KR markets play catchup, JP jawboning restarts on weak Yen

Asia Market Update: KR markets play catchup; JP jawboning restarts on weak Yen; US-China trade tensions ratcheting up again; BLS may release CPI data soon.

General trend and developments

- South Korean markets had some catching up to do after their extended holiday break (Samsung +6% to Jan 2021 highs, Hynix +10%) with the Kospi peaking +2.7% to fresh record highs and the Korean Won reopening -1.1% following other currencies’ southward moves against the greenback, weakest level since May 13th.

- Yen briefly higher overnight back to near 152 after Japan incoming PM Takaichi said she does not see an immediate need to revise BOJ-Japan govt joint accord and not in position to comment on rate hike [**Note: Takaichi has earlier floated the idea of revisiting that accord].

- Prior to Takaichi, her economic adviser Honda hoped that BOJ will not raise rates now, and suggested that USD/JPY unlikely to surge above 155 as inflation expectations remain low.

- Takaichi also stressed the need for some fiscal relief needed to be passed, such as cutting gasoline tax, compiling a supplementary budget to help the economy (inline).

- Nikkei -1% even as major component Fast Retailing +8% following healthy FY25 results and guidance overnight.

- With the Yen rapidly weakening to early 2025 levels, warnings from the Japan Fin Min of one-sided and rapid FX moves being undesirable. [Reminder in early March Pres Trump criticized JPY (Yen) and CNH (Yuan) as "weakening currencies", unfair on the US].

- Chances of a BOJ rate hike slightly softened yesterday; by Oct down to 23.5% (vs 26% Wed) and by Dec down to 66.0% (vs 70% Wed).

- Japan yield curve flat again for a second day running after significant falls in 30-year yields following the well-bid 30-year JGB auction earlier in the week. [10-year benchmark did tick higher to 1.70%, highest since mid-2008].

- In trade news US Treas Sec Bessent promised 'soon' going to see a rebalancing where India buys less oil from Russia while also believing that China will have to come back at the end of the season and buy soybeans.

- Pres Trump said to be ratcheting up pressure on China by threatening to halt Chinese imports as China added further curbs yesterday on rare earths and buying no US soybeans recently.

- Meanwhile China today reported to launch a crackdown on Nvdia chips, escalating the recent pressure against using Nvdia's H20 chips in China.

- China offshore Yuan continued to strengthen overnight well into 7.12 handle, also assisted during the Asia session by a strong fix in 7.10 handle.

- Hong Kong and China shares generally weak with HSBC down a further -1.5% on top of yesterday’s -6% fall following bank’s announcement to take troubled lender Hang Seng Bank private.

- Inline comments from Australia RBA Gov Bullock, affirming services inflation still 'a little sticky' but domestic economy is in 'a pretty good spot', while weakness in consumer confidence is a bit of a 'puzzle'.

- In the US after the close reportedly BLS (Bureau of Labor Statistics) is preparing to release Sept CPI data despite the government shutdown.

- First Brands bankruptcy potential contagion story will not stop with Allianz and AIG now said to be preparing for first wave of First Brand claims.

- US equity FUTs slightly higher during Asia trading.

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

- Fri Oct 10th (Fri night Oct Michigan Consumer Sentiment).

Holidays in Asia this week

- Mon Oct 6th China, South Korea, Taiwan.

- Tue Oct 7th China, Hong Kong, South Korea.

- Wed Oct 8th China, South Korea.

- Thu Oct 9th South Korea.

- Fri Oct 10th Taiwan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.3% at 8,944.

- RBA Gov Bullock: Affirms services inflation does remain 'a little sticky'; domestic economy is in 'a pretty good spot'

- New Zealand Sept Manufacturing PMI: 49.9 v 49.9 prior (2nd month of contraction).

- New Zealand Finance Min Willis: Government making progress on fiscal consolidation; Economy does Not need fiscal stimulus - press.

China/Hong Kong

- Hang Seng opens -0.9% at 26,523; Shanghai Composite opens -0.5% at 3,915
*CHINA LAUNCHES CRACKDOWN ON NVDIA CHIPS - FT.

- US President Trump 'threatens' to halt China imports - SCMP [update].

- US Treasury Sec Bessent: Believes China will have to come back at the end of the season and buy soybeans

- China said to have 'cut' Canadian analyst TechInsights from data after Co's report 'exposed Huawei's trade secrets' - financial press (update).

- Saudi Arabia Nov crude oil supply to China expected to decline to 40M barrels v 51.0M m/m - US financial press.

- (HK) Offshore Yuan (CNH) overnight HIBOR rises to highest since April.

- China sells 2-year and 50-year ultra-long Sovereign bonds - traders.

- US said to consider action against China router producer TP-Link – press [overnight update].

- China NDRC (state planner) reportedly issues notice on managing 'disorderly' price competition – press [overnight update].

- China PBOC sets Yuan reference rate: 7.1048 v 7.1102 prior.

- China PBOC Open Market Operation (OMO): Injects CNY409B in 7-day reverse repos; Net drains CNY191B v drains CNY1.4T prior (Net drain based on 7-day and 14-day reverse repo.

Japan

- Nikkei 225 opens -0.4% at 48,430.

- Japan Sept PPI (domestic CGPI) M/M: 0.3% v 0.1%e; Y/Y: 2.7% v 2.5%e.

- Japan Sept Bank Lending Y/Y: 3.8% v 3.5% prior.

- Japan Fin Min Kato: Seeing one-sided and rapid moves in the FX market; declines comment on FX trends.

- Japan top Trade negotiator Akazawa said to have talked with US Sec Commerce Sec Lutnick by phone for about an hour- financial press.

- Japan FSA (regulator) said to "clamp down" on insider trading present in tender offers - Nikkei Asia (update).

- BOJ Quarterly Opinion Survey: 84.8% of Japanese households expect inflation to rise five years from now vs 83.1% prior.

- Japan Incoming PM Takaichi: Do not see immediate need to revise BOJ-Japan govt joint accord; Not in position to comment on rate hike [**Note: Takaichi has earlier floated the idea of revisiting that accord] [overnight update].

- Japan PM Takaichi's close economic adviser Honda: I genuinely hope BOJ don't raise rates now, but, of course, it's entirely up to the BOJ; USD/JPY unlikely to surge above 155 as inflation expectations remain low [overnight update].

- Japan PM-elect Takaichi: Will need to pass legislation through parliament to cut gasoline tax, compile supplementary budget as otherwise cost of living will hurt consumption, worsen economy [overnight update].

- Reportedly in talks for $5.0B margin loan backed by ARM stock - press.

Korea

- Kospi reopens +1.4% at 3,598 after extended break.

- South Korea Sept Foreign Reserves: $422.0B v $416.3B prior.

- Bank of Korea (BOK): Holding meeting to "closely review financial markets" [follows extended market break due to holidays] - press.

- Follow up: South Korea measures on steel industry to be prepared in October - Industry Ministry statement.

Other Asia

- Indonesia Fin Min Purbaya: Sees Indonesia Q4 GDP growth at 5.5%, growth could hit 6.0% by H2 2026.

- Philippines Central Bank (BSP) Gov Remolona: Corruption scandal a big reason for rate cut yesterday - US press interview.

- (IN) US Treasury Sec Bessent: 'Soon' going to see rebalancing where India buys less oil from Russia; Argentina Milei is a great ally for the US.

- Thailand Central Bank (BoT): To keep policy accommodative through 2026 [overnight update].

- Philippines Central Bank (BSP) Gov: Rate cut reflects reading on economic conditions; More room to lower rates; Possible one more cut this year; Seeing policy rate between 4% and 5% (currently 4.75%) - post rate decision press conference [overnight update].

- PHILIPPINES CENTRAL BANK (BSP) CUTS OVERNIGHT BORROWING RATE BY 25BPS TO 4.75%; NOT EXPECTED [overnight update].

- Taiwan Sept Trade Balance: $12.4B v $16.3Be [overnight update].

North America

- (US) Allianz and AIG said to be preparing for first wave of First Brand claims - FT.

- Trump administration proposed banning China airlines from flying over Russia on US flights - SCMP [update].

- (US) Fed's Daly (non-voter): Reiterates inflation has come in much less than had feared; affirms the Fed is projecting more cuts as part of 'risk management'.

- (PE) Peru Central Bank (BCRP) leaves Reference Rate unchanged at 4.25%; as expected.

- Reportedly BLS is preparing to release Sept CPI data despite the government shutdown - NYT.

- (MX) Mexico Sept CPI M/M: 0.2% v 0.3%e; Y/Y: 3.8% v 3.8%e.

- (BR) Brazil Sept IBGE Inflation IPCA M/M: 0.5% v 0.5%e; Y/Y: 5.2% v 5.2%e.

- (UR) US Amb to NATO Whitaker: May move further capabilities to Ukraine; Have 'fearsome' capabilities not yet on battlefield.

- (BR) Brazil Central Bank (BCB) monetary policy Dir David: Inflation reasonably contained, but well about target tolerance range.

- (US) Treasury Sec Bessent: Regulatory framework is too tight; Will release Treasury Budget Statement after govt shutdown ends.

- (US) Pres Trump: Will try to make trip to Middle East to have official deal signing in Egypt; Gaza will be slowly redone; Iran wants to work on peace too - comments at cabinet meeting.

- (US) TREASURY $22B 30-YEAR BOND REOPENING DRAWS 4.734% V 4.651% PRIOR; BID TO COVER 2.38 V 2.38 PRIOR AND 2.43 OVER LAST 8 REOPENINGS.

- (US) Fed's Barr (voter): Labor market more vulnerable to negative shocks; Am skeptical about fully looking through tariff inflation; Price stability goal faces 'significant risks' - speech text.

- (US) DOJ said to have begun inquiry into bankruptcy of First Brands - FT.

- (AR) US Treasury Sec Bessent: Discussed Argentina's strong economic fundamentals, have finalized $20B FX swap framework; Today we directly purchased Argentine pesos; Trump to meet Pres Milei on Oct 14th - X post.

Europe

- ECB's Nagel (Germany): Affirms not concerned by strength in Euro; high bar to change monetary policy stance.

- (IE) Ireland Sept CPI M/M: -0.2% v +0.4% prior; Y/Y: 1.9% v 2.0% prior.

- (EU) ECB's Escriva (Spain): Seeing unprecedented levels of uncertainty; Inflation is already at 2% target - comments from Spanish parliament.

- (CN) EU spokesperson: Concerned about China govt decision on rare earth exports.

- (EU) ECB ACCOUNT OF SEPT 10-11TH RATE DECISION (AKA MINUTES): No immediate pressure to change policy rates at the current meeting.

- (IL) Israel govt spokesperson: There will be Gaza ceasefire today within 24 hours of cabinet meeting; After that 24-hour period, the 72-hour period for release of hostages will begin.

- (PL) Poland Central Bank (NBP) Gov Glapinski: May be room for further rate cuts; Oct rate cut doesn't rule out Nov cut; Poland is continuing to buy gold on market; Quarter of our central bank reserves is in gold - post rate decision press conference.

- (IL) Hamas Gaza leader: We declare end to the war today and start of permanent ceasefire; Deal includes opening Rafah crossing in both directions; Israel to release all jailed women and children.

- (IL) Israel Cabinet approves agreement to stop war in Gaza - Axios.

Levels as of 01:20 ET

- Nikkei 225 -1.0%, ASX 200 -0.1%, Hang Seng -1.3%; Shanghai Composite -0.6%; Kospi +2.5%.

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

- EUR 1.1554-1.1576; JPY 152.64-153.27; AUD 0.6552-0.6573; NZD 0.5742-5861.

- Gold +0.4% at $3,989/oz; BTC -0.7% at $121,290; Crude Oil -0.3% at $61.35/bbl; Copper -0.8% at $5.0977/lb.