• Asia-Pac stocks were pressured following the tech sell-off in the US and several headwinds for global markets
• President Biden reportedly stated to progressives that the spending package needs to be between USD 1.9tln-2.2tln
• In FX, the DXY hovers around the 94.00 mark, EUR/USD and GBP/USD eye 1.16 and 1.36 respectively
• RBA kept policy settings unchanged and reiterated its dovish guidance that suggests no rate hike until 2024 at the earliest
• Looking ahead, highlights include Eurozone, UK & US Services and Composite PMIs (final), US ISM Services PMI, ECB's Lagarde, supply from the UK

CORONAVIRUS UPDATE

US CDC lowered its COVID travel advisory to high risk for France, Portugal, Morocco, Argentina, South Africa and Iceland. (Newswires)

Pfizer (PFE) and BioNTech (BNTX) received CHMP positive opinion for COVID-19 vaccine booster in the EU. (Newswires)

ASIA

Asia-Pac stocks were pressured following the tech sell-off in the US and amid several headwinds for global markets including US-China trade frictions, China's record incursion into Taiwanese airspace and with higher oil prices stoking inflationary concerns. ASX 200 (-0.6%) was dragged lower after the losses in tech rolled over into the region and following somewhat mixed Trade and PMI data releases, but with downside stemmed by resilience in gold miners and the energy sector, after gains in the underlying commodity prices including the rally in oil to a seven-year high. Nikkei 225 (-2.3%) slumped below the 28k level and briefly entered into correction territory as it suffered intraday losses of as much as 3% and with index heavyweights Fast Retailing and SoftBank dominating the list of worst performers, while KOSPI (-1.8%) also fell into a correction with the index at least 10% below the record highs registered earlier this year despite efforts by South Korea’s antitrust regulator to dispel fears of a harsh tech crackdown. Hang Seng (Unch.) was pressured at the open amid tech woes and default fears after reports that Fantasia Holdings missed payments due yesterday for USD 206mln of bonds, although the Hong Kong benchmark then pared its losses with notable strength seen in Chinese oil majors as they benefit from the rising energy prices. Finally, 10yr JGBs were initially kept afloat by the risk aversion but then reversed course amid the uninspired mood in T-notes and Bund futures, as well as weaker metrics from the 10yr JGB auction which attracted a lower bid to cover despite a decline in accepted prices.

China's banking regulator said it is to ban loans for speculating on luxury goods and it was also reported that China prohibits loans for commodity speculation. (Newswires)

USDA Secretary Vilsack said China is running about USD 5bln short on agricultural buying commitments. (Newswires)

Taiwanese President Tsai said it would be catastrophic for regional peace if Taiwan were to fall to China and that they do not seek military confrontation but will defend themselves if democracy and way of life are threatened, while she added that Taiwan will not bend to pressure, but nor will it turn adventurist. There were earlier comments from a Taiwanese official that "this is getting close to the brink of conflict" and sources said that Chinese aircraft were simulating attacks on some of the naval vessels that had participated in weekend drills, while the White House said they are in touch and privately conveying messages through diplomatic channels when asked about China's actions regarding Taiwan. (Newswires/FT)

Japanese Foreign Minister Motegi said the geopolitical situation surrounding Japan is becoming increasingly difficult and that they will work with other countries to realise vision for a free and open Indo-Pacific, while Defence Minister Kishi said he was instructed by PM Kishida to boost deterrence in cooperation with the US. (Newswires)

• Tokyo CPI YY (Aug) 0.3% vs. Exp. -0.1% (Prev. -0.4%)
• Tokyo CPI Ex. Fresh Food YY (Aug) 0.1% vs. Exp. 0.2% (Prev. 0.0%)
• Tokyo CPI Ex. Fresh Food & Energy YY (Aug) -0.1% vs. Exp. -0.1% (Prev. -0.1%)

UK/EU

Irish Finance Minister Donohoe said he received new corporate tax reform text from OECD and will brief the Irish government on Thursday, while he added that they are making progress but there is need for further engagement and Irish Deputy PM Varadkar also commented that the updated text of OECD global corporate tax reform responds to a lot, if not all, Irish concerns. (Newswires/RTE)

FX

In FX markets, the DXY was initially lacklustre following the prior day’s slip beneath the 94.00 level as its major counterparts clawed back some of the prior month’s losses, although the dollar then found some support from haven flows as the stock sell-off in Asia worsened which pressured the greenback's major counterparts and in particular, the activity currencies. Elsewhere, warnings continued to echo in Washington regarding the looming debt ceiling and President Biden held meetings with House progressives on the reconciliation bill where he reportedly stated that the spending package needs to be between USD 1.9tln-2.2tln. EUR/USD retraced some of the prior day’s gains as a counterparty to the USD swings. GBP/USD plateaued and traded both sides of 1.3600 with the pair somewhat indecisive following the latest threats by the UK to invoke Article 16 if there are no changes to the Northern Ireland Protocol. USD/JPY shrugged off the underperformance in Japan and mixed Tokyo CPI data to reclaim the 111.00 handle to the upside, while antipodeans pulled back overnight owing to their high beta statuses and with mild pressure seen following the RBA policy announcement where the central bank kept policy settings unchanged, as expected, and reiterated its dovish guidance that suggests no rate hike until 2024 at the earliest.

RBA maintained its Cash Rate Target and 3yr Yield Target at 0.10%, while it also keeps bond purchase plan unchanged at AUD 4bln per week through to at least mid-February 2022, as expected. RBA reiterated that the central scenario is that the condition for a rate increase will not be met before 2024 and it is committed to maintaining highly supportive monetary policy. RBA added tge the Delta outbreak interrupted the recovery of the economy and GDP is expected to have declined materially in the September quarter, although the setback to the economic expansion is expected to be temporary and economy will grow again in the December quarter. Furthermore, it noted that the economy is expected to bounce back as vaccination rates increase further and restrictions are relaxed, but also commented that wage and price pressures remain subdued. (Newswires)

• Australian Trade Balance (AUD)(Aug) 15.1B vs. Exp. 10.3B (Prev. 12.1B)
• Australian Goods/Services Exports (Aug) 4% (Prev. 5%)
• Australian Goods/Services Imports (Aug) -1% (Prev. 3%)

COMMODITIES

Commodities were mixed with WTI crude stable as it held on to most the gains seen during the prior session where oil prices rallied to seven-year highs following the OPEC decision to proceed with the planned 400k bpd output increase, instead of a potential larger increase that was previously touted by sources. Furthermore, there were comments from Russian Deputy PM Novak that increasing oil output by 400k BPD in November will help stabilise markets and it was also reported that UAE's ADNOC hiked its November Murban crude OSP to USD 73.41/bbl from USD 69.73/bbl in October. Elsewhere, gold prices mildly retreated overnight as the greenback nursed losses and recovered the 94.00 level, while copper languished amid the downbeat risk tone.

Kazakhstan's OPEC+ quota has been set at 1.540mln BPD for November, (prev. 1.524mln in October), according to a source. (Newswires)

White House said the US will use all tools to keep gasoline prices down. (Newswires)

GEOPOLITICAL

US official said the US and Israel are to share intelligence and come up with a baseline assessment on how far Iran's nuclear program has advanced, while the official added that the time for Iran to achieve a nuclear breakout has narrowed from 12 months to a few months since Trump abandoned the nuclear deal. Furthermore, Biden officials will tell Israeli counterparts on today that the US is committed to diplomacy with Iran but will pursue other avenues if talks fail. (Newswires)

US

Treasuries were marginally lower after risk-off conditions reversed curve steepening out of Europe. By settlement, 2s +1.6bps at 0.280%, 3s +1.6bps at 0.501%, 5s +1.1bps at 0.944%, 7s +1.2bps at 1.273%, 10s +1.5bps at 1.482%, 20s +1.1bps at 1.992%, 30s +0.9bps at 2.049%; TYZ1 volumes were below recent averages. Inflation breakevens little changed. SOFR and EFFR both unchanged at 5bps and 8bps, respectively. Europe returned for the week on the offer for govvies, with the gains in oil and commodities supporting the inflation trade. Lows for T-Notes were made going into the NY cash equity open at 131-27+, with cash 10s marking a yield high of 1.51%, before the sell-off in stocks saw a flight-to-quality bid emerge for USTs, reversing some of the selling. Some of the factors cited for the haven bid were the supply-driven oil rally, fresh China woes after Fantasia missed debt payments, in addition to reports of over 50 military Chinese jets that flew over Taiwan's airspace in what marks the biggest provocation yet. However, as the stock selling subsided and indices levelled at lows, T-Notes tracked choppy and sideways through the afternoon, just lower on the session. On an RV perspective, note that the belly was weakest, with the long-end finding some support from the Fed buyback operation and no coupon supply this week. T-note (z1) futures settled 3 ticks lower at 132-02+.

Fed said it began discussions last week with the OIG for the Fed to initiate an independent review of trading activity by officials in which the review will look into if trading was in compliance to ethics rules and the law. In relevant news, Senator Warren called for the SEC to investigate Fed officials’ trading activities and said the financial disclosures of Vice-Chair Clarida reflects 'atrocious judgement'. (Newswires/WSJ)

US President Biden said raising the debt ceiling is about repaying past debts rather than allowing new expenditure and should be a bipartisan undertaking, while he warned that not raising the debt limit would threaten the reserve status of the dollar. President Biden also stated he is asking Republicans not to use procedural tricks to prevent the debt ceiling from being raised and that in the days ahead, people may see their retirement account values sink and interest rates go up. Furthermore, he added that the GOP should let Democrats raise the debt ceiling this week and stated that he cannot guarantee the US won't default on its debt, which he added was up to McConnell. (Newswires)

US President Biden spoke with 12 progressive members of Congress in which they agreed to follow through on key priorities, while it was also reported that President Biden told House progressives the spending package needs to be between USD 1.9tln-2.2tln and he will meet with moderate House Democrats virtually today. (Newswires/CNN)

US Senate Majority Leader Schumer said he will soon file cloture on the House passed bill to extend the debt limit until December 2022 and is preparing for a vote on that measure. It was separately reported that Schumer stated Democrats must arrive at a final agreement on the details of the build-back better agenda as soon as possible and preferably within a matter of days, not weeks, according to Fox's Pergram. (Newswires/Fox/Twitter)

US Republican Senator Rounds said he would be open to allowing Democrats to increase debt ceiling by a dollar amount but plans to filibuster a suspension. (Newswires)