• APAC stocks were mostly lower as the region failed to shrug off the negative mood following last Friday’s losses on Wall St.
• European equity futures are indicative of a lower open with the Euro Stoxx 50 future -1.7% after the cash market closed with gains of 1.2% on Friday.
• DXY has reclaimed 112, GBP lags G10 FX and hovers just below 1.11, antipodeans lead the majors.
• OPEC+ sources on Sunday said the group may opt for cuts over 1mln BPD. Energy Intel suggests as much as 1.5mln is under consideration.
• Looking ahead, highlights include EZ, UK & US Final Manufacturing PMI, US ISM Manufacturing, Speeches from Fed’s Bostic, Barkin, George & Williams, BoE’s Mann & UK Chancellor Kwarteng.

US TRADE

• US stocks continued to decline on Friday in which the S&P dipped below 3600 heading into the close and posted its worst monthly decline since March 2020.
• SPX -1.42% at 3,588, NDX -1.73% at 10,971, DJIA -1.71% at 28,725, RUT -0.45% at 1,664.
• Click here for a detailed summary.

NOTABLE HEADLINES

• Tesla (TSLA) announced it delivered 343.8k vehicles in Q3 which was lower than the 359.0k expected, while the Co. cited an increasingly challenging environment for transport and logistics, according to FT.

APAC TRADE

EQUITIES

• APAC stocks were mostly lower as the region failed to shrug off the negative mood following last Friday’s losses on Wall St. and with risk sentiment in Asia also clouded by holiday closures ahead of this week's key events.
• ASX 200 was lacklustre with price action contained amid the quasi-holiday conditions in Australia.
• Nikkei 225 recovered from early weakness and reclaimed the 26,000 level despite the mixed Tankan data in which headline Large Manufacturers’ sentiment worsened for a 3rd consecutive quarter and printed its lowest level since March 2021, although Large All Industry Capex topped forecasts.
• Hang Seng was choppy in which the index briefly recouped initial losses as the property sector strengthened after the recent announcement by the PBoC to allow some cities to cut mortgage rates for first-time buyers, although the recovery was short-lived amid the absence of mainland participants and Stock Connect flows for a week-long closure.
• US equity futures remained subdued (e-mini S&P -0.3%) after the S&P 500 closed off its worst monthly decline since March 2020.
• European equity futures are indicative of a flat open with the Euro Stoxx 50 future -1.7% after the cash market closed with gains of 1.2% on Friday.

FX

• DXY was indecisive and initially retreated below 112.00 but then spent the rest of the session in recovery mode.
• EUR/USD failed to hold on to early gains and eventually gave back 0.9800 status.
• GBP/USD pulled back from resistance at 1.1200 with UK PM Truss reportedly preparing to abandon plans to scrap the 45p tax rate which she blamed on Chancellor Kwarteng for the decision amid the Tory backlash.
• USD/JPY was choppy following the disappointing Tankan survey data and familiar FX jawboning by Japanese Finance Minister Suzuki, while there was a brief spike on a break above 145.00 which was eventually faded.
• Antipodeans were firmer amid strength in oil prices and heading into this week’s anticipated 50bps rate increases by the RBA and RBNZ.
• Brazil's electoral authority confirmed that the presidential election will go to a second-round runoff between Bolsonaro and Lula after none of the candidates achieved the 50% threshold although former President Lula received 48.2% and incumbent Bolsonaro received 43.4%, according to BBC.

FIXED INCOME

• 10yr UST futures were rangebound and took a breather from last Friday's fluctuations with participants looking ahead to this week’s key risk events culminating with the latest US jobs report on Friday.
• Bund futures remained little changed after the lack of pertinent fresh macro drivers over the weekend.
• 10yr JGB futures eked marginal gains after the BoJ recently raised its monthly bond purchase intentions in the long end.

COMMODITIES

• Crude futures jumped at the reopen on source reports that OPEC+ will consider cutting output by more than 1mln bpd which is larger than the 500k-1mln bpd that was touted last week.
• OPEC+ sources on Sunday said the group may opt for cuts over 1mln BPD. One source suggested cuts could also include voluntary cuts by Saudi Arabia, according to Reuters. Meanwhile, OPEC+ delegates indicated cuts of 1.5mln BPD or more under consideration, according to Energy Intel’s Bakr.
• UK regulator will fast-track North Sea gas fields to boost domestic production, according to FT.
• Italy’s Eni said gas supply to Italy from a Russian gas supplier has not been confirmed for Monday because Gazprom is unable to transfer gas through Austria with consequent zero flows and it expects the situation to remain the same until Tuesday, according to Reuters.
• Spot gold traded rangebound but was kept afloat amid early dollar softness.
• Copper remained subdued amid the mostly negative risk tone and with its largest purchaser absent from the market for the entire week.

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelenskyy said Lyman had been cleared of Russian troops and that the success of Ukraine’s soldiers is not limited to Lyman with the Arkhanhelske and Myrolyubivka settlements liberated in the Kherson region, while he also stated that the abduction of the Zaporizhzhia nuclear power plant’s Director-General is another instance of a clear act of Russian terror, according to Reuters.
• Russian Defence Ministry said its troops have left the east Ukraine stronghold of Lyman, according to RIA. It was also reported that Chechnya leader Kadyrov said that Russia should consider using a low-yield nuclear weapon in Ukraine after Russian troops were forced out of the eastern Ukraine town of Lyman, according to Reuters.
• Russian Defence Ministry said Russian forces hit seven artillery and missile depots in the Ukrainian regions of Kharkiv, Zaporizhzhia, Mykolaiv and the Donetsk People’s Republic, according to Reuters.
• Germany, Denmark and Norway will buy 16 Zuzana-2 Howitzers for Ukraine for EUR 92mln with delivery to start next year, according to Reuters citing the German Defence Ministry.
• US National Security Adviser Sullivan met with Ukrainian Head of the Presidential Administration Yermak in which they discussed the Zaporizhzhia nuclear plant and food security, according to a US statement cited by Reuters.
• IAEA chief Grossi is expected to travel to Kyiv and Moscow in the week ahead for talks regarding creating a protection zone around the Zaporizhzhia nuclear power plant, according to Reuters.
• NATO Secretary General Stoltenberg said any deliberate attack on NATO critical infrastructure will be met with a firm and united response, while he added that any use of nuclear weapons will have severe consequences for Russia and said that Russian President Putin’s nuclear rhetoric is dangerous and reckless, according to Reuters.
• NATO sent an intelligence note to member countries that suggested Russia has moved the submarine K-329 Belgorod into Arctic waters for the first potential test of the Poseidon nuclear missile, according to Repubblica.

CHINA-TAIWAN

• US Defense Secretary Austin said the US does not see an imminent invasion of Taiwan by China and said that China is trying to establish a new normal with actions in and around Taiwan, according to a CNN interview. Furthermore, Austin said the US is working with partners to ensure a free Indo-Pacific region is maintained and will work to ensure that US-China military communications open up.
• Taiwan Defence Ministry said four Chinese aircraft crossed the Taiwan Strait median line on Sunday, according to Reuters.

OTHER

• North Korea conducted another ballistic missile launch on Saturday involving two suspected ballistic missiles which it fired towards its east coast and landed outside of Japan’s exclusive economic zone, according to Reuters.
• South Korea condemned North Korea’s ballistic missile launch and President Yoon said North Korea’s nuclear program is a direct challenge to the world nuclear non-proliferation regime. Yoon added that North Korea will face an overwhelming response from the US and South Korea if it tries to use nuclear weapons and that South Korea will strengthen joint military drills with the US, while South Korea will also dramatically upgrade reconnaissance and strike capability against North Korea, according to Reuters.
• Israeli PM Lapid said they are studying a draft US-brokered deal demarcating the maritime border with Lebanon and that the draft offer would fully preserve Israel’s security and economic interests, while they are open to Lebanon developing gas in the disputed field if Israel gets royalties from it, according to Reuters.
• A regional country mediated between Iran and the US for a prisoner swap and billions of dollars of Iran’s frozen assets will be released soon, according to Iran’s Nournews.
• Venezuela released 7 jailed Americans in exchange for the US freeing 2 relatives of Venezuelan President Maduro, while a senior US administration official said the US policy towards Venezuela has not changed and they continue to believe that a Venezuelan-led dialogue to the restoration of free and fair elections in the country is still the top priority, according to Reuters.

CRYPTO

• Bitcoin traded marginally higher and held on to the 19,000 level.

ASIA

NOTABLE APAC HEADLINES

• PBoC and other departments issued the overall plan for three pilot areas of inclusive financial reform, according to Reuters.
• BoJ Summary of Opinions stated that Japan's core consumer inflation is likely to accelerate towards year-end and narrow the pace of increase thereafter, while it added the Bank should maintain monetary easing and that it is desirable to maintain current forward guidance with a dovish bias as the impact of the pandemic is uncertain and inflation is likely to slow next fiscal year and onwards.

DATA RECAP

• Japanese Tankan Large Manufacturing Index (Q3) 8 vs. Exp. 11 (Prev. 9)
• Japanese Tankan Large Manufacturing Outlook (Q3) 9 vs. Exp. 11 (Prev. 10)
• Japanese Tankan Large Non-Manufacturing Index (Q3) 14 vs. Exp. 13 (Prev. 13)
• Japanese Tankan Large Non-Manufacturing Outlook (Q3) 11 vs. Exp. 15 (Prev. 13)
• Japanese Tankan All Big Capex Estimate (Q3) 21.5% vs. Exp. 18.8% (Prev. 18.6%)

EU/UK

NOTABLE HEADLINES

• UK PM Truss is to delay the vote on cutting the 45p rate of tax, according to The Telegraph. However, it was separately reported that PM Truss is preparing to abandon the plan to scrap the 45p tax rate following crisis talks with Chancellor Kwarteng amid the brutal Tory backlash, according to The Sun.
• UK PM Truss said that they would be in serious trouble on the economy if they hadn’t acted and that they also needed to act on other areas of taxation to make sure that the economy did not slow down any further. Truss also said that she wants to reassure people that they have a very clear plan, while she stands by the package they announced and thinks they made the right decision to borrow more this winter, according to Reuters.
• UK government has been asked by the Chinese owner of British Steel for a rescue package of up to GBP 500mln to keep its vast steelworks in Lincolnshire open which has stoked fears of thousands of job losses and the prospect of the closure of some of the last blast furnaces in the UK, according to FT.
• S&P affirmed the UK at AA; Outlook revised to Negative from Stable on Friday.
• Credit Suisse CEO said the firm is at a critical moment and sees strength, as well as noted they have a strong capital base and liquidity in a recent attempt to calm nerves. Note, there were unsubstantiated rumours on social media that a major investment bank is on the brink with many pointing to Credit Suisse. The BoE is reportedly monitoring the situation at the Co. amid market turbulence. However, officials are satisfied that there have been no major developments at the Bank, according to the Telegraph.