• European bourses & US futures have given up initial gains but action remains tentative pre-data/Powell and after mixed Chinese PMIs
• US House/Senate passed a short-term spending bill, Biden signed a 45-day stop-gap measure into law
• DXY is bid on dips and towards the top-end of 106.04-49 parameters with JPY lagging; antipodeans cautious ahead of policy announcements
• Core debt benchmarks back under pressure ahead of afternoon events
• WTI & Brent maintain modest gains while metals are hampered by the risk tone and USD
• Looking ahead, highlights include US PMI (Final), US ISM Manufacturing. Speeches from Fed’s Powell & Williams.

EUROPEAN TRADE

EQUITIES

• European bourses & US futures are a touch softer after starting the session with mild gains, though action overall is contained and tentative after a limited APAC handover ahead of data & Fed speak.
• Currently, Euro Stoxx 50 -0.3% with sectors mainly in the red and following suit to the above broader macro tone, but action the breadth of action is relatively modest.
• Stateside, futures are tilting into the red after faring marginally better than their European peers in the early part of the session; newsflow has been limited and focused on weekend fiscal developments ahead of Fed's Powell and ISM metrics; ES +0.1%.
• EU antitrust regulators say there is no formal investigation into AI chips
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FX

• DXY bid on dips within 106.040-490 range as Yen lags and offsets Franc outperformance, USD/JPY remains elevated after probing 149.80 as BoJ retains ultra-easy stance and Japanese officials stick to mere verbal intervention
• USD/CHF retreats from 0.9166 towards 0.9100 after better than forecast Swiss manufacturing PMI and not as weak as previous retail sales.
• Aussie and Kiwi cautious ahead of RBA and RBNZ policy meetings as AUD/USD probes 0.6400 from 0.6445 and NZD/USD touches 0.5975 from just over 0.6000.
• Euro, Pound and Loonie all lose ground vs Greenback within 1.0591-36, 1.2220-1.2162 and 1.3557-1.3612 respective ranges.
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FIXED INCOME

• Bonds back in the firing line following a short squeeze into the end of September and Q3.
• Bunds hit buffers at 128.50 before testing psychological support at 128.00, Gilts retreat from 93.71 to 93.22 and T-note drifts back from 107-29+ to 107-19 awaiting US final manufacturing PMI, ISM and Construction Spending before Fed speakers including Chair Powell.
• Orders for the new BTP Valore 5yr hit EUR 1bln, via Reuters citing Bourse data.
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COMMODITIES

• WTI Nov and Brent Dec futures maintain modest gains but remain off best and worst levels within a tight consolidative range after the contracts settled lower by just under USD 1/bbl apiece on Friday.
• Spot gold remains shy of the USD 1850/oz mark though the recent modest deterioration in the risk tone has provided some slight assistance, while spot silver is the standout laggard with downside in excess of 2.5% intraday.
• Base metals are hampered by the USD, overall risk tone and the absence of Chinese participants for the regions week long holiday. Additionally, the mixed Chinese PMIs failed to provide any lasting support.
• Turkey's Energy Minister says within the week they will recommence operating the Iraq-Turkey pipeline; subsequently, Iraq says the Kirkuk-Ceyhan oil pipeline cannot restart yet as there issues still need to be resolved on pipeline, according to an Iraqi official cited by Bloomberg
• India is not comfortable with current oil prices, according to the Indian Petroleum Secretary; OPEC has the right to cut output but it's led to high prices.
• Iraq’s September oil exports averaged 3.4mln bpd and oil prices averaged USD 92.05/bbl.
• Five more cargo ships were reportedly headed towards Ukrainian Black Sea ports for further grain exports, according to Ukraine’s Deputy PM.
• UAE Energy Minister says they have decided to speed up the upstream expansion plan to reach 5mln/bpd by 2027 in order to counter for loss of supply from other producers; separately, says production capacity more than 4.2mln BPD and on track to produce 5mln BPD by 2027
• Morgan Stanley believes the oil market will be 1mln BPD undersupplied in Q4, according to CNBC.
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EUROPEAN DATA RECAP

• UK Nationwide House Price YY (Sep 2023) -5.3% vs. Exp. -5.7% (Prev. -5.3%); MM 0.0% vs. Exp. -0.4% (Prev. -0.8%)
• UK S&P Global/CIPS Manufacturing PMI Final (Sep) 44.3 vs. Exp. 44.2 (Prev. 44.2)
• EU HCOB Manufacturing Final PMI (Sep) 43.4 vs. Exp. 43.4 (Prev. 43.4); "With the exception of the great recession in 2008/2009, output prices have never decreased at a pace faster than the current three-month average, and it’s similar with input prices, which fell almost as fast as when oil prices hit rock bottom in the late-90s and during the bursting of the dot-com bubble in 2001."
• EU Unemployment Rate (Aug 2023) 6.4% vs. Exp. 6.4% (Prev. 6.4%, Rev. 6.5%)

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak said the government is making good progress on bringing down inflation, according to Reuters.
• UK Chancellor Hunt was reportedly caught in a secret recording suggesting that PM Sunak will call a general election once inflation falls below 3% which gives the strongest hint that the next general election could be held in Autumn next year, according to Sunday Times’ Wheeler.
• UK Housing Minister Gove said his opinion is wherever they can cut taxes that those cuts should fall on workers and he would like to see the tax burden reduced before the next election, while he added that they first need to be certain that inflation is coming down.
• England's water companies are to pledge to invest GBP 90bln in water and sewerage networks in plans which would increase household bills, especially in the southeast, according to Sunday Times.
• ECB's de Guindos dismissed talk of rate cuts and warned that getting back to 2% inflation will be difficult with the last mile of disinflation the hardest, according to FT.
• Slovakia’s former PM Fico’s leftist-populist Smer party won the election with 23.4% of votes, while the party is seen as pro-Russian after promising to stop sending weapons to Ukraine, according to Politico.
• Fitch raised Portugal’s sovereign rating from BBB+ to A-; Outlook Stable, while Moody’s raised Cyprus’s sovereign rating to investment grade of Baa2; Outlook Revised to Stable from Positive.
• Riksbank Minutes: prices are increasing at a rate that is not compatible with the inflation target; members emphasised the risks associated with the continued high underlying inflation and the weak krona; policy rate may need to be increased further. Click here for more detail.

NOTABLE US HEADLINES

• US House and Senate passed a short-term spending bill to keep the government funded, while President Biden signed the 45-day stop-gap funding measure into law which averts a government shutdown and funds the government until November 17th although does not include Ukraine funding.
• US President Biden said it is time to stop governing by crisis and he is sick and tired of brinkmanship, while he expects Republicans to honour the deal they made in May and urges them to not waste time on funding the government. Furthermore, he hopes Republicans will maintain support for Ukraine and said his message to Ukraine on future aid is that they are going to get it done, according to Reuters.
• US GOP Rep. Gaetz will file a motion to remove House Speaker McCarthy, while it was later reported that House Speaker McCarthy said he will not be ousted, according to Reuters citing CNN and CBS.
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GEOPOLITICS

• UK Defence Secretary Shapps said UK troops will be deployed in Ukraine for the first time to start training Ukrainian soldiers on-site and not only at NATO bases under plans being discussed with military chiefs. Shapps also stated the UK signed contracts worth GBP 4bln to drive forward AUKUS submarines with the contracts signed with BAE Systems (BA/ LN), while the UK is deploying RAF typhoons to Poland and deploying forces to the UN peacekeeping mission in Kosovo, according to Reuters.
• US Central Command conducted a helicopter raid in Northern Syria on September 28th and captured ISIS facilitator Mamduh Ibrahim Al-Haji Shaykh, according to Reuters.
• Turkey’s Interior Minister said two terrorists attacked in front of the ministry building in which one was neutralised and the other blew himself, while Turkey stated that one of the attackers was a PKK member and Turkey later carried out air strikes in Northern Iraq and destroyed 20 targets of Kurdish militant group PKK, according to Reuters.
• Turkish President Erdogan said will continue the struggle against inflation, terror and the outlawed group FETO, while he also commented that Turkey has kept every promise to the EU although the EU did not, and Turkey does not have any expectations from the EU.

CRYPTO

• Bitcoin is firmer on the session continuing the marked gains seen at the commencement of APAC trade despite a lack of specifics. Action which has lifted BTC to a circa. USD 28.5k high, surpassing levels from the last few weeks with the next mark around USD 29k from mid-August.

APAC TRADE

• APAC stocks traded mixed in severely holiday-quietened conditions amid the mass closures in the region, while participants digested the key weekend developments including the US averting a government shutdown and mixed Chinese PMI data.
• ASX 200 was lacklustre with many domestic participants absent in observance of Labour Day in Australia’s most populous state of New South Wales and ahead of tomorrow’s RBA meeting which is the first under Governor Bullock’s tenure.
• Nikkei 225 opened above 32,000 with the index boosted by a weaker currency and an encouraging Tankan survey which showed Large Manufacturers’ Sentiment at its highest since June last year and the Non-Manufacturing at its highest in over three decades, although the index later pared most of the gains and eventually slipped back beneath the aforementioned key level.
• Hang Seng and Shanghai Comp. were shut alongside closures in South Korea and India, with mainland China away the entire week for the National Day Golden Week celebrations.

NOTABLE ASIA-PAC HEADLINES

• German Finance Minister Lindner said at the third German-Chinese financial dialogue in Frankfurt which was attended by Chinese Vice Premier He Lifeng that Germany and China are keen to further strengthen their cooperation on financial and economic issues, while he added that both sides want to create a fair and non-discriminatory market environment and strengthen the security of global supply chains. Lindner also pledged that Germany will continue supporting a Chinese state-backed development bank despite Canada's decision to freeze ties, according to AA and Politico.
• BoJ Summary of Opinions from the September meeting noted a member stated they need to continue easing patiently and a member said they should maintain easy policy for now but in future exit, must consider what to do with non-JGB asset holdings. Furthermore, there was an opinion that there is no need to make additional YCC tweaks as long-term rates are moving fairly stably and it was also stated that they cannot currently determine the timing of the policy tweak as that would depend on economic and price conditions at the time, while a member said it is important to prepare for exit from a risk management perspective as they could have clarity around January-March next year on whether the 2% inflation target can be met in a sustained and stable fashion.
• BoJ Governor Ueda said the sustainable and stable achievement of the BoJ’s 2% inflation target is not yet in sight and there is still some distance before reaching an exit from easy policy. Ueda stated that the BoJ’s ability to conduct monetary policy is not impaired by a temporary decrease in profits and capital as long as it conducts appropriate monetary policy, while he added that given the current distance to exit, he believes it is the right time to discuss the topic of central bank finances and monetary policy conduct from an objective perspective.
• Japan reportedly put the brakes on the lucrative used-car trade with Russia which is valued at nearly USD 2bln annually, according to Reuters.

DATA RECAP

• Chinese NBS Manufacturing PMI (Sep) 50.2 vs. Exp. 50.0 (Prev. 49.7); Non-Manufacturing PMI (Sep) 51.7 vs Exp. 51.5 (Prev. 51.0)
• Chinese NBS Composite PMI (Sep) 52.0 (Prev. 51.3)
• Chinese Caixin Manufacturing PMI (Sep) 50.6 vs Exp. 51.2 (Prev. 51.0); Services PMI (Sep) 50.2 vs Exp. 52.0 (Prev. 51.8)
• Chinese Caixin Composite PMI (Sep) 50.9 (Prev. 51.7)
• Japanese Tankan Large Manufacturing Index (Q3) 9 vs. Exp. 6 (Prev. 5); Outlook (Q3) 10 vs. Exp. 5 (Prev. 9)
• Japanese Tankan Large Non-Manufacturing Index (Q3) 27 vs. Exp. 24 (Prev. 23); Outlook (Q3) 21 vs. Exp. 22 (Prev. 20)
• Japanese Tankan Large All Industry Capex (Q3) 13.6% vs. Exp. 13.6% (Prev. 13.4%)