US and China day two talks are underway; overnight, FT reported that there has been a lack of progress, potentially reducing the odds of a Beijing summit. Recently, US Treasury Secretary Bessent said the US and China made good progress on technical details.
Crude benchmarks are higher amid a softer USD and after President Trump said he is ready to impose sanctions on Russia, once NATO stops buying Russian oil. Most recently, Russia’s Kremlin says NATO is fighting Russia.
NVIDIA hit in the pre-market, weighing on the NQ and broader sentiment, as China said NVIDIA violated antitrust laws; European bourses off best, but still firmer, Euro Stoxx 50 +0.6%.
Fitch downgraded France to A+ (prev. AA-), sparking modest OAT-Bund widening though levels remain orderly. EUR is unreactive, GBP leads with the DXY softer.
Gold had an initial upward bias with the focus on geopols, though off best. Base metals capped by soft Chinese data.
Looking ahead, NY Fed Manufacturing (Sep), Speakers including ECB’s Schnabel, Rehn & Lagarde.
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TARIFFS/TRADE
US Treasury Secretary Bessent said the US and China made good progress on technical details; Chinese counterparts have an “aggressive ask”; if there is no TikTok agreement, then it will not affect overall relations. Not willing to sacrifice national security.
USTR Greer said they are close to resolving the TikTok issue with China. Wants a good relationship to be maintained with China.
US President Trump posted on Truth Social that “When Foreign Companies who are building extremely complex products, machines, and various other “things,” come into the United States with massive Investments, I want them to bring their people of expertise for a period of time to teach and train our people how to make these very unique and complex products, as they phase out of our Country, and back into their land.”
US President Trump said China is paying a lot in tariffs and talks with China in Spain are going well, while he also commented that they are still negotiating on TikTok and may let it die, but it depends on China.
China’s Commerce Ministry said it is to immediately open an antidumping investigation into certain US analogue chips and began an anti-discrimination investigation into US measures against China in the integrated circuit sector.
US Treasury said talks with China regarding TikTok and trade began in Madrid on Sunday, while talks will resume today.
Wall Street executives working on the TikTok deal said President Trump will announce another operating extension this week as the last one concludes on September 17th, although this could change, while the fate of the app is tied to the US-China trade talks and China is using it for leverage, according to Fox’s Gasparino who cited sources that noted it is easier for Trump to just extend the deadline and continue with negotiations.
US official said the Chinese delegation came into the talks in Madrid with a fundamental misunderstanding of the US’ position regarding TikTok.
The lack of progress in US talks with China on tariffs and fentanyl is said to have reduced the chances of a Beijing summit, and it is more likely that a Trump-Xi meeting will be a lower-profile event at the APEC forum in South Korea during October, according to FT. Furthermore, it was noted that China had made a formal invitation to President Trump for a state visit to Beijing, but the White House has yet to respond amid difficulties in making headway on trade and fentanyl.
US added 32 entities to the restricted trade list on Friday, including 23 from China, while other entities added to the list were based in countries including India, Iran, Turkey and the UAE, according to the Federal Register.
South Korea’s Finance Ministry declined to confirm specific measures currently in discussion regarding an FX swap with the US, while it is in talks with the US to minimise any impact on the FX market from the US investment package. In relevant news, South Korea’s Foreign Ministry said US Deputy Secretary of State Landau expressed regret over the recent immigration raid on South Korean workers.
Indian trade official said the next round of India-EU trade talks is scheduled for 6-10 October in Brussels.
EUROPEAN TRADE
EQUITIES
European bourses (STOXX 600 +0.5%) are broadly firmer across the board, in contrast to an overall mixed session in APAC trade. Price action this morning was initially only upward, however, while benchmarks are still firmly in the green, they waned from best in tandem to the general pullback seen on the China-NVIDIA update.
European sectors hold a strong positive bias, with only a couple of sectors residing in negative territory. Consumer Products takes the top spot, largely boosted by gains in Luxury names following the disappointing Chinese Activity Data, which has increased calls for the country to implement further fiscal stimulus. Financial Services is found in second spot; UBS (+1.3%) gains following reports via the NY Post which reported that the Co. could move to the US as it seeks to avoid new capital requirements in Switzerland.
US equity futures are mixed, (ES +0.1%, NQ -0.1%, RTY +0.4%) with some very slight underperformance in the NQ after China said its preliminary probe found that NVIDIA (-2% pre-market) violated anti-monopoly law, via Bloomberg. Thereafter, the FT reports that the findings were concluded before US-China trade talks, but were released now to give China greater leverage in trade talks.
China Market Regulator is to continue antitrust investigation into NVIDIA (NVDA); China said preliminary probe finds NVIDIA violated anti-monopoly law, via Bloomberg.
FT journalist suggests China released its statement on NVIDIA (NVDA) now to give China greater leverage in trade talks.
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FX
DXY is choppy with a negative bias and within a tight range, with weekend macro newsflow somewhat overlooked as traders zeroing in on the FOMC policy announcement due mid-week – with a 25bps cut priced in a 95% and a 50bps at 5%, and with ~70bps of cuts priced in through to year-end. Sticking with the Fed, weekend reports suggested that documents showed Fed Governor Cook declared her Atlanta property as a vacation home in documents, indicating it would not be her primary residence, which contradicts mortgage fraud allegations. DXY resides in a narrow 97.497-97.702 range.
EUR is underpinned by mild USD weakness with no obvious reaction seen on Fitch cutting France’s sovereign rating from AA- to A+, with the outlook revised to Stable from Negative. In Germany, exit polls from the election in the bellwether state of North Rhine-Westphalia showed Chancellor Merz’s Christian Democrats won with 34% of the votes. Ahead, EUR focus could be on commentary from ECB’s Schnabel at 12:30 BST/ 07:30 ET. EUR/USD resides in a 1.1716-1.1751 range at the time of writing
USD/JPY is subdued against the backdrop of a fragile USD this morning, whilst overnight, there was an absence of Japanese participants due to Respect for the Aged Day. Political uncertainty lingered ahead of the LDP election on October 4th – it was reported that Japan’s Chief Cabinet Secretary Hayashi will announce on Tuesday his intention to run in the leadership race. USD/JPY remains heavy with reports this morning suggesting China ruled that NVIDIA (NVDA) violated anti-monopoly laws after concluding a prelim investigation, which ups the pressure on Washington during sensitive trade negotiations in Spain. USD/JPY trades on either side of its 21 and 50 DMAs (at 147.57 and 147.65 respectively) in a current 147.32-147.81 range.
GBP is underpinned by the mostly positive risk tone across Europe, albeit with the FTSE 100 hampered by its domestic currency strength. Over the weekend, the UK government announced over GBP 1.25bln of inward investment from US finance companies which will create 1,800 UK jobs. On the domestic fiscal front, UK Chancellor Reeves plans to scrap VAT on energy to lower bills and told cabinet members that ‘all options were on the table’ for a budget giveaway to ease the cost of living, according to The Sunday Times.
Antipodeans are both holding a mild upward bias amid the mostly positive risk tone in the market and USD weakness at the time of writing.
PBoC set USD/CNY mid-point at 7.1056 vs exp. 7.1213 (Prev. 7.1019)
Canadian PM Carney said the budget deficit will be ‘substantial’, meaning bigger than it was last year due to US tariffs, while he announced a new federal agency with CAD 13bln to build affordable housing.
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FIXED INCOME
USTs started the week on the backfoot but have traded with an upward bias throughout the European morning. Officials from China and the US have begun the second day of talks in Spain. A lot of the focus has been on TikTok while overnight the FT reported that the lack of progress in US talks with China on tariffs and fentanyl is said to have reduced the chances of a Beijing summit. Most recently, China’s Market regulator is continuing its antitrust investigation into NVIDIA; an update that hit the risk tone and lifted USTs back to a 113-08 high; currently in a 113-02 to 113-08 band. Focus ahead on the appointment process for Miran, who looks set to be eligible to partake in this week’s meeting, assuming the votes progress without incident.
Bunds are in the green, by just over 15 ticks at best. While firmer, the 128.73 peak is someway shy of Friday’s 129.09 best which, in turn, is someway below last week’s 129.44 peak. Specifics a little light so far. For Germany specifically, August WPI came in at 0.7% Y/Y (prev. 0.5%), Destatis highlights that this is primarily due to higher prices for food, beverages and tobacco products. Elsewhere, exit polls from NRW in focus as Chancellor Merz’s CDU won with 34% of the vote, while support for AfD tripled to 16.5%.
Gilts are marginally outperforming into a week packed with UK data and then the BoE on Thursday. At best, higher by 17 ticks in a 91.14 to 91.41 band. Specifics are a little light since the Gilt open. However, newsflow beforehand was focused on various investment details with the Government announcing over GBP 1.25bln of inward investment from US firms, a deal for SNRs involving Centrica and a GBP 1.1bln maritime scheme; all ahead of this week’s US state visit by President Trump. Elsewhere, The Sunday Times reports that Chancellor Reeves intends to scrap VAT on energy with all options on the table for a budget giveaway to ease the cost of living situation.
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COMMODITIES
Crude is modestly firmer against the backdrop of a softer USD and following recent comments by US President Trump that he is willing to impose sanctions on Russia, but noted that Europe has to toughen sanctions and should stop purchasing oil from Russia. WTI currently resides in a USD 62.52-63.24/bbl range while Brent sits in a USD 66.78-67.52/bbl range.
Spot gold is flat despite a softer dollar ahead of this week’s central bank meetings and with the spotlight on Wednesday’s FOMC. Spot gold currently resides in a USD 3,626.46-,3646.95/oz range
Base metals trade mixed with the upside contained as participants digested the latest Chinese activity data, which fell short of expectations. China’s economy showed signs of slowing in August, with weaker retail sales, industrial production, and investment, rising unemployment, and a struggling housing market. Slowing export growth and persistent deflation added pressure on Beijing to introduce near-term stimulus measures, according to data from the NBS. 3M LME copper holds above USD 10k/t and resides in a USD 10,053.97-10,102.00/t range at the time of writing.
EDF said it has received a strike notice for Wednesday September 17th 20:00BST to Thursday September 18th 20:00BST.
Iraq signed a joint operation agreement with TotalEnergies and QatarEnergy LNG, according to the Iraqi PM.
Egypt signed three new agreements for investments worth more than USD 121mln for oil and gas exploration in the Western Desert, Suez Gulf and north of Sinai.
Ecuador’s government is withdrawing its diesel subsidy and will redirect funds to social programs.
Thailand reportedly mulling tax on gold trades to slow the THB rally, according to Bloomberg; follows, Thai PM saying they need to urgently address the strong THB.
Indonesia’s Mining Minister is targeting an increase in the ownership of Freeport (FCX) Indonesia by over 10%.
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NOTABLE DATA RECAP
UK Rightmove House Prices MM (Aug) 0.4% (Prev. -1.3%); YY (Aug) -0.1% (Prev. 0.3%)
German Wholesale Price Index YY (Aug) 0.7% (Prev. 0.5%)
Italian Trade Balance EU (Jul) 1.917B EU (Prev. -0.069B EU, Rev. -0.093B EU)
NOTABLE EUROPEAN HEADLINES
ECB’s Kazimir said they must not change policy because of small deviations from the inflation target. Monetary policy must remain nimble, need to take a meeting-by-meeting approach.
UK Chancellor Reeves plans to scrap VAT on energy to lower bills and told cabinet members that ‘all options were on the table’ for a budget giveaway to ease the cost of living, according to The Sunday Times.
UK government announced over GBP 1.25bln of inward investment from US finance companies which will create 1,800 UK jobs, while the deal lines up GBP 20bln in trade between the two countries, including an expected GBP 7bln commitment from BlackRock (BLK) to grow in the UK.
UK government announced over GBP 1.1bln in joint government and industry investment for the maritime sector.
ECB’s Kocher said the rate-cutting cycle is either over or very close to the end, and the central bank can keep its interest rates steady at 2% for the time being, provided there are no major shocks, according to FT.
Exit polls from the election in Germany’s bellwether state of North Rhine-Westphalia showed German Chancellor Merz’s Christian Democrats won with 34% of the votes, although support for the far-right AfD tripled with 16.5% of the votes, according to The Guardian.
Italy’s Economy Minister said the government is to confirm its GDP growth estimates in the upcoming Budget plan, while he added that the Italian banking sector must consolidate to face challenges posed by giants such as Amazon and others that will compete for their market share.
Fitch cut France’s sovereign rating from AA- to A+; Outlook Revised to Stable from Negative, and raised Portugal’s sovereign rating from A- to A: Outlook Revised to Stable from Positive, while S&P raised Spain’s sovereign rating from A to A+; Outlook Stable.
German Economy Ministry said Germany must expand grids, renewable energies and decentralized flexibility at the same time; must maintain and expand unified and liquid energy markets. Must support hydrogen ramp-up pragmatically and cut back over-complex regulation. Fixed feed-in tariffs for new renewable energy installations will be abolished.
NOTABLE US HEADLINES
US President Trump said the Fed chair is incompetent and is hurting the housing market, while Trump added that he has three people he likes a lot for Fed Chair.
US President Trump’s administration on Sunday renewed its request to an appeals court to fire Fed Governor Cook.
Fed Governor Cook declared her Atlanta property as a vacation home in documents, indicating it would not be her primary residence and appears to contradict mortgage fraud allegations, according to FT.
US Treasury Secretary Bessent was reported on Friday to have interviewed 4 of the 11 Fed Chair candidates, and had interviewed BlackRock’s Rieder, who was said to have climbed the ranks of contenders for the Fed Chair role, according to Bloomberg.
US companies reportedly put the brakes on hiring after US President Trump’s tariffs hit, with industries most exposed to the increased costs due to trade wars launching a wave of job cuts, according to FT.
Axios reported on Friday that many of the claims were fake regarding the massive spike in jobless claims on Thursday that heightened labour market fears and was “a result of attempted fraudulent unemployment filings in Texas.”
OpenAI plans to share 8% of its revenue with Microsoft (MSFT), while it is expected to gain USD 50bln from cutting the revenue share with Microsoft and partners, according to The Information. In relevant news, xAI is cutting staff by about 500 workers with the Co. laying off about a third of its data annotation team.
GEOPOLITICS
MIDDLE EAST
Israeli PM Netanyahu said getting rid of Hamas chiefs living in Qatar would rid the main obstacle to releasing all hostages and ending the war in Gaza.
Hamas said on Sunday it suspended talks on a prisoner swap with Israel after accusing Israel of targeting its negotiating delegation in Doha last week.
Qatar’s PM said Israel’s attack will not lead to anything but aborting de-escalating efforts, and Israeli ‘practices’ will not stop Doha from its Gaza mediation efforts with Egypt and the US to end the war.
Iran’s top security body warned on Sunday that EU threats to reinstate UN sanctions on Iran could jeopardise efforts to restore international monitoring of the country’s nuclear program, according to Economic Times.
Afghan Foreign Ministry said US officials held talks in Kabul over Americans detained in Afghanistan.
RUSSIA-UKRAINE
Russia’s Kremlin says NATO is fighting Russia, that is a certainty; obvious that NATO is de facto involved in this war; has provided direct and indirect support to Kyiv.
Chinese Commerce Ministry firmly opposes US secondary tariffs over Russian oil purchases; said will take measures to safeguard legitimate rights and interests.
Russia’s Deputy Chair said “Allowing NATO countries to shoot down Russian drones over Ukraine means war between NATO and Russia”, via Sky News Arabia
US President Trump said he is ready to impose major sanctions on Russia when all NATO nations have agreed and started to do the same thing, and when all NATO nations stop buying oil from Russia. Trump said NATO is placing 50%-100% tariffs on China, to be fully withdrawn after the Russia-Ukraine war ends, while he added that China has strong control, and even grip, over China and these powerful tariffs will break that grip. Trump later commented that he is willing to impose sanctions on Russia, as well as stated that Europe has to toughen sanctions and should avoid purchasing oil from Russia.
G7 Finance Ministers discussed options to increase pressure on Russia to end its war against Ukraine and agreed to accelerate discussions to further use immobilised Russian sovereign assets to fund Ukraine, while they also agreed to explore other mechanisms that would allow further increasing financial support to Ukraine. Furthermore, they discussed a range of possible economic measures, including further sanctions and trade measures such as tariffs.
Ukrainian President Zelensky posted on Friday that they can confirm the Russian offensive operation on Sumy had been completely thwarted by their forces.
Ukraine’s Defence Minister said Ukraine will need at least USD 120bln next year for defence efforts.
Ukrainian military said Ukraine attacked Russia’s Kirishi oil refinery, while the regional governor said the refinery sustained a fire, which was put out.
Russian troops struck control points, launch sites and storage sites for long-range drones in Ukraine, while Russian troops captured Novomykolaivka in eastern Ukraine, according to TASS. Furthermore, Russia’s Defence Ministry said early on Sunday that Russia had shot down 361 Ukrainian drones over the past day, while it also stated that Russia test-fired a Zircon hypersonic cruise missile at a target in the Barents Sea during ’Zapad’ exercises.
Polish and allied aircraft were deployed on Saturday in a “preventive” operation in Poland’s airspace because of a threat of drone strikes in neighbouring areas of Ukraine, and the airport in Lublin was closed, while the alert lasted about two hours, according to The Guardian.
Romania scrambled two F-16 fighter jets after a Russian drone entered Romania’s airspace on Sunday, while the drone was tracked by the Romanian air force for nearly an hour before leaving.
Russian Defence Ministry said Russian forces take control of Olhivske in Ukraine’s Zaporizhzhia region, according to Ria.
OTHER
US, Japan and the Philippines held joint maritime exercises in the Philippines’ Exclusive Economic Zone in the South China Sea from Thursday to Saturday.
Chinese military conducted ‘routine’ cruises in the South China Sea and said it will continue to defend China’s sovereignty in the South China Sea, while it also stated that the Philippines must immediately stop provoking incidents and must stop escalating tensions in the South China Sea.
Pakistan’s Foreign Affairs Ministry said the Pakistani Deputy PM received a call from US Secretary of State Rubio and they both expressed satisfaction over a positive trajectory of US-Pakistan ties, as well as discussed recent developments.
Venezuela said a US Navy destroyer intercepted and boarded a Venezuelan tuna vessel on Friday in waters in Venezuela’s economic zone, while its government demanded that the US stop targeting Venezuelan vessels, which it said places the security and peace of the Caribbean at risk.
CRYPTO
Bitcoin is a little lower and trades around USD 115k; Ethereum underperforms, scaling back from weekend strength.
French regulator reportedly threatens to block crypto company passporting rights amid concerns about weak crypto licencing, via Reuters citing the AMF President.
APAC TRADE
APAC stocks traded mixed with the region somewhat cautious ahead of this week’s flurry of central bank updates and as participants digested disappointing Chinese activity data, while Japanese participants were away for a holiday
ASX 200 marginally declined amid weakness in the healthcare, mining and financial sectors, in which the latter was pressured by losses in Big 4 bank ANZ after it admitted to widespread misconduct related to incorrectly reporting bond trading data and agreed to pay AUD 240mln in penalties.
Hang Seng and Shanghai Comp were kept afloat with the Hong Kong benchmark lifted by tech strength after China announced an antidumping investigation into certain US analogue chips and began an anti-discrimination investigation into US measures against China in the integrated circuit sector, while US and Chinese officials also began talks on TikTok and trade in Madrid on Sunday. Nonetheless, the gains were limited as participants also digested disappointing activity data.
NOTABLE ASIA-PAC HEADLINES
China’s stats bureau said the economic operation was generally steady in August and they are facing many uncertainties, while it was noted that the external environment is very severe and uncertainties are rising, and some firms are having difficulties in operations. NBS said China will expand domestic demand and boost consumption and promote a rebound in prices, as well as stated that employment is generally steady with jobless rates expected to ease as college graduates find jobs. It also stated that China will further stabilise the economy and stabilise employment, and that more efforts are needed to support the property sector, but expects Q3 economic operations to maintain a stable trend as macro policies gain traction.
China MIIT aims for vehicle sales to rise around 3% Y/Y to about 32.3mln this year, while it was also reported that Hong Kong is in talks with several Chinese EV makers to establish local EV manufacturing.
South Korea’s Foreign Minister will visit China from September 17th to 18th and will discuss plans including Chinese President Xi’s visit to South Korea in October.
Australian Foreign Minister Wong said Australia and China will hold high-level talks in Beijing this week.
DATA RECAP
Chinese Industrial Output YY (Aug) 5.2% vs. Exp. 5.7% (Prev. 5.7%)
Chinese Retail Sales YY (Aug) 3.4% vs. Exp. 3.9% (Prev. 3.7%)
Chinese Urban Investment (YTD)YY (Aug) 0.5% vs. Exp. 1.4% (Prev. 1.6%)
Chinese Unemployment Rate Urban Area (Aug) 5.3% (Prev. 5.2%)
Chinese House Prices MM (Aug) -0.3% (Prev. -0.3%); YY (Aug) -2.5% (Prev. -2.8%)
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