Trump continues to consider additional strike options against Iran

Asia market update: Uneventful CN mainland trade after extended holiday; Samsung’s Q3 figures looked light; Trump continues to consider additional strike options against Iran; Higher yields again embraced at JGB auction ahead of 30-year UST supply; Firmus IPO woes.

General trends and developments

- Oct Fed rate hike probabilities decline post FOMC-minutes release [18.3% v 19.9% prior day]: The Federal Reserve’s meeting minutes from the September 15-16th FOMC interest rate decision stated that board members had not seen enough progress on inflation, and despite the recent rise in long-term treasury yields, financial conditions appeared supportive of economic growth. FOMC board members concluded that members expect another rate increase by year-end. Markets are currently pricing an 81.7% probability of a hold at 3.75–4.00% and an 18.3% probability of a +25bps hike to 4.00-4.25% by the next October 28th interest rate decision. Separately, the US Treasury $39 billion 10-year note reopening recorded an average yield of 5.300% (vs. 4.834% prior), with solid demand reflected in a bid-to-cover ratio of 2.77x (vs. 2.71x prior), remaining above the 2.58x average of the last eight reopenings.

- Japan’s MOF, similar to the recent 10-year auction, saw higher demand at today’s 30-year auction. Both Japan and the US have seen stronger demand as higher yields have been offered. The UST sells 30-year bonds later on Thurs. Much softer demand was seen at today’s inflation-indexed bond auction in Australia, despite the higher yield offered, as inflation expectations surged back above 5.0% during Oct [highest since Jun]. China is bucking the entire global trend of higher bond yields, according to the WSJ. Hence, the Chinese MOF has continued to sell 30-year bonds at lower yields. In Europe, France remains the focal point of sovereign debt market concerns. There's been no change in bond issuance strategy, according to earlier remarks from the French Finance Ministry. The French government is considering issuing more shorter-term debt amid the budget crisis, said the WSJ citing comments from France Fin Min Lescure. Soft auction results were also seen at AAA-rated Sweden. Soft auction results were also seen at AAA-rated Sweden [ Sweden sold total SEK4.6B vs. SEK5.0B indicated in 2037 and 2039 SGB bonds].

- Following the U.S. market open where Nasdaq futures opened +0.1% to 31,432 (vs. 31,402 prior) and the S&P 500 futures opened flat at 7,854 (vs. 7,853 prior), CENTCOM reported that 20M barrels of crude oil flowed through the Strait of Hormuz and stated the U.S. and regional partners “clearly” control the Strait. At the Freeman Coliseum in San Antonio, Texas [open press], U.S. President Trump provided an update on the Iran situation, stating that he does not believe a deal with Iran is something he wants to pursue.

- WTI crude futures opened +0.8% higher at $88.94 per barrel (vs. $88.28 at prior close), while Brent crude futures also rose by +0.8% to $100.96 per barrel (vs. $100.20 at prior close). The move followed a Politico report that French and German officials were preparing to release diesel stocks already committed under the G7 pledge in March. Germany has so far released only 600,000 of the 2.65 million tons of oil, diesel and jet fuel it pledged, while France has privately indicated that it still has 8 million barrels remaining under its commitment. (**Reminder March 11th: The 32 Member countries of the IEA unanimously agreed today to make 400 million barrels of oil from their emergency reserves available.).

- Samsung Electronics has fluctuated between slight gains and losses [<2%] as traders assess the record figures that missed consensus expectations. The detailed/final Samsung figures are due on Oct 29th. Chip-equipment firms have traded mixed on the weaker Samsung figures. Taiwan Semi (TSMC) Sept and Q3 sales figures are expected after the market close in Taiwan. Meanwhile, Hynix’s ADR lockup expiration remains a focal point for traders [Oct 8th]

- In other Asian corporate earnings, LG Energy has rallied by >4% on better than expected figures as the co. reported record quarterly results. Fast Retailing and Seven & I results are expected in the Japanese consumer space, after the Tokyo close.

- Firmus had announced cuts to its IPO price to A$8.25/share (vs. A$11.00/share prior), bankers reportedly spent Wednesday night trying to persuade investors to bid at the lower level, though it remains unclear whether those efforts succeeded. Bank of ⁠America, JPMorgan, Morgan Stanley and Morgans are leading the IPO. The stock is due to start trading on the Australian Securities Exchange on October 23rd and is valued at $10.5B.

- Incidentally, technology firms are expected to continue to flood the corporate bond market in order to finance AI-related expenditures. Oracle, SpaceX and Broadcom are, for example, reportedly seeking debt deals to help pay for AI chips [press]. With the increases in equity and corporate debt investment opportunities available investors could elect to eventually become more selective. Earlier today, Japanese property firm Mitsui Fudosan elected to cancel a planned short-term debt sale on market conditions.

- Singapore banks track global weakness: Big banks in Singapore have seen general declines of >3% on Thursday. Factors cited include the impact of higher yields on funding costs, cautious broker commentary and global weakness in financials.

- The Isaias tropical storm depression currently located at 22.9°N 91.9°W continued to strengthen moving ENE at 9 mph and has become a hurricane [as expected]. Prior to the hurricane confirmation, Shell & Chevron provided updated statements: Shell stated it is evacuating all personnel and shutting in production at its Mars, Olympus, Ursa, Vito, and Appomattox assets, whilst Chevron has initiated shut-in procedures at four out of nine company-operated Gulf of America facilities.

- US equity FUTs flat during Asia trading.

Looking ahead (Asian-weighted focus, using EST/EDT time-zone)

- Mon Oct 5th: Global European Sept S&P/HCOB Svcs/Composite PMI, EU Aug PPI, US Sept S&P/ISM Svcs/Composite PMI, NZ Q3 NZIER Business Confidence, (Mon night, HK Sept S&P Mnfg PMI, PH Sept CPI & Core CPI, TH Sept CPI & Core CPI, JP 10-Year JGB Auction, IN Sept HSBC Svcs PMI).

- Tue Oct 6th: EU Aug Retail Sales, US Aug Trade Balance, CA Aug Trade Balance, US EIA Short-Term Energy Outlook, (Tue night, JP Aug Labor Cash Earnings, JP/ID/MY/CN/HK/SG/PH Sept Foreign Reserves - USD, AU Aug Building Approvals, PH Aug Industrial Production, IN RBI Interest Rate Decision, JP Aug Preliminary Leading Index & Coincident Indicator, DE Aug Industrial Production, TW Sept CPI).

- Wed Oct 7th: UK Sept Mortgage Rate - GBP, US 10-Year Note Auction, US Sept 15-16 FOMC Meeting Minutes, AR Aug Industrial Production, (KR Aug Current Account, JP Aug Current Account, AU Oct MI Inflation Expectations, ID/TH Sept Consumer Confidence, JP 30-Year JGB Auction, DE Aug Trade Balance, TW Sept Trade Balance).

- Thu Oct 8th: EU Sept 9-10 ECB Meeting Minutes, MX Sept CPI & Core CPI & Sept 24 BANXICO Meeting Minutes, US 30-Year Bond Auction, (Thu night, JP Aug Household Spending, ID Aug Retail Sales, MY Aug Industrial Production & Unemployment Rate, JP Sept Machine Tool Orders).

- Fri Oct 9th: US WASDE Report, RU Sept CPI.

Holidays in Asia this week

- Fri Oct 9th: South Korea, Taiwan.

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 Index opens -0.5% at 8,688.

-(NZ) New Zealand 2025-26 Budget (NZ$): -8.67B.

-(AU) Australia Oct Consumer Inflation Expectation: 5.3% v 4.9% prior.

-(AU) Australia regulator [ASIC] places stop orders on additional private credit funds – US financial press.

-(AU) ASIC halts offers in mortgage schemes managed by Australian Secure Capital Fund - update.

-(AU) Firmus said to cut IPO price to A$8.25/share v A$11.00/share prior - Australian press.

-(AU) Follow-up on Firmus: Sources from the AFR reports state that the Firmus IPO might need repricing from A$8.25/share to ~A$7/share or even A$6/share, if it is is to move forward.

-(AU) Australia sells A$150M v A$150M indicated in 0.25% Nov 2032 Indexed Bonds: Avg Yield 2.6065% v 2.3319% prior: bid-to-cover: 3.93x v 6.05x prior.

-(NZ) RBNZ: Has commenced recruitment for two new roles of Assistant Governor Monetary Policy and Assistant Governor Payments & Cash.

-(NZ) New Zealand sells NZ$450M vs. NZ$450M indicated in 2029 and 2036 bonds.

China/Hong Kong

-(CN) Shanghai Composite Index opens -0.1% at 3,839; (HK) Hang Seng Index opens -0.4% at 24,032.

-(CN) China recorded 2.14B passenger trips during the Oct Golden Week holiday - Chinese media.

-(CN) China to raise the aviation fuel surcharge, effective from Oct 10th - China Daily.

-(CN) China ‘races’ to build AI data centers across energy-rich hinterland - FT.

-(CN) Citigroup Economists: China domestic economy is on the 'verge' of recession, but headline growth should still meet the 2026 target - Press [update].

-(CN) China sells 5-year special treasury bonds, 30-year ultra-long special treasury bonds.

-(CN) China PBOC sets the yuan mid-point at 6.7367 v 6.7351 prior.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY606B in 1-day Overnight Reverse Repo and 7-day Reverse Repos; Net drains CNY609B v injects CNY127B prior.

Japan

-(JP) Nikkei 225 Index opens -0.3% at 69,841.

- (JP) Japan sells ¥600b vs. ¥600b indicated in 30-year JGB bonds; avg yield: 4.1090% v 4.0790% prior; bid-to-cover: 3.88x v 3.79x prior.

-(JP) Japan Sept Tokyo Avg Office Vacancies: 1.9% v 1.9% prior.

-(JP) Japan Sept Corporate Bankruptcies Y/Y: -4.8% v +3.1% prior.

-(JP) Japan PM Takaichi: Fiscal stability is prerequisite to policy; tax revenue will fall -¥4.3T on consumption tax cut - Parliament.

-(JP) Japan-led AZEC group set to agree on oil reserves - Yomiuri.

-(JP) Japan releases weekly flows data [period ended Oct 2nd]: Foreign buying of Japan equities: ¥2.19T v -¥362.0B prior.

-(JP) Japan sells ¥3.00T vs. ¥3.00T indicated in 6-month bills; Avg Yield: 1.4051% v 1.2887% prior, bid-to-cover: 4.03x v 3.87x prior.

Korea

-(KR) Kospi Index opens +0.1% at 6,808.

-(KR) South Korea Foreign Ministry: Commercial diesel, jet fuel is not included in export control to Russia.

-(KR) North Korea's Kim Yo Jong (sister of Kim Jong Un): Hostile nature of Inter-Korean relations and South Korea's identity cannot change - KCNA.

-(KR) South Korea Aug Current Account Balance: $46.1B v $42.1B prior.

-(KR) South Korean Presidential Office: South Korea, Egypt upgrade bilateral ties to strategic partnership. South Korea, Egypt to begin negotiations for comprehensive economic partnership agreement.

-(KR) Follow up: South Korea financial sector hack suspect believed to be 26-year-old in China's Guangdong Province - Yonhap.

-(KR) South Korea considers banning unlicensed foreign banks' global bond deals - US financial press.

-(KR) South Korea sells KRW100B vs. KRW100B indicated in 1.125% 10-year inflation-indexed bonds: Avg Yield: 1.686%v 1.64% prior.

-(KR) 005930.KR Reports prelim Q3 (KRW) Op 107.40T v 108.67Te (v 11.38T y/y), Rev 195.00T v 201.9Te (v 24.4T y/y).

-(KR) 5.HK South Korea Court: Upholds lower court ruling that clears the co of short-selling charges.

Other Asia

-(ID) Indonesia Sept Consumer Confidence: 118.1 v 118.5 prior.

-(ID) Indonesia Finance Minister: 2026, 2027 state budget design does not include Danantara state-owned enterprises dividends.

-(ID) Indonesia releases rules on ride-hailing motorbikes: to set online food and package delivery rates by Dec 31st.

-(IN) India considers export floor price for cotton yarn - Mint.

-(IN) India Government: India’s regulatory framework for satellite communication services is fair and non-discriminatory.

-(MY) Malaysia considers buying missile systems from France and South Korea - Local press [update].

-(MY) Malaysia PM: Express appreciation to Myanmar for accepting repatriation of 10,493 nationals.

-(TH) Thailand Sept Consumer Confidence: 52.1 v 53.2 prior.

-(TH) Thailand Central Bank sells THB40B vs. THB40B indicated in 1-year bonds: Avg Yield: 1.02041% v 1.02062% prior, bid-to-cover: 1.60x v 1.34x prior.

North America

-(US) FOMC Sept Minutes: Had not seen enough inflation progress; Most officials expected another rate hike this year [US Market Close].

-(US) Treasury's $39b 10-year note reopening draws 5.300% v 4.834% prior; bid-to-cover ratio: 2.77 v 2.71 prior and 2.58 over last 8 reopenings [US Market Close].

-(US) DOE CRUDE: -3.2M V +1.5ME; GASOLINE: +0.4M V -1.5ME; DISTILLATE: -0.0M V -2ME [US Market Close].

-(US) MBA Mortgage Applications w/e Oct 2nd: -4/2% v -6.0% prior [US Market Close].

-(US) US Treasury Sec Bessent: Economy is strong, but Fed should have an open mind - Fox News Interview.

-(US) US reportedly pressured EU, Canada to withdraw from conference - Politico.

-(US) President Trump: Giving money back to American seniors. Affirms over 20M seniors on Medicare will get checks. - The President delivers Remarks [Open Press], Freeman Coliseum, San Antonio, TX.

-(US) NHC: Isaias becomes a hurricane (as expected).

-(US) NHC: Tropical Storm Isaias continues to strengthen and still expected to become a hurricane tomorrow.

-(US) Bipartisan group of US Representatives address letter to House Speaker Johnson and Minority Leader Jeffries to thwart any Parliamentary move to block successors - WSJ.

-(US) Trump Administration grants self-driving trucks from Aurora and other companies’ exemption from rules requiring human drivers to manually set up reflective triangles around stopped trucks.

-(US) Trump Administration is paving way for temporary sale of some unapproved peptides - The Washington Post.

-(US) BLUEORIGIN.IPO CEO Bezos: Someday Blue Origin will IPO; Raised $10 billion from outside investors [for first time], may take more; Personally, have invested $28 billion in Blue Origin - Fox Interview.

-(US) SPCX Statement: Now seeing no earlier than Oct. 10th for Falcon 9 mission.

-(US) SHEL Follow up: Statement: At Mars, Olympus, Ursa, Vito, and Appomattox assets, we are evacuating all personnel and shutting in production. Already moved non-essential personnel from our Stones asset.

-(US) CVX Follow up: Statement: In preparation for tropical storm Isaias, have initiated shut-in procedures for production at four of Chevron-operated Gulf of America facilities. Certain additional personnel are being transported onshore, production from other five Gulf of America facilities remains at normal levels.

-(BR) Brazil Sept FGV Inflation IGP-DI M/M: 1.5% v 1.5%e; Y/Y: 3.8% v 3.8%e [US Market Close].

-(BR) Brazil's Center-Right Part Republicanos endorses Senator Flávio Bolsonaro - US financial press.

-(CO) Colombia Sept CPI M/M: 0.4% v 0.4%e; Y/Y: 6.3% v 6.3%e.

-(PE) Peru Central Bank (BCRP) leaves Reference Rate unchanged at 4.25%; not expected.

Europe

-(EU) France and German officials said they will release diesel stocks that were already committed in March as part of the G7 pledge to tap stockpiles of oil products - Politico [EU Market Close].

-(EU) ECB’s Pereira (Portugal): Current inflation and core inflation levels are far below those seen during 2022 energy shock [EU Market Close].

- (UK) Conservative (Tory) Leader Badenoch: Tories have identified £70B in budget savings; Savings plan would allow £35B cut to deficit; Conservatives won't unite with Reform; Western economies are running out of time and money - comments from party conf [EU Market Close].

-(UK) Sept RICS House Price Balance: -32% v -30%e.

-(UK) PM Burnham, German Chancellor Merz to hold security talks in Berlin on Thursday - BBC.

-(UK) UK firms seek additional staff for the first time in 2 years, according to REC/KPMG - Press.

-(FR) French Finance Ministry: There's been no change in bond issuance strategy; Bond issuance strategy follows investor demand [EU Market Close].

-(PL) Poland central bank (NBP) leaves base rate unchanged at 3.75%; as expected [EU Market Close].

-(PT) Portugal Central Bank raises 2026 GDP growth forecast from 1.8% to 2.3% [EU Market Close].

-(SE) Sweden Sept Maklarstatistik Housing Prices: 3.9% v 3.9% prior.

-(NL) Netherlands Aug Consumer Spending Y/Y: 2.1% v 1.2% prior.

Middle East

-(IR) Iran President Pezeshkian: Country is in an all out war; will resist the enemy; Weapons range can be raised as battlefield requires [EU Market Close].

-(IR) US CENTCOM: 20M barrels of crude oil flowing through the Strait of Hormuz - post on X.

-(SA) Saudi-Led Coalition: Commenced with another round of retaliatory strikes against the Houthis; Attacks on civilian targets 'won't go unpunished'.

-(QA) Reportedly first LNG train at Qatar's Northfield east expansion project is ready to start, first gas expected in November - press [EU Market Close].

-(PK) IMF: Reaches staff-level agreement on fourth review for extended fund facility, third review for resilience and sustainability facility for Pakistan. Upon approval, Pakistan will have access to about $1.0B under eff and ~$210M (SDR 154M) under RSF.

-(YE) Yemen Houthis: Saudi airspace will be target of military operations except over Mecca, Medina.

Levels as of 01:20 ET

Nikkei 225 -0.6%; ASX 200 -0.8%; Hang Seng -0.6%; Shanghai Composite -0.7%; Kospi -1.3%.

Equity S&P500 Futures flat; Nasdaq100 flat; DAX flat; FTSE100 flat.

EUR 1.1213-1.1191; JPY 158.25-157.58; AUD 0.6969-0.6955; NZD 0.5616-0.5595.

Gold +0.4% at $4,129/oz; BTC -1.7% at $83,027; WTI Crude Oil +2.2% at $90.19/bbl; Copper +1.0% at $6.7155/lbs.