Perhaps after intervening every single day in the past week (remember that FT piece saying the PBOC would no longer directly buy stocks… good times) in either the stock or the FX (both on and offshore) market, China needed a day off; perhaps even the algos got tired of constantly spoofing the E-mini and inciting momentum ignition, but for whatever reason the overnight session has been oddly uneventful, with no ES halts so far, few USDJPY surges (then again those come just before the US open), and even less violent CNY or CNH moves, leading to virtually unchanged markets in Japan (small red) and China (small green). And while the initial tone in Europe has been modestly “risk off”, it is nothing in comparison to the massive gyrations that have become a stape in the past few weeks.

Asian equity markets traded mixed with price action relatively subdued amid light news flow and lack of key data with participants remaining tentative ahead of next week’s FOMC meeting and Chinese industry data over the weekend. As such, the Nikkei 225 (-0.2%) and ASX 200 (-0.5%) traded with losses with little in the way of new macro newsflow. Elsewhere, Chinese markets traded mixed through most of the session before falling as European participants got to their desks with the Hang Seng (-0.3%) initially benefitting from strength in tech names in a continuation of the move seen in the US before closing in the red. JGBs traded mildly lower despite the mixed risk outlook in Asia, while the BoJ also entered the market to buy JPY 870 bn government bonds in the short end.

The BoK kept the 7-day repo rate unchanged at 1.50% as expected, with BoK Governor Lee adding that the current rate is at a level capable of supporting the South Korean economy. Moments ago, the Russian central bank joined the “unch” category when it left its key rate at 11.00%, as expected.

In Europe, participants kicked off the final European session of the week amid a bout of risk off sentiment, with equities (Euro Stoxx: -0.90%) falling into the red shortly after the open. Despite opening modestly in the green, equities have spent the majority of the session in the red, despite light macro news. On a sector specific basis, telecom names are the notable underperformers after Teliasonera (TLSNY) (-1.2%) and Telenor (TELNY) (-1.4%) announced a withdrawal from merger in Denmark, citing disagreements with the European Commission.

The IBEX 35 (-0.9%) continues to underperform after experiencing weakness throughout the early part of September as market participants react to the upcoming Catalan election, with the majority of pro-independence groupings joining forces and suggesting that if they get a majority of seats they will declare unilateral independence, even if they do not win the majority of votes. Perhaps as a result the SP/GE 10y bond yield spread is also wider amid the heightened risk off sentiment, while T-notes and Bunds both reside in positive territory, benefiting from weakness in equities .

The risk off sentiment has also filtered through to FX markets with EUR and JPY benefiting from a safe-haven bid and as such EUR/USD briefly broke above 1.1300 to the upside, with the USD/JPY trading down to the 120.50 level, which in turn has weighed on the USD, with the USD-index (-0.1%) residing in modest negative territory heading into the North American crossover. This however was promptly followed by a round of SNB intervention, which pushed the EURCHF to above 1.10, the highest level since the January 2015 de-pegging.

Of note FOMC related risks are beginning to be evident in FX options market, where the 1-w tenor is up nearly 400bps at its highest level since mid-July. Furthermore, commodity currencies have weakened alongside the softness in commodity complex, with the likes of CAD, RUB and NOK all seeing further weakness today.

In commodities, softness has been seen in both the metals and energy complex today, with the latter falling after a bearish note from Goldman Sachs on the sector (more shortly). As such, WTI and Brent crude futures have broken below the USD 45 and USD 48 levels respectively, which comes in the context of Saudi Arabia downplaying the need for an additional summit to discuss price stability in the energy market yesterday.