US Govt shutdown stalls economic data – Semiconductors surge on flood of deals

Notes/observations

- US govt remains shutdown. Govt funded statistics agencies are furloughed, causing majority of US data to be postponed until later date. Privately backed releases remain on schedule. Analysts expect shutdown to be temporary, with economic activity usually recovered next quarter. Axios reports Trump administration will begin firing federal workers in a "day or two", no specifics on which agencies would be targeted.

- After back-to-back negative ADP prints, Fed futures now imply a near-certain 25bp cut on Oct 29 (99%) with even 1% tail for 50bp, and a 54% chance of a further 100bp of easing by June 2026, up from 33% last week.

- Global chip makers boosted by Samsung and SK Hynix deal with OpenAI. Infrastructure deal is under Stargate project. ASML, ASM International and BE Semiconductor are lifted in European trade.

- This chip rally looks rational because reports that OpenAI signed LOIs with Samsung and SK hynix and floated DRAM needs up to 900,000 wafers per month - ~40% of global DRAM output - imply a multi-year, memory-centric demand shock that would reprice contracts, lift ASPs and margins, and pull forward capex even if only partially realized.

- Swiss Sept CPI was in line at 0.2%. Looking ahead, it could hit zero, rent is expected to fall further. SNB might cut rates again after holding steady last week, would take it into negative territory.

- Notable EU Corp News: Tesco raised guidance and gained market share, LFL sales +4.3%. Analysts question H2 sustainability; Ryanair and Wizz air reported healthy load factors for Sept. JPM sees IAG as most favored among European airlines, being least exposed to long-haul overcapacity and strong FCF. Delta among first to report in airline sector, on Oct 9th. Strength in higher-end consumers and business travel predicted.

- Escalation headlines like reported U.S. intel support for Ukrainian strikes and Russian Iskander-M and Kinzhal missiles are increasingly evading US-made Patriot defenses in Ukraine likely added a safe-haven bid to gold.

- Asia closed higher with KOSPI outperforming +2.7%. EU indices +0.0-1.1%. US futures +0.0-0.4%. Gold +0.2%, DXY -0.2%; Commodity: Brent 0.0%, WTI 0.0%; Crypto: BTC +1.9%, ETH +1.6%.

Asia

- South Korea Sept CPI M/M: 0.5% v 0.5%e; Y/Y: 2.1% v 2.0%e.

- Australia Aug Trade Balance (A$): 1.8B v 6.2Be; Exports M/M: -7.8% v +2.5% prior [largest decline since July 2022; Imports M/M: +3.2% v -2.4% prior.

- RBA Financial Stability Review noted that the financial system remained well positioned to navigate a period of elevated global uncertainty.

- Japan 10-year JGB auction saw bid-to-cover ratio fall to 3.34x.

- US said to have told South Korea that it was reviewing a potential currency swap (in conjunction with the US-Korean trade deal) but was not optimistic.

- China tightened its domestic telecoms market beyond US firms to curb the use of both Nokia and Ericsson amid its national security drive.

Reminder: Chinese markets closed Oct 1-8th Oct for Golden Week holiday.

Global conflict/tensions

- Hamas was considering President Trump’s Gaza peace plan but had reservations about disarming and releasing all 48 hostages within 72 hours. Mediators from Qatar, Egypt, and Turkey are pressuring Hamas to accept the plan, warning of withdrawn diplomatic support.

- US said to provide Ukraine with intelligence for long-range missile strikes on Russia’s energy infrastructure

Europe

- UK govt said to be poised to exempt new LSE listings from stamp duty tax in the wake of fears about the diminishing competitiveness of Britain’s public markets

- Chancellor Reeves (Fin Min): Said to be set to remove higher business rates for UK retailers on food inflation concerns

Americas

- Supreme Court refused to allow Trump to immediately remove Fed ‘s Cook; To hear arguments in January.

- Fed's Goolsbee (voter for 2025): Uncertainty was a significant part of low hiring; Nervous counting on inflation being transitory.

- Pres. Trump poste that Republicans must use this opportunity of Democrat forced closure to clear out dead wood, waste, and fraud.

- Trump administration said to have frozen $18 billion for New York, home to top Democrats. $8 billion in green-energy projects in Democratic states also frozen

- S&P on the US: Govt shutdown added uncertainty to economic outlook.

- Fitch on the US: A prolonged govt shutdown could strain public finance credits; macroeconomic impact of shutdown is limited in near term; protracted disruption could slightly slow economic growth.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.70% at 568.60, FTSE -0.03% at 9,443.15, DAX +1.26% at 24,428.72, CAC-40 +1.02% at 8,048.48, IBEX-35 +0.08% at 15,571.50, FTSE MIB +0.38% at 43,242.00, SMI +0.57% at 12,424.87, S&P 500 Futures +0.17%].

Market Focal Points/Key Themes: European indices opened generally higher and remained upbeat through the early part of the session; Isreal closed for holiday; risk appetite supported after Euro area inflation was in line with views; better performing sectors include technology and industrials; utilities and real estate sectors among the laggards; reportedly Siemens looking to sell down its stake in Healthineers; Prosus declares its offer for Just Eat Takeaway unconditional; no major earnings expected in the upcoming US session.

Equities

- Consumer discretionary: Tesco [TSCO.UK] +3.0% (earnings; raises outlook; Chancellor Reeves said to be set to remove higher business rates for UK retailers; To remove top band of business rates on food inflation concerns), Universal Music [UMG.NL] +1.0% (reportedly close to "landmark" AI licensing deal with Warner Music).

- Healthcare: Novo Nordisk [NOVOB.DK] +2.0% (analyst upgrade).

- Industrials: BASF [BAS.DE] +2.0% (CMD), Continental [CON.DE] +1.5% (pre-close call with analysts), Siemens [SIE.DE] +3.0% (said to consider distributing Siemens Healthineers unit shares as a dividend; Also considers spinoff of the unit), Morgan Sindall [MGNS.UK] +12.5% (trading update).

- Technology: ASML [ASML.NL] +4.5% (broad Asian chip stocks rally after OpenAI memory deal).

- Telecom: Nokia [NOKIA.FI] -0.5% (China curbs use of Nokia and Ericsson in telecoms networks).

Speakers

- Bank of England (BOE) Decision Maker Panel (DMP) Sept Survey raised 1-year ahead CPI from 3.3% to 3.4% (3.4%e).

- Poland Central Bank (NBP) Dep Gov Kightley noted that large budget deficit curbed room for rate cuts.

- Japan Fin Min Kato commented that US tariff picture was getting clearer; virtuous cycle was firmly taking root.

- Japan BOJ Dep Gov Uchida reiterated stance that to raise rates if economic outlook was realized; real rate was at significantly low level. Reiterated overall assessment that domestic economy recovering despite some weakness.

Currencies/fixed income

- USD was on some soft footing as market participants remained cautious in the midst of the US government shutdown. Recent weak ADP. jobs data also putting headwinds on the greenback as its fueled expectations for further interest-rate cuts.

- EUR/USD at 1.1755 by mid-session as various unemployment rate in the region ticked higher but failed to stem any upside momentum.

- GBP/USD holding above 1.35.

- USD/JPY at 146.70 with focus on the upcoming LDP leadership results this weekend.

- 10-year German Bund yield at 2.72% and 10-year Gilt yield at 4.70% 10-year Treasury yield: 4.10%.

Economic data

- (CH) Swiss Sept CPI M/M: -0.2% v -0.2%e; Y/Y: 0.2% v 0.3%e.

- (CH) Swiss Sept CPI EU Harmonized M/M: -0.3% v -0.1% prior; Y/Y: 0.0% v 0.0% prior; CPI Core Y/Y: 0.7% v 0.7%e.

- (FR) France Aug YTD Budget Balance: -€157.4B v -€142.0B prior.

- (ES) Spain Sept Net Unemployment Change: -4.8K v +21.9K prior; Employment Net Change M/M: +56.7K v +29.8K prior.

- (IT) Italy Aug Unemployment Rate: % v 6.0%e.

- (BR) Brazil Sept FIPE CPI (Sao Paulo) M/M: % v 0.4%e.

- (HK) Hong Kong Aug Retail Sales Value Y/Y: 3.8% v 2.0%e; Retail Sales Volume Y/Y: 3.2% v 1.9%e.

- (NG) Nigeria Sept PMI (whole economy): 53.4 v 54.2 prior.

- (EU) Euro Zone Aug Unemployment Rate: 6.3% v 6.2%e.

- (BE) Belgium Aug Unemployment Rate: 5.8% v 5.8% prior.

- (GR) Greece Aug Unemployment Rate: 8.1% v 8.3% prior.

- (CY) Cyprus Sep CPI M/M: 0.6% v 0.3% prior; Y/Y: -0.7% v -0.9% prior.

Fixed income issuance

- (ES) Spain Debt Agency (Tesoro) sold total €5.339B vs. €4.5-5.5B indicated range in 2030, 2033 and 2042 SPGB bonds.

- (ES) Spain Debt Agency (Tesoro) sells €592M vs. €250-750M indicated range in 1.15% Nov 2036 inflation-linked bonds (SPGBei); Real Yield: % v 1.470% prior; bid-to-cover: x v 2.14x prior.

- (FR) France Debt Agency (AFT) sold total €11.5B vs. €10.0-11.5B indicated range in 2035, 2036, 2044 and 2060 Bonds.

- (UK) DMO sold £4.5B in 4.75% Mar 2035 Gilts; Avg Yield: 4.769% v 4.522% prior; bid-to-cover: 2.78x v 3.33x prior; Tail: 0.6bps v 0.1bps prior.

Looking ahead

- 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).

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

- 07:00 (ZA) South Africa Aug Electricity Production Y/Y: No est v -2.3% prior; Electricity Consumption Y/Y: No est v -4.5% prior.

- 07:30 (US) Sept Challenger Job Cuts Y/Y: No est v 13.3% prior.

- 08:00 (MX) Mexico Sept Vehicle Domestic Sales: No est v 124.2K prior.

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

- (ZA) South Africa Sept Naamsa Vehicle Sales Y/Y: No est v 18.7% prior.

- 08:30 (US) Initial Jobless Claims: 225Ke v 218K prior; Continuing Claims: 1.93Me v 1.926M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (IE) ECB’s Makhlouf (Ireland).

- 09:00 (RU) Russia Gold and Forex Reserve w/e Sept 26th: No est v $712.6B prior.

- 09:00 (SG) Singapore Sept Purchasing Managers Index: No est v 50 prior; Electronics Sector Index: No est v 50.4 prior.

- 10:00 (US) Aug Factory Orders: +1.4%e v -1.3% prior; Factory Orders (ex-transportation):0.3%e v 0.6% prior.

- 10:00 (US) Aug Final Durable Goods Orders: 2.9%e v 2.9% prelim; Durables (ex-transportation): 0.4%e v 0.4% prelim; Capital Goods Orders (non-defense/ex-aircraft): No est v 0.6% prelim; Capital Goods Shipments (non-defense/ex-aircraft): No est v -0.3% prelim.

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

- 10:30 (US) Fed’s Logan.

- 11:00 (DK) Denmark Sept Foreign Reserves (DKK): No est v 678.6B prior.

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

- (EG) Egypt Central Bank (CBE) Interest Rate Decision: Expected to cut Deposit Rate by 100bps to 21.00%.

- 11:35 (CH) SNB President Schegel.

- 12:30 (FR) ECB’s Villeroy (France).

- 13:00 (ES) ECB’s De Guindos (Spain).

- 13:40 (CA) Bank of Canada (BOC)( Dep Gov Mendes.

- 19:00 (AU) Australia Sept Final PMI Services: No est v 52.0 prelim; PMI Composite: No est v 52.1 prelim.

- 19:30 (JP) Japan Aug Jobless Rate: 2.4%e v 2.3% prior; Job-To-Applicant Ratio: 1.22e v 1.22 prior.

- 20:01 (IE) Ireland Sept PMI Services: No est v 50.6 prior; PMI Composite: No est v 51.3 prior.

- 20:30 (SG) Singapore Sept PMI (whole economy): No est v 51.2 prior.

- 20:30 (JP) Japan Sept Final PMI Services: No est v 53.0 prelim; PMI Composite: No est v 51.1 prelim.

- 21:05 (JP) BOJ Gov Ueda in Osaka.

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