• APAC stocks were negative in holiday-thinned trade, while the region digested a contraction in Chinese Caixin PMI and Friday's NFP.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.7% after the cash market closed with losses of 1.7% on Friday.
• DXY stalled out just ahead of 113, FX is otherwise contained, AUD lags peers.
• Russian President Putin described the Crimea bridge explosion as an act of terrorism which Ukraine is responsible for.
• Looking ahead, highlights include EZ Sentix Index, Speeches from Fed’s Evans & Brainard, ECB’s Lane, US Columbus Day with CME floor trade closed but will be a regular session elsewhere.

US TRADE

• US stocks declined on Friday and yields gained after better-than-expected US jobs data supported the views for more rate hikes ahead in which markets priced an over 90% probability of a 75bps hike for November.
• S&P 500 -2.8% at 3,639, Nasdaq-100 -3.9% at 11049, DJIA -2.1% at 29,296, R2K -2.9% at 1,702.
• Click here for a detailed summary.

NOTABLE HEADLINES

• EU is urging the US to rethink its ‘discriminatory’ provisions in the new flagship green legislation amid concerns in Europe that the rules could prompt European manufacturers to move production to the US, according to FT.
• Tesla (TSLA) sold a record number of China-made vehicles in September with 83,135 units in wholesale, according to the CPCA cited by Reuters.

APAC TRADE

EQUITIES

• APAC stocks were negative in a holiday-thinned start to the week with market closures in Japan, South Korea and Taiwan, while the region digested a contraction in Chinese Caixin PMI data and the recent stronger-than-expected US jobs data which paves the way for the Fed to continue with its hawkish normalisation.
• ASX 200 was led lower by gold miners and tech stocks after the post-NFP rise in yields and with risk appetite also not helped by a deterioration in the AIG Services Index.
• Hang Seng and Shanghai Comp. weakened with Hong Kong pressured by notable losses in the tech sector after the US recently announced new curbs on exports to China on certain tools essential for high-end chip production. Furthermore, sentiment was also dampened following the PBoC’s largest weekly net drain in eight months and after Chinese Caixin Services and Composite PMIs fell into contraction territory, although losses in the mainland are somewhat cushioned following the return of participants from a week-long holiday.
• US equity futures remained subdued (e-mini S&P -0.4%) in the aftermath of the NFP data which spurred hawkish Fed bets.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -0.7% after the cash market closed with losses of 1.7% on Friday.

FX

• DXY took a breather from last week’s post-NFP advances and brief approach to just shy of the 113.00 level, while focus this week turns to the FOMC Minutes on Wednesday and US CPI on Thursday.
• EUR/USD was contained amid lingering geopolitical and energy-related concerns for the bloc.
• GBP/USD remained subdued with an early rebound attempt thwarted by resistance at the 1.1100 handle.
• USD/JPY briefly climbed above 145.50 but with upside limited amid the absence of Japanese participants
• Antipodeans were subdued with AUD the underperformer following the weaker AIG Services data.
• PBoC set USD/CNY mid-point at 7.0992 vs exp. 7.1215 (prev. 7.0998).
• Turkish President Erdogan said the CBRT will keep cutting rates every month for as long as he is in power, according to Reuters.

FIXED INCOME

• 10yr UST futures traded rangebound after the pressure seen from last Friday’s strong jobs data and amid quasi-holiday conditions for Columbus Day in the US where the bond market will remain shut.
• Bund futures were off the week’s lows but with the rebound limited owing to the closures of key bond markets and last week’s hawkish central bank rhetoric.

COMMODITIES

• Crude futures slightly pulled back amid the subdued risk tone, while COVID concerns also lingered with China placed on high alert amid increases in cases ahead of the Communist Party congress.
• Iraq set November Basrah medium crude official selling price to Asia at Oman/Dubai plus USD 1.70, to Europe at Dated Brent minus USD 9.20/bbl and to North and South America at ASCI minus USD 2/bbl, according to Reuters.
• US Treasury Secretary Yellen said the move by OPEC+ to reduce output was unhelpful and unwise for the global economy, especially emerging markets that are already experiencing difficulties with the high energy prices, according to FT.
• Russian Kremlin said that working within the OPEC+ framework balances the mess that the US is creating in the global energy market and claimed the US has begun to lose its composure due to the OPEC+ decision to cut oil output. Kremlin also stated that the US is trying to manipulate with its oil reserves and such a game will not yield any good result, according to IFX and Tass.
• French petrol station woes reportedly deepened as strikes continued and the French Energy Ministry stated that 29.7% of service stations were experiencing supply difficulties with at least one fuel product as of 3pm on Sunday vs 21% of service stations on Saturday. Furthermore, TotalEnergies (TTE FP) called on the responsibility of workers to ensure that the country is well supplied with fuel and proposed to bring forward the compulsory annual negotiations to October subject to the end of blockades, according to Reuters.
• China issued its first batch of 2023 crude import quotas which was mainly to independent refiners and with the volume issued at about 20mln tonnes, according to sources cited by Reuters.
• Spot gold prodded post-NFP lows after hitting resistance at the USD 1700/oz level.
• Copper nursed some of Friday's losses as Chinese participants returned to the market but with the rebound contained by the risk aversion.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian media reported a large explosion at the Kerch bridge in Crimea where a fuel tank was on fire at one of the sections of the bridge, while there were comments from a Ukrainian presidential adviser who called the bridge explosion ‘the beginning’ and said ‘everything illegal must be destroyed’ but did not directly claim responsibility, according to Reuters.
• Russian President Putin described the Crimea bridge explosion as an act of terrorism which Ukraine is responsible for and he ordered tighter security for the Crimea bridge, as well as the infrastructure supplying electricity and natural gas to Crimea, according to Reuters and Interfax.
• Russian investigative committee head said the blast on the Crimea bridge was prepared by Ukrainian special services, according to Reuters. It was also reported that Russian government spokesperson Peskov said it is wrong to consider the terrorist attack on the Crimean bridge as a reason for the possible use of nuclear weapons, according to Ria Novosti.
• General staff of Ukraine’s armed forces said dozens were reportedly killed or injured in shelling at the Zaporizhzhia city. In relevant news, IAEA said the Zaporizhzhia nuclear power plant lost its last remaining external power source on Saturday after renewed shelling and relied on its emergency diesel generators, although IAEA chief Grossi announced on Sunday that the nuclear power plant’s offsite power line was restored and the plant was reconnected to the grid which Grossi described as a temporary relief in a still untenable situation. It was also reported that Grossi will soon travel to Russia and then to Ukraine for talks on setting up a protection zone at Zaporizhzhia, according to Reuters.
• White House national security spokesman Kirby said US President Biden’s “Armageddon” warning was not based on any new intelligence and reflects the very high stakes that are currently in play. Kirby also stated that Russian President Putin started the war and could end it simply by moving troops out of Ukraine, while he added the US will continue offering security assistance to Ukraine, according to The Guardian and Reuters.
• German Defence Minister Lambrecht said NATO must do more for common security and that they do not know ‘how far Putin’s delusions of grandeur can go’, according to Reuters.
• Russian Defence Ministry announced that it named a new commander of Russian forces engaged in Ukraine, according to IFX.

CHINA-TAIWAN

• Taiwan President Tsai said they must stand up for democracy and prepare prudently and sufficiently to respond to any possible contingency, while she added that they are sending a message to the international community that Taiwan will take responsibility for its self-defence. Tsai also stated that they want to make clear that armed confrontation is absolutely not an option for both sides and they look forward to the gradual resumption of the healthy and orderly cross-strait people-to-people exchanges, thereby easing tensions in the Taiwan Strait, according to Reuters.
• Taiwan’s Defence Ministry said two Chinese aircraft crossed the Taiwan Strait median line on Sunday, according to Reuters.

OTHER

• North Korea fired two short-range ballistic missiles from the Munchon area over the weekend which fell outside of Japan’s exclusive economic zone, while South Korea stated that the latest missile launches are a serious provocation that harms peace, according to Yonhap and Reuters.
• North Korea conducted tactical nuclear operational training during September 25th - October 9th and leader Kim oversaw tactical nuclear military training, while Kim said they will continue to strengthen nuclear operations going forward, according to Yonhap and KCNA.
• Japan and the US conducted a joint military exercise involving the aircraft carrier USS Ronald Reagan, according to Japan’s Defence Ministry cited by Reuters.
• Lebanon’s President Aoun that the final draft of the proposal to demarcate Lebanon’s maritime border with Israel will be sent to Lebanon within hours following a call with the US mediator, according to Reuters.

CRYPTO

• Bitcoin traded relatively flat with early upside capped by resistance near the 19,500 level.

ASIA

NOTABLE APAC HEADLINES

• PBoC injected CNY 17bln via 7-day reverse repos for CNY 594bln net daily drain on Saturday and injected CNY 2bln through 7-day reverse repos with the rate kept at 2.00% on Sunday which resulted in the largest net weekly drain in eight months. PBoC also injected CNY 2bln via 7-day reverse repos with the rate kept at 2.00% on Monday, according to Reuters.
• PBoC noted that it issued CNY 400bln via MLF during September and outstanding MLF loans fell to CNY 4.55tln at end-September vs. CNY 4.75tln at end-August, while it issued a total of CNY 969mln via SLF in September and its outstanding PSL was at CNY 2.65tln at end-September vs CNY 2.54tln at end-August, according to Reuters.
• PBoC survey found that 53% of bankers believe Q3 monetary policy is appropriate and 45.8% believe Q3 monetary policy is loose, according to Reuters.
• China was placed on high alert amid increases in COVID cases ahead of the Communist Party Congress, according to FT.
• Chinese Foreign Ministry said the US is abusing trade measures to maintain technological hegemony following the recent announcement of controls targeting Chinese chip manufacturers, according to Reuters.

DATA RECAP

• Chinese Caixin Services PMI (Sep) 49.3 (Prev. 55.0)
• Chinese Caixin Composite PMI (Sep) 48.5 (Prev. 53.0)
• Australian AIG Services Index (Sep) 48.0 (Prev. 53.3)

EU/UK

NOTABLE EU/UK HEADLINES

• UK Cabinet Office Minister Zahawi said it is extremely unlikely that Britain will have planned power cuts over the winter, according to Reuters.
• UK PM Truss is prepared to listen to Conservative critics who oppose proposals to raise benefits by less than inflation, according to Telegraph sources.
• Retailers in London’s West End warned that the capital faces a consumer growth slowdown with footfall in London’s main shopping area remaining about a fifth lower than pre-pandemic levels, according to research by New West End Company cited by FT.ch by New West End Company cited by FT.