• European bourses & US futures modestly lower into a session of data & Fed speak, awaiting updates on the increasingly likely US gov't shutdown.
• DXY extending on recent pressure, EUR and GBP both firmer, JPY bid for a 3rd consecutive session, AUD bolstered by a hawkish-hold.
• Fixed benchmarks hit highs on cooler French HICP but have since trimmed with EGBs in the red after hotter German State CPIs, mainland due shortly
• Crude continues to falter, XAU hit another ATH but has since come under pressure.
• Looking ahead, highlights include US Consumer Confidence, JOLTS Job Openings. Speakers include RBA’s Bullock, ECB’s Cipollone, Elderson, Fed’s Goolsbee, BoE’s Lombardelli, Mann, Breeden. Earnings from Nike, Lamb Weston.
• Click for the Newsquawk Week Ahead.

TRADE/TARIFFS

• The White House said US President Trump signed a proclamation adjusting imports of timber, lumber, and related derivatives into the US, imposing a 10% tariff on softwood, timber and lumber imports effective 14 October. It added that Trump intends to cap tariff rates for EU and Japanese wood products at 15%, according to Reuters.
• The White House confirmed new 25% tariffs on vanities and kitchen cabinets will take effect on 14 October, with imports of certain upholstered wooden products also subject to a 25% tariff. It announced tariffs on imported cabinets will rise from 25% to 50%, while tariffs on upholstered furniture will increase from 25% to 30% effective 1st January, unless trade agreements are reached beforehand, according to Reuters.
• South Korea’s Top Security Adviser Wi said it is challenging to strike a currency swap deal with the US, according to Reuters.
• EU Trade Commissioner Sefcovic says the EU and US are "very soon going to propose the post 2026 safeguard measures" on steel, working with tariff-rate quotas, to deal with "global overcapacity".

EUROPEAN TRADE

EQUITIES

• European bourses lower across the board, Euro Stoxx 50 -0.3%; broader market narrative is dictated by the looming US government shutdown.
• Sectors are mostly lower after a mixed start to the session, just Financial Services & Media remain in the green. Energy hit by ongoing crude softness. Gambling names impacted by late-night comments from Chancellor Reeves. Mining sector underpinned by initial XAU strength.
• Stateside, futures a touch softer in tandem with the above European performance; ES -0.2%, NQ -0.2%. Fresh catalysts light as we count down to data, Fed speak and the midnight ET shutdown.
• Equity specifics include Tesla's TeslaAI Weibo account announced that they are working to aggressively scale the humanoid AI programme, intend to introduce 3rd gen by end-2025 and start mass production in 2026. CEO Musk forecasts an annual production rate of 1mln units before 2030.
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FX

• DXY is extending on the modest downside seen since last Friday and scaling back some of last week's data-induced upside. Focus firmly on data, Fed speak and the increasingly likely government shutdown, a shutdown that will impact Friday's BLS report. DXY briefly slipped below yesterday's low @ 97.77 with the next downside target coming via the September 25th trough @ 97.37.
• EUR fractionally firmer against the USD, peaked just above 1.750 thus far. Modest move on the hotter-than-expected German state CPIs, no reaction to the cooler harmonised French measures. As we count down to the mainland German series, we also await several ECB speakers. Thus far, EUR/USD has ventured as high as 1.1761, taking out yesterday's best @ 1.1754.
• JPY firmer vs USD for the 3rd consecutive session. USD/JPY below the 148.37 200-DMA and looking to the 50-DMA at 147.77. Modest strength on the latest BoJ SOO, as while the document was mixed the undertones were hawkish and signal the BoJ is moving closer to further tightening.
• Sterling firmer against the USD, relatively contained vs the EUR. UK drivers light as we await the speech from PM Starmer at the Labour conference, though he is unlikely to add anything new on the fiscal side of things vs Reeves on Monday. Cable is eyeing yesterday's peak @ 1.3457. If breached, the 50DMA kicks in @ 1.3465.
• Antipodeans outperform, initially gaining on a firmer Yuan fixing. Thereafter, extended as the RBA left rates unchanged in a unanimous decision but with the tone hawkish. AUD/USD has made its way back onto a 0.66 handle with a current session peak @ 0.6613. The next target comes via last week's high @ 0.6628.
• PBoC set USD/CNY mid-point at 7.1055 vs exp. 7.1166 (Prev. 7.1089)
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FIXED INCOME

• Benchmarks contained overall into a session dominated by US data, with JOLTS and the labour metrics within consumer confidence likely to draw even greater attention than usual owing to the real possibility that Friday's BLS report is delayed. Thus far, USTs to a 112-22 peak and looking to 112-31+. However, the strength was knocked in the mid-European morning by a move lower in EGBs on German state CPIs.
• Bunds initially bid, got to a 128.79 peak with gains of c. 20 ticks. A high that occurred after slightly cooler than expected French preliminary inflation data, following Spain on Monday. However, this was shortlived as Germany’s state CPIs saw a larger increase from the prior than consensus for the mainland implies and sent Bunds from the mentioned peak to a 128.54 trough, lower by six ticks at worst.
• Gilts opened on the front foot, got as high as 91.01 with gains of 12 ticks before succumbing to the pullback seen in fixed generally after the German state CPIs. Currently, Gilts reside below opening levels but near enough unchanged vs Monday’s close.
• Japan sold JPY 2.7tln in 2-year JGBs; b/c 2.81x (prev. 2.84x); average yield 0.949% (prev. 0.863%); Lowest cover ratio since September 2009.
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COMMODITIES

• Crude benchmarks continue to sell off following yesterday's substantial move lower. At worst, benchmarks hit lows of USD 62.45/bbl and USD 66.10/bbl in WTI and Brent respectively.
• Newsflow for the space light, as such the move is likely a continuation of the bearishness from Monday which was driven by reports of an increased global oil supply from OPEC+ and the reopening of the Ceyhan pipeline.
• Initially, spot gold extended on yesterday’s gains to a new ATH at USD 3871/oz. However, the precious metal has since lost its allure and has found itself under increasing pressure. Down to a USD 3793/oz low. No clear fundamental driver behind the gold pullback this morning, instead it seems to be a function of some profit taking in XAU with a view that the recent move may be a little stretched.
• Base metals remain muted throughout the European session, with 3M LME Copper trading in a tight c. USD 100/t range. Copper got to just shy of yesterday’s high, peaking at USD 10.44k/t before falling to a low of USD 10.35k/t and oscillating within these bounds during the European morning.
• China bans all BHP (BHP LN) iron ore cargoes as pricing dispute continues, according to Bloomberg citing sources.
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NOTABLE DATA RECAP

• UK GDP QQ (Q2) 0.3% vs. Exp. 0.3% (Prev. 0.3%); YY (Q2) 1.4% vs. Exp. 1.2% (Prev. 1.2%)
• German Retail Sales YY Real (Aug) 1.8% vs. Exp. 1.8% (Prev. 1.9%); MM Real (Aug) -0.2% vs. Exp. 0.6% (Prev. -1.5%)
• German Import Prices MM (Aug) -0.5% vs. Exp. -0.2% (Prev. -0.4%); YY (Aug) -1.5% vs. Exp. -1.4% (Prev. -1.4%)
• French CPI (EU Norm) Prelim YY (Sep) 1.1% vs. Exp. 1.3%; MM (Sep) -1.1% vs. Exp. -0.90% (Prev. 0.50%)
• Swiss KOF Indicator (Sep) 98.0 vs. Exp. 97.0 (Prev. 97.4, Rev. 96.2)
• German Unemployment Chg SA (Sep) 14.0k vs. Exp. 8.0k (Prev. -7.0k); Rate SA (Sep) 6.3% vs. Exp. 6.3% (Prev. 6.3%)
• German Bavaria State CPI YY (Sep) 2.4% (Prev. 2.1%); MM (Sep) 0.4% (Prev. 0.1%). Overall, the skew from the state CPIs is hotter than the mainland consensus implies, as such a hawkish reaction was seen.
• Italian CPI (EU Norm) Prelim YY (Sep) 1.8% vs. Exp. 1.7% (Prev. 1.6%); MM 1.3% vs. Exp. 1.1% (Prev. -0.2%)
• Italian Consumer Price Prelim YY * (Sep) 1.6% vs. Exp. 1.7% (Prev. 1.6%); MM -0.2% vs. Exp. -0.1% (Prev. 0.1%)

NOTABLE EUROPEAN HEADLINES

• Italy is set to forecast its 2025 budget deficit at or below 3% of GDP, in line with EU rules, according to Reuters, citing sources.
• Annual UK shop price inflation rose to 1.4% in September, up from 0.9% in August, according to the latest monthly report from the British Retail Consortium (BRC) and analysts NIQ, via the Guardian.
• ECB's Vice President Guindos says the current level of interest rate is adequate and further decisions will be made meeting by meeting.
• SNB's Schlegel says inflation is expected to rise slightly in the coming quarters. Indicators point to a stable situation and moderate growth. Uncertainty remains high. Pharmaceutical tariffs have raised the downside risk, "a bit".

NOTABLE US HEADLINES

• US Senate Minority Leader Schumer said he met with President Trump, noting “we have large differences” and adding that the decision to avoid a government shutdown lies with Republicans. Democratic Leader Jefferies said Democrats will not support a partisan Republican bill that hurts healthcare, according to Reuters.
• US Vice President Vance said he had frank talks with Democratic leadership, adding “you don’t shut government over disagreements,” but said “I think we’re headed to a shutdown because the Democrats won’t do the right thing.”, according to Reuters.
• Punchbowl’s Sherman said that from listening to Schumer, Jeffries, and Vance, it does not sound like there was a breakthrough in the meeting, adding that a shutdown is around the corner, via Punchbowl.
• US House Speaker Johnson said they want to allow more time for negotiations, according to Reuters.
• Major airlines warned that a potential government shutdown could strain US aviation and cause flight delays, according to a statement.
• US Senate Minority Leader Schumer said he would not accept a 7–10 day stopgap bill, according to Reuters.

GEOPOLITICS

• Several sources suggested that there is no certainty that Hamas will accept the deal, according to i24 correspondent Stein. He added that the fact that Arab countries, including Qatar, are supporting it strengthens the chances of acceptance.
• Russian President Putin said Russia’s military operation in Ukraine is a righteous battle and asserted that Russia will prevail, according to Reuters.

APAC TRADE

• APAC stocks traded flat/mixed following a mostly but modestly firmer handover from Wall Street, with focus on the looming US government shutdown and the possibility of delayed NFP data as a result. Meanwhile, the White House announcement of further tariff details overnight capped upside in sentiment.
• ASX 200 gave up initial mild gains to trade flat as strength across gold miners just about offset hefty losses in energy and a subdued performance in financials, with little move seen in the index after the RBA policy announcement, in which the central bank left rates unchanged as expected in a unanimous decision but struck a hawkish tone, noting inflation risks and that the decline in underlying inflation has slowed.
• Nikkei 225 narrowly underperformed at the start and briefly fell back under the 45,000 mark with losses led by energy names, while some hawkish undertones from the BoJ Summary of Opinions likely weighed, with some members arguing it may be time to consider another adjustment after more than six months since the last hike, while others cautioned against surprising markets or moving prematurely given uncertainty around the US outlook.
• Hang Seng and Shanghai Comp varied, the former gave up earlier upside and the latter held onto mild gains with newsflow light ahead of the weeklong break, whilst Chinese PMIs showed manufacturing beat expectations, but services declined from the prior month in both the NBS and RatingDog (formerly Caixin) releases. Furthermore, China’s Securities Journal suggested experts believe the PBoC may flexibly use a variety of monetary policy tools in the future to maintain ample liquidity.
• KOSPI was subdued with US-South Korean trade talks seemingly at a standstill, with the South Korean national security adviser suggesting it is tough to strike an FX swap deal with the US.

NOTABLE ASIA-PAC HEADLINES

• RBA maintained its Cash Rate at 3.60%, as expected, in a unanimous decision, noting that the decline in underlying inflation has slowed. It said recent data suggest September quarter inflation may be higher than expected in August, though both headline and trimmed mean inflation were within the 2–3% range in Q2. The Bank added that inflation has fallen substantially since the 2022 peak as higher rates have helped bring demand and supply closer to balance. RBA noted that financial conditions have eased since the beginning of the year, and this seems to be having some impact, but it will take some time to see the full effects of earlier cash rate reductions.
• RBA Governor Bullock says Board sees risks as broadly balanced; labour market remains solid, still a little tight; economy is in a good spot; need to be a little cautious on inflation; Policy is a little bit restrictive, not expansionary. Could be a couple more rate cuts, could not be. Not giving forward guidance, will have more data in November. Impact of past easing still to come.
• BoJ Summary of Opinions noted one member suggested it may be time to consider raising the policy interest rate again, while another said the BoJ gains more information on the US outlook by waiting, and one argued the Bank should maintain accommodative conditions at this point. On the economy, members said US tariffs will still impact Japan even after being reduced to 15%, with growth likely to moderate temporarily. On prices, CPI is expected to rise below 2% in fiscal 2026 as cost-push pressures ease, warranting continued accommodative policy. Some members argued that, given it has been more than six months since the last hike, the Bank should consider raising rates again at regular intervals if activity and prices remain in line with projections. Others noted that constraints from overseas factors have abated, allowing the Bank to return to a stance of raising rates and aligning real interest rates with overseas levels. However, members also stressed that the impact of prior hikes to 0.5% has been limited, and while risks to prices are skewed to the upside, the BoJ should avoid moving rates immediately to restrictive levels, instead gradually shifting closer to neutral to prevent shocks from rapid future hikes.
• Experts believe that to maintain ample liquidity, the PBoC may flexibly use a variety of monetary policy tools in the future, according to China’s Securities Journal.

DATA RECAP

• Chinese NBS Manufacturing PMI (Sep) 49.8 vs. Exp. 49.6 (Prev. 49.4); Services PMI (Sep) 50.0 (Prev. 50.3)
• Chinese NBS Composite PMI (Sep) 50.6 (Prev. 50.5)
• Chinese RatingDog Manufacturing PMI Final (Sep) 51.2 vs. Exp. 50.3 (Prev. 50.5); Services PMI (Sep) 52.9 (Prev. 53.0)
• Chinese RatingDog Composite PMI (Sep) 52.5 (Prev. 51.9)
• Japanese Retail Sales YY (Aug) -1.1% vs. Exp. 1.0% (Prev. 0.3%, Rev. 0.4%)
• Japanese Industrial O/P Prelim MM SA (Aug) -1.2% vs. Exp. -0.8% (Prev. -1.2%)
• Japanese IP Forecast 2 Month Ahead (Oct) 1.2% (Prev. -0.3%); 1 Month Ahead (Sep) 4.1% (Prev. 2.8%)
• South Korean Industrial Output YY (Aug) 0.9% vs. Exp. 1.3% (Prev. 5.0%, Rev. 5.0%)
• South Korean Service Sector Output Gr (Aug) -0.7% (Prev. 0.2%, Rev. 0.2%)
• South Korean Industrial Output Growth (Aug) 2.4% vs. Exp. 0.4% (Prev. 0.3%, Rev. 0.3%)
• New Zealand ANZ Business Outlook (Sep) 49.6% (Prev. 49.7%); Own Activity (Sep) 43.4% (Prev. 38.7%)
• Australian Private Sector Credit (Aug) 0.6% (Prev. 0.7%)
• Australian Private House Approvals (Aug) -2.6% (Prev. 1.1%)
• Australian Housing Credit (Aug) 0.6% (Prev. 0.5%)
• Australian Building Approvals (Aug) -6.0% vs. Exp. 3.0% (Prev. -8.2%, Rev. -10.0%)