• APAC stocks traded mostly lower after global markets faded last Friday's post-Powell dovish reaction.
• US President Trump threatened to impose substantial additional tariffs on countries that do not remove discriminatory actions such as digital taxes.
• US President Trump posted a letter removing Fed's Cook from her position with immediate effect; Cook says she will not resign.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.5% after the cash market closed with gains of 0.8% on Monday.
• FX markets are contained, EUR/USD is supported by the 1.16 mark, USD/JPY sits on a 147 handle.
• Looking ahead, highlights include US Durable Goods (Jul), Consumer Confidence (Aug), Atlanta Fed GDP, Riksbank Minutes, NBH Announcement, E3/Iran Nuclear talks, Fed Discount Rate Minutes, Fed’s Barkin & BoE’s Mann, Supply from Italy and the US.

SNAPSHOT

US TRADE

EQUITIES

• US stocks declined and all indices closed in the red with underperformance in the small-cap Russell 2000 index after rallying on Friday as markets largely unwound the recent post-dovish Powell moves, while sectors were predominantly lower, particularly defensives such as Consumer Staples, Health Care and Utilities, although Communication, Tech and Energy outperformed. There was little fresh fundamental news behind the reversal, but it is worth noting that even after Powell's dovish speech at Jackson Hole, money markets are still not fully pricing in a 25bps cut in September with a current implied probability of around 80% for such a move, while there is still key data to digest between now and the September meeting, particularly the US NFP report next week, as well as July PCE on August 29th and August CPI data on September 11th.
• SPX -0.42% at 6,439, NDX -0.31% at 23,426, DJI -0.77% at 45,283, RUT -1.05% at 2,337.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump threatened on Truth Social to impose substantial additional tariffs on countries that do not remove discriminatory actions such as digital taxes, legislation, and rules against US tech companies, while he also threatened export restrictions on tech and chips.
• US President Trump said he does not mind renegotiating the South Korea deal but added that it doesn't mean they will get anything, while he also stated that they will have serious discussions and are thinking about contracting some ships from South Korea. Furthermore, Trump later said regarding the South Korea meeting that he thinks they have a deal done.
• South Korean President Lee's office said Lee and US President Trump talked about shipbuilding and that Trump stressed his support for Lee, while it added that the mood from the meeting was good enough that a written joint statement was unnecessary and the meeting was an opportunity for the leaders to get close to each other, rather than discussing the specifics on trade.
• South Korean adviser Wi said details on trade talks still need to be determined and progress has been made on modernising the alliance, while Wi added that Trump and Lee had meaningful talks about nuclear energy.
• US President Trump said Chinese President Xi wants him to come to China, and he is going to allow Chinese students to come in, while he added that China has to give the US magnets and if they do not, the US will charge them 200% tariffs or something. Trump said at some point, he will visit China and maybe he will go to China with South Korean President Lee.
• Chinese top trade negotiator Li Chenggang is set to head to the US as talks resume and will meet with US Trade Representative Greer and senior Treasury Department officials later this week, according to WSJ. It was later reported that a US government spokesperson said Washington welcomes Chinese efforts to reduce its persistent and massive trade surplus with the US.
• US President Trump’s administration reportedly weighs visa sanctions for EU and EU member state officials over the bloc's digital services act, according to Reuters citing sources.
• Canadian and US officials are to meet after Canada removes some tariffs, according to Bloomberg News.
• Brazil's Foreign Minister Vieira said Canada and the South American bloc Mercosur are to resume negotiations for a free trade agreement, while he added a joint decision was made to resume the negotiations and there will be an important meeting in October regarding Canada-Mercosur talks.

NOTABLE HEADLINES

• US President Trump posted on Truth Social a letter removing Fed's Cook from her position with immediate effect.
• Fed's Cook (voter) said no cause exists for her to be fired and she will not resign, while she added that President Trump has no authority to fire her and she will continue to carry out her duties. It was also reported that Bloomberg Intelligence noted that Fed's Cook was likely to challenge the firing and could win reinstatement, while it added that mere allegations of fraud are not enough to meet the cause for removal standard.
• Fed's Logan (2026 voter) said the US has more room to reduce reserves, and as the reserve levels drop, it is preferable for the Fed to seek to meet lower long-run bank demand for reserves rather than the higher short-run demand. Logan said responding to banks' increased short-run demand for reserves is a recipe for an ever-expanding central bank balance sheet and she repeated that the Fed balance sheet should hold primarily treasuries in the long run. Logan also commented that the Fed should explore ways to avoid over-emphasising the median view relative to diversity of views at the Fed, while she added there are also ways to improve Fed communications on the balance sheet and should continue to look to see if it is optimal to continue communicating a range for the Fed Funds Rate target.
• US President Trump said on US stakes in companies, that he wants to get as much as he can and hopes to have many more cases like Intel (INTC), while he added there will be other cases.

APAC TRADE

EQUITIES

• APAC stocks traded mostly lower after global markets faded last Friday's post-Powell dovish reaction, while Trump also moved to fire Fed Governor Cook and threatened to impose substantial additional tariffs on countries that do not remove digital taxes and regulations against US tech companies.
• ASX 200 retreated amid a continued deluge of earnings releases including from the likes of Coles and Fortescue.
• Nikkei 225 underperformed with notable weakness seen in power names including TEPCO, and with Nissan pressured as Mercedes-Benz is to offload its 3.8% stake in the Japanese automaker, while participants also digested Services PPI data and Japan's top tariff negotiator is set to travel to the US as early as this week.
• Hang Seng and Shanghai Comp pared early losses and returned to flat territory with some resilience seen after another firm liquidity operation by the PBoC, while it was also reported that China's top trade negotiator Li Chenggang is set to head to the US and will meet with US Trade Representative Greer and senior officials at the Department of the Treasury later this week.
• US equity futures (ES -0.1%, NQ -0.1%) lacked demand amid Fed independence concerns and after Trump's latest tariff warning, while participants also await earnings from NVIDIA on Wednesday.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.5% after the cash market closed with gains of 0.8% on Monday.

FX

• DXY marginally softened overnight after spending most of the prior day in recovery mode to claw back the majority of the losses seen in the aftermath of Fed Chair Powell's dovish Jackson Hole comments. Nonetheless, the latest pressure in the dollar was spurred by US President Trump who posted a letter removing Fed Governor Cook in a move which puts him on course for a majority on the Fed board, although Cook was defiant in which she declared she will not resign and that President Trump has no authority to fire her, while Bloomberg Intelligence noted that mere allegations are not enough to meet the cause for removal standard.
• EUR/USD rebounded off yesterday's lows after support held at the 1.1600 level but with the recovery limited after US President Trump threatened to impose substantial additional tariffs on countries that do not remove discriminatory actions such as digital taxes, legislation and regulations against US tech companies, while the single currency is also not helped by political uncertainty in France where the government is at risk of collapsing after the PM called for a confidence vote.
• GBP/USD attempted to nurse some losses after retreating yesterday in quietened conditions owing to the UK Bank Holiday.
• USD/JPY was choppy with an early dip seen amid the risk-off mood and as the dollar was pressured after US President Trump moved to oust Fed's Cook.
• Antipodeans marginally weakened amid a quiet calendar and with headwinds from the subdued risk appetite.
• PBoC set USD/CNY mid-point at 7.1188 vs exp. 7.1670 (Prev. 7.1161)

FIXED INCOME

• 10yr UST futures remained subdued after partially unwinding some of last Friday's post-Powell dovish moves, while there was a brief upside seen after President Trump posted a letter addressed to Fed Governor Cook informing of her removal from the Fed board with immediate effect. Nonetheless, the knee-jerk reaction to Trump's attempt to oust Cook, which would put Trump on course for a majority on the Fed board, was only brief with Cook defiant and refusing to quit, while participants await incoming supply from the US and the key data releases later in the week.
• Bund futures took a breather above the 129.00 handle after the prior day's intraday recovery and with a EUR 4bln Bund issuance scheduled tomorrow.
• 10yr JGB futures were choppy following softer Services PPI data from Japan and an enhanced liquidity auction for long to super-long JGBs.

COMMODITIES

• Crude futures mildly retreated in a slight pullback following the previous day's geopolitically driven advances.
• Russia's Energy Ministry and oil companies are working on additional introduction of reserve capacities for refining growth, according to Interfax.
• Pakistan will reportedly ask Qatar to defer LNG for years on weak demand, according to Bloomberg.
• Canada's Alberta province in talks to invest in Japan's refining sector and Alberta could help fund the coker unit to enable Japan to process more Canadian heavy crude, according to Reuters sources.
• Spot gold recouped early losses and more, as the dollar softened following President Trump's move to fire Fed's Cook.
• Copper futures were rangebound with demand constrained amid the mostly risk-off mood for global markets.
• Chile's mining regulator added requirements to restart sectors of Codelco's El Teniente copper mine affected by the collapse.

CRYPTO

• Bitcoin saw two-way trade and gradually returned to flat territory after rebounding from support around the USD 109k level.

NOTABLE ASIA-PAC HEADLINES

• RBA Minutes from the August meeting stated the board saw a strong case for a 25bps cut in the Cash Rate and judged some further reduction in the Cash Rate is likely needed over the coming year, while the stance of policy was still judged somewhat restrictive and it noted the pace of rate cuts would be determined by incoming data and the balance of global risks. RBA Minutes also stated that the board saw arguments for both a gradual pace of easing and for a faster pace, as well as noted the labour market was still a little tight, inflation remained above the midpoint, and domestic demand was recovering. Furthermore, it said uncertainty about spare capacity and the neutral rate also argued for gradual easing, but faster easing might be needed if the labour market was already in balance, risking inflation undershooting the midpoint.
• Japan will invest USD 68bln in India over 10 years including in AI and chips, while India and Japan's PMs intend to revise their countries' joint declaration on security cooperation for the first time in 17 years, according to Nikkei.

DATA RECAP

• Japanese Services PPI (Jul) 2.90% (Prev. 3.20%)

GEOPOLITICS

MIDDLE EAST

• US President Trump said Gaza has to be settled soon, while he thinks they will have a good and conclusive ending within the next 2-3 weeks.
• Australian PM Albanese said the Iranian government directed at least two antisemitic attacks in Australia and the Iranian ambassador will be expelled, while he added that operations at Australia’s embassy in Tehran have been suspended and Australian diplomats are now safe in a third country. Furthermore, the government will legislate to list Iran’s Islamic Revolutionary Guard Corps as a terrorist organisation.

RUSSIA-UKRAINE

• Ukrainian President Zelensky said he had a good meeting with US Envoy Kellogg and that Ukraine values US readiness to be part of Ukraine's security architecture, while he discussed with Kellogg how to exert pressure on Russia to hold "real talks" to end the war and said military cooperation is important with the US, particularly on purchases of weapons and accord on drones. It was separately reported that US and Ukrainian officials are expected to meet later this week.
• US President Trump said regarding talks with Russian President Putin that they are also talking about nuclear missiles and stated "we" would like to denuclearise, while he added that Putin is reluctant to meet Ukrainian President Zelensky because he does not like him. Furthermore, Trump later commented that he discussed denuclearisation with Putin, and thinks that Russia and China would be willing to do it.
• US President Trump said Russian President Putin and Ukrainian President Zelensky should meet, while Trump said he may be there for the Putin-Zelensky meeting or may not and there could be consequences if they do not meet, but we will see what happens over a week or two and at that point, he will step in.

OTHER

• US President Trump thinks they can do something on North and South Korea and he looks forward to meeting with North Korean leader Kim, while South Korean President Lee said Trump is the only person who can solve the North Korean issue and that he would like to meet Kim this year.
• South Korean President Lee said he agreed to work closely with US President Trump for peace in the Korean peninsula and noted that North Korea keeps developing its weapons programme as a result of sanctions. Furthermore, Lee said problems cannot be solved solely by pressuring North Korea and that North Korea reached a stage with capabilities of making 10-20 nuclear weapons per year, while it was separately reported that South Korean President Lee invited US President Trump to APEC to pursue a meeting with North Korean leader Kim, according to Newsis.
• North Korea's military said US-South Korea drills prove a US intention to occupy the Korean peninsula, according to KCNA.

EU/UK

NOTABLE HEADLINES

• UK think tank Resolution Foundation's analysis highlighted a rapid weakening of the jobs market and warned the UK unemployment rate could hit 5% in the three months to August which would be the highest level since the start of 2021, according to FT.

DATA RECAP

• UK BRC Shop Price Index YY (Aug) 0.9% vs Exp. 0.9% (Prev. 0.7%)