BoJ rate hike expectations continue to retreat ahead of Ueda

Asia market update: BOJ rate hike expectations continue to retreat ahead of Ueda; Higher yields embraced at JGB auction; Trump confirmed diesel tax reduction, revealed BDX will invest billions in the US ; Foxconn rises after Sept and Q3 sales.

General trend and developments

- On Monday, Oct 5, the Nasdaq Composite closed at a new all-time high of 27,477.31, up +1.05% (or +286 points). The move was driven by AI/tech leaders: Nvidia rose ~2% to a record close, Microsoft, Meta, and Tesla also gained solidly. The slight +0.1% overnight bias in Nasdaq futures is consistent with that ongoing tech leadership. S&P 500 closed Monday at 7,773.95, up +0.66% — a solid gain but clearly lagging the Nasdaq.

- This is classic low-conviction overnight trade — very small moves in opposite directions. Nasdaq is showing a slight positive bias at +0.1%, consistent with the tech/AI strength that pushed it to a fresh record on Monday. S&P is a touch softer at -0.1%, reflecting a bit more caution in the broader market (still-elevated yields, mixed macro backdrop).

- During the session, the Japanese 10-year JGB auction showed a higher average yield of 3.1010% vs. 2.9950% prior. The bid-to-cover ratio of 3.76x remained above the 12-month average of 3.21x, marking the strongest reading since May 2026. The 2bp tail also indicated a tighter, healthier auction, with the lowest reading since June 2025. Meanwhile, Japan's Q2 output gap increased to +0.55% from +0.36% q/q, indicating that demand is stronger than the economy's available capacity. OIS is currently pricing in a 12.0% chance of a +25bp hike at the October meeting and a 90.5% chance of a hike by December. The next BoJ rate decision is scheduled for October 29-30th.

- BoJ Governor Ueda may provide more details at his scheduled speech at the National Securities Conference at 15:35pm JST (=02:35am ET).

- Following the FT’s reported WTI Crude Oil modest stabilization or small rebounds in thin after-hours/overnight trade (link: https://markets-data-api-proxy.ft.com/data/commodities/tearsheet/historical?c=WTI+Crude+Oil), U.S. President Trump today announced the White House released Order on Off-Road Dyed Diesel [as expected citing a previous Axios source]. The order seeks to defer payment of the Federal excise tax imposed for on-road use of dyed diesel fuel for the remainder of the year without interest or penalties and ensure farmers’ access to dyed diesel in high-demand areas, encouraging corresponding action by States. U.S. President Trump announced that it would give farmers, ranchers $12B in relief.

- Additionally, U.S. President Trump announced Becton Dickenson & Company will invest $3B to onshore manufacturing of essential medical products in the U.S., including more than $1B in Nebraska to expand production of products such as needles made with American steel [citing forthcoming medical device tariffs as a key driver for expansion]. Separately, VP Vance stated that the Alaska Railbelt project will devote over $400M to new transmission infrastructure, including 223 miles of lines between Beluga and Healy, to strengthen grid reliability for approximately 75% of Alaska’s population [as expected].

- Foxconn 2317.TW [former Hon Hai Precision Industries] released its sales figures last night. September Revenues rose by +38.4% y/y to NT$1.16T, whilst Q3 Revenues rose by +47.1% y/y to NT$3.03T. The company stated continued growth in Q4, and necessary to monitor the impact of a volatile global political and economic environment.

- US equity FUTs +0.1% to +0.1% during Asia trading.

Looking ahead (Asian-weighted focus, using EST/EDT time-zone)

- Mon Oct 5th: Global European Sept S&P/HCOB Svcs/Composite PMI, EU Aug PPI, US Sept S&P/ISM Svcs/Composite PMI, NZ Q3 NZIER Business Confidence, (Mon night, HK Sept S&P Mnfg PMI, PH Sept CPI & Core CPI, TH Sept CPI & Core CPI, JP 10-Year JGB Auction, IN Sept HSBC Svcs PMI).

- Tue Oct 6th: EU Aug Retail Sales, US Aug Trade Balance, CA Aug Trade Balance, US EIA Short-Term Energy Outlook, (Tue night, JP Aug Labor Cash Earnings, JP/ID/MY/CN/HK/SG/PH Sept Foreign Reserves - USD, AU Aug Building Approvals, PH Aug Industrial Production, IN RBI Interest Rate Decision, JP Aug Preliminary Leading Index & Coincident Indicator, DE Aug Industrial Production, TW Sept CPI).

- Wed Oct 7th: UK Sept Mortgage Rate - GBP, US 10-Year Note Auction, US Sept 15-16 FOMC Meeting Minutes, AR Aug Industrial Production, (KR Aug Current Account, JP Aug Current Account, AU Oct MI Inflation Expectations, ID/TH Sept Consumer Confidence, JP 30-Year JGB Auction, DE Aug Trade Balance, TW Sept Trade Balance).

- Thu Oct 8th: EU Sept 9-10 ECB Meeting Minutes, MX Sept CPI & Core CPI & Sept 24 BANXICO Meeting Minutes, US 30-Year Bond Auction, (Thu night, JP Aug Household Spending, ID Aug Retail Sales, MY Aug Industrial Production & Unemployment Rate, JP Sept Machine Tool Orders).

- Fri Oct 9th: US WASDE Report, RU Sept CPI.

Holidays in Asia this week

-Mon Oct 5th: China, South Korea.

-Tue Oct 6th: China.

-Wed Oct 7th: China.

-Fri Oct 9th: South Korea, Taiwan.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 Index opens +0.3% at 8,714.

-(AU) Australia Sept ANZ-Indeed Job Advertisements M/M: 2.2% v 2.5% prior.

-(AU) Australia Oct Westpac Consumer Confidence Index: 80.4 v 84.4 prior.

-(AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 67.1 v 70.5 prior.

-(AU) Australia Treasurer Chalmers: Private sector is leading growth in Australia economy.

-(AU) Australian Army solider dies and five other injured during a training exercise in Northern Australia - ABC News.

-(NZ) New Zealand NZIER Shadow Board publishes quarterly statement on business opinion; New Zealand business confidence improved in Q3 at 43% v 8% q/q.

-(NZ) RBNZ: New Zealand financial stability report will be published on Nov 17th.

China/Hong Kong

-(CN) Shanghai Composite Index closed for the National Day of the People's Republic of China holiday; (HK) Hang Seng Index opens +0.3% at 24,040.

-(CN) Beijing wanted more from Chinese President Xi's Washington state visit - SCMP [update].

-(HK) Hong Kong Sept PMI (whole economy): 49.2 v 49.5 prior (2nd month of contraction).

-(HK) MOONSHOT.IPO Reportedly said to close pre-IPO funding round at $50B valuation in Q1 of 2027 - US financial press.

-(HK) KLING.IPO Reportedly said to target Hong Kong IPO as soon as next year worth $1B+ - US financial press.

-(HK) 0005.HK Hong Kong questions HSBC over Singapore AI hub decision - FT.

Japan

-(JP) Nikkei 225 Index opens -0.1% at 69,861.

-(JP) Japan announces additions to Russia export ban list including steel products, copper products, and certain plastics & chemicals.

-(JP) Japan sells ¥2.90T VS. ¥2.90T indicated in 3.10% 10-year JGB bonds; AVG yield: 3.1010% V 2.9950% prior; bid-to-cover: 3.76X V 3.29X prior (highest bid-to-cover ratio since May, 2026).

-(JP) Japan Pension Fund GPIF said not to have discussed portfolio allocation at the Sept meeting [EU Market Close].

-(JP) Follow-up: GPIF's Management Committee held meeting on September 28th; the agenda for the meeting did not include a report from the portfolio review team - US financial press.

-(JP) Japan Fin Min Katayama: We have enough measures to meet spending needs for next year's budget, will thoroughly communicate with markets - Tokyo, Japan.

-(JP) BoJ may signal underlying inflation has hit 2% target goal [similar to Mon report from Jiji] - US financial press.

-(JP) Japan plans market system to extend thermal plant life - Nikkei.

-(JP) Japan detains member of Qilin Ransomware Group - Asahi.

-(JP) 8035.JP CFO: Tokyo Electron FY26 Operating Income likely ¥1.00T - Nikkei.

Korea

-(KR) Kospi Index opens +0.6% at 7,045.

-(KR) South Korea Sept Foreign Reserves: $440.6B v $442.3B prior.

-(KR) South Korea Finance Minister: Affirms economic growth expected at 3% level this year.

-(KR) South Korea President Lee: Some hacking attacks have signs of AI involvement - Cabinet Meeting.

-(KR) Follow up: South Korea police launch investigation into hacking at commercial banks - Yonhap.

-(KR) South Korea Defense Ministry: Preparing response to force North Korea to apologize for the mine blast that injured South Korean soldiers.

-(KR) South Korea MOF sells 2-year Bonds: Avg Yield: 3.895% v 3.630% prior [update].

Other Asia

-(TW) Taiwan Dollar (NT$) strengthens to as much as 31.699/USD, highest level since Sept 23rd.

-(TW) 2317.TW Reports Sept (NT$) Rev 1.16T +38.4% y/y; Q3 Rev 3.03T +47.1% y/y [EU Market Close].

-(PH) Philippines Sept CPI M/M: 1.0% v 0.7%e; Y/Y: 7.2% v 6.8%e.

-(PH) Philippine Central Bank (BSP): To continue assessing impact of Mideast war on inflation; Remains vigilant and guided by incoming data - Statement.

-(TH) Thailand Sept CPI M/M: 0.3% v 0.5%e; Y/Y: 2.8% v 3.0%e.

-(TH) Thailand Central Bank sells THB60B vs. THB60B indicated in 3-month Bills: Avg Yield: 0.97233% v 0.97721% prior; bid-to-cover: 1.62x v 1.40x prior.

-(IN) India Central Bank (RBI) said to be likely selling USD through state-run banks to limit the Rupee weakness – traders.

-(MY) Follow up: Zetrix AI submits plan to resolve outstanding remittances - The Star.

North America

-(US) President Trump: Announcing another step to bring down oil costs; Tonight I will sign order to waive off-road requirement to allow anyone to purchase tax-free red-dyed diesel [as expected] - The President delivers Remarks [Pre-Credentialed Media], Pinnacle Bank Expo Center, Grand Island, NE19.

-(US) SEPT FINAL S&P SERVICES PMI: 58.8 V 58.7 PRELIM (confirms 6th month of expansion): No orders surged; Input cost inflation accelerated [US Market Close].

-(US) SEPT ISM SERVICES INDEX: 54.9 V 55.0E; Prices Paid: 74.0 v 73.3e (highest since July 2022); New Orders Index: 59.8 v 60.3e [US Market Close].

-(US) Federal Reserve Bank of NY said to be visiting with 'big banks' to conduct private credit reviews; Bank names disclosed include Morgan Stanley, Wells Fargo, and Barclays - Semafor - Semafor [US Market Close].

-(US) Pres. Trump: Attributes raising gasoline prices to Russian refineries being damaged by the Ukraine conflict and to refinery closures in blue states - Truth Social [US Market Close].

-(US) Agriculture Sec Rollins: Pres Trump likely to take action on farmers later today; More to do on cost of diesel, urge states to act; Looking how to bring cost of diesel down [US Market Close].

-(US) CFTC Chair Selig: CFTC is moving to propose first round of regulations for crypto markets later today [US Market Close].

-(US) US Treasury Sec Bessent: Underlying, core inflation down to around 2.3% - Pennsylvania Chamber of Business and Industry Annual Dinner, Hershey Lodge, PA.

-(US) White House Releases Order on Off-Road Dyed Diesel: Executive Order to temporarily allow off-road “dyed” diesel for highway use and defer the applicable Federal excise tax, lowering costs for Americans.

-(US) VP Vance: Alaska Rail Belt project to devote over $400M to grid - Alaska Event, AK.

-(US) Bridgewater Associates' Founder Ray Dalio: US debt service payments are squeezing out spending; Sees possibility of US debt crisis within 3 years.

-(US) Pres. Trump: Restates criticism for The New York Times - Truth Social.

-(US) Pres. Trump: The Radical Left is upset with the fact that I am taking Ads, which I consider to be a positive prom... - post on Truth Social.

-(US) LIV Golf: BC Partners Credit, the credit arm of BC Partners, today announced an initial committed investment in LIV Golf by funds advised on its platform.

-(US) META On Oct 2nd, Meta announced Muse Gadgets, an open-source hardware and software initiative that lets developers build custom physical devices and peripherals around its Muse personal AI agent [US Market Close].

-(US) BDX President Trump: Becton Dickenson and Company, has agreed to an investment of $3B to onshore manufacturing of essential medical products - post on Truth Social.

-(US) ANTHROPIC.IPO SemiAnalysis report finds that Anthropic subscriptions offer as much as 5x value versus OpenAI.

-(US) ACN Accenture contractor removed from FBI following 'damaging' data breach - Press.

-(CA) Voters in Quebec elected a separatist political party for the first time in >10 years – Press.

-(BR) Brazil Sept Services PMI: 49.2 v 50.5 prior (flips back into contraction) [US Market Close].

-(CO) Colombia Central Bank Oct Minutes: The decision adopted by the Board of Directors maintains a restrictive monetary policy stance, in line with expectations of a declining inflation path in 2027. [update].

-(AR) Argentina Econ Min Caputo: He sees signs of Argentina recovery in August, September - Podcast.

Europe

-(RU) Russia Moscow Mayor: Ukraine sent 650 drones towards Russia's Moscow region overnight - Max channel.

-(UK) Govt Spokesperson Wells: UK has diverse and resilient supplies of diesel [EU Market Close].

-(UK) BP CEO: We have adjusted our refineries to move focus from jet to diesel production; We have no intention of shying away from the Middle East [EU Market Close].

-(EU) Foreign Affairs Policy Chief Kallas: Russian Kremlin is putting lives at risk across Europe with hybrid attacks [EU Market Close].

-(FR) Bank of France Gov Moulin: Warns that the French Govt risks being 'strangled by rising interest rates' if it does not act on public finances - FT [EU Market Close].

Middle East

-(SA) Saudi Arabia East-West oil pipeline said to be flowing 'normal' again - press reports [US Market Close].

-(YE) Yemen's armed forces claim to have taken control of Red Sea port Mocha near Bab el- Mandeb Strait [EU Market Close].

-(IQ) Reportedly Iraq seeks more oil tankers in further effort to control transit through the Strait of Hormuz - press [EU market close].

-(IR) IRGC Commander Rezaee: The enemy's next mistake will bring about new fronts and new surprises - X post [EU Market Close].

-(YE) Yemen's Houthis claims to have carried out three military ops in Saudi Arabia [EU Market Close].

-(KW) Kuwait Petroleum Corp (KPC) CEO: Kuwait is pumping oil at ~75% of pre-Iran war rate [EU Market Close].

-(SA) Saudi-Led Coalition: Destroyed Sanaa (Yemen capital city) missile launcher - SPA.

Levels as of 01:20 ET

Nikkei 225 +1.1%; ASX 200 +0.6%; Hang Seng +0.7%; Shanghai Composite +0.3%; Kospi -1.1%.

Equity S&P500 Futures +0.1%; Nasdaq100 +0.1%; DAX +0.3%; FTSE100 +0.3%.

EUR 1.1231-1.1212 ; JPY 158.21-157.77; AUD 0.6977-0.6963; NZD 0.5619-0.5593.

Gold -0.4% at $4,123/oz; BTC -0.1% at $85,680; WTI Crude Oil +0.5% at $89.87/bbl; Copper +0.1% at $6.6470/lbs.