TSMC hails strength of AI demand

EU mid-market update: TSMC hails strength of AI demand; UK monthly GDP was anemic; China says US interpretation of recent export controls has distorted facts and caused panic.

Notes/Observations

- UK GDP rose just 0.1% in August, with quarterly growth at 0.3%. Weak consumer spending and business investment signal sluggish momentum. Markets now price a 45% chance of BOE rate cut in Dec, up from 33%, amid slowing activity and rising unemployment at 4.8%. Budget uncertainty ahead of November’s statement is dampening spending.

- Ahead of the Nov 10 tariff détente expiration, Trump again reiterated that the U.S. is in a trade war with China, after Beijing reversed its long-standing order of “talk first, fight second” to “fight first, talk later,” signaling a hardened stance even as working-level contacts continue.

- France faces two no-confidence votes in the National Assembly, though Socialist comments earlier this week suggest PM Lecornu will likely survive both.

- Taiwan Semi Q3 results impressed, beating profit expectations. Q4 guidance was strong. Raised FY revenue. Exec calls AI demand stronger than they believed 3 months ago, calling it ‘insane numbers’. TSMC management remains prudent on potential US tariff impacts in consumer-sensitive markets when planning for 2026, hinting Revenue to outpace CapEx growth over coming years.

- US banks tapped $6.5B from the Fed’s Standing Repo Facility on October 15, the largest non-quarter-end use since the pandemic, signaling mounting strain as repo rates hit an unusual 4.36% mid-month. With the reverse-repo facility now drained, the Treasury’s cash rebuild directly pulling liquidity from banks, the SRF’s sudden use marks the first visible test of a system running “QT without a cushion”.

- Asia closed mixed with KOSPI outperforming +2.5%. EU indices -0.1% to +0.1%. US futures +0.2-0.4%. Gold -0.6%, DXY -0.1%; Commodity: Brent +0.6%, WTI +0.7%; Crypto: BTC -1.6%, ETH -3.8%.

Asia

- New Zealand Sept Food Prices M/M: -0.4% v +0.3% prior.

- Japan Aug Core Machine Orders M/M: -0.9% v +0.5%e; Y/Y: 1.6% v 4.9%e.

- Australia Sept Employment Change: +14.9K v +20.0Ke; Unemployment Rate: 4.5% v 4.3%e.

- South Korea Sept Total Bank Lending To Household (KRW): 1170.2T v 1,168T prior.

- RBA Assist Gov Kent: Easing financial conditionsweare helping to balance the economy.

- RBA Gov Bullock: The latest data suggested consumption has been a little stronger than we thought; Headline inflation was a little bit volatile; Data was giving us time to think on whether it is time for more easing; Job is not done on policy objectives. Policy was not really restrictive in Australia, rather marginally tight.

- Japan Innovation Party (Ishin) is eyeing up a coalition with the ruling Liberal Democratic Party in a move that would set LDP leader Sanae Takaichi on the path to become prime minister.

- Japan Fin Min Kato reiterated stance need to watch excessive, disorderly FX moves. Met with US Treas Sec Bessent and confirmed US-Japan FX agreement.

- BOJ Tamura (hawk; dissenter): BOJ should push rates closer toward levels deemed neutral but did not believe that the Bank should immediately raise the policy interest rate to a restrictive level in an attempt to curb inflation.

- South Korea said to be seeking an Argentina-style currency swap with the US.

Europe

- ECB's Muller (Estonia): Interest rates at 2% are where they should be; Inflation risks are more or less balanced now. China export controls could be inflationary.

- UK Chancellor Reeves: Higher taxes on wealthy 'will be part of the story' for Nov budget.

Americas

- Fed Beige Book noted wages grew across all reporting districts. Economic activity changed little since prior report. Prices rose modestly as in the prior reporting period.

- Judge blocked federal firings from >30 agencies during shutdown (as expected).

- US banks borrowed $6.5B from the Fed's Standing Repo Facility (SRF) on Wed, Oct 15th; (largest amount since pandemic.

Trade

Pres Trump: We're in a trade war with China now; Tariffs are an important tool for defense.
US warned world would ‘decouple’ from China if it imposed new export controls.

- Treasury Sec Bessent: If China wanted to be an unreliable partner, world must decouple; US doesn't want decoupling; China can’t be trusted with the global supply chain. To have a series of meetings on China’s restrictions this week. Trump was still expecting to meet with China Pres Xi in Korea.

Energy

- Weekly API Crude Oil Inventories: +7.4M v +2.8M prior.

- India PM Modi said to have promised that his country would stop buying Russian oil.

Speakers/fixed income/FX/commodities/erratum

Indices [Stoxx600 +0.16% at 568.68, FTSE -0.14% at 9,411.92, DAX -0.28% at 24,142.20, CAC-40 +0.17% at 8,090.66, IBEX-35 -0.56% at 15,504.40, FTSE MIB +0.01% at 41,911.00, SMI +1.39% at 12,676.32, S&P 500 Futures +0.21%].

Market Focal Points/Key Themes: European indices opened mixed with a downward bias, and remained downbeat through the early part of the session; trade tensions between US and China weighing on risk appetite; better performing sectors include utilities and real estate; sectors leading th way lower include communication services and telecom; focus on US retail sales later in the day; earnings expected in the upcoming U S session include Charles Schwab, US Bancorp, Infosys and Intuitive Surgical.

Equities

- Consumer discretionary: Nestle [NESN.CH] +8.0% (earnings; job cuts), Kering [KER.FR] -2.5% (analyst downgrade), Whitbread [WTB.UK] -8.5% (earnings).

- Consumer staples: Pernod Ricard [RI.FR] +2.5% (earnings).

- Healthcare: Merck KGaA [MRK.DE] -1.0% (CMD).

- Industrials: ABB [ABBN.CH] -1.0% (earnings; new CFO).

- Technology: ASML [ASML.NL] +1.0% (TSMC earnings; guidance), Sartorius [SRT.DE] +11.5% (earnings).

Speakers

- ECB’s Kocher (Austria): ECB is at the end of rate cutting or very close to it.

- ECB acting member Dolenc (Slovenia): Reiterates stance of no reason to change rates in coming months as growth, inflation on solid path.

- Bank of England Bank Quarterly Liabilities/Credit Conditions Surveys noted that availability of secured and unsecured household credit rose in Q3 2025 and is expected to increase further by end-November. Total funding grew in Q3 2025, led by increases in wholesale and central bank-related sources, while retail deposits were flat. Funding volumes are expected to rise further by end-November.

- Swiss SECO Autumn Economic Forecasts maintained 2025 GDP growth forecast at 1.3% while cutting 2026 GDP growth forecast from 1.2% to 0.9%. SECO raised 2025 CPI from 0.1% to 0.2% while maintaining 2026 CPI at 0.5%.

- Germany Chancellor Merz: commented that needed a European stock exchange.

- Turkey Central Bank (CBRT) reiterated stance that tight monetary policy to be maintained until price stability is achieved.

- BOJ Board member Tamura (hawk) declined to comment when asked about potential BOJ rate hike in October. Believe necessary to adjust degree of monetary easing to make rate closer to neutral rate.

- Japan's Innovation Party (JIP) Co-Representative Fujita stated that would have another round of discussions with LDP on Fri, Oct 17th.

- LDP Policy Chief Kobayashi confirmed in talks with JIP; share stance on constitution, security and energy.

- Chinese hackers accessed classified UK computer systems for more than a decade; China routinely accessed low- and medium-level classification information on UK govt.

- China Commerce Ministry (MOFCOM) on rare earth export controls: All licence applications for civilian use will be approved; Controls do not equate to export ban.

Currencies/fixed income

- USD was steady after enduring some softness during the Asian session. Dealers noted that the Fed’s Beige Book reinforced the view that the economic outlook has changed little since the September FOMC meeting. This left the Fed on track to cut rates by 25 basis points later this month and most likely in December.

- Inline UK GDP number did little to stimulate price movement Pair at 1.3335 by mid-session.

- EUR/USD steady at 1.1655 area with little in terms of data to promote fresh price action.

- USD/JPY briefly tested below 151 during Asia. Yen softened after BOJ hawk Tamura declined comment when asked about potential BOJ rate hike in October. He noted but did not believe that the Bank should immediately raise the policy interest rate to a restrictive level in an attempt to curb inflation.

- 10-year German Bund yield at 2.57%, France 10-year Oat at 3.35% and 10-year Gilt yield at 4.54% 10-year Treasury yield: 4.02%.

Economic data

- (NL) Netherlands Sept Unemployment Rate: 4.0% v 3.9%e.

- (UK) Aug Monthly GDP M/M: 0.1% v 0.1%e; 3M/3M: 0.3% v 0.3%e.

- (UK) Aug Industrial Production M/M: 0.4% v 0.2%e; Y/Y: -0.7% v -0.8%e.

- (UK) Aug Manufacturing Production M/M: 0.7% v 0.2%e; Y/Y: -0.8% v -1.0%e.

- (UK) Aug Construction Output M/M: -0.3% v -0.2%e; Y/Y: 1.0% v 1.5%e.

- (UK) Aug Index of Services M/M: 0.0% v 0.1%e;3M/3M: 0.4% v 0.4%e.

- (UK) Aug Visible Trade Balance: -£21.2B v -£22.0Be; Overall Trade Balance: -£3.4B v -£4.8Be.

- (CZ) Czech Sept PPI Industrial M/M: -0.4% v -0.1%e; Y/Y: -1.0% v -0.7%e.

- (IT) Italy Sept Final CPI M/M: 0.2% v -0.2% prelim; Y/Y: 1.6% v 1.6% prelim.

- (IT) Italy Sept CPI EU Harmonized M/M: 1.3% v 1.3% prelim; Y/Y: 1.8% v 1.8% prelim; CPI Index (ex-tobacco): 121.7 v 121.8 prior.

- (EU) Euro Zone Aug Trade Balance: €9.7B v €7.0Be; Trade Balance NSA (unadj): €1.0B v €9.1Be.

- (IT) Italy Aug Trade Balance: €2.1B v €7.8B prior; EU Trade Balance: €0.2B v €1.8B prior.

- (CA) Canada Sept Existing Home Sales M/M: -1.7% v +1.1% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €4.442B vs. €4.0-5.0B in 2030, 2032 and 2035 SPGB bonds.

- Sold €1.13B in 1.25% Oct 2030 SPGB bonds; Avg Yield: 2.443% v 2.888% prior; Bid-to-cover: 2.02x v 1.51x prior

- Sold €1.23B in 2.55% Oct 2032 SPGB bond, Avg Yield: 2.716% v 3.014% prior, bid-to-cover: 1.94x v 1.83x prior.

- Sold €2.07B in 3.20% Oct 2035 SPGB bonds; Avg Yield: 3.085% v 3.230% prior; bid-to-cover: 1.70x v 1.93x prior.

- (FR) France Debt Agency (AFT) sold total 11.499€B vs. €9.5-11.5B indicated range in 2028, 2030 and 2031 bonds.

- Sold €4.707B in 2.40% Sept 2028 Oat; Avg Yield: 2.22% v 2.34% prior, bid-to-cover: 2.71x v 4.01x prior.

- Sold €2.403B in 2.50% May 2030 Oat; Avg Yield: 2.48% v 2.62% prior; bid-to-cover: 2.61x v 4.68x prior.

- Sold €1.739B in 0.0% Nov 2031 Oat; Avg Yield: 2.74% v 2.70% prior; Bid-to-cover: 3.20x v 2.44x prior.

- Sold €2.650B in 2.70% Feb 2031 Oat; Avg Yield: 2.63% v 2.79% prior; bid-to-cover: 3.49x v 2.84x prior.

- (SE) Sweden sold total SEK750M vs. SEK750M indicated in 2036 and 2039 I/L Bonds.

Looking ahead

- (AR) Argentina Sept Budget Balance (ARS): No est v 1.56T prior.

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:50 (FR) France Debt Agency (AFT) to sell €0.75-1.25B in inflation-linked 2034, 2040 and 2053 bonds (Oatei).

- 06:00 (IL) Israel Q2 Final GDP Annualized: No est v -4.0% prelim.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (RO) Romania to sell RON500M in 6.75% Apr 2035 bonds.

- 07:00 (CA) Canada Oct CFIB Business Barometer: No est v 50.2 prior.

- 08:00 (PL) Poland Sept CPI Core M/M: 0.2%e v 0.2% prior; Y/Y: 3.2%e v 3.2% prior.

- 08:00 (BR) Brazil Aug Economic Activity Index (Monthly GDP) M/M: +0.7%e v -0.5% prior; Y/Y: 0.7%e v 1.2% prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:15 (CA) Canada Sept Annualized Housing Starts: 257.5Ke v 245.8K prior.

- 08:30 (US) Sept Advance Retail Sales M/M: 0.4%e v 0.6% prior; Retail Sales (ex-auto) M/M: 0.3%e v 0.7% prior; Retail Sales (ex-auto/gas): 0.3%e v 0.7% prior; Retail Sales (Control Group): 0.3%e v 0.7% prior.

- 08:30 (US) Sept PPI Final Demand M/M: 0.3%e v -0.1% prior; Y/Y: 2.7%e v 2.6% prior.

- 08:30 (US) Sept PPI (ex-food/energy) M/M: 0.2%e v -0.1% prior; Y/Y: 2.7%e v 2.8% prior.

- 08:30 (US) Sept PPI (ex-food/energy/trade) M/M: 0.3%e v 0.3% prior; Y/Y: No est v 2.8% prior.

- 08:30 (US) Oct New York Fed Services Business Activity: No est v -19.4 prior.

- 08:30 (US) Oct Philadelphia Fed Business Outlook: 10.0e v 23.2 prior.

- 08:30 (US) Initial Jobless Claims: 230Ke v K prior; Continuing Claims: 1.93Me v M prior.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Oct 10th: No est v $722.5B prior.

- 09:00 (UK) BOE’s Mann.

- 09:00 (US) Fed’s Waller.

- 09:00 (BE) ECB’s Wunsch (Belgium).

- 09:00 (US) Fed’s Barr.

- 09:00 (US) Fed’s Miran.

- 10:00 (US) Oct NAHB Housing Market Index: 33e v 32 prior.

- 10:00 (US) Aug Business Inventories: 0.1%e v 0.2% prior.

- 10:00 (US) Fed’s Bowman.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 10:45 (UK) BOE’s Mann.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 11:45 (IE) ECB’s Lane (Irerland, chief economist).

- 12:00 (US) Weekly DOE Oil Inventories.

- 12:00 (EU) ECB Chief Lagarde.

- 13:30 (CA) Bank of Canada (BOC) Gov Macklem.

- 14:30 (UK) BOE’s Greene.

- 16:15 (US) Fed’s Miran.

- 17:00 (KR) South Korea Sept Import Price Index M/M: No est v 0.3% prior; Y/Y: No est v -2.2% prior.

- 17:00 (KR) South Korea Sept Export Price Index M/M: No est v 0.7% prior; Y/Y: No est v -1.0% prior.

- 19:00 (KR) South Korea Sept Unemployment Rate: 2.6%e v 2.6% prior.

- 20:30 (SG) Singapore Sept Non-Oil Domestic Exports Y/Y: -2.1%e v -11.3% y/y; Electronic Exports Y/Y: No est v -6.5% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.