Little Vol despite month/quarter-end plus RBA rate decision

Asia Market Update: Little Vol despite month/quarter-end plus RBA rate decision; Potential US govt shutdown tonight; Focus on US JOLTS.

General trend and developments

- Month and quarter-end trading in Asia was unusually quiet, with little movement in equities, currencies or bonds.

- Australia RBA unanimous decision to hold at 3.60% also saw limited reaction, with AU 3-yr yields and Aussie dollar a little higher. Board Statement saw inflation creeping higher and may be persistent in some areas, as telegraphed by Gov Bullock in parliamentary testimony last week.

- Monday’s meeting between Pres Trump and a bicameral, bipartisan leadership group of US lawmakers saw no immediate progress to preventing a US govt shutdown from Tuesday midnight.

- Last night saw perennial BOJ dove Noguchi become openly hawkish, saying the need to raise rates is increasing more than ever and that Japan will require new policy perspective to address upside risks. Later, the Japan govt also upgraded its view on consumer spending for the first time since Aug 2024.

- Japan Aug prelim Industrial Production negative and worse than expected, while Japan Retail Sales also negative and a touch worse than expected. The data contrasted against the BOJ Summary of Opinions for its recent Sept meeting, with mixed views from members going forward but clearly a more hawkish bias developing among some members.

- Japan’s 2-year JGB auction today saw an even lower bid-to-cover ratio than back in August, once again the weakest since Sept 2009. Japan yield curve flattened further with 2-yrs +1.5bps while the long-end fell.

- The focus tomorrow will be on the BoJ's bond buying plan for the October to December quarter. The central bank is widely expected to cut the size of its 10-25-year bond buying.

- China’s Official PMI Manufacturing ticked closer to 50 but still recorded its 6th month of contraction, while the alternative RatingDog PMI Manufacturing measure rose over 51 for its second month of expansion. Meanwhile the Official PMI Services reading fell to flat (50.0), ending a 32 month expansionary streak, as the RatingDog PMI Services rose strongly to attain its 2nd month of expansion.

- China’s Politburo gave the date of the Fourth Plenum to be Oct 20-23rd.

- Three headlines from China overnight neatly summed up many of the issues the China economy faces as the NDRC confirmed new policy-based financial tools totaling CNY500B to “fund projects” in efforts to stimulate the economy, while China also said it would create a department to oversee local govt debt while also urging the US to stop unreasonable oppression of Chinese firms.

- Ahead of the mysterious Quantico base meeting tomorrow of US’ global generals and senior officers, the Pentagon is reportedly pushing to double or even quadruple missile production rates for potential China conflict.

- The Wall St Journal noted that Trump's tariffs on Lumber, Cabinets and Furniture are 'initially less than previewed'

- Reports that Indonesia is planning a $2.0B "Christmas stimulus" as its economy struggles.

- TTN Reminder: The clock runs out Monday, Sept 29 on Pres Trump’s demand that 17 big drugmakers submit “binding commitments” to lower U.S. prices - largely by tying them to what other rich countries pay under a most-favored-nation (MFN) benchmark; What happens after the deadline is at the White House’s discretion.

** Note: If the US government shuts down from Oct 1st and stays shut then September’s US Nonfarm Payrolls may not be released on Friday, Oct 3rd.

- Reminder that Chinese markets go on holiday tomorrow from Oct 1st through Oct 8th for Golden Week.

- US equity FUTs -0.1% during Asia trading.

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

- Tue Sept 30th (Tue night US Aug JOLTS).

- Wed Oct 1st KR Sept Exports, Global S&P PMIs, JP Q3 Tankan Index, (Wed eve EU Sept CPI, US Sept ISM PMI Manufacturing).

- Thu Oct 2nd KR Sept CPI, AU Aug Trade Balance, JP Sept Consumer Confidence, JP BOJ Dep Gov Uchida speech.

- Fri Oct 3rd JP BOJ Gov Ueda speech, (Fri night US Sept Nonfarm Payrolls**, US ISM Sept Services PMI).
[** Note: Friday’s US Sept Nonfarm Payrolls may not be released if the US govt is still shut down]

Holidays in Asia this week

- Wed Oct 1st China, Hong Kong.

- Thu Oct 2nd China, India.

- Fri Oct 3rd China. South Korea.

** Note: China to be on holiday from Oct 1st to Oct 8th for Golden Week

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,867.

- RESERVE BANK OF AUSTRALIA (RBA) KEEPS CASH RATE TARGET UNCHANGED AT 3.60%; AS EXPECTED.

- S&P affirms Australia AAA rating; Outlook Stable.

- Australia Aug Building Approvals M/M: -6.0 v +2.6%e.

- Australia Aug Private Sector Credit M/M: 0.6% v 0.6%e; Y/Y 7.2% v 7.2% prior.

- Reportedly the Trump Admin will proceed with AUKUS defense pact linking US, UK, and Australia – Nikkei.

- New Zealand Sept ANZ Business Confidence: 49.6 v 49.7 prior.

China/Hong Kong

- Hang Seng opens +0.2% at 26,674; Shanghai Composite opens +0.2% at 3,869.

- CHINA SEPT OFFICIAL MANUFACTURING PMI: 49.8 V 49.6E (6th month of contraction).

- CHINA SEPT RATINGDOG MANUFACTURING PMI: 51.2 V 50.2E (second month of expansion).

- HK$ HIBOR overnight interbank rate continues rise to highest level since Dec 2024.

- China PBOC ensures 'sufficient liquidity' with 'advanced injections' - China Securities Journal.

- (US) Pentagon pushes to double or even quadruple missile production rates for potential China conflict; Some people involved in the effort both inside and outside of the government worry that the government's targets aren't realistic - WSJ

- NDRC official: Confirms China new policy-based financial tool totals CNY500B; all funds to be used for 'funding projects'

- China to create a dept to oversee local govt debt - Chinese press.

- China MOFCOM: Oppose US export controls; Urge US to stop unreasonable oppression of Chinese firms.

- China holds Politburo meeting; Studied draft of next five-year plan; China to hold CPC plenary session on Oct 20-23rd.

- China PBOC sets Yuan reference rate: 7.1055 v 7.1089 prior.

- China PBOC Open Market Operation (OMO): Injects CNY242B in 7-day reverse repos; Net drains CNY34B v injects CNY48B prior.

Japan

- Nikkei 225 opens +0.1% at 45,076.

- JAPAN AUG PRELIM INDUSTRIAL PRODUCTION M/M: -1.2% V -0.9%E; Y/Y: -1.3% V -0.9%E.

- JAPAN AUG RETAIL SALES M/M: -1.1% V 1.2%E; Y/Y: -1.1% V 1.1%E.

- BANK OF JAPAN (BOJ) SUMMARY OF OPINIONS FOR SEPT POLICY MEETING; Mixed views from various members going forward.

- Jhapan Aug Annualized Housing Starts: 711K v 750Ke; Y/Y: -9.8% v -5.2%e.

- Japan Cabinet Office (Govt) Monthly Report: Upgrades view on consumer spending for the 1st time since Aug 2024 and upgrades view on capital spending for the first time since Mar 2024.

- JAPAN SELLS ¥2.7T VS. ¥2.7T INDICATED IN NEW 2-YEAR JGB BONDS; AVG YIELD: 0.9490% V 0.8630% PRIOR; BID-TO-COVER: 2.81 V 2.84X PRIOR (below 12-month avg of 3.79x and weakest since Sept 2009).

- Japan Aug Annualized Housing Starts: 711K v 750Ke; Y/Y: -9.8% v -5.2%e.

- Japan Fin Min Kato: Election results were extremely severe for the LDP; Koizumi can counter multiple challenges including inflation.

- Japan Chief Trade Negotiator Akazawa: Japan's US investment agreement is Not unequal - press.

Korea

- Kospi opens +0.1% at 3,436.

- South Korea Aug Industrial Production M/M: 0.9% v 0.4%e; Y/Y: 2.4% v 2.6%e.

- Follow up: South Korea Top Security Advisor: Tough to strike a currency swap deal with the US - financial press.

- ADB cuts South Korea 2025 GDP growth forecast to 0.8% v 1.5% prior.

Other Asia

- Thailand Aug ISIC Manufacturing Production Index Y/Y: -4.2% v -2.0%e.

- Indonesia said to promise $2.0B "Christmas stimulus" as economy 'flags' - FT.

- Singapore Aug M2 Money Supply Y/Y: 9.5% v 9.2% prior.

- Philippines Aug Trade Balance: -$3.5B v -$4.0Be.

North America

- (US) Louisiana Gov Landry (R-LA) reportedly requests to activate National Guard - Axios.

- (US) House Speaker Johnson: Pres Trump meeting with lawmakers (relating to govt shutdown) went 'well' - Fox News interview.

- (US) Follow up: Pres Trump signs proclamation Adjusting imports of timber, lumber and derivatives into the US.

- US VP Vance: Thinks we're heading to a Govt shutdown because of Democrats; Democrats did have a few ideas that Trump and I found reasonable; We have to keep central services functioning in light of a shutdown; It's not reasonable to hold good ideas as leverage.

- (US) Reportedly Senate Min leader Schumer (D-NY) would not support 7-10 day stopgap - Punchbowl.

- (US) Pres Trump: Will be imposing substantial tariffs on furniture; Details to follow.

- (US) Fed's Waller (voter): Doesn't comment on economic outlook or monetary policy; New technology should be welcomed in payments space - speech text.

- (BR) Brazil Sept FGV Inflation IGPM M/M: 0.4% v 0.4%e; Y/Y: 2.8% v 2.8%e.

- (MX) Mexico Aug Unemployment Rate: 2.9% v 2.9%e.

- (US) Fed's Hammack (non-voter for 2025; voter in 2026): Inflation is too high, trend in wrong direction.

- (US) White House Press Sec Leavitt: Hopefully Trump will finalize peace plan for Gaza; Trump will speak with Qatar.

- (US) Pres Trump: Imposing 100% tariff on foreign-made movies.

- (US) Pres Trump: Will be imposing substantial tariffs on furniture; Details to follow.

- (US) SEPT DALLAS FED MANUFACTURING ACTIVITY: -8.7 V -1.6E.

- (US) AUG PENDING HOME SALES M/M: 4.0% V 0.0%E; Y/Y: 0.5% V 0.5% PRIOR.

Europe

- (UK) Sept Lloyds Business Barometer: 42 v 54 prior.

- (UK) Sept BRC Shop Price Index Y/Y: 1.4% v 1.2%e.

- (UK) Chancellor Reeves: Reiterates will keep taxes, inflation, rates as low as possible - Labor party conf speech.

- (IN) India Aug Industrial Production Y/Y: 4.0% v 5.1%e.

- (DE) Germany Govt Spokesperon: Assume 15% US tariff rate will apply to pharma and heavy trucks.

- (HU) Hungary Central Bank (MNB) Dep Gov Virag: Risks from any premature easing are asymmetrical, such a move would revive inflation and weaken stability in financial markets.

- (EU) ECB’s Lane (Ireland, Chief Economist): Inflation outlook is reasonably benign.

- (FR) French PM Lecornu faces no-confidence threat; Budget standoff with Socialists - FT.

- (IL) ISRAEL CENTRAL BANK (BOI) LEAVES BASE RATE UNCHANGED AT 4.50%; AS EXPECTED.

Levels as of 01:20 ET

- Nikkei 225 +0.1%, ASX 200 +0.1%, Hang Seng +0.2%; Shanghai Composite +0.6%; Kospi -0.1%.

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

- EUR 1.1712-1.1733; JPY 148.34-149.84; AUD 0.6571-0.6606; NZD 0.5774-5795.

- Gold +1.0% at $3,894/oz; BTC +2.1% at $114,350; Crude Oil -0.5% at $63.13/bbl; Copper -0.2% at $4.8973/lb.