Metals break out, the yen squeezes, Germany's firewall holds by three seats

Asia: an AI melt-up without a US lead

Monday was the rarest kind of Asian session — a large directional move with no overnight Wall Street cue, because there wasn't one. The KOSPI rose 4.61% to 6,995.39, its highest since 23 July, on semiconductors: Samsung Electronics +5.28%, SK Hynix +7.77%. The Nikkei 225 added 2.12% to 66,399.84 in a second consecutive advance, led by SoftBank Group +11.2%, Kioxia +9.3%, Ibiden +8.4%, Rohm +7.8% and Advantest +4.2%; the TAIEX rose 1.67% to 47,326.27. The stated catalyst across all three tapes was optimism about a new OpenAI model and the compute demand it implies. Breadth did not corroborate the enthusiasm: TOPIX rose only 0.55% to 4,125.80 with 630 gainers against 883 decliners on the Prime Market, and Japanese financials and consumer names fell (Mitsubishi UFJ −2%, Nintendo −1%). This was a narrow, large-cap, AI-supply-chain move rather than a broad risk rally.

China was quieter and mixed. The CSI 300 rose 0.59% to 4,575.02 and the Shanghai Composite just 0.07% to 3,932.70, though the Shenzhen Component climbed 1.91% and ChiNext 0.47% — the A-share complex found a bid rather than continuing last week's froth-deflation. Hong Kong went the other way, the Hang Seng falling 0.90% to 25,413 from a two-week high, weighed by financials, technology and energy minerals. August FX reserves, released Monday, rose $19.5bn to $3.4383trn (+0.57% m/m) on valuation effects as the dollar eased through August. Over the weekend Beijing confirmed the state-sector recapitalisation flagged on Monday: roughly $54bn across Agricultural Bank of China (private placement up to ¥160bn), ICBC (up to ¥100bn), China Life (¥35bn), Export-Import Bank (¥30bn), PICC (up to ¥15bn), China Taiping (¥7bn), China Re (¥3bn) and a further ¥290bn distributed across state banks, framed as capacity to serve the real economy against weak loan demand. India was the regional laggard, the Nifty 50 falling 0.57% to 23,760.30 and the Sensex 0.50%, with IT names down 0.9–3.8% on geopolitical risk and crude near $97.

Europe: the firewall held, and the market shrugged

The Saxony-Anhalt result was the session's political event and it was less severe than Sunday night's projections implied. The AfD took 43.8% and 39 of the 83 Landtag seats — three short of the 42 required for a majority — against CDU 17.2% and 15 seats (from 37.1% in 2021), SPD 9.3%, Greens 8.9% and Left 8.6%, on turnout of 77.8%. AfD's Ulrich Siegmund said the party would not play "games" such as propping up a minority government, which leaves no arithmetic path to a stable administration that excludes it. Merz said the result had "shaken the party to its very foundations"; 87% of voters expressed dissatisfaction with the federal government and roughly three-quarters, including nearly half of CDU voters, said Merz personally hurt the showing. French finance minister Roland Lescure called it a "very, very worrying signal" of a global populist wave.

Markets treated it as noise rather than a shock. The DAX fell 0.34% to 25,957.40 (SAP −2.5%, Qiagen −2.7%, Vonovia −2%; Infineon +3.2%, Siemens Energy +2.3%), the Stoxx 600 slipped 0.11% to 649.14, Euro Stoxx 50 −0.06% to 6,389.20, CAC 40 −0.2% to 8,264, FTSE 100 −0.13% to about 10,816 (Shell +0.7%, BP +1.5% on crude; Unilever −1.6%, BAT −1.5%) and the IBEX rose 0.25%. Bunds sold 3bp to 3.36%, a fourth consecutive weekly back-up, with commentary attributing the move to energy and ECB expectations rather than the election; the 30-year reached 3.84%. OATs rose 2bp to 4.23% leaving OAT–Bund unchanged around 87bp, and BTPs +3bp to 4.18% at roughly 82bp over — Italy no longer trades through France on these marks. Gilts added 2bp to 5.16% (30y 5.80%). The data was two-sided: German industrial production fell 1.1% m/m in July against +0.3% expected, the largest drop in almost a year, while Sentix investor confidence jumped to 5.1 from 0.9, a four-year high, on a fifth consecutive monthly improvement.

Commodities: copper's record, iron ore's breakout, and a firm crude

The metals complex did the work. LME copper printed an all-time high of $14,533/t, surpassing the January record, on anticipation that the administration extends Section 232 to refined metal — a decision that hinges on a Commerce report the department has delayed. Global stockpiles are concentrated in US warehouses after eighteen months of tariff-arbitrage imports while LME inventories have dwindled, and spot now trades at a steep premium to three-month futures. Iron ore reclaimed $100/t, the highest since mid-July, on tightening Chinese coking-coal supply lifting steelmaking costs, rebar and hot-rolled coil at multi-month highs, falling inventories and position unwinds. Aluminium rose 0.60% to $3,312.35/t. Brent settled at $96.94 (+0.69%) after touching about $97.5 intraday, a six-week high and near 40% above pre-war levels, with WTI at $92.82 (+1.46%); TTF gas jumped 4.32% to €75.18/MWh without an identified catalyst. Gold fell 0.62% to $4,404.98 in thin holiday trade on the payrolls-driven hike repricing, though China extended its official buying streak to a 22nd month at 76.73m fine troy ounces. Silver rose 0.26% to $66.17, platinum fell 0.50% to $1,816.90, and lithium carbonate dropped 2.96% to ¥147,500/t.

On the war: Iran's Supreme National Security Council secretary Mohsen Rezaei said on state television Monday that Tehran will declare a restricted maritime zone "in the coming days" running from the US blockade line through the Strait and into the Gulf, with vessels transiting without Iranian coordination facing sanctions and insurance consequences, and that a separate Iran–Oman corridor would be announced. A senior US official countered that the waterway is "fully open and under US Navy control" and that Washington is satisfied with flows. Kpler counted 77 Hormuz transits last week, down 28% week-on-week; the US claims 17m b/d still moves through against roughly 20m b/d pre-war, a figure independent trackers cannot corroborate. OPEC+ — the seven-producer group — held October output at September levels on Sunday and meets next on 4 October. The diesel squeeze remains the binding constraint, with the distillate leg of the crack near $107/bbl.

Digital assets and the Sydney morning

Crypto drifted lower across the long weekend. Bitcoin is $79,229 (−1.2% from Friday's $80,196), ether $2,489.67 — still rejecting $2,500 — solana $104.01, XRP $1.40 and BNB $739.72, with total capitalisation $2.762trn and BTC dominance 57.6%. Spot bitcoin ETFs took +$174.6m on Friday after +$730.8m on Thursday, the strongest single day since mid-January; cumulative net inflows now stand at $55.69bn. Two items are new: Strategy has sold roughly 7,000 BTC across March and August at average prices of $60,000–65,000 to fund preferred dividends and reduce debt, even as it bought 4,603 BTC for $370m in late August to reach 845,050 coins — the pure-accumulation posture has broken. And self-described white-hat hackers drained $320m from the Liquid Network, a Bitcoin sidechain, on Sunday, announcing it over social media and via chain transactions; the federation paused new transactions and the attackers say funds will be returned once the vulnerability is patched.

Into the open. The AUD pushed to a four-month high of 0.7224 overnight after closing Monday at 0.7205; the dollar index is 98.90 (−0.27%), EUR/USD 1.1628, GBP/USD 1.3525, NZD/USD 0.5878, USD/CAD 1.3836 in thin holiday trade. Canada's counter-tariffs took effect at 00:01 today: C$27.6bn of US products — not the C$19.9bn this note reported on Monday — across 700-plus lines at 15%, 25% and 50% matched product-for-product to US rates, hitting steel, dairy, appliances, agricultural equipment, pulp and paper and electronics. In Sydney, the Bathla Group stood down 213 of roughly 350 staff on Monday, some already eight weeks unpaid, after five lenders agreed a two-week funding extension of about $1–1.3m a week covering only their own projects; work stopped immediately on the remainder of its 45 Sydney sites. The NSW government had earlier declined a requested $20m support package.

Fed detail. Chair Kevin Warsh (confirmed 54–45 on 13 May, sworn in shortly after; Powell remains a Governor to January 2028) has reversed his pre-appointment dovishness — at Sintra on 1 July he said "we're going to deliver price stability" and that independence would see "no changes." His 28 August Jackson Hole framing ("underlying inflation trends have not meaningfully improved… we have work to do") is what turned September from a cut debate into a live hike. Blackout began Saturday 5 September and runs to the 17th, so the political commentary of the past week — Trump's tariff-for-cuts ultimatum, Vance's "we believe the Fed should be lowering interest rates", Navarro's "clowns" — is entirely administration-side with no Fed reply available. The Street has moved toward the hike: UBS reversed on 7 September from no 2026 changes to two hikes, September and December, citing payrolls and Warsh's tone; Goldman's Kaplan argues the Fed is "50bp, plus or minus, from neutral" and one more hike is justified; JPMorgan's Feroli, writing before Jackson Hole, put true hike odds below 30% and favoured December. Note one unresolved conflict: No. 001 reported Citi pushing its first cut to June 2027, while a secondary source now reports Citi expecting three cuts from October — the attribution on the latter is doubtful and it is not used here.

ECB detail. Thursday's +25bp to 2.50% is as close to certain as these things get — all 65 economists in the latest Reuters poll, up from 83% in August — and the interest is entirely in the path. Ninety-one per cent of the same poll see the deposit rate still at 2.50% at year-end and 78% see it there at mid-2027, which would make this the shortest tightening cycle since 2011 at two hikes; OIS pricing implies a peak nearer 3.00% by 2027, which the polled economists regard as excessive. That gap between survey and market is Thursday's trade. Watch the new staff projections (June had HICP at 3.0/2.3/2.0% for 2026–28), any energy scenario analysis, and second-round wage language. Monday's data cut both ways: German industrial production −1.1% m/m against +0.3% expected, the biggest fall in nearly a year and concentrated in civilian manufacturing masked partly by defence orders; Sentix at 5.1 from 0.9, a four-year high, with the current-situation index at −3.3 from −8.0.

BoJ detail. The Bank's own schedule confirms a two-day meeting on 17–18 September with the decision on Friday the 18th — one calendar provider shows the 17th and is wrong. Inflation is not the driver; the yen and the long end are. Monday delivered both: USD/JPY −1.18% to 154.41 and JGB 30s +4bp to 4.01%. Japan's FX reserves fell $79.6bn in August after the officially confirmed 3 August coordinated US–Japan intervention, an unusual arrangement in which Washington actively supported the yen. Economic adviser Takuji Aida expects a September hike and roughly quarterly moves through January. Today's Q2 GDP second estimate (09:50, consensus +0.4% q/q, +1.1% annualised) and July labour cash earnings (09:30, consensus +3.9%) land after this note is filed.

RBA detail. The pricing range has widened rather than converged: 62% at centralbank.watch (as of 4 September), 66% per Trading Economics, 68% at rateprobability.com, with one secondary source quoting "nearly 80%" that is not corroborated and is excluded. All agree 4.60% is reached by the 3 November meeting. House calls remain split — NAB, Deutsche Bank and UBS for September; ANZ and CBA for November; Westpac holding through 2026 while acknowledging November risk. Today is the first RBA commentary since the Q2 GDP beat, and the sequencing matters: consumer sentiment at 10:30 and the NAB survey at 11:30 both land before Hunter speaks at 13:20, so she will be answering questions with the numbers already on the screen.

Portfolio-level read. The book is unchanged in shape — low gross, long convexity, long energy optionality, short the yen carry, neutral-to-long the belly funded from the long end — with three amendments from Monday's tape. First, the credit leg gets bigger: a 1,051bp CCC index against 81bp IG is the widest quality bifurcation in this cycle and it is the correct place to express a hike that has not yet happened. Second, the Australian equity underweight is now half wrong, because the materials leg has flipped from headwind to tailwind; the view survives on the RBA and seasonality alone, at reduced conviction. Third, the European political hedge did not pay and should not be re-struck as a Germany trade — the OAT–Bund widener is a France position from here. The event path into Friday is auctions, the ECB and CPI; today's local sequencing of sentiment, NAB, China trade and Hunter is the nearest thing to a domestic catalyst before the 29th.

These are analytical framings for a professional reader, expressed in the vernacular of a macro desk; they are not personalised investment advice and carry no position sizing. The "what changes the view" column is the accountability mechanism — each view is logged and scored in the project's views ledger. Views closed this morning: V015 copper (neutral, policy-driven), closed as a scratch and replaced by a directional expression after the record high. Views opened: V020 copper Comex–LME, V021 Korea/Taiwan semis.