Fed hike bets ease ahead of FOMC Minutes

Asia market update: Cautious trading prevails near record highs; JGB curve steady after BoJ comments, wages and extra-budget talk; RBI raises key repurchase rate +25bps as expected; Asian corporate earnings loom; Fed hike bets ease ahead of FOMC minutes.

General trends and developments

- The Reserve Bank of India (RBI) raised its key repurchase rate by +25 basis points to 5.50% in a unanimous decision, marking its first hike since February 2023. The decision marks the end of the previous easing cycle, during which the RBI delivered four rate cuts totaling +100 basis points, with the most recent rate cut in December 2025. The statement stated that rate cuts are now off the table in the near term, with future moves expected to be either further hikes or holds, depending on the growth and inflation outlook. The updated staff projections for its FY26/27 outlook raises CPI to 5.2% (vs. 5.0% prior), raises core CPI to 4.4% (vs. 4.3% prior), and raises GDP growth to 7.1% (vs. 6.7% prior).

- China’s foreign exchange reserves fell to $3.400 trillion at the end of September 2026, down -$38.1 billion from $3.438 trillion a month earlier. The decline was driven primarily by a stronger US dollar index and broadly lower prices across major global financial assets, which produced negative valuation effects from exchange-rate conversion and asset-price changes. Additionally, the PBOC continued its gold-buying streak: gold reserves rose to 77.5 million troy ounces (from 76.73 million), although the value of those holdings dropped to $323.5 billion from $350.1 billion, reflecting the fall in gold prices. (**Reminder: On July 6th, 2026, Hong Kong Chief Executive confirmed the launch of central clearing system for gold with the Shanghai Gold Exchange at HK Fic & Bond Connect Summit [as expected]).

- Post-Japan Market Close, JP BoJ Governor Ueda at the National Securities Conference reiterated the overall assessment that financial conditions are still accommodative [domestic economy is recovering moderately], that the central bank will continue raising interest rates in response to both economic developments & inflation trends, and that the risk of the price trend overshooting underscores the importance of anchoring underlying inflation “around” the 2% target.

- Japan’s extraordinary Diet session runs for 69 days from October 5th to December 12th, during which the government is considering a small secondary supplementary budget focused on disaster relief, shifting from plans to fund the Kumamoto earthquake solely through reserve funds under the FY26 initial budget and the first extra budget. (**Reminder: Japan submitted a record ¥143 trillion budget request for FY27 [vs. ¥122.3 trillion [record] budget in FY26], reflecting requests under a new uncapped “Honebuto” investment framework [>¥12 trillion for AI, semiconductors, energy, etc.]).

- Japan’s official reserve assets declined by -$29.1 billion to $1.178 trillion at the end of September, following August’s record -$79.6 billion decline [which reflected the impact of substantial yen-buying intervention operations in July]. Meanwhile, Japan’s total cash earnings rose 3.8% year-on-year in August, slightly above the 3.7% consensus forecast, while real cash earnings increased 1.5%, marking an eighth consecutive monthly gain. (**Note: Yesterday’s reported BoJ Q2 output gap increased by +0.55% quarter-over-quarter vs. +0.36% previously reported).

- A tropical depression at 22.1°N 95.6°W has formed over the Western Gulf of America and is expected to strengthen rapidly moving E at 5 mph into a tropical storm on Wednesday, followed by a hurricane on Thursday. Chevron stated its offshore production remains at normal levels [non-essential personnel being transported off Gulf platforms], whilst Shell is evacuating non-essential workers from several Gulf assets.

- US equity FUTs flat 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 flat at 8,736.

-(AU) RBA warned AI and other shares correcting could cut household spending by 2.4%; cites internal documents of the central bank - US financial press [update].

-(AU) Australia sells A$1.0B v A$1.0B indicated in 4.25% Oct 2036 Bonds: Avg Yield 5.3802% v 5.0345% prior: bid-to-cover: 4.51x v 4.70x prior.

-(AU) ASX.AU Reports Sept metrics (A$): Total cash market value: 203.07B; Total average daily value: 7.74B, +4% y/y.

-(NZ) New Zealand to publish 2025-26 government financial statements on October 8th.

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 -0.4% at 24,172.

-(CN) China Sept Foreign Reserves: $3.400T V $3.425TE.

-(CN) China Commerce Ministry (MOFCOM): Urges France, Germany not to back EU trade protectionism; Decoupling hurt both sides of trade [EU Market Close].

-(CN) During Sept 'leading' China AI firms released a total of 16 new models and a total of 20 LLMs during Q3 v 17 q/q - Nikkei [update].

-(CN) China Golden Week Box Office Sales: CNY1.07B - CCTV.

-(CN) China 'breaks silence' on plague and Russia as the Chinese have said in contact with Russia - US financial press [update].

Japan

-(JP) Nikkei 225 Index opens -0.1% at 70,582.

-(JP) Japan Aug labor cash earnings Y/Y: 3.8% V 3.7%E.

-(JP) Japan considers second supplementary budget which is expected to be of 'small-scale'; the budget will differ from prior supplementary budgets aimed at stimulus - Yomiuri.

-(JP) Japan Aug Preliminary Leading Index CI: 118.0 v 117.7 prior.

-(JP) Japan end-September Foreign Reserves: $1.18T v $1.21T prior.

-(JP) Japan Sept 1-20th: Exports Y/Y: +23.5%; Imports Y/Y: +19.9%.

-(JP) BOJ's Sato: Agrees with the policy of adjusting rates in stages; Personal consumption momentum is not strong [EU Market Close].

-(JP) Japan ruling party official Nakanishi: Japan should expand sales of government bonds to households on a much larger scale to create a more stable domestic investor base [EU Market Close].

-(JP) Japan PM Takaichi: Will consider reviewing policies, government income and outgoings if interest rate moves differ from expectations - Parliament.

-(JP) Japan Chief Cabinet Sec Kihara: US Military curfew shows swift response on Okinawa case - Tokyo, Japan.

-(JP) Follow-up: US forces in Okinawa to pause operations after previously reported arrest of US Marine; US military in Okinawa to also impose a night curfew - Press.

-(JP) Japan Defense Minister Koizumi: Feel deep frustration over [Okinawan] heinous crime - Tokyo, Japan.

-(JP) Japan Fair Trade Commission (FTC) announces probes towards 4 Japanese breweries over suspected cartel - Nikkei.

-(JP) Japan Govt and BOJ said to plan releasing lending data to researchers - Nikkei.

-(JP) Japan considers introducing nuclear submarines - Yomiuri.

-(JP) BOJ Outright Bond Purchase Operation for <1 Year; 1~3 Years & 10~25 Years Bonds (inline with planned amounts for Q4, 2026).

-(JP) Bank of Japan (BOJ) Results related to today's outright bond buying operations.

Korea

-(KR) Kospi Index opens -1.1% at 6,8641.

-(KR) North Korea warns US to think twice before standing in opposition to China concerning Taiwan - KCNA state media.

-(KR) South Korea's home-developed Nuri rocket launches from Naro Space Center - US financial press.

-(KR) South Korea investors have lost $1.7B from leveraged ETFs tracking large domestic chipmakers; cites brokerage data related to single-stock ETFs - US financial press.

-(KR) North Korea 'warns' South Korea not to cross the border 'by even a millimeter' - US financial press.

-(KR) South Korea Finance Ministry sells KRW1.8T vs. KRW1.8T indicated in 30-year government bonds at Avg Yield: 4.495% v 4.630% prior.

-(KR) Bank of Korea sells KRW300B in 1-year Monetary Stabilization Bonds (MSB); Avg Yield: 3.550% v 3.430% prior.

-(KR) 005930.KR Statement: Samsung wallet now supports digital keys for select GM vehicles; Starting with select 2026 & 2027 Cadillac EVs.

Other Asia

-(IN) India central bank (RBI) raises repurchase rate by 25bps to 5.50%; as expected.

-(IN) India Forex Reserve w/e Oct 2nd: $734.6B v $747.6B prior.

-(ID) Indonesia Sept Foreign Reserves: $146.3B v $146.5B prior.

-(ID) Indonesia said to see 2026 nickel ore production at approximately 290 Mts - US financial press.

-(ID) FTSE Russell reaffirmed the emerging-markets status of Indonesia - update.

-(TW) Taiwan indicts 10 over alleged US chip diversion to China - CNA.

-(TW) Taiwan suspends China imports of glass fiber silicon tubing.

-(SG) Singapore Central Bank (MAS): Monetary policy statement to be released on October 14th.

-(SG) MAS: Sets Out Supervisory Expectations on Responsible AI Adoption by Financial Institutions.

-(TH) Thailand Interior Ministry: Death toll from Thailand floods since September 16th rises to 60 (vs. 31 prior).

-(TH) Thailand sells total THB30B vs. THB30B indicated in 10-year bonds; Avg Yield: 2.3466% v 1.9900% prior; bid-to-cover 1.48x v 2.18x prior.

-(VN) Vietnam said to consider all-day equity trading and wider price bands - Local Press.

-(VN) Vietnam Finance Ministry sells total VND13.0T vs. VND 15.0T indicated in 3-year, 5-year, 10-year, 15-year and 30-year bonds.

-(PH) Philippines Aug Unemployment Rate: 5.3% v 6.0% prior.

-(MY) Malaysia Dep Fin Min Liew: Malaysia's tax revenue rises 9% in 1h 2026 on economic growth. Malaysia tax revenue gains driven by corporate income tax, SST [2027 budget presentation due on Oct 9th].

North America

-(US) AUG Ttrade balance: -$105.6B V -$102.1BE [US Market Close].

-(US) NHC: Tropical Depression Nine has formed over the Western Gulf of America (as expected); Storm expected to strengthen quickly, becoming a Tropical Storm on Wednesday and a Hurricane on Thursday [US Market Close].

-(US) TREASURY $58B 3-YEAR NOTE AUCTION RESULTS: DRAWS 4.932% V 4.474% PRIOR; BTC: 2.62X V 2.72X PRIOR [US Market Close].

-(US) ADP Preliminary Employment Change for 4-weeks ending Sept 19th: +23.8K v +20.0K prior (hiring accelerates for 5th straight week) [US Market Close].

-(US) IEA expected to decide on details of G7 diesel and oil stock release at meeting on Oct 14-15th - press citing sources [EU Market Close].

-(US) Energy Sec Wright: Think diesel prices peaked a few weeks ago [US Market Close].

-(US) Fed's Daly (non-voter, dove): It doesn't seem like the demand for AI is going down. If anything, it seems like it's going up; I see it less as a one-off - Axios interview [US Market Close].

-(US) Fed's Schmid (hawk; non-voter in 2026): The labor force remains in a good place; Slow way to go in beating inflation, it's frustrating [US Market Close]

-(US) Weekly API Crude Oil Inventories: -2.1M v +1.0M prior.

-(US) VP Vance: Undecided about seeking presidency in 2028.

-(US) White House Releases President Trump's Schedule for Wednesday [October 7th, 2026]: Trump to make an announcement at 1pm EDT on Wednesday. Trump to deliver remarks in San Antonio at 7pm EDT on Wednesday..

-(US) SPCX Looks to raise $40B to buy Nvidia chips; financing led by Apollo - FT.

-(US) CVX Statement: No impacts so far from possible hurricane to its offshore production in US Gulf.

-(US) AAPL Partners with LG Electronics to prepare for indoor and outdoor security projects in Smart Home push to compete with Amazon and Google - press.

-(CA) Canada Aug INT'L merchandise trade (CAD): 4.2B V 1.5BE [US Market Close].

-(CA) Canada Sept Ivey Purchasing Managers Index: 58.2 v 64.3 prior [US Market Close].

-(MX) Mexico Sept Consumer Confidence: 45.1 v 46.2e [US Market Close].

-(MX) TTN Summary Federal Reserve Bank of Dallas: Global Perspectives with Former Mexico Central Bank Gov Agustín Carstens: Agustín Carstens warned that governments and central banks “cannot defy gravity”: persistent overspending, excessive debt and neglected inflation ultimately produce higher rates, recession, fiscal stress or banking problems.

-(CO) Colombia Presidency publishes pension funds decree: Colombia scraps 30% cap on pension funds' foreign investments - Website.

-(VE) Reportedly fire and smoke seen at Venezuela's Cardon Refinery (310K bpd); Operations halted amid the fire - press [US Market Close].

-IMF: Reaches staff-level agreement with Papua New Guinea. Once approved by IMF Executive Board, Papua New Guinea will have access up to $189M.

Europe

-(EU) Eurozone Aug Retail Sales M/M: 0.1% V 0.2%E; Y/Y: 0.8% V 1.0%E [EU Market Close].

-(RU) Reportedly Russia's diesel export ban may be lifted this month for some Russian companies - Russian press [EU Market Close].

-(RU) Russia announcement on upcoming OFZ bond issuance.

-(RU) Russia's Volgograd oil refinery said to halt processing following a drone attack on Oct 2nd - press [EU Market Close].

-(RU) US preparing formal request to Russia on plague deaths - WAPO.

-(RU) US Pres Trump: Will probably be able to report on pneumonic plague incident in Russia tomorrow, following phone call with Putin tonight.

-(UK) BOE’s Mann (hawkish dissenter): Supply shocks are embedding inflation; Looking at inflation 'notably' above 4% in Q1 2027 [EU Market Close].

-(UK) ASC.UK confirms unauthorized activity involving customer notification platforms; no current operational disruption; Potential trading impact is too early to quantify [EU Market Close].

-(FR) France Fin Min Lescure: Govt is prepared to use special constitutional powers to circumvent Parliament and push through billions in budget cuts if budget negotiations fail - WSJ interview [US Market Close].

-(EU) Brussels examines capturing big TECH through tax on large corporations - FT.

-(IE) Ireland Fin Min Harris presents 2027 budget: See general govt budget surplus of €6.7B for 2026 and €9.5B for 2027 [EU Market Close].

Middle East

-(YE) Yemen: Two missiles launched by Houthis attacked Yemen's Aden International airport; No causalities reported - Aden Security Authority's Media Office.

-(YE) Yemen Houthis: Attacked King Khalid International Airport in Riyadh with drones; [No immediate Saudi confirmation].

-(SA) Saudi-Led Coalition: Intercepted and destroyed Houthi-launched ballistic missile North of Riyadh.

-(SA) Saudi-led Coalition: We Continue to intercept Houthi missiles.

-(QA) QatarEnergy secures $3B loan from four Chinese banks - US financial press.

Levels as of 01:20 ET

Nikkei 225 -0.5%; ASX 200 -0.1%; Hang Seng -0.6%; Shanghai Composite +0.3%; Kospi -1.5%.

Equity S&P500 Futures +0.1%; Nasdaq100 flat; DAX -0.6%; FTSE100 -0.3%.

EUR 1.1263-1.1228; JPY 158.51-158.08; AUD 0.6985-0.6969; NZD 0.5627-0.5604.

Gold -0.8% at $4,132/oz; BTC -1.4% at $84,328; WTI Crude Oil +0.8% at $90.16/bbl; Copper -0.3% at $6.6265/lbs.