Asia-Pacific markets: Gulf strikes and Russia-Ukraine truce doubts

Summary:

• The Houthis said they were responsible for a deadly attack on Riyadh's airport, as well as strikes on Dammam airport and two Aramco facilities; the Saudi and Iranian foreign ministers have since held what are their first reported talks since the escalation.
• President Trump declared an energy ceasefire agreed by Russia and Ukraine; Kyiv said power plants were hit within hours, and the Kremlin has not commented.
• The Russian diesel agreement was criticised by some Republicans and Democrats alike, who called it a financial lifeline to Moscow and a breach of US law.
• Russia eased its diesel export ban in part, releasing 500,000 tons; the IEA, meanwhile, called for faster emergency diesel releases.
• Oil edged lower and gold returned to above $4,200.
• Japan was off for a holiday; US equities are open Monday, but the cash Treasury market is closed.
• The PBOC fixed the yuan reference rate at its strongest since February 2023, and the offshore yuan reached its strongest since 2022.
• The rupee gained after the RBI announced one of its largest currency-support packages since 2013.
• TSMC is due to report third-quarter earnings on Thursday.

Saudi Arabia

The Houthis in Yemen said they were behind a Saturday attack on Riyadh's international airport that killed 13 people and wounded more than 300 — the third such assault on the airport in a week. A fresh attack on Sunday caused more injuries, according to Saudi authorities, and the Houthis said they also targeted King Fahd International Airport in Dammam and two Saudi Aramco facilities. Saudi civil aviation officials confirmed the Dammam strike, but Aramco offered no comment, so the oil-facility claims remain unverified. Saudi Arabia's foreign minister then spoke with Iran's foreign minister about de-escalation, their first publicly reported contact since the Houthi attacks escalated.

Russia, Ukraine and diesel

Donald Trump, the US president, said on Sunday that Russia and Ukraine had agreed to an immediate ceasefire on energy infrastructure. Doubts appeared at once: Volodymyr Zelenskyy, Ukraine's president, said Russian forces hit a power plant in Kharkiv and one in Kyiv within hours, and the Kremlin has yet to publicly confirm it accepted the truce. Ukraine would stop striking Russian energy facilities if Russia reciprocated, Zelenskyy said.

Friday's agreement for Russian diesel to flow to the US and world markets came before the truce. Critics included some Republicans from Trump's own party as well as Democrats, who called the arrangement a financial lifeline for the Russian government and said it violates US law. On Saturday, Moscow partly lifted its diesel export ban, clearing 500,000 tons for overseas buyers; no shipping schedule was provided.

In a separate move, the International Energy Agency called on countries that have not yet handed over all the stocks promised in its March emergency release to speed up deliveries, prioritising diesel, before the agency's governing board meets on October 15. Fatih Birol, the IEA's executive director, also asked every member to consider whether additional diesel releases are required.

Oil and gold

Crude prices slipped a bit in Asian dealings, and gold climbed back above $4,200 per ounce. During the Iran war, the two assets have usually moved in opposite directions: bullion retreats when dearer energy raises inflation expectations and strengthens the case for Federal Reserve increases, and it gains when oil weakens.

The dollar gave up a small amount. With Japan shut for the holiday, no cash Treasury trading occurred on Monday.

Holidays

Japan's financial markets were shut for a national holiday. In the US, Columbus Day is being observed: stock exchanges are operating as usual, but the cash Treasury market is closed, which leaves liquidity limited heading into the US session.

China

The daily reference rate for the yuan was fixed by the People's Bank of China at its strongest level since February 2, 2023, and the offshore yuan strengthened to its highest against the dollar since 2022.

India

The rupee firmed after the Reserve Bank of India announced one of its biggest currency-support packages since 2013. Among the measures are a dedicated dollar window for state-owned oil companies and reserve requirements on some foreign-exchange derivatives, both intended to contain a record jump in corporate hedging. These actions come after the rupee fell toward a record low of nearly 97 against the dollar and the RBI raised its policy rate last week.

Still to come

On Thursday, TSMC will publish its third-quarter results, followed by an earnings call at 06:00 GMT (2:00 am ET), and the company is expected to show a sixth consecutive quarter of record profit.