MNI EUROPEAN OPEN:Yen/JGBs Down, Equities Up Post Takaichi Win
EXECUTIVE SUMMARY
- FED’S JEFFERSON: LABOR MARKET SOFTENING ACROSS INDICATORS - MNI
- TAKAICHI ELECTED LDP’S 1st FEMALE HEAD - MNI BRIEF
- JAPAN STOCKS JUMP, YEN SAGS AS TAKAICHI DIMS BOJ RATE HIKE HOPES - BBG
- MACRON’S CONTINUITY CABINET RISKS ANOTHER GOVERNMENT COLLAPSE - BBG
- HAMAS READIES FOR GAZA TALKS THAT US HOPES WILL HALT WAR, FREE HOSTAGES - RTRS
Fig 1: Japan Equities & USD/JPY - Higher Post Takaichi LDP Leadership Win
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
POLITICS (BBC): “The Conservatives will set out proposals later on cutting public spending on welfare, aid and civil servants which the shadow chancellor will say would save £47bn over five years.”
EU
FRANCE (BBG): “French President Emmanuel Macron’s decision to appoint a broadly unchanged cabinet sparked an immediate backlash from opposition parties, undermining Prime Minister Sebastien Lecornu’s chances of surviving a make-or-break week in parliament.”
FRANCE (RTRS): “French Prime Minister Sebastien Lecornu plans a tax targeting individuals with annual incomes of over 250,000 euros to try to win the Socialist opposition's backing for his government's 2026 state budget, financial daily Les Echos said on Saturday.”
EU (POLITICO): “As the European Commission president braces for another no-confidence vote debate on Monday, she knows the tests will keep coming.”
EU (POLITICO): “The EU is preparing to reduce foreign steel quotas by almost half as part of new measures set to be officially proposed on Tuesday.”
GERMANY (BBC): “Flights have resumed at Germany's Munich airport after unconfirmed drone sightings forced it to suspend operations for the second time in 24 hours.”
CZECH (BBC): “Billionaire businessman Andrej Babis has won parliamentary elections in the Czech Republic, although his populist ANO party fell short of an overall majority. ANO received just under 35% of the vote, earning them 80 seats in the 200-seat lower house – up from 72 seats four years ago, according to preliminary results.”
CZECH (POLITICO): “Czech President Petr Pavel said Sunday that a strong pro-NATO and pro-EU stance, along with safeguarding democratic institutions, will be key factors in appointing the country’s next prime minister and Cabinet.”
POLAND/UKRAINE (POLITICO): “Poland said it rapidly mobilized military aircraft early Sunday to secure its airspace after Russia launched airstrikes on Ukraine’s Lviv region near the Polish border.”
UKRAINE (BBC): “At least 30 people have been injured following a Russian drone strike on a railway station in north-east Ukraine, Ukrainian President Volodymy Zelensky has said.”
GEORGIA (BBC): “Police in Georgia have arrested five people after clashes with anti-government protesters trying to storm the presidential palace in the capital, Tbilisi. The protest took place on the same day as local elections, which the opposition is largely boycotting following a government crackdown.”
US
JOBS (MNI): A variety of indicators point to a softening in the U.S. labor market that rebalances the risks to the Fed's outlook, Federal Reserve Governor Philip Jefferson said Friday after the official jobs report for September was delayed due to a federal government shutdown.
SERVICES (MNI INTERVIEW): Activity in the U.S. service sector stagnated in September and is likely to remain sluggish despite Federal Reserve interest rate cuts, Institute for Supply Management services chair Steve Miller told MNI Friday.
OTHER
MIDDLE EAST (RTRS): “Hamas officials arrived in Egypt on Sunday ahead of talks with Israel that the U.S. hopes will lead to a halt in fighting and the freeing of hostages in Gaza, with Washington's top diplomat saying the next days are critical.”
JAPAN (MNI BRIEF): Japan’s ruling Liberal Democratic Party on Saturday elected Sanae Takaichi as its new president in a runoff against Agriculture Minister Shinjiro Koizumi, paving the way for her to become Japan’s first female prime minister. Opposition parties, which together control a majority in both chambers of parliament, are unlikely to agree on a unified candidate due to policy differences.
JAPAN (BBG): “Japan’s stocks rose and its yield curve steepened, after the surprise victory of pro-stimulus lawmaker Sanae Takaichi damped expectations of an immediate rate hike by the Bank of Japan. The yen slid against other major currencies, hitting a record low versus the euro.”
JAPAN (RTRS): “Sanae Takaichi came out top in a male-dominated race to lead Japan's ruling party on Saturday, putting her on course to emulate her hero, former British leader Margaret Thatcher, and become her country's first female prime minister.”
CHINA
CHINA/US (BBG): “China is pushing the Trump administration to roll back national-security restrictions on Chinese deals in the US, dangling the prospect of a massive investment package as part of a proposal that would upend a decade of policy.”
MARKET DATA
NEW ZEALAND SEP ANZ COMMODITY PRICE M/M -1.1%; PRIOR 0.7%
AUSTRALIA SEP MELBOURNE INSTITUTE INFLATION Y/Y 3.0%; PRIOR 2.8%
MARKETS
US TSYS: Futures Lower, 10yr Might See Buyers Re-engage Around 4.20%
US Tsy futures hold weaker across the board 10yr last at 112-16+, -05. We remain above the 50-day EMA support point (112-12+) for 10yr futures, which will be watch on any further extension lower. The Sep move through this support zone proved to be a false break. The US Tsy cash curve has had a steepening bias, +56.5bps last. Spill over from a sharp steepening in the cash JGB curve (after Takaichi surprised and won the LDP leadership battle).
- Outside of government shutdown news, with seemingly little progress made over the weekend, focus will remain on what can be gleaned from private sector surveys/economy wide anecdotes. Focus later today may be on Trump administration government job lay offs.
- For US 10yr outright, we remain within recent ranges, last 4.14%, with broader 4.00-4.10% ranges holding. Buyers might re-emerge on any move back toward 4.20%, given on-going signs around labour market softness (with the Fed's Jefferson highlighting on Friday the jobs market is softening across a range of indicators) and how the Fed composition may change as we progress through 2026. Still, with elevated inflation pressures it is unlikely to be a sharp break lower on the downside, rather a steady grind.
- Looking ahead, there is no data scheduled or Fed speakers for Monday. Tuesday's Trade Balance & Import/Export data suspended due to the Gov shutdown. US Treasury supply kicks off Monday with $84B 13W & $75B 26W bill auctions (1130ET).
JGBS: Curves Steeper, But Sub Recent Highs, 30yr Debt Auction Tomorrow
All the action today has away from the 10yr JGB, which has been fairly steady, last near 1.67%. The front end is weaker, back end firmer in yield terms as markets have moved to price in less BoJ hike risks, as well greater fiscal uncertainty. The 2/10s curve was last +76.5bps, +4.5bps for the session, while the 2/30s was +239bps, up 17bps.
- We noted earlier after the initial adjustment to Takaichi's victory, sentiment may stabilize and await cabinet announcements and early policy outcomes before taking the curve to fresh highs. The early Sep high for 2/30s was +245bps. The 30yr outright was last 3.30%, the 40yr 3.53%, while the 2yr was near 0.91%.
- These moves have largely been mirrored in the swap space, although yield moves haven't been as large at the back end (with JGBs likely more susceptible to fiscal policy concerns).
- BoJ tightening risk has fallen dramatically for Oct, with just 6bps of tightening priced in against recent highs of 17bps, as Takaichi stated the government and BoJ should be coordinated on economic policy. Takaichi has been a critic of BoJ hikes in the past (but her rhetoric wasn't as strong during this most recent LDP leadership campaign).
- JGB futures are back to flat, last 135.93, +.02, but well off earlier highs of 136.53.
- Note tomorrow, we get on the data front, Aug Household spending prints. Greater focus will be on 30yr dent auction, the first test for the new Takaichi regime.
BONDS: All Eyes On RBNZ On Wednesday, Mkt Close To Split On 25 or 50bps Cut
NZGB yields have shown a steepening bias as Monday's session has unfolded, consistent with US and JGB moves. The 2/10s curve was last +150bps, close to fresh highs since April of this year. Local news flows has been light, with all eyes on the RBNZ outcome this Wednesday. While it is widely expected to cut rates further, economists are split between a 25bp and 50bp move. 10 out of the 25 analysts surveyed by Bloomberg are forecasting the larger reduction. The announcement won’t be accompanied by updated forecasts or a press conference (they are scheduled for November), but post-meeting speaking events should be announced this week.
- The 2yr swap rate is holding under 2.50%, so near recent cycle lows. A more dovish RBNZ this week is likely to see the market target a move into the 2.00-2.25% region. Moves back towards 2.75% may be faded on any hawkish surprise. The bias around 2yr swap still appears skewed lower until NZ growth is on a firmer footing. Market pricing per OIS RBNZ dated contracts show an implied rate of 2.67% for Wednesday's meeting, versus the current policy rate of 3.00% (so around 131% of a 25bps moved priced in), whilst the terminal rate into 2026 sits close to 2.25%, which is where we have been close to in recent weeks.
- The 2yr government bond yield was last around 2.72%, little changed today, while the 10yr is back above 4.22%, +2bps firmer. Both benchmarks remain within recent ranges.
FOREX: USD/JPY Testing Above 150.00, Options Volumes See 151-155.00 Strikes
Yen weakness has been the standout today, with USD/JPY breaking above 150.0, off 1.75% so far today for the session. The surprise Takaichi election win from Saturday's LDP leadership race has driven sentiment (with market odds of her victory very low on Friday per Polymarket). BoJ tightening risk has fallen dramatically for Oct just 6bps of tightening priced in against recent highs of 17bps), with Takaichi stating the government and BoJ should be coordinated on economic policy. Takaichi has been a critic of BoJ hikes in the past (but her rhetoric wasn't as strong during this most recent LDP leadership campaign).
- For USD/JPY technicals, a clean break above 150.00, will see focus shift to 150.92, the Aug 1 high and key resistance.
- Positioning focus will rest with asset managers and whether they go back a short position (with leveraged contracts already net short). Asset managers were last net long to the tune of +79.3k.
- The 1 month risk reversal is highs last -0.30, fresh highs back to 2022. So far today we have seen close to $7.4bn in options volumes go through in USD/JPY (63% of total volumes per DTCC on BBG). The larger volume transactions have been skewed towards USD/JPY calls with strikes in 151-155.00 region.
- USD/JPY looks too high relative to US-JP rate differentials, but further position adjustments could still play out in the near term.
- Elsewhere, EUR/USD is back slightly lower at 1.1720/25, with French politics likely to come back into focus.
- The kiwi has outperformed the G10 today with NZDUSD up 0.1% to 0.5836, close to the intraday high at 0.5840, helped by stronger US equity futures even though the NZX was lower.
- AUDUSD fell to 0.6582 in early trading as USDJPY rose following news that Japan’s conservative Takaichi won the LDP leadership. The pair has recovered to be up 0.1% to 0.6609, close to the intraday high of 0.6612, aided by better risk appetite with equities generally stronger. The USD index is 0.3% higher. BBDXY last near 1204.25.
ASIA STOCKS: Japan Stocks To Fresh Record High On Takaichi Victory
Japan stocks have surged in the aftermath of Takaichi winning the LDP leadership battle. The combination of Takaichi's pro growth/dovish BoJ backdrop has seen local bourses post sharp gains. The NKY 225 is up 4.5%, while the Topix has gained nearly 2.9%. Elsewhere US equity futures have ticked higher but remain just short of recent highs. The US government shutdown drags on, while Monday focus may rest with the Trump administrations government job cut announcements (reportedly expected to be in the thousands). China and South Korean markets remain closed. Much of Australia is also out, although the ASX200 is still trading (down modestly).
- Japan indices, now at fresh record highs, have been aided by the weaker yen trend (we are approaching the 150.00 level), with the Topix transport gaining 2.8%. The bank sub index has lagged though, as BoJ hiking expectations have been pared, this sub index down 2.5%. Fiscal concerns under the new Takaichi regime are yet to impact broader sentiment (although the potential for pro growth from higher government borrowing/spending is a market positive). Also note offshore investors have mostly been net sellers in recent week of local stocks, so they may be coming back into the market as we break higher.
- Elsewhere Hong Long markets are weaker, but this follows a strong run higher recently. The HSI off around 0.75%.
- In South East Asia, Philippines losses have been evident. The PCOMP down a further 0.80% at the time of writing. We are still above recent lows (sub 6000), but earlier headlines from the Stock Exchange CEO noted the challenges facing the market amid near term political instability/corruption probes. (via BBG). Offshore investors have been net sellers of local stocks so far in Oct.
OIL: Crude Relief Rally After Restrained OPEC Output Decision
Oil prices are higher during Monday’s APAC session after falling sharply last week. The move higher appears to be a relief rally following OPEC’s decision to increase November’s output 137kbd in line with October’s rise. There had been fears that it could have been substantially higher as the IEA is forecasting a record market surplus in 2026. WTI is up 1.6% to $61.85/bbl, close to the intraday high, and Brent is 1.5% higher at $65.48, after reaching $65.52. The USD index is up 0.3%.
- According to Bloomberg there were some dissenting views with Russia arguing that prices needed to be supported and Algeria that demand could weaken but Saudi arguing for a larger target increase.
- The group is trying to regain market share but most members have limited spare capacity except Saudi Arabia, and so the impact of output decisions on physical supply is unclear.
- The Fed’s Schmid speaks later on the economy and monetary policy, and also the ECB’s Lagarde, Lane and de Guindos appear. August euro area retail sales print.
Gold Makes Another New High On Elevated US Uncertainty
Gold has traded above round-number resistance at $3900/oz for most of Monday’s APAC session and has also broken above resistance at $3909.4, a Fibonacci projection. Today’s rally has resulted in another record high being reached at $3926.61. Bullion is currently 1.0% higher at $3926.3 helped by the ongoing US government shutdown with no near-term resolution apparent and the uncertainty it creates around the economy. This is outweighing the stronger US dollar (BBDXY +0.3%) and unchanged yields.
- Gold has benefited from safe-haven flows from the government shutdown as it not only weighs on US activity but also delays key data releases. Both are likely to make monetary policy decisions difficult as the outlook is even less clear. The market has almost 50bp of easing priced in by end 2025. Another senate vote to resolve the impasse will be held Monday.
- The prospect of further US rate cuts as well as uncertainty around the government shutdown and Fed independence mean that gold continues to make new highs and approach $4000/oz.
- Silver is up 01.0% to $48.47 after a high of $48.38, above resistance at 48.232. It fell to $47.962 early in the session.
- The S&P e-mini is up 0.3% and Nikkei +4.5% but ASX down 0.2%. A number of Asian markets are closed today. Oil prices are higher with WTI +1.5% to $61.81/bbl. Copper is down 0.3%.
- The Fed’s Schmid speaks later on the economy and monetary policy, and also the ECB’s Lagarde, Lane and de Guindos appear. August euro area retail sales print.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 06/10/2025 | 0700/0900 | ** |  ES | Industrial Production |
| 06/10/2025 | 0700/0900 | ** |  CH | Unemployment |
| 06/10/2025 | 0715/0915 |  EU | ECB de Guindos Speech at Diario Expansion | |
| 06/10/2025 | 0730/0930 | ** | EU | S&P Global Final Eurozone Construction PMI |
| 06/10/2025 | 0730/0930 | *** |  FR | HCOB France Construction PMI |
| 06/10/2025 | 0800/1000 | EU | ECB Lane Keynote at ECB MonPol Conference | |
| 06/10/2025 | 0830/0930 | ** |  GB | S&P Global/CIPS Construction PMI |
| 06/10/2025 | 0900/1100 | ** | EU | EZ Retail Sales |
| 06/10/2025 | 1500/1600 | GB | BOE Bailey Keynote at Scotland Global Investment Summit | |
| 06/10/2025 | 1530/1130 | * |  US | US Treasury Auction Result for 13 Week Bill |
| 06/10/2025 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 06/10/2025 | 1700/1900 | EU | ECB Lagarde at ECON Hearing, European Parliament | |
| 06/10/2025 | 2100/1700 | US | Kansas City Fed's Jeff Schmid | |
| 07/10/2025 | 2330/0830 | ** |  JP | Household spending |
| 07/10/2025 | 0600/0800 | ** |  DE | Manufacturing Orders |
| 07/10/2025 | 0645/0845 | * | FR | Foreign Trade |
| 07/10/2025 | 1230/0830 | ** |  CA | International Merchandise Trade (Trade Balance) |
| 07/10/2025 | 1230/0830 | ** | US | Trade Balance |
| 07/10/2025 | 1230/0830 | ** | US | Trade Balance |
| 07/10/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
