APAC stocks traded flat/mixed following a mostly but modestly firmer handover from Wall Street, with focus on the looming US government shutdown and the possibility of delayed NFP. Meanwhile, the White House announcement of further tariff details overnight capped upside in sentiment.
The White House announced tariffs, including a 10% levy on timber and lumber from 14th October, alongside 25% duties on cabinets and vanities, with further hikes on cabinets and upholstered furniture set for 1st January unless trade deals are reached.
Punchbowl’s Sherman said that from listening to Schumer, Jeffries, and Vance, it does not sound like there was a breakthrough in the meeting, adding that a shutdown is around the corner.
BoJ Summary of Opinions noted one member suggested it may be time to consider raising the policy interest rate again, while another said the BoJ gains more information on the US outlook by waiting, and one argued the Bank should maintain accommodative conditions at this point.
RBA maintained its Cash Rate at 3.60%, as expected, in a unanimous decision, noting that the decline in underlying inflation has slowed
Looking ahead, highlights include UK GDP (Q2), French CPI Prelim (Sep), German CPI Prelim (Sep), Italian CPI Prelim (Sep), US Consumer Confidence, JOLTS Job Openings. Speakers include RBA’s Bullock, ECB’s Lagarde, Cipollone, Elderson, Fed’s Logan, Jefferson, Goolsbee, BoE’s Lombardelli, Mann, Breeden. Earnings from Nike, Lamb Weston.
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US TRADE
EQUITIES
US stocks posted mild gains at the start of the week, supported by strength in NVIDIA after a Jefferies price target upgrade, amid otherwise light newsflow. Attention was on Fed commentary from Williams, Musalem, and Hammack, while data showed pending home sales came in better than expected.
SPX +0.26% at 6,661, NDX +0.44% at 24,611, DJI +0.15% at 46,316, RUT +0.04% at 2,435
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NOTABLE HEADLINES
Fed’s Musalem (2025 voter) said short-term inflation expectations are somewhat high but long-term expectations remain anchored, while risks of labour market weakening have increased. He said inflation is expected to stay elevated for two or three quarters, noted monetary policy is between modestly restrictive and neutral, and added he is open-minded to potential future cuts but stressed the need for caution with limited room before policy becomes too loose. He said the impact of tariffs has been more muted than expected and accounts for perhaps 10% of current inflation, while the labour market continues to soften but remains near full employment, according to Reuters.
Fed’s Williams (voter) said monetary policy remains restrictive and continues to put downward pressure on inflation, adding the Fed still has a way to go to reach its 2% target. He noted that underlying inflation is moderating and the labour market has been resilient but is gradually softening, stressing they do not want to see it weaken too far. Williams said policy is a balancing act; some upside inflation risks have ebbed, making recent rate cuts sensible, and decisions will be made meeting by meeting. He added that some factors keeping neutral rates low are still in place, a low underlying interest rate world is likely to persist, and his model estimates the real neutral rate at 0.75%, according to Reuters.
US GOVERNMENT SHUTDOWN
US Senate Minority Leader Schumer said he met with President Trump, noting “we have large differences” and adding that the decision to avoid a government shutdown lies with Republicans. Democratic Leader Jefferies said Democrats will not support a partisan Republican bill that hurts healthcare, according to Reuters.
US Vice President Vance said he had frank talks with Democratic leadership, adding “you don’t shut government over disagreements,” but said “I think we’re headed to a shutdown because the Democrats won’t do the right thing.”, according to Reuters.
Punchbowl’s Sherman said that from listening to Schumer, Jeffries, and Vance, it does not sound like there was a breakthrough in the meeting, adding that a shutdown is around the corner, via Punchbowl.
US House Speaker Johnson said they want to allow more time for negotiations, according to Reuters.
Major airlines warned that a potential government shutdown could strain US aviation and cause flight delays, according to a statement.
US Senate Minority Leader Schumer said he would not accept a 7–10 day stopgap bill, according to Reuters.
TRADE/TARIFFS
The White House said US President Trump signed a proclamation adjusting imports of timber, lumber, and related derivatives into the US, imposing a 10% tariff on softwood, timber and lumber imports effective 14 October. It added that Trump intends to cap tariff rates for EU and Japanese wood products at 15%, according to Reuters.
The White House confirmed new 25% tariffs on vanities and kitchen cabinets will take effect on 14 October, with imports of certain upholstered wooden products also subject to a 25% tariff. It announced tariffs on imported cabinets will rise from 25% to 50%, while tariffs on upholstered furniture will increase from 25% to 30% effective 1st January, unless trade agreements are reached beforehand, according to Reuters.
Switzerland has offered to invest in the US gold-refining industry as part of efforts to persuade the Trump administration to lower the 39% import tariff imposed last month, according to Bloomberg.
South Korea’s Top Security Adviser Wi said it is challenging to strike a currency swap deal with the US, according to Reuters.
APAC TRADE
EQUITIES
APAC stocks traded flat/mixed following a mostly but modestly firmer handover from Wall Street, with focus on the looming US government shutdown and the possibility of delayed NFP data as a result. Meanwhile, the White House announcement of further tariff details overnight capped upside in sentiment.
ASX 200 gave up initial mild gains to trade flat as strength across gold miners just about offset hefty losses in energy and a subdued performance in financials, with little move seen in the index after the RBA policy announcement, in which the central bank left rates unchanged as expected in a unanimous decision but struck a hawkish tone, noting inflation risks and that the decline in underlying inflation has slowed.
Nikkei 225 narrowly underperformed at the start and briefly fell back under the 45,000 mark with losses led by energy names, while some hawkish undertones from the BoJ Summary of Opinions likely weighed, with some members arguing it may be time to consider another adjustment after more than six months since the last hike, while others cautioned against surprising markets or moving prematurely given uncertainty around the US outlook.
Hang Seng and Shanghai Comp varied, the former gave up earlier upside and the latter held onto mild gains with newsflow light ahead of the weeklong break, whilst Chinese PMIs showed manufacturing beat expectations, but services declined from the prior month in both the NBS and RatingDog (formerly Caixin) releases. Furthermore, China’s Securities Journal suggested experts believe the PBoC may flexibly use a variety of monetary policy tools in the future to maintain ample liquidity.
KOSPI was subdued with US-South Korean trade talks seemingly at a standstill, with the South Korean national security adviser suggesting it is tough to strike an FX swap deal with the US.
Nifty 50 eked out mild gains ahead of the RBI announcement on Wednesday.
US equity futures opened flat and traded sideways throughout the session, with focus on whether US lawmakers can avert a government shutdown by midnight Tuesday (ET). If they cannot, the BLS suggested that data will be delayed until the government reopens, threatening the release of the NFP report this Friday.
European equity futures are indicative of a subdued cash open with the Euro Stoxx 50 future -0.1% after cash closed with gains of 0.1% on Monday.
FX
DXY was choppy within a narrow band on either side of 98.00. The index saw some impetus from the White House releasing details on previously announced tariffs, though gains were short-lived, with focus firmly on efforts to avert a government shutdown.
EUR/USD was flat and largely driven by the dollar, with little EUR-specific newsflow overnight. Traders now look ahead to CPI metrics from France and Germany as well as remarks from several ECB speakers, including President Lagarde.
GBP/USD saw little action, with FX markets largely moving sideways. Cable held onto the 1.3400 handle as markets awaited commentary from BoE’s Lombardelli, Mann, and Breeden throughout the day.
USD/JPY was ultimately unchanged, though some fleeting JPY strength followed the BoJ Summary of Opinions. The release was mixed but carried hawkish undertones, signalling the central bank is edging closer to further tightening while remaining highly sensitive to external risks, particularly from the US economy and trade policy.
Antipodeans outperformed modestly, supported by a firmer CNY fixing. AUD/USD gained after the RBA left rates unchanged as expected in a unanimous decision but struck a hawkish tone, noting inflation risks and that the decline in underlying inflation has slowed.
PBoC set USD/CNY mid-point at 7.1055 vs exp. 7.1166 (Prev. 7.1089)
FIXED INCOME
10yr UST futures traded flat, consolidating the prior day’s gains amid light newsflow and ahead of several risk events. Focus remains on the looming US government shutdown and its potential impact on BLS data, including Friday’s US jobs report.
Bund futures were modestly firmer in uneventful trade, taking a breather from the prior day’s gains as the German benchmark awaits inflation metrics from France and Germany alongside remarks from several ECB speakers.
10yr JGB futures edged higher, catching up to gains across western counterparts, with short-lived two-way volatility following the release of the BoJ Summary of Opinions. Modest downticks were seen as the 2-year JGB auction drew the lowest cover ratio since 2009.
Japan sold JPY 2.7tln in 2-year JGBs; b/c 2.81x (prev. 2.84x); average yield 0.949% (prev. 0.863%); Lowest cover ratio since September 2009.
COMMODITIES
Crude futures resumed downward price action after Monday’s heavy selling, pressured by reports that OPEC+ is looking to increase output at its 5 October meeting and by Iraq resuming Kurdish oil exports to Turkey after a two-and-a-half-year halt. Sentiment was further dampened overnight by the White House tariff announcement.
Spot gold extended higher in one-way trade, with some pointing to haven demand amidst geopolitics and government shutdown risks, whilst others suggested technical drivers. The yellow metal topped USD 3,800/oz yesterday for the first time and topped USD 3,850/oz today before extending further.
Copper futures traded mixed in line with the broader market mood, with modest losses seen as sentiment in industrial commodities was weighed by the White House tariff announcement.
CRYPTO
Bitcoin was uneventful and traded flat on either side of USD 114,500.
NOTABLE ASIA-PAC HEADLINES
RBA maintained its Cash Rate at 3.60%, as expected, in a unanimous decision, noting that the decline in underlying inflation has slowed. It said recent data suggest September quarter inflation may be higher than expected in August, though both headline and trimmed mean inflation were within the 2–3% range in Q2. The Bank added that inflation has fallen substantially since the 2022 peak as higher rates have helped bring demand and supply closer to balance. RBA noted that financial conditions have eased since the beginning of the year, and this seems to be having some impact, but it will take some time to see the full effects of earlier cash rate reductions.
BoJ Summary of Opinions noted one member suggested it may be time to consider raising the policy interest rate again, while another said the BoJ gains more information on the US outlook by waiting, and one argued the Bank should maintain accommodative conditions at this point. On the economy, members said US tariffs will still impact Japan even after being reduced to 15%, with growth likely to moderate temporarily. On prices, CPI is expected to rise below 2% in fiscal 2026 as cost-push pressures ease, warranting continued accommodative policy. Some members argued that, given it has been more than six months since the last hike, the Bank should consider raising rates again at regular intervals if activity and prices remain in line with projections. Others noted that constraints from overseas factors have abated, allowing the Bank to return to a stance of raising rates and aligning real interest rates with overseas levels. However, members also stressed that the impact of prior hikes to 0.5% has been limited, and while risks to prices are skewed to the upside, the BoJ should avoid moving rates immediately to restrictive levels, instead gradually shifting closer to neutral to prevent shocks from rapid future hikes.
Experts believe that to maintain ample liquidity, the PBoC may flexibly use a variety of monetary policy tools in the future, according to China’s Securities Journal.
DATA RECAP
Chinese NBS Manufacturing PMI (Sep) 49.8 vs. Exp. 49.6 (Prev. 49.4)
Chinese NBS Non-Manufacturing PMI (Sep) 50.0 (Prev. 50.3)
Chinese NBS Composite PMI (Sep) 50.6 (Prev. 50.5)
Chinese RatingDog Manufacturing PMI Final (Sep) 51.2 vs. Exp. 50.3 (Prev. 50.5)
Chinese RatingDog Services PMI (Sep) 52.9 (Prev. 53.0)
Chinese RatingDog Composite PMI (Sep) 52.5 (Prev. 51.9)
Japanese Retail Sales YY (Aug) -1.1% vs. Exp. 1.0% (Prev. 0.3%, Rev. 0.4%)
Japanese Industrial O/P Prelim MM SA (Aug) -1.2% vs. Exp. -0.8% (Prev. -1.2%)
Japanese IP Forecast 2 Month Ahead (Oct) 1.2% (Prev. -0.3%)
Japanese IP Forecast 1 Month Ahead (Sep) 4.1% (Prev. 2.8%)
South Korean Industrial Output YY (Aug) 0.9% vs. Exp. 1.3% (Prev. 5.0%, Rev. 5.0%)
South Korean Service Sector Output Gr (Aug) -0.7% (Prev. 0.2%, Rev. 0.2%)
South Korean Industrial Output Growth (Aug) 2.4% vs. Exp. 0.4% (Prev. 0.3%, Rev. 0.3%)
New Zealand ANZ Business Outlook (Sep) 49.6% (Prev. 49.7%)
New Zealand ANZ Own Activity (Sep) 43.4% (Prev. 38.7%)
Australian Private Sector Credit (Aug) 0.6% (Prev. 0.7%)
Australian Private House Approvals (Aug) -2.6% (Prev. 1.1%)
Australian Housing Credit (Aug) 0.6% (Prev. 0.5%)
Australian Building Approvals (Aug) -6.0% vs. Exp. 3.0% (Prev. -8.2%, Rev. -10.0%)
GEOPOLITICS
MIDDLE EAST
The White House posted a 20-point comprehensive plan to end the Gaza conflict, stating that Gaza will be a deradicalised, terror-free zone that does not pose a threat to its neighbours and will be redeveloped for the benefit of its people. The plan says if both sides agree, the war will immediately end with Israeli forces withdrawing to the agreed line to prepare for a hostage release; during this period, all military operations will be suspended and battle lines frozen until conditions are met for a complete staged withdrawal. It adds that within 72 hours of Israel publicly accepting the agreement, all hostages, alive and deceased, will be returned, via X.
US President Trump said they are beyond very close on a Gaza peace deal, and that if Hamas rejects the deal, Israel has his full backing to destroy Hamas; he thanked PM Netanyahu for agreeing to the plan and said Netanyahu spoke on Iran, trade, the Abraham Accords and ending the Gaza war. He added he is hearing Hamas wants to “get this done”, that parties will agree a timeline for Israeli withdrawal, and he feels they will have a positive answer from Hamas; he also said he expects Iran will be a member of the Abraham Accords one day, according to Reuters.
Several sources suggested that there is no certainty that Hamas will accept the deal, according to i24 correspondent Stein. He added that the fact that Arab countries, including Qatar, are supporting it strengthens the chances of acceptance.
A Dutch-flagged cargo ship sustained substantial damage after being hit by an explosive device in the Gulf of Aden, with a fire breaking out onboard and two crew members injured, via Reuters citing the ship operator.
Israeli PM Netanyahu spoke with the Qatari PM by phone, apologised for violating Qatari sovereignty in the strike on Doha and expressed regret for the killing of a Qatari security guard, according to Axios’ Ravid, citing sources via X.
RUSSIA-UKRAINE
Russian President Putin said Russia’s military operation in Ukraine is a righteous battle and asserted that Russia will prevail, according to Reuters.
EU/UK
NOTABLE HEADLINES
Italy is set to forecast its 2025 budget deficit at or below 3% of GDP, in line with EU rules, according to Reuters, citing sources.
Annual UK shop price inflation rose to 1.4% in September, up from 0.9% in August, according to the latest monthly report from the British Retail Consortium (BRC) and analysts NIQ, via the Guardian.
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