US stocks declined amid hot CPI and tech woes - Newsquawk Daily Asia-Pac Market Open

• US stocks were sold on Wednesday, with initial pressure following the hotter-than-expected US CPI report, particularly in the core metrics. Meanwhile, AI concerns continued to mount, with further weakness in memory stocks, while concerns over AI-related financing intensified after CoreWeave's corporate bond yield rose above 15%, with Bloomberg noting that its bonds had reached levels typically associated with distress. AI-related stocks were sold aggressively throughout the session, raising broader concerns over credit risk and the sustainability of AI-related financing, while Financials were lower again as Q3 earnings continue to display a mixed picture.
• USD strength extended on a hot US CPI report that has brought October Fed rate hike expectations back to a coin flip. The report was hotter than expected on core M/M and Y/Y, while headline CPI exceeded expectations Y/Y but was broadly in line M/M, with elevated energy prices driving the 0.6% M/M headline reading. Additionally, a broad-based sell-off in equities, led by Tech, with Financials also having a rocky start to Q3 earnings. The CPI report catalysed the move. However, yields reversed the rise on the report, trading lower on the belly and long-end at settlement.
• Looking ahead, highlights include Japanese Machinery Orders, South Korean Trade Data, Australian Employment Change & Unemployment Rate, Comments from Fed's Bowman, BoE's Woods & Pill, SNB's Schlegel.

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LOOKING AHEAD

• Highlights include Japanese Machinery Orders, South Korean Trade Data, Australian Employment Change & Unemployment Rate, Comments from Fed's Bowman, BoE's Woods & Pill, SNB's Schlegel.
• Click for the Newsquawk Week Ahead.

IRAN CONFLICT

• Israeli PM Netanyahu said he opposes a pre-emptive attack on Iran at this time before the elections, adding, "I think it's not convenient for us."
• A source told the Tehran Times that the assessment is that US President Trump, under pressure from Israeli PM Netanyahu, is seeking a new confrontation in the region but lacks the capacity to expand or sustain it.
• Iranian Parliament Speaker Ghalibaf said that when Tehran talks about both fighting and negotiating, it does not mean waging an endless war or engaging in constant negotiations. He added that Iran would continue fighting until the enemy was forced to meet the nation's demands or accept defeat.
• Iranian Parliament Speaker Ghalibaf said "Regarding the US proposal, I must say that they must be punished and made to understand that they must accept the legitimate demands of the Iranian people."
• Senior Iranian officials told regional diplomats in recent days that they were certain the US would attack, adding that "there is an atmosphere of war in Tehran", according to i24.
• IRGC Navy said a container ship carrying 2,500 containers sank south of the Strait of Hormuz, according to Sepah News. It said the vessel, which was attempting to pass through what it described as the unauthorised and dangerous Strait of Hormuz, exploded after hitting a naval mine and caught fire.
• A dry bulk ship sank near the Strait of Hormuz after being hit by a projectile on September 23rd, according to sources. It was reportedly the second commercial vessel to sink near Hormuz in the past 24 hours.
• Houthi spokesperson said the group had attacked King Khalid International Airport in Riyadh, Saudi Arabia, with a ballistic missile, while the group's armed forces targeted several Saudi troop concentrations in the Ras al-Ara and al-Mudharabah areas with three ballistic missiles. Furthermore, a Yemeni army spokesperson had earlier stated that operations targeting Saudi airports and oil facilities would continue in the coming days and warned global shipping companies, civilians and workers to evacuate the sites, which the group considers legitimate targets.
• Explosions were reportedly heard in Jeddah as Houthis targeted Aramco's Jeddah North distribution station in Saudi Arabia, according to Naya.

US TRADE

• US stocks were sold on Wednesday, with initial pressure following the hotter-than-expected US CPI report, particularly in the core metrics. Meanwhile, AI concerns continued to mount, with further weakness in memory stocks, while concerns over AI-related financing intensified after CoreWeave's corporate bond yield rose above 15%, with Bloomberg noting that its bonds had reached levels typically associated with distress. AI-related stocks were sold aggressively throughout the session, raising broader concerns over credit risk and the sustainability of AI-related financing, while Financials were lower again as Q3 earnings continue to display a mixed picture.
• SPX -1.05% at 7,724, NDX -2.02% at 29,951, DJI -0.09% at 51,622, RUT -1.90% at 2,730.
• Click here for a detailed summary.

TARIFFS/TRADE

• Germany is reportedly set to push the EU to impose caps on additional Chinese imports.

NOTABLE HEADLINES

• Fed's Bowman (voter) said there was no urgency to take further action on interest rates, adding that the Fed could wait to assess conditions before making another move.
• Fed's Barkin (2027 voter) said he does not want to project the outcome of the October FOMC meeting and the CPI report was higher than what he would have hoped, while Thursday's PPI will help inform his inflation outlook.
• Fed's Goolsbee (2027 voter) said a hotter-than-expected reading on September inflation is “discouraging" but wants to wait for more data before taking action to raise rates higher, while he stated that if the underlying trend in inflation is 4% core inflation, it is "not acceptable" and not compatible with the Fed's target, and that policy needs to address it.
• Fed Beige Book stated that most districts described little or no net change in overall employment levels and that since the prior Beige Book, two of the twelve Federal Reserve districts reported moderate growth in economic activity. It stated three districts reported modest growth, while four reported slight growth, and three reported no significant change.
• US NEC Director Hassett said the headline inflation figure was disappointing, although there was a lot of positive news within the report. He said the energy shock was the main story of the day, while the strength of the economy remained evident and spending was looking almost healthy.
• US Treasury announced a preliminary liquidity-support buyback of up to USD 6bln in nominal coupon securities with maturities of 10–20 years.
• NY Fed desk plans to conduct c. USD 14.6bln (prev. USD 15.6bln) in reinvestment purchases between October 15th and November 13th.

DATA RECAP

• US CPI (Sep M/M) 0.6% vs. Exp. 0.6% (Prev. 0.4%)
• US CPI (Sep Y/Y) 3.7% vs. Exp. 3.6% (Prev. 3.4%)
• US Core CPI (Sep M/M) 0.3% vs. Exp. 0.2% (Prev. 0.3%)
• US Core CPI (Sep Y/Y) 2.6% vs. Exp. 2.5% (Prev. 2.4%)

FX

• USD strength extended on a hot US CPI report that has brought October Fed rate hike expectations back to a coin flip. The report was hotter than expected on core M/M and Y/Y, while headline CPI exceeded expectations Y/Y but was broadly in line M/M, with elevated energy prices driving the 0.6% M/M headline reading. Additionally, a broad-based sell-off in equities, led by Tech, with Financials also having a rocky start to Q3 earnings. The CPI report catalysed the move. However, yields reversed the rise on the report, trading lower on the belly and long-end at settlement.
• EUR was pressured amid the firmer buck but is off intraday lows, while in terms of French fiscal policy risk, ECB's Simkus doesn't see a role for ECB intervention in France at present and attributes the rise in French yields to economic developments. Furthermore, he doesn't see evident second-round effects yet.
• GBP fell beneath the 1.3200 level, although it is off worst levels as the softer US yields provided some relief, while participants look ahead to monthly GDP and production data.
• JPY eked mild gains against most major counterparts but was ultimately flat against the dollar, with the early upside in USD/JPY fully wiped out after stalling just shy of the 159.00 handle and amid the turnaround in US yields.

FIXED INCOME

• T-notes saw two-way price action on Wednesday and initially tumbled following the hotter-than-expected US CPI report. Core inflation exceeded forecasts on both a M/M and Y/Y basis, while headline CPI was hotter than expected Y/Y but broadly in line M/M. The upside surprise in core inflation prompted traders to bolster expectations for an October Fed rate hike, with the implied probability of a 25bps move rising to around 50% from approximately 20% before the data. Pricing further along the policy path also shifted more hawkishly, although to a lesser extent, with around 4bps of additional tightening priced across meetings beyond October through March. However, the move was gradually unwound throughout the session in a notable turnaround. By settlement, only the 2-year yield remained higher, albeit well off its earlier peak, while the long end had completely reversed its initial post-CPI sell-off. There was no obvious catalyst for the gradual recovery, although the broader risk tone remained poor, with equities declining throughout the session amid continued pressure on AI-related names. Weakness in memory stocks persisted, while other AI names also came under significant selling pressure. Particular attention was on CoreWeave's corporate bond yield rising above 15%, raising concerns over credit risk and the sustainability of AI-related financing.

COMMODITIES

• Oil prices gained as geopolitical tensions continued to simmer, with little sign of a breakthrough or de-escalation.
• IEA's October Oil Market Report forecasts global oil demand will fall by 2.6mln BPD in 2026 due to disruption from the Iran war and rising prices, compared with a previously forecast decline of 2.5mln BPD. Oil supply is projected to post an average annual decline of 5.8mln BPD to 100.7mln BPD.
• Russian Deputy PM Novak said Russia could increase diesel exports to 3.5mln tonnes per month and capture 10% of the market by year-end, according to TASS. He said the first Russian diesel deliveries had already been exported and that additional exports would support oil refining and budget revenue.
• Kazakhstan's Energy Ministry said maintenance at the Karachaganak oil and gas field was completed on October 1st and that production was currently stable.
• BHP's (BHP AT) Escondida mine has reportedly reached a preliminary agreement with the Supervisor's Union, which must be ratified by members, with a strike thereby avoided, according to sources.

GEOPOLITICAL

RUSSIA-UKRAINE

• US official said the possibility of cutting off intelligence-sharing with Ukraine is being discussed inside the White House, according to Semafor.
• Russian Deputy PM Novak said Ukraine attacked two Russian refineries today, adding that Kyiv was showing no signs of moving towards an "energy truce".
• Ukrainian President Zelensky said he felt betrayed by Trump's diesel deal with Russia, but added that the situation was complicated. Separately, a Zelensky adviser said Russian reports about refinery strikes were fake.

OTHER

• US is reportedly sending several hundred Army soldiers to train and conduct exercises with local forces in Latin America as the Pentagon expands its campaign to combat drug trafficking in the region, according to NYT citing US military officials.

ASIA-PAC

NOTABLE HEADLINES

• PBoC Governor is reportedly due to meet with his BoJ counterpart on the sidelines of the IMF's annual meeting in Bangkok.

DATA RECAP

• Chinese New Yuan Loans (Sep) 1,080B vs. Exp. 975B (Prev. 60B)
• Chinese Total Social Financing (Sep) 3,550B vs. Exp. 3,270B (Prev. 1,660B)
• Chinese M2 Money Supply (Sep Y/Y) 7.2% vs. Exp. 7.4% (Prev. 7.5%)

EU/UK

NOTABLE HEADLINES

• ECB's Simkus said he sees no role for ECB intervention in France at present, adding that there were no evident second-round effects yet and that rising French yields reflected economic developments.