• European bourses & US futures are firmer in a continuation of the APAC handover where action was driven by Chinese inflation
• Tesla +5.5% in pre-market trade following action by Morgan Stanley
• USD pressured by both the JPY & Yuan following Ueda and midpoint/CPI respectively
• Core fixed benchmarks remain depressed but are off worst as JGBs regroup from BoJ-inspired lows
• Crude continues to pullback despite bullish catalysts while metals benefit from China and the softer USD
• Looking ahead, highlights include NY Fed SCE. Supply from the US.

EUROPEAN TRADE

EQUITIES

• European bourses are in the green, Euro Stoxx 50 +0.5%, with action picking up slightly around the European cash open but dipping incrementally from best since in catalyst light trade.
• Sectors are almost all firmer, with Basic Resources the marked outperformer given benchmark metal action.
• Stateside, futures are in the green as optimism returns following the China data on Saturday with a limited docket for US participants ahead, ES +0.4%.
• Tesla +5.5% in pre-market trade following a significant upgrade at Morgan Stanley; upgrading the auto-name to Overweight, raising its PT to USD 400 (prev. USD 250), making it the top pick stock at MS.
• Click here for more detail.
• Click here and here for a recap of the main European equity updates.

FX

• Dollar under pressure from Yen and Yuan as BoJ Governor hints at potential end of NIRP and PBoC sets most skewed midpoint fix ever.
• DXY sub-105.000 within 104.890-520 range, USD/JPY slips to 145.92 from 147.27.
• USD/CNY and USD/CNH retreat towards 7.2700 and 7.2900 respectively from 7.3250+ and 7.3660; modest further Yuan upside seen on the most recent Reuters source reports.
• Aussie and Kiwi latch on to Yuan rebound and reclaim 0.6400/0.5900 handles vs Buck.
• Sterling, Loonie, Euro and Franc all firmer against Greenback around 1.2500, 1.3600, 1.0700+ and circa 0.8900.
• PBoC set USD/CNY mid-point at 7.2148 vs exp. 7.3437 (prev. 7.2150)
• PBoC held an FX mechanism meeting in Beijing and said it is confident to maintain the stability of the yuan, while it noted that China's FX self-regulatory body stated the yuan exchange rate has a solid basis to stay at reasonable and balanced levels. Furthermore, the body pledged to take actions when needed to correct one-sided and pro-cyclical activities and said it will resolutely fend off currency overshooting risks.
• PBoC will scrutinise bulk dollar buying of USD 50mln and above; purchase of USD 50mln and above will need approval from PBoC, via Reuters citing sources.
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• Click here for the Option Expires for the NY Cut.

FIXED INCOME

• Debt futures remain depressed, but off worst levels as JGBs regroup from BoJ-inspired lows.
• Bunds circa 25 ticks adrift, Gilts around 50 ticks below par and T-note -5/32 within 130.92-66, 94.62-28 and 109-29/20 respective ranges.
• UK DMO plans a sale via tender of the 0.125% 2073 Gilt, to take place on September 27th; moves 0.125% 2051 I/L to November 8th (prev. 25th) due to the budget.
• Click here for more detail.

COMMODITIES

• WTI and Brent are in the red as the pullback during the latter half of last week continues, despite broader sentiment being generally constructive.
• Base metals are bolstered by the latest data from China and strong performance in associated trade while precious peers are also firmer as the USD wanes
• Iraq set October Basrah medium crude OSP to Asia at a premium of USD 1.80/bbl vs Oman/Dubai average and set OSP to Europe at a discount of USD 2.55/bbl vs dated Brent, while it set OSP to North and South America at a discount of USD 0.35/bbl vs ASCI.
• The Iraqi Oil Minister said no agreement was reached with Turkey to immediately resume Iraq’s northern oil exports,** while he also said that average daily oil production is at 4.23mln bpd with exports averaging 3.35mln bpd.
• Libya’s Ras Lanuf, Zueitina, Brega and Es Sider oil ports were closed on Saturday evening for three days due to an expected hurricane, according to Reuters citing oil engineers.
• India and Saudi Arabia are likely to sign an energy cooperation MOU on Monday, while Saudi Crown Prince MBS announced the signing of an MOU for an economic corridor between India, the Middle East and Europe which will include pipelines for electricity and hydrogen.
• US and Saudi Arabia are in talks to secure metals for EVs, according to WSJ.
• Click here for more detail.

NOTABLE US HEADLINES

• US President Biden said at the G20 that the US wants to expand economic corridors and needs to maximise investments, while he added that they are focusing on infrastructure projects that deliver results across multiple countries and sectors, according to Reuters.
• US President Biden spoke with Saudi Crown Prince MBS and Chinese Premier Li at the G20, while it was also reported that the US and Vietnam signed a deal on semiconductor supply chains which will help expand manufacturing capacity with reliable partners, according to the White House. Furthermore, top US chipmakers and tech firms are to attend a Vietnam meeting on Monday amid US President Biden’s visit, according to Reuters.
• US Treasury Secretary Yellen said she is confident regarding a soft landing for the US economy and said that every measure of inflation is on the path down, according to Bloomberg.
• US House Republicans are set to move forward with FY24 defence department spending legislation this week.
• WSJ’s Timiraos said an important shift in Fed officials’ rate stance is underway and the Fed is likely to pause increases in September and then take a harder look at whether more are needed. Timiraos added that some officials still prefer to err on the side of raising rates too much with the reasoning that they can cut them later, while other officials see risks as more balanced and worry that raising rates could cause an unnecessary downturn or trigger a new bout of financial turmoil.
• Click here for the US Early Morning Note.

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak faces a new Cabinet rift after he hinted at curbing benefit increases next year and cast doubt on the pensions triple lock, according to The Sun.
• British Chambers of Commerce survey showed that small and medium-sized enterprises in the UK are completely unprepared for an impending ‘avalanche’ of fresh EU regulations and taxes such as next month’s EU green tax and obligations related to the EU’s VAT regime that kick in from 2025, according to FT.
• UK trade unions are to challenge anti-strike laws at the UN watchdog, according to FT.
• Italy reportedly could amend the 40% tax on banks’ windfall profits which was unveiled last month.
• ECB to remove leveraged loan capital add-ons for some banks as they have dealt with shortcomings in their leveraged finance units, via Bloomberg citing ECB's Enria.
• S&P affirmed Portugal at BBB+; Outlook Revised to Positive from Stable.
• Greece has been upgraded to BBB at DBRS Morningstar; i.e. to investment grade from junk.
• EU Commission sees EZ GDP growth at 0.8% in 2023 (prev. 1.1%), 1.3% 2024 (prev. 1.6%); Sees EZ inflation in 2023 at 5.6% (prev. 5.8%), 2024 inflation 2.9% (prev. 2.8%)

NOTABLE EUROPEAN DATA

• Norwegian Consumer Price Index YY (Aug 2023) 4.8% vs. Exp. 5.3% (Prev. 5.4%); MM (Aug 2023) -0.8% vs. Exp. -0.4% (Prev. 0.4%)
• Norwegian Core Inflation YY (Aug 2023) 6.3% vs. Exp. 6.6% (Prev. 6.4%); MM (Aug 2023) -0.6% vs. Exp. -0.3% (Prev. 0.9%)

GEOPOLITICS

• Ukrainian President Zelensky said Ukrainian troops had advanced on the southern front in the past week and there was also movement in the east near Bakhmut, according to Reuters.
• US is reportedly nearing a decision on sending long-range missile ATACMS to Ukraine for the first time, according to officials cited by ABC News.
• Russian Foreign Minister Lavrov said there are ideas for other regional organisations to join the G20 and said that the de-dollarisation process has already started including with India, while Lavrov also said that they regret the decision by Armenia regarding plans for military drills with the US, according to Reuters.
• European Council President Michel criticised Russia for its cynicism in pulling out of the Black Sea grain deal and said Russia’s offer of a million tons of grain to African countries was a parody of generosity.
• Turkish President Erdogan said they discussed the issue of the Black Sea grain deal in great detail and any initiative that isolates Russia is bound to fail. Erdogan also stated that Russian President Putin is ready to send grain to poor countries and Qatar also agreed, while he noted it is not hopeless regarding reimplementing the grain deal and the process can start again.
• Romanian Defence Ministry said pieces of a drone similar to those used by the Russian army were found in Romanian territory on Saturday.
• Azerbaijan’s Defence Ministry said Armenian forces fired on Azerbaijani army positions and the Azerbaijani army took retaliatory measures. In relevant news, Nagorno-Karabakh separatist authorities said a deal was reached with Azerbaijan to restore transport on the Lachin corridor by Russian peacekeepers and Red Cross. However, an Azerbaijani presidential adviser denied a deal to reopen the Lachin corridor but said the road to Azerbaijan will open for aid shipments regardless, according to Reuters.
• US Navy said US and Canadian warships sailed through the Taiwan Strait on Saturday, according to Reuters.
• Taiwan's Defence Ministry said 10 Chinese air force planes crossed the Taiwan Strait Median Line during the past 24 hours, while it noted a Chinese aircraft carrier group is to Taiwan's southeast and heading to the western Pacific.
• North Korean leader Kim and the Chinese delegation to North Korea shared views on intensifying multi-faceted cooperation.
• Russian President Putin sent a letter to North Korean leader Kim and stated that the two countries’ relations will expand in all aspects on common efforts, according to KCNA.
• N. Korean Leader Kim and Russian President Putin could hold a summit on September 13th, via YTN citing a S. Korean source.

CRYPTO

• Bitcoin is a touch softer on the session, holding just below the USD 26k mark. Action comes despite a softer USD but continues the recent sessions performance for Bitcoin where the bias has been for incrementally lower trade.

APAC TRADE

• APAC stocks traded mixed as yields climbed following comments from BoJ Governor Ueda who said that the BoJ cannot rule out that they might have sufficient data by year-end to determine whether they can end negative rates and that his focus is on a quiet exit.
• ASX 200 was rangebound with gains in the top-weighted financial industry making up for the underperformance in the tech and healthcare sectors.
• Nikkei 225 was subdued after the comments from BoJ Governor Ueda which lifted the 10yr JGB yield to above 0.70% for the first time since 2014 although further downside in the index was stemmed as banks were lifted on the exit-related talk and with Japan aiming to take drastic economic stimulus measures.
• Hang Seng and Shanghai Comp were varied with the Hong Kong benchmark pressured as last Friday’s losses caught up to the index following the black rainstorm closure and with declines led by weakness in the property sector, while Alibaba shares also suffered after its former CEO Daniel Zhang stepped down from the cloud business. Conversely, the mainland was kept afloat following somewhat mixed inflation data from China which showed headline CPI Y/Y was softer than expected but no longer in deflationary territory and the latest loans and financing data topped forecasts, while China’s National Administration of Financial Regulation also eased rules for insurers to buy stocks.

NOTABLE ASIA-PAC HEADLINES

• BoJ Governor Ueda said they cannot rule out that they might have sufficient data by year-end to determine whether they can end negative rates and that his focus is on a quiet exit, while he noted they will end negative rates if they judge that achieving the price target becomes possible and that they will keep ultra-easy policy for now. Furthermore, he stated that there are various options they can take if economic growth and inflation overshoot expectations, as well as noted that the BoJ will work with the government to assess the impact on the economy and prices regarding recent yen declines, according to an interview with Yomiuri.
• Japanese PM Kishida confirmed he plans to reshuffle the cabinet and to conduct personnel change at the party leadership, while he added that they aim to take drastic economic stimulus measures, according to Reuters.
• Japanese PM Kishida and South Korean President Yoon agreed to work on the resumption of a three-way summit with China, according to Reuters.
• Chinese Premier Li said G20 countries should step up macro-economic policy coordination and China will resolutely deepen reforms and opening up. Furthermore, Premier Li said China and Europe should unite and provide stability amid global uncertainties.
• China’s National Administration of Financial Regulation will make it easier for insurers to buy stocks with the risk weighting of insurance companies’ investment in component stocks of the CSI 300 index and stocks listed on the STAR Market to be lowered, according to Bloomberg citing a statement.
• White House official said it is incumbent on China to explain why its leader was not present at the G-20 Summit and it is unfortunate if China was not committed to the bloc’s success.
• European Council President Michel met with Chinese Premier Li and confirmed a shared interest in holding an EU-China summit by year-end, according to Reuters.
• Italian PM Meloni told Chinese Premier Li about Italy’s plan to quit the Belt and Road Initiative, according to Italian media cited by Reuters.
• UK PM Sunak said he raised strong concerns over any interference in Britain’s parliament with Chinese Premier Li and said any interference would be unacceptable.
• UK and Singapore signed a new strategic partnership to boost economic growth and strengthen security, according to a UK government statement.
• Japanese Chief Cabinet Secretary Matsuno says monetary policy specifics are up to the BoJ to decide; expects the BoJ to closely communicate with the government and conduct policy appropriately.

DATA RECAP

• Chinese CPI MM (Aug) 0.3% vs. Exp. 0.3% (Prev. 0.2%); YY (Aug) 0.1% vs. Exp. 0.2% (Prev. -0.3%)
• Chinese PPI YY (Aug) -3.0% vs. Exp. -3.0% (Prev. -4.4%)
• Chinese New Loans (CNY) (Aug) 1360B vs Exp. 1250B (Prev. 346B); 3120B vs Exp. 2420B (Prev. 528B)
• Chinese Money Supply M2 YY (Aug) 10.6% vs Exp. 10.7% (Prev. 10.7%)