• APAC stocks traded mixed following a lacklustre lead from the US where the major indices paused their two-day rally.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.3% after the cash market closed with losses of 1.1% yesterday.
• DXY lingers just below 111.00, EUR/USD has reclaimed 0.99 status, Cable is back on a 1.13 handle, Antipodeans lead the majors.
• Crude was uneventful overnight but held on to the gains from the OPEC+ 2mln BPD output reduction.
• Looking ahead, highlights include EZ/UK Construction PMI, EZ Retail Sales, ECB Minutes, Speeches from Fed's Waller, Evans, Cook & Mester, Supply from France & Spain.

US TRADE

• US stocks finished with marginal losses to put a halt to the strong two-day rally amid upside in yields and a firmer dollar. Nonetheless, price action was less than clear-cut with selling pressure seen at the open although stocks then gradually recovered in which the S&P 500 briefly turned positive and reclaimed the 3,800 level which it ultimately failed to sustain amid a large sell-side imbalance.
• SPX -0.22% at 3,782, NDX -0.08% at 11,573, DJIA -0.14% at 30,273, RUT -0.74% at 1,762.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Bostic (2024 voter) said the inflation fight is still in the early days and wants rates at a moderately restrictive level from 4.0%-4.5% then hold to assess the impact. Bostic stated the Fed should not be too quick to cut rates if the economy weakens but stay purposeful and resolute in seeing inflation lowered. Bostic also noted the August inflation report shows price pressures are still broad and stubborn, while he added that low unemployment means Fed has manoeuvring room to continue tightening, according to Reuters.
• White House Economic Advisor Deese said the labour market is showing signs of resilience and signs of cooling.
• Twitter (TWTR) and Elon Musk are continuing talks about closing the deal and hope to have an agreement soon, possibly as soon as today, according to WSJ sources. Furthermore, the sides agreed to postpone Elon Musk's Thursday deposition with no new time set, according to a source familiar with the litigation cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks traded mixed as the region partially shrugged off the lacklustre lead from the US where the major indices snapped a firm two-day rally and finished the somewhat choppy session with mild losses amid higher yields and as Fed rhetoric essentially pushed back against a policy pivot.
• ASX 200 lacked direction amid underperformance in the Real Estate and the Consumer sectors, although the downside was also limited by strength in energy after oil prices were lifted by the OPEC+ output cut.
• Nikkei 225 was positive with notable gains in exporter names and with Rakuten leading the advances as Mizuho looks to acquire a 20% stake in Rakuten Securities for USD 555mln.
• Hang Seng was lacklustre and took a breather after the prior day’s more than 5% jump with the mood also not helped after Hong Kong PMI slipped into contraction territory for the first time in 6 months.
• US equity futures continued on yesterday's intraday rebound with the E-mini S&P (+0.5%) back above the 3,800 level.
• European equity futures are indicative of a higher open with the Euro Stoxx 50 future +1.3% after the cash market closed with losses of 1.1% yesterday.

FX

• DXY traded rangebound near 111.00 after the prior day’s upside in yields and as Fed speakers essentially pushed back on a policy pivot including Fed’s Daly who noted they have to be prepared for inflation to be more persistent than expected and that they will hike to restrictive territory, while Fed’s Bostic also said the Fed should not be too quick to cut rates if the economy weakens but stay purposeful and resolute in seeing inflation lowered.
• EUR/USD nursed some of its recent losses and just about reclaimed the 0.9900 handle.
• GBP/USD composed itself after yesterday’s underperformance in sterling whereby the currency largely ignored comments from UK PM Truss on levelling up and growth, while Fitch recently revised the UK outlook to negative.
• USD/JPY was indecisive with price action contained owing to the absence of any major catalysts.
• Antipodeans extended their rebound with help from recent advances in the commodities complex.

FIXED INCOME

• 10yr UST futures remained lacklustre after yesterday’s selling pressure in the aftermath of the better-than-expected data releases and hawkish Fed rhetoric.
• Bund futures were subdued following the recent slump and with price action stuck near the 140.00 level ahead of German Factory Orders, Eurozone Construction PMIs and ECB Minutes.
• 10yr JGB futures conformed to the glum mood across the treasuries complex with firmer demand at the enhanced liquidity auction for 10yr-30yr JGBs doing little to spur prices.

COMMODITIES

• Crude was uneventful overnight but held on to the gains from the OPEC+ 2mln BPD output reduction, albeit with upside capped as cuts are to be measured from current baselines rather than existing production levels.
• Saudi Energy Minister Prince Abdulaziz said the actual cut is around 1.0mln-1.1mln BPD, according to Bloomberg.
• Iraqi Oil Minister hopes the OPEC+ decision to cut production will contribute to world market stability and support crude prices, while Iraq intends to maintain its benchmark production level agreed upon with OPEC member countries in July 2021 and said its exports will not be affected by OPEC+ decision, according to Reuters.
• Acting Kuwaiti Oil Minister said the OPEC+ decision to cut output will have positive ramifications for oil markets, while they understand consumers' concerns about prices increasing but added that the main motive in OPEC+ is balancing supply and demand, according to Reuters.
• Algerian Energy Ministry said it has been noticed weeks ago that the oil market situation has been deteriorating faster than expected and that global oil demand reveals worrying signs of a slowdown as global oil supplies are more than sufficient.
• It was initially reported that the US plans to relax sanctions on Venezuela which will enable Chevron (CVX) to pump oil, according to WSJ. However, a US National Security official later stated the US sanctions policy on Venezuela remains unchanged and there are no plans to change the sanctions policy without constructive steps from Maduro, according to Reuters.
• Goldman Sachs raised its Q4 oil price forecast by USD 10 to USD 110/bbl and said the OPEC+ supply cut is very bullish for oil.
• Energy Intel estimates that the price caps/sanctions may slash Russia's oil and condensate output by around 1.2mln BPD.
• Spot gold was kept afloat after having found support at the USD 1700/oz level.
• Copper continued on yesterday's advances as risk appetite steadily improved.
• LME restricted new deliveries of metal from Russia's UMMC after UK sanctions on Makhmudov.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said armed forces liberated three more settlements in the Kherson region on Wednesday, according to Reuters.

OTHER

• North Korea launched two short-range ballistic missiles which were fired from Pyongyang and landed outside of Japan's exclusive economic zone, according to the South Korean military cited by Yonhap. Furthermore, North Korea said that its missile launches are counteraction measures against the US and South Korean military drills.
• US State Department condemned North Korea's ballistic missile launch and said North Korea's missile launches pose a threat to regional neighbours and the international community, while it added that the US remains committed to a diplomatic approach to North Korea and called on North Korea to engage in dialogue, according to Reuters.
• US envoy to UN accused China and Russia of enabling North Korea's Kim Jong Un by protecting Pyongyang from UN actions, according to Reuters.

CRYPTO

• Bitcoin traded higher and gradually extended its advances above the 20,000 level.

ASIA

NOTABLE APAC HEADLINES

• Haikou city in China's Hainan imposed a COVID lockdown for Thursday, according to Bloomberg.

DATA RECAP

• Hong Kong PMI (Sep) 48.0 (Prelim. 51.2)
• Australian Trade Balance (AUD)(Aug) 8.3B vs. Exp. 10.1B (Prev. 8.7B)
• Australian Exports (Aug) 3% (Prev. -10%)
• Australian Imports (Aug) 4% (Prev. 5%)

EU/UK

NOTABLE EU/UK HEADLINES

• Fitch affirmed the UK at AA-; Outlook revised to Negative from Stable, while it stated that the fiscal package announced as part of the new UK government's growth plan could lead to a significant increase in deficits over the medium-term, according to Reuters.
• The UK Treasury is set to impose GBP 21bln of additional income taxes despite the "tax-cutting mini-budget", according to a study by the Institute for Fiscal Studies. (Times)