Equities gain amid trade nervousness, esp. KR ahead of Trump meeting

Asia market update: Equities gain amid trade nervousness, esp. KR ahead of Trump meeting; JP Takaichi sees a path to power; AU jobless 4-yr high.

General trend and developments

- Market nervousness on trade remains muted as Pres Trump commented, “We’re in a trade war with China now” along with USTR Greer and US Treas Sec Bessent’s joint press conference suggesting "decoupling” if China can’t be trusted with global supply.

- Markets left to guess if there will be a meeting between Trump and Xi at APEC in South Korea end-Oct. [Bessent did say there are a series of working level meetings taking place between the two sides ahead of APEC].

- It is not clear if China MOFCOM and its trade envoy Li Chengang are issuing trade policy on items such as rare earths counter to the wishes of other more moderate voices in China’s Politburo and whether Pres Xi specifically supports the announcements.

- South Korean officials signaled a potential turnaround in US' attitude towards recent Korean trade negotiation requests. Includes presumably either Korea's desired US-KRW swap line for the country to help safeguard its $350B investment into the US, or alternatively Pres Trump said to have suggested Korea could make an upfront $350B investment.

- Comes amid reports Samsung CEO and other Korean CEOs to meet US Pres Trump at Mar-A-Lago, along with officials including SK's Industry Minister and Presidential Policy Chief.

- Korea’s Kospi outperformed +2.3% to fresh record highs just shy of 4,000.

- A glimmer of light for LDP’s embattled PM-elect Takaichi, after DPP head Tamaki said that there was “still some distance” between his party and potential coalition member CDP (and the Japan Innovation Party; JIP), and that ‘governing would be hard’. Tamaki also opened the door back to the LDP by saying there is a lot of overlap between the DPP and the LDP “If we can develop trust, we can work with the LDP”.

- Came as Takaichi herself reached out to the Japan Innovation Party. [** Note: the DPP (center-right party) with 27 seats and the JIP (right-wing party) with 35 seats if combined with the LDP’s 196 seats would take that coalition comfortably over the 233 threshold required to rule by simple majority.].

- Nikkei up 1% at the open, continued higher +1.3%.

- Japanese yield curve flattened further with the short-end rising and long-end falling as BOJ Board member Tamura (hawk) suggested rates should be higher, but cautioned against rapid hikes. USD/JPY fell back into 150 handle again, also amid Tokyo reporting on Bessent’s comments that the Yen will settle if BOJ keeps taking "the right policies".

- Aussie jobs for September saw unemployment come in at a four-year high of 4.5% (although a higher participation rate also recorded). AUD/NZD came quickly back to 1.13 from close to 1.14 (recent 3-year highs) against the Kiwi with equities on ASX charging to a record high and 3-year yields -12.5bps as markets placed bets the RBA may be forced to cut again, against recent commentary from board members suggesting a hold.

- China PBOC set the Yuan reference rate at its strongest fix since Oct 15, 2024.

Note: In the coming hours BoJ to hold meeting with market participants to discuss BoJ ops.

- US equity FUTs flat during Asia trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Fri Oct 17th KR jobs.

Note: US releases scheduled for this week but postponed due to the govt shutdown: Sept PPI, Sept Retail Sales, Sept Housing Starts, Sept Building Permits.

Holidays in Asia this week

- Mon Oct 13th Japan, Thailand, US bond markets closed.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.5% at 9,035.

- Australia Sept employment change: +14.9K V +20.0KE; unemployment rate: 4.5% V 4.3%E (highest unemployment rate since Nov 2021).

- RBA Gov Bullock: The latest data suggest consumption has been a little stronger than we thought; Headline inflation is a little bit volatile; Data is giving us time to think on whether it is time for more easing; Job is not done on policy objectives.

- RBA Assist Gov Kent: Easing financial conditions are helping to balance the economy- New Zealand Sept Food Prices M/M: 0.4% v 0.3% prior.

- New Zealand Sept Non Resident Bond Holdings: 59.6% v 61.5% prior.

China/Hong Kong

- Hang Seng opens -0.1% at 25,890; Shanghai Composite opens -0.3% at 3,900.

- US Pres Trump: We're in a trade war with China now; Tariffs are an important tool for defense.

- (US) Treasury Sec Bessent: If China wants to be an unreliable partner, world must decouple; US doesn't want decoupling; China can’t be trusted with the global supply chain.

- USTR Greer: China rare earths move is global supply chain power grab; There is room for positive relationship with China.

- Trump's threat on China cooking oil is said to be 'Ineffective' - Global Times.

- China Sept YTD aggregate financing (CNY): 30.09T V 29.905TE.

- China Sept YTD new Yuan loans (CNY): 14.75T V 14.919TE.

- China Sept M2 money supply Y/Y: 8.4% V 8.5%E.

- China to hold National People's Congress (NPC) Standing Committee meeting in Beijing on Oct 24-28th.

- (IT) Italy govt said to add extra tariff on Chinese imports to protect its fashion industry – press.

- China PBOC sets Yuan reference rate: 7.0968 v 7.1021 prior (strongest fix since Oct 15, 2024).

- China PBOC Open Market Operation (OMO): Injects CNY236B in 7-day reverse repos; Net drains CNY376B v injects CNY44B prior.

Japan

- Nikkei 225 opens +0.9% at 48,075.

- Japan Aug Core Machine Orders M/M: -0.9% v 0.5%e; Y/Y: 1.6% v 4.9%e (weakest pace since Feb 2025).

- Japan sells ¥3.2T vs. ¥3.2T indicated in 12-Month Bills; Avg Yield: 0.7414% v 0.7273% prior; bid-to-cover: 3.35x v 3.22x prio.

- Japan METI: Guides Q4 Japan Steel Output 20.2Mt, -2.4% y/y.

- Japan BOJ Board member Tamura (hawk): BOJ should push rates closer toward levels deemed neutral but do not believe that the Bank should immediately raise the policy interest rate to a restrictive level in an attempt to curb inflation.

- (US) Follow up: Treasury Sec Bessent: Yen will settle if BOJ keeps taking "the right policies" - Japanese press, follows earlier Bessent comments.

- Japan Fin Min Kato: Discussed Ukraine support at G-7 meetings; Key G7 coordinates on China rare earth countermeasures; Seeing rapid FX moves in weak Yen direction.

- LDP leader Takaichi said to have reached out to the JIP [Japan Innovation Party] amid Wed meeting, both sides agreed to commence policy dialogue from Thurs - Nikkei.

- Japan DPP Head Tamaki (opposition party); Still some distance between DPP and CDP party; will continue talks at secretary-general level - 3 party opposition talks.

Korea

- Kospi opens +0.5% at 3,675.

- TTN Research Alert: South Korean officials signaling potential turnaround in US attitude towards recent Korean trade negotiation requests.

- South Korea Presidential Policy Chief: "Optimistic" [when asked about trade talks with the US].

- South Korea Fin Min Koo says US may accept South Korea proposal in tariff talks – Yonhap.

- South Korea Sept Total Bank Lending To Household (KRW): 1,170T v 1,168T prior (smallest monthly increase since March).

Other Asia

- India Sept Unemployment Rate: 5.2% v 5.1% prior.

- (IN) Trump: India PM Modi has assured me India will stop buying Russia oil, but it will take some time.

North America

- FFIV *Follow Up: Breach of US-based cybersecurity provider F5 said to be attributed to China - US financial press.

- (US) Trump Admin said to be preparing "sweeping" changes at IRS - WSJ.

- Macquarie Group to sell Aligned Data Centers to a consortium of investors comprising the AI Infrastructure Partnership (AIP), MGX and BlackRock’s Global Infrastructure Partners for $40B, largest to date for global data center.

- Coreweave confirms agreement with Poolside to provide NVIDIA GB300 NVL72 cluster, totaling over 40K GPUs, to support foundation model development and enterprise AI agents.

- (US) MBA Mortgage Applications w/e Oct 10th: -1.8% v -4.7% prior (3rd straight week of declines).

- (US) Oct Empire Manufacturing: +10.7 V -1.8E (above all estimates); New Orders: +3.7 v -19.6 prior; Notes price increases picked up and are expected to pick up further in the months ahead.

- (US) Fed's Miran (FOMC voter, dovish dissenter): More downside growth risks than a week or month ago (due to China tensions); With change in balance of risk, more urgent to get to neutral rate faster - CNBC forum.

- (US) Treasury Sec Bessent: Just seeing beginning of AI boom; Only thing standing in our way is the Democrats and the government shutdown; Will see trade announcements during Pres Trump's Asia trip - CNBC.

- (AR) Treasury Sec Bessent: We're working on $20B private sector facility for Argentina that would sit alongside swap line and invest in debt; Actions will total $40B for Argentina.

- (US) Fed Beige Book: Wages grew across all reporting districts; economic activity changed little on balance since.

- (US) Judge blocks federal firings from >30 agencies during shutdown (as expected).

Europe

- Saudi Aramco warns of global oil shortage if industry fails to invest - FT.

- (EU) ECB's Muller (Estonia): Interest rates at 2% are where they should be; Inflation risks are more or less balanced now.

- (EU) ECB's Nagel (Germany): It's too early to give indications about the next rate move.

- (IL) Israel Sept CPI M/M: -0.6% v -0.3%e; Y/Y: 2.5% v 1.9%e.

- (UK) Chancellor Reeves: Higher taxes on wealthy 'will be part of the story' for Nov budget - UK press interview.

Levels as of 01:20 ET

- Nikkei 225 +1.2%, ASX 200 +0.9%, Hang Seng -0.7%; Shanghai Composite -0.2%; Kospi +2.4%.

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

- EUR 1.1642-1.1675; JPY 150.52-151.21; AUD 0.6480-0.6516; NZD 0.5712-0.5756.

- Gold +0.8% at $4,230/oz; BTC -1.3% at $111,270; Crude Oil +0.8% at $58.72/bbl; Copper -0.3% at $4.9548/lb.