Trade deal momentum building towards APEC for some?

Asia market update: Trade deal momentum building towards APEC for some? [KR,TW, IN]; US equity stake in quantum firms amid CN software restrictions; Russia sanctions; KRW and NKY decline along with Tesla and IBM; KR BOK holds rates; JP, US CPI tomorrow.

General trend and developments

- Following on from a fairly quiet US session with Tesla -3.8% and IBM -6.5% after hours. Nikkei opened weak at -1.0% and then fell sharply further, -1.8%, with Softbank losing another 6% at the open on top of yesterday’s 8% fall.

- Trump Admin announced it was going to give up to $10M grants to some US quantum computing companies.

- US and EU coordinated further secondary sanctions against Russia’s war in Ukraine, with the US targeting Russian oil & gas companies Rosneft and Lukoil and the EU targeting four companies in the Chinese energy sector. US also considering to restrict global exports to China that contain or are made with US software.

- Meanwhile, anonymous reporting said that Russian oil supply to India is set to fall to ‘near zero’, although time frame uncertain, as India chases a drop in US tariff rates of 50% to 15-16%.

- Treas Sec Bessent warned [ahead of the US-China Nov 1st tariff deadline] of the possibility of no deal between Trump and Xi at APEC, as the USTR expressed doubts if there even would be a meeting.

- Meanwhile, Taiwan’s US envoy said “close to a trade deal with the US”. Comes a month after the Taiwan Government rejected a US request to make 50% of its chips locally.

- Bank of Korea left rates unchanged for a third straight pause (with one dovish dissenter), as expected. Korean Won hit its April lows (1.425 vs USD) prior to Gov Rhee’s post-rate press conference. Rhee mentioned high home prices and the weak Won as factors in not cutting. Added that now only 4 of 6 board members are open to a further rate cut in the next 3 months [prior was 5 of 6 members]. Korea’s Kospi index hit another record high during the Governor’s presser (fell steeply later).

- Prior to the Asia equity openings South Korea said to have made ‘some’ progress with the US on the $350B investment package, with $250B over 8 years and focus on structure of investment with no mention yet of the currency swap desired by Korea.

- PM Takaichi’s cabinet rating in a press poll of 71% provides an initial boost to her leadership, where Japan cabinet ratings have consistently been down in the 20s and 30s in recent years.

- Australia Q3 Business Confidence and Business Conditions both rose compared to the prior quarter.

- Today is the final day of China’s 4th Plenum, with all eyes on all senior leaders’ demotion or promotion. Particular interest on whether Pres Xi consolidates power or loses some degree of autonomy or more.

- US equity FUTs +0.1% to +0.2% during Asia trading.

Upcoming events

- Fri Oct 24th JP Sept CPI, Global Flash PMIs, US Sept CPI (delayed release).

Holidays in Asia this week

- Mon Oct 20th Singapore.

- Tue Oct 21st India.

- Wed Oct 22nd India.

- Thu Oct 23rd Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.4% at 8,996- Australia Q3 NAB Business Confidence 2 v 0 prior; Business Conditions 6 v 1 prior.

- Australia sells A$100M v A$100M indicated in 0.25% Nov 2032 Indexed Bonds: Avg Yield 1.5265% v 1.7518% prior: bid-to-cover: 4.10x v 3.89x prior.

- New Zealand sells total NZ$450M vs. NZ$450M indicated in 2030, 2036 and 2054 bonds.

China/Hong Kong

- Hang Seng opens -0.2% at 25,718; Shanghai Composite opens -0.3% at 3,904.

- China Sept Swift Global Payments (CNY): 3.2% v 2.9% prior.

- China removes Wang Dongwei from post of Vice Min of Finance - financial press.

- US Pres Trump: Reiterates belief that a deal can be made with China's Xi; Maybe a deal with soybean, maybe nuclear, or on everything.

- US Treasury Sec Bessent: Contemplating US and allies' next move if discussions with China fail; Will have two days of China talks in Malaysia; Incoming Russia sanctions to be among the biggest - Fox Business.

- China Sept Power Consumption: 888.6B KWh, +4.5% y/y; YTD to Sept: +4.6% y/y at 7.77T KWh.

- Trump administration said to consider plan to restrict global exports to China that contain or are made with US software – press.

- US Treasury Sec Bessent: Plans to announce a substantial pickup in Russia sanctions; Everything is on the table with China; Any export control will be in coordination with G7 Allies.

- USTR Greer: We will see if Trump meets with Xi - CNBC.

- EU said to prepare trade options to counter China rare earths restrictions – press.

- (RU) EU's 19th Russia sanctions package said to include four companies in the Chinese energy sector - press cites EU diplomats.

- China PBOC sets Yuan reference rate: 7.0918 v 7.0954 prior [strongest since Oct 15th, 2024].

- China PBOC Open Market Operation (OMO): Injects CNY213B in 7-day reverse repos; Net drains CNY24B v injects CNY95B prior.

Japan

- Nikkei 225 opens -1.0% at 48,795.

- Japan releases weekly flows data [period ended Oct 17th]: Foreign buying.

- Japan sells ¥248.1B vs. ¥250B indicated in 3-Month Bills; Avg Accepted Spreaad: -0.024%; bid-to-cover: 3.64x v 3.58x.

- JERA to acquire shares in Haynesville Shale Gas (Louisiana, US) for $1.5B.

- Japan to pressure companies to start spending $750B in cash reserves as the financial regulator is seeking changes to the governance code to spur growth investment - Nikkei [update].

- Japan PM Takaichi cabinet approval rating at 71% - Yomiuri Poll.

- Japan PM reportedly to move up defense spending goal by 2 years – press [overnight update].

- Japan shipbuilding industry companies said to announce ¥350B capex – Nikkei [overnight update].

- Japan PM Takaichi prepared to tell Trump that Japan will buy US soybeans, pickups and LNG - financial press, citing sources [overnight update].

- Japan Fin Min Katayama: Can not say Japan has exited deflation fully; PM Takaichi has instructed to proceed with fiscal reform, both in terms of spending and revenue [overnight update].

Korea

- Kospi opens -1.2% at 3,835.

- Bank of Korea (BoK) leaves 7-day repo rate unchanged at 2.50%; as expected.

- South Korea prices ¥110B in multi-tranche Samurai bonds - Press.

- US and South Korea said to discuss $200B investment paid over 8 years - press.

- South Korea Fin Min Koo: South Korea to launch 24 hour FX trading as soon as possible; Govt plans on finalizing US trade deal at APEC summit (Oct 28-31) - press interview [overnight update].

Other Asia

- India shrimp exporters +6-20% on reports India nearing US tariff deal to cut tariffs from 50% to 15-16%.

- Russian oil supply to India said to be set to fall to 'near zero' [time frame uncertain] - financial press, citing sources.

- Taiwan Central Bank (CBC) Gov Yang: Growth upgrades by economists are not 'overly optimistic' - comments to lawmakers.

- Taiwan US envoy says "close to reaching US trade agreement" - Taiwan press.

- Thailand Dep Fin Min Vorapak resigns due to scam center allegation – press [overnight update].

- Indonesia Central Bank (BI) Gov Warjiyo: Tariffs have weakened global trade - pre-rate decision press conference [overnight update].

- INDONESIA CENTRAL BANK (BI) LEAVES BI RATE UNCHANGED AT 4.75%; NOT EXPECTED [overnight update].

North America

- Trump admin said to be in talks for stakes in some US quantum computing companies - WSJ.

- (US) Republican Senators said to consider bill specifically for SNAP program benefits during govt shutdown - Politico.

- Tesla CEO Musk: Confident we can expand Tesla's production [does not provide timeline] - earnings call.

- (US) Automakers are pushing for Trump administration to refrain from imposing new tariffs on factory robots and industrial machinery – press.

- (US) MBA Mortgage Applications w/e Oct 17th: -0.3% v -1.8% prior (4th straight week of declines).

- (MX) Mexico Aug IGEA Economic Activity Index (Monthly GDP) M/M: 0.6% v 0.2%e; Y/Y: -0.9% v -0.5%e.

- (US) Fed reportedly floats plan with much smaller capital hikes for large banks; To increase of ~3-7% in aggregate for most big banks – press.

- (US) Treasury $13B 20-year bond reopening draws 4.506% v 4.613% prior, bid-to-cover 2.73 v 2.74 prior and 2.68 over last 8 reopenings.

- (UR) Reportedly US has lifted restriction on Ukraine's usage of certain long range missiles - WSJ.

- (US) DOE CRUDE: -1.0M V +1.5ME; GASOLINE: -2.1M V -1ME; DISTILLATE: -1.5M V -2ME.

Europe

- (RU) US Sec of State Rubio: Had a good call with Russian Foreign Min Lavrov, will follow up on that.

- (RU) Russia Pres Putin holds strategic nuclear drills "Grom" - press.

- (EU) ECB Pres Lagarde: Need to address fragmentation of EU trading venues.

- (RU) Trump: Hope that new Russian sanctions won't be on for long; Felt it the timing was right for sanctions; Doesn't know if these new sanctions will push Putin.

- (UR) NATO Sec Gen Rutte: There is no NATO Russia-Ukraine peace plan - White House comments.

- (US) Trump: US has nothing to do with long range missiles approval to fire deep into Russia.

- (RU) US Treasury Dept: Targeting Russian integrated oil & gas companies Rosneft and Lukoil in latest round of sanctions.

- (RU) EU's 19th Russia sanctions package said to include four companies in the Chinese energy sector - press cites EU diplomats.

- (EU) ECB’s De Guindos (Spain): Development of inflation is positive; reiterates stance that current interest rate level is adequate.

- (SE) Sweden Central Bank (Riksbank) Dep Gov Jansson: Reasons to believe that current elevated level of inflation is temporary.

Levels as of 01:20 ET

- Nikkei 225 -1.6%, ASX 200 flat, Hang Seng -0.3%; Shanghai Composite -0.7%; Kospi -1.2%.

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

- EUR 1.1591-1.1615; JPY 151.83-152.57; AUD 0.6479-0.6496; NZD 0.5725-0.5743.

- Gold +0.8% at $4,099/oz; BTC +0.5% at $108,920; Crude Oil +3.9% at $60.77/bbl; Copper flat at 5.0006/lb.