MUFG Research highlights an increasing risk-off sentiment among investors ahead of next week's FOMC meeting.

"The list of reasons for investors to reduce their appetite for risk is lengthening – and all of this ahead of the FOMC’s likely rate hike next week. This seems foolish to us and the Fed continues to look in the rear-view mirror to justify another rate hike that looks less and less necessary," MUFG notes. 

"The FOMC remains in focus but you can sense investors looking beyond that event already, especially to the event risk that is likely to quickly dominate – the debt ceiling fiasco and the impending moment of reaching the point of exhausting the extraordinary measures to keep the government functioning. In addition to this we have uncertainties over the US banking sector that won’t go away and the mixed economic data that mostly points to recession risks increasing," MUFG adds.