• European equities are mixed/modestly firmer, a theme which is also seen across US futures
• Dollar is firmer, benefiting from losses in the EUR after particularly poor French/German PMI metrics, AUD bid ahead of the RBA on Tuesday
• USTs remain steady ahead of its own PMI release, Bunds were lifted after poor EZ PMIs & Gilts gained after UK PMIs missed across the board, but still point towards a “soft landing” for the UK economy
• Crude is incrementally firmer, XAU and base metals are lower across the board
• Looking ahead, US PMIs (Flash), Comments from ECB’s Cipollone, Fed’s Bostic, Kashkari & Goolsbee

EUROPEAN TRADE

EQUITIES

• European bourses, Stoxx 600 (+0.3%) began the session on a tentative footing, trading on either side of the unchanged mark. Indices then took a dip lower ahead of the French PMI metrics, in-fitting with a broader risk-off mood; a move which has since stabilised, with indices now generally sitting in positive territory. Today’s slew of PMI metrics had little impact on the complex.
• European sectors hold a slight positive bias vs opening mixed, though the breadth of the market remains thin; Utilities takes the top spot alongside Telecoms. Banks lag given the takeover related weakness in Commerzbank (-3.6%). Consumer Products is also towards the foot of the pile, after several companies within the sector received downgrades at Bank of America.
• US Equity Futures (ES +0.1% NQ +0.1% RTY +0.1%) are flat/very modestly firmer, taking impetus from a tentative session seen in Europe thus far. Today’s US-specific data docket remains light, with focus only on the US PMI release; there are a few Fed speakers today, including Goolsbee, Kashkari and Bostic.
• "Speculation mounts over potential discontinuation of Nvidia's (NVDA) H20 chip as US export review approaches", according to Digitimes
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FX

• DXY is boosted by the post-PMI softness in the EUR. DXY has moved back onto a 101 handle and eclipsed last Friday's high at 101.01. The next target comes via the 19th September high at 101.47, which could be tested following the US PMI metrics.
• EUR is the clear laggard across the majors after a raft of EZ-wide PMI data underscored the region's soft growth outlook as the boost from the French Olympics proved to be short-lived. EUR/USD had been as high as 1.1167 overnight but has since slipped onto a 1.10 handle.
• GBP is lower vs. the USD but firmer vs. the EUR given the EZ's awful PMI metrics. Cable was already on the backfoot in the run up to UK PMI metrics with USD boosted by the soft EUR. UK PMI data showed misses across the board but failed to add to Cable's downside.
• JPY was initially softer vs. the USD and what looked to be an extension of Friday's price action, but JPY has been able to claw back some gains vs. the USD. USD/JPY had been as high as 144.45, stopping just shy of Friday's 144.49 peak.
• AUD has trimmed its opening gains vs. the USD but is just about holding above the 0.68 mark. NZD/USD is currently contained within Friday's 0.6210-60 range.
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FIXED INCOME

• USTs are little changed overall but toward 114-26+ highs given the bullish-bias from the morning’s European data points (discussed below). US PMIs are on the docket today, with a few Fed speakers dotted across the day, including Bostic, Goolsbee and Kashkari.
• A session of gains for EGBs, bolstered by a particularly poor set of Flash PMIs from France & Germany, with the nowcast for the latter pointing to a “0.2% decrease compared to the quarter before”. French number lifted Bunds to a 134.64 peak, before taking another leg higher following the German and EZ-wide figures to a session peak of 134.82; currently, Bunds sit around 134.55 and German yields are lower across the curve but with the short-end under more pressure than the long end.
• OATs are also firmer, with the bulk of action driven by aforementioned data points. Additionally, there is renewed focus on the French political backdrop into the fast approaching constitutional deadline to put forward a budget on October 1st.
• Gilts are propped up by the region's own PMI release, which dropped from the prior by more than expected but remain indicative of a soft landing for the UK with services. The data took Gilts to a fleeting 100.00 peak, with resistance above at 100.09 from Friday and thereafter 100.39 from Thursday.
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COMMODITIES

• A choppy session for the crude complex this morning as the APAC geopolitical gains in the complex were wiped out amid risk aversion in European hours - not helped by the slew of dismal flash PMI data from the region, with the metrics overall endorsing the dovish bias. Brent'Nov in a USD 74.18-75.13/bbl parameter.
• Lower trade across precious metals but spot gold is slightly more cushioned than its peers, with spot silver and spot palladium posting losses of over 2% as the Dollar strengthened. Spot gold resides in a USD 2,613.89-2,631.41/oz range.
• Base metals are lower across the board as a function of the stronger Dollar and risk aversion, with little solace felt from the PBoC's unscheduled 14-day reverse repo rate cut, although this was not much of a surprise. 3M LME copper has fallen back under USD 9,500/t.
• Chinese Government to revamp tax rebates for fuel oil imports, with change likely effective from October, via Reuters citing sources; would raise import costs for independent refiners and curb fuel oil imports
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NOTABLE DATA RECAP

• German HCOB Composite Flash PMI (Sep) 47.2 vs. Exp. 48.2 (Prev. 48.4); "GDP nowcast for the current quarter, which considers the HCOB PMI among other indicators, now points to a 0.2% decrease compared to the quarter before. In the second quarter GDP already shrank at a rate of 0.1%".
• German HCOB Manufacturing Flash PMI (Sep) 40.3 vs. Exp. 42.3 (Prev. 42.4); Services 50.6 vs. Exp. 51.0 (Prev. 51.2)
• French HCOB Composite Flash PMI (Sep) 47.4 vs. Exp. 50.6 (Prev. 53.1); "HCOB Nowcast predicts near stagnation in the French economy for the third quarter, compared to the previous one" & "September survey data signalled a marked easing of cost pressures, with input prices rising at the softest pace in close to four years."
• French HCOB Manufacturing Flash PMI (Sep) 44.0 vs. Exp. 44.3 (Prev. 43.9); Services 48.3 vs. Exp. 52.5 (Prev. 55)
• EU HCOB Composite Flash PMI (Sep) 48.9 vs. Exp. 50.5 (Prev. 51); "With the ECB closely watching the persistently high inflation in services, the news that both input and output price inflation has slowed down is certainly welcome."
• EU HCOB Manufacturing Flash PMI (Sep) 44.8 vs. Exp. 45.5 (Prev. 45.8); Services Flash PMI (Sep) 50.5 vs. Exp. 52.3 (Prev. 52.9)
• UK Flash Composite PMI (Sep) 52.9 vs. Exp. 53.5 (Prev. 53.8); "The data therefore hint at a ‘soft landing’ for the UK economy"
• UK Flash Manufacturing PMI (Sep) 51.5 vs. Exp. 52.5 (Prev. 52.5); Services PMI (Sep) 52.8 vs. Exp. 53.5 (Prev. 53.7)

NOTABLE EUROPEAN HEADLINES

• French PM Barnier did not rule out a tax hike for the rich and is open to changes in pension reform with input from employers and unions, while he said they must protect France’s credibility with investors and the government will take pragmatic measures to limit immigration.
• French President’s Chief of Staff said Antoine Armand was named as Finance Minister and Jean-Noel Barrot was named as Foreign Minister, while Bruno Retailleau was named as Interior Minister.
• German Chancellor Scholz’s SPD narrowly beat the far-right AfD in elections in the eastern state of Brandenburg as exit polls showed the SPD at 31%-32% vs AfD at 29%-30%, according to BBC.
• Fitch affirmed Portugal at A- and revised the outlook to Positive.
• ECB's Kazaks says services inflation is a concern, as is slow growth; direction for rates is downward.
• Spain's Economy Minister says the Gov't is lifting its 2024 GDP forecast to 2.7% (prev. 2.4%)

NOTABLE US HEADLINES

• US VP Harris is expected to release new economic proposals this week with the proposals aimed at middle-class wealth-building and the economic incentives for business to facilitate that, according to Reuters sources. It was also reported that Harris accepted a CNN debate invitation and challenged former President Trump to a debate although Trump rejected the offer and said it was 'too late' for another debate.
• US House Republicans unveil three-month stopgap bill to avert a government shutdown which would fund the government through December 20th and omits changes to voter registration that Trump had called for.

GEOPOLITICS

MIDDLE EAST

• "Renewed Israeli raids on southern Lebanon", according to Sky News Arabia
• Israeli PM Netanyahu said that they inflicted a series of blows on Hezbollah in the past few days that it never imagined.
• Israel Defence Forces said during the weekend that it struck Hezbollah targets in Lebanon after over 100 rockets were fired towards northern Israel by the military group, while it added that strikes would continue and intensify against Hezbollah, according to Reuters. It was separately reported that IDF announced on Monday that it conducted widespread strikes on Hezbollah targets in Lebanon.
• Israel’s Defence Minister said Hezbollah is beginning to feel some of Israel’s military capabilities and Israel will continue its operations against the group until northern Israel residents can return home safely, according to Reuters.
• Israel’s military chief said operations against Hezbollah are a message to anyone in the Middle East looking to harm Israeli citizens, while he added that Hezbollah will keep getting hit until it understands that Israel will return its citizens to their homes safely. Furthermore, he said Israel is well-prepared for the next stages planned in the coming days, according to Reuters.
• IDF spokesman said they have monitored preparations by Hezbollah to launch attacks on Israel and Hezbollah has turned southern Lebanon into a confrontation arena, while the spokesman added that they will hit Hezbollah hard and will work to reduce its power and keep it away from the border. Furthermore, Israeli media stated that warplanes attacked deep into Lebanon 120 km from the border, as well as noted that Hezbollah is preparing to carry out intensive attacks in the coming hours, while the IDF spokesman responded that the army will do whatever it takes to restore security to northern Israel when asked about the possibility of a ground incursion into Lebanon.
• Hezbollah said it targeted Ramat David Airbase with dozens of missiles in response to repeated Israeli attacks on Lebanon, according to a statement. Hezbollah also stated its top commander Ahmed Wahbi was killed during Israel’s strike on Beirut suburbs.
• Hezbollah’s Deputy Leader said the confrontation with Israel entered a new phase of an open-ended battle of reckoning.
• Islamic Resistance in Iraq launched cruise missiles and explosive drones towards Israel’s north and south, while it said it targeted with drones a military post in northern Israel on Sunday morning and launched a drone attack on a target in Jordan Valley in ‘occupied territories’.
• Iran’s Supreme leader Khamenei said Israel is committing “shameless crimes” against children, not combatants, while he called for inner strength among Muslims to eliminate the ‘malignant cancerous tumour’ from Palestine.
• Iran’s Revolutionary Guards said they arrested 12 operatives collaborating with Israel and planning actions against Iran’s security, according to SNN.
• US directly warned Israel against a full-blown war with Hezbollah, according to the FT. It was separately reported that the UN special coordinator in Lebanon said with the region on the brink of imminent catastrophe, it cannot be overstated enough that there is no military solution that will make either side safer, according to Reuters.
• Qatari Al Jazeera TV said Israeli forces stormed its bureau in West Bank’s Ramallah with a military order to close it for 45 days.
• A bomb explosion killed a police officer in the security details of foreign ambassadors in northwest Pakistan, while all foreign diplomats were safe and were reported to travel back to the capital of Islamabad.

OTHER

• Ukrainian President Zelensky thanked the military for a new attack on Russian arsenal and said the end of the war against Russia depends on the decisiveness of Ukraine’s partners, as well as noted that Ukraine’s defences would be better if its partners provided the needed weapons and permission to use them.
• Russian Defence Ministry said Russia hit Ukrainian energy facilities with high-precision weapons and drones, according to agencies.
• Russian Foreign Ministry said Moscow will take no part in the follow-up to the Swiss-organised peace summit.
• US official said Quad leaders expressed concern about the Russian-North Korean relationship, as well as about the South China Sea and maritime disputes.

CRYPTO

• Bitcoin edges higher and climbs above USD 63.5k, with Ethereum also gaining and holding above USD 2.6k.

APAC TRADE

• APAC stocks were mostly positive albeit with gains capped amid a lack of fresh macro drivers and as weekend newsflow was dominated by geopolitical-related headlines, while Japanese participants were away for the Autumnal Equinox holiday.
• ASX 200 was led lower by the consumer-related sectors and with sentiment also not helped by a deterioration in the latest flash PMIs.
• Hang Seng and Shanghai Comp gained after the PBoC cut the 14-day reverse repo rate ahead of next week's National Day holiday although this was not much of a surprise given that it was the first such operation since the PBoC's short-term funding rate cuts in July, while automakers were mixed after reports the Biden administration is to propose barring Chinese software and hardware in connected vehicles.

NOTABLE ASIA-PAC HEADLINES

• PBoC injected CNY 160.1bln via 7-day reverse repos with the rate maintained at 1.70% and injected CNY 74.5bln via 14-day reverse repos with the rate lowered by 10bps to 1.85% from 1.95%, which follows the cuts to other funding rates in July.
• PBoC Governor Pan says will continue to maintain an accommodative monetary policy stance and enhance precision of monetary policy adjustments.
• US President Biden said his view is that Chinese President Xi is looking to buy diplomatic space to aggressively pursue China’s interests and is trying to minimise turbulence in diplomatic relations. Biden said that China continues to behave aggressively in the South China Sea and Taiwan Straits, while he noted the US sees engagement with China as important for conflict prevention and crisis management, according to Reuters.
• US President Biden’s administration is to propose barring Chinese software and hardware in connected vehicles on US roads with the Commerce Department expected to propose making prohibitions on software effective in the 2027 model year and prohibitions on hardware would be in January 2029, according to Reuters sources.
• US President Biden and Japanese PM Kishida reaffirmed a commitment to developing and protecting technologies like AI and semiconductors while increasing resilience to economic coercion, while they also discussed diplomacy with China and destabilising activities including in the South China Sea during a meeting on Saturday.

DATA RECAP

• Australian Judo Bank Manufacturing PMI Flash (Sep) 46.7 (Prev. 48.5); Services PMI Flash (Sep) 50.6 (Prev. 52.5)
• Australian Judo Bank Composite PMI Flash (Sep) 49.8 (Prev. 51.7)
• New Zealand Trade Balance (Aug) -2203.0M (Prev. -963.0M, Rev. -1016M); Annual Trade Balance (Aug) -9.29B (Prev. -9.29B, Rev. -9.35B)
• New Zealand Exports (Aug) 4.97B (Prev. 6.15B, Rev. 6.09B); Imports (Aug) 7.17B (Prev. 7.11B, Rev. 7.10B)