• APAC stocks were mostly rangebound with participants lacking conviction heading into the crucial Fed policy decision.
• European equity futures are indicative of a softer cash open with the Euro Stoxx 50 future -0.2% after the cash market closed higher by 0.7% on Tuesday.
• DXY is lingering below the 101 mark, JPY is the clear outperformer across the majors with FX otherwise contained.
• Market pricing assigns a 65% chance of a 50bps Fed cut and a 35% possibility of a 25bps move, according to Refinitiv.
• Looking ahead, highlights include UK CPI, EZ HICP (Final), US Building Permits, FOMC Policy Announcement & Press Conference, BCB Policy Announcement, BoC Minutes, Supply from UK & Germany

SNAPSHOT

US TRADE

EQUITIES

• US stocks were indecisive and the major indices mostly finished flat on the eve of the FOMC although the small-cap Russell 2000 outperformed and the dollar strengthened as participants digested a slew of data releases including better-than-expected US Retail Sales and Industrial Production, while all attention now turns to the pivotal Fed meeting.
• SPX +0.03% at 5,635, NDX +0.05% at 19,432, DJIA -0.04% at 41,606, RUT +0.74% at 2,205.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Former Atlanta Fed President Lockhart said he sees a normal 25bps rate cut by the Fed but wouldn't be surprised by 50bps.
• Atlanta Fed GDPnow (Q3) 3.0% (prev. 2.5%)

APAC TRADE

EQUITIES

• APAC stocks were mostly rangebound with participants lacking conviction heading into the crucial Fed policy decision.
• ASX 200 was contained amid light macro newsflow and a quiet overnight calendar heading into this week's central bank updates.
• Nikkei 225 initially rallied on currency weakness but then reversed course and briefly wiped out its gains after mixed data and as the JPY nursed some of its losses.
• Some BoJ policymakers are reportedly worried that they may not be able to increase interest rates much further as a stronger JPY would result in cheaper imports, slow inflation and impact corporate earnings, via WSJ citing sources.
• Shanghai Comp initially struggled for direction on return from the holiday closures before retreating below the 2,700 level. Hong Kong participants were absent from the market, while the weak activity data from over the weekend had little impact and the PBoC delayed its MLF operations once again.
• US equity futures (ES U/C) treaded water with the Fed's first expected rate cut in four years on the horizon and with views split on the magnitude of the move.
• European equity futures are indicative of a softer cash open with the Euro Stoxx 50 future -0.2% after the cash market closed higher by 0.7% on Tuesday.

FX

• DXY took a breather after gaining yesterday on the back of stronger-than-expected Industrial Production and Retail Sales data, while the focus remains on the highly anticipated looming Fed rate cut, accompanying statement, SEPs and Powell's press conference.
• EUR/USD was rangebound amid light overnight catalysts and after recent ECB commentary provided very little to shift the dial.
• GBP/USD traded little changed after sliding beneath the 1.3200 handle with participants also awaiting UK inflation data.
• USD/JPY faded some of the advances from its recent outperformance and reverted to a sub-142.00 status.
• Antipodeans eked marginal gains amid a firmer CNY-reference rate setting but with upside capped by the cautious mood and soft New Zealand current account data.
• PBoC set USD/CNY mid-point at 7.0870 vs exp. 7.0828 (prev. 7.1030).
• BoC Deputy Governor Rogers said that the Bank wishes to see more progress on core inflation measures, adding that "there is still work to do", according to Bloomberg.

FIXED INCOME

• 10yr UST futures remained contained after retreating yesterday on better-than-expected US data, while all focus turns to the FOMC.
• Bund futures lacked demand after recently sliding back beneath the 135.00 level and ahead of today's 30yr Bund supply.
• 10yr JGB futures gradually edged after several data releases including mixed Machinery Orders and mostly disappointing trade data.

COMMODITIES

• Crude futures mildly pulled back after being driven higher yesterday by geopolitical tensions following the pager explosions targeting Hezbollah, while the latest private sector inventory data showed a surprise build in headline crude and larger-than-expected builds in other components of the release.
• US Private Energy Inventories (bbls): Crude +2.0mln (exp. -0.5mln), Distillate +2.3mln (exp. +0.6mln), Gasoline +2.3mln (exp. +0.2mln), Cushing -1.4mln.
• US is to seek 6mln bbls of oil for emergency reserve, taking advantage of relatively low prices, according to Reuters sources.
• BSEE reported that 6% of oil production and 10% of natural gas production is shut in the US Gulf of Mexico post-Francine.
• Venezuela's largest oil refinery has reportedly been paralyzed since September 12th due to a power failure.
• Spot gold traded rangebound with participants unwilling to commit ahead of the pivotal Fed policy announcement.
• Copper futures were subdued and failed to benefit from a return to the market of its largest buyer amid cautiousness ahead of the Fed decision.

CRYPTO

• Bitcoin marginally gained following a rebound from support around the USD 60,000 level.

NOTABLE ASIA-PAC HEADLINES

• PBoC said it will conduct a Medium-term Lending Facility loan rollover on September 25th.
• China asked Germany to push the EU to reach a solution over EV tariff, during a meeting of China’s Commerce Minister with Germany's Economic Affairs Minister. China’s Commerce Minister also warned the imposition of tariffs will seriously interfere with trade and investment cooperation, as well as cause damage to the interests of both sides.
• US is urging Vietnam to avoid Chinese cable-laying firm HMN Technologies and other Chinese companies in its plans to build new undersea cables, while Washington shared intelligence with Hanoi about possible cable sabotage

DATA RECAP

• Japanese Machinery Orders MM (Jul) -0.1% vs. Exp. 0.5% (Prev. 2.1%)
• Japanese Machinery Orders YY (Jul) 8.7% vs. Exp. 4.2% (Prev. -1.7%)
• Japanese Trade Balance Total (JPY)(Aug) -695.3B vs. Exp. -1380.0B (Prev. -621.8B, Rev. -628.7B)
• Japanese Exports YY (Aug) 5.6% vs. Exp. 10.0% (Prev. 10.3%, Rev. 10.2%)
• Japanese Imports YY (Aug) 2.3% vs. Exp. 13.4% (Prev. 16.6%)

GEOPOLITICS

MIDDLE EAST

• At least 2,750 were injured and 9 died in the pager detonation incident across Lebanon, while the Lebanese Information Minister said the government condemned the pagers detonation as '"Israeli aggression". Furthermore, Hezbollah promised to retaliate after blaming Israel for detonating pagers on Tuesday and Hezbollah Chief Nasrallah was reportedly not harmed in the pager blasts, according to a Senior Hezbollah source cited by Reuters.
• Israel didn't inform the Biden administration ahead of its intelligence operation that included exploding thousands of Hezbollah members' pager devices, according to Axios citing sources. Israeli officials said they are aware that a major escalation on the northern border is possible after the attack and said Israel Defense Forces are on high alert for a possible response by Hezbollah, while the operation was approved earlier this week during security meetings with Israeli PM Netanyahu and senior members of his cabinet and the heads of the security services.
• Israel’s Mossad reportedly put a quantity of high-explosive PETN on the battery of devices and it was detonated by raising the temperature of the battery, according to Sky News Arabia citing special sources.
• Israeli press cited sources that warned Hezbollah will pay a heavy price if it chooses escalation, according to Al Jazeera. It was also reported that senior Israeli military officials are preparing for a third Hezbollah War which is expected to begin almost immediately, according to Israel's Channel 14. Furthermore, the security and military weight will shift from the Gaza Strip to the northern front, according to Al Jazeera citing Israel's Channel 14.
• Hamas said blasts are an escalation that will only lead Israel to "failure and defeat".
• US officials cited by NYT stated that Hezbollah's communication devices are Taiwanese and were hacked before they reached Lebanon, while they added that Israel hid explosives inside a batch of Taiwanese pagers imported into Lebanon.
• Taiwan's Gold Apollo founder said the pagers in the Lebanon explosions were not made by the company and had their brand but production had been outsourced and were made by a company in Europe. Gold Apollo later stated that a company called BAC made the pagers used in the Lebanon blasts.
• Jordanian armed forces thwarted an attempt by a drone to cross Jordanian territory, according to the state news agency.

OTHER

• Russia's Tver regional governor ordered a partial evacuation of Toropets town after a Ukrainian drone attack sparked a fire.
• North Korea fired suspected ballistic missiles which fell shortly after and appeared to have landed outside of Japan's Exclusive Economic Zone.
• Taiwan's Defence Ministry said a Chinese aircraft carrier group sailed through waters to the northeast of Taiwan on Wednesday and then sailed to the southeast of Japan's Yonaguni island, while NHK reported that a Chinese navy aircraft carrier temporarily entered Japan's contiguous waters in a first such entry.

EU/UK

NOTABLE HEADLINES

• ECB's Villeroy said the French goal to cut the deficit to 3% of GDP by 2027 is not realistic and most of the effort should come from reducing spending, but targeted tax hikes are needed too.
• Irish Central Bank lowered its 2024 HICP forecast to 1.6% from 1.7% and 2025 HICP forecast to 1.9% from 2.0%, while it cut its 2024 GDP forecast to -0.9% from 1.9% and raised 2025 GDP forecast to 4.6% from 4.4%. Furthermore, it stated that economic growth risks are tilted to the downside and risks to the inflation outlook are broadly balanced.
• The Times' BoE Shadow MPC said the Bank should leave rates unchanged whilst increasing the rate at which it reduces its balance sheet from GBP 100bln per year to GBP 120bln.