• APAC stocks declined amid the rising global yield environment and the continued absence of some key markets.
• The RBA unsurprisingly kept rates steady in Governor Bullock's inaugural meeting and with the statement largely a carbon copy from the Lowe era.
• European equity futures are indicative of a lower open with Euro Stoxx 50 future -0.7% after the cash market closed down 0.9% yesterday.
• DXY is firmer above 107, EUR/USD is subdued beneath 1.05, USD/JPY continues to eye 150, AUD lags.
• Looking ahead, highlights include US IBD/TIPP & JOLTS, Australian PMI (Final), Fed’s Bostic, ECB’s Lane & Valimaki, Supply from UK.

US TRADE

EQUITIES

• US stocks traded mixed as notable outperformance in tech and telecoms offset the losses across the majority of sectors, while there were headwinds from a higher yield environment and the dollar also strengthened. This was after the US averted a government shutdown and ISM Manufacturing PMI data topped forecasts with the employment component back in expansionary territory.
• SPX +0.01% at 4,288, NDX +0.83% at 14,837, DJI -0.22% at 33,433, RUT -1.58% at 1,756.
• Click here for a detailed summary.

NOTABLE US HEADLINES

• Fed Chair Powell said the economy is still coming through the other side of the pandemic and the Fed's ambition is a sustained strong labour market, which requires price stability.
• Fed's Barr (voter) said they are at a point where they can 'proceed carefully' on monetary policy and the most important question is not whether an additional rate hike is needed this year, but how long they need to hold rates at a sufficiently restrictive level and expects it will take some time. Barr also said it is likely they are at, or very near sufficient restriction and he is confident they will get inflation to 2%, while he repeated it is likely that they will need to keep rates up for some time.
• Fed's Harker (voter) said the Fed is working on stable prices and maximum employment.
• Fed's Mester (non-voter) said the monetary policy path depends on how the economy performs and the Fed will likely need to hike rates one more time this year. Mester stated that inflation is too high but she sees welcome signs of progress in lowering price pressures, while she also commented that the Fed will keep rates restrictive to get inflation down and higher rates are needed to make sure the disinflation process continues.
• US GOP Rep. Gaetz moved to oust House Speaker McCarthy, while McCarthy said 'bring it on' in response to the move, according to Reuters.

APAC TRADE

EQUITIES

• APAC stocks declined amid the rising global yield environment and the continued absence of some key markets, while the focus turned to central bank announcements beginning with the RBA.
• ASX 200 was dragged lower by underperformance in the mining-related sectors due to the recent declines in commodity prices and with headwinds from the rising yields after Australia’s 10yr yield rose to its highest since 2011, while the RBA decision to keep rates steady provided no major fireworks.
• Nikkei 225 weakened with all industries pressured and energy firms leading the broad declines.
• Hang Seng was the worst hit on return from holiday amid losses in property, tech and energy with developers suffering despite an early spike in Evergrande shares by around 35% on resumption of trade.
• US equity futures (ES -0.2%) were lacklustre but with losses minimal compared to Asian peers.
• European equity futures are indicative of a lower open with Euro Stoxx 50 future -0.7% after the cash market closed down 0.9% yesterday.

FX

• DXY was firmer above the 107.00 level after yields rose following the shutdown aversion and ISM data, while there were also several Fed speakers including Mester who stated the monetary policy path depends on how the economy performs and the Fed will likely need to hike rates one more time this year.
• EUR/USD remained subdued beneath the 1.0500 handle owing to the dollar strength.
• GBP/USD trickled further south of 1.2100 with the latest BRC shop price index pointing to the slowest retail inflation in a year.
• USD/JPY traded sideways and continued to linger in close proximity to the 150.00 status.
• Antipodeans weakened amid the risk aversion and pressure in commodities, while the RBA unsurprisingly kept rates steady at 4.10% in Governor Bullock's inaugural meeting and with the statement largely a carbon copy from the Lowe era as it reiterated that some further tightening may be required.
• Japanese Finance Minister Suzuki said it is important for currencies to move in a stable manner reflecting fundamentals and they will take appropriate steps on FX moves with a sense of urgency, while he added that they will stand ready to respond while closely watching FX moves. Furthermore, he said currency interventions are not targeting FX levels and whether to carry out FX intervention is determined by volatility, according to Reuters.

FIXED INCOME

• 10yr UST futures were stuck around contract lows following the recent bond selling in which yields climbed to fresh highs last seen in 2007 after ISM data and various Fed commentary.
• Bund futures nursed some of their losses although the recovery lacked meaningful strength.
• 10yr JGB futures reversed opening losses with prices further supported after the latest 10yr auction showed demand was relatively stable despite the higher accepted prices.

COMMODITIES

• Crude futures remained pressured amid headwinds from a firmer dollar and the broad downbeat risk sentiment across Asia which dragged Brent crude futures back beneath the USD 90/bbl level.
• IEA's Birol said subsidies are a major incentive to increase fossil fuel use and eliminating them is an absolute must.
• Spain's Energy Minister showed support for the Dutch call to phase out fossil fuel subsidies.
• Spot gold was marginally pressured as the greenback sustained its recent strength.
• Copper futures extended on declines amid the risk-off mood and absence of Chinese buyers.

CRYPTO

• Bitcoin was marginally higher with price action contained after yesterday's pullback from the USD 28,000 level.

NOTABLE ASIA-PAC HEADLINES

• US President Biden’s administration reportedly warned Beijing to expect updated rules curbing shipments of AI chips and chipmaking tools to China as soon as early October, according to Reuters citing a US official. The report also noted that the rules could hit ASML because its systems contain US parts and components.
• US Senators hope to meet with Chinese President Xi and discuss Micron (MU) during a China visit next week, according to Bloomberg.
• RBA kept the Cash Rate Target unchanged at 4.10%, as expected, while it reiterated that some further tightening of monetary policy may be required and that the Board remains resolute in its determination to return inflation to the target. Furthermore, it stated that returning inflation to the target within a reasonable timeframe remains the Board’s priority and recent data are consistent with inflation returning to the 2–3% target range over the forecast period but also noted significant uncertainties around the outlook.

DATA RECAP

• Australian Building Approvals MM (Aug) 7.0% vs. Exp. 2.5% (Prev. -8.1%, Rev. -7.4%)
• Australian Building Approvals YY (Aug) -6.7% vs Exp. -6.4% (Prev. -7.0%)

GEOPOLITICS

• Israel carried out an air attack on Syrian armed forces positions in the vicinity of Deir al Zor, according to Syrian state media.
• India told Canada to withdraw dozens of diplomatic staff whereby it must repatriate around 40 diplomats by October 10th, according to FT.

EU/UK

NOTABLE HEADLINES

• France is reluctant to delay Brexit tariffs on electric cars traded between the UK and the EU, according to Reuters sources.
• EU is to assess risks of four critical technologies being used by third countries such as semiconductors, AI, quantum technologies and biotechnologies, while the EU aims to take measures next year to mitigate risks to these technologies, according to an EU official cited by Reuters.
• Brussels will unfreeze about EUR 13bln in EU funding to Hungary as it seeks help for Ukraine, according to FT.

DATA RECAP

• UK BRC Retail Shop Price Index YY (Sep) 6.2% (Prev. 6.9%)