* PELOSI ANNOUNCES IMPEACHMENT INQUIRY INTO TRUMP

* CHINA’S WANG REJECTS U.S. CRITICISMS, SAYS BOTH SIDES SHOULD COOPERATE (RTRS)

* CHINA TO KEEP SUPPORTING PORK, SOY PURCHASE FROM U.S. (XINHUA)

* CHINA PREPARING TO BUY MORE U.S. PORK AS TRADE TALKS REVIVE (BBG)

* RBNZ LEAVES RATES ON HOLD, POLICY ROOM IF NEEDED (MNI)

* EU GETS FOURTH SET OF U.K. PROPOSALS WITH BACKSTOP ALTERNATIVES (BBG)

• Risk tone is on the backfoot following Trump’s harsh tone on China’s trade policies, further exacerbated by Democrats’ impeachment inquiry into Trump
• Asian equities are a sea of red so far in the midweek session; Nikkei 225 -0.38%, Shanghai Comp -0.57%, Shenzhen Comp -1.21%
• European and US equity futures are mixed; Euro Stoxx 50 -0.171%, FTSE 100 -0.228%, S&P500 e-minis +0.202%
• UST yields are mixed; 2yr -1.21bp to 1.6135% area and 10yr USTS +0.44bp to 1.6500% area
• DXY index seen pushing higher towards 98.550 area, +0.21% on the day
• Brent -0.81% to USD62.59/bbl; WTI -0.65% to USD56.92/bbl

FED: Minneapolis Federal Reserve President Neel Kashkari says two factors are holding the U.S. economy back right now: President Trump’s trade war and high interest rates. The current U.S. interest rate is a bit below 2 percent after the Fed lowered it slightly last week. Kashkari would like to see the rate cut to under 1.5 percent to stimulate the economy. “I’m concerned that we’ve needlessly raised interest rates over the past three years and put the economy into a more dangerous position that makes it more vulnerable to shocks that could hit us,” Kashkari told The Washington Post in an interview Tuesday. “Why are we trying to contract the economy?” Kashkari said he pushed for a bigger interest rate cut when the Fed’s policy setting committee met last week and that he will continue to advocate for a sizable reduction later this year. He will be one of the 10 Fed leaders who get to vote on the appropriate level of interest rates in 2020. (Washington Post)

POLITICS: The House will start an impeachment inquiry into President Donald Trump as a swell of Democrats denounce the president over alleged abuses of power, House Speaker Nancy Pelosi said Tuesday. Gathering pressure finally broke through the speaker’s reluctance to start impeachment proceedings amid concerns about the president’s efforts to push Ukraine to investigate the family of former Vice President Joe Biden, one of his top rivals for the presidency in 2020. At least 174 House members have now backed some action on impeachment. The number ballooned this week as centrist Democrats and vulnerable freshman lawmakers joined their ranks. (CNBC)

ECB: Incoming European Central Bank President Christine Lagarde said the global economy is likely to dodge an outright contraction, though trade tensions remain the top threat to the growth outlook. “It is not in the baseline to have a recession,” Lagarde said in a Bloomberg Television interview on Tuesday. “That said, it’s mediocre growth, it’s at risk because of essentially one major threat, which is the trade war that we see developing or brewing and the uncertainty it generates for investors.” (BBG)

BREXIT: British Prime Minister Boris Johnson said he was cautiously optimistic but still cautious about reaching a Brexit deal as he met his Irish counterpart Leo Varadkar on the sidelines of the UN General Assembly on Tuesday. Varadkar said he was keen for Britain to leave the European Union in an orderly fashion. “We remain cautiously optimistic, but still cautious,” Johnson told reporters as the pair began their meeting. (RTRS)

BREXIT: The U.K has sent a fourth set of informal proposals to the European Commission, laying out alternative arrangements to the backstop post-Brexit, two EU diplomats say on condition of anonymity, in line with policy. The Commission hasn’t shared contents of the fourth so-called non- paper with the bloc’s remaining 27 governments, as it’s “property of Her Majesty’s Government,” one of the officials says. Technical level talks between EU Commission, U.K negotiators are scheduled in Brussels on Wednesday, after which EU27 governments will be debriefed on state of play, official says

GLOBAL TRADE: China’s top diplomat, Foreign Minister and State Councillor Wang Yi, hit back at tough criticisms from the United States on Tuesday and said the world’s two biggest economies should respect each others’ interests and cooperate for their mutual benefit and for that of rest of the world. Wang made the remarks in an address at an event hosted by the U.S.-China Business Council in New York on the sidelines of the annual United Nations General Assembly. Earlier on Tuesday, U.S. President Donald Trump delivered a stinging rebuke to China’s trade practices at the United Nations General Assembly, saying he would not accept a “bad deal” in U.S.-China trade negotiations. (RTRS)

GLOBAL TRADE: The U.S. may employ a trade weapon designed to maximize pain against the European Union in a move that will heighten transatlantic tensions and put further strain on global commercial ties, according to people familiar with the plan. The office of the U.S. Trade Representative has already compiled a list of possible goods it will target once the World Trade Organization publicizes the amount of damages it suffered due to illegal European Union aid for Airbus SE. But instead of choosing a static list of products, the U.S. may rotate them to create uncertainty and hit as many industries as possible, said the people who asked not to be identified because the plans are private. (BBG)

BOJ: POLICY: BOJ Masai: To Act If Needed; Benefits, Costs Eyed
– The Bank of Japan must carefully examine the risks surrounding overseas economies and how they affect Japan, board member Takako Masai said on Wednesday, noting that the BOJ like other central banks will take policy action if needed.
BOJ: POLICY: BOJ Minutes: Members See Pre-Emptive Move On Risks
– A few Bank of Japan board members emphasized the need to take pre-emptive policy action against the heightened risks facing Japan’s economy, the minutes of the July 29-30 policy-setting meeting released on Wednesday showed. Some members also called for measures to mitigate the side-effects of further easing on commercial banks and the financial system.

RBNZ: POLICY: RBNZ Leaves Rates On Hold, Policy Room If Needed
– The Reserve Bank of New Zealand has left its official cash rate (OCR) unchanged at 1%, but said there “remains scope” for more fiscal and monetary stimulus. The RBNZ said that developments had not changed significantly since the August meeting at which it announced a big cut of 50 basis points down to the new record low of 1%.

OVERNIGHT DATA

JAPAN AUG PPI SERVICES +0.6% Y/Y; MEDIAN +0.5%; JUL +0.6%

AUSTRALIA AUG SKILLED VACANCIES -0.1% M/M; JUL -0.1%

NEW ZEALAND AUG TRADE BALANCE -NZ$1.565BN; MEDIAN -NZ$1.400BN; JUL -NZ$700MN
NEW ZEALAND AUG EXPORTS NZ$4.13BN; MEDIAN NZ$4.10BN; JUL NZ$4.96BN
NEW ZEALAND AUG IMPORTS NZ$5.69BN; MEDIAN NZ$5.58BN; JUL +NZ$5.66BN.
NEW ZEALAND AUG TRADE BALANCE YTD -NZ$5.484BN; MEDIAN -NZ$5.400BN; JUL -NZ$5.485BN

EU session:

07:45- FR: Consumer Confidence

08:00- EZ: ECB’s Couere (Dove) second roundtable on euro risk-free rates

11:00- EZ: ECB’s Lautenschlager (Hawk) on cybersecurity

European supply:

10:00- IT: €1-1.5bn 2-year CTZ

10:00- IT: €0.25-0.5bn 22-year BTPei

10:30- GER: €3bn 10-year Bund

US session:

13:00- US: Fed’s Evans (Voter,Dove) on economy and monetary policy

14:05- UK: BoE’s Carney (Neutral) moderates climate change panel

15:00- EZ: ECB’s Couere (Dove) on digital currencies

15:00- US: New Home Sales

15:00- US: Fed’s George (Voter, Hawk) on payments system

15:00- US: Fed’s Brainard (Voter, Dove) on financial stability

16:15- UK: BoE’s Carney (Neutral) on climate risk panel

US supply:

16:30- US: $18 bn 2-year FRN

17:00- CAN: CAD 2.4bn 3-year bonds

18:00- US: $41bn 5-year Notes

A quiet day in terms of economic data. French Consumer Confidence is seen remaining unchanged at 102.0 at 0745 BST, with US New Home Sales forecast to strengthen to 656 from 635 at 1500 BST.

Several central bank speakers are due to speak, though only the Fed’s Evans (Voter, Dove) will address monetary policy at 1300 BST.