Asia Summary and Highlights 12 Oct
U.S. major equity indexes opened higher on TACO headline over the weekend
Japan's Komeito doesn’t rule out opposition party cooperation
Asia Session
U.S. major equity indexes opened higher on TACO headline over the weekend. After his tough remark of 100% tariffs, Trump softened his stance over the weekend and revived market sentiment. Regional equities, on the other hand, had a terrible opening but calms as session progress despite still in the red. So far, we did not see a similar reaction form the Chinese front. AUD/USD opened 30 pips higher and is trading 0.82% higher from Friday's close at 0.6526, NZD/USD is trading 0.33% higher at 0.5739 (20 pips gap) while USD/CAD slips 0.1% with gap once being closed.
We have more update from the Japanese politic on Monday as Komeito suggest they don't rule out opposition party cooperation. While it is inevitable with the LDP coalition being minority in both houses, Komeito (coaltion with LDP for the past years) signaling openness to co-operate with the opposing side is good news as they have previously stated that they may not work with the coming PM. USD/JPY is trading 0.49% higher at 151.86 after opening 60 pips higher from Friday's close. Else, EUR/USD and GBP/USD are unchanged from Friday close despite opening in favor of the USD.
North American session
The main move of the day came after Trump threatened a massive increase in tariffs on China in retaliation for Chinese restrictions on rare earth exports. This sent equities sharply lower with UST yields and the USD also slipping. EUR/USD rose to 1.1615 from 1.1575 and USD/JPY fell to 151.65 from 152.65. EUR/CHF fell to .9300 from .9320 while AUD/USD fell below .65 from .6550 as risk appetite fell.
Before the Trump comments USD/CAD had fallen to a low of 1.3976 from 1.4015 on a stronger than expected September Canadian employment increase of 60.4k. After Trump’s comments the reaction was less sharp than elsewhere but a gradual return to pre-data levels was seen, before renewed slippage to around 1.40. AUD/CAD fell sharply below .91 from near .92.
The Preliminary October Michigan CSI was almost unchanged at 55.0 from 55.1. Fed’s Waller stated the Fed should ease only in 25bps increments while Musalem saw limited room for further rate cuts.