Asia Market Quick Take – 19 October, 2026

Key points:

• Macro: Saudi and Houthis tension continues. Trump postpones sanctions on Russia.
• Equities: US stocks slumped on AI-chip rout; futures rebound ahead earnings-heavy week
• FX: USD weakens on Fed-hold bets; AUD outperforms while EUR lags
• Commodities: Oil holds near $110 on persistent Middle East and shipping disruptions
• Fixed income: Treasury curve steepens amid renewed haven demand

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Disclaimer: Past performance does not indicate future performance.

Macro:

• Fed Chair Warsh offered no guidance on this month’s FOMC decision, saying hotter inflation hadn’t changed his outlook and further reducing odds of an October hike. He said inflation is still too high but broadly in line with expectations. The Fed lifted rates to 3.75%–4% in September, its first hike since 2023, and most officials still expect one more increase this year.
• Saudi–Houthi fighting continued with a Saudi helicopter down near Yemen and Houthi strikes on Yanbu, while three tankers were damaged in the Strait of Hormuz as Iran’s IRGC tightened control. Ukrainian drones hit oil sites in St. Petersburg, and Trump said he struck a diesel export deal with Russia and delayed new sanctions to safeguard Ukraine peace talks.
• US capacity utilization climbed to 76.9% in September 2026, the highest since December 2023 and above the 76.5% forecast, but still below the 79.4% long-run average. Mining rose to 87.5%, utilities to 73.8%, and manufacturing to 75.9%.
• US industrial production rose 0.7% month-on-month in September, the most in five months and above the 0.4% forecast. Manufacturing output increased 0.3%, mining 0.2%, and utilities 3.5%. Capacity utilization climbed to 76.9%, still 2.5 points below its long‑run average. For Q3, industrial output grew at a 2.8% annualized pace.
• The New York Fed’s Services Index slid to -20.7 in October 2026 from -8.7, the weakest since March, signaling faster contraction amid a very weak business climate, flat employment, high input costs, faster price increases, and a pessimistic six‑month outlook.
• Eurozone inflation rose to 3.8% in September 2026 from 3.2%, a third straight acceleration and the highest since September 2023, driven by higher energy, services, and food prices. Core inflation edged up to 2.5%. Month-on-month, CPI increased 0.6%.

Equities: 

• US — On Friday 16 October, the S&P 500 fell 1.1% to 7,659, the Nasdaq Composite dropped 2.1% to 26,140, and the Dow slipped 0.3% to 52,002, capping the S&P 500's worst week since June and the Nasdaq's worst week since April 2025. The selloff was driven by a rout in AI and semiconductor stocks, with chipmakers posting their longest losing streak since 2008. CoreWeave was the epicentre of the AI trade unwind, falling more than 20% on the week amid capital expenditure financing concerns. This morning, S&P 500 futures are up 0.5% and Nasdaq 100 futures are up 0.9%, bouncing ahead of a heavy earnings week.
• EU — European equities outperformed sharply last week, with the Stoxx 600 rising 2.1% — its biggest weekly outperformance versus the S&P 500 since April 2025 — as investors rotated out of AI names and into European defensives and value stocks. On Friday, the Stoxx 600 closed up 0.7% to 644.74, led by banks and food and beverage. The FTSE 100 rose 0.4% to 10,881, its highest close since 25 August, with BAT and Babcock leading. The SMI gained 0.3% to 14,391. Goldman Sachs strategists expect Stoxx 600 constituents to post 20% earnings growth in the second half of 2026.
• Asia — Asian equities are navigating a difficult backdrop this morning as the global AI trade continues to unwind. The Kospi is under acute pressure, with the 5,000 level now firmly on investors' radar after this month's slide of more than 10%; Samsung Electronics and SK Hynix have been among the hardest hit following reports of Chinese competition in memory chips. The Hang Seng closed up 0.5% to 24,186 on Friday 16 October, led by Alibaba (+2.3%) and Lenovo (+8.0%), though mainland investors sold a net HK$3.57 billion via Stock Connect for a fourth consecutive session. The Nikkei and STI are also under pressure from the broader AI-driven selloff and elevated oil prices. Nasdaq futures bouncing +0.9% this morning, alongside Anthropic's announcement of a public-benefit fund commitment, may provide some relief at the open. The Taiwan dollar remains under pressure, having posted its largest single-day drop in over a year last week on AI sentiment.

Earnings this week:

• Tuesday: GE Aerospace, General Motors, 3M, Netflix, United Airlines, SpaceX, CATL
• Wednesday: Abbott, NextEra Energy, AT&T, CME Group, Danaher, Tesla, Meta, IBM, Lam Research, Texas Instruments, Philip Morris
• Thursday: Lockheed Martin, Nokia, Comcast, American Airlines, Bloom Energy
• Friday: American Express, Schlumberger

FX:

• USD weakened on Friday, with the Bloomberg Dollar Spot Index down 0.2%, capping its worst week since early September after Warsh’s comments were read as favouring a Fed hold. The softer USD helped the euro break a five‑week losing streak and supported a broad rally in EM FX and equities.
• AUD is the clear G10 outperformer this morning (+0.27%), extending Friday's risk-on momentum.
• EUR is the laggard among commodity-currency pairs, down 0.09%, consistent with the geopolitical risk premium noted at the open.
• JPY is firming slightly — USDJPY pulling back to 157.79 from Friday's 158.02 close, suggesting mild safe-haven demand.
• CAD is also strengthening (USDCAD -0.14%), likely supported by oil prices.

Commodities:

• Brent crude hit $110 a barrel for the first time since May last week, driven by supply disruption fears from the Strait of Hormuz and the Black Sea, as well as Houthi strikes on Saudi Aramco's headquarters. Oil slipped modestly this morning as doubts grow over the materialisation of Trump's Russian diesel deal, with US lawmakers having introduced a bill to block the transaction.
• Gold is trading near multi-month highs, supported by elevated inflation, geopolitical risk and tentative safe-haven flows as the AI trade wobbles. The 10-year real yield at 2.75% remains a headwind, though the recent bond rally has provided some relief.
• Silver has fallen more than 50% from its record high earlier this year, with analysts noting the metal's economic sensitivity as a potential leading indicator of slowing growth amid persistently high fuel prices.

Fixed income:

• US Treasuries — curve steepening: The Treasury curve steepened on Friday, with the 10-year yield rising 2.4bps to 5.087% and the 30-year rising 2bps to 5.428%, while the 1-year fell 1.8bps to 4.44%. The 5s30s spread widened to 54.2bps. The long-end selloff was exacerbated by the oil surge and the release of the primary dealer survey for the November refunding, which asked about long-end buyback operations — Citi strategists interpreted this as signalling a potential reduction in long-bond issuance.
• Despite Friday's long-end weakness, 10-year yields fell approximately 17bps over the course of last week as the AI trade wobbled and the Nasdaq tumbled 5.5%. Treasuries are showing tentative signs of reclaiming their traditional safe-haven role, threatening investors who are heavily short duration.
• 8-week T-bill yields hit 4.05% at auction last week — the highest in over a year — with record-low demand, reflecting investor reluctance to absorb growing bill supply amid a widening deficit and an uncertain Fed path.

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