Asia Market Quick Take – October 16, 2025

 Key points:

• Macro: IMF urges BoJ to maintain loose monetary policy
• Equities: Morgan Stanley up 4.7%, BOA 4.4% on strong earnings results
• FX: USD weakens amid U.S.-China tensions; yen fluctuates during political talks
• Commodities: Oil rose from five‑month lows as gold hit a new record
• Fixed income: Treasuries stalled as two‑year yields neared YTD lows around 3.5%

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Disclaimer: Past performance does not indicate future performance.

Macro:

• IMF official Nada Choueiri urged the Bank of Japan to maintain loose monetary policy and gradually raise rates amid global trade uncertainties. Japan's economy is strong, but unresolved US-China trade tensions pose risks. Choueiri stressed gradualism and monitoring data, noting sluggish wage growth might not sustain 2% inflation. Political instability adds to uncertainty as BoJ meets on October 29–30.
• The NY Empire State Manufacturing Index rose 19.4 points to 10.7 in October 2025, exceeding expectations and indicating modest growth. New orders and shipments rebounded, while delivery times lengthened and supply availability worsened. Employment increased despite a shorter workweek, and costs and prices rose faster. Nearly half of firms are optimistic about near-term improvements.
• Japan's core machinery orders dropped 0.9% month-over-month to ¥8890 billion in August 2025, improving from July's 4.6% fall but missing a forecasted 0.4% rise. Non-manufacturing orders fell 6.4%, and manufacturing orders slipped 2.4%. Sharp declines were seen in goods leasing, chemicals, pulp and paper, transport equipment, and other non-manufacturing sectors. Annually, private-sector orders rose 1.6%, below the expected 4.8%. These orders serve as a volatile leading indicator for capital expenditure over six to nine months.
• Fed’s Stephen Miran said the US-China uncertainty introduces a new tail risk and said two more rate cuts this year sounds realistic.

Equities: 

• US - U.S. stocks ended a choppy session mostly higher Wednesday despite persistent U.S.-China trade tensions and a prolonged government shutdown. The S&P 500 rose 0.4%, driven by strong bank earnings as Morgan Stanley surged 4.7% and Bank of America gained 4.4% after beating profit estimates on robust dealmaking. The Nasdaq 100 climbed 0.7%, supported by a 3% jump in the Philadelphia Semiconductor Index after ASML reported better-than-expected orders, signaling strong AI demand. The Dow slipped slightly amid volatility and renewed tariff threats. Mixed earnings added to swings, with Progressive (-5.8%) and Abbott (-2.4%) disappointing, contrasting with gains in banking and grain trading.
• EU - European stocks rebounded Wednesday, with the Stoxx 50 up nearly 1% and Stoxx 600 gaining over 0.5%. Luxury shares led the rally as LVMH surged 12% on stronger revenues, lifting Hermès (+7%), Moncler (+7%), Richemont (+6%), Kering (+5.3%), and Burberry (+3.3%). Tech also advanced, with ASML up 3.4% after upbeat earnings and guidance tied to AI demand. France’s CAC 40 jumped 2.2%, its best day since April, as PM Lecornu pledged to suspend pension reform until 2027, easing political risk. Sentiment improved further after U.S. Treasury Secretary Scott Bessent signaled tariff delays on China, while Germany’s Aurubis fell 6% on convertible bond news.
• HK - Hang Seng jumped 1.8%, to 25,911 on Wednesday, ending a seven-day losing streak. Sentiment improved after dovish comments from Fed Chair Powell and strong U.S. bank earnings boosted global risk appetite. Gains were broad-based, led by tech and consumer stocks, as Beijing reaffirmed plans to spur domestic consumption ahead of its next five-year plan. Financials strengthened, while property shares rose modestly. Deflation concerns lingered after weak September CPI capped upside. J&T Global Express gained 5.8%, Xuanzhu Biopharma soared 167% on debut, and SenseTime rose 5% on an AI partnership. Other movers included Laopu Gold (+9.1%) and Geely Auto (+4%).

Earnings this week:

• Thursday: Infosys; ABB, TSMC
• Friday: Tokyo Steel; American Express; Interactive Brokers; Volvo

FX:

• USD softened, with the DXY ranging between 98.653 and 99.077, amid heightened U.S.-China tensions and dovish comments from Fed Chair Jerome Powell. Treasury Secretary Bessent stressed the U.S.'s focus on de-risking from China rather than decoupling. NY Fed Manufacturing data surpassed expectations, while the Beige Book showed stable employment levels.
• G10 currencies mostly strengthened against the dollar, with the CAD being the exception. USDCAD traded above 1.34. JPY below 151 as Japanese political leaders held coalition talks.
• GBP traded near 1.34 following Chancellor Reeves's hint at upcoming tax increases.
• AUD advanced, driven by a strong Yuan fix and RBA’s hawkish comments, with AUDUSD trading near 0.6510, and NZDUSD near 0.5710, ahead of key Australian employment data.

Commodities:

• Oil rose from a five‑month low after Trump said Indian Prime Minister Modi pledged to halt purchases of Russian crude, potentially tightening global supply. WTI climbed towards $59 after a 2% slide over the prior two sessions, while Brent settled just below $62 on Wednesday. Trump offered no timeline, noting New Delhi couldn’t stop “immediately.”
• Gold extends gains, setting another record as intensifying US–China tensions and expectations of further Fed easing through year‑end supported demand. It’s up almost 5% this week, touching $4,226 as the mid‑August rally persisted. Silver rose 3.1% trading above $53 amid tight London supply.

Fixed income:

• Treasuries stalled after two‑year yields neared year‑to‑date lows on bets of another Fed cut this month, before yields edged higher across the curve; the two‑year closed around 3.50%, within about 3bp of April’s tariff‑fuelled low. Treasury futures drifted lower through the US session, extending front‑end‑led losses after the London close, while equities rallied on earnings optimism. Fed funds futures activity remained elevated, with focus on a potential tick‑up in the effective rate. Gilts provided early support, outperforming in a sharp bull‑flattening as UK long‑end yields closed up to 5bp richer.

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