Markets ease into the new week ahead of potential US govt shutdown

Asia market update: Markets ease into the new week ahead of potential US govt shutdown; Focus on AU RBA rate decision.

General trend and developments

- USD weaker, gold at new highs, higher equities (ex-Japan), crypto off lows as positive US data late Friday allows rate-cut narrative to continue in absence of new catalysts.

- Trump Admin vs Democrats appear ready to play a game of chicken right to the wire, with the US government to shut down from midnight on Tue Sept 30th if no agreement reached on the Republicans’ Continuing Resolution (CR) funding bill. Pres Trump to meet with congressional leaders on Monday.

- China’s industrial profits in August bounced back over 20% y/y, pulling the year-to-date figure up from negative territory to be positive. State firms’ profits still seen to be negative for the year.

- KRW +0.7% amid FX swap hopes with the US.

- Kospi shook off its mid-to-late week correction last week to rip once more, +1.6%, re-approaching its all time highs. Hang Seng also strong +1.4% while the Nikkei under-performed -0.6%; Stock volatility for high-yield stocks in Japan with ex-div stocks today. (**Reminder last Friday >1,400 companies traded ex-dividend].

- Different polls for the Japan LDP leadership race continue to flip between Takaichi and Koizumi as preferred leader (election this Saturday, Oct 4th). Takaichi over the weekend said to 'signal' a review of trade deal with the US [if victorious in leadership race].

- Japanese yield curve at the long-end continued to steepen in early Japan trading, although not as much as last Friday. Today 40-year JGBs +2bps, 30-year JGBs +1bps. JPY/USD continued to curb last week’s losses, +0.2% back to 149.22 (vs nearly 150 late last week.

- Meanwhile, financial press commentary from Japan saw last month’s "hawkish split" by the BOJ board in its 7-2 decision to hold rates said to lower bar for potential October rate hike given the two dissenters calling time for a 25bps hike.

- WTI crude initially continued its Friday fall after the restart of Kurdistan crude exports via the Iraq-Turkey Pipeline. Opec+ also said to be planning yet another production hike in Nov.

- Spot Gold trades at fresh record high of $3,800/oz ; Silver also hits fresh 14 year high;

- Copper +1.4% amid China support for non-ferrous metals market.

- (EU) Moldova Election results (after 90% counted): Pro-EU party “Party of Action and Solidarity” leads with 46%; Pro-Russian bloc 27% - Moldova Election Bureau.

- Over the weekend the White House confirmed that the latest pharma tariffs don't apply to countries with established trade deals while also said to be considering tariffs on foreign electronic devices based on the number of chips in each device.

- In the Ukraine-Russia war Pres Trump said to be “open” to provide long-range weapons to Ukraine.

- US Fed's Bowman appeared to move firmly into the Fed’s dove camp with comments late Friday that “it is time to act decisively and proactively to protect jobs”.

- In other geopolitical news Axios reported that US, Israel said to be "very close" to an agreement on Pres Trump's plan to end war in Gaza.

- Further good economic data out of the US late Friday, with Atlanta Fed GDPNow Q3 GDP forecast raised from 3.3% to 3.9%, University of Michigan Final Confidence for Sept revised slightly higher while the Fed’s closely watched PCE (for August) as well as the Truflation Proxy for mid-Sept were both showing no increase in inflation, yet August personal income rose above expectations.
Note: If the US government shuts down from Oct 1st and stays shut then September’s US Nonfarm Payrolls will likely not be released on Friday, Oct 3rd.

- US equity FUTs +0.3% to +0.4% during Asia trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Tue Sept 30th JP BOJ Summary of Opinions, JP Aug Industrial Prod + Aug Retail Sales, NZ Business Confidence, CN Sept NBS Manufacturing PMI, CN Sept RatingDog Manufacturing PMI, AU RBA Rate Decision, (Tue night US Aug JOLTS).

- Wed Oct 1stKR Sept Exports, Global S&P PMIs, JP Q3 Tankan Index, (Wed eve EU Sept CPI, US Sept ISM PMI Manufacturing).

- Thu Oct 2nd KR Sept CPI, AU Aug Trade Balance, JP Sept Consumer Confidence, JP BOJ Dep Gov Uchida speech.

- Fri Oct 3rd JP BOJ Gov Ueda speech, (Fri night US Sept Nonfarm Payrolls**, US ISM Sept Services PMI).
[Note: Friday’s US Sept Nonfarm Payrolls may not be released if the US govt is still shut down].

Holidays in Asia this week

- Wed Oct 1st China, Hong Kong,

- Thu Oct 2nd China, India.

- Fri Oct 3rd China. South Korea.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.3% at 8,811.

- Australia Treasurer Chalmers: Final Australia 2024-25 Budget Deficit A$10B - press.

- New Zealand Aug Filled Jobs M/M: 0.2% v 0.2% prior.

China/Hong Kong

- Hang Seng opens +0.7% at 26,321; Shanghai Composite opens flat at 3,828.

- China MOF comments on Aug local government bond issuance (CNY): Net local government debt issuance at 571.5B, net local gov't special bond issuance 489B; local govt debt refinancing 408.6B.

- Banks in China are adjusting their bond strategies amid volatility; some of these banks are seeking to add hedges, notes increasingly challenging bond market conditions toward the end of Q3 - China Securities Times.

- (HK) Macau Tourism Office official expects daily passenger turnover at 150K during the Golden Week Holiday - Press.

- China said to be planning to support growth of non-ferrous metals sector plus 5% growth in petrochemical sector.

- Follow up: China PBOC, SAFE and CSRC: Joint announcement on further supporting overseas institutional investors to conduct onshore bond repurchases - financial press.

- China said to be planning to support growth of non-ferrous metals sector - financial press (update|).

- China launches new “K” visa program from Oct 1st; Aims to attract “the world’s best and brightest” in science and technology – NYT (update).

- China Aug Industrial Profits Y/Y: +20.4% v -1.5% prior [weekend update].

- Mexico Econ Min Ebrard: China could send Officials to Mexico to discuss tariffs; Mexico's Congress is expected to pass tariffs to Asia on Oct 20th, 2025 [late Friday update].

- Mexico Pres Sheinbaum: Mexico is proposing a panel to address differences with China on tariffs [late Friday update].

- China Premier Li Qiang: World is entering new period of change, with unilateralism and Cold War mentality making a comeback; Will establish China-UN global south development support system and provide $10M in budget support to the mechanism [late Friday update].

- (US) White House trade adviser Navarro: China, Indonesia and Vietnam dominate furniture (import) sector [late Friday update].

- China State Asset Regulator [SASAC]: Held meeting on economic operation of SOEs [late Friday update].

- China Commerce Ministry (MOFCOM) to implement export license management for EVs from Jan 1st, 2026 – press [late Friday update].

- China PBOC holds Q3 monetary policy committed (MPC) meeting: Recommend strengthening monetary policy regulation; Reiterates to increase support for boosting consumption and keep liquidity ample [all comments in-line, as expected] [late Friday update].

- Reportedly US TikTok will be divided into two companies – press [late Friday update].

- House China Panel Chair Moolenaar: Requested an urgent briefing from Trump admin on TikTok; Bytedance has shown that it is a 'Bad actor' - Statement regarding TikTok [late Friday update].

- China issues plan on the use of AI in the transportation sector; aims for wide usage of AI in the sector by 2027 [late Friday update].

- HKMA: Launching cross-border bond repo business to help lower CNY funding cost [late Friday update].

- China PBOC sets Yuan reference rate: 7.1089 v 7.1152 prior.

- China PBOC Open Market Operation (OMO): Injects CNY289B in 7-day reverse repos; Net injects CNY48B.

Japan

- Nikkei 25 opens -0.5% at 45,142.

- Japan BOJ's "hawkish split" said to lower bar for potential October rate hike - opinion piece from US financial press, citing various sources.

- Japan LDP head candidate Takaichi said to 'signal' review of trade deal with the US [if victorious in leadership race] - Press [update].

- BOJ Outright Bond Purchase Operation for 3~5 Years; 5~10 Years; >25 Years maturities and inflation-indexed bonds; (Leaves purchase amounts unchanged).

- Japan to convene an extraordinary Diet session in mid-October – Yomiuri.

- Japan's Koizumi leads the LDP leadership race at 33%; Takaichi 31% - ANN Poll.

- Japan Takaichi leads the LDP leadership race at 34%; Koizumi 25% - Nikkei Poll.

- Japan PM Ishiba to visit South Korea between Sept 30th - Oct 1st.

- Follow Up: Former BOJ official Sakurai said the central bank is likely to raise rates to 1.50%, forecasts another rate hike by the end of 2025 and 2 more increases in FY2026 - financial press [late Friday update].

Korea

- Kospi opens +0.8% at 3,414.

- US and South Korea are planning to hold working group talks on the US visa systems on Sept 30th [Tues] - Yonhap.

- South Korea Fin Min Koo: US and South Korea have completed currency negotiations - Yonhap, citing Minister on return from the US.

- Follow up: South Korea reportedly 'cannot' pay $350B in cash for US investment package - Yonhap, citing National Security Advisor (update).

- Follow up: South Korea govt restores "99%" of key security equipment affected by yesterday's data center fire - Korean press.

Other Asia

- Thailand PM Anutin: Thai govt to quickly address economic, security issues - delivers policy statement to Parliament.

- Singapore Dep PM / Trade Min Gan: Pharmaceutical companies in Singapore need clarity if they qualify for new pharma tariffs by US - US financial press (update).

- India Aug economic report: If tariff uncertainties persist, there will be impact on export sectors with risk of spillover to domestic employment [late Friday update].

- Taiwan Aug Monitoring Leading Indicator: 30 v 29 prior [late Friday update].

North America

- US) SEC Chair Atkins: Fast-tracking bid to allow semi-annual reporting: Market must decide how often companies report [inline with comments made by US President Trump on Sept 15th] - FT.

- (US) President Trump plans to meet with the Bicameral bipartisan leadership on Mon at 3 PM ET, to sign executive order on Mon at 10:15 AM ET; plans to hold press conference with Israel Netanyahu on Mon at 1:15 PM ET.

- (US) Follow up: Pres Trump to address General's meeting in Quantico (near DC), Tues Sept 30th press (update).

- (US) Truflation proxy of us aggregated inflation index stays unchanged at 2.0% v 2.0% mid-Sept v 1.4% before 'liberation day'.

- US DOT: Trump administration will restrict commercial drivers licenses (CDL) for non-US citizens [late Friday update].

- (US) Fed's Bowman (voter): Time to act decisively and proactively to protect jobs; Smaller balance sheet gives Fed more room to respond to shocks - speech text [late Friday update].

- (UR) US Pres Trump was reportedly open to provide new long-range weapons to Ukraine; Didn't commit to reversing current stance on barring long-range attacks with US weapons – WSJ [late Friday update].

- (US) Reportedly Trump Admin considers tariffs on foreign electronic devices based on the number of chips in each device – press [late Friday update].

- (US) US White House: The latest pharma tariffs don't apply to countries with established trade deals [late Friday update].

- (US) Atlanta Fed GDPNow: Raises Q3 GDP forecast from 3.3% to 3.9% [late Friday update].

- (US) Sept final University of Michigan confidence: 55.1 V 55.4E.

- (US) Sept final University of Michigan confidence: 55.1 V 55.4E [late Friday update].

- (US) AUG PCE price index M/M: 0.3% V 0.3%E; Y/Y: 2.7% V 2.7%E [late Friday update].

- (US) AUG personal income: 0.4% V 0.3%E; personal spending: 0.6% V 0.5%E.

- (CA) Canada JULY GDP M/M: 0.2% V 0.1%E; Y/Y: 0.9% V 0.7%E [late Friday update].

Europe

- OPEC+ plans another oil production hike in Nov; cites sources - financial press [update].

- (IE) Ireland Central Bank Gov/ECB Makhlouf: Ireland must adopt and stick to fiscal rules - FT.

- US, Israel said to be "very close" to an agreement on Pres Trump's plan to end war in Gaza - Axios.

- (EU) Moldova Election results (after 90% counted): Pro-EU party “Party of Action and Solidarity” leads with 46%; Pro-Russian bloc 27% - Moldova Election Bureau.

- UK reportedly plans to offer to pay more for drugs to placate Pres Trump and avert recent pharma tariffs announcement - press [late Friday update].

- (EU) Reportedly plans tariffs of 25-50% on Chinese steel and related products in coming weeks - press [late Friday update].

Levels as of 01:20 ET

- Nikkei 225 -0.9%, ASX 200 +0.8%, Hang Seng +1.3%; Shanghai Composite +0.2%; Kospi +1.7%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.4%; DAX +0.4%; FTSE100 +0.4%.

- EUR 1.1700-1.1734; JPY 148.89-149.55; AUD 0.6546-0.6674; NZD 0.5770-5792.

- Gold +0.7% at $3,835/oz; BTC +2.0% at $111,900; Crude Oil -0.6% at $65.29/bbl; Copper +1.4% at $4.8112/lb.