US lawmakers face a deadline of September 30th to pass a funding bill to avoid a government shutdown. Members of the Senate are not scheduled to return to Washington until September 29th, and House lawmakers are not due to return until October 7th, according to NBC.
European and US equity futures are broadly lower; ASML +2.5% boosted after a broker upgrade.
USD trims post-FOMC upside ahead of a slew of Fed speak; GBP and EUR leads.
Fixed paper broadly higher as markets await a deluge of Fed speakers.
Crude initially firmer but has slipped in recent trade; XAU makes a fresh ATH at USD 3,726/oz, with geopols in focus.
Looking ahead, Canadian Producer Prices (Aug); Speakers include BoE’s Pill, Bailey, Fed’s Williams, Musalem, Barkin, Hammack, BoC’s Kozicki.
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TRADE/TARIFFS
US House lawmakers made a rare visit to China on Sunday in an effort to stabilise ties, according to Nikkei. “The visit on Sunday was the first House of Representatives delegation to visit China since 2019″.
US President Trump reportedly withheld approval of over USD 400mln in military aid to Taiwan this summer while seeking a trade deal and possible summit with Chinese President Xi Jinping, according to Washington Post sources.
US President Trump said “we made progress with China on several important issues” and said “we will not allow anything bad to happen to the TikTok app”.
China’s Commerce Ministry said its position on the TikTok issue is clear, adding that the government respects the will of enterprises and welcomes companies to conduct business negotiations based on market rules. The ministry said it hopes the US will work together with China to fulfil its commitments earnestly, and provide an open, fair, just, and non-discriminatory business environment for Chinese companies, including TikTok, to continue operating in the US. It added that China hopes the US will work with it to promote stable, healthy, and sustainable development of China-US economic and trade relations, according to Reuters.
EU is set to block big tech companies from a new financial data sharing system, according to FT.
South Korean President Lee said South Korea will face a financial crisis if it agrees to US demands on USD 350bln investments, according to comments made to Reuters; South Korea and the US are at odds over the investment. South Korean President Lee aims to resolve the US-South Korea tariff issues as soon as possible. The Hyundai US plant raid will not damage the alliance with the US.
South Korea, US, and Japan’s leading diplomats plan to meet in New York this week, according to Yonhap.
EUROPEAN TRADE
EQUITIES
European bourses (STOXX 600 U/C) opened mostly in the red, and then moved lower soon after the European cash open despite a clear driver, but alongside a broader slip in sentiment across markets. However, that downside has since pared, with some indices managing to climb back into the green. Some traders may focus on the lack of concrete progress between US President Trump and Chinese President Xi, following their call on Friday.
European sectors were split down the middle but have followed benchmarks lower, with a very broad breadth to the market thus far. Basic Resources is by far and away the outperformer today, boosted by the continued strength in spot gold, which has made yet another ATH. Mining names such as Fresnillo (+4%), Rio Tinto (+2%) and Anglo American (+1%) all move higher. Tech follows in second place, albeit with gains of a much lesser magnitude. Strength which can be attributed to upside seen in ASML (+2.5%), which has been boosted following a broker upgrade at Morgan Stanley to Overweight from Equal Weight; its PT was also boosted to EUR 950 (prev. EUR 600). Autos is in last place, and by far the clear underperformer today. Pressure in Porsche SE (-5.2%) is driving the downside in the sector after the Co. cut guidance citing EV-launch delays and increased costs due to a revamp to its production lineup; Porsche AG (-6%) and Volkswagen (-6.5%) move lower as a result.
US equity futures are broadly marginally lower, with the ES/NQ both posting losses to a slightly larger magnitude than the RTY. Newsflow thus far has been relatively quiet, but will pick up throughout the week, which is packed with Fed/Trump speak and the PCE report.
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FX
DXY has kicked the week off on the back foot after the post-FOMC gains seen in the second half of last week. FOMC officials will come thick and fast at the start of this week with today’s agenda including voters Williams & Musalem, non-voters Hammack & Barkin and dovish-dissenter Miran. DXY briefly eclipsed Friday’s peak at 97.80, topping out at 97.82 before pulling back in early European trade.
EUR is a touch firmer vs. the USD with incremental macro drivers for the Eurozone lacking since the ECB policy announcement earlier in the month. Over the weekend, ECB’s Kazaks and Simkus gave remarks with the former noting there will be plenty of data available at the December meeting and the latter stating that a December rate cut is needed to safely reach 2% inflation. There has been little follow-through from Morningstar DBRS’s downgrade of France on Friday or Fitch’s upgrade of Italy. EUR/USD briefly dipped below Friday’s trough at 1.1728 before fading downside and moving back above the 1.1750 mark.
JPY is currently flat vs. the USD after a brief foray above the 148 mark overnight, which saw the pair top out at 148.37; highest level since September 8th. Domestic focus has shifted from the BoJ to the LDP election. The latest poll suggested that dovish Japanese PM candidate Takaichi is the top pick to lead the LDP with 28.3%, according to FNN Poll. Modest JPY weakness was seen before the poll was released to Western wires. Since, Takaichi has remarked that she won’t rule out cutting sales tax on food as an option, whilst second-place Koizumi, who is seen to be more fiscally prudent, says he is open to discussing options for sales tax.
GBP is attempting to atone for Friday’s selling pressure, which was brought about by the dreadful public sector borrowing data for August. Fresh UK newsflow has been lacking over the weekend, however, markets are awaiting comments from BoE Chief Economist Pill at 1.30pm London time, followed by Governor Bailey at 7pm. Cable briefly breached the 1.35 mark but has been unable to make a meaningful move above the level. Friday’s high is still some way off at 1.3559.
Antipodeans both are broadly steady vs. the USD. AUD showed little reaction to RBA Governor Bullock’s overall balanced remarks, highlighting increased uncertainty, while she noted scope for rate adjustments if there is a downturn in the global economy. Upticks in the AUD were seen after China pledged tighter controls on steel sector capacity, with iron ore and steel prices also supported.
PBoC set USD/CNY mid-point at 7.1106 vs exp. 7.1159 (Prev. 7.1128)
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FIXED INCOME
USTs are marginally firmer, though very much at the low-end of the post-Powell range, which modest support gleaned from the weak start to the European week. However, as sentiment has picked up off worst this morning, fixed income has remained robust and continues to gradually inch higher. USTs are at the upper-end of a 112-22 to 112-27+ band. A slew of Fed speakers are due, including Miran’s formal dissent speech is scheduled to be published today.
Bunds are steady. Underpressure in APAC trade despite the numerous geopolitical updates and mixed tone, with benchmarks continuing the downward trajectory that has been in play since the latter half of last week post-Powell. Specifics for the bloc thus far a little light. Largely awaiting PMI data later in the week. A few points of note in an ECB bulletin this morning, writing that “consumers who view tariffs as inflationary have adjusted their inflation expectations upward” and consumers are altering spending habits due to tariff concern, pivoting from the US and reducing spending. Bunds marginally firmer in a 128.01 to 128.35 band, taking out last week’s 128.16 base and looking to 127.82 from the last week of August for support. Supply from the EU due shortly, EUR 6bln to be sold across three lines.
Gilts are firmer by a handful of ticks. Domestic press remains focussed on the deputy contest and the mood music around PM Starmer, as the US state visit moved into the rear view and focus more generally returns to the Autumn Budget. Today, a contained to slightly firmer start which is very much in-fitting with the above peers. Gilts are just about in the green in 90.60 to 90.78 parameters; the low point takes out last week’s 90.65 base and we now look to 90.31 and 90.22 before the 89.36 contract low from the first week of September.
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COMMODITIES
Crude was initially firmer by c. USD 0.60/bbl after a weekend of geopolitical newsflow. More recently, benchmarks have moved into the red and are at the lower end of USD 62.23-63.00/bbl and USD 66.53-67.31/bbl parameters for WTI and Brent respectively. Initially unreactive to the recent bout of USD pressure and slight recovery in the European equity risk tone; however, as the European morning progressed the complex has trimmed notably. Geopolitical focus has been on Estonia triggering NATO Article 4; in the Middle East, Israel is said to be considering annexing the West Bank to some degree.
Spot gold benefits from the heightened geopolitical environment. Experienced a modest jump in the European morning as the general risk tone deteriorated from the mixed APAC handover. As a reminder, much of the overnight focus was on the Xi-Trump call, described as disappointing by some. Despite the mentioned slight recovery in sentiment, the yellow metal continues to inch higher (similar action seen in Fixed), at a USD 3722.56/oz peak and at yet another ATH.
Copper was contained in APAC trade with initial modest gains fading as the tone in China deteriorated as the leaders’ call was digested, and into a meeting with Chinese regulators. The readout started with the PBoC Governor saying the briefing would not involve any short term policy adjustment. For the first part of the morning, 3M LME Copper didn’t move significantly from the unchanged mark, however, the slight recovery in the European risk tone/US pre market has been sufficient to lift the base metal back above the USD 10k handle.
The Iraqi Petroleum Marketing Authority said it has increased its oil exports after a gradual end to voluntary production cuts within the framework of the OPEC Plus deal, according to Iran International.
NHC said a new tropical storm has formed south of Mexico, which is expected to remain offshore and intensify, according to Reuters.
Chilean state copper miner Codelco said its biggest mine will take longer to return to full production following a deadly tunnel collapse in July, according to El Mercurio.
China pledged tighter controls on steel sector capacity and will ban new production capacity in the industry, according to state media CCTV.
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NOTABLE EUROPEAN HEADLINES
ECB’s Kazaks said there will be plenty of data available at the December meeting, adding that the central bank has achieved its 2% goal and there is no need to hurry the next interest-rate shift, according to Bloomberg.
ECB’s Simkus said a December rate cut is needed to safely reach 2% inflation, according to Bloomberg.
France’s sovereign debt rating downgraded to AA by Morningstar DBRS
Italy’s sovereign debt rating upgraded to BBB+ from BBB at Fitch
European Commission President von der Leyen said she isn’t considering running in Germany’s 2027 presidential election, according to a newspaper interview published on Sunday.
Multiple European airports have said a suspected cyber attack has impacted them, according to Sky News.
Stellantis (STLAM IM/STLAP FP) said they detected unauthorised access to a third-party service provider’s platform that supports North American customer service operations; the company is notifying the appropriate authorities and informing affected customers, according to the company.
ECB Blog: Consumer expectations and actions during the recent trade tensions; “consumers expect tariffs to adversely affect inflation, household finances and economic growth”. “In response to tariff-related concerns, consumers are altering their spending habits in notable ways. Approximately 26% of respondents reported switching away from US products, while around 16% indicated that they have reduced their overall spending”.
BoE’s PRA has today announced proposals to reduce regulatory requirements for banks by deleting 37 individual reporting templates.
NOTABLE US HEADLINES
Fed Governor Miran on Friday said disinflationary forces are in the works, including lower immigration, via Fox Business. He reiterated that he doesn’t see material inflation from tariffs. Monetary policy is pretty restrictive, and he warned that the longer it stays restrictive, the bigger the risk. He said comparing goods inflation this year to pre-pandemic trends is the wrong comparison. He reiterated that he will be trying to convince other Fed policymakers to cut rates faster. He said, “We are in an easing cycle”. He noted that people have been moving in the direction of thinking tariff inflation is less than previously thought, and added that folks will eventually come around to the view that tariffs will not drive up inflation.
US Senate Minority Leader Schumer said he is ready to meet “anytime” with President Trump to avoid a government shutdown, according to a CNN interview.
US President Trump said he will deliver a speech at the UN General Assembly, according to a Fox News interview.
Rupert Murdoch reportedly privately told executives working on the TikTok deal that he wanted to own a small stake in the company if an agreement could be reached, and any investment in the TikTok-US deal would come through Fox Corp, according to WSJ sources.
US President Trump invoked a ‘golden share’ to block US Steel’s (X) plans for an Illinois plant, while Commerce Secretary Lutnick told the company’s CEO the administration would not allow Granite City production to cease, according to WSJ.
Trump administration is set to link acetaminophen to autism risk, according to WaPo.
US lawmakers set to meet with Chinese defence minister in Beijing, according to Pool Report.
US DoE Secretary Wright says the offshore wind pullbacks are a “one-off exception”, via Axios; adds, “solar will continue to grow”.
US Republican Senators are reportedly holding early discussions about altering Affordable Care Act (ACA) tax credits to allow for subsidies to be extended beyond the end-2025 expiry, via Axios.
GEOPOLITICS
NATO-RUSSIA
On September 21st, Germany’s air force said it sent two fighter jets to track a Russian plane flying over the Baltic Sea, according to Sky News.
Russian Defence Ministry said Russian fighters did not violate Estonian airspace, according to Reuters.
The United Nations Security Council (UNSC) will meet on Monday at Estonia’s request to discuss the violation of the Baltic country’s airspace by Russian fighter jets on Friday, according to a statement.
US President Trump said the US will help defend Poland if Russia continues escalating, according to a Fox Interview. Trump, when asked about Russian jets in Estonia, said “we don’t like it”.
British Defence Minister said Typhoon aircraft carried out their first air defence missions over Poland, according to a statement on Sunday.
RUSSIA-UKRAINE
Ukraine’s President Zelensky said they are closer to finalising the 19th sanctions package and he expects its approval soon. He added that Ukraine will quickly synchronise the package domestically and expressed gratitude that many of Ukraine’s proposals were taken into account in the EU sanctions package. Zelensky also said he now expects strong sanctions steps from the United States on Russia, according to his X post.
US President Trump urged Europe to “stop buying oil” from Russia ahead of new US economic pressure on Moscow, adding that the US won’t let Europeans buy Russian oil much longer, according to Bloomberg.
Russian Defence Ministry said a Ukrainian drone attack on a resort area in the Crimean peninsula killed two people and injured 15, according to Reuters.
A Ukrainian SBU official said Ukrainian drones hit oil pumping stations involved in Russian oil exports via the Novorossiysk port, according to Reuters.
MIDDLE EAST
An Israeli official has told Sky News a full or partial annexation of the West Bank is being considered in response to the UK’s formal recognition of Palestinian statehood. Israeli media reported that the Israeli army is preparing for the possibility of an escalation of the conflict in the West Bank, according to Iran International.
UK, Canada, Portugal, and Australia recognised Palestine as an independent state, according to the BBC.
Israel “categorically rejects” the UK and other countries’ unilateral recognition of a Palestinian state, according to the Foreign Ministry.
Palestinian Authority Foreign Minister said a two-state solution is possible, according to Iran International.
Israeli military said it killed a Hezbollah member in southern Lebanon, adding that as a result of the attack, a number of citizens were killed. The military said it regrets any harm to civilians and is working as much as possible to minimise harm to them, according to Reuters.
US President Trump plans to meet with Arab leaders on Tuesday to discuss the Gaza war, according to Axios.
“The Lebanese newspaper Al-Akhbar quotes senior Egyptian officials as saying that although Egypt has shown indirect readiness for the possibility of a military confrontation with Israel”, via Kan’s Kais on X.
OTHERS
South Korean President Lee said South Korea does not believe any concrete discussions are happening between the US and North Korea. Russia-North Korea military cooperation is a significant threat to South Korea and must be addressed with dialogue. He added that dialogue with North Korea will likely be difficult for the time being. South Korea risks being on the frontier of conflict and must find peaceful coexistence with North Korea, Russia, and China.
North Korea leader Kim Jong Un said the concept of denuclearisation for the country is no longer valid, via KCNA, adding that North Korea will never give up its nuclear force. He added they will never sit down with South Korea, and that he still has good memories of US President Trump, but there is no reason to sit down with the US until it gives up its insistence on denuclearisation.
US President Trump said that on his orders, the Secretary of War authorised a lethal kinetic strike on a vessel in the USSOUTHCOM area of responsibility. He said intelligence confirmed the vessel was trafficking illicit narcotics, and the strike killed three males. Trump added that no US forces were harmed and that the vessel was in international waters, according to Reuters.
US President Trump said that if Afghanistan does not give the Bagram airbase back to the US, bad things are going to happen, according to Reuters.
CRYPTO
Bitcoin slips towards USD 112k; Ethereum sinks to the USD 4.1k mark. No real driver for the move, but comes amid broader risk-off sentiment.
APAC TRADE
APAC stocks traded mixed after sentiment from Wall Street initially reverberated to the region before dissipating. Chinese markets failed to benefit from the phone call between US President Trump and Chinese President Xi on Friday, with some citing a lack of concrete progress.
ASX 200 was lifted by the metals and mining sector, with gold names spearheading the upside following the recent rise in the yellow metal, offsetting underperformance in energy names.
Nikkei 225 was boosted at the open amid a softer JPY and as the index digested Friday commentary from BoJ Governor Ueda, with the BoJ’s surprise ETF and J-REIT selling seen as too incremental to impact markets. Focus now turns to the LDP election as the 12-day official campaign period began ahead of the October 4th polls.
KOSPI was supported amid Samsung Electronics shares surging ~5% after clearing the NVIDIA hurdle for 12-layer HBM3E supply.
Hang Seng and Shanghai Comp initially bucked the trend and failed to benefit from upbeat mood elsewhere, with traders unconvinced despite the “productive” Trump-Xi call, although the mainland later eked mild gains. Meanwhile, US lawmakers made a rare visit to China on Sunday in an effort to stabilise ties. Overnight, the PBoC maintained its LPRs as expected and injected CNY 300bln via 14-day reverse repo after an eight-month hiatus. In Hong Kong, participants brace for a “Super” typhoon with Hong Kong airport weighing a 36-hour closure, according to Bloomberg.
Nifty 50 fell at the open with losses attributed to US President Trump’s H-1B visas update. India is said to be the primary beneficiary of H-1B visa which allows US employers to hire foreign workers in “speciality occupations”.
NOTABLE ASIA-PAC HEADLINES
Japanese PM candidate Takaichi is the top pick to lead LDP with 28.3%, according to an FNN Poll.
Japanese PM contender Koizumi said it is important for the government and the BoJ to move in lockstep in achieving price stability and economic growth, according to Reuters.
Japanese PM contender Hayashi said the BoJ is conducting monetary policy in a way that does not deviate much from government thinking, adding that Japan’s past aversion to a strong JPY has diminished. He said a weak yen, coupled with rising oil costs from the Ukraine war, has caused cost-push inflation. Hayashi said if chosen as prime minister, he will compile an economic package to cushion the blow from rising living costs and provide spending for disaster relief, adding that the size of the package must take into account Japan’s ‘quite small’ output gap and avoid the issuance of deficit-covering debt, according to local media.
Japanese LDP leadership candidate Takaichi says she won’t rule out cutting sales tax on food as an option.
Japanese LDP leadership candidate Koizumi says is open to discussing options for sales tax.
RBA Governor Bullock said since the August meeting, domestic data have been broadly in line with expectations, or slightly stronger. She noted that recent interest rate cuts are expected to support household and business spending. While labour market conditions have eased a little with the unemployment rate rising slightly, some tightness remains, and conditions are close to full employment. Bullock said the economic outlook continues to be clouded by uncertainty, though recovery in household consumption growth is forecast to be sustained as real incomes grow. She warned there is a risk the recent pick-up in domestic activity is not sustained, but monetary policy is well placed to respond if international developments have a material impact. She added there may be more excess demand in the economy and stronger-than-expected labour outcomes. The board will remain attentive to data and evolving risks, and must be alert to changing circumstances and prepared to respond if necessary, according to the RBA. Bullock noted there is scope for rate adjustments if there is a downturn in the global economy, adding she is more confident that inflation will stay within the RBA’s band.
Indian PM Modi said he will accelerate the country’s growth story with GST reforms, according to his national address.
Hong Kong’s weather forecaster will issue the No 1 standby signal at 12:20pm local on Monday and consider upgrading it to the No 3 alert later in the evening as Super Typhoon Ragasa moves towards the city at a “relatively high” speed, according to SCMP.
Hong Kong airport weighs 36-hour closure as super typhoon nears, according to Bloomberg.
PBoC injected CNY 240.5bln via 7-day reverse repos with the rate maintained at 1.40%; PBoC injected CNY 300bln via 14-day reverse repo following an eight-month hiatus; conducted through fixed-volume, interest-rate bidding with multiple-price allocation.
PBoC Governor Pan says China has ensured there are no systemic financial risks. Press conference will not involve short term policy adjustment. Domestic financial system is sound. Pledges support for high-quality economic growth. Local government financing platform debt fell over 50% versus 2023 levels. Will strengthen monitoring and early warning of financial risks. Plans to strengthen measures against financial corruption.
PBoC Governor Pan says China will use various policy tools based on economic situation and will be data driven; Have “appropriately accommodative policy stance”
China’s Financial Regulator says efforts to prevent risk have seen important results attained. Number of high risk institutions and assets are well off peak levels, this will continue to moderate. Number of high-risk institutions set to decline further. Pledges to establish more transparent foreign exchange management mechanisms. Risks from small banks have been brought under control. Supports resolution of local government debt risks. Notes significant improvement in investor confidence and market expectations.
China Securities Regulator Head says “will improve mechanisms for stock listing and M&A; will strictly supervise market”.
Alibaba (BABA/9988 HK) is to offer commission and shipping to brands on Amazon (AMZN), according to Bloomberg.
DATA RECAP
Chinese Loan Prime Rate 5Y (Sep) 3.50% vs. Exp. 3.50% (Prev. 3.50%); 1Y (Sep) 3.00% vs. Exp. 3.00% (Prev. 3.00%)
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