Markets initially settle as CN-US verbally spar but sell off once more

Asia market update: Markets initially settle as CN-US verbally spar but sell off once more as CN enacts new countermeasures.

General trend and developments

- Markets initially settled during Asian trading as China continued to defend its latest rare earth control measures amid the renewed China-US trade tensions. Came after Tres Sec Bessent still expects Pres Trump and Pres Xi to meet at APEC (end-Oct in South Korea) whilst also threatening that US could move more aggressively than China has.

- However, just after midnight ET, global equity markets fell steeply and Hanwha Ocean plunged -8.4% as China took countermeasures against five US-linked firms belonging to Hanwha Ocean's US units while also opening investigation into US301 tariffs on Chinese shipping.

- Nikkei initially played catch up after Monday’s holiday, -1.3%, echoing US indices having recovered about half of their outsize losses on Friday. Then fell as much as -3.% on the China countermeasures.

- Prior to the China news Kospi touched another record high as Samsung’s outsized Q3 prelim profits (+32%) confirmed the demand for it and Hynix’s HBM and DRAM high capacity chips in the current AI capex boom. (Reminder both companies closed HBM chip supply deals with OpenAI two weeks ago). Kospi then fell -1.6% on the new China countermeasures.

- Japan’s yield curve steepens amid Takaichi’s LDP search for coalition partners, plus meetings between potential partners among themselves as well as opposing factions meeting, all with little outcome thus far.

- RBNZ said it would ease restrictions on lending to higher risk borrowers as the NZ housing market continues to struggle. Comes amid more poor data out of New Zealand with contracting card spending for the month of September.

- No new information garnered from the RBA Minutes following a lot of board member-speak since the decision to hold. Board believes Aussie dollar in equilibrium, labour market a little tight but hard to determine how much, while consumer demand had been robust but more recent data casts a shadow over that.

- Australia Sept Business Confidence rose in September.

- Gold and Silver continued their advance to new all-time highs, while Bitcoin -2% and Ethereum -3% diverge southwards.

- OpenAI said it was prepared to spend “tens of billions” on today’s Broadcom chips deal amid the AI energy and chip and equipment boom required to fuel the current insatiable demand for AI software applications.

- US equity FUTs -0.3% to -0.5% during Asia trading.

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

- Tue Oct 14th (Tue night Fed’s Powell speech).

- Wed Oct 15th CN Sept CPI/PPI.

- Thu Oct 16th AU Sept jobs.

- 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 (US stock markets remain open).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.4% at 8,914.

- Australia Central Bank (RBA) Sept Minutes: Australia dollar close to estimates of equilibrium level given terms of trade, yield differentials.

- Australia Sept NAB Business Confidence: 7 v 4 prior.

- Australia sells A$400M v A$400M indicated in 3.25% Jun 2039 bonds; Avg Yield: 4.5113% v 4.3927% prior ; bid-to-cover 3.26x v 2.72x prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 83.0 v 85.1 prior.

- RioTinto: Reports Q3 Pilbara Iron Ore output 84.1Mt; Pilbara Iron Ore Shipments 84.3Mt v 85Mte; Affirms guidance- New Zealand Sept Total Card Spending M/M: -0.4% v 0.4% prior.

- New Zealand Sept REINZ House Sales Y/Y: +3.1%.

- RBNZ: Intends to ease mortgage loan-to-value ratio restrictions, effective Dec 1st, 2025.

China/Hong Kong

- Hang Seng opens +0.3% at 25,969; Shanghai Composite opens +0.6% at 3,910.

- China MOFCOM statement on recent US tariffs; Defends rare earth control measures - US financial press.

- China MOFCOM to take countermeasures against five US-linked firms belonging to Hanwha Ocean's US units.

- US Treasury Sec Bessent: New China export controls were provocative move; US has pushed back and de-escalated situation - X post.

- (US) Treasury Sec Bessent: Had substantial communication over weekend on China trade; Believe they are open to discussion, if not, we have substantial levers we can pull; Trump on track to meet Xi in Korea; Could move more aggressively than China has.

- China govt issues fresh implementation rules on port fees charged to US ships; Exemptions for Chinese-made ships owned by US companies.

- China PBOC sets Yuan reference rate: 7.1021 v 7.1007 prior.

- China PBOC Open Market Operation (OMO): Injects CNY91B in 7-day reverse repos; Net injects CNY91B v injects CNY138B prior.

Japan

- Nikkei 225 reopens -1.3% at 47,446.

- Japan Sept M3 Money Supply Y/Y: 1.0% v 0.8% prior.

- Japan PM-elect considering Koizumi as Defense Min - Japanese press.

- Japan Fin Min Kato: Declines comment on FX trends; Reiterates important for currencies to move in stable manner reflecting fundamentals- Japan Economic Revitalization

Min Akazawa: Reiterates FX rates are determined by various market factors.

- Japan DPP [opposition party] Head Tamaki: Will hold Sec-Gen meeting with LDP, DPP and Ishin today, to hold 3-way meeting today with DPP, Ishin and CDP; seeking inflation measures by year-end from all parties.

Korea

- Kospi opens +0.5% at 3,604.

- Samsung Reports prelim Q3 (KRW) Op 12.1T v 9.7Te, Rev ~86T v 84.4Te.

- South Korea official: There has been some response from US on South Korea's revised proposal, cannot elaborate in detail at the moment.

- South Korea Joint Chiefs of Staff (JCS) Chairman: Russian technology may have gone into North Korea's new ICBM - press.

Other Asia

- Philippines Fin Min Recto: Watchful of inflation despite slowdown; Philippines' economic growth may slow down in 3Q and 4Q.

- Singapore central bank (MAS) quarterly monetary policy statement: Maintains width, slope and center of currency band.

- Singapore Q3 advance GDP Q/Q: 1.3% V 0.6%E; Y/Y: 2.9% V 2.0%E.

- INDIA SEPT CPI Y/Y: 1.5% V 1.5%E (Annual pace moves back below target range).

North America

- JPM Unveils increased Security and Resiliency Initiative, a $1.5T (raised by 50%), 10-year plan to facilitate, finance and invest in industries critical to national economic security and resiliency; Will make direct equity investments of up to $10B.

- (US) Pres Trump: Would be great if we could make a peace deal with Iran; This is start of era of harmony for Israel and region - Knesset address in Israel.

- (US) New Philadelphia Fed Pres Paulson (voter in 2026): Labor market risks are increasing, but not outrageously; Gradual rate cuts should keep job market close to full employment; Don't know where neutral rate is, so Fed must move cautiously - speech text [first official comments since taking Philly Fed position].

Europe

- (IE) Ireland Sept Construction PMI: 43.7 v 45.9 prior.

- (UK) Aug BRC Like-For-Like Sales Y/Y: 2.0% v 2.9% prior.

- (CN) UK Security Min Jarvis: UK Gov gravely concerned about the security of institutions; CPS call to drop China spy case was not influenced by the Gov.

- (IL) Israel PM Netanyahu: Gaza agreement opens door to expansion of peace.

- (UK) BOE’s Greene (hawkish dissenter): Activity stronger that thought a year ago; Inflation and wage growth stronger too.

- OPEC Monthly Oil Report (MOMR): Maintaines 20205 and 2026 demand and supply outlooks.

- (DE) Germany Aug Current Account Balance: €8.3B v €15.6B prior.

- ML.FR cuts FY25 SOI €2.6-3.0B, Adj FCF €1.5-1.8B (prior: €3.4B, above €1.7B) to reflect deterioration of business environment.

- (UR) Ukraine Pres Zelenskiy: Expect to meet US energy and weapons companies during US visit; Confirms will talk about defense and weapons with US Pres Trump on Fri (Oct 17th).

- (FR) France PM Lecornu's govt to present budget that seeks to cut costs by €31B; Targets €14B from new revenue; Budget to include tax rule that targets holding companies used by the wealthy - French press.

- (FR) France Pres Macron: Confident that France will have budget by end of 2025 - comments to media in Egypt.

Levels as of 01:20 ET

- Nikkei 225 -2.5%, ASX 200 +0.2%, Hang Seng -0.9%; Shanghai Composite +0.1%; Kospi -0.8%.

- Equity S&P500 Futures -0.4%; Nasdaq100 -0.5%; DAX -0.3%; FTSE100 -0.2%.

- EUR 1.1555-1.1593; JPY 151.79-152.62; AUD 0.6474-0.6533; NZD 0.5701-0.5748.

- Gold +1.4% at $4,189/oz; BTC -1.1% at $113,630; Crude Oil flat at $59.47/bbl; Copper -0.5% at $5.1030/lb.