• European equities have kicked the week off on the backfoot following the selling pressure seen on Wall Street on Friday whilst the APAC session saw holiday-thinned conditions
• US futures are more of a mixed bag with the tech-laden NQ incrementally lagging peers.
• Cable lifted to a 1.1279 best sending DXY below 112.00; however, this action has since eased with peers heavily mixed vs. USD
• Core benchmarks lifted markedly alongside the commencement of Gilt trade following the gov't u-turn, upside which has since eased
• Crude benchmarks bid on weekend/early-morning reporting around the potential OPEC+ cut magnitude
• Looking ahead, highlights include US Final Manufacturing PMI, US ISM Manufacturing, Speeches from Fed’s Bostic, Barkin, George & Williams, BoE’s Mann & UK Chancellor Kwarteng.

As of 11:00BST/06:00ET

LOOKING AHEAD

• US Final Manufacturing PMI, US ISM Manufacturing, Speeches from Fed’s Bostic, Barkin, George & Williams, BoE’s Mann & UK Chancellor Kwarteng.
• Click here for the Week Ahead preview.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelenskyy said Lyman had been cleared of Russian troops and that the success of Ukraine’s soldiers is not limited to Lyman with the Arkhanhelske and Myrolyubivka settlements liberated in the Kherson region, while he also stated that the abduction of the Zaporizhzhia nuclear power plant’s Director-General is another instance of a clear act of Russian terror, according to Reuters.
• Russian Defence Ministry said its troops have left the east Ukraine stronghold of Lyman, according to RIA. It was also reported that Chechnya leader Kadyrov said that Russia should consider using a low-yield nuclear weapon in Ukraine after Russian troops were forced out of the eastern Ukraine town of Lyman, according to Reuters.
• Russian Defence Ministry said Russian forces hit seven artillery and missile depots in the Ukrainian regions of Kharkiv, Zaporizhzhia, Mykolaiv and the Donetsk People’s Republic, according to Reuters.
• Russian-installed official says Ukrainian forecast have made some breakthroughs in the Kherson region and have taken control of some settlements, via Reuters.
• Germany, Denmark and Norway will buy 16 Zuzana-2 Howitzers for Ukraine for EUR 92mln with delivery to start next year, according to Reuters citing the German Defence Ministry.
• IAEA chief Grossi is expected to travel to Kyiv and Moscow in the week ahead for talks regarding creating a protection zone around the Zaporizhzhia nuclear power plant, according to Reuters.
• NATO Secretary General Stoltenberg said any deliberate attack on NATO critical infrastructure will be met with a firm and united response, while he added that any use of nuclear weapons will have severe consequences for Russia and said that Russian President Putin’s nuclear rhetoric is dangerous and reckless, according to Reuters.
• NATO sent an intelligence note to member countries that suggested Russia has moved the submarine K-329 Belgorod into Arctic waters for the first potential test of the Poseidon nuclear missile, according to Repubblica.
• EU Ambassadors to meet at 08:00BST today, to discuss latest Russian sanctions package which includes a price cap on Russian seaborne oil exports, via Politico; however, diplomats note that some nations are still opposing this. Diplomats believe it will take one or two more meetings to resolve issues, looking to sign it off before Friday's leader's meeting.

CHINA-TAIWAN

• US Defense Secretary Austin said the US does not see an imminent invasion of Taiwan by China and said that China is trying to establish a new normal with actions in and around Taiwan, according to a CNN interview. Furthermore, Austin said the US is working with partners to ensure a free Indo-Pacific region is maintained and will work to ensure that US-China military communications open up.
• Taiwan Defence Ministry said four Chinese aircraft crossed the Taiwan Strait median line on Sunday, according to Reuters.

OTHER

• North Korea conducted another ballistic missile launch on Saturday involving two suspected ballistic missiles which it fired towards its east coast and landed outside of Japan’s exclusive economic zone, according to Reuters.
• South Korea condemned North Korea’s ballistic missile launch and President Yoon said North Korea’s nuclear program is a direct challenge to the world nuclear non-proliferation regime. Yoon added that North Korea will face an overwhelming response from the US and South Korea if it tries to use nuclear weapons and that South Korea will strengthen joint military drills with the US, while South Korea will also dramatically upgrade reconnaissance and strike capability against North Korea, according to Reuters.
• Israeli PM Lapid said they are studying a draft US-brokered deal demarcating the maritime border with Lebanon and that the draft offer would fully preserve Israel’s security and economic interests, while they are open to Lebanon developing gas in the disputed field if Israel gets royalties from it, according to Reuters.
• A regional country mediated between Iran and the US for a prisoner swap and billions of dollars of Iran’s frozen assets will be released soon, according to Iran’s Nournews.
• Venezuela released 7 jailed Americans in exchange for the US freeing 2 relatives of Venezuelan President Maduro, while a senior US administration official said the US policy towards Venezuela has not changed and they continue to believe that a Venezuelan-led dialogue to the restoration of free and fair elections in the country is still the top priority, according to Reuters.
• Iranian Foreign Ministry says "There is still a chance to revive the nuclear agreement if Washington shows the necessary will", according to Al Jazeera.

EUROPEAN TRADE

EQUITIES

• European equities have kicked the week off on the backfoot following the selling pressure seen on Wall Street on Friday whilst the APAC session saw holiday-thinned conditions with China away from market.
• Sectors in Europe are mostly lower with the exception of Energy and Utility names. To the downside, Banking names lag with Credit Suisse the worst performing stock in the Stoxx 600 amid ongoing speculation over the fragility of the Bank’s outlook.
• Stateside, US futures are more of a mixed bag with the tech-laden NQ incrementally lagging peers.
• Credit Suisse cuts their 2022 SPX target to 3,850 from 4,300; initiates 2023 target at 4,050 and Citi cuts their 2022 SPX target to 4,000 from 4,200; initiates 2023 target at 3,900, via Reuters.
• Click here for more detail.

FX

• Activity currencies are on the front foot at the start of the new month and quarter, but more so on idiosyncratic factors as opposed to broader risk appetite.
• Sterling saw a boost in the early hours as reports circulated that the UK would ditch plans to abolish the GBP 0.45 top tax rate (later confirmed by the Chancellor).
• DXY has been edging higher in recent trade despite a lack of newsflow, but ahead of several central bank speakers and the US jobs report on Friday.
• CHF, JPY, and EUR sit as the current laggards whilst the EZ Manufacturing Final PMIs suggested the “worst looks set to come” for the sector.
• The offshore Yuan has been trading towards the top end of its intraday range as the PBoC omitted from setting a CNY fixing overnight amid the Golden Week holiday which is poised to end on the 7th of October.
• Brazil's electoral authority confirmed that the presidential election will go to a second-round runoff between Bolsonaro and Lula after none of the candidates achieved the 50% threshold although former President Lula received 48.2% and incumbent Bolsonaro received 43.4%, according to BBC.
• RBI is likely selling USD via state banks around 81.85-81.90 levels, according to traders cited by Reuters.
• Click here for more detail.
• Click here for OpEx for the NY Cut.

FIXED INCOME

• Core benchmarks lifted markedly alongside the commencement of Gilt trade following reports and the subsequent confirmation that the UK Gov’t is not moving forward with its plan to abolish the 45p tax threshold.
• Lifting Gilts above 98.00 briefly and sending the yield below 4.00%; however, this proved short-lived with significant funding concerns still to be addressed.
• Broader benchmarks lifted alongside this but have since reverted back to unchanged/negative territory ahead of numerous Central Bank speakers; USTs & Bunds essentially unchanged.
• Click here for more detail.

COMMODITIES

• WTI and Brent futures gapped higher at the open amid reports over the weekend that OPEC+ could opt for target cuts deeper than 1mln BPD, whilst Saudi may also decide on an additional voluntary cut.
• Spot gold has been edging lower in tandem with the Dollar picking up, but remains north of USD 1,650/oz.
• LME metals are relatively mixed with 3M copper back under USD 7,500/t amid the downbeat risk tone and the absence of China due to the Golden Week holiday.
• OPEC+ sources on Sunday said the group may opt for cuts over 1mln BPD. One source suggested cuts could also include voluntary cuts by Saudi Arabia, according to Reuters. Meanwhile, OPEC+ delegates indicated cuts of 1.5mln BPD or more under consideration, according to Energy Intel’s Bakr.
• UK regulator will fast-track North Sea gas fields to boost domestic production, according to FT.
• Italy’s Eni said gas supply to Italy from a Russian gas supplier has not been confirmed for Monday because Gazprom is unable to transfer gas through Austria with consequent zero flows and it expects the situation to remain the same until Tuesday, according to Reuters.
• Click here for more detail.

NOTABLE EUROPEAN HEADLINES

• UK Gov't confirms they will not go ahead with the abolition of the 45p rate of income tax. Follows multiple reports around this beforehand which sparked a bid in GBP; prior to this, there was two-way reporting around a u-turn and a delay.
• UK PM Truss said that they would be in serious trouble on the economy if they hadn’t acted and that they also needed to act on other areas of taxation to make sure that the economy did not slow down any further. Truss also said that she wants to reassure people that they have a very clear plan, while she stands by the package they announced and thinks they made the right decision to borrow more this winter, according to Reuters.
• UK government has been asked by the Chinese owner of British Steel for a rescue package of up to GBP 500mln to keep its vast steelworks in Lincolnshire open which has stoked fears of thousands of job losses and the prospect of the closure of some of the last blast furnaces in the UK, according to FT.
• S&P affirmed the UK at AA; Outlook revised to Negative from Stable on Friday.
• Credit Suisse CEO said the firm is at a critical moment and sees strength, as well as noted they have a strong capital base and liquidity in a recent attempt to calm nerves. Note, there were unsubstantiated rumours on social media that a major investment bank is on the brink with many pointing to Credit Suisse. The BoE is reportedly monitoring the situation at the Co. amid market turbulence. However, officials are satisfied that there have been no major developments at the Bank, according to the Telegraph.

DATA RECAP

• EU S&P Global Manufacturing Final PMI (Sep) 48.4 vs. Exp. 48.5 (Prev. 48.5)
• German S&P Global/BME Manufacturing PMI (Sep) 47.8 vs. Exp. 48.3 (Prev. 48.3)
• UK S&P Global/CIPS Manufacturing PMI FNL (Sep) 48.4 vs. Exp. 48.5 (Prev. 48.5)

NOTABLE HEADLINES

• Tesla (TSLA) announced it delivered 343.8k vehicles in Q3 which was lower than the 359.0k expected, while the Co. cited an increasingly challenging environment for transport and logistics, according to FT.

CRYPTO

• In-fitting with the last few sessions, Bitcoin is within narrow sub-500 ranges but is at the lower-end of these parameters and under modest pressure around USD 19.1k.

APAC TRADE

• APAC stocks were mostly lower as the region failed to shrug off the negative mood following last Friday’s losses on Wall St. and with risk sentiment in Asia also clouded by holiday closures ahead of this week's key events.
• ASX 200 was lacklustre with price action contained amid the quasi-holiday conditions in Australia.
• Nikkei 225 recovered from early weakness and reclaimed the 26,000 level despite the mixed Tankan data in which headline Large Manufacturers’ sentiment worsened for a 3rd consecutive quarter and printed its lowest level since March 2021, although Large All Industry Capex topped forecasts.
• Hang Seng was choppy in which the index briefly recouped initial losses as the property sector strengthened after the recent announcement by the PBoC to allow some cities to cut mortgage rates for first-time buyers, although the recovery was short-lived amid the absence of mainland participants and Stock Connect flows for a week-long closure.

NOTABLE APAC HEADLINES

• PBoC and other departments issued the overall plan for three pilot areas of inclusive financial reform, according to Reuters.
• BoJ Summary of Opinions stated that Japan's core consumer inflation is likely to accelerate towards year-end and narrow the pace of increase thereafter, while it added the Bank should maintain monetary easing and that it is desirable to maintain current forward guidance with a dovish bias as the impact of the pandemic is uncertain and inflation is likely to slow next fiscal year and onwards.

NOTABLE APAC DATA

• Japanese Tankan Large Manufacturing Index (Q3) 8 vs. Exp. 11 (Prev. 9); Manufacturing Outlook (Q3) 9 vs. Exp. 11 (Prev. 10)
• Japanese Tankan Large Non-Manufacturing Index (Q3) 14 vs. Exp. 13 (Prev. 13); Non-Manufacturing Outlook (Q3) 11 vs. Exp. 15 (Prev. 13)
• Japanese Tankan All Big Capex Estimate (Q3) 21.5% vs. Exp. 18.8% (Prev. 18.6%)