USD/JPY briefly dipped below 153.00; European equity futures are indicative of a flat open - Newsquawk EU Market Open

• Iran warned that economic warfare will be met with a maritime exclusion zone from the Persian Gulf to the blockade perimeter, and said it has the ability to strike ships participating in the US blockade.
• Yemeni forces reportedly launched ballistic missile and drone attacks on targets in Saudi Arabia, including around Khamis Mushait, Abha airport and King Khalid Airbase.
• Canada’s retaliatory tariffs on US goods took effect as scheduled, while US President Trump called for a halt to US sales of Bombardier aircraft.
• USD/JPY extended declines and briefly dipped beneath the 153.00 level as the yen continues to strengthen amid BoJ rate hike expectations; Japanese GDP was revised higher and wage growth beat expectations.
• APAC stocks traded mixed in the absence of a lead from Wall Street; European equity futures indicate a flat cash market open.
• Looking ahead, highlights include German Trade Balance (Jul), US ADP Employment Change Weekly. Speakers include ECB's Elderson, BoE's Bailey, Ramsden, Greene & Taylor. Supply from the Netherlands, Germany & the US.

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IRAN CONFLICT

• Iran's top national security official Rezaee said Washington has received a clear warning from Iran’s new missiles and that economic warfare will be met with a maritime exclusion zone across the Persian Gulf to the blockade perimeter, while he added that the operational posture toward US warships and bases has been fundamentally recalibrated.
• Iran's acting Minister of Defence Ibn Al-Reza said they have the ability to strike ships participating in the US blockade against Iran.
• Iranian Foreign Minister Araghchi held a call with the new Secretary-General of the Organisation of Islamic Cooperation (OIC) and briefed him on the regional situation, while he urged Islamic states to take unified, responsible measures to safeguard Iranian sovereignty.
• Iran's envoy to the IAEA warned that US or Israeli strikes on Iran's IAEA-safeguarded peaceful nuclear facilities, if 'normalised', would have serious consequences.
• Yemeni armed forces spokesperson said Saudi Arabia would not go unpunished for its ongoing acts of aggression following a Saudi air strike on a correctional facility in Al-Jawf, which resulted in over a dozen casualties.
• Several explosions were reported in the southwest of Saudi Arabia due to Yemeni ballistic missiles being fired at the city of Khamis Mushait and Yemeni drone attacks on the Abha airport in the province of Asir, while it was also reported that Yemeni forces targeted King Khalid Airbase.

US TRADE

EQUITIES

• US stock markets were closed for Labor Day.

TARIFFS/TRADE

• Canada's retaliatory tariffs against US goods took effect, as scheduled.
• US President Trump called for a stop to US sales of Canada’s Bombardier aircraft.
• Latvian PM said they plan to impose a 300% tariff on grain arriving from Russia and Belarus.
• Japanese Chief Cabinet Secretary Kihara said China's anti-dumping move targeting Japan defies practice and they will act to prevent an undue impact from China's actions.

APAC TRADE

EQUITIES

• APAC stocks traded mixed in the absence of a lead from Wall Street and as attention turned to several data releases from the region, including Japanese GDP and Chinese trade data.
• ASX 200 underperformed with sentiment not helped by a deterioration in the Westpac Consumer Sentiment and NAB Business Confidence surveys.
• Nikkei 225 was choppy amid recent currency strength and as the latest data, including upward GDP revisions and hot Labour Cash Earnings, solidified the case for a BoJ rate hike next week.
• KOSPI outperformed on tech momentum and after South Korean GDP matched initial estimates.
• Hang Seng and Shanghai Comp were mixed as the Hong Kong benchmark was dragged lower by weakness in the local tech and biopharma stocks, while the mainland was kept afloat as participants digested the ultimately mixed Chinese trade data, in which Exports and Imports accelerated and continued to show strong double-digit percentage growth, but missed estimates.
• US equity futures were mixed following the holiday lull and as Canada's retaliatory tariffs took effect.
• European equity futures indicate a flat cash market open with Euro Stoxx 50 futures down 0.1% after the cash market closed with gains of 0.2% on Monday.

FX

• DXY slightly softened but with downside stemmed amid mixed performances against its major peers and with a lack of fresh catalysts stateside following the Labor Day holiday, while trade frictions lingered as Canada's retaliatory tariffs of 15%-50% on US goods, announced last month, took effect overnight.
• EUR/USD trades indecisively at the 1.1600 handle amid quiet newsflow from the bloc and despite the recent upward revisions to EU GDP data.
• GBP/USD lacked conviction and was contained by near-term resistance around the 1.3550 level, while there are several BoE speakers scheduled today, including Bailey, Ramsden, Greene and Taylor.
• USD/JPY extended declines and briefly dipped beneath the 153.00 level as the yen continues to strengthen amid BoJ rate hike expectations and following data releases including firmer-than-expected Labour Cash Earnings and an upward Q2 GDP revision. There were also comments from Japanese Finance Minister Katayama, who stated there was no change to their forex stance since the Japan-US joint intervention and that they will closely communicate with the US to achieve orderly forex markets.
• Antipodeans were constrained after a deterioration in Westpac Consumer Sentiment and NAB Business Confidence from Australia, while the currencies were also not helped by the somewhat mixed trade data from both Australia and New Zealand's largest trading partner.
• PBoC set USD/CNY mid-point at 6.7804 vs Exp. 6.7104 (prev. 6.7795).

FIXED INCOME

• 10yr UST futures eked slight gains in quiet trade following the recent holiday lull and with prices also not helped by looming supply, with a US 3yr note auction scheduled later.
• Bund futures nursed some of the prior day's losses but with upside limited ahead of German Trade Data and with EUR 7bln of Bund issuances due Tuesday-Wednesday.
• 10yr JGB futures rallied as long-term yields declined despite stronger-than-expected revised GDP data and firmer Labour Cash Earnings, while JGBs were also unfazed by a weaker 5yr auction.

COMMODITIES

• Crude futures gradually edged higher to extend the prior day's gains in the absence of a settlement due to the recent Labor Day holiday and following the weekend tit-for-tat attacks on vessels.
• US President Trump posted, "Oil prices will drop precipitously, like everything else is dropping (but more!), when we WIN the war with Iran. Three Dollars a gallon, but ultimately, below Two Dollars a gallon. It will all happen quickly, and Iran will never have a Nuclear Weapon. MAGA!"
• Spot gold steadily gained above the USD 4,400/oz level after shrugging off the recent choppy trade.
• Copper futures rallied after LME prices surged to a record high amid supply concerns and tariff fears.

CRYPTO

• Bitcoin retreated in a choppy fashion with prices dipping beneath the USD 79,000 level.

NOTABLE ASIA-PAC HEADLINES

• Japanese Finance Minister Katayama said they will bolster efforts to secure funding for a consumption tax cut on food and will communicate fully with markets and the public to gain credibility in their fiscal policy. Furthermore, she said they won't comment on specific FX levels and there is no change to their forex stance since the Japan-US joint intervention, while they will closely communicate with the US to achieve orderly forex markets.

DATA RECAP

• Chinese Trade Balance (USD(Aug) 119.1B vs. Exp. 119.1B (Prev. 112.5B)
• Chinese Exports YY (USD)(Aug) 25.0% vs. Exp. 25.9% (Prev. 23.9%)
• Chinese Imports YY (USD)(Aug) 28.2% vs. Exp. 30% (Prev. 27.5%)
• Chinese Trade Balance (CNY)(Aug) 809.3B vs. Exp. 795B (Prev. 767.07B)
• Chinese Exports YY (CNY)(Aug) 18.6% (Prev. 17.8%)
• Chinese Imports YY (CNY)(Aug) 21.7% (Prev. 21.2%)
• Japanese GDP Growth Rate Final QQ (Q2) 0.4% vs. Exp. 0.3% (Prev. 0.5%)
• Japanese GDP Growth Annualised Final (Q2) 1.4% vs. Exp. 1.1% (Prev. 1.8%)
• Japanese Average Cash Earnings (Jul YY) 4.7% vs. Exp. 3.9% (Prev. 4.0%)
• South Korean GDP Growth Rate Final QQ (Q2) 0.6% vs. Exp. 0.6% (Prev. 1.8%)
• South Korean GDP Growth Rate Final YY (Q2) 3.7% vs. Exp. 3.7% (Prev. 3.6%)
• Australian Westpac Consumer Confidence Change (Sep) -5.2% (Prev. 6.0%)
• Australian NAB Business Confidence (Aug) -8 (Prev. -6)
• Australian NAB Business Conditions (Aug) -1 (Prev. 4)

GEOPOLITICS

MIDDLE EAST

• Israel's army announced that a large-scale operation was launched in the Shuafat refugee camp and Anata town east of Jerusalem.
• Israeli Finance Minister Smotrich said Israel will expel the UK ambassador, while he accused the UK government of "anti-Semitism" and of attacking Israel. In relevant news, Israel's National Security Minister Ben-Gvir posted, "It is time for the State of Israel to publicly recognise that the Falkland Islands are occupied Argentine territory, violently stolen from the Argentine people by the British."
• UK government will accelerate sanctions against Israeli settlements in the West Bank, while the sanctions could include a ban on trade with West Bank settlements, according to The Telegraph.

RUSSIA-UKRAINE

• Explosions were heard in Ukraine's capital of Kyiv.
• Ukrainian President Zelensky said the US is exploring whether Ukraine and Russia could take steps to de-escalate the war in the winter while restarting negotiations for a broader peace agreement, according to an interview with Axios.
• US President Trump and UK PM Burnham discussed working towards a Russia-Ukraine ceasefire during a call, according to Downing Street.
• France said its plan to send air defence systems to Ukraine is on track.

OTHER

• Cuba’s Foreign Minister said there has been no progress, no negotiations, nor any agenda for future negotiations with the US.
• South Korea notified the IAEA of its intent to consult on safeguards arrangement for nuclear-powered subs

EU/UK

NOTABLE HEADLINES

• UK PM Burnham will host bosses next Monday to reassure the private sector that Labour has a sound economic growth plan amid fears that next month's budget will hike business taxes.
• US President Trump and UK PM Burnham held a phone call, while The Sun reported that they are expected to meet at the UNGA, with a possible Oval Office visit beforehand under discussion.
• King Charles will host a closed-door AI meeting later this month, with NVIDIA (NVDA) CEO Huang and DeepMind Chair Hassabis invited.
• European Commission signalled greater willingness to consider large corporate mergers, with top competition official Whelan noting that deals which help companies scale up and innovate will get a closer hearing, according to FT

DATA RECAP

• UK BRC Retail Sales Monitor (Aug YY) 0.5% vs. Exp. 1.2% (Prev. 1.0%)