Xi arrives in US ahead of Trump summit; trade truce extended

Key points:

• Chinese President Xi Jinping landed in the United States on the eve of his summit with President Donald Trump. Trump personally greeted Xi at the airport.
• Treasury Secretary Scott Bessent announced that the trade truce from Busan, originally set to end in November, will now last until January 10.
• Expectations of a new Boeing order from China during the summit are diminishing.
• Crude oil prices dipped marginally amid a lack of new developments.
• Japanese markets resumed trading following a three-day break. The Nikkei 225 advanced 1.3% by midday, boosted by component-related stocks, while the Topix added 0.1%.
• Ten-year Japanese government bond futures dropped approximately 70 ticks upon reopening. The Ministry of Finance plans to hold talks about reducing liquidity-enhancement bond issuance.
• Japan's flash composite PMI indicated 18 consecutive months of expansion, but at the weakest rate since May. Inflationary pressures remained high.
• The dollar weakened against the yen, with USD/JPY falling to about 157.80 from levels above 158.20.
• Employment in Australia increased by 39,500 in August, yet the unemployment rate rose to 4.6% due to a surge in participation. The Australian dollar traded flat against the US dollar.
• Mainland Chinese markets will be shut on Friday for the Mid-Autumn Festival. A longer suspension for National Day runs from October 1 to 7.

Chinese President Xi Jinping arrived in the US ahead of his Thursday summit with President Trump. Meanwhile, Washington confirmed that the trade truce agreed in Busan last October has been extended. Treasury Secretary Scott Bessent stated that the one-year deal, originally set to expire in November, will now last until January 10. This provides negotiators with additional time to pursue a more comprehensive agreement.

Trump went to the airport to greet Xi personally, a move noted as unprecedented for either country's president welcoming a counterpart at the airport. It also marks the first time Trump has met another leader at an airport in Washington (he previously met Putin at an airport in Alaska). The formal talks are scheduled to begin on Thursday US time. Aircraft orders seem to have a low priority, with reports indicating that expectations for a new Chinese Boeing order are waning while the planemaker tries to finalise a 200-jet deal from May.

Oil prices edged down during a session lacking any new major news.

Japanese markets returned from a three-day holiday closure. The Nikkei 225 climbed 1.3% by midday, driven by computer component stocks after Meta CEO Mark Zuckerberg introduced a small handheld device named Meta Charm, boosting hopes for component demand. The broader Topix rose a smaller 0.1%.

Japan's bond market faced a catch-up move. Ten-year JGB futures dropped about 70 ticks upon reopening, tracking the global yield increase from Wednesday. Separately, sources said the Ministry of Finance plans to talk with primary dealers next week about reducing liquidity-enhancement bond issuance in the 5-to-11-year segment, since supply constraints in that area have lessened.

According to flash PMI data, Japan's private sector grew for the 18th straight month in September, but at the weakest rate since May. Inflationary pressures remained high due to a weak yen and Middle East conflict-related costs. The yen strengthened, pushing USD/JPY down to around 157.80 from earlier levels above 158.20.

Australia added 39,500 jobs in August, roughly twice what was forecast. However, the unemployment rate rose to 4.6%, the highest since late 2021, as participation increased to 67.1%. Full-time employment declined by 6,300. Before the data, the local stock market hit a three-month low, then recovered slightly. AUD/USD saw little movement. The higher unemployment resulted from more people entering the workforce rather than job cuts, keeping the possibility of a rate hike by the Reserve Bank of Australia at next week's meeting intact.

Mainland Chinese markets will be closed on Friday for the Mid-Autumn Festival, and Stock Connect will also be shut. However, Hong Kong remains open. A longer closure comes next, with mainland exchanges closed from October 1 to 7 for National Day, reopening on October 8.