- APAC stocks traded mostly in the red following the subdued handover from Wall Street where sentiment was clouded by the higher yield environment.
- European equity futures are indicative of a lower open with Euro Stoxx 50 future -0.4% after the cash market closed down 0.3% yesterday.
- DXY has held on to a bulk of yesterday’s gains, USD/JPY remains on a 147 handle, EUR/USD languishes firmly below 1.08.
- Japanese top currency diplomat Kanda warned that officials won’t rule out any options in response to FX moves.
- Looking ahead, highlights include German Industrial Orders, EZ, German, French, Italian, UK Construction PMI, US ISM Services, NBP & BoC Policy Announcements, Fed’s Collins & Logan, BoE’s Bailey, Cunliffe & Dhingra, Riksbank’s Thedeen, Supply from UK & Germany.
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US TRADE
EQUITIES
- US stocks finished mostly lower after the recent weak PMI data releases from Asia and Europe, while equity markets faced headwinds from the rising yield environment as bonds were sold on return from the Labor Day holiday amid large corporate supply and with higher oil prices following Saudi and Russia’s output cut extensions.
- SPX -0.42% at 4,497, NDX +0.11% at 15,508, DJI -0.56% at 34,642, RUT -2.10% at 1,880.
- Click here for a detailed summary.
NOTABLE HEADLINES
- US Senate voted 83-10 in cloture vote to limit the debate and advance Fed Vice Chair nominee Jefferson toward confirmation, according to Reuters.
APAC TRADE
EQUITIES
- APAC stocks traded mostly in the red following the subdued handover from Wall Street where sentiment was clouded by the higher yield environment, a stronger dollar and rising oil prices.
- ASX 200 was dragged lower by tech and with most sectors pressured aside from energy which benefitted from the higher oil prices, while better-than-expected GDP data for Australia failed to inspire a turnaround.
- Nikkei 225 bucked the trend after it reclaimed the 33,000 status and with tailwinds from a weaker currency.
- Hang Seng and Shanghai Comp suffered from tech weakness but losses were stemmed as developers surged on hopes of further support measures and with Sunac up by over 60% after its return to the Stock Connect.
- US equity futures remained subdued and marginally extended beneath yesterday’s lows.
- European equity futures are indicative of a lower open with Euro Stoxx 50 future -0.4% after the cash market closed down 0.3% yesterday.
FX
- DXY held on to the prior day’s gains after strengthening on return from the Labor Day weekend amid a higher yield environment and after the rise in oil prices contributed to the hawkish impulse.
- EUR/USD languished firmly below 1.0800 after its recent slump and disappointing PMI data.
- GBP/USD was contained with a slight reprieve after having retreated beneath the 1.2600 handle.
- USD/JPY slightly eased from a YTD high after the latest bout of JPY depreciation spurred renewed jawboning in which top currency diplomat Kanda warned they won’t rule out any options in response to FX moves.
- Antipodeans were choppy with early pressure from the mostly risk-averse mood and a weaker yuan, while stronger-than-expected GDP from Australia had little effect as the data showed a slowdown in growth and a negative deflator.
- PBoC set USD/CNY mid-point at 7.1969 vs exp. 7.3097 (prev. 7.1783)
- China’s major state-owned banks were seen withdrawing yuan liquidity in the offshore FX market and were seen selling dollars in the onshore spot FX market, according to sources cited by Reuters.
FIXED INCOME
- 10yr UST futures saw mild reprieve from recent selling pressure albeit with the recovery limited amid this week’s slew of corporate issuances and with headwinds from the recent gains in oil prices.
- Bund futures were stuck near yesterday’s worst levels ahead of today’s German 10yr auction.
- 10yr JGB futures clawed back opening losses although the upside was capped after mixed comments from BoJ Board Member Takata who was somewhat hawkish on inflation but believes the BoJ must patiently maintain easy policy given a very high uncertainty on the outlook.
COMMODITIES
- Crude futures traded sideways and took a breather after yesterday’s advances which lifted Brent crude above USD 90/bbl for the first time this year owing to Saudi Arabia and Russia’s extension of output cuts to year-end.
- DoE said the US added 2.9mln bbls of oil to the SPR in August which was the largest monthly increase in the stockpile in more than three years.
- US Congress is set to sell off a 1mln bbl emergency reserve of gasoline which was created in the aftermath of Hurricane Sandy amid questions about the reserve’s usefulness, according to Bloomberg.
- Spot gold languished at yesterday’s lows as the greenback held on to its recent gains.
- Copper futures traded lower amid the mostly negative risk sentiment in Asian bourses.
CRYPTO
- Bitcoin was uneventful with trade confined to within a tight range beneath the USD 26,000 level.
- Coinbase (COIN) is launching a digital asset lending program for its institutional prime clients.
NOTABLE ASIA-PAC HEADLINES
- Chinese diplomat Liu said the US and China are major trading partners and that China opposes decoupling.
- US Commerce Secretary Raimondo said she does not expect any changes to Trump-era tariffs on China until the ongoing USTR review is completed, according to a CNBC interview.
- BoJ Board Member Takata said Japan’s economy is recovering moderately and Japan is seeing early signs of achieving 2% inflation, while he added that there is a sign of change in Japan’s trend inflation as rising wages push up inflation expectations. However, he believes the BoJ must patiently maintain easy policy given very high uncertainty on the outlook and noted that inflation is already exceeding the BoJ’s 2% target but there is some distance to achieving it stably and in a sustainable fashion.
DATA RECAP
- Australian Real GDP QQ (Q2) 0.4% vs. Exp. 0.3% (Prev. 0.2%)
- Australian Real GDP YY (Q2) 2.1% vs. Exp. 1.8% (Prev. 2.3%)
GEOPOLITICS
- US President Biden will call for durable peace based on territorial sovereignty at the G20 meeting, according to the White House. Furthermore, it stated that nothing has been scheduled between President Biden and China’s Xi, while there is also no bilateral meeting scheduled between President Biden and Saudi Arabia’s Crown Prince.
- India’s Foreign Minister said he doesn’t think the absence of Russian President Putin and Chinese President Xi from G20 has anything to do with India. Furthermore, he stated that G20 countries are negotiating to arrive at a consensus and have a declaration but added that there is a very sharp North-South divide and a sharper East-West polarisation.
- US Secretary of State Blinken spoke with Israeli PM Netanyahu on Tuesday and discussed countering threats posed by Iran.
EU/UK
NOTABLE HEADLINES
- ECB’s Nagel said the central bank has still not reached its target on inflation, while he added that the ECB has a data-dependent approach to monetary policy and it is wrong to bet on fast rate cuts after peak rates have been reached, according to Handelsblatt.
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