• European bourses trade with a directionless bias on ECB day; US equity futures are portraying a similar tentativeness.
• DXY pulled back further from Wednesday’s new multi-year peak before finding support just under 109.500; JPY pared more losses.
• Bunds and Gilts sit far from best levels; US Treasuries are treading water albeit also off  overnight peaks 
• US President Biden delayed the decision on Trump-era tariffs on China; China Health Authority encourages people to stay put during China National Day holidays (Oct 1st-7th).
• Looking ahead, highlights include US IJC, ECB Announcement, Speeches from ECB's Lagarde, Fed's Powell, Evans, Kashkari & BoC's Rogers

8th September 2022

LOOKING AHEAD

• US IJC, ECB Announcement, Speeches from ECB's Lagarde, Fed's Powell, Evans, Kashkari & BoC's Rogers
• Click here for the Week Ahead preview.
• Click here for the Newsquawk ECB preview.
• Click here for the Newsquawk primer on Fed Chair Powell's speech.

GEOPOLITICS

RUSSIA-UKRAINE

• Belarus begins military exercises near the border region, according to the Ministry of Defence, via Reuters.
• Russian Finance Minister says the Yuan's role in Russian reserves will grow, according to Ifax; Considers it reasonable to build reserves in gold and Yuan, according to Tass citing the Finance Minister.

OTHER

• US President Biden delayed the decision on Trump-era tariffs on China, according to Bloomberg.
• The 14 nations in the US-led Indo-Pacific Economic Framework will consider creating a formal system for sharing semiconductor devices, medical products and other vital supplies during international emergencies, according to Nikkei.

EUROPEAN TRADE

EQUITIES

• European bourses trade with a directionless bias on ECB day after waning off best levels, and following a mixed APAC handover.
• European sectors are now mixed (vs mostly firmer at the open), with defensives making their way up the ranks.
• Stateside, US equity futures are portraying a similar tentativeness as their European counterparts, with the main contracts trading on either side of the flat mark but holding onto yesterday’s gains.
• Click here for more detail.

FX

• DXY pulled back further from Wednesday’s new y-t-d and multi-year peak before finding support just under 109.500.
• The EUR briefly popped over parity and the JPY pared more losses from its worst levels in around 24 years vs the USD.
• The Kiwi and Aussie both have cause to underperform given a deceleration in NZ manufacturing sales, bleak Australian trade data and remarks from RBA Governor Lowe.
• Click here for more detail.

Notable FX Expiries, NY Cut:

• EUR/USD: 1.0000 (2.2bln)
• Click here for more detail

FIXED INCOME

• Bunds and Gilts sit far from best levels between 145.82-144.71 and 106.84-105.75 parameters.
• Conversely, US Treasuries are treading water ahead of jobless claims and Fed chair Powell, albeit also off overnight peaks
• Click here for more detail.

COMMODITIES

• WTI and Brent front-month futures trade volatile with two-way action seen in the European morning.
• JPMorgan believes OPEC+ will need to cut another 1mln BPD to stabilise the market.
• Spot gold holds onto yesterday’s gains north of USD 1,700/oz, but under the USD 1,726.79/oz high set on Tuesday
• Base metals are mostly firmer but the upside is capped by China’s COVID woes, nonetheless, 3M LME copper is supported by reports that Workers at Chile's Escondida copper mine voted to strike over safety concerns.
• Russian Finance Minister considers it reasonable to build reserves in gold and Yuan, according to Tass.
• Click here for more detail.

CRYPTO

• Bitcoin trades relatively flat just above USD 19,000 whilst Ethereum remains north of USD 1,600.

NOTABLE EUROPEAN HEADLINES

• Poland has called for the EU to prioritise other measures over windfall taxes on power producers, according to the FT. The report frames it as a sign of divisions in Brussels.

NOTABLE US HEADLINES

• US SEC will propose rules next week on US treasury market trading and clearing, according to a notice cited by Reuters.

APAC TRADE

• APAC stocks were mostly positive after the relief rally on Wall St where a lower yield environment and declines in oil prices underpinned risk appetite, although Chinese markets underperformed on COVID woes.
• ASX 200 was positive with tech and gold miners leading the advances across nearly all sectors aside from energy after the recent fall in oil.
• Nikkei 225 surged towards the 28,000 level with sentiment lifted following the larger-than-expected upward revisions to Q2 GDP.
• Hang Seng and Shanghai Comp underperformed their regional peers after the megacity of Chengdu extended its lockdown in most areas and Shenzhen also temporarily lowered its entry quota for Hong Kong travellers amid a resource squeeze from the ongoing outbreak.

NOTABLE APAC HEADLINES

• PBoC set USD/CNY mid-point at 6.9148 vs exp. 6.9204 (prev. 6.9160)
• China Health Authority encourages people to stay put during China National Day holidays (Oct 1st-7th), and to avoid travel outside their cities, via Reuters. China Transport Ministry Official said daily average travel for mid-Autumn festival expected to drop 32% Y/Y.
• RBA Governor Lowe said further rate rises will be required but they are not on a preset path and said the case for a slower pace of rate hikes becomes stronger as the level of the Cash Rate increases. Lowe also commented that demand has to grow more slowly to bring it back in line with supply and there is a significant demand element to higher inflation, while he added it is very possible that wage growth does not pick up much further and said quantitative tightening is not on the agenda.
• Japanese top currency diplomat Kanda said MoF, BoJ, and FSA meeting produced no statement this time as basic understanding on FX remains unchanged from the prior meeting. Japanese top currency diplomat Kanda agreed at the meeting on the need to watch markets with a strong sense of urgency, will not rule out any step, and are ready to take action in the FX market; BoJ and Govt are extremely worried about the recent JPY moves.
• Japan Deputy Chief Cabinet Secretary said it is watching FX moves with high sense of urgency, ready to take necessary steps if recent FX moves continue. When asked about potential intervention, said he would not comment on specific market views. Will make decisions at the appropriate time regarding both economic sentiment and inflation when asked about supplementary budget

DATA RECAP

• Japanese GDP Revised QQ (Q2) 0.9% vs. Exp. 0.7% (Prev. 0.5%)
• Japanese GDP Rev QQ Annualised (Q2) 3.5% vs. Exp. 2.9% (Prev. 2.2%)
• Australian Trade Balance G&S (AUD) (Jul) 8.7B vs. Exp. 14.5B (Prev. 17.7B)
• Australian Goods/Services Exports (Jul) -10% (Prev. 5%)
• Australian Goods/Services Imports (Jul) 5% (Prev. 1%)
• New Zealand Manufacturing Sales (Q2) -4.9% (Prev. -3.5%)