising policy.
• European Banking Authority said easing bank capital rules would be unlikely to significantly help ease the cash crunch in energy markets and could make banks more vulnerable, according to Reuters.

DATA RECAP

• UK Lloyds Business Barometer (Sep) 16 (Prev. 16)