Equities to fresh records as Bessent signals US-CN prelim “framework” in place for Trump-Xi

Asia market update: Equities to fresh records as Bessent signals US-CN prelim “framework” in place for Trump-Xi; Comes amid blockbuster set of market catalysts this week; Milei wins; Trump arrives JP.

General trend and developments

- Pres Trump raised tariffs on Canada by a further 10% due to the 'fraudulent' ad misrepresenting Pres Reagan’s view of tariffs put out by the province on Ontario last week.

- However, all eyes this week on US-China negotiations between Trump-Xi at APEC in South Korea (Oct 30th – Nov 1st). US Treas Sec Bessent, USTR Greer and their China counterparts announced on Sunday from Malaysia trade meetings that the two sides have established a “framework” for a deal, setting the stage for Trump-Xi to avoid the additional 100% tariffs threatened by Pres Trump set to begin on Nov 1st, along with a deferral for China’s rare earth restrictions and likely to again purchase US soybeans.

[** Note: Late Friday Polymarket priced only a 7% chance of Trump’s 100% tariffs being implemented from Nov 1st, so there remains huge room for a surprise to the downside should a US-China deal (or at least an extension of the status quo) not come to fruition after all.].

- Prior to APEC Pres Trump will now meet Japan PM Takaichi in Tokyo Oct 27-29th where security issues (esp. regarding China) may supersede trade issues, with Takaichi’s comments post-election that she would not attempt to renegotiate the US-Japan trade deal. However, it is possible that automakers Toyota and Nissan may formally announce importation of some US-built vehicles into Japan.

- South Korea Pres Lee said US and South Korea trade talks still deadlocked over Korea's $350B investment, while some reports that North Korea may be preparing for potential meeting between Kim Jong Un and Pres Trump during Trump’s Asia trip.

- Malaysia’s PM Anwar said Trump said 'will deal with chip levy at the appropriate time' (not now).

- Brazil’s Pres Lula enthusiastically trumpeted what he saw as a Brazil-US trade deal “within weeks’ after having what he described as a better than expected meeting with Trump at ASEAN in Malaysia.

- Amid the positive trade news from Malaysia in advance of the Trump-Xi meeting at APEC, stocks rose while gold turned down again towards last week’s lows as Crypto climbs back up. US equity FUTs +~1% up, while the Nikkei +2% hit 50K for the first time, the Kospi +2% hitting fresh highs while Australia’s ASX also threatened fresh all-time highs. HK/CN also +1% each.

- Friday’s OIS chances of a BOJ rate hike this week stayed at 11% (vs Thurs) while December chances fell slightly to 62% (vs 65% Thurs). Today, Japan’s PPI Services came in hotter than expected with a 3 handle.

- China PBOC set Yuan reference rate in the 7.08 handle for first time since mid-Oct, 2024, as Offshore Yuan again briefly broke back into 7.10 handle.

- A reprieve and renewed mandate for Pres Milei’s ongoing economic reforms in Argentina, with Milei’s party outperforming expectations to increase their lower house seats (from 37 to 64) and win a majority of the vote (~42%) in the mid-term Legislative election. [Pres Trump had recently said that the US offer of assistance including a $20B FX swap would be taken away if Milei did not win].

- A blockbuster week of events and news coming up with the Fed’s FOMC meeting on Wednesday, where markets expect another rate cut and potential end of QT, kicking off a three-day stretch that includes five Mag 7 earnings (GOOGL, META, MSFT, AAPL, AMZN, all potentially with formal FY26 Capex outlook), the BOJ and ECB decisions, and the Trump-Xi meeting in South Korea.

- France has reportedly delayed the vote on the wealth tax. [Reminder the Socialist Party had reportedly threatened to bring down Macron’s government by Monday if their demands to raise taxes on billionaires are not met].

- US equity FUTs +0.7% to 0.9% during Asia trading.

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

Mon 26th through Fri Oct 30th; Trump to visit ASEAN in Malaysia (26th), PM Takaichi in Japan (27-29th), then meet Xi at APEC in South Korea (Oct 30th, Nov 1st).

- Tue Oct 28th KR Oct Consumer Confidence, KR Q3 Adv GDP, DE Nov Consumer Confidence.

- Wed Oct 29th KR Oct Business Confidence, AU Q3 CPI, JP Oct Consumer Confidence (Wed night BOC rate decision, US FOMC rate decision, GOOG + META + MSFT earnings).

- Thu Oct 30th JP BOJ rate decision, BOJ Quarterly Outlook; KR Trump-Xi meeting at APEC, (Thu eve various EU GDP releases, DE Oct CPI, EU ECB rate decision, Thu night US Adv Q3 GDP (likely delayed due to govt shutdown), AAPL + AMZN earnings).

- Fri Oct 31st JP Sept Industrial Prod + Retails Sales, CN Oct Manufacturing PMI (Fri eve EU CPI, Fri night US Core PCE* likely delayed due to US govt shutdown).

- Sat Nov 1st KR Oct Exports, New US tariffs to take effect on CN if no Trump/Xi agreement reached (additional 100% on various imports.

Holidays in Asia this week

- Mon Oct 27th New Zealand.

- Wed Oct 29th Hong Kong.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.4% at 9,057.

- (AU) China Premier Li: Reiterates to build more stable partnership with Australia [comments amid meeting with Australia PM Albanese] - Xinhua.

China/Hong Kong

- Hang Seng opens +1.3% at 26,495; Shanghai Composite opens +0.5% at 3,969.

- China Sept Industrial Profits Y/Y: 21.6% v 20.4% prior.

- Former PBOC Adviser said to call for 2008-style mega stimulus - US financial press.

- (US) Pres Trump confirms 'We will be talking to China's Pres Xi"- financial press.

- US Treasury Sec Bessent: China is ready to make a trade deal; Trump and XI will make final decisions; US and China will be able to avoid 100% tariff on Chinese goods - NBC.

- China top trade negotiator Li: Reached consensus with US; talked about tariff and export control; will enhance communication with US Li did not provide details on the agreed-upon issues and terms.

- China PBOC seen to maintain supportive Monetary Policy Stance - China Securities Journal.

- Chinese robotics start-up Noetix debuts ‘family-friendly’ $1,400 humanoid; The Bumi model signals the ‘entry of humanoid robots into the consumer market’ – SCMP [weekend update].

- (US) Trump: I have a lot to talk about with China Pres Xi; I have a lot of respect for Taiwan [weekend update].

- Reportedly US FBI Dir Patel to visit China next month (Nov) as part of fentanyl crackdown effort - CBS.

- USTR opens Section 301 investigation into China implementation of Phase I (2020) trade deal (as expected) [weekend update].

- China's PBOC: To properly calibrate intensity, timing and pace of monetary policy to support stable economic growth; To deepen Yuan exchange rate formation mechanism reform [weekend update].

- China PBOC sets Yuan reference rate: 7.0881 v 7.0928 prior [strongest level since Oct 15, 2024].

- China PBOC Open Market Operation (OMO): Injects CNY337B in 7-day reverse repos; Net injects CNY148B v injects CN3.2B prior.

Japan

- Nikkei 225 opens +1.2 % at 49,904.

- Nikkei 225 hits 50k for first time.

- Japan Sept PPI Services Y/Y: 3.0% v 2.7%e.

- Toyota exports Sept parent-only global vehicle output 918.1K units, +11% y/y [overseas +12.4% y/y, Japan production +8.5% y/y]; parent-only global sales at 879.3K units, +3.1% y/y.

- Japan Fin Min Katayama: If needed, Govt must "obviously" come up with means to increase defense spending (update) - reply to question if govt could issue deficit-covering bonds [weekend update].

- Japan and US reportedly to agree on cooperation in areas including AI and 6G – Nikkei [weekend update].

Korea

- Kospi opens +1.5% at 3,999 (fresh record high).

- South Korea Pres Lee: Bursting of real estate bubble would be more than a crisis; Excessive real estate investment is a 'ticking bomb'.

- North Korea may be preparing for potential meeting between Kim Jong Un and Pres Trump during Asia trip - South Korea press.

- South Korea Pres Lee: US and South Korea trade talks still deadlocked over $350B investment in US - Yonhap.

Other Asia

- Malaysia PM Anwar: US President Trump said 'will deal with chip levy at the appropriate time'; US chip tariffs not an issue for now.

- Malaysia signs Rare Earth deal with US, while reportedly Malaysia also ready to deepen cooperation with Japan on rare earths, critical minerals - Malaysia press.

North America

- (US) Energy Sec Wright: To double natural gas exports in the next 5 years and could double again in another 5-10 years if demand is there - financial press.

- Argentina President Milei: Invites Argentine Governors to discuss parliamentary agreements; invites Governors to discuss reform agreements.

- (AR) Argentina mid-term Legislative election results: Pres Milei's party wins, with 90% of vote counted- local media reports.

- (BR) Follow up: Brazil Foreign Min Vieira: We met with Greer, Bessent - financial press.

- Brazil Pres Lula: Announces "immediate" trade negotiations with the US after meeting Pres Trump in Malaysia (ASEAN Summit) [update].

- (CA) Trump: Immediately raising tariffs on Canada by another 10% because of 'fraudulent' ad misrepresenting Reagan view of tariffs.

- (US) Oct final University of Michigan confidence: 53.6 V 54.5E [weekend update].

- (US) Oct preliminary S&P Manufacturing PMI: 52.2 V 52.0E (3rd month of expansion); [weekend update].

Europe

- (EU) China Premier Li Qiang: Willing to work with the EU to keep bilateral relations on the right track - Xinhua.

- (RU) Reportedly meetings between Trump officials and Putin's Special Envoy Dmitriev in the US were held on Friday and Saturday, and will continue on Sunday - press.

- (US) Trump: Won't meet with Putin until I think we will have a peace plan.

- (RU) Putin Special Envoy Dmitriev: We are close to a diplomatic solution on Ukraine; Believe Putin-Trump meeting will happen – CNN [weekend update].

- Mid-Oct TTN innovation & corporate confidence index (ICCI): 114.2 V 113.6 prior (biggest uptick since early Aug; broad tech strides offset macro drags [weekend update].

Levels as of 01:20 ET

- Nikkei 225 +2.3%, ASX 200 +0.4% Hang Seng +0.9%; Shanghai Composite +1.0%; Kospi +2.6%.

- Equity S&P500 Futures +0.8%; Nasdaq100 +1.1%; DAX +0.3%; FTSE100 +0.1%.

- EUR 1.1620-1.1648; JPY 152.66-153.18; AUD 0.6514-0.6545; NZD 0.5749-0.5778.

- Gold -1.5% at $4,074/oz; BTC +3.4% at $115,230; Crude Oil +0.3% at $61.66/bbl; Copper +1.4% at 5.1937/lb.