• APAC stocks were mostly lower with risk appetite dampened ahead of the incoming deluge of central bank policy announcements.
• European equity futures are indicative of a contained open with Euro Stoxx 50 future flat after the cash market closed down 0.1% yesterday.
• DXY was steady above the 105 mark, EUR/USD and Cable sit below 1.07 and 1.24 respectively with the latter eyeing upcoming CPI data.
• Crude futures continued their pullback from a YTD peak with WTI back below USD 94/bbl amid profit-taking and cautiousness ahead of upcoming risk events.
• Looking ahead, highlights include UK CPI & US MBA, FOMC & Fed Chair Powell's Press Conference, BCB Policy Announcement, BoC Minutes, ECB’s Panetta, Schnabel & Elderson.

US TRADE

EQUITIES

• US stocks finished lower and bonds were also pressured on the eve of the FOMC as yields climbed following hot Canadian CPI data and after oil prices climbed to a fresh YTD high. However, stocks clawed back some of the losses later in the session as oil prices eased from their peaks.
• SPX -0.22% at 4,444, NDX -0.22% at 15,191, DJIA -0.31% at 34,518, RUT -0.42% at 1,827.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• US Treasury Secretary Yellen said the demand-supply imbalances in the US labour market have abated and that US growth needs to slow in line with potential due to full employment. Yellen also commented that there may be spillovers to the US from China's economic difficulties but expects China to use its policy space to avoid a slowdown with major proportions, according to Reuters.
• US House Speaker McCarthy said the procedural vote on the short-term funding measure was delayed to provide more time for negotiations, while Reuters also reported that House Republicans failed to move forward on the defence spending as shutdown looms.
• UAW President Fain is to make an announcement on Friday 10:00EDT/15:00BST and the White House said it is no longer sending top officials to Detroit for UAW strike talks this week. In relevant news, Ford (F) said it is developing contingency plans for further work stoppages in the US including shipping parts that keep Ford vehicles on the road, while Canada's Unifor union reached a tentative agreement with Ford (F) and will prepare to present the unanimously endorsed agreement to members.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower with risk appetite dampened ahead of the incoming deluge of central bank policy announcements including the latest FOMC rate decision and dot plot projections.
• ASX 200 was dragged lower by the commodity-related sectors including energy after oil prices eased back from YTD highs although losses were cushioned by resilience in consumer stocks.
• Nikkei 225 gradually weakened after the latest trade data showed Japanese exports and imports remained in contraction territory, albeit not as bad as feared.
• Hang Seng and Shanghai Comp conformed to the subdued mood after the PBoC unsurprisingly maintained its benchmark 1-year and 5-year Loan Prime Rates at 3.45% and 4.20%, respectively, while Country Garden’s dollar bondholders have been left in the dark regarding a coupon payment which was due on Monday although the developer still has a 30-day grace period.
• US equity futures lacked demand as participants await the conclusion of the FOMC meeting.
• European equity futures are indicative of a contained open with Euro Stoxx 50 future flat after the cash market closed down 0.1% yesterday.

FX

• DXY was uneventful above the 105.00 level as participants remained on the sidelines with the FOMC policy announcement looming on the horizon.
• EUR/USD lacked firm direction after yesterday’s return journey from the 1.0700 territory.
• GBP/USD traded sideways after a recent failure to sustain the 1.2400 status ahead of CPI data.
• USD/JPY price action was choppy although it sustained a firm footing at the 147.00 handle despite the renewed jawboning by Japan's top currency diplomat.
• Antipodeans adhered to the rangebound mood across the region following the lack of surprises regarding the PBoC’s LPRs and with NZD/USD only briefly supported by current account data.
• PBoC set USD/CNY mid-point at 7.1732 vs exp. 7.2926 (prev. 7.1733)
• PBoC official Zou said the global FX market has seen great volatility this year and said more attention will be paid to changes in the yuan exchange rate against a basket of currencies. Zou added there is a solid foundation to keep the yuan exchange rate basically stable and said they will resolutely correct one-sided pro-cyclical behaviour for the yuan exchange rate, while they will resolutely curb disruptions to market order and guard against exchange rate overshooting risks.
• US Treasury Secretary Yellen said the Treasury generally understands the need to smooth out volatility in exchange rates but not to influence forex levels, while she added that the view on any Japanese yen intervention would depend on the circumstances, according to Reuters.
• BoC Deputy Governor Kozicki said recent volatility in headline inflation is not unusual but the underlying trend shown by core measures was inconsistent with bringing inflation down to the 2% target and they are prepared to hike if required. Furthermore, she said core measures have eased but recent data indicates inflationary pressures are still broad-based and inflation has come down but is still too high which means real rates need to remain high.
• Japan's top FX diplomat Kanda says excessive yen moves are not desirable and watching FX with a high level of urgency, while they will take appropriate steps on FX as needed and are closely communicating with US and overseas FX

FIXED INCOME

• 10yr UST futures were stuck near contract lows following yesterday’s bout of selling ahead of the FOMC and after hot Canadian inflation data, while a strong 20yr auction failed to support prices.
• Bund futures remain subdued after their recent slump beneath the 130.00 level.
• 10yr JGB futures traded indecisively with headwinds from a rise in yields to their highest since 2014 despite the BoJ’s presence in the market for JPY 1.75tln of JGBs on top of its fixed-rate operations.

COMMODITIES

• Crude futures continued their pullback from a YTD peak with WTI back below USD 94/bbl amid profit-taking and cautiousness ahead of upcoming risk events, while bullish private sector crude inventory data had very little impact on prices.
• US Energy Inventory Data (bbls): Crude -5.3mln (exp. -2.2mln), Gasoline +0.7mln (exp. +0.3mln), Distillate -0.3mln (exp. +0.2mln), Cushing -2.6mln.
• Spot gold traded sideways amid an uneventful greenback heading into the FOMC.
• Copper futures lacked demand after recent declines and amid the subdued risk tone.

CRYPTO

• Bitcoin was marginally lower and took a breather after it recently reclaimed the USD 27,000 status.

NOTABLE ASIA-PAC HEADLINES

• Chinese Loan Prime Rate 1Y (Sep) 3.45% vs. Exp. 3.45% (Prev. 3.45%)
• Chinese Loan Prime Rate 5Y (Sep) 4.20% vs. Exp. 4.20% (Prev. 4.20%)
• PBoC official said China's monetary policy still has ample policy room to respond to unexpected challenges and changes, while they will continue to implement prudent monetary policy and step up counter-cyclical adjustments. Furthermore, the PBoC will keep liquidity reasonably ample and enhance the stability of credit growth, according to Reuters.
• NDRC Vice Chairman Cong Liang said China's macroeconomic policies have been effective and that China's economy faces a lot of difficulties and challenges, while he added that economic positives are increasing and those shorting China will surely be proven wrong.
• US State Department said Climate Envoy Kerry met with Chinese Vice President Han and emphasised the need for China to raise ambition in efforts to accelerate decarbonisation and reduce emissions of methane, according to Reuters.
• US House Republican Chair seeks details of Tesla's (TSLA) relationship with Chinese battery manufacturer CATL (300750 CH), according to a letter cited by Reuters.
• China exported zero germanium and gallium products in August which are materials key to the semiconductor industry, according to customs data.

DATA RECAP

• Japanese Trade Balance Total (JPY)(Aug) -930.5B vs. Exp. -659.1B (Prev. -78.7B)
• Japanese Exports YY (Aug) -0.8% vs. Exp. -1.7% (Prev. -0.3%)
• Japanese Imports YY (Aug) -17.8% vs. Exp. -19.4% (Prev. -13.5%)
• New Zealand Current Account (Q2) -4.2B vs. Exp. -4.8B (Prev. -5.2B)
• New Zealand Current Account/GDP (Q2) -7.5% vs. Exp. -8.0% (Prev. -8.5%)

GEOPOLITICS

• White House's Kirby said the US wants to reopen military-to-military communications with China, according to MSNBC.
• NATO Secretary General Stoltenberg told Reuters that Ukraine needs air defences urgently and needs not only new defence systems but spare parts and maintenance of arms as well, while he added the Ukraine war has not reached a stalemate.
• Gulf Cooperation Council Countries and the US called for the completion of the demarcation of Kuwaiti-Iraqi maritime borders and urged Iraq to settle its internal legal status to ensure regulation of maritime in the Khor Abdallah Waterway, while they also urged Iran to fully cooperate with the IAEA, according to a joint statement.
• Iranian President Raisi said Washington should prove its goodwill and determination for the revival of the 2015 nuclear pact, while he reportedly demanded that the US end its sanctions on Iran.

EU/UK

NOTABLE HEADLINES

• UK PM Sunak is reportedly considering weakening key net zero policies including delaying a ban on the sales of new petrol and diesel cars and phasing out gas boilers, according to BBC citing sources.
• The Times' Shadow MPC voted 7-2 in favour of a 25bps hike to the Bank Rate to "ensure inflation is finally under control".