• The BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote.
• In the press conference, BoJ Governor Ueda said the BoJ believes the phase of policy has changed but clarified that the objective is now to stabilise underlying inflation at around 2%.
• US equity futures are mixed, with outperformance in tech as gains extend following Nvidia's Huang comments of doubling chip sales in 2027.
• DXY is slightly firmer; JPY the clear laggard as 2 dissenters give the BoJ a dovish tilt.
• Fixed income benchmarks are lower due to multiple factors which include elevated energy prices and hawkish ECB speak.
• Crude prices pare earlier downside despite a clear driver.
• Looking ahead, highlights include Quad witching, US Industrial/Manufacturing Production (Aug). Speakers include Fed's Bowman and Schmid. Credit Rating upgrades from Morningstar DBRS on France, Scope Ratings on France, and Moody's on Germany.

SNAPSHOTLOOKING AHEAD

• Highlights include Quad witching, US Industrial/Manufacturing Production (Aug). Speakers include Fed's Bowman and Schmid. Credit Rating upgrades from Morningstar DBRS on France, Scope Ratings on France, and Moody's on Germany.
• Click here for the Week Ahead preview

EUROPEAN TRADEEQUITIES

• European bourses have started the final trading session of the week on the backfoot, despite the constructive risk tone in Asia-Pac equities and the downside seen in energy benchmarks. Optimism in Europe has risen and according to a Bloomberg poll, the STOXX 600 will finish 2026 at 670, implying gains of 5% from Wednesday's close. HSBC analysts highlight the improving macroeconomic data as a driver for the upbeat tone in Europe, while welcoming any downside in energy prices.
• Sectors point to a negative bias. Telecoms is the sector laggard, followed by Insurance and Retail. On the other hand, Tech is the sector outperformer, with Health Care and Industrials rounding out the sector gainers.
• US equity futures continues its post-FOMC reversal, with the ES extending further above the 7,700 mark. The upside is seemingly driven by chip stocks, following on from comments by Nvidia's CEO projecting a doubling of chip sales in 2027. Such comments lifted South Korea's tech giants overnight (SK Hynix +6.4%, Samsung Electronics +3.4%)
• Click for the sessions European pre-market equity newsflow
• Click for the additional news

FX

• Snapshot: G10s are mixed against the USD; the Aussie slightly outperforms, whilst the JPY is the clear laggard following the BoJ’s policy announcement.
• DXY is mildly firmer this morning and currently holds within a fairly narrow 100.19-38 range. The index still remains towards post-FOMC highs, benefiting from higher energy prices and as markets pull forward their calls for further hikes this year.
• The JPY is the clear underperformer this morning, after the BoJ decided to lift rates by 25bps (as expected), with the decision made by a 7-2 vote split. The two dissenters were PM Takaichi “reflationist” members; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The announcement itself spurred immediate pressure in the JPY, given the two surprise dissenters and after the BoJ avoided any guidance surrounding a faster pace of rate hikes. Governor Ueda’s presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. USD/JPY is stronger by c. 1.3% on the session so far, and currently holding at the upper end of a 155.87-158.06 range. No doubt, if the theme of widening differentials between the Fed and BoJ returns, USD/JPY will likely head back towards the 158-160 range.
• EUR is mildly firmer this morning, amidst a slew of ECB speak, where a number of members are currently in Ireland for an informal meeting of EU ministers. ECB’s Kaasik and Kazaks struck a hawkish tone, with the latter suggesting that a September hike is unlikely to be the last, “unless we find ourselves in a very different scenario than the baseline”. Elsewhere, President Lagarde reiterated that they are not seeing second-round effects. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East.

FIXED INCOME

• Global fixed benchmarks are lower this morning. USTs (-3 ticks) are trading on either side of the unchanged mark, whilst Bunds (-30 ticks) and Gilts (-41 ticks) underperform. Pressure today for the latter two is likely an accumulation of factors: 1) BoJ rate hike, 2) elevated energy prices, 3) paring of recent BoE-related strength, 4) hawkish central bank speak from the ECB.
• JGBs are net firmer today, following the BoJ’s decision to hike rates by 25bps to 1.25%. However, the decision was subject to dovish dissent, which saw PM Takaichi's “reflationist” appointees vote to hold rates; Asada noted that the economy was not strong enough, whilst Sato believed that price developments had not substantially accelerated. The presser thereafter saw Ueda also strike a dovish tone, where he highlighted that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. The JGB curve is steepening this morning (in contrast to global peers which are flattening), with underperformance in the short end given the dovish tone from the meeting/Ueda.
• USTs are flat, trading on either side of the unchanged mark. Some strength was seen in early morning trade alongside the pressure in energy prices, but this ultimately reversed. Ultimately, USTs are subdued this morning, following global peers with worldwide central banks shifting hawkish – the BoJ the latest to do so. Markets will get clarity out of the Fed later today, with Schmid and Bowman on the docket.
• It is worth highlighting that yields are bear-flattening this morning; this indicates that elevated energy prices and hawkish repricing are the main themes in traders’ minds. The US 2s10s currently holds around 24bps vs 34bps earlier in the week.
• Bunds have had a number of hawkish ECB speeches today, namely Kaasik and Kazaks. This may, in part, be weighing on the benchmark this morning. A recent Bloomberg survey showed that economists believe that the Bank will wait until December before delivering a final interest-rate increase to quell inflation triggered by conflict in the Middle East. Bunds will eye the Mecklenburg-Vorpommern state election, particularly in the context of the AfD’s strong showing in Saxony-Anhalt a few weeks ago.
• Australia sells AUD 1.0bln 1.00% November 2031 bonds: b/c 4.47x, average yield 4.9936%.

COMMODITIES

• Crude benchmarks continue to pull back from its peak seen earlier in the week, with escalatory strikes in the Gulf seemingly slowing down. There were a couple of UKMTO reports, which failed to move markets as traders now focus on next steps over any potential end to the war. Overnight, US President Trump told Axios he is at a "critical juncture" regarding the war in Iran, weighing whether to launch massive new attacks or pursue a different path to end the conflict. Further, this morning, a source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar. WTI Oct'26 rotates in a USD 99.39-101.57/bbl range while Brent Nov'26 trades either side of the USD 103/bbl mark (USD 101.92-104.27/bbl range).
• Precious metals continue to climb post-Fed, with spot gold currently trading at the upper end of its USD 4,334-4,400/oz range. The narrative behind the recent gold upside seems to come from lower yields and energy prices, tempering worries of inflation.
• 3M LME Copper regains the USD 14.5k/t handle and rose to levels just shy of USD 14.6k/t, as the red metal prepares for its 4th consecutive day of gains. Supporting copper gains are signs that Chinese demand is re-entering the market. The Yangshan premium, a gauge of copper demand, rose to its highest level since November 2022 while domestic copper production fell slightly in August.
• Saudi Arabia has sold about 60mln barrels of crude from its Ras Tanura port inside the Strait of Hormuz for loading in September and October, Reuters reported citing sources.
• Venezuela nears an agreement to move USD 4bln gold reserve to New York which would allow the interim government to access funding, according to FT.

TRADE/TARIFFS

• UK Chancellor Healey is to urge Brussels on Friday to include the UK in ‘Made in Europe’ policy and will indicate that London is willing to negotiate to reach a ‘reset’ deal, according to FT.

NOTABLE EUROPEAN HEADLINES

• ECB Consumer Expectations Survey (Aug): 1-year 3.0% (prev. 2.9%), 3-year 2.9% (prev. 2.7%), 5-year 2.5% (prev. 2.4%).

NOTABLE EUROPEAN DATA RECAP

• UK Retail Sales (Aug MM) 0.5% vs. Exp. -0.2% (Prev. -0.5%).
• UK Retail Sales (Aug YY) 2.4% vs. Exp. 1.9% (Prev. 1.2%).
• UK Retail Sales ex Fuel (Aug MM) 0.6% vs. Exp. -0.2% (Prev. -0.9%).
• UK Retail Sales ex Fuel (Aug YY) 2.7% vs. Exp. 1.9% (Prev. 1.8%).
• German PPI (Aug MM) 1.1% vs. Exp. 0.4% (Prev. 1.1%).
• German PPI (Aug YY) 4.6% vs. Exp. 4.1% (Prev. 3.0%).

CENTRAL BANKS

• BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote as board members Asada and Sato dissented and voted to hold. BoJ said it will continue to raise rates in response to economic and price developments as well as financial conditions. BoJ said inflation expectations are heightening moderately, with underlying inflation approaching 2%, and it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target. Furthermore, it said the accommodative financial environment will be sustained after the policy rate change, thereby supporting economic activity, and it is necessary to pay attention to the impact of the Middle East situation on financial and FX markets, the economy and prices. In terms of the dissenters, who are both known reflationists appointed by PM Takaichi, BoJ's Asada considered that with the rate of increase in the core CPI below 2% recently, it could not necessarily be said that the economic situation was strong and it was desirable for the Bank to maintain the guideline for money market operations, while Sato considered current economic and price developments did not appear to have substantially accelerated compared with before, and in this context, it was not appropriate for the Bank to raise the policy interest rate at this time.
• Overall, Ueda’s press conference did not signal any urgency to accelerate the pace of tightening. He mentioned that easy monetary conditions are expected to be maintained, adding that rates have tightened, but bank lending and asset markets remain accommodative. One hawkish aspect of the presser was that Ueda suggested that the BoJ believes the phase of policy has changed. However, he later clarified that this meant that the objective is now to stabilise underlying inflation at around 2%, essentially removing the initial hawkish remark. Ueda also did not mention anything related to increasing the pace of future rate hikes, which further added to the dovish tone.
• RBA's Governor Bullock said various indicators continue to suggest labour market conditions remain close to, but a little tighter than full employment, while she added that monetary policy is well placed to respond to developments. Bullock said lowering inflation is essential, and the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Furthermore, she stated they are in a world of higher-for-longer oil prices and that businesses are now more inclined to pass on cost increases.
• ECB President Lagarde, speaking on RTE Radio, said growth is a bit more promising than we thought and that they are not seeing second round effects yet. She also reiterated a meeting-by-meeting approach.
• ECB's Vujcic said market bets on further ECB rate hikes are being largely driven by higher energy prices and will look at a wider set of economic indicators when deciding the next policy move. Vujcic said higher inflation through Autumn will dampen GDP. On the current rate hike pace, he said it is worth keeping for the time being.
• ECB's Kazaks, speaking to Bloomberg, said the ECB must do everything to avoid second round effects and that all meetings are live meetings. On the neutral rate, he said they are near the upper end of neutral and that quite likely restrictive policy will be needed. Elsewhere, Kazaks told Econostream that the September hike will unlikely to be the last "unless we find ourselves in a very different scenario than the baseline". Kazaks highlighted that an October hike would still be consistent with the September projections. On considering the size of the moves, he said that if the move in inflation is very strong or core inflation is moving up, the ECB can take bigger steps.
• ECB's Kaasik said more tightening needed if inflation risks materialise but that the exact level of neutral rate is not a big concern now.

NOTABLE US HEADLINES

• OpenAI CEO Altman, NVIDIA (NVDA) CEO Huang and Qualcomm (QCOM) CEO Amon plan to attend the Trump-Xi dinner next week, with AI expected to be a key focus in the summit on September 24th, according to POLITICO.
• The US administration is set to announce that all states will see MFN pricing for certain drugs in Medicaid programmes, Semafor reported citing plans shared.
• US House Democrats are pressing the Trump administration for answers on the oil deal struck with Venezuela, Semafor reported citing a letter.
• US Department of Agriculture confirmed a case of New World screwworm in a horse in Grant County, New Mexico, marking the state's second case since the parasite entered from Mexico in June.

GEOPOLITICS

MIDDLE EAST

• Source close to the Iranian negotiating team said Tehran has informed Washington, via intermediaries, of its conditions for reopening the Strait of Hormuz, with the minimum conditions based on the “Islamabad understanding”, according to Al-Akhbar.
• US State Department said the US will continue to bar Iranian UN mission officials, visiting officials and their dependents from purchasing wholesale club memberships or luxury goods, and urged New York area retailers to avoid complicity in violations.
• US is reportedly expected to send MQ-9 Reaper drones to South America, CNN reported citing sources. The report added that the plan is part of counternarcotics and counterterror operations and that there are still discussions on whether to send some drones to the Middle East.
• UKMTO received a report of an incident in the Strait of Hormuz. The CSO of a vessel has reported a tanker being hit by an unknown projectile causing a fire, which was extinguished.
• IRGC said Togolese-flagged tanker 'Trend' was hit and stopped after a fire, while it stated the tanker violated Hormuz rules and that the US instigated the transit.
• Houthis are reportedly expanding its minefield in Bab al-Mandab and Dhubab, Al Araby reported.
• South Korea President Lee said several countries are deploying military assets near the Strait of Hormuz, and added that they won't deploy troops to join conflict but limited actions to safeguard South Korean economic interests and citizens are possible.

RUSSIA-UKRAINE

• Turkish President Erdogan and US President Trump may discuss initiatives for negotiations on Ukraine in New York, RIA reported citing sources.

OTHER

• US President Trump is making plans for the first-ever meeting with Venezuela's interim President Rodriguez as early as next week, although a meeting is not finalised, according to Axios.
• North Korea leader Kim's sister said there is no change to the course of strengthening nuclear war deterrence and the US-led multinational drills are the main source of worsening tensions on the peninsula.

CRYPTO

• Bitcoin steadily climbs and resides at the upper end of its USD 76.2k-78.51k range as the crypto pares completely the losses following the failure of the Clarity Act passage.

APAC TRADE

• APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where markets reversed the post-FOMC moves amid a Fed credibility boost and lower oil prices.
• ASX 200 lagged with the index range-bound trade as gains in tech and miners were counterbalanced by weakness in defensives, telecoms, energy and financials, while there were comments from RBA Governor Bullock that lowering inflation is essential and that the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time.
• Nikkei 225 rallied following the BoJ announcement to hike rates by 25bps, as widely expected, with the decision made by a 7-2 vote as Takaichi-appointed board members Asada and Sato dissented. The language from the central bank reaffirmed a hiking bias but didn't signal any major urgency, noting it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target, while the latest inflation data from Japan printed softer-than-expected on all key metrics of the report.
• KOSPI advanced with tech stocks buoyed following the outperformance in the Nasdaq stateside, while South Korean President Lee ruled out sending troops to the Strait of Hormuz.
• Hang Seng and Shanghai Comp conformed to the broad positive mood, with reports noting that the US is expected to delay announcing excess manufacturing capacity tariffs till after the Trump-Xi summit, while MOFCOM said Chinese and US trade teams remain in close contact over negotiations on mutual tariff reductions covering USD 30bln. In addition, the PBoC conducted 7-day and 14-day reverse repo operations ahead of the National Day holidays in early October.

NOTABLE ASIA-PAC HEADLINES

• Japanese Finance Minister Katayama said they will work to maintain an orderly FX market and will not hesitate to conduct further coordinated forex intervention. She added that they maintain close communication with financial authorities of other nations on FX and that it is important to maintain order regarding exchange rates and interest rates.
• Japan Economy Minister Kiuchi expects the BoJ to conduct appropriate monetary policy to sustainably and stably achieve its price target while working closely with the government, adding that details of monetary policy are for the BoJ to decide.

NOTABLE APAC DATA RECAP

• Japanese Core CPI (Aug YY) 1.7% vs. Exp. 1.8% (Prev. 1.8%).
• Japanese CPI (Aug YY) 1.9% vs. Exp. 2.0% (Prev. 1.9%).
• Japanese CPI Ex-Food and Energy (Aug YY) 1.9% vs. Exp. 2.0% (Prev. 1.9%).
• New Zealand Trade Balance (Aug) -1349MB vs. Exp. -1.775MB (Prev. -2118MB).

• US President Trump told Axios he is at a "critical juncture" regarding the war in Iran, weighing whether to launch massive new attacks or pursue a different path to end the conflict.
• BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote; USD/JPY outperformed.
• Crude futures were lacklustre after declining yesterday alongside de-escalatory reports.
• APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where markets reversed the post-FOMC moves amid a Fed credibility boost and lower oil prices.
• European equity futures indicate a lower cash market open, with Euro Stoxx 50 down 0.3% after the cash market closed with gains of 0.9% on Thursday.
• Looking ahead, highlights include Quad witching, German PPI (Aug), UK Retail Sales (Aug), US Industrial/Manufacturing Production (Aug). Speakers include BoJ Governor Ueda, ECB's Lagarde, Fed's Bowman and Schmid. Credit Rating upgrades from Morningstar DBRS on France, Scope Ratings on France, and Moody's on Germany.

SNAPSHOT

• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump told Axios he is at a "critical juncture" regarding the war in Iran, weighing whether to launch massive new attacks or pursue a different path to end the conflict. Trump said he has a big decision coming up and pondered whether he wants to go in and annihilate them or not, while he said anything could happen with him. Trump declined to say whether he will decide on the path forward before or after the midterms, while he and Hegseth have ordered the military to maintain its level of forces in the Middle East until the end of the year to remain ready for a potential return to full-scale combat.
• US senior official said the US is focused on ensuring navigation in the Red Sea and allowing its partners to manage security challenges, while the official stated that the US is in constant communication with Saudi Arabia and the Yemeni government regarding regional stability, and it expects the Houthis to continue adhering to the ceasefire condition.
• US approves visas for top Iranian leaders to attend the UN high-level meeting.
• US State Department said the US will continue to bar Iranian UN mission officials, visiting officials and their dependents from purchasing wholesale club memberships or luxury goods, while it urged New York-area retailers to avoid complicity in violations.
• US State Department said Washington's new sanctions against the Babak Zanjani network for transferring hundreds of millions of dollars in Bitcoin to the IRGC targeted Iran's efforts to finance destabilising activities through digital currency networks. It also stated that it remains committed to blocking the Iranian government and the IRGC's access to resources they use to threaten regional stability, support "terrorism," and undermine international security.
• US Senator Kaine said the Senate could hold its next vote on Iran war powers early next week, adding there could be more to come before the election.
• US forces began dismantling and transferring air defence systems from their positions in the Kurdistan Region, according to Al Hadath. Sources stated the withdrawal of international coalition forces from Iraq continues, with more than one military convoy departing daily. It was separately reported that most of the remaining US troops in northern Iraq are expected to move to Jordan.
• Satellite images reportedly revealed that Iran was rebuilding a previously bombed nuclear site.
• UKMTO received a report of an incident 75 NM east of Yemen's Aden, with a westbound tanker reporting that a skiff pursued and attempted to intercept the vessel. UKMTO also said it received a report of a security incident in the Strait of Hormuz 16 NM Northeast of Khasab, Oman.
• IRGC said Togolese-flagged tanker 'Trend' was hit and stopped after a fire, while it stated the tanker violated Hormuz rules and that the US instigated the transit.
• South Korean President Lee said several countries are deploying military assets near the Strait of Hormuz, while he won't deploy troops to join the conflict, but noted that limited actions to safeguard South Korean economic interests and citizens are possible.
• Israeli airstrikes hit two towns in southern Lebanon, according to Mehr News Agency.
• Board of Peace will hold a briefing for representatives from dozens of countries on the sidelines of the UN General Assembly next week to update them on efforts to implement US President Donald Trump’s plan for rebuilding the Gaza Strip.

US TRADEEQUITIES

• US stocks rallied and the Nasdaq outperformed, although gains were broad-based with the RSP +0.5%, while sectors were predominantly higher with advances led by Technology, Consumer Discretionary and Utilities, although Consumer Staples and Financials underperformed, closing marginally lower. The hawkish Fed reaction seen on Wednesday was broadly pared across markets on Thursday, with participants instead focusing on improved Fed credibility in its efforts to return inflation to target following the rate hike and Chair Warsh's steadfast commitment to restoring price stability, despite pressure from US President Trump for lower rates. This view helped support lower yields across the curve, resulting in a bull flattening, with the long end outperforming, with lower oil prices also supporting the move in Treasuries.
• SPX +1.14% at 7,638, NDX +1.73% at 29,447, DJI +0.61% at 51,783, RUT +0.55% at 2,875
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump and Mexican President Sheinbaum spoke by phone on Wednesday as the two countries close in on a trade deal, according to Politico citing sources, while the conversation was described as “so-so” and “created a bit of noise” as “new topics” were introduced into the leaders’ discussion.
• New Zealand Foreign Minister spokesperson said there are no talks with the EU regarding New Zealand joining as an associate member.

NOTABLE HEADLINES

• US Senate Republicans' attempt to quickly pass a bipartisan bill to prevent data centre-related utility cost increases failed on Thursday, amid Democratic concerns that it would rely only on voluntary commitments from states and data centre developers.
• US Department of Agriculture confirmed a case of New World screwworm in a horse in Grant County, New Mexico, marking the state's second case since the parasite entered from Mexico in June.

APAC TRADEEQUITIES

• APAC stocks were mostly higher as the region took impetus from the gains on Wall Street, where markets reversed the post-FOMC moves amid a Fed credibility boost and lower oil prices.
• ASX 200 lagged with the index range-bound trade as gains in tech and miners were counterbalanced by weakness in defensives, telecoms, energy and financials, while there were comments from RBA Governor Bullock that lowering inflation is essential and that the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time.
• Nikkei 225 rallied following the BoJ announcement to hike rates by 25bps, as widely expected, with the decision made by a 7-2 vote as Takaichi-appointed board members Asada and Sato dissented. The language from the central bank reaffirmed a hiking bias but didn't signal any major urgency, noting it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target, while the latest inflation data from Japan printed softer-than-expected on all key metrics of the report.
• KOSPI advanced with tech stocks buoyed following the outperformance in the Nasdaq stateside, while South Korean President Lee ruled out sending troops to the Strait of Hormuz.
• Hang Seng and Shanghai Comp conformed to the broad positive mood, with reports noting that the US is expected to delay announcing excess manufacturing capacity tariffs till after the Trump-Xi summit, while MOFCOM said Chinese and US trade teams remain in close contact over negotiations on mutual tariff reductions covering USD 30bln. In addition, the PBoC conducted 7-day and 14-day reverse repo operations ahead of the National Day holidays in early October.
• US equity futures paused after clawing back post-FOMC losses yesterday and ahead of quadwitching.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 down 0.3% after the cash market closed with gains of 0.9% on Thursday.

FX

• DXY traded little changed after giving back some of its post-FOMC spoils as yields eased, with some citing improved Fed credibility as markets appeared to take greater confidence in Chair Warsh's commitment to return inflation to the target. Elsewhere, dollar-specific newsflow remains light despite a slew of US data, which ultimately failed to move the needle, while participants will get to digest rhetoric from Fed speakers following the end of the blackout period.
• EUR/USD eked slight gains and looks to retest near-term resistance ahead of the 1.1500 handle, while there were comments from ECB officials that there were currently no signs of second-round effects of inflation.
• GBP/USD slightly edged higher but lacked conviction after lagging yesterday post-BoE as UK yields eased from their highs after the Bank announced it would pause APF gilt sales until April 2027 and confirmed it would not sell long-dated gilts into the market, while participants look ahead to UK Retail Sales data.
• USD/JPY was underpinned after the BoJ delivered a widely expected rate hike but with dissent from the two Takaichi-appointed, known reflationist board members, while Japan's CPI data was also softer-than-expected.
• Antipodeans were somewhat varied as AUD kept afloat amid the mostly positive risk appetite and after CNH hit its strongest level in around four years, while NZD/USD was slightly pressured after trade data.
• PBoC set USD/CNY mid-point at 6.7521 vs Exp. 6.7065 (prev. 6.7580)

FIXED INCOME

• 10yr UST futures paused overnight after yesterday's bull flattening and reversal of the post-Fed move, as Fed credibility received a boost following Wednesday's rate hike.
• Bund futures price action was range-bound after the recent mild rebound and with a lack of major catalysts for the bloc, while rhetoric from ECB officials provided little to shift the dial.
• 10yr JGB futures initially climbed higher as they tracked the recovery in global peers and with upside also facilitated by softer-than-expected Japanese CPI data, although the gains were then pared after the BoJ delivered a widely expected rate hike.

COMMODITIES

• Crude futures were lacklustre after declining yesterday alongside de-escalatory reports, including China pressing Iran to help rein in the Houthis following a Saudi appeal, while Saudi Arabia was said to have asked Oman to seek a two-week truce with the Houthis, and Pakistan's Army Chief also urged Iran to convince the Yemeni Houthis not to attack Saudi energy facilities.
• Three pumping stations along Saudi Arabia's East-West pipeline were damaged in an attack last week (prev. reported as two), while a repair timeline is unclear.
• Oil refinery in Russia's Yaroslavl region halted crude processing after a drone attack.
• Spot gold was choppy after spending the prior day clawing back all of its post-FOMC losses.
• Venezuela nears an agreement to move USD 4bln gold reserve to New York, which would allow the interim government to access funding, according to FT.
• Copper futures pulled back from a weekly peak after advancing alongside the improved sentiment.

CRYPTO

• Bitcoin steadily gained throughout the session and returned to above the USD 77,000 level.

NOTABLE ASIA-PAC HEADLINES

• BoJ hiked rates by 25bps to 1.25%, as expected, with the decision made by a 7-2 vote as board members Asada and Sato dissented and voted to hold. BoJ said it will continue to raise rates in response to economic and price developments as well as financial conditions. BoJ said inflation expectations are heightening moderately, with underlying inflation approaching 2%, and it will conduct monetary policy as appropriate from the perspective of sustainably and stably achieving the inflation target. Furthermore, it said the accommodative financial environment will be sustained after the policy rate change, thereby supporting economic activity, and it is necessary to pay attention to the impact of the Middle East situation on financial and FX markets, the economy and prices. In terms of the dissenters, who are both known reflationists appointed by PM Takaichi, BoJ's Asada considered that with the rate of increase in the core CPI below 2% recently, it could not necessarily be said that the economic situation was strong and it was desirable for the Bank to maintain the guideline for money market operations, while Sato considered current economic and price developments did not appear to have substantially accelerated compared with before, and in this context, it was not appropriate for the Bank to raise the policy interest rate at this time.
• RBA's Governor Bullock said various indicators continue to suggest labour market conditions remain close to, but a little tighter than full employment, while she added that monetary policy is well placed to respond to developments. Bullock said lowering inflation is essential, and the key question is whether the tightening in monetary policy to date will be sufficient to bring inflation back to the target in a reasonable time. Furthermore, she stated they are in a world of higher-for-longer oil prices and that businesses are now more inclined to pass on cost increases.
• China's MIIT, NDRC and eight other government ministries and agencies jointly issued the pharmaceutical industry's 15th Five-Year Plan.

DATA RECAP

• Japanese CPI (Aug YY) 1.9% vs. Exp. 2.0% (Prev. 1.9%)
• Japanese Core CPI (Aug YY) 1.7% vs. Exp. 1.8% (Prev. 1.8%)
• Japanese CPI Ex-Food and Energy (Aug YY) 1.9% vs. Exp. 2.0% (Prev. 1.9%)

GEOPOLITICS

RUSSIA-UKRAINE

• US President Trump is expected to sign the Russia-Iran sanctions bill as early as Friday.

OTHER

• US President Trump is making plans for the first-ever meeting with Venezuela's interim President Rodriguez as early as next week, although a meeting is not finalised, according to Axios.
• US Pentagon reportedly considers withdrawing nearly one-third of US forces from Europe.
• North Korea leader Kim's sister said there is no change to the course of strengthening nuclear war deterrence and the US-led multinational drills are the main source of worsening tensions on the peninsula.
• North Korea's Vice Foreign Minister Kim Son-Gyong will attend the UN General Assembly next week.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Healey is to urge Brussels on Friday to include the UK in ‘Made in Europe’ policy and will indicate that London is willing to negotiate to reach a ‘reset’ deal, according to FT.
• French PM Lecornu said ongoing austerity measures this year mean the 2026 deficit should remain well below 5.5% of GDP. Lecornu also stated that the deficit target in the draft budget reaches 5% of GDP for 2027 and that taxes will not be raised.
• ECB's Zigman said market bets do not determine the ECB's next steps and noted there is a lot of optimism for growth, while he does not see any major second-round effects and warned that growth is at risk if inflation is not tackled.

• US President Trump threatened to impose heavy tariffs on Europe if it considers Europe's decision to grant Canada observer status a hostile act.
• US President Trump said they are working very hard on Russia and Ukraine, while he added that the Ukraine war is the toughest war to end and is the one driving up diesel prices. On Iran, Trump said Iran wants to make a deal and hopefully we're more at the end of the Iran war.
• US equity futures climb and have pared entirely the downside seen post-Fed.
• DXY gives back some of Wednesday's gains; NZD strengthens following a stronger growth report.
• US 10-year yields fall back below 5%; Gilts on watch with BoE ahead.
• Energy benchmarks fall amid a lack of geopolitical escalation and constructive Trump comments.
• Looking ahead highlights include US Initial Jobless Claims (Sep/12), Housing Starts (Aug), Building Permits Prelim. (Aug), Atlanta Fed GDP (Q3), New Zealand Trade Balance (Aug). BoE Policy Announcement, CNB Policy Announcement. Supply from the US.

SNAPSHOTEUROPEAN TRADEEQUITIES

• European bourses are firmer across the board, helped by lower energy prices, while the rebound in fixed income is also lifting equities. For the FTSE 100 specifically, focus will be on the BoE decision, with a hold expected at 3.75%.
• Sectors have a clear positive bias. Travel & Leisure top the sector pile, with Industrials and Telecoms following closely behind. Only sectors in the red are Optimised Personal Care, Real Estate and Construction.
• US equity futures have steadily bid higher throughout the European morning, with the ES completely reversing the downside following the hawkish FOMC announcement.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news

FX

• Snapshot: G10s are mostly firmer against the USD this morning, which is giving back some of its post-FOMC strength. The JPY moves higher as traders eye the BoJ tomorrow, whilst the Kiwi benefits post-GDP, which was stronger than expected.
• DXY soared following the Fed’s decision to lift rates by 25bps. Whilst this was expected, what did come as a shock to markets was the unanimous decision and hawkish dot plot, with the median showing another 25bps hike in 2026. The hawkish meeting lifted yields further beyond the 5% mark, but it does help ease concerns related to the Fed’s credibility/stability. Traders will now await Fed speak as the blackout period gets lifted; Bowman and Schmid are the first scheduled to speak on Friday.
• On the subject of the Yen, the BoJ is set to deliver a 25bps hike at Friday’s meeting. That likely would not be enough to materially strengthen the JPY any further; however, any indication that the Bank could increase the pace of rate hikes would likely do so. (A full BoJ preview can be found in the Research Suite)
• Elsewhere for the JPY, attention has been on the latest cabinet reshuffle. It has been viewed by markets as a policy continuation, and little cause for concern for the currency. PM Takaichi has been on the wires this morning, where she has largely reiterated her proactive fiscal approach.
• GBP trades steady this morning vs USD, with all attention on the BoE later today. The Bank is expected to hold Bank Rate at 3.75%, with the vote split likely mirroring the July decision at 6–3. Incoming data since the previous meeting have been mixed but, on balance, supportive of a hold, while the proximity of the Autumn Budget also argues against a significant policy shift or signal at this meeting. Attention will be on whether the Bank tries to push back on market pricing, which currently fully prices in a hike by December.

FIXED INCOME

• Global fixed income benchmarks are mixed, with USTs outperforming, paring back some of the pressure seen following the hawkish FOMC announcement.
• As the European session got underway, USTs rebounded from the post-FOMC lows, and returned to the 106.00 mark, a move which came alongside pressure in the crude complex.
• With the Fed out of the way, focus will be on the BoE today and the BoJ early in tomorrow's session.
• For the BoE, markets expect the Bank to keep rates steady at 3.75% with the vote split seen at 6-3. Lombardelli is seen as the member on the fence, and could tilt the vote to 5-4. The annual QT vote is also due, with the pace of balance-sheet reduction expected to slow to GBP 50bln from GBP 70bln. Active sales are expected to remain at around GBP 20bln, although reports suggest the BoE will halt sales of long-dated gilts in the 20-30yr region. Thus far, Gilts reside in a 84.69-85.15 band.
• Regarding the BoJ, it is widely expected that rates will be hiked by 25bps to 1.25%, with money markets fully pricing in a hike. Multiple source reports have helped markets bake in a rate hike, while hawkish commentary by BoJ members has pointed to the need for further hikes, with Takata even calling for the possibility of a 50bp rate hike.
• France sells EUR 12.991bln vs Exp. EUR 11-13bln 2.40% 2029, 2.70% 2031, 3.25% 2032 and 2.00% 2032 OAT.
• Spain sells EUR 5.74bln vs Exp. EUR 5-6bln 0.70% 2032, 3.45% 2034 and 3.40% 2036 Bono.
• US Treasury Holdings (July, USD): Japan 1.104tln (prev. 1.117tln), China 618bln (prev. 633bln), UK 998bln (prev. 940bln).

COMMODITIES

• WTI and Brent futures are softer intraday but off worst levels, with traders finding little to trade on this morning. Earlier in the session, gradual downside was seen in crude futures despite the lack of an obvious driver. Some attention may be on reports in Axios, which suggested that Trump is expected to meet with Gulf leaders in New York next Tuesday, to discuss the next steps with Iran. The crude complex will likely continue to move on geopolitical developments amid direct influence on the supply side of the equation. WTI Oct resides in a USD 100.39-102.47/bbl, and Brent Nov trades in a USD 103.62-106.02/bbl range. Dutch TTF tilts slightly firmer but remains under EUR 80/MWh at the time of writing, after finding support just above EUR 76/MWh this morning.
• Metals are firmer as oil prices ease alongside the post-FOMC dollar, with spot gold briefly back above its 100 DMA (USD 4,323/oz) after printing a USD 4,235-4,367/oz range yesterday, and with today’s parameter within that range, between USD 4,257-4,335/oz. Spot silver similarly attempts to recoup yesterday’s losses but remains tucked within yesterday’s USD 62.31-64.93/oz range. Base metals are mostly firmer, with 3M LME copper towards the top of a USD 14,128.38-14,338.00/t range.
• Kazakhstan expects oil production to reach 96mln tonnes in 2028 and 99mln tonnes in 2029, according to IFX.
• Azerbaijan's oil production fell 8.3% Y/Y to 2.2mln tonnes in August, according to IFX.

TRADE/TARIFFS

• US President Trump said the US may impose heavy tariffs on Europe if it considers Europe's decision to grant Canada observer status a hostile act. Trump separately commented that they are very close to a deal with Mexico and we don't need anything Europe has, while he questioned why should the US carry Canada, Mexico and Europe.
• US-Mexico trade talks were pushed back one week, according to the WSJ.
• China's MOFCOM said Chinese and US trade teams are maintaining close contact on negotiations over mutual tariff reductions covering USD 30bln and will publish updates when appropriate. On EU trade, China is concerned about the "Europe First" clause and urged the EU to comply with WTO rules, maintain open markets and amend discriminatory provisions affecting third-country companies.
• China's MOFCOM Minister Wang held a video call with EU Trade Commissioner Sefcovic to talk on China-EU economic and trade issues.
• China's chief trade negotiator Li Chenggang met with a business delegation to discuss issues including China-US economic and trade.
• Japan and the US are reportedly discussing the construction of a semiconductor factory as part of the USD 550bln US investment package agreed during tariff negotiations, Nikkei reported.
• The EU has reportedly asked China to voluntarily restrict exports of hybrid cars as part of a deal to prevent a trade war, threatening of higher tariffs if they fail to do so, according to the FT.

NOTABLE EUROPEAN HEADLINES

• European Commission adopts the EU KIDS Act, banning social media platforms from accessing children under 13 and setting an EU-wide minimum age of 15 for minors to open their own accounts.
• UK government’s EU reset summit could be delayed again unless the EU agrees to include “Made in Europe” legislation on the agenda, according to The Guardian's Elgot citing sources.
• Germany's VDMA expects 2026 production to decline by 2% in real terms, compared with its previous forecast for no growth.
• Swiss SECO forecasts: Raises 2026 GDP to 1.7% (June forecast: 0.9%), 2027 GDP forecast unchanged at 1.6%. 2026 and 2027 CPI forecast unchanged at 0.6%.

NOTABLE EUROPEAN DATA RECAP

• European HICP Final (Aug YY) 3.2% vs. Exp. 3.3% (Prev. 2.9%).
• European HICP Final (Aug MM) 0.4% vs. Exp. 0.4% (Prev. 0.2%).
• European Core HICP Final (Aug YY) 2.4% vs. Exp. 2.4% (Prev. 2.5%).

CENTRAL BANKS

• ECB's Makhlouf, speaking on Bloomberg TV, said he is not seeing signs of second round effects but the outlook is uncertain. He added that every meeting is a live meeting and that inflation risks tilted to the upside.
• HKMA raised its base rate by 25bps to 4.25%, as expected, while Chief Executive Eddie Yue commented that the HKD may gradually ease after carry trade activity.
• Brazilian Central Bank cut the Selic Rate by 25bps to 13.75%, as expected and with the decision unanimous, while it will continue to monitor developments in this scenario in order to keep monetary policy adequately restrictive to ensure convergence to the inflation target. BCB also stated that the scenario requires serenity and cautiousness in the conduct of monetary policy.

NOTABLE US HEADLINES

• US President Trump posted that interest rates in the US should be 1% or less and urged to "LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!"
• US President Trump said Fed Chair Warsh has a tough board and that he still has confidence in Warsh, while he stated that interest rates are too high and not appropriate. Trump said they should be paying the lowest interest rates in the world and noted that inflation is too high. Furthermore, Trump stated he told Warsh to do what he wants and that he wants Warsh to be independent.
• US Senators have reportedly secured an antitrust exemption for AI companies in the defence policy legislation before negotiations over the measure were delayed, according to Semafor.
• BofA Institute (w/e Sep 12) Total Card Spending +5.8% Y/Y (prev. +7.8%). Says K-shaped spending looks increasingly like a stale narrative.

GEOPOLITICS

MIDDLE EAST

• US President Trump said Iran wants to make a deal and hopefully we're more at the end of the Iran war. Trump separately commented that the Iran war will end soon because Iran cannot go on and it is going to be a really good conclusion.
• US President Trump is expected to meet Gulf leaders on the sidelines of the UN General Assembly in New York next Tuesday to discuss next steps in the war with Iran, according to Axios
• IRGC Spokesperson said "If the US attacks again, it will face a more decisive, broader, and stronger response", Mehr News reported.
• US, Israel and Arab military chiefs held secret talks in Germany, while it was noted that increased risk in the Strait of Hormuz and Bab Al-Mandab was seen impacting energy, according to Nour News.
• A Saudi source suggested that it would not normalise ties with Israel, even if they would help the Saudis against the Houthis, Times of Israel reported.
• Yemeni government forces are battling Houthis in strategic Kahbub mountains, near Bab al-Mandeb, according to Al Jazeera.

RUSSIA-UKRAINE

• US President Trump said they are working very hard on Russia and Ukraine, while he added that the Ukraine war is the toughest war to end and is the one driving up diesel prices.
• The US House voted to impose sanctions and tariffs over Russia's conflict with Ukraine.
• Russia's Kremlin said the implementation of new sanctions by the US will make it harder to find a peace deal on Ukraine.
• Ukrainian President Zelensky said Ukrainian forces hit Russia's Yaroslavl oil refinery overnight while adding that Russians fired on energy in the Sumy and Odessa regions.
• Russia has reportedly damaged a rail bridge in Odessa, which would significantly limit Ukraine's ability to transport grain to its Danube river ports, reports suggest.

OTHER

• North Korean Vice Defence Minister said the US arms buildup justifies North Korea's nuclear force building, and that they will continue expanding the defensive nuclear deterrent.

CRYPTO

• Bitcoin has steadily climbed throughout the European morning and resides at the upper end of its USD 76k-76.70k range.

APAC TRADE

• APAC stocks traded mixed as the region partially weathered the hawkish reaction triggered by the FOMC meeting, where the Fed hiked the Fed Funds Rate by 25bps to 3.75-4.00%, as expected, in a unanimous decision and the dot plots pencilled in another rate hike this year.
• ASX 200 was kept afloat as outperformance in financials, healthcare and real estate offset the losses in the commodity-related sectors, but with upside capped amid a lack of bullish drivers.
• Nikkei 225 began with firm gains following a pullback in energy prices, although it has gradually faded the majority of the opening advances as participants also brace for a widely anticipated BoJ rate hike when the central bank concludes its 2-day policy meeting tomorrow.
• KOSPI gradually climbed amid tech resilience and with South Korea's Finance Minister vowing to deploy market stabilising measures if required.
• Hang Seng and Shanghai Comp were pressured with underperformance in Hong Kong after the HKMA raised rates for the first time since 2023 in lock-step with the Fed, while the downside in the mainland is cushioned following the PBoC's increased liquidity efforts.

NOTABLE ASIA-PAC HEADLINES

• Japanese PM Takaichi said they cannot maintain fiscal sustainability without economic growth, adding that they will accelerate policy to achieve strong growth under proactive fiscal policy. Takaichi said she decided to retain ministers in charge of key policies such as economic and fiscal policy, growth strategy and areas key to diplomatic relations with foreign governments.
• Japanese Finance Minister Katayama said they will review budget requests and control debt issuance at a level that can gain market credibility, while she added they have stated their determination to address excessive volatility when they launched Japan-US joint intervention.
• Japan's Chief Cabinet Secretary Kihara said Japan will continue close talks with the US Treasury to support orderly foreign exchange markets.
• Japan's GPIF has reportedly requested alternative investment strategy expertise from South Korea's NPS, according to Maeil.

NOTABLE APAC DATA RECAP

• New Zealand GDP Growth Rate (Q2 YY) 2.6% vs. Exp. 2.3% (Prev. 1.7%).
• New Zealand GDP Growth Rate (Q2 QQ) 0.2% vs. Exp. 0.1% (Prev. 0.9%).

• The Fed hiked rates by 25bps as expected in a unanimous decision, while the median projection saw another hike by year-end before rates remain on hold throughout 2027.
• The statement reiterated the Fed's commitment to price stability, a message echoed by Chair Warsh in the press conference.
• US stocks were pressured and the major indices largely finished lower; APAC stocks traded mixed, DXY and yields held onto post-FOMC gains.
• US President Trump said the US may impose heavy tariffs on Europe if it considers Europe's decision to grant Canada observer status a hostile act.
• European equity futures indicate a positive cash market open, with Euro Stoxx 50 futures up 0.5% after the cash market closed with gains of 0.5% on Wednesday.
• Looking ahead highlights include EU Inflation Final (Aug), US Initial Jobless Claims (Sep/12), Housing Starts (Aug), Building Permits Prelim. (Aug), Atlanta Fed GDP (Q3), New Zealand Trade Balance (Aug). BoE Policy Announcement, CNB Policy Announcement. Comments from ECB's Lane. Supply from Spain, France & the US.

SNAPSHOT

• Click for the Newsquawk Week Ahead.

FOMC

• Fed hiked rates by 25bps to 3.75-4.00%, as expected, in a unanimous decision. Fed said inflation remains elevated (prev. Inflation remains elevated relative to the Committee's percent goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy). It also stated that economic activity is expanding at a solid pace, productivity growth is strong, and capital investment is robust. The statement added that "while uncertainty remains elevated owing, in part, to geopolitical developments, domestic spending has been resilient." Fed also stated that "today's policy action will support a timelier return to the Committee's 2 percent goal. The Committee will deliver price stability."
• FOMC Summary of Economic Projections showed only 18 of 19 members submitted forecasts, with expectations that Warsh would not submit forecasts, while the Fed Funds Rate in 2026 is seen at 4.1% (exp. 3.875%, prev. 3.8%), 2027 at 4.1% (exp. 3.875%, prev. 3.6%), 2028 at 3.9% (exp. 3.375%, prev. 3.4%), 2029 at 3.6% (exp. 3.375%) and longer run at 3.2% (exp. 3.125%, prev. 3.1%). Distribution of dots for 2026 showed 12 see one hike to 4.125%, four see two hikes to 4.375%, and two see rates unchanged at 3.875%, while distribution of dots for 2027 showed six see one hike to 4.125%, eight see two hikes to 4.375%, three see one cut to 3.625%, and one sees three cuts to 3.125%.
• Fed Chair Warsh said the decision comes when the economy appears to be strengthening and is pointing in a good direction, while he added they would be hard-pressed to describe broad financial conditions as restrictive, which was a view widely shared by the committee, so they removed a dose of accommodation. Warsh said inflation has been running above target for more than 5 years, and the predominant focus is on the price stability side of our mandate, adding the plain fact is that inflation is too high and has been, for too long, while the committee's unanimous vote shows resolve to achieve price stability on a timelier basis.
• Fed Chair Warsh reiterated in the Q&A that inflation is the problem, as well as stated that price stability is foundational to growth and that today, they took a step in delivering it. Warsh responded, when asked what changed between now and July, that data has shown the economy has strengthened and at Jackson Hole said inflation trends weren't passing the test, and seeing very little information since to reverse that, so have stuck with it. Furthermore, when asked whether he sees rates as restrictive, he reiterated that he found it difficult to describe financial conditions as restrictive and hard-pressed, and around the table his colleagues were hard-pressed to describe it that way too. He also sees three reasons for the rise in bond yields, which were economic strength, capital expenditures and geopolitics.

IRAN CONFLICT

• US President Trump said Iran wants to make a deal and hopefully we're more at the end of the Iran war. Trump separately commented that the Iran war will end soon because Iran cannot go on and it is going to be a really good conclusion.
• US, Israel and Arab military chiefs held secret talks in Germany, while it was noted that increased risk in the Strait of Hormuz and Bab Al-Mandab was seen impacting energy, according to Nour News.
• Iran's Foreign Minister Aragchi said they had successful consultations with Chinese partners, and attach great value to the strategic partnership between the two countries.
• Israel conducted air and artillery fire on southern Lebanon, according to Mehr News Agency.
• Saudi forces conducted airstrikes on Houthi positions in Al-Mokha, Yemen.
• Yemeni armed forces report heavy clashes with Houthi militia in Taiz, while there were also reports that airstrikes targeted Houthi reinforcements in western Taiz.
• An explosive-laden drone targeted a camp of the Iranian opposition Kurdish group northwest of Iraq's Sulaymaniyah, although no injuries were reported.

US TRADEEQUITIES

• US stocks were pressured and the major indices largely finished lower, although the Nasdaq was little changed, while the Dow lagged and the RSP fell 0.8%. Sectors were predominantly in the red with Energy, Financials and Materials lagging, while Tech, Health Care and Utilities outperformed, albeit with minimal gains. The overall reaction to the FOMC rate decision and press conference was hawkish. The Fed hiked rates by 25bps as expected in a unanimous decision, while the median projection saw another hike by year-end before rates remain on hold throughout 2027. The statement reiterated the Fed's commitment to price stability, a message echoed by Chair Warsh in the press conference against the backdrop of a labour market at or near full employment and strong economic growth.
• SPX -0.40% at 7,555, NDX +0.03% at 28,945, DJI -1.21% at 51,463, RUT -0.32% at 2,861.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said the US may impose heavy tariffs on Europe if it considers Europe's decision to grant Canada observer status a hostile act. Trump separately commented that they are very close to a deal with Mexico and we don't need anything Europe has, while he questioned why should the US carry Canada, Mexico and Europe.
• US-Mexico trade talks were pushed back one week, according to WSJ
• China's chief trade negotiator Li Chenggang met with a business delegation to discuss issues including China-US economic and trade.
• EU asks China to voluntarily limit car exports and wants Beijing to restrict sales of Chinese hybrid vehicles to around 15% of the EU market, according to FT.

NOTABLE HEADLINES

• US President Trump said Fed Chair Warsh has a tough board and that he still has confidence in Warsh, while he stated that interest rates are too high and not appropriate. Trump said they should be paying the lowest interest rates in the world and noted that inflation is too high. Furthermore, Trump stated he told Warsh to do what he wants and that he wants Warsh to be independent.
• US President Trump posted that interest rates in the US should be 1% or less and urged to "LOWER THE INTEREST RATES FOR THE UNITED STATES OF AMERICA, AND FAST!"
• White House Council of Economic Advisers Chair Phelan said it was a mistake for the Fed to raise rates, according to Bloomberg TV.
• US Treasury Secretary Bessent said the US is open to discussing shared risks with China in upcoming AI talks this weekend, while it was separately reported that Trump officials were considering an AI executive meeting on the sidelines of Xi's visit.
• OpenAI launched a new framework for tracking and disclosing model misalignment, as well as published six reports on unexpected behaviour observed in the last six months.

APAC TRADEEQUITIES

• APAC stocks traded mixed as the region partially weathered the hawkish reaction triggered by the FOMC meeting, where the Fed hiked the Fed Funds Rate by 25bps to 3.75-4.00%, as expected, in a unanimous decision and the dot plots pencilled in another rate hike this year.
• ASX 200 was kept afloat as outperformance in financials, healthcare and real estate offset the losses in the commodity-related sectors, but with upside capped amid a lack of bullish drivers.
• Nikkei 225 began with firm gains following a pullback in energy prices, although it has gradually faded the majority of the opening advances as participants also brace for a widely anticipated BoJ rate hike when the central bank concludes its 2-day policy meeting tomorrow.
• KOSPI gradually climbed amid tech resilience and with South Korea's Finance Minister vowing to deploy market stabilising measures if required.
• Hang Seng and Shanghai Comp were pressured with underperformance in Hong Kong after the HKMA raised rates for the first time since 2023 in lock-step with the Fed, while the downside in the mainland is cushioned following the PBoC's increased liquidity efforts.
• US equity futures recouped most of their losses after slumping on the hawkish Fed.
• European equity futures indicate a positive cash market open with Euro Stoxx 50 futures up 0.5% after the cash market closed with gains of 0.5% on Wednesday.

FX

• DXY took a breather and held on to recent spoils after climbing back above the 100.00 level owing to the broad hawkish reaction to the FOMC meeting, where the Fed hiked rates by 25bps as expected in a unanimous decision, while the updated SEPs median view was for another 25bps hike this year, followed by rates remaining on hold throughout 2027. In terms of Fed Chair Warsh's presser, the overall message was a familiar one, with price stability the primary focus, while there were later comments from US President Trump that interest rates in the US should be 1% or less and called for a fast cut to US rates, although Trump also told Warsh to do what he wants and said that he wants Warsh to be independent.
• EUR/USD languished near post-FOMC lows after slumping to sub-1.1500 territory.
• GBP/USD retreated beneath the 1.3400 handle as the dollar strengthened on the Fed, while in-line UK CPI data is unlikely to shift views for the BoE's MPC at today's confab, where rates are expected to be held steady in a 6-3 vote split.
• USD/JPY plateaued overnight after climbing to 156.00 territory in reaction to the Fed announcement, while the BoJ also kicks off its 2-day policy meeting where the central bank is seen to be backed into a corner and expected to hike rates following rare joint currency intervention in July and rhetoric from officials, including pressure from the US.
• Antipodeans nursed some of their recent losses as sentiment in Asia-Pac proved to be resilient, while participants also digested the stronger-than-expected New Zealand GDP data.
• PBoC set USD/CNY mid-point at 6.7580 vs Exp. 6.7241 (prev. 6.7628).
• Brazilian Central Bank cut the Selic Rate by 25bps to 13.75%, as expected and with the decision unanimous, while it will continue to monitor developments in this scenario in order to keep monetary policy adequately restrictive to ensure convergence to the inflation target. BCB also stated that the scenario requires serenity and cautiousness in the conduct of monetary policy.
• BoC Minutes noted Governing Council members agreed near-term inflation was likely to remain elevated and that monetary policy would be guided by the inflation forecast and risks around it. Furthermore, it stated that persistently high gasoline prices and the Iran conflict had raised market expectations for oil prices, and members also saw a higher risk of inflation spreading to non-energy goods and services in Canada.

FIXED INCOME

• 10yr UST futures were contained after yesterday's Fed-triggered selling and curve flattening.
• Bund futures nursed some of the losses seen in the aftermath of the Fed as the recent pullback in energy prices eased inflationary pressures, while there were also comments from the German Economy Minister that it would be sensible to reduce VAT on fuel from 19% to 7%.
• 10yr JGB futures lacked demand in the absence of tier-1 data from Japan and with the BoJ kick-starting its 2-day policy meeting.

COMMODITIES

• Crude futures were contained after retreating throughout the prior day following supply-related headlines, including a report that Saudi looks to resume half of the key oil pipeline within days, while Libya's NOC Chief said production has returned to normal levels after shutdowns at three oil fields.
• Saudi Arabia reportedly looks to resume half of the key oil pipeline within days.
• US President Trump's administration temporarily relaxed truck hours of service rules for gasoline and diesel shipments, according to the US Department of Transportation.
• Spot gold rebounded overnight after the post-FOMC slump and retested the USD 4,300/oz level.
• Copper futures clawed back FOMC losses as Asia-Pac markets partially shrugged off the Fed rate hike.

CRYPTO

• Bitcoin was choppy with prices oscillating above the USD 76,000 level.

NOTABLE ASIA-PAC HEADLINES

• HKMA raised its base rate by 25bps to 4.25%, as expected, while Chief Executive Eddie Yue commented that the HKD may gradually ease after carry trade activity.
• Chinese President Xi said China is to boost supply chain self-reliance and strengthen advanced manufacturing, while he added that high-quality development and high-level security should be coordinated. Xi also said to improve the independent and controllable level of industrial chains.
• Japanese Finance Minister Katayama said they will review budget requests and control debt issuance at a level that can gain market credibility, while she added they have stated their determination to address excessive volatility when they launched Japan-US joint intervention.
• Japan's Chief Cabinet Secretary Kihara said Japan will continue close talks with the US Treasury to support orderly foreign exchange markets.

DATA RECAP

• New Zealand GDP Growth Rate (Q2 QQ) 0.2% vs. Exp. 0.1% (Prev. 0.9%)
• New Zealand GDP Growth Rate (Q2 YY) 2.6% vs. Exp. 2.3% (Prev. 1.7%)

GEOPOLITICS

RUSSIA-UKRAINE

• US President Trump said they are working very hard on Russia and Ukraine, while he added that the Ukraine war is the toughest war to end and is the one driving up diesel prices.
• US House voted to impose sanctions and tariffs over Russia's conflict with Ukraine.

OTHER

• US intelligence warned regarding the sale of F-35 jets to Saudi Arabia that China could acquire US jet technology through spying or cooperation with Saudis, according to NYT.
• North Korean leader Kim's sister denounced the IAEA's meeting on denuclearisation.
• North Korean Vice Defence Minister said the US arms buildup justifies North Korea's nuclear force building, and that they will continue expanding the defensive nuclear deterrent.
• Pakistan Foreign Ministry lodged a strong protest over Indian naval provocation in its Exclusive Economic Zone, stating that while the Pakistan Navy was undertaking a biennial exercise, an Indian vessel carried out aggressive manoeuvres in close proximity.

EU/UK

NOTABLE HEADLINES

• UK government’s EU reset summit could be delayed again unless the EU agrees to include “Made in Europe” legislation on the agenda, according to a source cited by The Guardian's Elgot. German Economy Minister said it would be sensible to reduce VAT on fuel from 19% to 7%, while adding that a cap on fuel prices is the wrong approach.
• Italian PM Meloni said Italy extends tax cut on diesel to October 5th.
• Sweden election authority said centre-left parties widen lead, with the count indicating 176 seats for centre-left parties versus 173 for the right-wing bloc as counting continues.

• Iranian FM Araghchi said the MoU with the US is in effect and that Tehran wants to return to a peaceful solution, and added that Iran is not interested in continuing the conflict and looks forward to returning to a diplomatic solution.
• US equity futures gain, with the NQ outperforming following reports of a potential Intel-SK Hynix deal.
• DXY flat; GBP saw two-way price action as headline CPI returns above 3%.
• Fixed income benchmarks mixed; USTs await the FOMC policy announcement.
• Energy pares back the recent upside, helped by the constructive commentary from Iran.
• Looking ahead, highlights include US Retail Sales (Aug), Atlanta Fed GDP (Q3), New Zealand GDP (Q2), Fed Policy Announcement, BCB Policy Announcement, BoC Minutes. Speakers include ECB's Vujcic, Elderson & Nagel, Fed Chair Warsh.

SNAPSHOT

 

EUROPEAN TRADEEQUITIES

• European bourses (STOXX 600 +0.3%) are firmer across the board, rebounding from Tuesday's losses. The pullback in bond yields have helped support equities, with energy prices also lower today. Constructive commentary by Iranian FM Araghchi adds to the positive tone, stating that the MoU with the US is in effect and looks forward to returning to a diplomatic solution.
• Sectors lack a clear bias. Basic Resources top the sector pile, with Utilities and Banks rounding out the sector gainers. To the downside lie Autos, with Optimised Personal Care and Media the sector laggards.
• US equity futures are higher, following their European peers. Intel (+4.5%) has found some strength pre-market, following a Reuters report detailing potential talks with SK Hynix (+3%) about the production of memory chips in the US.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news

FX

• G10s trade tentatively against the USD ahead of a key FOMC policy decision later today. EUR and JPY hold marginally afloat, whilst the Loonie slightly lags vs peers.
• DXY currently holds towards the lower end of a 99.53-99.73 range. Action has been lacklustre throughout the overnight session and for much of the European morning, with traders ultimately awaiting Retail Sales and the Fed policy decision later today. The former will likely spark little reaction given the close proximity to the Fed. On that note, expectations are for a 25bps hike; attention will be on if it is accompanied with hawkish rhetoric/guidance. This could either be provided through a hawkish set of SEPs, a unanimous hike or overt hawkish language at Warsh’s presser. At least one of these would likely be required to give bond traders enough confidence in market stability, to allow yields to edge off highs.
• Note: A full Fed preview can be found on the Newsquawk Research Suite.
• GBP had regional inflation metrics to digest this morning. Whilst headline rose from the prior (in-line), Core Y/Y and Services was unchanged from the previous month, indicating no signs of second-round effects. Therefore, the data is unlikely to shift views at the MPC into Thursday’s confab, where rates are expected to be held steady in a 6-3 vote split. Following the data, Cable saw some two-way action, before eventually moving lower as traders curtailed their rate hike bets.

FIXED INCOME

• Global fixed benchmarks are mixed. USTs (-1 tick) are essentially flat, whilst Bunds (-6 ticks) are under mild pressure. Gilts (+38 ticks) outperform vs peers, following the region’s inflation metrics, which keeps a hold at tomorrow’s BoE meeting in play.
• USTs are trading lacklustre within a 105-27+ to 106-02+ range. Ultimately, focus remains on the FOMC announcement later today, where rates are expected to be raised by 25bps. Attention for bond traders will be on whether there is a hawkish aftertaste (decision aside), which would likely allow yields to ease off best levels, given that hawkish commentary would signal that the Fed is offering some stability. Currently, the US 10-year sits around the 5% mark, and towards multi-decade highs.
• Gilts outperform vs peers, benefiting from lower energy prices and following the region’s inflation report. On that point, whilst headline rose from the prior (in-line), Core Y/Y and Services were unchanged from the previous month; there is also a lack of evidence of second-round effects. Therefore, the data is unlikely to shift views at the MPC into Thursday’s confab, where rates are expected to be held steady in a 6-3 vote split. As such, traders curtailed their bets of a rate hike tomorrow, with money markets assigning a c. 30% chance of such a move.
• Germany sells EUR 2.12bln vs Exp. 2.5bln 3.40% 2047 and 2.90% 2056 Bund.
• Australia sells AUD 1bln in 3.75% April 2037 bonds: b/c 3.85x, avg. yield 5.3910%.

COMMODITIES

• WTI Oct and Brent Nov futures are softer after yesterday’s renewed rally. WTI trades around USD 104.90/bbl within a USD 103.76-105.63/bbl range (vs yesterday’s USD 101.21-106.75/bbl range), while Brent trades around USD 108.43/bbl within a USD 107.15-108.59/bbl range (vs yesterday’s USD 105.10-109.45/bbl range). Energy benchmarks have come under modest pressure in recent trade following constructive commentary by Iranian FM Araghchi, stating that the MoU with the US is in effect and looks forward to returning to a diplomatic solution.
• Dutch TTF was initially flat but is now posting mild gains. The Middle East conflict continues to sustain concerns around regional energy flows and European supply security. The contract trades around EUR 80/MWh within a EUR 79.93-83.28/MWh range at the time of writing, with Europe also looking ahead to the winter period.
• Precious metals are firmer as the pullback in oil and Treasury yields provides some relief ahead of today’s FOMC decision, where markets lean heavily towards a 25bps hike. Spot gold has reclaimed USD 4,300/oz and trades around USD 4,330/oz within a USD 4,276-4,341/oz range, breaking above yesterday’s USD 4,317/oz high (vs yesterday’s USD 4,262-4,317/oz range). The Fed remains the key catalyst, with updated projections and Chair Warsh’s guidance set to provide the space with some impetus.
• Base metals are modestly firmer as risk sentiment improves and Treasury yields ease ahead of the Fed, although the fundamental backdrop remains less supportive, with this week’s Chinese activity data showing continued weakness in domestic demand despite stronger industrial production, albeit upping calls for support. 3M LME copper resides in a narrow range above USD 14k/t, currently within USD 14,074.40-14,216.15.
• US Private Inventory Data (bbls): Crude +7.1mln (exp. -1.8mln), Gasoline +1.5mln (exp. -1.2mln), Distillate +1.6mln (exp. +0.8mln), Cushing -0.2mln.
• Russian plans to expand its diesel-export ban through October, according to Russian press.
• CBRT Governor said global central banks are rediscovering gold.
• Aluminium Bahrain CEO Al Baqali said damage to the smelter from the Iranian strike in March has already been repaired.
• A gold mine collapsed in West Kordofan, Sudan, on Sunday, according to sources.

TRADE/TARIFFS

• US is pressuring Mexican officials to accept new rules for exports of AI hardware to prevent Chinese companies and other foreign firms from circumventing tariffs, according to WSJ.

NOTABLE EUROPEAN HEADLINES

• EU Commission President von der Leyen delivered her annual State of the Union address. On the trade front, she said the EU's trade deficit with China has reached its tipping point and are engaged with dialogue with China to rebalance trade, however warns of the use of all tools possible to rebalance trade. With Canada, she announced that they will create a common prosperity and economic security space covering manufacturing, technology, energy, AI, defence and the Arctic and proposed that Canada becomes the first associate member of the EU. For EU defence, she said that it is time for an Article 4-style EU security protocol and announced plans to establish a new European Instrument for military strategic enablers. She also announced that the EU will establish a new European cooperation to help obtain and stockpile critical raw materials.
• UK Chancellor Healey is said to be considering budget tax rate on higher stakes slot machines, according to FT.
• Senior German lawmaker Frei said that an energy price relief must come quickly and thinks that energy relief measures should come into effect in October, adding that lower sales tax on gasoline would be an obvious step to take, RTL TV reported.
• Germany's Economy Ministry said it is continuously assessing the situation and maintaining ongoing dialogue with all market participants in the natural gas sector and welcomed SEFE's intention to step up efforts to fill gas storage.

NOTABLE EUROPEAN DATA RECAP

• UK CPI (Aug YY) 3.1% vs. Exp. 3.1% (Prev. 2.9%); Services CPI 3.4% (prev. 3.4%).
• UK CPI (Aug MM) 0.5% vs. Exp. 0.5% (Prev. 0.3%).
• UK Core CPI (Aug YY) 2.6% vs. Exp. 2.6% (Prev. 2.6%).
• UK Core CPI (Aug MM) 0.3% vs. Exp. 0.3% (Prev. 0.2%).
• UK Retail Price Index (Aug YY) 3.4% vs. Exp. 3.5% (Prev. 3.2%).
• UK Retail Price Index (Aug MM) 0.6% vs. Exp. 0.7% (Prev. 0.6%).
• UK July ONS House Price Index 1.4% (prev. 2%).
• Italian HICP Final (Aug YY) 3.2% vs. Exp. 3.2% (Prev. 2.9%).
• Italian HICP Final (Aug MM) 0.1% vs. Exp. 0.1% (Prev. -1.0%).
• ECB Wage Tracker Annual (2026): 2.202% (prev. estimate 2.301%).
• European Industrial Production (Jul YY) 0.0% vs. Exp. -0.1% (Prev. -0.3%).
• European Industrial Production (Jul MM) -0.1% vs. Exp. -0.2% (Prev. -0.1%).

CENTRAL BANKS

• RBNZ Assistant Governor Silk is to leave the central bank after the December rate decision.

GEOPOLITICS

MIDDLE EAST

• Iranian FM Araghchi said "The memorandum of understanding with America is in effect and we want to return to a peaceful solution", adding that Iran is not interested in continuing the conflict and looks forward to returning to a diplomatic solution.
• Iran's Major General Rezaei said "there will be no negotiations until Iran's conditions are met".
• IRGC Navy political deputy said no vessel in the Persian Gulf, Strait of Hormuz or Sea of Oman moves outside the supervision of the IRGC Navy, and added that Iran can target any vessel anywhere if it wishes, IRNA reported.
• Iran said only a single-digit number of ships are currently passing through the Strait of Hormuz, disputing US claims that traffic through the strategic waterway is increasing. It was separately reported that Strait of Hormuz vessel transits fell to four, according to data.
• Pakistan's military spokesperson said the Mekkah agreement with Saudi Arabia and Turkey will not affect Pakistan's strategic relationship with Iran, and reiterated that the pact is defensive in nature.
• China's Foreign Minister met with their Iranian counterpart. China encouraged Iran and the US to exercise rationality, urged all parties to take effective measures to reopen the Strait and supported dialogue between Iran and Gulf states.
• Explosions were heard in Iran's Qeshm which originated from the sea, according to IRNA.

RUSSIA-UKRAINE

• Ukrainian President Zelensky said if Russia is prepared to agree to an energy ceasefire, it must bar any attacks on energy infrastructure in any form.
• Ukrainian media reports explosions in Kyiv, while Polish military aircraft have been activated amid Russian strikes on Ukraine.

OTHER

• US mulls purchasing warships from Japan and South Korea to counter China, according to Nikkei.

CRYPTO

• Bitcoin holds steady after slipping to a low of USD 74.92k in Tuesday's session following the failure by the Senate to pass the Clarity Act.

APAC TRADE

• APAC stocks were mixed in choppy trade, albeit with sentiment gradually improving, following the declines on Wall St and recent upside in oil, while participants now await the major central bank rate decisions, beginning with the FOMC later.
• ASX 200 eked slight gains with strength seen in the commodity-related sectors and with sentiment also helped by M&A news after reports that Brookfield is to acquire Reliance Worldwide for USD 2.8bln, although gains are limited amid weakness in tech, real estate and consumer stocks.
• Nikkei 225 traded indecisively after mixed data from Japan, in which Exports and Imports topped forecasts, but Machinery Orders disappointed.
• KOSPI edged higher in two-way trade after swinging between gains and losses, while the tech heavyweights have shown some resilience with SK Hynix mildly underpinned after its union approved the tentative wage agreement in a re-vote.
• Hang Seng and Shanghai Comp were mixed in range-bound trade, with the Hong Kong benchmark lacklustre as the special administrative region unveiled its first-ever Five-Year plan to align more closely with China, which some fear could be a step away from a free market, while the mainland pared initial losses with the PBoC upping its liquidity efforts.

NOTABLE ASIA-PAC HEADLINES

• Hong Kong unveiled its first Five-Year Plan to align more closely with mainland China and stated it will adhere to the one country, two systems principle, as well as strengthen the role of the global offshore renminbi business hub. Hong Kong will hold an executive-led system, adopt a holistic approach to development and security, while it will attract China financial firms to the city for business and develop a commodity trading ecosystem. Furthermore, it aims to speed up the Northern Metropolis development and targets GDP growth within a reasonable range in the Five-Year Plan.
• PBoC Governor Pan said slower loan growth may become a 'new grateful' and that slower credit growth can stabilise debt levels, while China will support local government financing vehicles to resolve debt risks. Furthermore, Pan said they will improve the short-term interest rate adjustment mechanism and further refine policy rates, as well as strengthen the role of policy interest rates.
• China's Defence Minister said global security governance must be strengthened and they must build an equal and orderly multi-polar world, as well as find a new path to security featuring collaboration rather than confrontation and should uphold multilateralism. Furthermore, he stated that they support regional countries to decide their own future without external interference, while risks should be anticipated and diffused early to prevent minor friction turning into major disputes.

NOTABLE APAC DATA RECAP

• Japanese Trade Balance (Aug) -1105.6B vs. Exp. -1052.6B (Prev. -638.3B).
• Japanese Exports (Aug YY) 19.3% vs. Exp. 18.2% (Prev. 23.2%).
• Japanese Imports (Aug YY) 28.0% vs. Exp. 26.3% (Prev. 27.9%).

• US VP Vance told the NY Post that the conflict with Iran is expected to shift into a "much different phase" in the coming months.
• A US official said the military and Gulf countries have begun conducting daytime tanker transits through the Strait of Hormuz, rather than only at night as in recent months, according to Axios.
• Crude futures pulled back after rallying again yesterday as a series of geopolitical and supply headlines lifted the benchmarks.
• APAC stocks were mixed in choppy trade, albeit with sentiment gradually improving; European equity futures indicate a modestly positive cash market open.
• Looking ahead, highlights include UK Inflation (Aug), Italian Inflation Final (Aug), ECB Wage Tracker (Aug), US Retail Sales (Aug), Atlanta Fed GDP (Q3), New Zealand GDP (Q2), Fed Policy Announcement, BCB Policy Announcement, BoC Minutes. Speakers include ECB's Vujcic, Elderson & Nagel, Fed Chair Warsh. Supply from Germany.

SNAPSHOTLOOKING AHEAD

• Highlights include UK Inflation (Aug), Italian Inflation Final (Aug), ECB Wage Tracker (Aug), US Retail Sales (Aug), Atlanta Fed GDP (Q3), New Zealand GDP (Q2), Fed Policy Announcement, BCB Policy Announcement, BoC Minutes. Speakers include ECB's Vujcic, Elderson & Nagel, Fed Chair Warsh. Supply from Germany.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US VP Vance told the NY Post that the conflict with Iran is expected to shift into a "much different phase" in the coming months. Vance said that the first phase of the conflict, focused on destroying Iran’s nuclear programme, conventional military, and power-projection capabilities, is complete, with the current focus shifting to preventing the regime from rebuilding.
• US official said the military and Gulf countries have begun conducting daytime tanker transits through the Strait of Hormuz, rather than only at night as in recent months, according to Axios.
• Top military commanders from the US, Israel, Saudi Arabia, the UAE, Bahrain, Kuwait, Qatar, Jordan and Egypt held a secret meeting in Germany last week, according to Axios citing sources. US CENTCOM commander Cooper reassured regional partners the US will maintain its military presence despite Iranian attacks on bases and outlined plans to expand shipping through the Strait of Hormuz.
• Explosions were heard in Iran's Qeshm which originated from the sea, according to IRNA.
• Iran and Pakistan reportedly cooperate to ensure regional security, according to Tasnim.
• Iran said only a single-digit number of ships are currently passing through the Strait of Hormuz, disputing US claims that traffic through the strategic waterway is increasing. It was separately reported that Strait of Hormuz vessel transits fell to four, according to data.
• Saudi Arabia and the forces it backs in Yemen are struggling to counter the Houthi advance and are unlikely to regain the key Red Sea port of Mokha, which the Houthis captured last week, according to assessments from several Western European militaries cited by Bloomberg.
• Saudi air defences intercepted and destroyed a drone attempting to enter Mecca airspace.
• Sirens were activated and explosions heard in the Jizan and Abha regions of Saudi Arabia.
• US State Department spokesperson said that the meeting between Lebanese and Israeli ambassadors in Washington discussed the upcoming round of negotiations.
• US is preparing a USD 2.8bln weapons package for Israel, while it was separately reported that the US is preparing to sell 2,000lb bombs to Israel, according to WaPo.
• Israeli airstrikes hit several areas in southern Lebanon, according to Al Jazeera.

US TRADEEQUITIES

• US stocks closed lower again on Tuesday, with the Nasdaq and Russell underperforming, while the equal-weight S&P fell 0.4%. Calls for a slowdown in AI development remained an overhang for sentiment, although the SOXX and DRAM ETFs were marginally firmer following their sharp declines on Monday. Sectors were predominantly in the red, with weakness led by Consumer Discretionary, Communication Services and Utilities, although Energy bucked the trend as crude prices rallied amid fresh supply concerns after Libya's NOC said operations had been suspended at three oil fields, while Saudi Arabia reportedly informed some European refiners that their September crude cargo loadings had been cancelled. Oil loadings were also reportedly suspended at the key Saudi Red Sea port of Yanbu following the recent attack on the East-West pipeline.
• SPX -0.45% at 7,585, NDX -0.78% at 28,938, DJI -0.63% at 52,093, RUT -0.68% at 2,873.
• Click here for a detailed summary.

TARIFFS/TRADE

• US is pressuring Mexican officials to accept new rules for exports of AI hardware to prevent Chinese companies and other foreign firms from circumventing tariffs, according to WSJ.
• US Treasury Secretary Bessent is to meet China’s Vice‑Premier He Lifeng in New York on Sunday ahead of the Trump‑Xi summit, according to FT.
• China launched the Pinglu Canal, a major waterway project aimed at cutting transit times for cargo moving to Southeast Asia.
• EU capitals have rebuffed Canadian PM Carney's push to be granted a “unique alliance” with the bloc, according to FT.

NOTABLE HEADLINES

• US Treasury Secretary Bessent said the Treasury’s bond buyback intervention was successful and it recently held two of its most successful auctions in 20 years, while he said the government should not set an equilibrium yield level and that addressing the deficit is one factor affecting the 10-year Treasury yield. Bessent also commented that USD 5K checks are a good idea, as well as urged lawmakers not to waive AI liability and said AI firms should not receive a "blank check on liability".

APAC TRADEEQUITIES

• APAC stocks were mixed in choppy trade, albeit with sentiment gradually improving, following the declines on Wall St and recent upside in oil, while participants now await the major central bank rate decisions, beginning with the FOMC later.
• ASX 200 eked slight gains with strength seen in the commodity-related sectors and with sentiment also helped by M&A news after reports that Brookfield is to acquire Reliance Worldwide for USD 2.8bln, although gains are limited amid weakness in tech, real estate and consumer stocks.
• Nikkei 225 traded indecisively after mixed data from Japan, in which Exports and Imports topped forecasts, but Machinery Orders disappointed.
• KOSPI edged higher in two-way trade after swinging between gains and losses, while the tech heavyweights have shown some resilience with SK Hynix mildly underpinned after its union approved the tentative wage agreement in a re-vote.
• Hang Seng and Shanghai Comp were mixed in range-bound trade, with the Hong Kong benchmark lacklustre as the special administrative region unveiled its first-ever Five-Year plan to align more closely with China, which some fear could be a step away from a free market, while the mainland pared initial losses with the PBoC upping its liquidity efforts.
• US equity futures recouped some of the prior day's losses as sentiment in Asia gradually improved, but with gains capped ahead of the looming Fed rate decision.
• European equity futures indicate a modestly positive cash market open with Euro Stoxx 50 futures up 0.2% after the cash market closed with losses of 0.4% on Tuesday.

FX

• DXY was flat amid the overall cautious sentiment and after gaining yesterday alongside the recent surge in oil prices and upside in yields, although dollar-specific newsflow remained sparse ahead of the pivotal FOMC decision, where money market pricing is leaning heavily towards a 25bps hike, although such a move is not quite seen as a foregone conclusion.
• EUR/USD lacked conviction in the absence of pertinent catalysts, while reports that France would back former Dutch central bank chief Knot to succeed Lagarde as ECB President garnered little reaction.
• GBP/USD traded uneventfully and lingered beneath the 1.3500 handle as UK CPI data also looms.
• USD/JPY continued to edge higher and returned to above the 155.00 level ahead of the key central bank rate decisions beginning with the Fed today, while participants also digest mixed data from Japan and recent comments from Treasury Secretary Bessent, who spoke on a wide range of topics at the House Financial Services Committee hearing and defended yen intervention.
• Antipodeans were contained in the absence of relevant tier-1 data and amid the cautious mood.
• PBoC set USD/CNY mid-point at 6.7628 vs Exp. 6.7148 (prev. 6.7670).

FIXED INCOME

• 10yr UST futures traded little changed following yesterday's mild declines and curve steepening, with participants cautious ahead of today's key FOMC rate decision.
• Bund futures kept afloat after rebounding from the prior day's trough but with upside capped as attention turns to key central bank rate decisions and with Bund supply scheduled later.
• 10yr JGB futures gained as yields mostly declined in Japan and participants digested mixed data.

COMMODITIES

• Crude futures pulled back after rallying again yesterday as a series of geopolitical and supply headlines lifted the benchmarks, including an announcement by Libya's NOC that production and operations were suspended at three oil fields after a valve was closed on the Al-Hamada-Zawiya pipeline, warning it may need to declare force majeure. Furthermore, Saudi Arabia informed some European refiners that their September crude cargo loadings had been cancelled, and oil loadings were reportedly suspended at the key Red Sea port of Yanbu following the recent attack on the East-West pipeline.
• US Private Inventory Data (bbls): Crude +7.1mln (exp. -1.8mln), Gasoline +1.5mln (exp. -1.2mln), Distillate +1.6mln (exp. +0.8mln), Cushing -0.2mln.
• US Energy Secretary Wright said he expects the pipeline to resume operations very soon, with its reopening measured in days.Libya's NOC head said production remains around 1.4mln bpd and that related shutdowns have not materially affected output, while he said oil exports are continuing normally, and Sharara oilfield production remains normal.
• Spot gold was somewhat choppy but eventually reclaimed the USD 4,300/oz level and broke out the prior day's range as oil faded some of its recent advances, while markets now await the Fed.
• Copper futures mildly gained as risk sentiment gradually improved overnight.

CRYPTO

• Bitcoin eked mild gains but with upside capped in choppy trade and with resistance at USD 76,000.

NOTABLE ASIA-PAC HEADLINES

• US Treasury Secretary Bessent said the US had been in constant dialogue with Japan over intervention and used a "nominal amount" for yen intervention. He added that a stronger yen is better for US exporters and that the US made tens of millions of dollars from the intervention.
• PBoC Governor Pan said slower loan growth may become a 'new grateful' and that slower credit growth can stabilise debt levels, while China will support local government financing vehicles to resolve debt risks. Furthermore, Pan said they will improve the short-term interest rate adjustment mechanism and further refine policy rates, as well as strengthen the role of policy interest rates.
• Hong Kong unveiled its first Five-Year Plan to align more closely with mainland China and stated it will adhere to the one country, two systems principle, as well as strengthen the role of the global offshore renminbi business hub. Hong Kong will hold an executive-led system, adopt a holistic approach to development and security, while it will attract China financial firms to the city for business and develop a commodity trading ecosystem. Furthermore, it aims to speed up the Northern Metropolis development and targets GDP growth within a reasonable range in the Five-Year Plan.
• Australia's Speaker of the House of Representatives will lead a delegation to visit China on September 18th-22nd.

DATA RECAP

• Japanese Trade Balance (Aug) -1105.6B vs. Exp. -1052.6B (Prev. -638.3B)
• Japanese Exports (Aug YY) 19.3% vs. Exp. 18.2% (Prev. 23.2%)
• Japanese Imports (Aug YY) 28.0% vs. Exp. 26.3% (Prev. 27.9%)
• Japanese Machinery Orders (Jul MM) -3.7% vs. Exp. -2.8% (Prev. 9.7%)
• Japanese Machinery Orders (Jul YY) 11.2% vs. Exp. 15.3% (Prev. 16.9%)

GEOPOLITICS

RUSSIA-UKRAINE

• Ukraine expects to require USD 52.6bln in international financial aid in 2027 to support its budget and war effort, according to its draft budget.
• Russian Defence Ministry said Russian forces hit a tanker in Ukraine’s port of Izmail.

OTHER

• US Treasury Secretary Bessent said the US has taken control of many Venezuelan assets.
• US mulls purchasing warships from Japan, South Korea to counter China, according to Nikkei.
• China's Defence Minister said global security governance must be strengthened and they must build an equal and orderly multi-polar world, as well as find a new path to security featuring collaboration rather than confrontation and should uphold multilateralism. Furthermore, he stated that they support regional countries to decide their own future without external interference, while risks should be anticipated and diffused early to prevent minor friction turning into major disputes.

EU/UK

NOTABLE HEADLINES

• UK PM Burnham is to meet with US President Trump in New York next week, while they are expected to discuss Ukraine, the Middle East and energy during their meeting at the UNGA.
• UK Chancellor Healey mulls a budget tax rate on higher-stakes slot machines, according to FT.
• France is prepared to support Dutch central banker Klaas Knot to succeed Christine Lagarde as ECB President if a French candidate is appointed the bank’s chief economist, according to reports.

• Iranian Parliament Speaker Ghalibaf said Iranian forces have full control of the Strait of Hormuz and will prevent enemy vessels from crossing.
• The Bank of England has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts, according to the Telegraph.
• Global equities continue to be weighed on by higher energy prices and bond yields.
• DXY edges higher; GBP unreactive following a mixed jobs report.
• Fixed income benchmarks fall, with USTs underperforming; Gilts little moved amid the Telegraph report.
• Energy benchmarks remain at elevated levels as Houthis continue to strike Saudi military sites.
• Looking ahead, highlights include US ADP Employment Change Weekly. Speakers include ECB's Cipollone and US Treasury Secretary Bessent. Supply from the US.

SNAPSHOTEUROPEAN TRADEEQUITIES

• European bourses (STOXX 600 -0.8%) are entirely in the red, as higher energy prices and yields continue to weigh on equities. Not much in terms of geopolitics overnight, outside of the continued strikes on Saudi airbases by the Houthis. On the data front, the UK jobs report was mixed; payrolls fell more than expected while the unemployment rate held steady. Little reaction was seen in the FTSE 100.
• Sectors highlight the negative bias, with Retail the only sector printing modest gains. Financial Services is the clear sector laggard, with Basic Resources and Consumer Products & Services following closely behind.
• US equity futures follow their European peers, with focus remaining on the FOMC policy announcement on Wednesday. According to Macro Risk Advisors, an 8-10% pullback in the S&P is expected if the Fed starts a rate-hiking cycle, as higher rates will "compress margins in companies that cannot pass costs through as well as deliver a volatility shock into a market that is not positioned for it."
• Click for the sessions European pre-market equity newsflow
• Click for the additional news

FX

• Snapshot: G10s are broadly lower against the USD, which continues to benefit from stronger energy prices and elevated yields. The JPY remains the underperformer on wider yield differentials, whilst high-beta Antipodeans have been pressured by the risk environment.
• DXY is firmer this morning and trades at the upper end of a 99.47 to 99.68 range. Strength is facilitated by higher energy prices and elevated yields, with the US 10-year topping the 5.00% mark. Should geopols/yields remain stable heading into the FOMC on Wednesday, then the index will likely hover within recent ranges.
• JPY continues to underperform, paring back a few weeks of strength. As mentioned previously, the next bout of strength for the JPY would likely require a hawkish BoJ this week - one which would see policymakers explicitly guide for a faster pace of rate hikes. Elsewhere, Finance Minister Katayama was on the wires earlier, where she stated that she was not aware of reports that the government plans to boost defence budget spending to 3.5% of GDP (vs current 1.9%).
• GBP has been hampered by the broad USD strength. Earlier, markets saw the release of a mixed Jobs/Wages report, whereby Unemployment remained steady at 4.9% (exp. 5%), whilst the wages components were in-line. Overall, it will not do much to shift views at the BoE ahead of Thursday’s meeting, where expectations are for rates to remain on hold.

FIXED INCOME

• Global fixed benchmarks are entirely in the red, and yields have risen to multi-decade/record highs. USTs (-14 ticks) are the clear underperformers, whilst Bunds (-20 ticks) and Gilts (-14 ticks) also remain in the red.
• USTs are the clear underperformers today. It appears that an accumulation of a) higher energy prices, b) hawkish Fed repricing, c) fiscal stability woes have all caught up to the benchmark. Moreover, there may be some concession heading into the US 20-year auction later today; for reference, the Japanese outing for the same maturity was solid.
• From a yield perspective, the US 10-year (5.02%) holds beyond the key 5.00% mark, after making a peak of 5.04% earlier this morning. This brings the yield to levels not seen since the GFC. The Fed policy decision on Wednesday should see yields edge off highs (at the long-end), however, a convincing breach below the 5% mark would also likely require a hawkish SEP/commentary. This, in theory, would help ease stability concerns at the long-end; but of course, other factors such as AI-issuance and the Middle East crisis will temper any moves lower.
• Gilts are pressured alongside peers, given energy dynamics. Earlier, a mixed jobs/wages report had little impact on Gilts at the open; the Unemployment Rate remained at 4.9% (exp. 5%), whilst wages were in-line. On the supply side, The Telegraph reported that the BoE has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts.
• Bunds follow the above. There was little move to WPI, which saw the M/M top expectations. Thereafter, the German ZEW Survey was released, where Economic Sentiment rose incrementally from the prior, whilst Current Conditions improved. No move was seen in Bunds following the data.
• The Bank of England has reportedly written plans with the DMO to overhaul its money-printing programme, with plans to stop selling 20- and 30-year gilts, according to the Telegraph.
• Germany sells EUR 3.817bln vs Exp. 5bln 2.70% 2028 Schatz: b/c 1.26x (prev. 1.49x), average yield 3.27% (prev. 2.85%), retention 23.66% (prev. 23.4%).
• UK sells GBP 1.25bln 2029 Gilt via Tender: b/c 3.65x (prev. 3.61x), average yield 4.818% (prev. 4.062%).
• Japan sells JPY 532.1bln 20-year JGBs: b/c 4.01x (prev. 3.98), average yield 3.856% (prev. 3.698%), Tail in price 0.15 (prev. 0.17).

COMMODITIES

• WTI Oct and Brent Nov futures remain firmer as the Middle East conflict continues to underpin the complex, with Saudi Arabia’s East-West pipeline still offline following attacks, Riyadh seeking to boost shipments through the Strait of Hormuz, and Iran reiterating that the Strait remains closed and under its control. WTI trades towards the bottom end of a USD 101.83-103.49/bbl range (vs yesterday’s USD 100.53-104.95/bbl range), while Brent resides close to the current intraday peak within a USD 106.25-107.86/bbl range (vs yesterday’s USD 104.80-109.80/bbl range).
• Dutch TTF are currently flat and off earlier highs, trading around EUR 82.50/MWh within a EUR 81.76-83.42/MWh range (vs yesterday’s EUR 79.52-84.50/MWh range), with the increasing energy-supply risks continuing to underpin European gas ahead of winter.
• Precious metals are softer as the firmer USD and high oil prices reinforce expectations of a Fed hike tomorrow. Spot gold has slipped back below USD 4,300/oz and trades within a USD 4,261-4,317/oz range (vs yesterday’s USD 4,253-4,355/oz range), with the 100 DMA at USD 4,328.90/oz).
• Base metals are subdued amid the firmer USD, softer risk tone and mixed Chinese activity data, with weak retail sales and investment offset somewhat by stronger industrial production. Copper is also pressured by fresh deliveries into LME warehouses signalling easing supply tightness. 3M LME copper trades on either side of USD 14k/t in a USD 13,985.85-14,083.68/t range.
• Half of Russia’s leading diesel-producing refineries have reduced output following drone strikes.
• Libya's oil and gas minister said they plan to raise nat gas production to 4bln SCFD within 3-5 years.
• EPA Administrator said the US is proposing to rescind all major greenhouse gas emission standards for all power plants.
• Oman November OSP for November delivery set at USD 128.48/bbl.
• China Steel Association said it condemns overproduction and urges controls and urges for supply-side remedies, and strictly enforces output controls.

NOTABLE EUROPEAN HEADLINES

• ECB’s Moulin said the current increase in long-term bond yields reflects higher supply and increased inflation expectations and added that the inflation outlook justified recent ECB rate rise. On government debt, he said member states must take steps to reduce budget deficits. Specifically for France, he said that France’s debt agency has no problem selling bonds, with no difficulty for the French Treasury in raising funds.
• Worldpanel said UK Grocery inflation at 2.3% in 4 weeks to Sep (vs 2.1% in Aug).

NOTABLE EUROPEAN DATA RECAP

• UK Unemployment Rate (Jul) 4.9% vs. Exp. 5.0% (Prev. 4.9%).
• UK Employment Change (Jul) 67K (Prev. 83K).
• UK HMRC Payrolls Change (Aug) -26K vs Exp. -5K (Prev. -19K).
• UK Claimant Count Change (Aug) 27.8K vs. Exp. 8.3K (Prev. -11.8K).
• UK Average Earnings excl. Bonus (Jul 3MYr) 3.5% vs. Exp. 3.5% (Prev. 3.5%).
• UK Average Earnings incl. Bonus (Jul 3MYr) 3.9% vs. Exp. 3.9% (Prev. 4.2%).
• European ZEW Economic Sentiment Index (Sep) 25.8 vs. Exp. 39.9 (Prev. 31.4).
• German ZEW Economic Sentiment Index (Sep) 34.7 vs. Exp. 37 (Prev. 34.2).
• German ZEW Current Conditions (Sep) -47.1 vs. Exp. -52.2 (Prev. -61.1).
• French HICP Final (Aug YY) 2.6% vs. Exp. 2.7% (Prev. 2.4%).
• French HICP Final (Aug MM) 0.7% vs. Exp. 0.8% (Prev. 0.6%).
• Spanish HICP Final (Aug YY) 4.6% vs. Exp. 4.5% (Prev. 3.9%).
• Spanish CPI Final (Aug MM) 0.7% vs. Exp. 0.7% (Prev. 0.3%).
• German Wholesale Prices (Aug MM) 0.9% vs. Exp. 0.1% (Prev. 0.2%).
• German Wholesale Prices (Aug YY) 6.8% (Prev. 5.3%).

CENTRAL BANKS

• ECB staff committee urged for clarification whether President Lagarde will leave before the end of the term, warning that prolonged uncertainty risks damaging trust in the institution, according to FT.
• NBP's Zarzecki said there's minimal room for Polish rate changes until end-2026.

NOTABLE US HEADLINES

• US President Trump posted "Just like I delivered on the Great Big Beautiful Bill, which everyone said was impossible to pass, and the $1,776 to our great Military Warriors, I will get the $5000 for adult citizens if the Republicans win the House and Senate. JUST GET OUT AND VOTE!!!"
• US House Democrats will reportedly challenge US Treasury Secretary Bessent on rising costs at the Financial Services Committee on Tuesday, Semafor reported citing a memo, with questions also to include bonds, tariffs, Russia, Iran and crypto.
• US Supreme Court rejected Trump administration mail ballot curbs for the Midterms.

GEOPOLITICS

MIDDLE EAST

• Iranian Parliament Speaker Ghalibaf said Iranian forces have full control of the Strait of Hormuz and will prevent enemy vessels from crossing.
• Iran's top security official Rezaei said don’t get distracted by the US President’s mixed signals from 'no negotiations' to 'we’re ready to talk', while he added that stakes around oil and the straits have changed, damage control won’t stop what’s coming, and there will be no talks until Iran's conditions are met, period!
• Iran's Foreign Minister Araghchi held a phone call with Lebanon's House of Representatives Speaker Berri and discussed the need to strengthen coordination to confront Israel's efforts to ignite wars against Lebanon and countries in the region. Araghchi stressed Iran's keenness to preserve Lebanon's national sovereignty and territorial integrity in the face of Israeli aggression, while he affirmed Iran's full support for the proud Lebanese resistance in the face of Israeli occupation and aggression.
• UKMTO said they received a delayed report of an incident in the Strait of Hormuz, stating that a vessel has been struck by an unknown projectile.
• UN Security Council will hold an emergency meeting on Tuesday regarding developments around the Bab Al-Mandab Strait, according to Fars News Agency.
• Iranian Foreign Minister Araghchi held talks with the leader of Iraq’s Patriotic Union of Kurdistan (PUK).

RUSSIA-UKRAINE

• Sources cited by Russian press said US President Trump's statement on an energy truce is "an impromptu move", and that no decision was made on an energy truce in the latest talks in Moscow between the US delegation and Russian President Putin.
• Russia Foreign Minister Lavrov said that the US has never offered concessions to Russia over the Ukraine conflict in exchange for Moscow’s assistance in resolving the Iranian issue, Interfax reported. Furthermore, Lavrov said Russia is ready for reasonable compromises on Ukraine.
• Russia Foreign Minister Lavrov plans to meet US Secretary of State Rubio on the sidelines of the UN General Assembly in New York, RIA reported.
• Ukraine President Zelensky said Ukrainian forces made new gains at the Syzran refinery and struck a UAV production facility in Taganrog, a UAV preparation and launch base in the Oryol region, and targets in the Black Sea
• NATO military jets were scrambled in Lithuania due to a drone near Vilnius and a military fighter jet shot down the drone in Lithuanian airspace, according to the National Crisis Management Centre.
• A Russian presidential aide warned that if Poland enters a war against Russia, Moscow would use its entire military arsenal.

CRYPTO

• Bitcoin completely reverses Monday's gains as optimism over the passage of a key US regulatory bill wanes, and has fallen back below the USD 77k mark.

APAC TRADE

• APAC stocks traded mostly lower following the recent tech selling that was triggered by calls from industry CEOs for a slowdown in AI development, which President Trump pushed back against, while participants digested mixed Chinese activity data and await major central bank meetings.
• ASX 200 underperformed amid weakness in the mining, materials, resources and financial sectors, while risk sentiment was also not helped by the rising yield environment.
• Nikkei 225 was choppy, while Kioxia benefited from reports that Kioxia is weighing a US listing next year. However, the index then stumbled and briefly turned negative before rebounding again.
• KOSPI saw two-way price action amid the choppy mood in the local tech giants. South Korea's main stock exchange saw its first after-hours trading session, trading between 16:00-20:00 KST. According to data cited by Bloomberg, volatility spikes in individual stocks triggered brief trading halts 1,637 times, over 4x the number during the regular session. This shows the lack of liquidity provided and will therefore remain risky until institutional traders provide more liquidity.
• Hang Seng and Shanghai Comp were indecisive following several data releases from China, including a continued contraction in House Prices and mixed activity data in which Industrial Production topped forecasts but Retail Sales disappointed, while Fixed Assets Investment weakened and the Urban Unemployment ticked higher.

NOTABLE ASIA-PAC HEADLINES

• China's stats bureau said August economic activity was generally steady, though the impact of an unfavourable external environment is deepening. NBS stated residents' ability and willingness to spend should be enhanced, while it added the supply of high-quality goods and services should be improved.
• Japan is said to mull raising defence spending to 3.5% of GDP, according to Bloomberg. However, Finance Minister Katayama stated that she is not aware of the report.
• Japan Finance Minister Katayama said Japan will include that a food sales tax cut will be limited to two years in upcoming legislation and that Japan will assess tax revenue, review spending and aim to lower the debt-to-GDP ratio in the upcoming budgeting process. Katayama added that Japan will control new debt issuance through the combined initial and supplementary budgets. Furthermore, she said the government will maintain market credibility by reviewing spending and revenue and will not rely on deficit-financing bonds to fund tax cuts.
• Japanese PM Takaichi is set to reshuffle LDP executives on Wednesday ahead of a cabinet reshuffle on Thursday.

NOTABLE APAC DATA RECAP

• Chinese Industrial Production (Aug YY) 5.2% vs. Exp. 4.8% (Prev. 4.5%).
• Chinese Fixed Asset Investment (YTD) (Aug YY) -7.2% vs. Exp. -7.2% (Prev. -6.7%).
• Chinese Retail Sales (Aug YY) 0.4% vs. Exp. 0.8% (Prev. 0.6%).
• Chinese Unemployment Rate (Aug) 5.3% vs. Exp. 5.2% (Prev. 5.2%).
• Chinese House Price Index (Aug YY) -3.0% (Prev. -3.2%).
• Chinese House Price Index (Aug MM) -0.1% (Prev. -0.1%).

• Crude futures remained firmer amid the ongoing conflict in the Middle East as Yemeni Houthis continued to target areas in Saudi Arabia, while Iran reiterated an unwillingness to negotiate an agreement with the US.
• IRGC Navy said the Strait of Hormuz is closed and remains under its control, according to Tasnim.
• APAC stocks traded mostly lower following the recent tech selling that was triggered by calls from industry CEOs for a slowdown in AI development; European equity futures indicate a flat cash market open.
• 10yr UST futures declined amid gains in oil prices and after the US 10yr yield hit 5% for the first time since 2023; DXY edged higher in APAC trade.
• Looking ahead, highlights include UK Jobs/Wages (Jul), French/Spanish Inflation Final (Aug), German/EU ZEW Economic Sentiment Index (Sep), and US ADP Employment Change Weekly. Speakers include ECB's Cipollone. Supply from the UK, Germany & US.

SNAPSHOT

• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump said Iran wants to make a deal "quickly and badly" and that he will determine whether the US engages, although the administration is open to the concept.
• US imposes Iran-related sanctions on Russia's VTB Bank.
• US reportedly attacked fishing boats in the Iranian port of Kergan, Minab, according to Tasnim.
• US is said to be seeking a "step-by-step" agreement with Iran which could lead to negotiations while maintaining military and economic pressure, according to ILNA citing Pakistani sources.
• Iranian President Pezeshkian said US claims that Iran is seeking a nuclear weapon are a lie, while he questioned: "How can we negotiate with America, when they never adhered to their commitments?!"
• Iran's top security official Rezaee said don’t get distracted by the US President’s mixed signals from 'no negotiations' to 'we’re ready to talk', while he added that stakes around oil and the straits have changed, damage control won’t stop what’s coming, and there will be no talks until Iran's conditions are met, period!
• Iran has repeatedly said it does not want to negotiate an agreement with the US, while US President Trump again said that Iran wants to reach a deal quickly, according to Tasnim.
• Iran has no plans for talks under current circumstances, according to journalist Ghaderi, who stated that, as emphasised in conditions announced to the US, there will be no talks and the Strait of Hormuz will not be reopened until the war on all fronts ends, the blockade is lifted and Iran's financial resources are released.
• IRGC Navy said the Strait of Hormuz is closed and remains under its control, according to Tasnim. IRGC also stated that a supertanker attempting to pass through the restricted area south of the Strait of Hormuz exploded after hitting a mine, although US CENTCOM later denied IRGC's claim that a tanker in the Strait of Hormuz exploded after hitting a naval mine.
• Iran's Foreign Minister Araghchi held a phone call with Lebanon's House of Representatives Speaker Berri and discussed the need to strengthen coordination to confront Israel's efforts to ignite wars against Lebanon and countries in the region. Araghchi stressed Iran's keenness to preserve Lebanon's national sovereignty and territorial integrity in the face of Israeli aggression, while he affirmed Iran's full support for the proud Lebanese resistance in the face of Israeli occupation and aggression.
• Yemeni sources announced a new field advance by Houthi forces, saying that these forces have dominated the strategic heights of Kahbub, according to Fars News.
• Yemeni Armed Forces successfully intercepted two Saudi Arabian fighter jets, according to IRIB.
• Sources reported explosions in Saudi Arabia's Khamis Mushait and Abha following attacks by Yemeni armed forces, according to SNN.
• Saudi Arabia conducted airstrikes on Mokha, Yemen, according to Tasnim.
• UN Security Council will hold an emergency meeting on Tuesday regarding developments around the Bab Al-Mandab Strait, according to Fars News Agency.
• UK PM Burnham is considering Saudi requests for military support against Houthi attacks as the UK fears a "catastrophic" economic impact from a new front in the Iran war, according to Bloomberg.

US TRADEEQUITIES

• US stocks were sold on Monday but finished off earlier lows, with weakness primarily driven by chip and memory names after a group of prominent AI CEOs, including those from OpenAI, xAI and Anthropic, called for a slowdown in the pace of AI development amid safety concerns. The majority of sectors finished lower, although Communication Services, Health Care and Consumer Staples outperformed. The AI developments weighed heavily on semiconductor and memory names given their significant exposure to the AI buildout, while cybersecurity names such as CrowdStrike (CRWD) and Palo Alto Networks (PANW) rallied. Software names also outperformed as concerns over increasingly advanced AI replacing existing software services eased. Elsewhere, Financials came under pressure after Bank of America (BAC), speaking at the Barclays conference, warned that sales and trading revenue is expected to be roughly flat Y/Y. Citi (C), however, pared earlier losses after guiding to low-single-digit Y/Y growth in investment banking revenue and mid-single-digit growth in markets revenue.
• SPX -0.47% at 7,621, NDX -0.82% at 29,127, DJI -0.31% at 52,412, RUT -0.41% at 2,892.
• Click here for a detailed summary.

TARIFFS/TRADE

• UK, Japan and Turkey are seeking deals to include their car-making sectors in the EU's Made in Europe rules, according to FT.

NOTABLE HEADLINES

• US President Trump said he hopes everyone realises that price increases across America were caused by Biden and the Biden administration, not by "TRUMP". He added that with the temporary exception of oil, prices are falling sharply and oil will drop "like a rock" once the conflict with Iran ends.
• US President Trump posted "Just like I delivered on the Great Big Beautiful Bill, which everyone said was impossible to pass, and the $1,776 to our great Military Warriors, I will get the $5000 for adult citizens if the Republicans win the House and Senate. JUST GET OUT AND VOTE!!!"
• US President Trump called NVIDIA (NVDA) CEO Jensen Huang to discuss AI, according to NYT.
• US President Trump posted "I am the Hoax Buster, and I’m right now breaking another Hoax — That AI is going to take over, consume, and destroy the World, and that Robots will be marching into our Cities, and getting rid of us all! This is even wilder than the RUSSIA, RUSSIA, RUSSIA HOAX, or the Global Warming Scam."
• US Senators are debating requirements for AI giants to commit to preventing catastrophe.
• US Supreme Court rejected Trump administration mail ballot curbs for the Midterms.

APAC TRADEEQUITIES

• APAC stocks traded mostly lower following the recent tech selling that was triggered by calls from industry CEOs for a slowdown in AI development, which President Trump pushed back against, while participants digested mixed Chinese activity data and await major central bank meetings.
• ASX 200 underperformed amid weakness in the mining, materials, resources and financial sectors, while risk sentiment was also not helped by the rising yield environment.
• Nikkei 225 was choppy, while Kioxia benefited from reports that Kioxia is weighing a US listing next year. However, the index then stumbled and briefly turned negative before rebounding again.
• KOSPI saw two-way price action amid the choppy mood in the local tech giants.
• Hang Seng and Shanghai Comp were indecisive following several data releases from China, including a continued contraction in House Prices and mixed activity data in which Industrial Production topped forecasts but Retail Sales disappointed, while Fixed Assets Investment weakened and the Urban Unemployment ticked higher.
• US equity futures remained subdued following the tech-led declines on Wall St and upside in yields.
• European equity futures indicate a flat cash market open with Euro Stoxx 50 futures ultimately unchanged after the cash market closed with losses of 1.0% on Monday.

FX

• DXY marginally extended on recent gains amid higher oil prices and with the US 10yr yield breaching 5% for the first time since 2023, while participants await key central bank rate decisions beginning with the FOMC on Wednesday, with money markets pricing an 84% chance of the Fed hiking rates.
• EUR/USD remained subdued after giving up ground to the firmer buck and with the single currency also failing to benefit from the recent hawkish-leaning comments from several ECB speakers.
• GBP/USD retreated back beneath the 1.3500 handle following the prior choppy performance and lack of pertinent catalysts, although the latest UK employment and average earnings data releases are due today.
• USD/JPY continued its rebound alongside higher US yields and continued gains in oil.
• Antipodeans were contained amid the frail risk sentiment, mixed Chinese activity data and weaker New Zealand Electronic Card Spending data.
• PBoC set USD/CNY mid-point at 6.7670 vs Exp. 6.7051 (prev. 6.7698).

FIXED INCOME

• 10yr UST futures declined amid gains in oil prices and after the US 10yr yield hit 5% for the first time since 2023, while prices were also not helped by incoming supply and ahead of Wednesday's FOMC.
• Bund futures lack demand after recent choppy trade and with participants awaiting German ZEW data and today's EUR 5bln Schatz issuance, followed by EUR 2.5bln of Bunds tomorrow.
• 10yr JGB futures conformed to the lacklustre mood in global peers amid the somewhat mixed results of the 20yr and with the BoJ widely expected to hike rates later in the week.

COMMODITIES

• Crude futures remained firmer amid the ongoing conflict in the Middle East as Yemeni Houthis continued to target areas in Saudi Arabia, while Iran reiterated an unwillingness to negotiate an agreement with the US and the IRGC announced that a supertanker exploded after hitting a mine in the Strait of Hormuz, although US CENTCOM denied this.
• US President Trump commented that oil is flowing through the Hormuz Strait.
• Saudi Arabia is seeking to further boost oil supply through the Strait of Hormuz, according to Bloomberg citing sources.
• US Interior Secretary Burgum sees possibility of Venezuelan coal exports being part of US deal.
• EPA Administrator said the US is proposing to rescind all major greenhouse gas emission standards for all power plants.
• Spot gold eked slight gains and returned to above the USD 4,300/oz level, but with the upside capped after the recent choppy performance and as participants await the FOMC on Wednesday.
• Copper futures were lacklustre alongside the subdued risk appetite and mixed Chinese activity data.

CRYPTO

• Bitcoin gradually retreated back beneath the USD 78,000 level.

NOTABLE ASIA-PAC HEADLINES

• China's stats bureau said August economic activity was generally steady, though the impact of an unfavourable external environment is deepening. NBS stated residents' ability and willingness to spend should be enhanced, while it added the supply of high-quality goods and services should be improved.

DATA RECAP

• Chinese Industrial Production (Aug YY) 5.2% vs. Exp. 4.8% (Prev. 4.5%)
• Chinese Retail Sales (Aug YY) 0.4% vs. Exp. 0.8% (Prev. 0.6%)
• Chinese Fixed Asset Investment (YTD) (Aug YY) -7.2% vs. Exp. -7.2% (Prev. -6.7%)
• Chinese Unemployment Rate (Aug) 5.3% vs. Exp. 5.2% (Prev. 5.2%)
• Chinese House Price Index (Aug MM) -0.1% (Prev. -0.1%)
• Chinese House Price Index (Aug YY) -3.0% (Prev. -3.2%)
• New Zealand Electronic Retail Card Spending (Aug MM) -0.9% (Prev. 1.2%)
• New Zealand Electronic Retail Card Spending (Aug YY) 0.2% (Prev. 3.4%)

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said Ukraine proposed partners secure an agreement with Russia and that Ukraine is ready to ensure a corresponding halt to its strikes. He also said Ukraine would agree to an energy truce if Russia does, but is not convinced Russia is willing to abide by any agreement.
• Moscow and Kyiv have resumed talks on a possible energy ceasefire, but Putin is reluctant to reach a deal before winter, according to the FT citing sources.
• Sources cited by Russian press said US President Trump's statement on an energy truce is "an impromptu move", and that no decision was made on an energy truce in the latest talks in Moscow between the US delegation and Russian President Putin.
• Ukraine conducted a renewed attack on an oil refinery in Russia's Sisran, according to Tasnim. There were also reports that a missile strike damaged a logistics depot in Russia's city of Taganrog, while explosions were heard in Ukraine's capital of Kyiv.
• Polish Armed Forces launched air operations amid Russian drone strikes on Ukraine.
• US House Democrats are moving amendments to the Graham Russia/Iran sanctions bill that would scrap broad secondary tariffs, exempt the EU from "country" treatment, tighten waiver authority and authorise USD 15bln in new military financing for Ukraine, according to RFE.
• France is lobbying EU countries to lift sanctions on Uzbek-Russian oligarch Alisher Usmanov as part of a prisoner release with Azerbaijan, according to the FT citing sources.
• NATO military jets were scrambled in Lithuania due to a drone near Vilnius and a military fighter jet shot down the drone in Lithuanian airspace, according to the National Crisis Management Centre.

EU/UK

NOTABLE HEADLINES

• ECB staff committee urged for clarification whether President Lagarde will leave before the end of the term, warning that prolonged uncertainty risks damaging trust in the institution, according to FT.

• Iranian Foreign Ministry Spokesperson said that Saudi Arabia insisted that the meeting between Iran and Gulf nations in Oman not to take place and it will be postponed to another date due to the Yemen situation.
• US President Trump said he warned Ukraine to stop targeting Russian oil refineries, as strikes have shut down diesel refining and helped lift prices of the fuel to record levels.
• Anthropic CEO Amodei urged a slowdown in the development of the most advanced AI systems to prevent AI from slipping beyond human control.
• US equity futures fall, Semis hit the hardest on worries of less capex investment.
• DXY firms on Fed rate hike bets and higher energy prices; JPY underperforms.
• Fixed income benchmarks mixed despite higher energy prices (Brent +2.7%).
• Looking ahead, highlights include the Canadian CPI (Aug). Speakers include ECB's Cipollone & Lagarde.

SNAPSHOTEUROPEAN TRADEEQUITIES

• European bourses are broadly lower to start the week, with Italy's FTSE MIB the underperformer, while the SMI and FTSE 100 print decent gains, helped by updates in the Pharma space. Sectors point to a mixed picture. Health Care tops the sector pile, with Optimised Personal Care and Food, Beverages & Tobacco rounding out the leaders. Tech leads the downside, followed by Basic Resources and Industrials.
• The overnight downside was driven by Anthropic CEO Amodei, urging a slowdown in the development of the most advanced AI systems to prevent AI from slipping beyond human control. The effect this has on semiconductors may be slower capex investment; however, Amodei insists that pacing AI capabilities will not necessarily translate into reduced spending or growth. As a result, SK Hynix and Samsung Electronics slumped overnight (-6.4% and -4.1%, respectively), while ASML is currently down by 5.2%, while US behemoth NVIDIA slides by 2.5% pre-market.
• US equity futures are lower across the board, with the NQ the laggard given the AI woes detailed above. Focus this week will be on the FOMC rate decision, with markets pricing in an 89% chance of a hike.
• Click for the sessions European pre-market equity newsflow
• Click for the additional news

FX

• Snapshot: G10s are lower against the broadly stronger USD, as traders increase their bets on a rate hike this week. JPY is the clear underperformer this morning on widening yield differentials, followed closely by the Kiwi. The Loonie fares a touch better vs peers, thanks to higher energy prices and simmering down in US-Canada tensions; Trump recently downplayed leaving the USMCA, with both countries suggesting that a deal would be found “fairly soon”.
• DXY is stronger this morning and currently trades towards the upper end of a 99.07 to 99.60 range. Much of the upside comes as a number of sell-side banks bring forward their bets of a hike this week; Goldman Sachs the latest to do so. As it stands, money markets assign an 86% chance of a hike this week. There’s not a whole lot on the docket heading into the Wednesday meeting, so the index will likely remain within familiar ranges – though any updates on the geopolitical situation would spur a break in either direction.
• JPY is the clear underperformer this morning on higher expectations that the Fed will join the BoJ in hiking rates this week. Much of the strength in the JPY over the past couple of weeks has been attributed to narrowing yield differentials (hawkish BoJ), and joint intervention worries. Another bout of near-term strength in the JPY would likely require a hawkish BoJ on Friday, and particularly, board members explicitly guiding for a faster pace of rate hikes. Recent source reports have suggested that the Bank could do this. USD/JPY currently holds within a 153.37 to 154.61 range.

FIXED INCOME

• Global fixed benchmarks are mixed. USTs (+3+ ticks) hold afloat, whilst Bunds (-4 ticks) and Gilts (-3 ticks) have been pressured by another bout of strength in the energy complex. For reference, energy benchmarks are moving higher on a) postponement of Iran-Gulf talks on the Strait and b) Saudi shutting a key pipeline.
• USTs remain firmer this morning, and currently hold within a 106-03 to 106-10+ range. Strength which comes despite sell-side banks boosting their bets of a hike this week, and higher energy prices. The environment is clouded by fiscal and geopolitical uncertainty. This is made evident by sustained elevated yields; the US 10-year (4.96%) trades just shy of the 5.00% mark, and a hawkish Fed mid-week will likely see it top that mark.
• Bunds and Gilts have been pressured throughout the European morning as energy benchmarks gradually picked up. Gilts are pressured given their high dependency on external energy, and as traders eye the BoE this week.
• BTPs have steadily fallen throughout the morning and are currently at the lower end of their 111.96-112.57 range. After-hours on Friday, Fitch affirmed Italy at 'BBB+'; outlook stable. The credit agency commented that the "continued increase in public debt/GDP over the medium term" is a risk that could result in a downgrade. Regarding the upcoming elections, Fitch observed that the "recent political stability has been a positive anchor for Italy's sovereign rating", and that the law to switch the proportional electoral system could favour a stable government.

COMMODITIES

• Snapshot: Crude benchmarks are stronger this morning on a) the postponement of the Iran-Gulf nations meeting, and b) Saudi Arabia shutting the East-West pipeline. Spot gold is hampered by a stronger USD, whilst base metals have been dented by the risk-tone.
• To recap the geopolitical environment briefly, Oman postponed the Persian Gulf meeting on Monday, where Iran had planned to formally unveil a temporary shipping lane agreement for the Strait of Hormuz. Axios suggested that Saudi was concerned that the new Strait proposal would effectively establish a new status quo; however, the Iranian FM Spokesperson suggested that the meeting was postponed due to the Yemen-Saudi situation. On the supply front, Saudi shut the East-West pipeline, which reportedly threatens the loss of c. 4% of global supply. Marhelm sources pointed out that repairs could take over a month.
• Given the above, crude benchmarks gapped higher at the open and traded sideways for most of the APAC session. As the European session got underway, the oil complex caught another bid higher (on reports that the IRGC shot down a US drone, and following Iran FM comments). As it stands, Brent Nov’26 (+2.6%) holds at the top end of a USD 106.11/bbl to 108.65/bbl range; WTI Nov’26 (+2.6%) also holds at the upper end of a USD 101.59/bbl to 103.83/bbl range.
• Spot gold (-1.6%) has been hampered by a stronger USD (increased rate hike bets) and higher energy prices. As such, the yellow metal currently sits at the bottom end of a USD 4,279.28/oz to USD 4,355.40/oz range. This week, action for gold will be dictated by any geopolitical developments and the Fed mid-week. Elsewhere, base metals are entirely in the red, given the downbeat risk tone. 3M LME Copper currently trades at the lower end of a USD 14,100-14,236/t range.
• Saudi oil buyers and traders warned the kingdom could run out of oil stocks for exports if it doesn’t restart a major pipeline to the Red Sea within days, which could lead to a loss of up to 4% of global supply.
• Marhelm cited sources within Saudi Arabia that stated the damages to the East-West Pipeline will take over a month to repair due to a lack of spare parts and deeply impacted supply chains. Furthermore, it was stated that minor damages to the pipe have been repaired, but catastrophic damage to pumping infrastructure will take longer to fix.
• Exxon (XOM) executive said that they see US LNG supply growing to make c. 30% of global LNG supply by 2030.
• Shell (SHEL LN) executive said around 36mln tonnes of LNG from the Middle East have been lost to date.

TRADE/TARIFFS

• US President Trump said he’s not worried about Chinese President Xi calling off their summit scheduled for this month, while Japanese media reported that Beijing informed Washington it will cancel the planned summit if any new arms sales to Taipei are approved.
• US President Trump suggested he may be willing to permit a Chinese car company to build EVs in the US if it did so with US workers. It was separately reported that President Trump said the US will lift tariffs on Irish whiskey.
• US President Trump expressed optimism regarding resolving the trade dispute with Canada soon and downplayed prospects of leaving the USMCA, while Trump took verbal jabs at Europe regarding trade and immigration during his Ireland visit.
• Canadian PM Carney is set to meet with UK PM Burnham as Canada deepens its relations with Europe, while Carney proposed that Canada should become the EU's first 'associate member', and the bloc is said to be open to the idea.

NOTABLE EUROPEAN HEADLINES

• Exit polls showed that Sweden's centre-left opposition is on course for an election win in a blow to the far-right, while broadcaster SVT's revised projections suggest the opposition bloc is on course to win 175 seats and the incumbent right-wing bloc is on course to win 174 seats.
• Swedish election is reportedly too close to call as total count may take days.
• Fitch affirmed Italy at 'BBB+'; outlook stable.

NOTABLE EUROPEAN DATA RECAP

• Swedish CPIF Final (Aug YY) 0.7% vs. Exp. 0.7% (Prev. 0.7%).
• Swedish CPIF Final (Aug MM) -0.3% vs. Exp. -0.3% (Prev. -0.3%).

CENTRAL BANKS

• ECB President Lagarde said the current inflation shock is longer-lasting, with the volatility and pressure on energy prices to continue amid the conflict in the Middle East.
• ECB's Kazaks said the case is building for more tightening and the ECB can afford to act stepwise without rushing.
• ECB's Simkus said he cannot exclude action at any meeting, adding that December is a natural time to assess the situation more.
• ECB’s Kazimir said all options will be considered for the next decision, but action will be taken if necessary.

NOTABLE US HEADLINES

• US House Speaker Johnson said US President Trump's proposed USD 5,000 dividend for every US adult would require congressional approval, contradicting Trump's claim that the payments can be made without authorisation.

GEOPOLITICS

MIDDLE EAST

• US President Trump said Iran-backed Houthis asked the US not to target them, while Trump reiterated that he expects the Iran war to end this year, possibly after the Midterms, but also suggested that the US could stay in Iran and keep the oil, like the Venezuela deal.
• Iran's Foreign Ministry Spokesperson said that Saudi Arabia insisted that the meeting between Iran and Gulf nations in Oman not to take place and it will be postponed to another date due to the Yemen situation. The spokesperson added that the MoU between Iran and Oman is the result of weeks of intensive negotiations and was drafted with full respect for the sovereign rights of the two countries. On the situation in Iran, Baghaei said Iran has no interference in Yemen and denied any participation in the attacks on a Saudi oil pipeline. On the reports about nuclear activity in Pickaxe mountain, he called them "baseless".
• Oman postponed the Persian Gulf Foreign Ministers meeting for an indefinite period. This was later confirmed by Iran.
• Oman's Energy Minister said the Strait of Hormuz will be open and it's probably a short-term situation, while he is pleased Oman is still able to continue producing oil and gas. Furthermore, he stated that skyrocketing oil and LNG prices are not sustainable and the situation should stabilise in the medium-term.
• Iran's Akbari said "The Iranian route can be a sustainable alternative to the Red Sea route and ensure the connection of Asia, India, China and Singapore to Europe in times of crisis"
• Iran’s PGSA published an updated list of 77 vessels allegedly violating Iranian Strait of Hormuz protocols. The listed vessels could face future passage restrictions, including fines, detention or confiscation. Vessels cooperating with sanctioned ships will also be added to the list.
• Houthi Spokesperson claimed the attack on Saudi's King Khaliq Air base, stating "The Armed Forces will continue to carry out significant military operations towards Saudi territory as long as it continues its unjust aggression against our people".
• Saudi Crown Prince met the US CENTCOM chief to discuss the latest regional developments, according to Saudi state TV.
• Saudi civil defence issued emergency alerts for Khamis Mushait, Abha City, Jizan region and Najra province but said the danger has passed.
• Saudi Yanbu oil exports were halted after a pipeline attack, while weekend reports noted multiple explosions struck Saudi Arabia’s Yanbu Industrial City on Sunday.

RUSSIA-UKRAINE

• US President Trump said he warned Ukrainian President Zelensky to stop targeting Russian oil refineries as strikes have shut down diesel refining and helped lift prices of the fuel to record levels.

OTHER

• US President Trump said he could settle the UK-Argentina dispute regarding the Falklands, while he separately commented that he would love to see Ireland unified.
• North Korea fired multiple short-range ballistic missiles towards its east coast on Saturday.

CRYPTO

• Bitcoin surged at the start of Asian trade and currently resides just shy of its USD 78.24k peak despite the risk-off tone.

APAC TRADE

• APAC stocks were ultimately mixed after gradually improving from the initial risk-off mood seen at the start of the session, which had been triggered by AI-related selling after key industry executives called for a slowdown in AI development. There were also headwinds from the conflict in the Middle East after Saudi Arabia shut its East-West Pipeline following drone attacks last week, which threatens the loss of 4% of global supply, while Oman postponed the Persian Gulf meeting on Monday, where Iran had planned to formally unveil a temporary shipping lane agreement for the Strait of Hormuz.
• ASX 200 was kept afloat in range-bound trade amid resilience in defensives and the consumer sectors, while there were some comments from RBA Assistant Governor Hunter, who stated that Australian household spending is holding up okay and business investment is showing signs of strength, but also noted inflation remains above target.
• Nikkei 225 slumped at the open amid notable losses in Kioxia and with SoftBank dropping by double-digit percentages owing to its heavy AI exposure, although the index is well off today's worst levels amid mixed yields in Japan and with the TOPIX index in the green.
• KOSPI underperformed amid losses in semiconductor heavyweights, while today marks the start of the Korea Exchange extending trading hours to allow stock trading until 8pm local time.
• Hang Seng and Shanghai Comp pared opening losses and moved into the green, but with upside capped ahead of tomorrow's activity data, while US President Trump said he is not worried about Chinese President Xi cancelling their planned summit after reports that Beijing informed Washington it will cancel the planned summit if any new arms sales to Taipei are approved.

NOTABLE ASIA-PAC HEADLINES

• PBoC plans to expand the yuan offshore market and will consider expanding the central bank's macroprudential and financial stability roles, adding that they will innovate macroprudential policy tools and support steady economic recovery and growth.

NOTABLE APAC DATA RECAP

• Chinese Outstanding Loan Growth (Aug YY) 4.9% vs. Exp. 5.1% (Prev. 5.1%).
• Chinese M2 Money Supply (Aug YY) 7.5% vs. Exp. 7.6% (Prev. 7.7%).
• Chinese Total Social Financing (Aug) 1660.0B vs. Exp. 2040B (Prev. 1410.0B).
• Chinese New Yuan Loans (Aug) 60.0B vs. Exp. 400B (Prev. -340.0B).
• Japanese Industrial Production Final (Jul YY) 3.9% (Prev. 4.9%).
• Japanese Industrial Production Final (Jul MM) -0.2% vs. Exp. 0.1% (Prev. 1.9%).

• Crude futures began the week higher, with Saudi Arabia shutting its East-West Pipeline following attacks last week.
• Oman postponed the Persian Gulf meeting on Monday, where Iran had planned to formally unveil a temporary shipping lane agreement for the Strait of Hormuz.
• US President Trump said he warned Ukraine to stop targeting Russian oil refineries, as strikes have shut down diesel refining and helped lift prices of the fuel to record levels.
• AI-related selling was seen in APAC stocks after key industry executives called for a slowdown in AI development.
• APAC stocks were ultimately mixed after gradually improving from the initial risk-off mood seen at the start of the session; Europe is poised to open subdued.
• Looking ahead, highlights include the Swedish CPIF Final (Aug), Canadian CPI (Aug). Speakers include ECB's Schnabel, Cipollone & Lagarde.

SNAPSHOTLOOKING AHEAD

• Highlights include the Swedish CPIF Final (Aug), Canadian CPI (Aug). Speakers include ECB's Schnabel, Cipollone & Lagarde.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump said Iran-backed Houthis asked the US not to target them, while Trump reiterated that he expects the Iran war to end this year, possibly after the Midterms, but also suggested that the US could stay in Iran and keep the oil, like the Venezuela deal.
• US Energy Secretary Wright downplayed prospects of a breakthrough in the Strait of Hormuz as Iran planned to pitch other Gulf countries on a deal for passage through the key waterway.
• Iran had planned to formally unveil an agreement on a temporary shipping lane for the Strait of Hormuz on Monday, although it was reported that Oman postponed the Persian Gulf Foreign Ministers meeting for an indefinite period. Furthermore, Iran confirmed that the meeting was postponed at the request of regional countries.
• Iranian source said the understanding between Iran and Oman does not provide an immediate reopening of the Strait of Hormuz, although it establishes the basis on which it could reopen.
• Oman's Energy Minister said the Strait of Hormuz will be open and it's probably a short-term situation, while he is pleased Oman is still able to continue producing oil and gas. Furthermore, he stated that skyrocketing oil and LNG prices are not sustainable and the situation should stabilise in the medium-term.
• Iran’s President Pezeshkian met with Abu Dhabi’s Crown Prince on the sidelines of the BRICS summit, as Iran touted a deal to permit more ships through the Strait of Hormuz.
• Local sources reported the sound of several missiles being fired from Iran's Sirik, which were linked to Hormuz Strait operations, although there has been no official confirmation regarding the incident, according to SNN.
• UKMTO said early on Sunday that a vessel was struck by an unknown projectile while transiting the Strait of Hormuz. It was separately reported that an Iranian commercial vessel was struck off Qeshm Island early on Saturday, which killed one person and wounded three others.
• Saudi Arabia shut the East-West pipeline that bypasses Hormuz following attacks on Thursday, while the drone attack was said to have been launched from Iraq.
• Saudi Yanbu oil exports were halted after a pipeline attack, while weekend reports noted multiple explosions struck Saudi Arabia’s Yanbu Industrial City on Sunday.
• Sirens sounded in four Saudi cities following a Yemeni strike, according to Tasnim.
• Saudi Foreign Minister held a call with his UAE counterpart to discuss regional developments and de-escalation efforts, while it was also reported that Qatar's PM and Foreign Minister held a call with Kuwait's Foreign Minister to discuss the regional situation and coordination on diplomatic efforts to ease tensions, as well as support security and stability in the region.
• Iraq is said to be moving to contain a fallout from the attack that caused a closure of Saudi Arabia’s East-West pipeline, after reports noted that the strikes were found to have been launched from inside Iraq.
• Yemeni government forces have reportedly retaken positions west of Taiz that were previously infiltrated by Houthis and have advanced towards the Jir Bani Omar area as part of operations to expel Houthis from Taiz province.

US TRADEEQUITIES

• US stocks gained on Friday, with broad-based strength seeing the SPX, NDX and DJI rise by around 1%, while the equal-weight S&P gained c. 0.8%. The majority of sectors finished higher, with Communication Services, Technology and Consumer Discretionary outperforming, while Utilities, Health Care and Energy lagged; Utilities and Health Care were the only sectors to close in the red. Sentiment was initially supported by Oracle (ORCL) earnings released after-hours on Thursday, although the stock ultimately faded its gains and closed the session lower. The highlight of the session was the US CPI report. The majority of metrics were in line with expectations, although core CPI rose 0.3% M/M, above the 0.2% forecast. The hotter-than-expected core print saw markets price a 25bps Fed rate hike in the week ahead with greater conviction, with the implied probability rising to around 86% from 70% pre-data, while several banks revised their calls from a hold to a hike. The initial reaction to the data was hawkish, with equities, T-notes and gold coming under pressure while the Dollar rallied. However, much of the initial move subsequently reversed. The Dollar finished broadly flat, gold erased its losses to close higher, while equities more than recovered their post-data weakness and finished firmly in the green. The Treasury curve ultimately flattened, with front-end yields rising while the long end was little changed.
• SPX +0.83% at 7,655, NDX +0.91% at 29,368, DJI +0.98% at 52,573, RUT +0.40% at 2,903.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said he’s not worried about Chinese President Xi calling off their summit scheduled for this month, while Japanese media reported that Beijing informed Washington it will cancel the planned summit if any new arms sales to Taipei are approved.
• US President Trump suggested he may be willing to permit a Chinese car company to build EVs in the US if it did so with US workers. It was separately reported that President Trump said the US will lift tariffs on Irish whiskey.
• US President Trump expressed optimism regarding resolving the trade dispute with Canada soon and downplayed prospects of leaving the USMCA, while Trump took verbal jabs at Europe regarding trade and immigration during his Ireland visit.
• Canadian PM Carney is set to meet with UK PM Burnham as Canada deepens its relations with Europe, while Carney proposed that Canada should become the EU's first 'associate member', and the bloc is said to be open to the idea.
• Philippines halted exports of fresh purple yam amid a rise in global demand.

NOTABLE HEADLINES

• US President Trump reiterated that the US should have the lowest interest rates in the world.
• White House economic advisor Hassett said they will 100% support what the Fed decides on rates.
• US House Speaker Johnson said President Trump's proposed USD 5,000 dividend would require congressional approval, contradicting Trump's claim that payments can be made without authorisation.
• Anthropic's CEO said "we need to slow down" AI developments, while OpenAI's CEO and SpaceX's CEO agreed with the Anthropic chief's view.
• NVIDIA (NVDA) plans to invest up to USD 10bln in the Anthropic IPO, with the latter seeking to raise USD 100bln at a USD 2tln valuation.
• OpenAI CEO Altman said the company will not conduct an IPO this year and will prioritise safety.

APAC TRADEEQUITIES

• APAC stocks were ultimately mixed after gradually improving from the initial risk-off mood seen at the start of the session, which had been triggered by AI-related selling after key industry executives called for a slowdown in AI development. There were also headwinds from the conflict in the Middle East after Saudi Arabia shut its East-West Pipeline following drone attacks last week, which threatens the loss of 4% of global supply, while Oman postponed the Persian Gulf meeting on Monday, where Iran had planned to formally unveil a temporary shipping lane agreement for the Strait of Hormuz.
• ASX 200 was kept afloat in range-bound trade amid resilience in defensives and the consumer sectors, while there were some comments from RBA Assistant Governor Hunter, who stated that Australian household spending is holding up okay and business investment is showing signs of strength, but also noted inflation remains above target.
• Nikkei 225 slumped at the open amid notable losses in Kioxia and with SoftBank dropping by double-digit percentages owing to its heavy AI exposure, although the index is well off today's worst levels amid mixed yields in Japan and with the TOPIX index in the green.
• KOSPI underperformed amid losses in semiconductor heavyweights, while today marks the start of the Korea Exchange extending trading hours to allow stock trading until 8pm local time.
• Hang Seng and Shanghai Comp pared opening losses and moved into the green, but with upside capped ahead of tomorrow's activity data, while US President Trump said he is not worried about Chinese President Xi cancelling their planned summit after reports that Beijing informed Washington it will cancel the planned summit if any new arms sales to Taipei are approved.
• US equity futures declined at the open with underperformance in the Emini Nasdaq 100 after Anthropic CEO Amodei called for the slowdown of AI development, while OpenAI CEO Altman and SpaceX CEO Musk agreed with Amodei's view.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.4% after the cash market closed with gains of 0.9% on Friday.

FX

• DXY gained amid higher oil prices and the early spooked sentiment, while participants look ahead to this week's key central bank rate decisions beginning with the FOMC mid-week, with money market pricing leaning towards a hike. Furthermore, there were some mixed comments from the administration as US President Trump reiterated that the US should have the lowest interest rates in the world, while White House economic advisor Hassett said they will 100% support what the Fed decides on rates.
• EUR/USD retreated further beneath the 1.1600 handle amid the dollar strength and after failing to benefit from recent hawkish comments from ECB officials, including Lagarde, who stated the current inflation shock is longer-lasting, while ECB's Kocher warned high oil prices could force the central bank to continue hiking rates.
• GBP/USD was lacklustre as participants await UK inflation data on Wednesday and the BoE rate decision on Thursday, with the latter expected to stand pat, while there was quiet weekend newsflow from the UK, although there were comments from US President Trump that he could settle the UK-Argentina dispute regarding the Falklands and that he would love to see Ireland unified.
• USD/JPY edged higher and returned to above the 154.00 level amid the upside in oil prices and despite a widely anticipated BoJ rate hike scheduled later in the week.
• Antipodeans retreated amid a firmer buck and as risk sentiment was pressured at the start of trade, while there were also declines seen in metal prices.
• PBoC set USD/CNY mid-point at 6.7698 vs Exp. 6.7083 (prev. 6.7743)

FIXED INCOME

• 10yr UST futures eked out slight gains in otherwise uneventful trade, with upside limited amid higher oil prices and as participants await the rate decision from the Fed this week, while US President Trump reiterated his call for the US to have the lowest interest rates in the world.
• Bund futures traded marginally higher and got some reprieve from last week's selling pressure, but with the rebound contained following hawkish rhetoric from ECB officials.
• 10yr JGB futures conformed to the slightly positive performance in global counterparts, albeit with price action somewhat choppy ahead of the key rate decisions from the Fed and BoJ, with money markets heavily leaning towards both central banks hiking rates.

COMMODITIES

• Crude futures began the week higher as the conflict in the Middle East continues to threaten global energy supplies, with Saudi Arabia shutting its East-West Pipeline following attacks last week, which risks the loss of 4% of global supply, while it was also reported that Oman postponed the Persian Gulf Foreign Ministers meeting, where Iran had planned to formally unveil an agreement on a temporary Hormuz shipping lane.
• Saudi oil buyers and traders warned the kingdom could run out of oil stocks for exports if it doesn’t restart a major pipeline to the Red Sea within days, which could lead to a loss of up to 4% of global supply.
• Marhelm cited sources within Saudi Arabia that stated the damages to the East-West Pipeline will take over a month to repair due to a lack of spare parts and deeply impacted supply chains. Furthermore, it was stated that minor damages to the pipe have been repaired, but catastrophic damage to pumping infrastructure will take longer to fix.
• Iraq kept its October Basrah medium crude official selling price to Asia unchanged at parity to the Oman/Dubai average.
• Spot gold mildly declined after last week's post-CPI whipsawing and as participants await the FOMC.
• Copper futures retreated with demand hampered alongside the early negative mood across the region and with the focus this week on major central bank rate decisions.

CRYPTO

• Bitcoin gradually advanced after climbing back above the USD 77,000 level.

NOTABLE ASIA-PAC HEADLINES

• Chinese President Xi used the BRICS summit as a platform for laying out Beijing’s vision for AI and said that China will lead the creation of a BRICS ‘community’ for open-source AI.
• Chinese President Xi held a bilateral meeting with Indian PM Modi in a signal of a reset of ties between the two countries.
• China called on state-owned enterprises to sharpen overseas investment strategies and strengthen security safeguards.
• Japan's government is considering subsidising defence equipment production.
• Japan’s GPIF could sell as much as USD 62bln of US Treasuries without a formal revamp of its asset allocation policy, according to analysts at Banco Santander.

GEOPOLITICS

RUSSIA-UKRAINE

• US President Trump said he warned Ukrainian President Zelensky to stop targeting Russian oil refineries as strikes have shut down diesel refining and helped lift prices of the fuel to record levels.
• Ukrainian President Zelensky's chief of staff said Kyiv is preparing for trilateral talks to resume in October.
• Ukraine struck Russian refineries as Russia targeted ports in Odesa, while Ukraine said a Russian drone struck a passenger train headed to Warsaw near the Ukrainian-Polish border and that Russia also attacked a truck near Ukraine’s border with Poland.
• Russian state nuclear energy corporation head accused Ukraine of attacking diesel fuel trucks and endangering the Zaporizhzhia nuclear plant.
• Russia’s Kremlin said Indian PM Modi and Chinese President Xi offered their services for Ukrainian peace talks, according to TASS.

OTHER

• US President Trump said he could settle the UK-Argentina dispute regarding the Falklands, while he separately commented that he would love to see Ireland unified.
• North Korea fired multiple short-range ballistic missiles towards its east coast on Saturday.

EU/UK

NOTABLE HEADLINES

• UK faces a GBP 258bln infrastructure spending gap, according to FT citing a report on the state of Britain’s infrastructure.
• Exit polls showed that Sweden's centre-left opposition is on course for an election win in a blow to the far-right, while broadcaster SVT's revised projections suggest the opposition bloc is on course to win 175 seats and the incumbent right-wing bloc is on course to win 174 seats.
• Swedish election is reportedly too close to call as total count may take days.
• Bank of France issued a statement denying it sold debt holdings on the market, as it faces increasing criticism from presidential candidate Melenchon and his far-left party.
• Italy’s Economy Minister said they need to keep public finances in check as the ECB hikes rates.
• ECB President Lagarde said the current inflation shock is longer-lasting, with the volatility and pressure on energy prices to continue amid the conflict in the Middle East.
• ECB's Kocher warned that high oil prices could force the central bank to continue hiking rates.