RBNZ keeps OCR steady

Asia market update: Nikkei falls for 5th day amid broad equity selling in Asia and continued weakness in Asian currencies vs USD; Yen intervention overnight?; Gov’t yields continue to rise; RBNZ keeps OCR steady; Tonight US Services PMI.

General trend

Equities

- USD/JPY finally poked over the 150 level overnight before collapsing >250bps in little more than a minute. A series of Japan Gov't officials today refused to confirm if Japan had intervened in the FX markets to protect the yen.

- Broad sell off in the Nikkei >-2% as Japanese stocks rose on higher global yields and the fear of more rate hikes. The Nikkei volatility index jumped to its highest level since Jun 15th.

- Korean Kospi also down >-2%; Australian and Hong Kong equities both fell -1%, with the ASX 200 hitting 11-month lows, dragged down by financials and technology stocks in particular.

- Thai tourism stocks fell -2.75% upon the shooting of a foreign tourist in Bangkok.

Gov’t bond yields

- Gov’t bond yields continued to rise around Asia to levels not seen since last Oct/Nov 2022.

- 10-yr JGBs up 3bps to hit 0.790% while South Korea 10-yr yields caught up on an extended market holiday of several days to rise +20bps to 4.215%.

- US yields again drove the increases after unexpectedly strong JOLTS job openings; UST 10-yrs hit 4.8540% during Asian session (highest since 2007).

Currency and market volatility

- Following on from yesterday's widespread commentary, Finance and Central Bank chiefs were today again out in force in Asia to talk up the stability of their respective currencies and markets.

Data releases

- The New Zealand RBNZ kept the OCR steady and also signaled that ‘pockets of stress' have appeared for some households as well as in agriculture.

- Japan and Australia Sept Services PMI figures were well into expansionary territory.

- Singapore whole economy Sept PMI also in strong expansionary territory.

- South Korea Sept PMI manufacturing just failed to eke into positive territory for the first time in 15 months but Aug industrial production well exceeded expectations with the fastest growth since Jun 2020.

- US equity FUTs fell -0.4% during Asian trading.

Looking ahead (Asian time zone)

- Wed night US Services PMI.

- Thu AU Balance of Trade, DE Balance of Trade.

- Fri night US Non-Farm Payrolls / Unemployment.

Holidays in Asia this week

- China markets are on holiday all this week through to and including Oct 6 (Friday).

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.2% at 6,931.

- Reserve Bank of New Zealand (RBNZ) leaves official cash rate (OCR) unchanged at 5.50%; as expected.

- Australia Sept Final PMI Services: 51.8 v 50.5 prelim (confirms 1st expansion in 3 months).

- Australia sells A$800M v A$800M indicated in 2.75% Jun 2035 bonds; Avg Yield: 4.6718% v 4.2628% prior; bid-to-cover: 3.21x v 3.34x prior.

- Australia and France sign bilateral pact on critical minerals (overnight update).

- Australia ANZ/Roy Morgan Weekly Consumer Confidence: 78.2 v 76.4 prior (overnight update).

- New Zealand Fonterra Global Dairy Trade Auction Dairy Trade price index: +4.4% (overnight update).

- New Zealand Sept CoreLogic House Prices Y/Y: -7.3% v -8.7% prior (overnight update).

China/Hong Kong

- Shanghai Composite closed for holiday all this week.

- Hang Seng opens -0.4% at 17,266.

- Hong Kong Monetary Authority (HKMA): lent HK$548M through the discount window on Tues [Oct 3rd] - update.

- US Treasury Sec Yellen: We have developed a huge over-dependence on China for critical supply chains, we must de-risk.

- China auto exports said to likely exceed 4M units in 2023 - China tv.

- US Gov’t announces action against Chinese fentanyl suppliers.

- US Senate Majority Leader Schumer (D-NY) to lead bipartisan US Senate delegation to visit China, Japan and South Korea later in Oct (overnight update).

- Apple (AAPL) Reportedly started on Sept 29th to require new apps to show proof of a Chinese govt licence before their release on its China App Store (overnight update).

Japan

- Nikkei 225 opens -1.5% at 30,765.

- Japan Sept Final PMI Services: 53.8 v 53.3 prelim (confirms 12th month of expansion).

- Japan top FX diplomat Kanda: Reiterates no comment on FX intervention; discussed economy in general with PM Kishida.

- Japan Chief Cabinet Sec Matsuno: Will continue to take appropriate steps on FX.

- Japan Fin Min Suzuki: No comment on whether Japan intervened in yen overnight.

- USD/JPY *Collapses >250bps to 147.35 after briefly topping 150.00 (speculated intervention zone).

**Note: If confirmed, would be the 1st intervention by Japan to strengthen yen since Oct 2022, 12 months ago (Overnight update).

- Former BOJ Gov candidate Watanabe: Recent grinding pace of Japanese yen (JPY) fall makes imminent intervention by Japan official in FX market less likely (overnight update).

- Fast Retailing 9983.JP Reports Domestic Sept Uniqlo Sales (SSS and online) -4.6% y/y (first drop since Jun 2023) [overnight update].

- Japan ruling LDP Senior member Seko: To mull income and corporate tax cuts; Corporate income tax cuts will 'naturally' be considered [when asked about tax policy changes] (overnight update).

- Bank of Japan (BOJ) announcement related to daily outright bond buying operation.

- Bank of Japan (BOJ) offers to buy 5-10 year JGBs at fixed rate of 100bps; Opens window to buy unlimited amount of 10-year JGBs at 1.00%.

South Korea

- Kospi reopens after extended break -1.2% at 2,435.

- South Korea Sept PMI Manufacturing: 49.9 v 48.9 prior (15th straight contraction).

- South Korea Aug Industrial Production M/M: 5.5% v 0.2%e; Y/Y: -0.5% v -5.8%e (fastest growth since Jun 2020).

- Bank of Korea (BOK) says it is closely monitoring markets, capital flows and will take market stabilising measures if required.

- South Korea said to lift limits on commercial banks' bond issuance.

Other Asia

- Taiwan Central Bank Gov Chin-Long: Will intervene if dramatic fluctuations in USD/TWD.

- Singapore Sept PMI (whole economy): 54.2 v 53.6 prior [7th straight expansion].

- Singapore Sept Purchasing Managers Index (PMI): 50.1 v 49.9 prior (overnight update).

- Indonesia Dep Central Bank Gov: Market volatility is due to external factors.

- Reportedly several Taiwan firms seen helping Huawei build infrastructure for a secret network of chip plants across southern China (overnight update).

- Thailand Central Bank (BOT) Gov Sethaput: Investment remains a weak point for the economy; need to watch impact of Bangkok shooting on tourism.

- Malaysia Central Bank (BNM) Chief: Rules out interest rate cut for now.

- Follow up: Marshall Islands-registered crude oil tanker hit Philippine fishing boat in 'accidental collision'.

North America

- US Ousted House Speaker McCarthy (R-CA): Confirms he will not run for Speaker again.

- * US House votes to remove McCarthy as Speaker; House Speaker's office is 'declared vacant'; Final vote was 216-210 (overnight update).

- US Fed’s Bostic (non-voter): See the next rate move as a 25bps cut sometime toward the end of 2024 - Q&A; I expect inflation to approach the 2% target by the end of 2025 (overnight update).

- US Fed’s Bostic (non-voter): Repeats we are in restrictive territory and that is bringing inflation down, but still a ways to go.

- US Aug JOLTS job opening: 9.61M V 8.82ME; prior Jolts revised higher from 8.83M to 8.92M.

- US Fed's Mester (non-voter): Expect to hit 2% inflation target by end of 2025; If the economy holds steady, I would support a rate hike in Nov.

Europe

- Ireland Sept PMI Services: 54.5 v 55.0 prior.

- (UR) Reportedly EU is prepared to approve Ukraine accession talks by end of the year.

- UK Trade Sec Badenoch: There is zero chance of anything resembling a free trade agreement with the current US President's Administration.

Levels as of 01:20 ET

- Nikkei 225 -1.8%; ASX 200 -0.8%; Hang Seng -0.7%; Shanghai Composite closed; Kospi -2.1%.

- Equity S&P500 Futures -0.2%; Nasdaq100 -0.2%; Dax -0.2%; FTSE100 -0.2%.

- EUR 1.0457-1.0476; JPY 148.97-149.32; AUD 0.6287-0.6327; NZD 0.5871-0.5922.

- Gold -0.3%% at $1,837/oz; Crude Oil -0.2% at $89.09/brl; Copper -0.6% at $3.5940/lb.