Relief as risk-back-on after overnight decline in USTs and Oil falling

Asia Market Update: Relief as risk-back-on after overnight decline in USTs and oil falling >5%; Focus shifts to US non-farm payrolls Fri night.

General trend

- Normal service was resumed after several days of intense selling pressure as the Nikkei (+1.6%) led Asian equity markets higher in a risk-back-on day.

- 2 yr UST yields -3.8bps; 10-yr UST yield -1.5bps.

- Oil down more than 5% overnight as OPEC+ JMMC meeting delegates affirmed no policy changes to supply.

- Asian currencies recovered, with Korean won +1%, AUD +0.8%, Yen +0.5%.

- The initial timing of the moves coincided around the time of yesterday’s BOJ announcement of further bond buying ops tomorrow (see below), further propelled overnight by soft ADP jobs data out of the US; All helping to reign in the level of expectations for further rate hikes.

- Regarding potential Yen intervention, Gov Ueda refused to discuss the issue, while money market data appeared to show that Japan likely did not intervene in the FX markets. Some speculation as to instead whether a rate check by the BOJ might have seen an opportunistic selling opportunity by traders in the know?

- Yesterday’s BOJ announcement they will conduct an extra 5-year fund-supplying operation tomorrow (6th October) may indeed have given the markets confidence that the BOJ will strongly defend the 1.0% upper-limit of the YCC band.

- However, after today’s 11:35pm ET JP 30-yr auction saw lower demand and the widest tail since 2019, JGB yields rebounded higher to nearly touch 1.84%, erasing all of the past 24 hours drop and more to reach the highest level of the past 30 days (and nearly back to early 2013 levels).

- After the previous week’s record -¥3.03T outflow by foreign funds selling Japanese stocks, last week foreigners were again (marginal) net buyers of Japanese equities.

- South Korea Sept CPI slightly above estimates while Hong Kong Sept PMI contracted for a 3rd straight month.

- Samsung price increase for their NAND memory chips by >10% this quarter.

- US equity FUTs flat during Asian trading.

Looking ahead (Asian time zone)

- Fri night US Non-Farm Payrolls / Unemployment.

Holidays in Asia this week

- China markets are on holiday all this week through to and including Oct 6 (Friday).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens flat at 6,890.

- Australia Aug Trade Balance (A$): 9.6B v 8.7Be.

- RBNZ: New Zealand Aug New Lending Y/Y: -6.0%.

- New Zealand's BNZ bank raises 2023-24 Fonterra milk price forecast to NZ$7.25/kg.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2028, 2033 and 2041 bonds.

China/Hong Kong

- Shanghai Composite closed for holiday all this week.

- Hang Seng opens +0.3% at 17,249.

- Hong Kong Sept PMI (whole economy): 49.6 v 49.8 prior (3rd straight contraction).

- US Commerce Sec Raimondo: Hopeful will be able to make some semiconductor chip funding announcements this fall - Huawei chip case shows US needs different tools.

- China Commerce Ministry (MOFCOM): China strongly opposes to EU probe into EV subsidies; China to pay close attention to EU probe into EV subsidies and safeguard the rights and interests of Chinese firms – statement (overnight update).

- According to UK intelligence, 55 Chinese sailors feared dead after on Aug 21st, China nuclear submarine hit a chain and anchor obstacle used by the Chinese Navy to trap US and allied submarines - UK Daily Mail [**Note: traders were circulating unverified chatter about such incident in Aug].

Japan

- Nikkei 225 opens +0.7% at 30,733
JAPAN SELLS ¥900B V ¥900B INDICATED IN 30-YEAR JGB BONDS; AVG YIELD: 1.6910% V 1.6400% PRIOR; BID-TO-COVER: 3.06X V 3.46X PRIOR (widest tail since 2019).

- Japan releases weekly flows data [period ended Sept 29th]: Japan buying of foreign bonds: +¥297.1B v -¥541.6B prior: Foreign buying of Japan stocks: +¥71.0B v -¥3.03T prior.

- Earthquake with prelim magnitude of 6.6 strikes off Japan [the magnitude is 6.1 on the USGS scale]; Japan issues tsunami warning near the Izu Peninsula.

- Japan PM Kishida: To make sure of wage rises being sustainable - comments at labour union meeting.

- BOJ Gov Ueda: Declines to comment on FX (overnight update).

-(JP) BOJ MONEY MARKET DATA REPORTEDLY SHOWS THAT JAPAN LIKELY DID NOT INTERVENE IN FX MARKET ON OCT 3RD – PRESS (overnight update).

- BOJ TO CONDUCT 5-YEAR FUND-SUPPLYING OPERATIONS AGAINST POOLED COLLATERAL ON FRI, OCT 6TH; AMOUNT TO BE NOTIFIED WHEN CONDUCTING OPS (overnight update).

- Japan Fin Min Suzuki: Have been instructed to build an asset management plan by year-end (overnight update).

- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 100bps; Opens window to buy unlimited amount of 10-year JGBs at 1.00%.

South Korea

- Kospi opens +0.7% at 2,423.

- SOUTH KOREA SEPT CPI M/M: 0.6% V 0.4%E; Y/Y: 3.7% V 3.5%E.

- Bank of Korea (BOK): Sept inflation was higher than projected path.

- South Korea Fin Min: To actively take measures to stabilize FX and bond markets if needed.

- Samsung Electronics (005930.KR) Reportedly to raise NAND chip prices by >10% in Q4.

- Follow up: South Korea confirmed to lift temporary cap on commercial banks' bond sales for Q4 (overnight update).

Other Asia

- Philippines Sept CPI M/M: 1.1% v 0.4%e; Y/Y: 6.1% v 5.3%e.

- Philippines Gov't: Uptrend in inflation was primarily due to increase in food and transport prices.

- Philippines Economic Planning Min: Closely monitoring both local and global markets in terms of price movements.

- Malaysia PM Ibrahim: Expects subsidy spending to exceed MYR81.0B (~$17.2B) in 2023.

- Economic Planning Min: Closely monitoring both local and global markets in terms of price movements.

- Indonesia President Jokowi: Need to modernise military hardware, but wary of the limited state budget.

- Sri Lanka Central Bank (CBSL) cuts Key Rates by 100bps; as expected.

North America

- (US) SAG-AFTRA [Screen Actors Guild], AMPTP [Hollywood studios] will continue with talks on Fri, Oct 6th and Mon, Oct 9th.

- Ford (F) To lay off additional 400 workers, citing strikes.

- Clorox CLX Reports prelim Q1 adj EPS -$0.40 to $0.00 v $1.42e, organic sales -26% to -21%, gross margins to decline y/y; Due to the impacts of the recent cybersecurity attack.

- Blackberry (BB) Provides Project Imperium update and announces intention to separate business units.

- Rivian RIVN Guides 3Q Rev $1.29-1.33B (update).

- Apple (AAPL) Apple held talks with DuckDuckGo as it considered replacing Google as the default search engine in private mode on the Safari browser - revealed in court documents.

- US SEPT ADP EMPLOYMENT CHANGE: +89K V +150KE (lowest print since Jan 2021); Notes steepening decline in jobs in Sept and steady decline in wages in the past 12 months.

- US SEPT FINAL S&P SERVICES PMI: 50.1 V 50.2E (confirms 8th straight expansion).

- US SEPT ISM SERVICES INDEX: 53.6 V 53.5E; New Orders Index: 51.8 v 57.5 prior.

Europe

- ECB's Centeno (Portugal, dove): We can expect that interest rate cycle has been completed by now and with present conditions.

- UK PM Sunak: Cannot borrow ourselves out of inflation; Best tax cut is to halve inflation - Annual Cons Party Conf Speech.

- OPEC+ JMMC meeting delegates recommend no policy changes (as speculated).

- Russia Dep PM Novak: OPEC+ may tweak decisions if needed; Continue to monitor fuel prices in Russia.

- Italy Econ Min Giorgetti: Working with Germany to broker a deal that would reform EU budget rules; Doubt that Italy sovereign ratings will be cut.

- EU COMMISSION FORMALLY COMMENCES ONE-YEAR PROBE INTO CHINESE EVS (overnight update).

Levels as of 01:20 ET

- Nikkei 225 +1.5%; ASX 200 +0.5%; Hang Seng +0.4%; Shanghai Composite closed; Kospi +0.2%.

- Equity S&P500 Futures flat; Nasdaq100 flat; Dax flat; FTSE100 +0.2%.

- EUR 1.0502-1.0530; JPY 148.27-149.13; AUD 0.6318-0.6378; NZD 0.5907-0.5951.

- Gold +0.4%% at $1,841/oz; Crude Oil +0.5% at $84.68/brl; Copper +0.3% at $3.5897/lb.