Markets nervous into US govt shutdown and amid HK/CN holiday

Asia market update: Markets nervous into US govt shutdown and amid HK/CN holiday; Focus on EU Sept CPI, US Sept ISM PMI Manufacturing.

General trend and developments

- Nasdaq, S&P FUTs fell -0.4% during Asia trading, coinciding from Taiwan news that it has rejected the US request to make 50% of its chips locally, in addition the shadow of a US govt shutdown at midnight ET as well as likely no non-farm payrolls figures this Friday plus the withdrawal of the new nominated head of the Bureau of Labor Stats, E.J. Antoni (with no replacement named) likely weighed on sentiment.

- Nervous trading in Asia, amid the HK and CN markets closed for holidays. (China will not reopen until Oct 9th). Nikkei underperformed -1.0% while the Kospi again threatened recent all-time highs +1.2%.

- Bond markets and commodities quiet with Gold holding its all-time high levels.

- Little reaction (as usual) to Asia PMI Manufacturing day, with Japan confirming its third month of contraction in September.

- Japan Tankan Industry surveys for Q3 largely in-line with expectations, although should be noted that the Large Manufacturer’s Index is at its highest since Dec 2024. JPY weaker at first upon the release, but came back to hit new highs for the week as the session progressed. Officials noted that firms were divided on how they saw impact of US tariffs.

- Aussie dollar lost its mild-strength seen post-RBA rate hold yesterday to fall back below 66c handle.

- South Korea chip exports continued their out-performance, hitting an all-time monthly high in September, helping overall Korean exports hit the highest level since March 2022. The amount of decrease for exports to the US also reduced to -1.4% y/y, much better than the -12.0% seen back in August, which was the biggest drop since May 2020.

- Bank of Japan confirmed to cut bond purchases for Oct-Dec quarter; Buying will decrease to ¥3.3T per month in the October-December period, down from ¥3.705T q/q [Cutting purchase amounts in the 1-3 Years, 3-5 Years, 5-10 Years and 10-25 Years series].

- Nike shot up +4.5% after hours to trade above levels seen during the entire week prior to today’s earnings, in spite of guiding Q2 Rev down to low single digits and 175bps impact from tariffs.

- US equity FUTs -0.4% during Asia trading.

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

- Wed Oct 1st(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 8,828.

- Australia Sept Final Manufacturing PMI: 51.4 v 51.6 prelim.

- Australia sells A$1.2B v A$1.2B indicated in 3.50% Dec 2034 bonds: Avg Yield: 4.2868% v 4.0895% prior; bid-to-cover: 2.10x v 3.73x prior.

- Australia said to offer to sell shares in its new strategic minerals reserve to allies including the UK – press.

- New Zealand Aug Building Permits M/M: 5.8% v 5.3% prior.

- New Zealand Fin Min Willis: Capital support encourage new projects.

- New Zealand Energy Min: Expects electricity package will push down prices.

China/Hong Kong

- Hang Seng closed for holiday; Shanghai Composite closed for holiday (reopens Oct 9th).

- (HK) Macau Sept (MOP) Casino Rev at 18.3B; Y/Y 6.0% v 9.0%e.

- USTR Greer: Reiterates that China reliance on exports unsustainable; Want to get to a place where trade with China is more balanced; Expects Trump to sign trade deals during trip to Asia.

- (US) War Sec Hegseth: We love peace, peace through strength; Will be making a speech on China soon - Marine Corps Base Quantico speech.

- China Sept top 100 developers see sales +0.4% y/y - China Real Estate Information Corp (CRIC).

- Hong Kong Aug M3 Money Supply Y/Y: 4.0% v 6.2% prior.

Japan

- Nikkei 225 opens -0.3% at 44,805.

- JAPAN Q3 TANKAN LARGE MANUFACTURING INDEX: 14 V 14E; LARGE MANUFACTURING OUTLOOK: 12 V 13E (LARGE MANUFACTURERS INDEX HIGHEST SINCE DEC 2024).

- Japan Sept Final Manufacturing PMI: 48.5 v 48.4 prelim (confirms third month of contraction).

- Japan's Koizumi leads LDP leadership race (no % update) - Asia press citing poll.

- Japan Chief Trade Negotiator Akazawa: We secured a win-win trade deal with the US – press.

- Japan's right-wing Sanseito party said to 'court' Trump allies - financial press.

- Bank of Japan confirmed to cut bond purchases for Oct-Dec quarter; Buying will decrease to ¥3.30T per month in the October-December period, down from ¥3.705T q/q [Cutting purchase amounts in the 1-3 Years, 3-5 Years, 5-10 Years and 10-25 Years series].

Korea

- Kospi opens +0.6% at 3,444.

- South Korea Sept Trade Balance: $9.6B v $8.0Be.

- South Korea Sept PMI Manufacturing: 50.7 v 48.3 prior (Moves into expansion after 8 months of contractio.

- South Korea President Lee: To increase defense budget for 2026 by 8.2% to KRW66.3T.

- South Korea and US agree to avoid manipulating FX rates to gain unfair competitive advantage; [No mention of FX swap] - US Treasury statement.

- South Korea and US agreed to set up dedicated section for US visas at US embassy in Seoul [no comments seen regarding FX swap]- press.

Other Asia

- (TW) Taiwan Government: Rejects US request to make 50% of its chips locally [follows recent WSJ article].

- (IN) India central bank (RBI) leaves repurchase rate unchanged at 5.50%; as expected.

- Philippines Central Bank (BSP): Projects Sept y/y inflation at 1.5-2.3% v 1.5% prior.

- Philippines Central Bank (BSP): Narrows 2026 BOP deficit at -$3.4B (prior -$6.3B).

- Singapore Q3 Preliminary URA Private Home Prices Q/Q: 1.2% v 1.0% prior.

- Philippines Sept PMI Manufacturing: 49.9 v 50.8 prior (moves into contraction after 5 months of expansion).

- India Sept Final PMI Manufacturing: 57.7 v 58.5 prelim.

- Vietnam Sept PMI Manufacturing: 50.4 v 50.4 prior (3rd month of expansion).

- Thailand Sept PMI Manufacturing: 54.6 v 52.7 prior (5th month of expansion).

- Malaysia Sept PMI Manufacturing: 49.8 v 49.9 prior (16th month of contraction).

- Indonesia Sept PMI Manufacturing: 50.4 v 51.5 prior (second month of expansion).

- Taiwan Sept PMI Manufacturing: 46.8 v 47.4 prior (7th month of contraction).

- (VN) US Commerce Dept aims to impose anti-dumping duties on Vietnam’s molded fiber products, with the rate ranging from 1.38% to 212.27%; Tariff order is expected to be issued on Nov 15th - press.

- (TW) China Pres Xi: Firmly oppose separatist act of Taiwan independence - Chinese state press.

North America

- (US) White House: Instructs agencies should be commencing shutdown plans.

- (US) White House said to withdraw E.J. Antoni's nomination as BLS head - press.

- (US) Republican sponsored bill to avert shutdown also fails to secure enough votes with the Senate; Voting continues.

- (US) Fed's Logan (non-voter in 2025; voter in 2026): It's not clear how much further the Fed can cuts rates before hitting neutral; There may be relatively little room to make additional rate cuts without inadvertently moving to an inappropriately accommodative stance; Will be cautious about further cuts.

- (US) Fed's Jefferson (voter): Labor market softening, could face stress if not supported; Impact of tariffs to show further in coming months; Expect disinflation to resume after 2025.

- (BR) Brazil Aug National Unemployment Rate: 5.6% v 5.6%e.

- (US) House Speaker Johnson: Do not understand what Dems are trying to accomplish with shut down other than political cover - CNBC.

- (US) July FHFA house price index M/M: -0.1% V -0.2%E.

- (US) July S&P cotality house price index (20-CITY) M/M: -0.07% V -0.20%E; Y/Y: 1.82% V 1.

- (US) Sept consumer confidence: 94.2 V 96.0E.

- (US) Fed's Collins (voter in 2025; non-voter in 2026): My inflation outlook is similar to median Fed projection; May be appropriate to cut rates again if data supports easing.

- (US) Sept Chicago Purchase Managers Index (PMI): 40.6 V 43.3E.

- (US) AUG JOLTS JOB OPENINGS: 7.23M V 7.200ME.

- (US) Sept Dallas Fed Services Activity: -5.6 v +6.8 prior.

- FTC: Suing Zillow and Redfin regarding over illegal agreements to suppress advertising for rental housing competition.

- (US) US Pres Trump: Pfizer agreed to offer major discounts on medications; US will be paying most favored nations (MFN) price; We'll tariff companies an extra 5-8% if no deals are reached.

- (CN) USTR Greer: Reiterates that China reliance on exports unsustainable; Want to get to a place where trade with China is more balanced - speech text.

- (CO) Colombia Central Bank leaves Overnight Lending Rate unchanged at 9.25%; as expected.

- (US) Senate Min Leader Schumer: We're heading into a shutdown.

Europe

- (IE) Ireland Sept PMI Manufacturing: 51.8 v 51.6 prior (9th month of expansion).

- (PT) Portugal Sept Preliminary CPI M/M: +0.9% v -0.2% prior; Y/Y: 2.4% v 2.8% prior.

- OPEC+ said to discuss larger 500Kbpd/month hike over next three months to discuss fast tracking its latest round of supply hikes as it seeks to recoup market share - press cites delegate.

- (DE) Germany Sept CPI M/M: 0.2% V 0.2%E; Y/Y: 2.4% V 2.3%E.

- (EU) ECB Chief Lagarde: Tariffs have had little inflationary effect so far; We’re in a good place but the place isn’t fixed.

- (RU) Russia reiterates will extend full gasoline export ban and partial diesel export ban until end-2025 - Russian press.

Levels as of 01:20 ET

- Nikkei 225 -1.0%, ASX 200 -0.3%, Hang Seng closed; Shanghai Composite closed; Kospi +1.2%.

- Equity S&P500 Futures -0.5%; Nasdaq100 -0.5%; DAX -0.1%; FTSE100 flat.

- EUR 1.1730-1.1767; JPY 147.46-148.23; AUD 0.6590-0.6619; NZD 0.5787-5808.

- Gold +0.5% at $3,893/oz; BTC +0.4% at $114,570; Crude Oil +0.4% at $62.62bbl; Copper -0.6% at $4.8460/lb.