Democrat and Republican bills to end the US government shutdown failed to secure sufficient votes for passage in the Senate, as expected.
Senior Hamas official Mahmoud Al-Mardaw said “President Trump’s plan is mainly an Israeli plan”, but emphasises that Hamas wants to end the war.
European bourses are choppy, trading on either side of the unchanged mark; US equity futures are flat/lower.
USD once again on the front foot despite ongoing impasse on Capitol Hill; Kiwi lags awaiting the RBNZ.
Bearish trade across global paper, except for JGBs which are marginally firmer following supply.
Gold prints fresh ATHs near USD 4,000/oz; crude subdued, eyeing geopolitical updates. On supply, Russian Deputy PM Novak says OPEC+ nations did not discuss increasing quotas by more than 137k BPD in November.
Looking ahead, NY Fed SCE, Atlanta Fed GDP, Canadian Trade Balance (Aug), Ivey PMI (Sep), EIA STEO, Speakers including Fed’s Bostic, Bowman, Miran, Kashkari, ECB’s Lagarde & Nagel, Supply from the US, Earnings from McCormick & Company.
Suspended Releases: US International Trade, Consumer Credit.
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TARIFFS/TRADE
Japan’s Chief Cabinet Secretary Hayashi said he is aware of US President Trump’s comments on truck tariffs, while he added that they will assess the details once clarified and will respond appropriately.
Trump will meet with Carney at 11.45EDT/16:45BST on Tuesday.
EUROPEAN TRADE
EQUITIES
European bourses (STOXX 600 -0.2%) opened mostly lower, albeit with very marginal losses. Though, soon after the cash-open sentiment slipped a touch to display a more negative picture in Europe, but without a clear driver.
European sectors are showing a slightly more negative picture vs initially opening mixed. Food Beverage & Tobacco takes the top spot, boosted by a couple of reasons. Firstly, Imperial Brands (+3%) helps to prop up the sector after the Co. announced a GBP 1.45bln share buyback and confirmed its FY25 guidance. Secondly, alcohol names opened higher in a read-across following strong Q2 metrics from US-listed Constellation Brands (+3.2% pre-market); the Co. beat on its top- and bottom-lines, where it cited continued demand for its beer portfolio. The likes of Diageo (+1%) and AB InBev (+0.7%) both move higher. Energy and Telecoms complete the top three; the former is helped by Shell (+1.7%) after the Co. said it expects “significantly higher” gas trading in Q3, with its outlook for that quarter also positive.
US equity futures (ES U/C NQ U/C RTY -0.1%) are modestly lower across the board, following a similar theme seen in the European morning.
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FX
DXY is extending on Monday’s upside that was triggered by JPY and to a lesser extent, EUR weakness. The government shutdown continues to grip the US macro narrative but is failing to weigh on the USD at the start of the week. This view may be re-appraised in the event that it drags on and has a more tangible impact on the US economy. The shutdown still shows no signs of being resolved after Democrat and Republican bills to end the shutdown failed to secure sufficient votes for passage in the Senate. As such, it is looking increasingly likely that mass layoffs of Federal workers are on the cards. For today’s docket, given that trade and consumer metrics will not be published, markets will instead focus on US RCM/TIPP Economic Optimism, NY Fed SCE, Atlanta Fed GDP metrics and a slew of Fed speakers. DXY has ventured as high as 98.47.
EUR remains on the backfoot vs. the USD with EUR/USD returning to a 1.16 handle as French political risks remain front and centre. In terms of the latest, outgoing PM Lecornu has been instructed by Macron to hold final discussion with political parties to see if there is a way forward. There are three paths the current crisis could take: 1) a new PM, which would appease opposition parties. 2) Fresh legislative elections. 3) An early Presidential election. France aside, German industrial orders disappointed this morning but failed to generate any traction in EUR. EUR/USD has delved as low as 1.1661.
JPY is once again lagging vs. the USD but to a lesser extent than most G10 peers. Focus remains on the fallout from Saturday’s LDP leadership election in which, Abe-protégé Takaichi was declared the victor. However, it remains to be seen how much sway the incoming PM will have on policy at the BoJ. Accordingly, investors look to scheduled speeches from multiple BoJ officials ahead of the October meeting; however, Wednesday’s appearance by Governor Ueda has been cancelled. USD/JPY has been as high as 150.70 with the next upside target coming via the 1st August peak at 150.91. Note, Finance Minister Kato attempted to jawbone the currency overnight but it had little impact on JPY.
GBP is softer vs. the USD but steady vs. the EUR. It remains the case that in the absence of any tier 1 data, focus in the UK is on the ongoing angst in the run-up to the November 26th budget. Ahead of which, Bloomberg reports that Chancellor Reeves is set to receive an unexpected GBP 5bln boost to her budget plans from inflation, which raises the taxable value of incomes, profits, and prices. The gain offsets higher debt servicing costs, helping narrow the UK’s projected GBP 20-30bln budget shortfall ahead of the budget. Cable sits towards the lower end of Monday’s 1.3417-90 range.
Antipodeans are both are at the foot of the G10 leader board with NZD lagging its antipodean peer in the run up to tomorrow’s RBNZ rate decision, which is set to see a reduction in the OCR. The scale of easing remains in debate, with a Reuters poll finding that 15 of 26 economists expect a 25bp cut to 2.75%, while 11 look for a larger 50bp move.
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FIXED INCOME
USTs are flat. Specifics for the most part are light owing to the ongoing shutdown and the subsequent lack of US data. Several Fed speakers due, but in the absence of fresh data points it remains to be seen what they can add beyond recent remarks to the narrative. On the shutdown, there are some glimmers of progress. President Trump commented that he is willing to look at and make a deal on ACA subsidies, but the government must reopen first. From the Democrats, Senate Minority Leader Schumer said Trump is not yet negotiating with them, but progress on the shutdown is being made. Currently, USTs find themselves in a thin 112-11 to 112-15+ band.
JGBs picked up overnight following a strong 30yr JGB auction. Supply was in more focus than usual given the move seen in JGBs and particularly the long-end driven steepening that occurred after the weekend’s LDP election. Auction aside, potentially the most pertinent update has been BoJ Governor Ueda cancelling his speech on October 8th. As it stands, that was Ueda’s last scheduled appearance before the end-October BoJ; though, several other officials are scheduled before then. More recently, Takaichi met with the Komeito leader. A meeting of particular pertinence amid concern that Komeito could lead the alliance. However, the meeting was positive overall with agreements shared on two out of three points and talks set to continue on the third; the officials reportedly shared an understanding on history and foreigners.
OATs are lower. On Monday, Takaichi met with the Komeito leader. A meeting of particular pertinence amid concern that Komeito could lead the alliance. However, the meeting was positive overall with agreements shared on two out of three points and talks set to continue on the third; the officials reportedly shared an understanding on history and foreigners. Thus far, the OAT-Bund 10yr yield spread is contained within yesterday’s parameters, been as high as 86.7bps but shy of the 88.2bps YTD peak that printed on Monday. As a reminder, the 2024 high resides at 90bps.
Bunds are softer than USTs but foreign better than OATs thus far. For Germany, the main update was another soft industrial orders print for August, a series that is even worse if large orders are excluded. A German Bobl auction was exceptionally weak, but had little impact on price action. Now we await ECB’s Lagarde and Nagel.
Gilts are also in the red, trading a little softer than Bunds at points throughout the morning but only marginally. The latest tender auction was strong, though did not spur any follow-through to the benchmark. For the UK, focus remains on the budget as commentators/desks continue to share their thoughts on what measures Chancellor Reeves may need to take to shore up the UK’s dire finances. Attention on an Oxford Economics note that the OBR’s price forecasts are likely to be revised higher, increasing the taxable value of profit and thus providing Reeves with a GBP 5bln boost.
UK sells GBP 1.25bln 0.125% 2028 Gilt via tender: b/c 3.84x (prev. 3.52x), average yield 3.783% (prev. 3.768%).
Germany sells EUR 3.405bln vs exp. EUR 4.5bln 2.20% 2030 Bobl: b/c 1.10x (prev. 1.70x), average yield 2.31% (prev. 2.29%), retention 24.33% (prev. 22.42%)
Saudi’s PIF is reportedly offering benchmark-sized EUR-denominated green bonds, via Bloomberg citing sources; three and seven year maturities reportedly offered.
Combined books for Saudi’s green benchmarks in excess of EUR 6.5bln, via IFR.
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COMMODITIES
Crude benchmarks are subdued despite limited crude-specific newsflow to start the European session. WTI and Brent have been oscillating in a c. USD 0.70-0.80/bbl range and thus far, remain relatively flat on the session. Early in the session, Russian Deputy PM Novak said OPEC+ did not discuss increasing quotas by more than 137k bpd and that increasing quotas after November was not discussed. WTI Nov resides in a USD 61.36-62.04/bbl range and Brent Dec in a USD 65.16-65.84/bbl parameter.
Spot gold has pared back on ATHs formed early in the APAC session as the yellow metal continues to soar towards USD 4,000/oz. XAU peaked at a new ATH at USD 3,977/oz before falling back into the prior days range and currently trading at around USD 3,950/oz. Spot gold resides in a current USD 3,941.06-3,977.40/oz intraday range.
Base metals remain calm following last week’s gains in copper which set the largest weekly gain since April on supply outages. 3M LME Copper oscillates in a tight USD 10.66-10.75k/t band, as the market awaits China to return from holiday.
Russian Deputy PM Novak says OPEC+ nations did not discuss increasing quotas by more than 137k BPD in November. Increasing quotas after November was not discussed.
Ukraine’s Energy Minister, following the Russian attack, says discussed with G7 additional gas imports; wants to increase gas imports by 30%. Ukraine is considering increasing LNG imports.
Slovakian PM Fico says the nation has signed an agreement with the US for the construction on a new nuclear power plant.
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NOTABLE DATA RECAP
German Industrial Orders MM (Aug) -0.8% vs. Exp. 1.1% (Prev. -2.9%)
UK Halifax House Prices MM (Sep) -0.3% vs. Exp. 0.2% (Prev. 0.3%, Rev. 0.2%); YY (Sep) 1.3% (Prev. 2.20%, Rev. 2.0%)
French Trade Balance, EUR, SA (Aug) -5.53B (Prev. -5.56B, Rev. -5.74B); Exports, EUR (Aug) 51.8B (Prev. 52.117B, Rev. 51.84B); Imports, EUR (Aug) 57.33B (Prev. 57.674B, Rev. 57.58B)
NOTABLE EUROPEAN HEADLINES
French President Macron reportedly believes the current political situation can be turned around and the Socialist Party and Les Republicans will return to the negotiating table, via Politico citing sources.
French National Rally (RN) leader Bardella says both options of fresh legislative elections and advanced presidential elections are on the table.
NOTABLE US HEADLINES
Fed’s Schmid (2025 voter) said the Fed must maintain inflation credibility, while he noted inflation is too high, and it is worrying that price increases are becoming more widespread. Schmid also commented that monetary policy is appropriately calibrated and is only slightly restrictive, while he stated that the labour market is cooling but remains healthy and that tariffs are expected to have a muted effect on inflation.
US President Trump said layoffs could be triggered if the Senate vote on the shutdown fails, while he added that negotiations are ongoing with Democrats and he would make a deal on Affordable Care Act subsidies. Trump later posted “Democrats have SHUT DOWN the United States Government right in the midst of one of the most successful Economies, including a Record Stock Market, that our Country has ever had…I am happy to work with the Democrats on their Failed Healthcare Policies, or anything else, but first they must allow our Government to re-open.”
US Senate Democrat Leader Schumer said Democrats will be at the table if President Trump is ready to work with Democrats on ending the government shutdown and get something done on health care for American families, while Schumer stated that Trump is not yet negotiating with US Congress Democratic leaders. Furthermore, he separately commented that they are making progress on the government shutdown.
Democrat and Republican bills to end the US government shutdown failed to secure sufficient votes for passage in the Senate, as expected.
US President Trump said he would invoke the Insurrection Act if people were being killed, and courts and local officials were holding us up, while it was later reported that Trump said what’s happening in Portland is insurrection, according to a Newsmax interview. Furthermore, Trump said he called into federal service at least 300 members of the Illinois National Guard until the governor consents to a federally funded mobilisation.
US federal judge declined to immediately block President Trump’s deployment of National Guard troops to Illinois, according to the New York Times.
Trump administration officials are said to be exploring options to sell off parts of the federal government’s USD 1.6tln student loan portfolio to the private market, according to Politico sources.
US White House memo says furloughed federal workers are not entitled to back pay for the time that is taken off during the government shutdown, via Axios.
Punchbowl, on the US government shutdown, surmises that “There’s no resolution to the crisis in sight.” and the outlook is “pretty grim”.
GEOPOLITICS
MIDDLE EAST
Senior Hamas official Mahmoud Al-Mardaw says “President Trump’s plan is mainly an Israeli plan”…” The resistance will not accept an agreement that does not end the war or one that can represent a reversal of the rights of the Palestinian people”. “Hamas emphasizes that it wants to end the war, and if the United States is serious about the aspiration to end the war, it must conduct negotiations and take into account the Palestinian demands”. “According to him, in the event that negotiations do not lead to an agreement, “the door will not be closed to any real diplomatic effort aimed at ending the war”.
“Indirect talks between Israel and Hamas are ‘positive’ and to resume Tuesday”, according to Sky News Arabia.
US President Trump said he did not tell Israeli PM Netanyahu to stop being negative about a deal, while he added that Hamas has been agreeing to things that are very important and he expects a Gaza deal soon. Trump said that he spoke with Turkish President Erdogan and noted a strong signal from Iran that they’d like to see this done, while Jordan’s King also discussed the Gaza plan with President Trump.
Egyptian media reported that the round of negotiations between Hamas and the mediators ended amid a positive atmosphere, according to Al Arabiya.
Iranian media reports that 2 people have been killed from the Revolutionary Guard in an attack West of the country.
RUSSIA-UKRAINE
US President Trump said he has made a decision on sending Tomahawk missiles to Ukraine, but wants to make sure what they are doing with them first, while Trump added that he is not looking to see an escalation regarding Russia-Ukraine.
EU governments agreed to limit travel of Russian diplomats within the bloc following a surge in sabotage attempts that intelligence agencies say are often led by spies operating under diplomatic cover, according to FT.
OTHER
US President Trump called off the diplomatic outreach to Venezuela, according to The New York Times.
CRYPTO
Bitcoin is essentially flat, whilst Ethereum outperforms and currently resides around USD 4.6k.
APAC TRADE
APAC stocks traded mixed despite the tech-led advances on Wall St with several holiday closures including Mainland China, Hong Kong and South Korea, while Japanese stocks rallied again as the post-LDP election euphoria persisted.
ASX 200 was subdued amid losses in Telecoms, Consumer Discretionary and Tech, with sentiment also not helped by weaker Consumer Confidence.
Nikkei 225 printed fresh record highs once again amid ongoing tailwinds from the dovish expectations associated with the incoming Takaichi government, while Japanese Household Spending also topped forecasts.
NOTABLE ASIA-PAC HEADLINES
Japanese LDP chief Takaichi said she is truly hoping to work together with US President Trump to make their alliance even stronger and more prosperous, as well as advance a free and open Indo-Pacific.
Japanese Finance Minister Kato said it is important for currencies to move in a stable manner, reflecting fundamentals, while he added they are closely watching FX moves and will thoroughly monitor for excessive fluctuations and disorderly movements in the forex market. Furthermore, he said the new LDP leader Takaichi will make appropriate policies given Japan’s fiscal situation.
US FCC is to vote this month to tighten restrictions on Chinese equipment posing a national security risk, according to the FCC Chair.
RBNZ is establishing a new Financial Policy Committee which will be given authority to make key policy decisions relating to financial stability.
World Bank raises China’s 2025 GDP growth forecast to 4.8% (prev. 4.0%), and 2026 forecast to 4.2% (prev. 4.0%), but warned of slowing momentum next year.
Japan’s Komeito Party Leader Saito says LDP leader Takaichi explained her stance on “our” concerns; says they have a shared understanding on history and foreigners, according to Bloomberg; talks will continue.
Japanese LDP Leader Takaichi, following talks with Komeito party, says “We discussed three points, shared agreements on two”.
UMC (2303 TT) September 2025 sales +52% Y/Y; Jan-Sept sales +2.2% Y/Y.
DATA RECAP
Japanese All Household Spending MM (Aug) 0.6% vs. Exp. 0.1% (Prev. 1.7%)
Japanese All Household Spending YY (Aug) 2.3% vs. Exp. 1.2% (Prev. 1.4%)
Australian Consumer Sentiment Index (Oct) 92.1 (Prev. 95.4)
Australian Consumer Sentiment MM (Oct) -3.5% (Prev. -3.1%)
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