• APAC stocks traded mixed amid the backdrop of several holiday closures and ongoing geopolitical tensions, while Hong Kong participants booked profits.
• Fed's Barkin (2024 voter) said he sees two 25bps cuts this year as "a reasonable path" if the economy evolves as expected.
• BoE Governor Bailey said the bank could be a "bit more aggressive" in cutting rates provided the news that inflation continues to be good, in an interview with The Guardian.
• Israeli security cabinet decided to implement a harsh response to the Iranian attack and the response to Iran will be cruel but it will not lead to a regional war.
• European equity futures are indicative of a negative cash open with the Euro Stoxx 50 future -0.5% after the cash market closed higher by 0.2% on Wednesday.
• Looking ahead, highlights include EZ/UK/US Services/Composite PMIs (Final), Swiss CPI, EZ Producer Prices, US Challenger Layoffs, IJC, Durable Goods (R), Factory Orders, ISM Services PMI, BoE Decision Maker Panel (Sept), Speakers include Fed’s Bostic & Schmid, Supply from Spain, France & US, Earnings from Constellation Brands & Tesco.

SNAPSHOT

• Click for the Newsquawk Week Ahead.

US TRADE

EQUITIES

• US stocks were ultimately flat with only marginal gains seen in the major indices and slight outperformance in the Nasdaq after tech was supported by the upside in NVDA which rebounded from the prior day's losses and was helped by positive commentary from JPM.
• The energy sector was the biggest gainer on the account of higher crude prices as geopolitical tensions remained high with participants eyeing the Israeli response to Iran, although most sectors finished in the red, while the Dollar was bid and Treasuries were pressured following stronger-than-expected ADP jobs data.
• SPX +0.01% at 5,710, NDX +0.15% at 19,803, DJIA +0.09% at 41,197, RUT -0.09% at 2,195
• Click here for a detailed summary.

NOTABLE HEADLINES

• Fed's Barkin (2024 voter) said a 50bp cut in September was warranted because rates were out of sync with the decline in inflation and the unemployment rate near its sustainable level. Barkin said the Fed cannot declare the inflation battle is over and expects a little further drop in core PCE until next year, as well as noted that 50bps of cuts shown as the median Fed policy projection for the rest of 2024 would also take a little bit of the edge off rates. Furthermore, Barkin commented that the "last mile" of inflation may still take longer than expected and is worried price pressures could get "stuck" next year, while he sees two 25bps cuts this year as "a reasonable path" if the economy evolves as expected.

APAC TRADE

EQUITIES

• APAC stocks traded mixed amid the backdrop of several holiday closures and ongoing geopolitical tensions, while Hong Kong participants booked profits.
• ASX 200 lacked direction alongside varied data releases including downward PMI revisions and mixed trade figures.
• Nikkei 225 outperformed on the back of a weaker currency after yesterday's dovish-leaning remarks from Japanese PM Ishiba who said they are not in an environment for an additional rate hike following a meeting with BoJ Governor Ueda, while Ueda said the BoJ will adjust the degree of monetary easing if the outlook is realised, but will take careful steps to determine that as it takes time.
• Hang Seng suffered heavy losses amid profit taking and in a possible sign that the China stimulus euphoria has finally worn out.
• US equity futures were lacklustre after the prior day's choppy performance and as several key data releases loom.
• European equity futures are indicative of a negative cash open with the Euro Stoxx 50 future -0.5% after the cash market closed higher by 0.2% on Wednesday.

FX

• DXY held on to the prior day's gains after benefitting from strong ADP jobs data which topped the forecast range, although trade was quiet overnight and participants now await upcoming Fed speakers and data releases including more jobs-related metrics ahead of Friday's NFP report.
• EUR/USD languished near this week's trough after giving way to the firmer dollar and was unresponsive to a slew of ECB rhetoric.
• GBP/USD was uninspired for most of the session before seeing late weakness on comments from BoE Governor Bailey who noted the central bank could be a "bit more aggressive" in cutting rates provided the news that inflation continues to be good, in an interview with The Guardian.
• USD/JPY extended on gains and briefly climbed above the 147.00 level owing to the recent dovish comments from Japanese PM Ishiba who suggested Japan was not ready for an additional rate hike after meeting with BoJ Governor Ueda.
• Antipodeans marginally softened overnight amid the mixed risk appetite in the region and varied data releases.

FIXED INCOME

• 10yr UST futures remained lacklustre after yesterday's decline which was triggered by the stronger-than-expected ADP Jobs data, while the attention for the US turns to more releases including ISM Non-Manufacturing, Factory Orders, Initial Jobless Claims and Challenger Job Cuts.
• Bund futures were restrained following recent selling pressure but with downside stemmed by support near the 135.00 level.
• 10yr JGB futures traded on both sides of the 145.00 level and partially clawed back early losses after mixed results from the 10yr JGB auction.

COMMODITIES

• Crude futures were higher in which WTI rebounded from support at the USD 70/bbl level after recent two-way price action owing to the heightened geopolitical tensions in the Middle East and bearish crude inventory data.
• OPEC refuted a recent WSJ report about Saudi Arabia saying oil may drop to USD 50/bbl if OPEC+ flouts output curbs, in which it stated that the story's claims are "wholly inaccurate and misleading".
• Spot gold struggled for direction after the prior day's choppy performance and with the upside restricted by a firmer dollar.
• Copper futures were subdued and faded some of the recent advances amid the mixed risk appetite.

CRYPTO

• Bitcoin steadily gained overnight after an early reclaim of the USD 61,000 level.

NOTABLE ASIA-PAC HEADLINES

• BoJ Board Member Noguchi said they must patiently maintain loose monetary conditions and it will take a considerable time for the public to shift to a mindset where inflation can sustainably hit 2%, while he believes the consumption uptrend is likely to become clearer and noted the cost pressure from wage hikes is gradually being reflected in service price rises. Furthermore, he said the BoJ will likely gradually adjust the degree of monetary support while cautiously examining whether inflation stably hits 2%, accompanied by wage gains, as well as noted that the BoJ can spend time and move cautiously, in reducing its balance sheet.

DATA RECAP

• Australian Trade Balance (AUD)(Aug) 5.6B vs. Exp. 5.5B (Prev. 6.0B)
• Australian Goods/Services Exports MM (Aug) -0.2% (Prev. 0.7%)
• Australian Goods/Services Imports MM (Aug) -0.2% (Prev. -0.8%)
• Australian Judo Bank Services PMI Final (Sep) 50.5 (Prev. 50.6)
• Australian Judo Bank Composite PMI Final (Sep) 49.6 (Prev. 49.8)

GEOPOLITICS

MIDDLE EAST

• Israel conducted raids on 3 sites in the neighbourhoods of Mouawad, Al-Amrikan and Zaghloul in Beirut. It was also reported that an Israeli strike hit central Beirut, while a building targeted by the Israeli raid in Bachoura reportedly housed the office of Beirut's Hezbollah deputy Amin Sherri.
• Israeli army called on residents of several buildings in Haret Hreik, Burj al-Barajneh and Hadath West in the southern suburbs of Beirut to evacuate and a Sky News Arabia correspondent reported a new series of Israeli raids targeting the suburbs of Beirut.
• Israeli Home Front announced sirens sounded in several areas of the Golan and that sirens sounded in Shlomi in the western Galilee in northern Israel. Furthermore, Israeli media reported that 4 marches launched from Yemen exploded at a low altitude in the airspace of Tel Aviv, according to Asharq News.
• Clashes were reported between Hezbollah and Israeli soldiers on the outskirts of Aitaroun, southern Lebanon, according to an Al-Arabiya correspondent.
• Israeli security cabinet decided to implement a harsh response to the Iranian attack and the response to Iran will be cruel but it will not lead to a regional war. It was also reported that a senior Israeli official said Israel is going to respond independently to the Iranian attack and wants to coordinate its plans with the US because of the strategic implications of the situation, according to Axios' Ravid. However, it was separately reported that Tel Aviv has not yet made a decision on how to respond to Iran's attack and does not currently plan to strike Iranian nuclear facilities, according to Israeli officials cited by NYT.
• Israeli press cited an official who stated that the response to Iran may include more than one option and not necessarily through airstrikes. The official added it is not certain that Washington will agree with them but it knows that they have to respond, while they should not go too far in our response although it will be much stronger than the response to the April attack.
• Israeli official cited by Yedioth Ahronoth said there are no limits to the response to Iran, according to Al Arabiya.
• Iran’s President vowed a stronger response if Israel retaliates.
• Iran's UN Envoy told the Security Council that Israel is pushing the region to the edge of an unprecedented catastrophe.
• Iran announced that airports in the western half of the country, including Tehran and Mehrabad, are closed until Thursday except for emergency and certain other flights, according to aviation security specialist Osprey Flight Solutions via WSJ. It was later reported that a spokesperson for Iran's Civil Aviation Organization said that airlines will be permitted to resume flight operations starting at 05:00 AM on Thursday (02:30BST/21:30EDT).
• US President Biden said there are going to be some sanctions imposed on Iran and that he does not support an attack on Iran's nuclear sites.
• US Deputy Secretary of State Kurt Campbell said it is not just Israel that is thinking about response options to the Iran attack and that the US is too.
• Israel reportedly conducted a strike on a residential building in Syria's Damascus resulting in injuries, according to state TV. It was also reported that Nasrallah's son-in-law Hassan Jaafar Qasir was killed in the Israeli raid on Mezzeh neighbourhood in Damascus, according to Sky News Arabia. It was also later reported that Israeli military targeted sites in western Syria coastal cities.
• Syrian and Russian air defences reportedly dealt with hostile targets over the sea in the west of the country, according to Al Jazeera.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said the bank could be a "bit more aggressive" in cutting rates provided the news that inflation continues to be good, in an interview with The Guardian.
• UK PM Starmer conceded during his first visit to Brussels that his "reset" with the EU won't be easy, according to AFP.
• ECB's Centeno said inflation has converged closely to the ECB's target and Euro-area inflation has been well anchored.
• ECB's de Guindos said the fight against inflation "is not totally over" and need to watch services inflation, while he added that services could be the main barrier to lower inflation and all options are open for the October rate decision.
• ECB's Schnabel said the ECB cannot ignore headwinds to growth, but at the same time, monetary policy cannot resolve structural issues, while she added that a return to the 2% target in a timely manner is becoming more likely.
• ECB's Vasle said they cannot exclude or commit to a rate cut in October and there will be more cuts but will depend on the data, while he added that inflation's downward trend is sustainable and will continue.