• US President Trump said they are in a trade war with China, and if the US don't have tariffs, they don't have national security, while he stated that tariffs are a very important tool for defence.
• The US Senate is set to leave for the week on Thursday and is nowhere near ending the shutdown, according to a journalist.
• BoJ’s Tamura said the BoJ should push rates closer towards levels deemed neutral, but does not need to raise rates sharply or tighten monetary policy now, given both upside and downside risks.
• US President Trump said Israeli forces could resume fighting in Gaza as soon as he gives the word if Hamas doesn't uphold the ceasefire deal, according to CNN.
• APAC stocks took impetus from the positive handover from Wall Street, where most major indices ultimately gained; European equity futures indicate a lower cash market open.
• Looking ahead, highlights include UK GDP (Aug), EZ Trade Balance (Aug), Philly Fed (Oct), Atlanta Fed GDP, Comments from Fedʼs Waller, Barkin, Barr, Miran, Bowman & Kashkari, ECBʼs Lane & Lagarde, BoCʼs Macklem, BoEʼs Greene & Mann, Supply from Spain & France, Earnings from TSMC, Bank of New York Mellon, KeyCorp, Charles Schwab, United Airlines, ABB & Bankinter. 
• Suspended Releases: US Weekly Claims, PPI (Sep), Retail Sales (Sep). 

SNAPSHOT

• Click for the Newsquawk Week Ahead.

US TRADE

EQUITIES

• US stocks finished mostly higher although price action was choppy in which equities bottomed out after Europe left for the day with a trough seen as Tech stocks took a hit, namely NVIDIA (NVDA), seemingly in response to a Reuters article that Anthropic updated its smallest AI model, which is much cheaper than its more expensive models, and performs as well or better.
• The news revived fears that tech names could be overpaying for AI chips from NVDA when the power needed may not be as much as initially thought - a similar reaction to the DeepSeek fears. Nonetheless, stocks then rebounded off lows, while there was also a lot of focus on US/China relations, with Bessent and Greer noting that the recent export controls are a global supply chain power grab and act of economic coercion, although Greer suggested there is room for positive relations with China, and he expects restrictions will not be implemented.
• SPX +0.41% at 6,672, NDX +0.68% at 24,745, DJI -0.04% at 46,253, RUT +0.89% at 2,518.
• Click here for a detailed summary.

TARIFFS/TRADE

• US President Trump said they are in a trade war with China, and if the US don't have tariffs, they don't have national security, while he stated that tariffs are a very important tool for defence.
• US President Trump claimed that South Korea signed a deal to make an "upfront" payment of USD 350bln to invest in the US, while it was also reported that Treasury Secretary Bessent said that South Korea and the US can resolve their differences over how to implement Seoul's USD 350bln investment pledge, and that he expects "something" to come "in the next 10 days", according to Yonhap.
• South Korean Presidential Policy Chief noted optimism when asked about tariff talks with the US, while South Korea's Finance Minister said the US may accept South Korea's proposal in tariff talks, according to Yonhap
• Mexican Economy Minister Ebrard said Mexico is in talks with the US to discount tariffs on heavy truck parts.
• Federal officials said they have found no evidence of widespread undervaluing of imported appliances after Whirlpool (WHR) last month accused its rivals of possible tariff evasion, according to WSJ.

NOTABLE HEADLINES

• Fed’s Miran (voter) said AI investment could lead to a higher neutral interest rate and that recent policy changes, including immigration, have produced fast changes in the neutral rate. Miran also said Fed policy is more restrictive than people think because the neutral rate has fallen, while he puts less weight on the value of changing policy gradually and does not think moving by more than 50bps cuts is necessary.
• Fed’s Waller (voter) said AI is moving so fast that they will see job losses before they see new jobs, while it may be a couple more years before they see new jobs from AI replacing the old jobs.
• Fed Beige Book stated that employment levels were largely stable in recent weeks, and demand for labour was generally muted across Districts and sectors. It also stated that economic activity changed little on balance since the previous report, with three Districts reporting slight to modest growth in activity, five reporting no change, and four noting a slight softening. Overall consumer spending, particularly on retail goods, inched down in recent weeks, although auto sales were boosted in some Districts by strong demand for electric vehicles ahead of the expiration of a federal tax credit at the end of September.
• US Treasury Secretary Bessent said the US investment boom is sustainable and just getting started, while he stated there is pent-up demand and America is open for business, according to CNBC. Bessent said the only thing slowing the US and President Trump down is the government shutdown, and he has seen numbers that the shutdown is hurting the economy by up to USD 15bln a day. Furthermore, he is not advocating that the Fed shrink its balance sheet or move away from an ample reserves system and said the Fed should use QE sparingly, like antibiotics, while he added that QE reform is an important consideration for the next Fed Chair choice.
• US Treasury official said the government shutdown could cost the US economy USD 15bln per week, correcting Treasury Secretary Bessent's recent comments that estimated USD 15bln of costs per day.
• US Senate is set to leave for the week on Thursday and is nowhere near ending the shutdown, according to a journalist.
• US Budget Director Vought said they are definitely talking about thousands of people regarding government layoffs and could be more than 10k.
• US judge blocked the Trump administration from laying off workers at more than 30 agencies amid the shutdown.
• US regulators are poised to offer capital relief to community banks, according to Bloomberg.

APAC TRADE

EQUITIES

• APAC stocks took impetus from the positive handover from Wall Street, where most major indices ultimately gained despite a choppy performance as US-China frictions remained in focus.
• ASX 200 printed a record high with most sectors in the green amid a softer yield environment, which was facilitated by a rise in unemployment.
• Nikkei 225 climbed higher and was unfazed by disappointing Machinery Orders and comments from BoJ hawk Tamura.
• Hang Seng and Shanghai Comp lagged behind regional peers amid US-China frictions, and with the Hong Kong benchmark underperforming amid weakness in Chinese tech stocks, while it was also reported that the FCC is to expel Hong Kong Telecom from US networks.
• US equity futures were little changed following yesterday's choppy mood and as participants await earnings releases and several Fed speakers.
• European equity futures indicate a lower cash market open with Euro Stoxx 50 futures down 0.4% after the cash market closed with gains of 1.0% on Wednesday.

FX

• DXY remained pressured after retreating yesterday amid the backdrop of US-China trade frictions, with President Trump acknowledging that they are in a trade war with China, and if the US don't have tariffs, they don't have national security. Participants also digested the latest rhetoric from the Fed including from Governor Miran who stated there is more downside risk than a week ago, and with the change in the balance of risk, it is more urgent to get to a more neutral policy quickly, while the latest Fed Beige Book noted employment levels were largely stable in recent weeks and that demand for labour was generally muted across Districts and sectors.
• EUR/USD benefitted from the weaker buck and extended on the prior day's gradual advances, with some encouragement from recent optimism by ECB officials regarding the economy and after better-than-expected Industrial Production data.
• GBP/USD returned to above the 1.3400 level following recent outperformance and as Chancellor Reeves flagged higher taxes on the wealthy, while participants await the incoming UK monthly GDP and output data scheduled later.
• USD/JPY initially trickled lower amid the softer dollar and recent comments from hawkish BoJ board member Tamura, who stated the BoJ should push up rates closer toward neutral to avoid being forced to hike rates sharply in the future.
• Antipodeans traded mixed with AUD pressured following disappointing jobs data from Australia, where headline employment change missed forecasts and the Unemployment Rate rose to 4.5% from 4.2%.
• PBoC set USD/CNY mid-point at 7.0968 vs exp. 7.1186 (Prev. 7.0995).

FIXED INCOME

• 10yr UST futures rebounded after the choppy performance seen yesterday alongside a slew of comments from Fed and government officials.
• Bund futures took a breather and held on to this week's spoils after climbing to above the 130.00 level.
• 10yr JGB futures were subdued with the curve flattening following comments from hawkish BoJ board member Tamura.

COMMODITIES

• Crude futures edged higher amid the mostly constructive mood and after US President Trump stated that Indian PM Modi assured him they won't buy Russian oil, although the upside was contained after the latest weekly private sector inventory data showed surprise builds in both headline crude and gasoline stockpiles.
• US Private Inventory Data (bbls): Crude +7.4mln (exp. -0.3mln), Distillate -4.8mln (exp. -0.3mln), Gasoline +3.0mln (exp. -0.1mln).
• US President Trump said Indian PM Modi assured him that they won't buy Russian oil, while he added that they now need to get China to stop buying Russian oil. It was later reported that some Indian oil refiners are preparing to cut Russian oil imports, with refiners expecting a gradual reduction in imports, according to Reuters sources.
• Saudi Aramco CEO warned of a global oil shortage if the industry fails to invest, according to FT.
• Spot Gold continued its record-setting rally with prices at a firmer footing above the USD 4,200/oz level amid a softer dollar.
• Copper futures remained lacklustre following the prior day's retreat and amid ongoing US-China trade tensions.

CRYPTO

• Bitcoin gradually advanced overnight after returning to above the USD 111k level.

NOTABLE ASIA-PAC HEADLINES

• BoJ, PBoC and BoK governors held a tripartite meeting on October 15th in Washington, which BoJ Governor Ueda chaired, while they exchanged views on recent economic and financial developments.
• BoJ's Tamura said the BoJ should push rates closer towards levels deemed neutral and the growth rate of Japan's economy is likely to rise, with overseas economies returning to a moderate growth path. Tamura said don't need to raise rates sharply or tighten monetary policy now, given both upside and downside risks, but stated that there is a strong possibility that the slowdown in overseas economies will not be as significant as initially expected. Furthermore, he said given upside price risks, the BoJ should push up rates closer toward neutral to avoid being forced to hike rates sharply in the future. BoJ's Tamura declined to comment when asked whether to propose a rate hike at the October meeting, while he stated he believes it is necessary to adjust the degree of monetary easing to make rate closer to neutral rate. He added a weak JPY could accelerate upward price pressures.
• RBA Governor Bullock said the latest data suggests consumption has been a little stronger than they thought, and that data is giving them time to think whether there is more easing to come or not, while she added that policy is not really restrictive in Australia, and rather marginally tight.
• RBA Assistant Governor Kent noted signs that financial conditions are less restrictive after past rate cuts and said the cash rate is within the range of neutral estimates, but the range is very wide and uncertain, while he added that neutral rates are not a suitable guide to the near-term path of monetary policy.

DATA RECAP

• Japanese Machinery Orders MM (Aug) -0.9% vs. Exp. 0.4% (Prev. -4.6%)
• Japanese Machinery Orders YY (Aug) 1.6% vs. Exp. 4.8% (Prev. 4.9%)
• Australian Employment (Sep) 14.9k vs. Exp. 20.0k (Prev. -5.4k)
• Australian Unemployment Rate (Sep) 4.5% vs. Exp. 4.3% (Prev. 4.2%, Rev. 4.3%)

GEOPOLITICS

MIDDLE EAST

• Israel's Defence Minister instructed the military to prepare comprehensive plans to 'defeat Hamas' in Gaza if war is renewed.
• Israeli media quoted a security source stating that Hamas is aware of the whereabouts of the bodies of other hostages and if Israel deems that Hamas is not releasing additional bodies, Israel will consider its steps, according to Sky News Arabia.
• Israel reportedly gave the US new intelligence that shows Hamas has access to more of the bodies than it claims, according to Axios' Ravid, while it was separately reported that the Red Cross received the remains of two new hostages, according to Sky News Arabia.
• Hamas armed wing said it has handed over all hostages and bodies it was able to recover so far, while the remaining bodies need efforts and special equipment to recover. Furthermore, it stated that it is committed to what was agreed upon in the ceasefire deal.
• US President Trump said Israeli forces could resume fighting in Gaza as soon as he gives the word if Hamas doesn't uphold the ceasefire deal, according to CNN.
• US senior advisor said there were very positive conversations involving the US on making sure aid reaches Gaza, while the advisor stated that stabilisation forces are starting to be constructed and that many countries have raised their hand to be part of a Gaza stabilisation force.

RUSSIA-UKRAINE

• US President Trump said Ukraine would like to go on the offensive in the war with Russia, while he also suggested that Russian President Putin could make a settlement.

OTHER NEWS

• US President Trump confirmed that he authorised the CIA to operate in Venezuela.
• Venezuela's government said it rejects the statement by US President Trump in which he publicly admitted to having authorised operations to act against the peace and stability of Venezuela, while it stated the US statement constitutes a violation of international law and the UN Charter. Furthermore, it stated that US manoeuvres seek to legitimise an operation of "regime change" with the ultimate aim of appropriating Venezuelan oil resources.

EU/UK

NOTABLE HEADLINES

• UK Chancellor Reeves said higher taxes on the wealthy "will be part of the story" at the upcoming budget, while the Chancellor told the Guardian there “won’t be a return to austerity” and hinted at tax increases for the most well off.
• IFS writes that Chancellor Reeves would need to raise the fiscal buffer to around GBP 50bln vs the GBP 9.9bln she had in March, in order to have a better than 50-50 chance of avoiding additional tax increases and/or spending cuts, according to Bloomberg.
• UK Chancellor Reeves is to launch an initiative next week with 20 of the UK’s largest pension funds, which will try to make it more seamless for pension funds to back British infrastructure and growth projects, according to FT.
• ECB's Villeroy said the global economy is surprisingly resilient, while Villeroy also commented that France can’t afford to fixate on short-term fiscal challenges and must find credible solutions for reducing its deficit.