APAC stocks sold off whilst European and US futures stabilised; US CPI ahead - Newsquawk EU Market Open

• US President Trump told reporters that the Iran war could end before the election, and there is no chance the Iran war will last through the rest of his term.
• Saudi Crown Prince MBS called President Trump twice on Thursday, urging him to launch strikes against Houthis, but Trump declined.
• US senior official told Israel's Channel 13 that Iran is planning a "major attack" involving Israel due to the pressure it is under.
• Crude futures paused overnight after surging yesterday, which saw WTI breach USD 104/bbl, and Brent climb to just shy of USD 110/bbl.
• APAC stocks were pressured, with global risk sentiment weighed by a further surge in oil prices; European equity futures indicate a flat cash market open.
• Looking ahead, highlights include UK GDP (Jul), US CPI (Aug), US University of Michigan Survey Prelim (Sep), IEA OMR, CBR Announcement. Speakers include US President Trump, ECB’s Lagarde & Lane. Earnings from Kroger.
  

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SNAPSHOT

LOOKING AHEAD

• Highlights include UK GDP (Jul), US CPI (Aug), US University of Michigan Survey Prelim (Sep), IEA OMR, CBR Announcement. Speakers include US President Trump, ECB’s Lagarde & Lane. Earnings from Kroger.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT/MIDDLE EAST

• US President Trump said Iran has some missiles, but most were knocked out, while he maybe won't go full into Iran because of the election. Trump also stated that the Iran war will end after the US midterm elections and that Iran is waiting for political change in America.
• US President Trump told reporters that the Iran war could end before the election and there is no chance the Iran war will last through the rest of his term.
• US VP Vance privately sought assessments from US military commanders who warned that the Iran war was draining critical stockpiles of Patriot interceptors and long-range missiles, and could weaken US deterrence against China, Russia and North Korea. Commanders also told Vance that Iran was more resilient than expected and willing to absorb heavy damage without collapsing, prompting Vance to advise President Trump and become more involved in efforts to end the conflict.
• US imposed new sanctions on networks aiding Iran's proxies in the Middle East, while Treasury Secretary Bessent said they are going to sanction a large bank on Monday.
• US CENTCOM said forces have redirected 96 commercial vessels to ensure total compliance, while more than 50 vessels supporting humanitarian aid have been allowed to pass.
• IRGC Navy said it hit an enemy unmanned vessel (submarine) at the entrance to the strategic Strait of Hormuz and thwarted its aggressive mission. IRGC Navy declared the Strait of Hormuz is closed and under their control and intelligence, as well as warned that any hostile presence in this strategic Strait will be targeted.
• Iran is reportedly producing ballistic missiles again, according to the WSJ. Iran has resumed its production of ballistic missiles using stockpiled components and working in underground facilities, according to officials from the US and Middle East familiar with the matter.
• Gulf Foreign Ministers plan to meet with their Iranian counterpart in an effort by Oman and Iran to secure a deal on shipping through the Strait of Hormuz, according to FT.
• Iran's Ministry of Foreign Affairs released a statement regarding developments related to Yemen, in which it stated that Iran emphasises its principled and consistent position on the need to respect the independence, national sovereignty and territorial integrity of Yemen, while it called for an end to the blockade of the country, as well as urged dialogue and a diplomatic solution to the Yemen conflict.
• Iran and Saudi Foreign Ministers held a call and discussed the escalation of tensions and increasing insecurity in the region, as well as emphasised the need for continued cooperation and diplomatic efforts.
• Saudi Crown Prince MBS called President Trump twice on Thursday, urging him to launch strikes against Houthis, but Trump declined, and US officials stressed the administration has no plans to intervene directly against the Houthis for now, according to Axios.
• Iranian sources said that Tehran ordered the Houthis last week to intensify attacks on Saudi Arabia and promised to provide more funding, weapons and senior officers, according to Iran International. Furthermore, Yemen military sources said the IRGC directed a recent Houthi campaign along the Red Sea coast.
• Houthis launched a missile attack on southern Saudi Arabia, according to IRNA.
• Satellite imagery reportedly captured fumes of smoke rising from Saudi Arabia's East-West oil pipeline, following an alleged strike by Yemen Houthis, according to Press TV.
• Yemen forces claimed the capture of 2000 Saudi mercenaries, according to SNN.
• More than 100 US military advisers are on the ground in Saudi Arabia providing intelligence and targeting support to the Kingdom in its military campaign against the Iran-backed Houthis in Yemen, according to CNN citing sources.
• UKMTO said it received a report of two vessels involved in a security incident 4nm west of Khasab, Oman, in which the master of the vessel reported seeing four unknown projectiles hit two unknown vessels, causing a fire on one vessel, while the status of the second vessel was unclear.
• US senior official told Israel's Channel 13 that Iran is planning a "major attack" involving Israel due to the pressure it is under. The official estimated that the US economic and naval blockade of Iran, which is causing significant damage to the regime's economy, will lead Tehran to launch a major military operation by the midterm elections in November, which would include Israel, while the official stated that Iranians are considering "a significant escalation" and will not be satisfied with only hitting the Gulf states as they have done previously.
• IDF blew up Hezbollah tunnels beneath the Ali Taher Ridge in southern Lebanon.
• Bahrain's Foreign Minister spoke by phone with UAE's Deputy PM and Foreign Minister to discuss bilateral relations and coordination on regional and international issues.

US TRADE

EQUITIES

• US stocks were lower as surging oil prices dictated price action across markets, which saw Treasury yields soar, the dollar strengthened, and weighed on spot gold. Highlighting the move in yields, the 30yr hit 5.366%, the highest since 2007, while the 10yr topped out at 4.954%, a peak since November 2023. Focus resided around the Bab al-Mandeb Strait, and saw the crude complex see gains of c. USD 7/bbl as Iranian media reported that the Houthis are nearing complete control of the strategic waterway, followed by reports of control over Zaqar and Mayun islands and the Al-Omari military base, as well as Al Mukha city. In terms of the data, US PPI was a mixed report and garnered limited reaction, as traders await the pivotal CPI metrics on Friday, which will likely dictate what the Federal Reserve does in the September confab.
• SPX -0.58% at 7,592, NDX -1.08% at 29,104, DJI -0.61% at 52,069, RUT -1.04% at 2,891.
• Click here for a detailed summary.

TARIFFS/TRADE

• Canadian PM Carney said the latest US trade measures against Canada are modest and he reiterated that Canada is always ready to sit down and negotiate with the US.
• South Korea's PM Han said talks on strategic investment projects with the US are progressing, and that the government will ease regulations and improve conditions for foreign investment. Han added that South Korea does not discriminate against companies based on nationality, and that US strategic investment talks must deliver mutual benefits and commercial returns.

NOTABLE HEADLINES

• US President Trump reiterated a pledge to provide a USD 5,000 Trump dividend to adults if Republicans win the Midterms and will make Trump tax cuts permanent, while he separately commented that the Trump dividend won't be a big problem at all and that he is doing it as a reward and not for the vote.
• US President Trump said in a recorded interview with Fox News that they're going to take care of USD 40tln debt through growth, while he spoke with Johnson and Thune regarding USD 5,000 dividends.
• US Treasury Secretary Bessent said they have the best-performing bond market in the world and will get to the other side of the energy supply shock, while he added that the Treasury market is in very good shape and term premium is at the lowest differential in many years. Bessent stated regarding the Treasury buyback operation that they didn't buy back as many as he said, because they buy cheap.
• US Treasury Buyback (Liquidity Support, 10yr-20yr, max USD 6bln): Accepted USD 5.187bln of 10.489bln offered, while it accepted 23 of 40 eligible securities.

APAC TRADE

EQUITIES

• APAC stocks were pressured with global risk sentiment weighed by a further surge in oil prices and upside in yields, as the geopolitical escalation in the Middle East threatens shipping in the Bab al-Mandab Strait, while there were social media reports citing satellite images that suggested a potential strike by Houthis on Saudi's East-West pipeline.
• ASX 200 declined amid higher yields, with the Australian 3yr yield at its highest in over 15 years, while Citi revised its call and now sees two more rate hikes by the RBA this year.
• Nikkei 225 underperformed owing to higher oil prices and yields, while participants also brace for a widely expected BoJ rate hike next week.
• KOSPI was dragged lower amid tech-related pressure, with notable losses in the industry heavyweights.
• Hang Seng and Shanghai Comp conformed to the broad risk-off mood in the region, with underperformance seen in miners, while recent comments from PBoC Deputy Lu Lei that they will refine the RRR framework and conduct open-market operations more flexibly and precisely failed to provide inspiration, with today's OMO remaining at an inconsequential amount.
• US equity futures were mixed after retreating yesterday and with focus turning to the incoming CPI report.
• European equity futures indicate a flat cash market open, with Euro Stoxx 50 futures U/C after the cash market closed with losses of 0.7% on Thursday.

FX

• DXY took a breather after strengthening yesterday as yields climbed to multi-year highs alongside a surge in oil prices owing to the geopolitical escalation in the Middle East between Saudi Arabia and Iran-backed Houthis, which increases the threat to shipping in the Bab al-Mandab Strait. In terms of recent data, PPI was mixed and therefore puts the onus on today's CPI report to influence the Fed decision next week.
• EUR/USD traded little changed overnight after having recently weakened against the buck despite the ECB's decision to hike rates by 25bps, which was widely expected, and the statement refrained from any clear forward guidance, but noted inflation will remain well above target for an extended period. Furthermore, there was a later source report that ECB governors think further policy tightening is likely and may debate another hike as soon as October, although it was stated that market expectations for three more hikes may be overly optimistic and December may be a more opportune time to raise borrowing costs.
• GBP/USD lacked demand and retested the 1.3500 level, while participants await data including monthly GDP.
• USD/JPY kept afloat after climbing above 154.00 alongside the rise in US yields and surge in oil prices.
• Antipodeans nursed some losses with little fresh overnight catalysts, while there was a hawkish call from Citi, which now sees two more RBA rate hikes this year to lift the Cash Rate to 4.85%.

FIXED INCOME

• 10yr UST futures were subdued after sliding as yields climbed to multi-year highs, which saw the US 10yr yield approach near 5% as oil surged, and with prices not helped after the Treasury Buyback operation of USD 5.19bln, while Treasury Secretary Bessent noted they didn't buy back as many as he said, because they buy cheap.
• Bund futures lingered at the prior day's trough beneath the 121.00 level after sliding as the rise in oil stoked inflationary pressures and after the ECB hiked rates as widely expected, with source reports also noting that ECB governors think further policy tightening is likely and may debate another hike as soon as October.
• 10yr JGB futures retreated after the surge in oil dictated price action across markets and heading into a widely anticipated BoJ rate hike next week, while PPI data from Japan was inconclusive as the Y/Y reading printed firmer-than-expected, but the M/M showed surprise deflation.

COMMODITIES

• Crude futures paused overnight after surging yesterday, in which WTI breached USD 104/bbl, and Brent climbed to just shy of USD 110/bbl amid the escalation in the Middle East between Saudi Arabia and Iran-backed Houthis in Yemen, which threatens shipping through the Bab al-Mandab Strait, while several sources on social media cited satellite images that suggested a possible attack on Saudi Arabia's East-West pipeline.
• US EIA Crude Oil Stocks Change (Sep/04) fell by 0.391M (exp. -1.6M, prev. -4.450M).
• US Interior Secretary Bergum said every idea is on the table when asked about diesel export controls.
• US official said Iranian or suspected Iranian oil on water averaged 110mln barrels over the past week vs 180mln barrels before the war.
• Spot gold attempted to rebound after suffering yesterday alongside higher oil prices and firmer yields, while attention turns to the looming US CPI report.
• Copper futures lingered near the prior day's lows after slumping alongside the downbeat risk tone.

CRYPTO

• Bitcoin edged higher but with upside capped in choppy trade beneath the USD 77,000 level.

NOTABLE ASIA-PAC HEADLINES

• BoJ is set to raise interest rates next week, most likely by 25bps, and may signal readiness to speed up hikes, but has no preset view on terminal rate, or timing of further rate increases, according to sources.
• China unveiled its 15th five-year plan for new energy vehicle industry development.
• China reportedly halted new battery projects pending a capacity review, according to Caixin.

DATA RECAP

• Japanese PPI (Aug MM) -0.2% vs. Exp. 0% (Prev. 0.1%)
• Japanese PPI (Aug YY) 7.6% vs. Exp. 7.4% (Prev. 7.2%)

GEOPOLITICS

RUSSIA-UKRAINE

• Ukrainian President Zelensky said there will be no trilateral talks before elections in Russia. It was separately reported that Zelensky said Ukraine and Canada signed a drone deal.
• Ukraine Air Force noted that strike drones were headed to the Kherson and Mykolaiv regions.
• European Commission resumed work on options that could persuade governments in the bloc to approve the use of Russia’s frozen assets for Ukraine, according to FT.

EU/UK

NOTABLE HEADLINES

• Head of a UK government review on getting young people into employment warned that it will not provide savings quick enough to avoid painful decisions on tax and spending, according to FT.
• ECB governors think further policy tightening is likely and may debate another hike as soon as October.