Asia trading starts thin as Tokyo and US Treasury markets close for holidays

Because Tokyo and the US cash Treasury market are closed on Monday, liquidity is thinner across Asia and into the US session. This can amplify price swings triggered by weekend headlines out of Saudi Arabia, Russia and Ukraine.

• However, markets in Singapore, Hong Kong, Australia and New Zealand remain open.

The week's oil prices are directly tied to inflation: energy is the primary factor keeping US headline CPI above 3%. Any fresh crude price gains from Gulf attacks could strengthen expectations of additional Fed tightening. On the other hand, the Russian diesel agreement and energy truce could push fuel prices lower. A strong CPI reading would probably push the short end of the Treasury curve up and boost the dollar, weighing on the yen. Bank earnings provide an initial look at credit quality in a higher-rate environment.

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After a quiet Monday in Tokyo and on the Treasury desk, the week's main events take over: inflation data, bank earnings, and a final appearance by Warsh.

Key points for the week:

• Monday brings holidays: Japan marks Sports Day, shutting its markets; the US observes Columbus Day, which closes the cash Treasury market but leaves equities open.
• On Wednesday at 12:30 GMT (8:30 ET), the US September CPI report is released, the final inflation figure ahead of the October 27-28 FOMC meeting.
• In August, headline CPI increased 0.4% month-on-month and 3.4% year-on-year, led by gasoline; core CPI was unchanged at 0.3% monthly and 2.4% annually.
• Tuesday sees earnings from JPMorgan, Goldman Sachs, Wells Fargo and Citi; Bank of America, Morgan Stanley and BlackRock follow on Wednesday.
• Thursday brings September producer prices and advance retail sales.
• Fed Chair Kevin Warsh is scheduled to speak at the IMF meetings in Bangkok early Friday, his last announced appearance before the blackout period.

The week begins with holidays in both Asia and the US. Japan is closed for Sports Day, shutting equity and bond markets in Tokyo. The US celebrates Columbus Day with equity markets open but the federal debt market closed. These closures mean Asian liquidity is thin at the start of a week that gradually heads toward a US inflation report and a final pre-meeting event with Fed Chair Kevin Warsh.

Tuesday's focus shifts to the US before the open, with JPMorgan Chase, Goldman Sachs, Wells Fargo, Citigroup, UnitedHealth Group and Johnson & Johnson all reporting. These results provide an early snapshot of credit conditions and loan demand following the Fed's September rate hike. On Wednesday, Bank of America, Morgan Stanley, BlackRock and ASML follow.

The September CPI release on Wednesday at 12:30 GMT (8:30 ET) is the week's key event, being the last inflation data before the October 28 FOMC meeting. The August report established a firm baseline: headline prices gained 0.4% month-over-month after 0.1% in July, with gasoline contributing more than a third of the increase; core prices also rose 0.3%. Year-over-year, headline inflation remained at 3.4%, while core eased to 2.4%, and energy was up roughly 16% from a year ago. Forecasts indicate that energy will again push the headline higher for September, with one analyst expecting a 0.6% monthly gain that would bring the annual rate to about 3.7%. A broad consensus had not yet been published.

On Thursday, September producer prices and advance retail sales are released at 12:30 GMT (8:30 ET).

Warsh has the last scheduled public appearance. He will participate in a moderated conversation at the IMF and World Bank Annual Meetings in Bangkok around 04:30 GMT on Friday (00:30 ET), which is described as a public event before the blackout period ahead of the October 27-28 FOMC meeting. Since assuming the role, Warsh has aimed to alter the Fed's communication style, moving from forward guidance while emphasizing the commitment to price stability. Thus, markets will focus on his tone rather than any timeline signal.

This combination is significant because energy, not core inflation, is driving the headline figure. A strong print fueled by energy costs would force Warsh to balance an energy shock with still-moderate underlying inflation, just two weeks before the FOMC meeting and shortly before the US midterm elections.