US major indices were predominantly lower amid tech selling and AI woes - Newsquawk Daily Asia-Pac Market Open

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IRAN CONFLICT

• US President Trump said he is having productive discussions with Iran and will not attack Iran at any time before the midterms.
• US and Israeli officials said Iranian leaders are deeply suspicious of Trump's statements, with Iranian leaders seeking to avoid a third surprise attack, according to Axios.
• US Secretary of State Rubio said oil shipments through the southern Hormuz corridor, which the US cleared of mines, have reached nearly 80% of pre-conflict levels. Rubio also stated that Iran faces enormous economic pressure that will worsen significantly in the next few weeks and is the only country that cannot reliably export oil from the Middle East because of the embargo.
• US Treasury Secretary Bessent said the Treasury is starving Iran of money used for the war and will continue exposing those facilitating Iran's oil sales. Furthermore, a Treasury official said Iran has stopped both loading and offloading crude oil vessels due to the US blockade and sanctions, estimating that Iran has 20mln bbls of crude oil remaining on vessels outside the US blockade of Iranian ports.
• US imposed Iran-related sanctions on vessels and entities.
• US CENTCOM was able to get 20mln barrels of oil through the Strait of Hormuz, exactly the volume that transited the strait before the war, according to the Jerusalem Post citing sources.
• US CENTCOM said US forces have supported the shipment of more than 1.25bln barrels of crude oil from Gulf partners and through the Strait of Hormuz in recent months. It also stated that routes for free transit through the Strait of Hormuz are open to all vessels not violating America's blockade against Iran and that CENTCOM forces have successfully cleared sea mines from primary transit lanes.
• Mediators asked Trump for additional time before any potential strike on Iran, while CENTCOM preparations are ongoing and awaiting Trump's decision on Iran, according to Al Arabiya citing sources. Furthermore, it was stated that Trump's change in tone with Iran does not mean there has been a breakthrough in negotiations.
• Iranian President Pezeshkian said they never left the negotiating table despite US attacks, while they are currently compiling proposals, and after the final text is prepared, we will review it through mediators and convey all proposals.
• Iranian Foreign Minister Araghchi said the negotiation process continues and Iran will respond to the US proposal within days. Araghchi added that Iran is currently examining the Americans' views and expects to provide its response within the next few days.
• Iranian Supreme Leader's adviser said the Strait of Hormuz will not reopen until outstanding issues are resolved, according to Al Jazeera, adding that Iran will take any measures necessary to strengthen the country.
• IRGC Commander-in-Chief said no trans-regional power has the right to threaten, impose a domineering presence or interfere in the Strait of Hormuz and the Persian Gulf, according to Fars. He said the IRGC Navy and Army are ready to respond decisively to any attempt at unauthorised passage through the Strait with devastating weapons, while he described Hormuz as a strategic red line for Iran and said drones and missiles will be used to guard the strait.
• IRGC Navy Commander Rear Admiral said the force will continue on its path with determination and respond directly and decisively to any threat or wave of hostile action, according to Tasnim.
• Head of Iran's Atomic Energy Organisation said Iran will not abandon uranium enrichment or hand over its uranium.
• Iranian intelligence services are reportedly targeting the US Ramstein and Spangdahlem air bases in Germany, according to WiWo. Iranian intelligence services are reportedly also targeting other US bases in Europe and planning complex attacks, with the UK also said to be a potential target.
• Military sources noted several heavy explosions occurred in the southern passage of the Strait of Hormuz, which were caused by oil tankers hitting mines, according to Fars.
• Arab sources said there were several severe explosions in the Strait of Hormuz and that a tanker was targeted in the strait.
• UKMTO issued a time-delayed report saying a crude oil tanker was struck by an unknown projectile while transiting the Strait of Hormuz on October 6.
• Hezbollah is spreading reports through anonymous sources that it received USD 200mln from Iran, according to Al Hadath.
• Yemen's Houthis said they attacked King Khalid Airport in Riyadh with ballistic missiles on Thursday, while it was also reported that the Houthi leader said anyone supporting the Saudi aggressor will face consequences, according to Fars. Furthermore, a Houthi spokesperson also warned all employees, including experts, engineers and workers, at Saudi oil facilities against being present in areas targeted by Houthi forces.
• Satellite images showed smoke rising from the Abqaiq oil facilities in Saudi Arabia as of October 8th, with fires seen at both Abqaiq facilities and the Tanjib gas plant.
• Reports suggested smoke was seen rising from a stationary aircraft at Riyadh Airport, with no official confirmation from Saudi authorities.
• Pakistan said reports of Pakistani fighter jets participating in the attack on Yemen are false and fabricated, according to Fars.

US TRADE

• US stocks were somewhat mixed with most major indices in the red, although the declines were predominantly driven by technology, and underlying market breadth remained positive. The Nasdaq underperformed, while the equal-weight S&P 500 gained, potentially reflecting some rotation out of highly valued technology stocks into other areas of the market. Sectors were mixed, with Energy the clear outperformer alongside Consumer Staples, while Technology lagged, followed by Health Care. Energy benefited from higher crude prices, while Consumer Staples was supported by gains in Coca-Cola (KO) and PepsiCo (PEP) following the latter's earnings report. Memory weakness began overnight following disappointing preliminary Samsung earnings, with operating profit and revenue missing expectations and the stock closing 2.4% lower in Asia. The results weighed on memory-related stocks, with the DRAM ETF falling c. 5%, alongside weakness in Samsung, SK Hynix, Micron and Seagate. AI-related names came under further pressure during US trade after the FT reported that OpenAI's annual revenue was USD 20bln below previous estimates, at USD 50bln versus USD 70bln. The report weighed on Nvidia, Microsoft, AMD, Oracle, Broadcom, Amazon, Nebius and CoreWeave. However, CNBC later clarified that the discrepancy reflected differences in accounting methodology, with OpenAI excluding gross revenue from cloud partners, providing a cleaner measure of revenue.
• SPX -0.49% at 7,764, NDX -1.39% at 30,726, DJI +0.10% at 51,232, RUT -0.03% at 2,792.
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TARIFFS/TRADE

• USTR Greer said Vietnam, China and other Asian countries do not agree on excess capacity, while he added that all EU countries see Chinese exports as a problem while the US has a stable situation with China. Greer also stated that he speaks frequently with Canadian counterparts and that Canada has always received the best treatment regarding tariffs, while he added that US President Trump is very comfortable with trade policy, US economic numbers are moving in the right direction, and the US will be available when Canada wants to get together, according to CNBC.
• China Commerce Minister met EU trade chief Sefcovic in Beijing.
• China Vice Premier He held a video call with UK Chancellor Healey to enhance economic and financial cooperation with the UK, according to Xinhua.

NOTABLE HEADLINES

• Fed's Waller (voter) said more rate hikes are likely needed to tame inflation, but there is flexibility over the pace and hikes do not need to be consecutive. Waller stated that inflation remains too high, with AI investment and the ongoing energy shock among persistent inflationary forces, while the labour market was solid and stable in September despite weaker job creation.
• Fed's Musalem (2028 voter) said inflation is elevated and being driven by persistent demand pressures and supply shocks, while he added that bringing inflation back to 2% in a timely manner and limiting second-round effects is key. Furthermore, he said more monetary policy firming will be required to bring inflation back to the target and that he goes into all meetings with an open mind, as well as noted that the current level of inflation requires the Fed to consider rate increases, and that rates ought to be going up in the next six to nine months.
• US Treasury Buyback (Liquidity Support, 20-30 year, max USD 6bln): Accepts USD 6bln of USD 14.89bln offers and 10 of 34 eligible securities.
• OpenAI's annualised revenue is about USD 20bln below what had previously been signalled, according to FT citing sources.

DATA RECAP

• US Initial Jobless Claims (Oct/03) 197K vs. Exp. 200K (Prev. 199K)
• US Continuing Jobless Claims (Sep/26) 1716K vs. Exp. 1710K (Prev. 1699K)

FX

• USD was marginally weaker as yields pulled back, but with risk-off trade across equities on AI concerns limiting the downside. Nonetheless, the declines in yields coincided a flight to haven amid risk-off, somewhat dovish ECB Minutes, and with US President Trump stating that no strikes on Iran will occur before the midterms amid 'productive' talks with Iran.
• EUR eked slight gains amid plenty of central bank rhetoric and with the ECB Minutes the highlight, which noted that "The repricing at the long end of the yield curve, provided it remained orderly, also supported the intended monetary policy stance and could have implications for appropriate policy rates in the future." This implies the ECB views recent yield moves as having helped its tightening aims, further dampening already declining rate hike expectations.
• GBP saw modest strength against the buck, while there were comments from BoE speakers including Bailey, who stated monetary policy needs an unwavering commitment to returning inflation to the target.
• JPY was firmer with USD/JPY dipping beneath 158.00 amid softer global yields and haven demand.

FIXED INCOME

• T-notes settled higher as AI concerns weighed on stocks, while Eurozone yields fell post-ECB Minutes.

COMMODITIES

• Oil prices were firmer, albeit settled off highs, after US President Trump pushed back on prior reports that the US could resume strikes on Iran before the Midterms, with Trump stating that they are having productive discussions with Iran and will not be attacking Iran at any time before the midterms.
• Saudi Arabia is said to be in talks to formalise Hormuz shuttle services in a push for market access.
• Iraq's state oil marketer SOMO set the official November selling price for Basrah Medium crude to Asia at a USD 2.80/bbl discount to the Oman/Dubai average. The November price for Europe was set at a USD 3.85/bbl discount to dated Brent, while North and South America were set at a USD 3.10/bbl premium to Argus Sour crude.
• UAE's ADNOC set November crude OSP at USD 11/bbl above Dubai quotes.
• French PM Lecornu said a price reduction of 12 to 18 cents per litre of diesel at the pump is expected following the mobilisation of strategic reserves. France will release 10mln barrels of diesel onto the French market, with the operation scheduled to last three months.
• French Armed Forces Chief said they are still studying several options with Saudi authorities for the Yanbu oil terminal, while they have deployed about 2000 soldiers to help protect Gulf Arab allies during the regional conflict.
• Japanese METI Vice Minister invited Saudi Arabia and the UAE to ministerial sessions with AZEC nations and expressed willingness to strengthen oil stockpiling.

GEOPOLITICAL

RUSSIA-UKRAINE

• Ukrainian President Zelensky said Ukraine has mirrored Russian attacks on Ukrainian data centres, adding that he expects European partners to join Ukraine-US talks in the coming days. Ukraine will raise air defence issues with the US.
• Ukraine said it struck Russia's Omsk oil refinery.
• Ukrainian Energy Minister said Russia damaged an important Kyiv energy facility.
• Ukrainian forces struck an oil refinery in Russia's Bashkortostan region and also announced an attack on Russia's Gazprom Neftekhim Salavat.
• US Special Envoys Witkoff and Kushner will reportedly meet with Ukrainian representatives in Miami on Friday and will discuss new ideas and proposals that US negotiators began developing with the Russians and Ukrainians during their recent visit to the region.
• US Secretary of State Rubio said the war in Ukraine appears to be at a stalemate. He said he hopes the risk of escalation brings the parties in Ukraine to talks.
• Russia’s Kremlin spokesman Peskov said Russia agrees with US Secretary of State Rubio that the Ukraine conflict is in a stalemate.
• Russia's Kremlin said the exact timing of a call between Russian President Putin and US President Trump will be agreed, adding that the call may take place, according to TASS.
• EU Council President Costa is to open two Ukraine-EU accession negotiation clusters next week.

ASIA-PAC

NOTABLE HEADLINES

• PBoC said it does not intend to devalue the CNY for trade advantages and will keep the market as the main influence on the yuan exchange rate, while it will begin reporting FX operation data to the IMF in 2027.
• Japanese PM Takaichi told the House of Representatives that the current economic situation does not require a reflation policy and reiterated that the BoJ should remain independent, according to Nikkei.

EU/UK

NOTABLE HEADLINES

• UK PM Burnham said he had indicated openness to Germany joining the GCAP programme and remains very committed to securing deeper cooperation with the EU at the summit.
• UK Chancellor Healey reportedly called in retail and hospitality chiefs for pre-Budget talks next week amid industry concerns over a business rates raid, according to Sky News.
• BoE Governor Bailey said policymakers should strengthen core financial markets so they can absorb future shocks without amplifying them, while he added that monetary policy needs an unwavering commitment to returning inflation to target. Bailey also said the conflict in the Middle East has created major uncertainty about growth, inflation and interest rates, but noted that looking through a shock is possible only if inflation expectations remain well anchored. Furthermore, he said the textbook response is to look through a one-off increase in the price level, while he also stated that he remains sceptical of unconditional promises about future interest rates.
• BoE Governor Bailey said market movements are some way from normal, but the UK is not seeing illiquidity or stress conditions. He also commented that policymakers must test for a significant shock to expectations, that markets remain resilient, and the BoE will spare no effort to restore inflation to target.
• BoE's Pill said current price pressures are concerning and need to be addressed and that monetary policy must focus strongly on inflation.
• BoE's Greene said she expects the UK to see some second-round effects from current inflation, while she added that early indications are UK wages will grow around 3.5% next year, which concerns her.
• ECB Minutes showed the 2.50% deposit rate remained within staff estimates of the neutral range, while members stressed the importance of refraining from guidance on the future interest-rate path. All members backed Lane's proposal to raise the three key rates by 25bp, taking the deposit rate from 2.25% to 2.50%. Members stressed the need to retain full discretion at future meetings based on data dependence and a comprehensive assessment, while Lane said the Governing Council should maintain a data-dependent, meeting-by-meeting approach with no pre-commitment to a rate path. Some members noted the response should remain proportionate and that a 2.50% deposit rate is still within staff's estimated neutral range, while it stated a hike was judged robust across all three staff scenarios, and higher long-end yields, if orderly, support the intended stance and could affect where policy rates should go in future. Furthermore, it stated that the repricing at the long end of the yield curve, provided it remained orderly, also supported the intended monetary policy stance and could have implications for appropriate policy rates in the future.
• ECB President Lagarde told euro finance chiefs that the ECB is attentive to markets and sees no broadening of price pressures, adding that the ECB has tools to counter unwarranted market dynamics. Lagarde also stated that higher long-term yields will weigh on economic growth and dampen the inflationary effects caused by the energy shock, according to Euronews citing sources.
• ECB's Lane said banks should be believed when they say inflation will return to target, adding that the shock is medium-sized and a measured response is appropriate, while he expects upward pressure on food prices over the next year and has not seen wages rise materially.
• ECB's Dolenc said inflation risks are skewed to the upside due to oil, gas, food and strong growth. Dolenc reiterated a meeting-by-meeting approach and said monetary policy is transmitted more or less homogeneously into broader financial conditions, while he added that more stable core inflation provides some reassurance that broader price pressures are contained.
• ECB's Moulin said inflation is clearly 100% energy-driven and that he does not see second-round effects, adding that the geopolitical shock is transmitting into a financial shock. He also commented that economic growth in the Euro area has been quite resilient.
• ECB's Stournaras said the region is showing resilience, adding that inflation expectations are well anchored around 2%, there are no serious second-round effects and the economy is currently between the baseline and adverse scenarios.
• ECB's Sleijpen said the energy shock is quite persistent, but added that inflation expectations remain well anchored.
• ECB's Zigman said the October meeting will involve intensive discussions.
• EU Commissioner Dombrovskis said he is mindful but not alarmed about bond spreads in the Eurozone, and the key to calming bond markets over France is for France to adopt a sound 2027 budget.
• French unions are calling for a further strike on October 13.