Key Highlights

• Risk appetite continues to struggle on concerns over credit and its financial impact.
• BoJ Deputy Governor Shinichi Uchida says the bank will continue raising rates if economic conditions are met.
• Presidents Trump and Zelenskyy will meet today, ahead of another Trump-Putin summit in Budapest.

Chart of the Day

Daily flows into CNY since August 1

^{Source: BNY}

The upcoming plenum in Beijing, which opens on Monday, is one of the most important policy events this year in China as the blueprint for the next five-year plan is announced. Consequently, we believe markets should manage expectations regarding near-term stimulus policy, as this is perhaps not the right forum for such announcements. However, like in the U.S., a lot of asset performance is currently based on long-term investment (public and private) trends such as AI and tech, and current geopolitical trends will likely mean that Beijing steps up efforts to support new industries. There is also the matter of U.S.-China trade relations in the background, though for now expectations of a major fallout appear low. Even so, we can see that material hedging flow is starting to pick up in CNY, even though PBoC guidance is not necessarily in this direction. Even before the recent exchange surrounding rare earths, currency interest had started to turn, with only three net purchase days registered since the second week of September. The last round of significant interest was in August and only lasted two weeks. Moves in domestic equities have very little impact on overall CNY interest, as rate differentials mean the currency remains expensive to hold and keep hedging preference strong, even with a more cautious Fed.

What's Changed?

Equities reflect ongoing credit concerns, with the key focus on U.S. regional banks reminiscent of the SVB moves in March 2023. Much of the concern reflects the week-long worries about sub-prime lending losses from autos. The KBW regional banking index fell 4.8% yesterday, in the worst move since April. The role of NDFIs (non-depository financial institutions) in providing commercial and industrial loans rose to 33%, adding to worries that risks are opaque. At the IMF meetings, its managing director Kristalina Georgieva expressed her contagion concerns. What is clear is that buying the dip has a limit, and that regionalization of risk has a larger global switch. The fallout from yesterday still dominates today, with gold at a new high of close to $4,380, bitcoin at three-month lows near $106k, USD lower in its worst week since July, and also U.S. equity futures down another 1%. Bonds are bid but look unable to balance out the run for cover. However, today’s market reaction isn’t just a U.S. story: in China, bonds have rallied while CNY and stocks are both down going into the weekend, as the market waits for the next plenum and further economic policy shifts. Japan faces a 50-50 moment in which the LDP may not win the prime ministership, while megabanks in the country are allowed to issue stablecoins for business use. The global demand fears are also driving energy: oil is off 1%, with the key $60/barrel Brent mark in sight. In Europe, the focus is on defense shares and plans for a Putin/Trump meeting after today’s Zelenskyy/Trump meetings. EU drug maker shares are also in focus following Trump’s vows to cut weight-loss drug prices. All this means ECB and BoE comments from the IMF ahead will act as drivers, as investors want to see how financial stability still plays a role in driving rates. Bund 10y yields are off 2bp to four-month lows, catching up to the U.S. where 10y is back at 3.95%. The fallout from today will be in how further comments from central bankers and the Trump administration leave a market that is worried about contagion. This comes as the Fed blackout period starts tonight and with a hoped-for solution to the U.S. government shutdown seemingly weeks rather than days ahead. 

What You Need to Know

President Trump will meet Ukrainian President Volodymyr Zelenskyy at the White House today to discuss potential U.S. supplies of Tomahawk long-range missiles to Kyiv. The meeting precedes Trump’s planned summit with Russian President Vladimir Putin in Budapest in the coming weeks, aimed at finding a path to end the war in Ukraine. Trump and Putin agreed on the location during a two-hour phone call on Thursday. Putin’s aide Yuri Ushakov said Trump proposed Budapest and that Russian Foreign Minister Sergey Lavrov will coordinate with U.S. Secretary of State Marco Rubio ahead of the summit. Putin warned that sending Tomahawks to Ukraine would harm U.S.-Russia relations, while Trump said “great progress was made” in their call. PFTS 0% to 457.18, USDUAH +0.048% to 41.720110y UGB +27.1bp to 14.477%.

The BoJ’s Deputy Governor Shinichi Uchida said on Friday that the bank will continue raising interest rates if the economic and price outlook unfolds as expected. Speaking at the National Federation of Credit Cooperatives conference in Tokyo, Uchida noted that underlying inflation is projected to align broadly with the BoJ’s 2% target in the latter half of the forecast period through fiscal 2027, adding that decisions will be made without preconceptions. His comments come ahead of the October 29-30 policy meeting, following the BoJ’s September decision to keep policy unchanged for a fifth consecutive time, despite two board members voting for a rate hike amid growing internal debate. Nikkei -1.441% to 47582.15, USDJPY -0.419% to 149.8, 10y JGB -3.4bp to 1.631%.

Japan Innovation Party (Ishin) co-leader Fumitake Fujita said in Tokyo that his party will not continue discussions with other opposition groups, as talks with the ruling Liberal Democratic Party (LDP) move into a delicate final stage. Fujita said progress had been made but that the two sides were still working toward a compromise. He reiterated that Ishin’s 12 policy requests should not be viewed as a coalition checklist, while political funding reform and a 10% cut in the number of lawmakers remain fundamental demands. Fujita said there has been no discussion of cabinet posts and that it is still too early to say the parties are on track for an agreement. The main opposition CDP party said it would vote for its own leader, Yoshihiko Noda, to be prime minister.

China’s Ministry of Commerce (MOFCOM) has announced that it will soon hold a hearing on the ongoing anti-dumping investigation into pork and pork by-products imported from the EU. The hearing, requested by the European Commission and France’s pork industry alliance INAPORC, will address issues related to dumping, injury and causation as outlined in the preliminary ruling. Interested parties must submit their registration forms and supporting documents via the Trade Remedy Investigation Information Platform by 17:00 on October 23, 2025. The hearing will be conducted in Chinese, and participant details, including the final list, time and venue, will be published on MOFCOM’s website. CSI 300 -2.256% to 4514.23, USDCNY +0.02% to 7.126, 10y CGB -1.8bp to 1.821%.

What We're Watching

Central bank speakers

BoE MPC member Megan Greene speaks at an Atlantic Council roundtable in Washington D.C. at 12:00 ET.

The Fed’s Alberto Musalem speaks in a fireside chat at the IIF in Washington D.C. at 12:15 ET.

BOE Deputy Governor Sarah Breeden speaks on a panel at the IMF and World Bank meetings in Washington D.C. at 12:30 ET.

What iFlow is Showing Us

Mood: Remains in risk-off territory and looks almost certainly to extend given current market themes.

FX: iFlow Carry has continued its sharp decline and is now negative, indicating strong sales of high-yielding currencies and purchases of low-yielders. However, the indicator is not yet statically significant but matches the direction of risk. HUF, PLN and ZAR sales are leading reductions in EMEA holdings.

FI: Eurozone and U.K. fixed income have continued to perform strongly, matching the ongoing decline in yields. ZAR and COP lead sales of high-yielders.

Equities: South Africa and Sweden continue to lead equity inflows. Given sales from the former’s fixed income markets, intra-South Africa asset rotation is likely taking place. We have also observed heavy selling in South Korean equities, which would be a warning signal for global semiconductor stocks.

Quotes of the Day

“Only one form of contagion travels faster than a virus. And that is fear.” – Dan Brown

“Humans are social animals, highly susceptible to emotional contagion. Training, logic and intelligence are often no match for the power of groupthink.” – Bruce D. Perry

Economic Details

Euro area annual inflation rose to 2.2% in September from 2.0% in August, while EU inflation increased to 2.6% from 2.4%. The highest annual rates were recorded in Romania (8.6%), Estonia (5.3%), and Croatia and Slovakia (both 4.6%), while the lowest were in Cyprus (flat), France (1.1%), and Italy and Greece (both 1.8%). Inflation in the euro area was driven mainly by services (+1.49 percentage points), followed by food, alcohol and tobacco (+0.58 percentage points) and non-energy industrial goods (+0.20 percentage points), partially offset by energy (-0.03 percentage points). Real price pressures remained modest overall, with the monthly rate at 0.1%. Euro Stoxx 50 -1.427% to 5571.37, EURUSD +0.095% to 1.1698, BBG AGG Euro Government High Grade EUR -2.8bp to 2.902%.

Sweden’s September unemployment rate stood at 8.3% (8.7% seasonally adjusted), with 476,000 unemployed people, including 158,000 long-term jobseekers. Youth unemployment remained elevated at 23.8%, rising to 24.0% on a seasonally adjusted basis. The employed population totaled 5.238 million, producing an employment rate of 68.6% (68.9% seasonally adjusted), while the labor force participation rate reached 74.8% (75.5% adjusted). Temporary employment rose as permanent positions declined, with 645,000 temporary and 4.12 million permanent employees. Total hours worked averaged 174.9 million per week, or 154.8 million on a seasonally adjusted basis. The unused labor supply equaled 24.2 million hours/week, corresponding to 605,000 full-time jobs. OMX -2.129% to 2683.461, EURSEK +0.522% to 11.0754, 10y Swedish GB -2.5bp to 2.563%.

Hungary’s August average gross earnings rose 8.7% y/y to HUF 683,300, while average net earnings reached HUF 472,600, up 9.2%. Real earnings increased 4.7% as consumer prices rose 4.3%. Regular gross earnings excluding bonuses averaged HUF 654,700, 8.1% higher y/y. Gross pay stood at HUF 685,100 in the business sector, HUF 669,700 in budgetary institutions and HUF 702,800 in non-profit institutions, each rising between 8.5% and 9.7%. Median gross earnings were HUF 563,400 and median net earnings HUF 394,300, up 8.9% and 10.0%, respectively. For January-August 2025, gross and net earnings both increased by 9.1% y/y to HUF 691,700 and HUF 476,100, respectively. Budapest SI -0.667% to 102377.9, EURHUF +0.218% to 390.76, 10y HGB +2bp to 6.78%.

Türkiye’s October Survey of Market Participants showed inflation expectations moderating but still high. Monthly CPI inflation was projected at 2.34% for October and 1.55% for November, with two-month-ahead expectations at 1.14%. Annual inflation was expected at 31.77% by end-2025, 23.26% in 12 months’ time and 22.13% by end-2026, declining further to 17.36% in 24 months and 11.40% over the next five years. These figures indicate that market participants anticipate a gradual disinflation path. The survey, conducted between October 13-15, 2025, also reported policy rate expectations of 39.0% for the next meeting, easing to 26.2% in 12 months. BI 100 -2.854% to 10074.82, USDTRY +0.246% to 41.9504, 10y TGB 0bp to 32%.

Türkiye’s short-term external debt stock stood at $169.8bn at end-August 2025, down 0.7% m/m, while on a remaining maturity basis the total was $226.5bn. Bank liabilities rose 0.9% to $75.3bn, with short-term FX loans up 18.0% to $11.8bn and non-resident bank deposits rising 1.5% to $19.8bn. Central bank liabilities fell 4.6% to $27.5bn. The short-term debt of other sectors fell by 0.9% to $67.0bn, driven by a 1.1% drop in trade credit liabilities. The currency breakdown of the debt stock showed 35.4% in USD, 27.3% in EUR, 22.0% in TRY and 15.3% in other currencies.

South Korea’s September unemployment rate was flat at 2.1% y/y, with 635,000 unemployed people, up 12,000 or 2.0% from a year earlier. The economically active population reached 29.788 million, an increase of 324,000 or 1.1% y/y, while the labor force participation rate rose 0.4 percentage points to 65.0%. There were a total of 29.154 million employed people, up 312,000 or 1.1% y/y, and the employment-to-population ratio climbed 0.4 percentage points to 63.7%. Employment expanded in business, personal and public services (+4.4%) and wholesale and retail trade (+1.0%) in particular, while manufacturing (-1.4%) and construction (-4.1%) recorded declines. The economically inactive population fell by 0.7% y/y to 16.009 million, continuing its downward trend. KOSPI +0.014% to 3748.89, USDKRW +0.544% to 1424.65, 10y KTB +6.1bp to 2.92%.

Singapore’s September Non-oil Domestic Exports (NODX) grew 6.9% y/y, reversing August’s 11.5% fall. This was led by a 30.4% surge in electronic shipments, with ICs, PCs and disk media products up 34.9%, 58.3% and 42.9%, respectively. Non-electronic exports rose 0.4% y/y, supported by higher non-monetary gold (+82.7%) and specialized machinery (+14.1%). Non-oil Re-exports (NORX) expanded by 21.2% y/y after growing 12.0% in August, driven by electronics (+26.8%) and non-electronics (+13.3%). Total trade climbed 14.9% y/y, with exports and imports up 15.0% and 14.8%, respectively, supported by both the oil and non-oil segments. By market, NODX to Hong Kong (+56.3%), Taiwan (+31.9%) and China (+10.1%) rose sharply, while shipments to the U.S. (-9.9%) and EU27 (-20.5%) declined. STI -0.856% to 4318.91, USDSGD +0.031% to 1.2943, 10y SGB +1bp to 1.777%.

Malaysia’s September trade rebounded strongly, with total trade up 9.8% y/y to MYR 257.5bn and the trade surplus surging 54.7% to MYR 19.9bn. Exports rose 12.2% y/y to MYR 138.7bn, driven by a 46.1% jump in re-exports to MYR 34.5bn, which made up 24.9% of total exports, while domestic exports increased 4.2% to MYR 104.2bn. Imports expanded by 7.5% y/y to MYR 118.8bn. On a m/m basis, total trade grew 4.3% and the surplus widened by 25.3%. For January-September 2025, exports rose by 4.8%, imports by 4.0% and the trade surplus by 13.6%. In Q3 2025, total trade climbed 3.7%, with a 93.6% jump in the surplus. KLCI -0.276% to 1607.84, USDMYR 0% to 4.2285, 10y MGB +0.6bp to 3.457%.

Malaysia’s advance GDP grew 5.2% y/y in Q3 2025, accelerating from 4.4% in Q2, supported by broad-based gains across all sectors. On a q/q basis, the economy expanded by 5.5%, up from 1.0% in Q2. The services sector rose 5.1%, driven by wholesale and retail trade, transport, and food and accommodation. Manufacturing output increased by 4.0%, led by electronics, food processing and metal products. Mining and quarrying rebounded 10.9% after a 5.2% contraction, supported by natural gas and crude oil output. Construction grew 11.2%, while agriculture edged up 0.4% amid declines in palm oil and rubber. For the first three quarters of 2025, GDP expanded by 4.7% y/y.