• APAC stocks declined following the CPI-inspired bloodbath on Wall St where the S&P 500 had its worst day since June 2020.
• DXY is a touch softer but on a 109 handle, JPY leads G10 FX amid intervention speculation, EUR/USD lingers below parity.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -0.7% after the cash market closed down by 1.6% yesterday.
• Crude weakened overnight in the aftermath of bearish inventory data and recent dollar strength.
• Looking ahead, highlights include UK inflation, US PPI, New Zealand GDP, Speeches from European Commission State of Union Address & ECB's Lane.

US TRADE

• US stocks sold off and bonds were also hit after US CPI data printed hotter than expected on all metrics, which resulted in a bloodbath across Wall St with the rate-sensitive Nasdaq slumping by around 5.5%, while the S&P 500 suffered its worst decline since June 2020.
• SPX -4.33% at 3,932, NDX -5.54% at 12,033, DJIA -3.94% at 31,104, RUT -3.80% at 1,830.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US President Biden said the stock market doesn't necessarily reflect the state of the overall economy and he is not concerned about the recent inflation report, according to Reuters.
• US Senate Majority Leader Schumer said the energy permitting bill is to be added to the stop-gap spending bill this month, according to Reuters.
• US Senator Graham (R) said he is working on a new regulatory agency for companies like Twitter (TWTR) and is working with Senator Warren on social media regulation.
• US Labor Secretary Walsh will meet with rail carriers and unions in Washington D.C. on Wednesday morning and there were prior reports that a ninth railroad union secured a tentative deal with the US freight railways, while 3 of 12 unions which represent around 60k workers have not inked deals.
• Nomura called for a 100bps Fed rate hike next week (the first bank to make such a call) and it anticipates a terminal rate of 4.50-4.75% by February 2023, which is 50bps higher than the previous forecast.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian Presidential Adviser said Ukraine expects the quantity of Russian attacks on Ukrainian energy infrastructure to grow, according to Reuters.
• IAEA said all three backup power lines to the Russian-held Zaporizhzhia nuclear power plant in Ukraine have been restored.
• Russian President Putin highlighted to German Chancellor Scholz Russia's willingness to be a reliable energy supplier, according to TASS citing the Kremlin. It was separately reported that German Chancellor Scholz emphasised to Russian President Putin that any further Russian annexation steps would not go unanswered and would not be recognised under any circumstances.

CHINA-TAIWAN

• US is reportedly in early talks on sanctions against China to deter it from invading Taiwan, according to Reuters sources, while Taiwan is lobbying the EU to prepare a possible sanctions package against China.
• Taiwan was reported to host dozens of lawmakers in Washington to gather support for measures to deter China and visiting lawmakers are set to pledge support in their home countries for sanctions as a deterrent against China's hostility, according to Reuters.

OTHER

• US statement to IAEA said it stands ready to quickly revive the Iran nuclear deal but lacks a willing partner in Iran, while a US State Department spokesperson said that it is not too late to conclude an Iranian nuclear deal.
• Russia reportedly spent GBP 260mln on secret operations to influence politicians around the world, according to US intelligence cited by Sky News.

APAC TRADE

EQUITIES

• APAC stocks declined following the bloodbath on Wall St where the S&P 500 had its worst day since June 2020, the DJIA slumped by nearly 1,300 points, while the Nasdaq 100 led the declines with all constituents in the red after hot US inflation data spurred more hawkish Fed rate pricing.
• ASX 200 was pressured with losses in all sectors and underperformance in real estate after ASIC moved to stop investment in two major property funds.
• Nikkei 225 fell below 28k amid notable losses in the tech industry and with stronger than expected Machinery Orders doing little to inspire a turnaround.
• Hang Seng and Shanghai Comp were also negative amid headwinds from an approaching typhoon and with the US reportedly in early talks on sanctions against China to deter it from invading Taiwan.
• US equity futures traded sideways which provided some respite from the recent sell-off that dragged the Emini S&P (+0.2%) below 4,000.
• European equity futures are indicative of a weaker open with the Euro Stoxx 50 future -0.7% after the cash market closed down by 1.6% yesterday.

FX

• DXY was steady for most of the session and held on to its post-CPI gains after the data spurred hawkish Fed bets with a 75bps hike next week fully priced in and the probability of a 100bps hike at around 40%. The greenback also benefitted after WSJ's Timiraos noted the inflation report supports the case for the Fed to hike rates by "at least" 75bps and increases the prospects of hefty increases continuing in the coming months, although was eventually pressured in late Asia trade as the JPY strengthened on speculation that the BoJ was preparing for FX intervention.
• EUR/USD slipped below parity after the prior day’s slump against the dollar with the recent weak ZEW data doing the single currency no favours.
• GBP/USD suffered after US CPI overshadowed UK Unemployment and Wages data although was off its lows and reclaimed the 1.1500 handle.
• USD/JPY retreated below 144.00 with late pressure after reports that the BoJ conducted a rate check on FX in apparent preparation for intervention.
• Antipodeans were lacklustre with price action contained amid the broad downbeat mood and after weak Current Account data from New Zealand.
• PBoC set USD/CNY mid-point at 6.9116 vs exp. 6.9003 (prev. 6.8928).

FIXED INCOME

• 10yr UST futures were lacklustre following the recent inflation-triggered sell-off and pronounced curve flattening post-30yr auction.
• Bund futures remained subdued by the inflationary impulse from the US and with ECB's Simkus anticipating at least a 50bps rate hike in October.
• 10yr JGBs futures suffered from spillover selling but are off their lows amid the BoJ’s presence in the market for nearly JPY 1.1tln of JGBs on top of its daily fixed rate buying operations and with the 10yr yield already at the top end of the BoJ's target band of 0.25%.

COMMODITIES

• Crude eventually weakened overnight in the aftermath of bearish inventory data and recent dollar strength, although the downside was stemmed after recent reports that the US is considering refilling reserves at USD 80/bbl.
• US Private Inventory Data (bbls): Crude +6.0mln (exp. +0.8mln), Cushing +0.1mln, Gasoline -3.2mln (exp. -0.9mln), Distillates +1.8mln (exp. +0.6mln).
• US President Biden is considering buying oil at around USD 80/bbl to refill reserves, according to Bloomberg.
• Libya's NOC said oil production at 1.22mln BPD (prev. 1.205mln BPD on Sept. 11th).
• Norway PM said it will meet gas producers on Thursday to discuss prospects for longer-term contracts that may stabilise prices on sales to Europe.
• Spot gold traded sideways around the USD 1700/oz level after having slumped against the firmer dollar.
• Copper languished near the prior day's lows with prices subdued by the broad risk aversion.

CRYPTO

• Bitcoin found some mild reprieve overnight from the prior day's near-10% drop and remained above the 22,000 level.

NOTABLE APAC HEADLINES

• US congressional panel was told by experts that the US ban on sales by Nvidia to Chinese clients will slow Beijing’s efforts to build a facial recognition surveillance network and further restrictions on high-tech product sales should be imposed, according to SCMP.
• Hong Kong is to tighten rules regarding issuing provisional vaccine passes to travellers, according to SCMP.
• Japanese Finance Minister Suzuki said FX intervention is among the options and FX moves are apparently rapid, while he added they are very concerned about sharp yen weakening and will take necessary steps if such moves persist.
• BoJ reportedly conducted a rate check on FX in apparent preparation for currency intervention, according to Nikkei.

DATA RECAP

• Japanese Machinery Orders MM (Jul) 5.3% vs. Exp. -0.8% (Prev. 0.9%)
• Japanese Machinery Orders YY (Jul) 12.8% vs. Exp. 6.6% (Prev. 6.5%)
• New Zealand Current Account QQ (NZD)(Q2) -5.2B vs. Exp. -4.7B (Prev. -6.1B, Rev. -6.5B)
• New Zealand Current Account YY (Q2) -27.8B vs. Exp. -26.6B (Prev. -23.3B)
• New Zealand Current Account/GDP (Q2) -7.7% vs. Exp. -7.4% (Prev. -6.5%)

EU/UK

NOTABLE HEADLINES

• French Finance Minister Le Maire cut 2023 economic growth outlook to 1.0% (prev. 1.4%) and expects French inflation to fall to 4.2% in 2023 from 5.3% in 2022.