US stocks extended on losses as yields continued to climb in post-FOMC fallout and amid a central bank frenzy - Newsquawk Asia-Pac Market Open

• US stocks extended on losses to finish at session lows and bonds remained pressured as yields continued to climb in the fallout from the Fed's hawkish pause, while participants also digested mixed data releases and a slew of central bank updates including the BoE which narrowly paused on rates.
• USD returned to flat territory after reversing some of its post-FOMC gains and with the latest data releases mixed as jobless claims fell but existing home sales and Philly Fed manufacturing disappointed.
• Looking ahead, highlights include New Zealand Consumer Sentiment and Trade Data, Australian PMIs, Japanese National CPI and PMIs, BoJ Policy Decision.

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LOOKING AHEAD

• Highlights include New Zealand Consumer Sentiment and Trade Data, Australian PMIs, Japanese National CPI and PMIs, BoJ Policy Decision.

US TRADE

• US stocks extended on losses to finish at session lows and bonds remained pressured as yields continued to climb in the fallout from the Fed's hawkish pause, while participants also digested mixed data releases and a slew of central bank updates including the BoE which narrowly paused on rates.
• SPX -1.64% at 4,330, NDX -1.84% at 14,694, DJI -1.08% at 34,070, RUT -1.56% at 1,782.
• Click here for a detailed summary.

NOTABLE HEADLINES

• US House Speaker McCarthy said Republicans had a funding breakthrough last night, while it was separately reported that the House again refused to allow debate on the FY24 defence spending bill as the government shutdown deadline nears.

DATA RECAP

• US Philly Fed Business Index (Sep) -13.5 vs. Exp. -0.7 (Prev. 12.0)
• US Leading Index Change MM (Aug) -0.4% vs. Exp. -0.5% (Prev. -0.4%)
• US Existing Home Sales (Aug) 4.0M vs. Exp. 4.1M (Prev. 4.1M)
• US Initial Jobless Claims (W/E 16 Sep) 201k vs. Exp. 225k (Prev. 220k, Rev. 221k)
• US Continued Jobless Claims (W/E 9 Sep) 1.662M vs. Exp. 1.695M (Prev. 1.688M, Rev. 1.683mln)

FIXED INCOME

• US Treasuries saw massive post-FOMC bear-steepening which was accentuated by the BoE pausing and a tumble in jobless claims.

FX

• USD returned to flat territory after reversing some of its post-FOMC gains and with the latest data releases mixed as jobless claims fell but existing home sales and Philly Fed manufacturing disappointed.
• EUR traded rangebound amid a slew of ECB speakers in which some suggested a pause next month.
• GBP was pressured following the BoE's close-call decision to keep the Bank Rate unchanged.
• JPY strengthened heading into the BoJ policy announcement and despite the upside in US yields.
• Norwegian Central Bank raised its policy rate by 25bps to 4.25%, as expected, while it stated there will likely be one additional policy rate hike, most probably in December.
• SNB maintained its policy rate at 1.75% (exp. 25bps hike), while it maintained focus on selling foreign currency and said it cannot be ruled out that a further tightening of monetary policy may become necessary. SNB Chair Jordan said the central bank will not hesitate on further rate hikes to keep inflation down and they will decide in December whether further tightening is needed or not.
• South African Reserve Bank kept the Repo Rate at 8.25%, as expected, while it said 2023 CPI is seen at 5.9% (prev. view of 6.0%) and 2024 seen at 5.1% (vs. prev. view of 5.0%)
• Swedish Riksbank raised its rate by 25bps to 4.0%, as expected, while the forecast for the policy rate indicates that it could be raised further.
• Turkish Central Bank raised the Weekly Repo Rate by 500bps to 30.0%, as expected, while it stated that tightening will continue until a significant improvement to the inflation outlook is achieved.
• Philippines Central Bank maintained its Overnight Borrowing Rate at 6.25%, as expected, while it is ready to resume tightening if needed.

COMMODITIES

• Crude was flat after staging a recovery during the NY session as the dollar pared from highs.
• Dubai set official crude differential to DME Oman 10Qc1 for December at USD 0.05/bbl premium.
• Iran set October Iranian light crude price to Asia at Oman/Dubai plus USD 3.50/bbl.
• Iraqi PM said he envisions oil prices of no less than USD 85/bbl to 95/bbl, according to Bloomberg.
• Russia imposed a ban on gasoline and diesel exports from September 21st.

GEOPOLITICAL

• White House said President Biden is to announce new military aid and air defence for Ukraine, while Biden has not taken ATACMS off the table for Ukraine.
• US Treasury Secretary Yellen indicated support for a windfall tax on frozen Russian assets, while it was separately reported that Russia introduced export duties linked to the USD/RUB exchange rate until end-2024.
• US considers twin defence treaties to achieve Israel-Saudi normalisation, according to Bloomberg.
• US State Department approved the possible sale of a weapons supply support package to Saudi Arabia for an estimated cost of USD 500mln.
• Russian Foreign Minister Lavrov and UN's Guterres were reported to discuss the grain deal..
• Nagorno-Karabakh ethnic Armenians said Azerbaijani forces have violated the ceasefire, while Azerbaijan denied that its forces violated the ceasefire.

ASIA-PAC

NOTABLE HEADLINES

• Chinese Premier Li said China's economy is at a major juncture of high-quality development overcoming challenges and it is necessary to further strengthen confidence in development.
• China's Beijing Municipal Commerce Bureau issued draft rules to promote a high level of opening up and it encourages foreign investments.
• China is to host China-EU high-level economic and trade dialogue in Beijing on September 25th, according to the Chinese Commerce Ministry.
• Chinese Embassy in Berlin said should Germany unjustifiably exclude Chinese firms, then this would be a violation of fair competition.
• Chinese Commerce Ministry said some firms have obtained export licenses for gallium and germanium.
• Japanese PM Kishida said he will reform the asset management sector and will introduce a new programme to assist new entrants to the asset management sector. Furthermore, Kishida said it is important for FX to move stably, reflecting economic fundamentals.

EU/UK

NOTABLE HEADLINES

• BoE kept rates unchanged at 5.25% (exp. 25bps hike) in 5-4 vote and it is to reduce the stock of gilts by GBP 100bln (exp. ~80bln) in 12 months starting October. BoE stated further tightening would be needed if evidence of more persistent inflation pressures is seen, while it noted that inflation has fallen a lot in recent months which will continue to do so and policy will be sufficiently restrictive to get inflation back to the target.
• BoE Governor Bailey said the job is not done yet and is not predicting what the next Bank Rate move will be, while he noted there is no premature celebration on inflation falling and the MPC has not had any discussions about cutting the Bank Rate. Bailey also commented that it is good news that inflation in the UK is coming down and they have to stay the course on the inflation fight, while he expects the next noticeable drop in UK inflation will be in the October number released in November.
• UK Chancellor Hunt said tax cuts are virtually impossible and they will have difficult decisions during the autumn statement, according to an LBC interview.
• ECB's Kazaks said rates will need to remain restrictive for quite a while and will take decisions meeting by meeting, while he is quite satisfied with where rates stand now.
• ECB's Knot does not expect a hike at the October meeting and will stay alert to signals indicating that inflation remains too high.
• ECB's Nagel said not clear if rates have peaked, while he added EZ core inflation is still stubborn and inflation rate is not falling at the desired rate.
• ECB's Stournaras said he feels that rates have peaked and will need to stay steady for a few months, while he added it is too early to discuss the timing of a cut, but the next move is likely to be a cut, according to Borsen-Zeitung.
• ECB's Vujcic said 4% rates will be more restrictive as prices ease and if the outlook holds, they won't need any more rate hikes, while he added that the latest hike puts them in a better position.
• ECB's Wunsch said whether they need to do more or not is a very difficult question and has greater confidence that projections can be used as an anchor, while he added they cannot conclude that they have reached the terminal rate.

DATA RECAP

• EU Consumer Confidence Flash (Sep) -17.8 vs. Exp. -16.5 (Prev. -16.0)