US stocks finished mixed amid US-China trade frictions - Newsquawk Asia-Pac Market Open

• US stocks were choppy with early pressure amid the heightened US/China tensions and mixed US bank earnings, while indices then reversed through the majority of the US session, before once again falling near the close as Trump upped his rhetoric on China, in which he threatened to terminate business with China related to cooking oil. As such, sectors ended mixed with Tech and Consumer Discretionary the laggards, while Consumer Staples and Industrials outperformed.
• USD softened following the latest salvos in the US-China trade spat in which China's Commerce Ministry took countermeasures against five US-linked firms and its Transport Ministry opened an investigation into the US 301 tariffs' impact on China's shipping industry, while Trump later announced he is considering terminating business with China having to do with cooking oil, and other elements of trade, as retribution for purposefully not buying US soybeans. There were also several comments from Fed officials, including Fed Chair Powell, who said they may be approaching the end of balance sheet contraction in the coming months and that officials will be discussing the composition of the balance sheet.
• Looking ahead, highlights include Australian MI Leading Index, Chinese CPI & PPI, Japanese Industrial Production Final Reading for September, Supply from Australia & Japan.

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LOOKING AHEAD

• Highlights include Australian MI Leading Index, Chinese CPI & PPI, Japanese Industrial Production Final Reading for September, Supply from Australia & Japan.
• Click for the Newsquawk Week Ahead.

US TRADE

• US stocks were choppy with early pressure amid the heightened US/China tensions and mixed US bank earnings, while indices then reversed through the majority of the US session, before once again falling near the close as Trump upped his rhetoric on China, in which he threatened to terminate business with China related to cooking oil. As such, sectors ended mixed with Tech and Consumer Discretionary the laggards, while Consumer Staples and Industrials outperformed.
• SPX -0.16% at 6,644, NDX -0.69% at 24,579, DJI +0.44% at 46,270, RUT +1.38% at 2,495.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said he is considering terminating business with China having to do with cooking oil, and other elements of trade, as retribution for purposefully not buying US soybeans.
• US President Trump earlier said they have to be careful with China and that he has a great relationship with President Xi, while he added that sometimes it gets testy, but stated they have a fair relationship with China.
• US President Trump reportedly spoke with senior officials in recent days about sending a message that the US wants to de-escalate trade tensions with China, according to WSJ citing sources.
• US President Trump said he is thinking about giving Spain trade punishment.
• USTR's Greer said they have had constructive talks with China over the past six months and that China's rare earths measures are disproportionate, while he thinks they will be able to work through issues with China over rare earth supply chains. Furthermore, he said the November 1st tariffs depend on what China does and that 100% US tariffs on China could come sooner.
• China's Commerce Ministry urged the US to correct mistakes and hopes to resolve concerns through dialogue.
• China increased oversight of export license applications for rare earth magnets, according to Reuters citing sources.
• Hu Xijin posted on X that "The US keeps issuing laws and executive orders to strictly restrict chip and semiconductor exports to China, constantly adding Chinese companies to the Entity List. How can they expect China not to retaliate strongly?"

NOTABLE HEADLINES

• Fed Chair Powell said the future path of monetary policy is driven by data and risk assessments, while data before the shutdown suggested growth may be better than expected. Powell said downside risks to the US jobs market have risen and rising risks to the job market justified a September interest rate cut, as well as noted that available data shows tariffs are pushing up price pressures. Furthermore, he said they may be approaching the end of balance sheet contraction in the coming months and that officials will be discussing the composition of the balance sheet.
• Fed Vice Chair of Supervision Bowman continues to see two more rate cuts before year-end.
• Fed's Collins (2025 voter) said even with some additional easing, monetary policy would remain "mildly restrictive" and it seems "prudent" to cut rates further given lower inflation risks and job market concerns. Collins stated that inflation should begin to ease as tariff impact wanes and downside risks to the job market have risen, but noted that favourable financial conditions will support households and she expects more growth, a small climb in unemployment, and inflation elevated. Furthermore, she said inflation risks have become more contained, but tariffs will still push up prices, as well as stated that policy is not on a pre-set path and there are scenarios that would keep rates steady.
• White House is reportedly preparing for a long shutdown and has found several new funding streams for critical programs, according to top Trump administration officials cited by Punchbowl.
• Republicans on Capitol Hill and inside the Trump administration are said to be discussing potential pathways to prevent the tax credits (regarding Obamacare) from expiring at the end of the year, according to Politico.

FX

• USD softened following the latest salvos in the US-China trade spat in which China's Commerce Ministry took countermeasures against five US-linked firms and its Transport Ministry opened an investigation into the US 301 tariffs' impact on China's shipping industry, while Trump later announced he is considering terminating business with China having to do with cooking oil, and other elements of trade, as retribution for purposefully not buying US soybeans. There were also several comments from Fed officials, including Fed Chair Powell, who said they may be approaching the end of balance sheet contraction in the coming months and that officials will be discussing the composition of the balance sheet.
• EUR initially weakened with the single currency not helped by weaker-than-expected German ZEW data, although it later rebounded as the greenback retreated, while there were various comments from ECB officials, but had little impact on price action.
• GBP was only marginally softer on the day, with early pressure seen after UK jobs data disappointed with an unexpected rise in the Unemployment Rate, before nursing the majority of the initial declines.
• JPY strengthened as the gyrations in stocks and US-China trade tensions supported haven appeal.

FIXED INCOME

• T-notes added to recent upside as US-China tensions boil while Fed Chair Powell touted the end of the balance sheet drawdown.

COMMODITIES

• Oil prices reversed some of the prior gains amid heightened US/China trade tensions, while IEA lowered its 2025 world oil demand growth forecast to 710k BPD (prev. 740k BPD), and notably added that the world oil market faces a surplus of almost 4mln BPD next year as OPEC+ producers and non-OPEC rivals raise output and demand remains sluggish.
• IEA OMR lowered the 2025 world oil demand growth forecast to 710k BPD (prev. 740k BPD) and left the 2026 average oil demand growth forecast steady at 700k BPD.

GEOPOLITICAL

MIDDLE EAST

• Israeli security reportedly recommended not to open the Rafah crossing and not to transfer the full aid to Gaza, until Hamas fulfils its pledge to transfer the bodies of deceased hostages, according to Al Arabiya.
• Israeli Defence Force said several suspects were identified crossing the yellow line and approaching IDF troops operating in the northern Gaza Strip, which constitutes a violation of the agreement, while troops opened fire to remove the threat, according to CGTN.
• US President Trump said the job is not done regarding Israel/Hamas as the dead have not been returned, while he said phase two begins right now.
• US President Trump said Hamas will disarm, and if they don't, "we will disarm them", while he added that disarming Hamas would happen quickly and perhaps violently. Furthermore, he said he spoke to Hamas and that they told him they would disarm.

RUSSIA-UKRAINE

• US President Trump said he had a good relationship with Russian President Putin and that Putin doesn't want to end the war, while he added that Ukrainian President Zelensky is coming on Friday and that Zelensky would like to have Tomahawks.
• US Representative to NATO Whitaker expects a 'big' Ukraine weapons announcement on Wednesday.

OTHER

• US President Trump said he ordered a strike on a vessel affiliated with a designated terrorist organisation conducting narcotrafficking off the coast of Venezuela.

ASIA-PAC

NOTABLE HEADLINES

• PBoC is to conduct CNY 600bln of outright reverse repos on October 15th on the open market.
• Chinese Premier Li said they need to grasp the economic situation from a broader viewpoint, while he added they should implement a counter-cyclical adjustment and make full use of policy resources, as well as regulate disorderly competition.
• Japanese LDP leader Takaichi is reportedly making arrangements to hold one-on-one meetings with each of the three major opposition party leaders on Wednesday, according to Jiji.

EU/UK

NOTABLE HEADLINES

• BoE Governor Bailey said today's labour market data supports his view of a softening labour market, while he noted that UK businesses tell him they are delaying investment decisions due to uncertainty and are not seeing a lot of impact yet on prices from tariffs.
• BoE's Taylor said there is a broader trend of trade policy being driven more by concerns about national security and strategic autonomy, while he stated the UK economy slowed and output has fallen below potential, slack has opened up in the labour market and confidence indicators of businesses and households have drifted to very low levels, while the trend of underlying disinflation has continued.
• ECB President Lagarde said she's quite surprised how resilient the economy has been, and the ECB is generally in a good place, but would never say the ECB is done when it comes to cutting rates. Lagarde added that risks to the economic outlook are now more balanced and noted both upside and downside risks to the inflation outlook. Lagarde also said there is nothing disorderly regarding French bonds.
• ECB's Villeroy said the next rate move is more likely a cut than a hike, and the impact of US tariffs on Eurozone inflation should remain negligible.
• ECB's Makhlouf said the European economy is showing resilience, and inflation is where they want it to be.
• ECB's Kocher said a majority of stakeholders think banking rules have become too complex, and there is room for reducing the stock of regulation.
• French PM Lecornu said the government is suspending pension reform until the next presidential election, and the suspension will be paid for by belt-tightening measures. Lecornu said he is proposing a conference on retirement and will work with the French Socialist Party (PS) on this, but stated that suspension of pension reform does not mean it is being renounced.
• French Socialist Party (PS) will not vote against PM Lecornu's government in the motions filed by LFI and RN, but will instead file its own motion of no confidence in the scenario it is not satisfied with the budget proposals, according to Reuters citing sources.
• German Economy Ministry said current indicators do not point to economic recovery in Q3.

DATA RECAP

• UK Employment Change (Aug) 91k vs. Exp. 123k (Prev. 232k)
• UK HMRC Payrolls Change (Sep) -10k vs. Exp. -10k (Prev. -8k)
• UK ILO Unemployment Rate (Aug) 4.8% vs. Exp. 4.7% (Prev. 4.7%)
• UK Avg Earnings (Ex-Bonus) (Aug) 4.7% vs. Exp. 4.7% (Prev. 4.8%)
• UK Avg Wk Earnings 3M YY (Aug) 5.0% vs. Exp. 4.7% (Prev. 4.7%, Rev. 4.8%)
• German HICP Final MM (Sep) 0.2% vs. Exp. 0.2% (Prev. 0.2%)
• German HICP Final YY (Sep) 2.4% vs. Exp. 2.4% (Prev. 2.4%)
• German ZEW Current Conditions (Oct) -80.0 vs. Exp. -74.8 (Prev. -76.4)
• German ZEW Economic Sentiment (Oct) 39.3 vs. Exp. 41.0 (Prev. 37.3)
• EU ZEW Survey Expectations (Oct) 22.7 (Prev. 26.1)