US stocks rebounded from recent losses as front-end yields edged lower - Newsquawk Daily Asia-Pac Market Open

• US stocks gained on Wednesday, with the Russell 2000 outperforming while the Nasdaq lagged but finished in the green. The vast majority of sectors were higher, although Consumer Discretionary was flat and Real Estate closed lower amid ongoing concerns around elevated yields, albeit the Treasury curve itself was little changed on the session. The Treasury curve saw a marginal steepening, with front-end yields edging lower while the belly and long end were broadly flat as attention turns towards Friday's NFP report. Administration officials continued to be quizzed on elevated bond yields, with Commerce Secretary Lutnick saying rates will come back down and the market will stabilise, adding that he is not concerned. Meanwhile, Treasury Secretary Bessent said the goal of the buyback operations is to avoid a bad market outcome, noting that buybacks free up balance-sheet capacity and make room for banks to participate more at Treasury auctions.
• USD saw very modest losses, but performance against G10 counterparts was mixed. For the dollar specifically, geopolitics continues to dominate the tape while Dollar-specific newsflow was still pretty light. NY Fed President Williams said that rates are in a good place to balance the Fed’s dual mandate and reiterated his support for the previous decision to hold, with future policy dependent on the totality of incoming data. Next on the Fed docket is the influential Waller due to speak on Thursday ahead of NFP on Friday.
• Looking ahead, highlights include New Zealand Terms of Trade, Australian Final Services PMI & Trade Data, Japanese Final Services PMI, Chinese RatingDog Services PMI, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include New Zealand Terms of Trade, Australian Final Services PMI & Trade Data, Japanese Final Services PMI, Chinese RatingDog Services PMI, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• US President Trump said the renewed campaign against Iran would not continue for too long and that oil prices would come down, while he said Iran was trying to build a rocket that drops mines and that the US took it out. Trump added that the US was prepared to conduct another attack on Iran but said he did not think the Iran war would last much longer.
• US President Trump said Israel should not worry about a renewed war with Iran.
• Israeli PM Netanyahu said "We will defeat the regime in Iran - it will fall. All of our systems are working to overthrow the regime." He added that if Iran chooses to attack Israel, "they know it will be one of their last decisions".
• Iranian Parliament Speaker Ghalibaf said Iran does not reject negotiations but views them as a tool in its broader confrontation with the US and Israel, according to Tasnim, while reiterating that the US must fulfil its commitments before Iran "takes steps" to reopen Hormuz.
• Iranian Army commander warned that Iran would respond to any future attack with several times greater force, Press TV reported.
• Iran reiterated that regional countries should prevent the US from using their territory for attacks against Iran.
• Iran’s Strait of Hormuz management body added to a list of ships that face action if they try to pass through the chokepoint, taking the total to more than 50.
• Iranian media said some news sources had reported a security incident involving a ship near the Strait of Hormuz, SNN reported.
• Iranian hackers attempted cyberattacks on US energy, telecommunications and other critical infrastructure, but the attacks have so far been unsuccessful, NBC reported citing sources.
• Saudi Foreign Ministry said it had urged all parties to remain calm, halt escalations, respect international law and return to negotiations.

US TRADE

• US stocks gained on Wednesday, with the Russell 2000 outperforming while the Nasdaq lagged but finished in the green. The vast majority of sectors were higher, although Consumer Discretionary was flat and Real Estate closed lower amid ongoing concerns around elevated yields, albeit the Treasury curve itself was little changed on the session. The Treasury curve saw a marginal steepening, with front-end yields edging lower while the belly and long end were broadly flat as attention turns towards Friday's NFP report. Administration officials continued to be quizzed on elevated bond yields, with Commerce Secretary Lutnick saying rates will come back down and the market will stabilise, adding that he is not concerned. Meanwhile, Treasury Secretary Bessent said the goal of the buyback operations is to avoid a bad market outcome, noting that buybacks free up balance-sheet capacity and make room for banks to participate more at Treasury auctions.
• SPX +0.48% at 7,668, NDX +0.23% at 29,143, DJI +0.56% at 53,062, RUT +1.23% at 2,956.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said he had very productive things to talk about with China President Xi, adding it "Will be very exciting and great. Trump said Canada had been ripping the US off for decades and that Canada takes advantage of airlines, while he added that Canada is tougher to deal with than China or Vietnam and that Canada had felt emboldened. Furthermore, Trump said the US had a good relationship with Brazil.
• US Treasury Secretary Bessent said China engages in financial repression on its savers, while he said BYD vehicles are the best USD 70k that USD 35k can buy, China products were heavily subsidised, and he was working to get the US budget deficit to GDP down.
• US Commerce Secretary Lutnick said he was in the room with US President Trump and Canada PM Carney and that they set out a path about moving forward. He added that Canada blew up the US/Canada deal due to politics and that the US was treated disrespectfully.
• US Commerce Secretary Lutnick said to companies, if they build in America, they will get tariff relief, while he said the US would pursue targeted and thoughtful tariff policy and positively mentioned TSMC and MU for their investment in the US.
• USTR Greer reportedly informed lawmakers that the beef import move is temporary, according to Fox News.
• US top trade official privately told a group of House Republicans this afternoon that Brazil and Paraguay are best positioned to supply a flood of imported beef under the president's controversial plan ahead of the midterms, according to Politico.
• A contingent of GOP lawmakers wants to talk to US Trump and White House staff tonight about his plans to import more foreign beef, which farm district Republicans have warned will harm US farmers, according to Politico citing sources.
• Mexican President Sheinbaum said Economy Minister Ebrard is seeking a deal with the US on auto and steel tariffs.

NOTABLE HEADLINES

• Fed Beige Book stated that economic activity increased modestly since early July, while employment rose very slightly overall and prices increased moderately in eight Districts.
• Fed's Williams (Voter, Neutral) said the bond market was driven by the strong US economy and big investments in AI, while he said yields were not driven by the inflation outlook or financial conditions. He also stated it was hard to know if there was an inflation component within bond yield movement and that there was a correlation between bond yields and the Middle East conflict.
• US Treasury Secretary Bessent said buybacks' goal was to get rid of a "bad outcome" by buying back illiquid, long-dated bond and that the US could try to get prices back to equilibrium.
• US Commerce Secretary Lutnick, asked about global bond yields and Treasury intervention, said he thought the market would stabilise in a more positive way than people could imagine. He added that he was optimistic the bond market would treat the US very well, that it may take a couple of months, but rates would stabilise, and that he was comfortable with where things were.

DATA RECAP

• US Factory Orders (Jul MM) 0.9% vs. Exp. 0.6% (Prev. -0.2%)
• US ADP Employment Change (Aug) 38K vs. Exp. 47K (Prev. 44K)

FX

• USD saw very modest losses, but performance against G10 counterparts was mixed. For the dollar specifically, geopolitics continues to dominate the tape while Dollar-specific newsflow was still pretty light. NY Fed President Williams said that rates are in a good place to balance the Fed’s dual mandate and reiterated his support for the previous decision to hold, with future policy dependent on the totality of incoming data. Next on the Fed docket is the influential Waller due to speak on Thursday ahead of NFP on Friday.
• EUR was choppy and ultimately returned to flat territory beneath the 1.1600 level with very little in the way of pertinent catalysts to drive the single currency.
• GBP mildly weakened after oscillating through the 1.3500 level, with price action not helped by the lack of UK data.
• JPY was the clear G10 outperformer, and saw large bouts of strength through the afternoon with headline driver behind the move. Highlighting this, USD/JPY tumbled from 159.58 to a low of 158.21, before reversing some of the move. Prior to this, BoJ hawkish dissenter Takata overnight said that they need to consider a broad range of options, not just a 25bps hike each time, and that a different response is needed from the normal semi-annual pace of tightening, while another bout of downside in USD/JPY was seen after US Treasury Secretary Bessent stated that "I know what the Japanese are planning on doing".
• CAD strengthened following the BoC rate decision in which the central bank held rates as expected, and stated that "upside risks to inflation have increased, while new tariffs make growth prospects more uncertain". Macklem acknowledged the limits of monetary policy in dealing with the tariff fallout, putting focus on inflation.
• BoC held rates as expected at 2.25%, saying upside risks to inflation had increased and new tariffs had made growth prospects more uncertain. The Governing Council will assess the sustainability of the economic rebound and the outlook for inflation and is prepared to adjust monetary policy as needed.
• BoC Governor Macklem said inflation was too high and very concentrated in gasoline and oil prices, adding that risks were shifting and the BoC was prepared to adjust monetary policy as needed. He said the bigger inflation issue was developments in the Middle East, particularly how long oil prices remained elevated and how high they rise, while future rate decisions would be guided by the inflation outlook and surrounding risks, adding that inflation remained too high and must be closely monitored.

FIXED INCOME

• T-notes settled with minimal gains and the yield curve marginally steepens as eyes turn to ISM Services and Waller on Thursday before NFP on Friday.

COMMODITIES

• Oil prices extended on this week's gains as US/Iran headlines did little to shift the overall backdrop.
• US EIA Crude Oil Stocks Change (Aug/28) -4.45M vs. Exp. -1.1M (Prev. 0.095M)
• US Energy Secretary Wright, asked about the Venezuela deal, said it was a partnership, not a displacement, and that the US government would not be the operator or producer of returns of oil. He said it was a deal between the US government and a Venezuelan company, not the country, adding that the structure would have US oversight and enforcement of law over contracts.
• US Energy Secretary Wright said Venezuela production would rise 25% and exports 50%, while China would not have a claim to Venezuela's oil fields. He also stated that the US has not held discussions with Venezuela on OPEC, as well as stated that Trump was changing the importance of the Strait of Hormuz and that Venezuela output would allow for swapping barrels.
• White House said barrels from the Venezuela deal could hit reserves in the US in November.
• Venezuelan government and Chevron (CVX) confirmed they had signed agreements for oil expansion projects, while the government and Italy's Eni (ENI IM) also signed agreements for oil expansion projects.
• OPEC+ meeting on Sunday will not make any oil output policy decisions and will focus on discussing market conditions, according to sources.
• Russia's Deputy PM Novak said there was no talk about reducing OPEC+ quotas right now as there was a shortage in the market, according to IFX.
• German Economy Ministry spokesman said gas storage levels were tighter than in previous years, but there was no risk of gas shortages this winter.

GEOPOLITICAL

RUSSIA-UKRAINE

• Ukrainian President Zelensky announced the start of a plan to swarm Moscow’s airports with AI-guided drones to isolate Russian elites and pressure Russian President Putin to negotiate a truce.
• Russian Defence Ministry said its forces struck a cargo vessel at Ukraine’s port of Chornomorsk.
• **US President Trump said regarding Russia's war in Ukraine that they have got to stop that war, while he wants to do a summit with Russian President Putin when they are ready to do a peace deal on Ukraine.
• **US Secretary of State Rubio said the US should have the opportunity to maintain dialogue with Russia despite any disagreements, according to TASS.
• European Commission President von der Leyen said the Leipzig incident marked a new escalation on European soil and that the incident had strengthened resolve to support Ukraine. She added that the EU would increase pressure on Russia.

ASIA-PAC

NOTABLE HEADLINES

• PBoC Governor Pan, at the G20, said China would not deliberately pursue a trade surplus and would expand domestic demand while maintaining high-level opening. He added that China’s economy remained broadly stable, with long-term growth fundamentals intact, and that China would prioritise structural upgrading under the 15th Five-Year Plan and provide more market opportunities to support global economic rebalancing. Pan said the PBoC would continue reforming its monetary policy framework and refining the interest-rate system, while monetary policy would remain appropriately accommodative to support stable growth and financial-market stability.
• China proposed consolidating three local levies into a single "local surtax" with an 11-13% rate set by provincial governments, CCTV reported. The existing taxes generated CNY 913.4bln in 2025, while public feedback is open until 27th September, and experts said the reform targets tax-burden neutrality, with the current combined average burden at about 11.6%.
• US Treasury Secretary Bessent said "I know what the Japanese are planning on doing".

EU/UK

NOTABLE HEADLINES

• UK government source said UK PM Burnham had not committed to spending 3% of GDP on defence by 2030 despite appearing to do so at PMQs, adding that his position remained unchanged.
• UK Chancellor Healey is to deliver a speech on growth on September 7th, according to Politico sources.
• Greece will reportedly pay off its first bailout loan two years earlier than planned, according to sources, with plans to raise EUR 7-8bln from bond markets in 2027, while at least EUR 5.1bln of the first-round bailout loans will be pre-paid in 2027.