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South Korean markets have been in focus as the authorities respond to the fall out from Tuesday's brief martial law period. Equities are weaker, but away from lows, while the KRW has rallied. The opposition parties have submitted an impeachment proposal for President Yoon this afternoon.
Elsewhere AUD and local yields were down sharply following the Q3 GDP miss, which showed weak private sector growth momentum. RBA easing odds for 2025 are higher.
Looking ahead, we have final PMI reads in the EU and UK. BoE speak, along with ECB speak. In the US the ADP prints, along with the services ISM. There is also Fed speak, headlined by comments from Fed Chair Powell.
After yesterday’s weak close in US time with yields 2-4bp higher into the Asia open, bonds then turned around today to finish lower in yield.
US 2YR 4.169% (-1.3bp), US 5YR 4.107% (-0.7bp), US 10YR 4.226% (unch) US 30YR 4.407% (+0.4bp)
Despite the movements in cash, and the uncertainty emanating from Korea, futures had a quiet day opening at 110-31 where they have stayed for most of the day.
In a week of data that will likely seal the rates decision, tonight sees a raft of data including ADP, PMIs, ISM, Factory Orders and Durable Goods.
Projected rate cuts into early 2025 look mixed after surging late Monday following Fed Gov Waller's comments but moved higher with the lower yields. Current levels as follows: Dec'24 cumulative -18.4bp, Jan'25 -24bp, Mar'25 -40bp, May'25 -48bp.
JGB futures are sharply stronger and near session highs, +31 compared to settlement levels, as domestic political uncertainty shifted back to centre stage.
Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity.
(MNI) The potential political reaction to rate hikes is making senior BOJ officials tend towards normalising policy more slowly, despite data showing it is moving towards achieving its inflation target, MNI understands.
The Bank’s concerns over politics, and also over how markets might react to higher rates, means that an increase to the 0.25% policy rate at the Dec 18-19 meeting will be unlikely unless the yen weakens to JPY160 against the dollar.
Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today. Fed Powell speaks at a policy discussion.
Cash JGBs are flat to 3bps richer across benchmarks, with a steepening bias. The benchmark 10-year yield is 3bps lower at 1.051%.
The swaps curve has twist-steepened, with rates 3bps lower to 1bp higher.
Tomorrow, the local calendar will see International Investment flows alongside 30-year supply. BOJ Board Nakamura will give a speech in Hiroshima.
ACGBs (YM +8.0 & XM +5.0) sharply richer after reversing early weakness following weaker-than-expected Q3 GDP.
The Australian economy grew at 0.3% in Q3, 20bps lower than expected, and 0.8% y/y. Growth was propped up by public sector expenditure, up 1.4%, with government consumption and public investment both contributing to the Q3 result. The RBA forecasts year-ended GDP to print at 1.5% in Q4.
GDP per hour worked, a measure of productivity which the RBA watches closely, fell 0.5% q/q, from Q2’s 0.8% decline, and was -0.8% y/y. Real unit labour costs, meanwhile, rose 0.5% q/q, down from Q2’s 1.5%.
Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today while Fed Chairman Powell speaks at a moderated policy discussion at 1340ET. US Non-Farm Payrolls are due on Friday.
Cash ACGBs are 5-9bps richer with the AU-US 10-year yield differential at +3bps.
Swap rates are 4-9bps lower.
The bills strip has cheapened, with pricing flat to -1.
RBA-dated OIS pricing is 5-13bps softer across 2025 meetings. Nevertheless, a 25bps rate cut is still not fully priced until May.
Tomorrow, the local calendar will see Household Spending and Trade Balance data.
Australian Q3 GDP was weaker than market forecasts. The economy expanded +0.3%q/q against a 0.5% forecast. In y/y terms were were up 0.8%, against a 1.1% forecast and prior of 1.0%. This is the softest y/y print since end 2020 (when the Covid pandemic impacted).
In terms of the detail, household spending was flat in the quarter, after a -0.3% dip in Q2. We slowed further in y/y terms to 0.4%.
General government spending was 1.4% in consumption terms, led by state governments. Broader government spending was also strong.
Dwelling and machinery and equipment investment rose in q/q terms, but again the government side was quite dominate. Private capital formation didn't make any contribution to GDP growth. Overall domestic demand rose 0.7% q/q, versus a 0.2% gain in Q2.
GDP per capita was down -0.3% continuing the negative trend.
Today's data doesn't paint a great picture for the domestic economy (outside of government expenditure). It is unlikely to shift near term RBA thinking though, with recent Oct data showing slightly firmer household spending trends. The central bank meets next Tuesday.
Fig 1: Australia GDP & Household Spending (orange line) Y/Y
The cross-market curve correlation between Australia and the U.S. has collapsed over the past week, indicating a shift in focus toward domestic factors rather than global or U.S.-centric drivers.
This marks the fourth such episode in 2024.
The previous three episodes coincided with key Australian CPI releases. The first occurred in late April, coinciding with the release of Q1 CPI data. The second followed the May Monthly CPI release in late June.
The third dip emerged in late September after the August Monthly CPI print.
This latest decline, however, appears to be driven by concerns over Australian economic growth, culminating in today’s weaker-than-expected Q3 GDP print.
In each of the previous instances, the cross-curve correlation quickly rebounded to near its peak levels, suggesting that short-lived dislocations have been the norm.
However, it’s worth noting that global yield curve correlations often weaken during transitions from synchronised policy tightening to divergent easing cycles. As central banks begin to chart different paths, the current low level of correlation may be more sustainable this time around.
Figure 1: Rolling 10-day Correlation – ACGB 3/10 Curve Vs. US Tsy 2/10 Curve
RBA-dated OIS pricing is 5-13bps softer across 2025 meetings after today’s weaker-than-expected Q3 GDP data.
The Australian economy grew at 0.3% in Q3, 20bps lower than expected, and 0.8% y/y. Growth was propped up by public sector expenditure, up 1.4%, with government consumption and public investment both contributing to the Q3 result. The RBA forecasts year-ended GDP to print at 1.5% in Q4.
GDP per hour worked, a measure of productivity which the RBA watches closely, fell 0.5% q/q, from Q2’s 0.8% decline, and was -0.8% y/y. Real unit labour costs, meanwhile, rose 0.5% q/q, down from Q2’s 1.5%.
Nevertheless, a 25bp rate cut remains only partially priced until May, with the April meeting currently reflecting a 95% probability of a 25bp reduction.
Notably, market expectations for the May meeting have softened by around 20bps over the past two weeks. Previously, a full 25bps cut wasn’t anticipated until August, highlighting a significant shift in rate cut expectations.
NZGBs closed showing a bear-flattener, with benchmark yields flat to 3bps.
Swap rates, however, closed flat to 5bps lower, with the 2s10s curve steeper and implied swap spreads significantly tighter.
Late session strength could be linked to positive spillover from ACGBs, which have rallied strongly following a disappointing Q3 GDP print.
Governor Adrian Orr told a parliamentary select committee that changing capital rules is unlikely to improve bank competition.
The ANZ World Commodity Price Index increased 2.9% m/m in November. In NZD terms, the index was up 5.2%. Dairy prices rose 5.4% amid a continued increase in demand and relatively stagnant supply. Notably, butter is at record prices and are up 44% in the past year, as per ANZ.
RBNZ dated OIS pricing is flat to 7bps softer across meetings, led by late 2025. 42bps of easing is priced for February, with a cumulative 101bps by November 2025.
The local calendar will see CoreLogic Home Values, Volume of All Buildings and NZ Government 4-Month Financial Statements tomorrow.
Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 3.00% Apr-29 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.
The USD BBDXY index is little changed in the first part of Wednesday dealings. The index was last near 1281.25, but the main story has been AUD weakness post weaker than forecast Q3 GDP numbers.
AUD/USD got too fresh multi month lows of 0.6408. The pair sits slightly higher now, last near 0.6435, still off 0.80% for the session. We have seen a sharp move lower in local yields, while RBA pricing for cuts next year has firmed as well. A cut for the April meeting is now 95% priced. Downside focus for AUD/USD is likely to rest on a target south of 0.6400.
Q3 GDP for Australia showed flat consumer spending and little private sector growth elsewhere. Government spending boosted the headline of 0.3% growth, but this was still below market expectations.
NZD/USD got dragged lower as well, the pair last near 0.5855, off around 0.45%.
USD/JPY got to lows of 149.53, but sits back in the 149.90/95 in latest dealings. The leader of the DPP, Yucihiro Tamaki, will temporarily step down over a scandal related to an affair (per BBG). DPP is a key power broker for the minor led Ishiba government. It remains to be seen if this impacts legislation that needs to be passed by the Ishiba regime.
Spot USD/KRW is much lower, as the authorities try to contain fallout from the Tuesday martial law episode. It remains to be seen if President Yoon stays on, with the opposition calling for him to be impeached. The pair was last near 1412, up 1.20% for the session in won terms.
In the cross asset space, US yields have ticked down this afternoon, led by the front end, while US equity futures are higher.
Looking ahead, we have final PMI reads in the EU and UK. BoE speak, along with ECB speak. In the US the ADP prints, along with the services ISM. There is also Fed speak, headlined by comments from Fed Chair Powell.
The larger markets in the Asean region had a weak day today as Political Uncertainty in Korea boiled over and the outlook for the current President now uncertain.
The KOSPI fell in early trading and stayed negative all day to be down -1.92%, the largest underperformer of the major indices in the region.
China followed suit despite the CAIXIN composite PMI being up on prior month, with the CSI300 down -0.20%, Shanghai down -0.07%, Shenzhen down -0.38% and Hang Seng up +0.08%.
South East Asia bucked the negative trend with Malaysia’s FTSE Malay KLCI up +0.29%.
Indonesia’s Jakarta Composite rose +1.46% continuing on from yesterdays strong day following remarks from the Central Bank governor indicating rates could be on hold for some time.
India had a strong day yesterday up +0.75% and has opened strong today to be up +0.44%, marking a fourth successive day of positive returns.
Following a period of outflows yesterday saw strong inflows the larger economies.
South Korea: Recorded inflows of +$561m yesterday, bringing the 5-day total to -$705m. YTD flows remain positive at +$4.512bnbn. The 5-day average is -$141m, the 20-day average is -$134m and the 100-day average of -$139m.
Taiwan: Experienced inflows of +$1035m yesterday, with total outflows of -$503m over the past 5 days. YTD flows are negative at -$17.317bn. The 5-day average is -$101m, the 20-day average of -$286m and the 100-day average of -$221m.
India: Saw inflows of +$448m as of Monday, with a total outflow of -$351m over the previous 5 days. YTD inflows stand at +$1.799bn. The 5-day average is -$70m, the 20-day average of -$112m and the 100-day average of -$21m.
Indonesia: Posted inflows of +$130m yesterday, bringing the 5-day total to -$160m. YTD flows remain positive at +$1.517b. The 5-day average is -$32m, the 20-day average is -$51m the 100-day average of +$17m.
Thailand: Recorded inflows of +$41m yesterday, totaling -$36m over the past 5 days. YTD flows are negative at -$3.795bn. The 5-day average is -$7m, the 20-day average of -$17m the 100-day average of -$5m.
Malaysia: Experienced outflows of -$49m yesterday, contributing to a 5-day outflow of -$482m. YTD flows stand at -$410m. The 5-day average is -$96m, the 20-day average of -$39m the 100-day average of -$4m.
Philippines: Saw outflows of -$7m yesterday, with net outflows of -$58m over the past 5 days. YTD flows are negative at -$313m. The 5-day average is -$12m, the 20-day average of -$17m the 100-day average of +$2m.
OPEC+ delegates have provided some updates as to the ongoing discussions over the last week on supply for 2025, with an agreement likely to be reached to delay increasing oil production.
The US announced new sanctions against Iran targeting the shadow oil fleet that illegally transports Iranian oil to foreign markets.
Shipping firms and their management will be targeted by the new sanctions aimed at ‘imposing additional costs on Iran’s petroleum sector following Iran’s attack on Israel,’ the Treasury Department said in its statement.
This is the second time in two months the US has widened its approach to sanctions on Iran as the conflict in the Middle East continues.
Overnight news that Israel attacked and killed Hezbollah’s liaison to the Syrian army according to Israeli defense ministry release.
WTI had a very strong day in the US trading session yesterday, oil jumped 2.50% to close at US$69.9, and then continued rallying in Asia to be $70.08.
Brent followed suit up 2.35% to close at US$73.61, before continuing its rally to be $73.80.
Next week sees a significant gathering of Chinese leaders where it is intended to map out the strategy for the economic revival in 2025. China’s faltering growth has been a significant drag in 2024 on oil prices.
Gold enjoyed a safe haven bid today with the political turmoil in Korea with both countries facing serious political turmoil that could topple the government.
Gold rose during the last hours in US trade to a high of US$2,655.63 before giving back some of those gains to trade below $2,640, only to bounce back in the Asia afternoon to be at $2,648.70.
Gold markets will watch closely the array of data from the US to get a sense of whether the FED will cut rates at their last meeting of the year.
Bank Indonesia Says Ready to Intervene to Support Rupiah (source: BBG)
Indonesian Banks Cut Back Lending After Busy 2024: (source: BBG)
Indonesia Needs $850B in Investment to Hit 8% GDP Growth: (Source: Kompas)
Indonesia’s Jakarta Composite rose +1.46% continuing on from yesterday’s strong day following remarks from the Central Bank governor indicating rates could be on hold for some time.
IDR – withstood the volatile day relatively unscathed down just -0.03% at 15,950.
Bonds: most maturities saw higher yields today with the 10YR at 6.901%
Today’s HSBC India PMI Services is no exception and whilst very strong at +58.4, is has softened from the prior month’s reading of +59.2. (source: MNI – Market News).
India is prepared for a compromising approach while engaging with the incoming administration of Donald Trump to maintain its ties with the US, the South Asian nation’s foreign minister said. (source: BBG).
With some market participants suggesting the RBI will cut rates this week, India's NIFTY 50 has had a strong day yesterday up +0.75% and has opened strong today to be up +0.44%, marking a fourth successive day of positive returns.
INR – continues to be stable at 84.65.
Bonds: India’s 10-year is seeing strong demand with yields down almost 3bps at 6.687%.
USD/Asia pairs are mostly lower in the first part of Wednesday dealing. The standout has been the won, with USD/KRW down by over 1.2% at this stage. We opened sharply lower, getting to 1406.35 before rebounding. The pair was last near 1411. Intra-session highs from Tuesday were close to 1445. Pre martial law headlines were around the 1403 level.
There has been lots of regulatory/BoK meetings today, with the authorities pledging to provide unlimited liquidity. The BoK also noted it didn't discuss interest rates today.
For President Yoon, opposition parties are looking to submit an impeachment motion against President Yoon at 2:40pm local time today, which is right about now.
Elsewhere, spot USD/CNH is down around 0.20%, last near 7.2860/70. The CNY fixing was much stronger than forecast and remains sub 7.2000. We had the Caixin PMI for services print weaker than expected but that didn't impact greatly.
In South East Asia, all currencies except IDR are higher.
USD/MYR is away from recent highs, last near 4.4500, while USD/PHP is down 0.35% to sub 58.40. USD/THB is back near 34.30. Earlier data showed weaker than expected Thailand CPI for Nov, headline dipping m/m, while the y/y pace is still under 1%.
USD/IDR is relatively steady near 15950, it's likely to authorities are on guard against a sharp break through 16000.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
04/12/2024
0815/0915
**
ES
S&P Global Services PMI (f)
04/12/2024
0815/0915
**
ES
S&P Global Composite PMI (final)
04/12/2024
0845/0945
**
IT
S&P Global Services PMI (f)
04/12/2024
0845/0945
**
IT
S&P Global Composite PMI (final)
04/12/2024
0850/0950
**
FR
S&P Global Services PMI (f)
04/12/2024
0850/0950
**
FR
S&P Global Composite PMI (final)
04/12/2024
0855/0955
**
DE
S&P Global Services PMI (f)
04/12/2024
0855/0955
**
DE
S&P Global Composite PMI (final)
04/12/2024
0900/1000
**
EU
S&P Global Services PMI (f)
04/12/2024
0900/1000
**
EU
S&P Global Composite PMI (final)
04/12/2024
0900/1000
EU
ECB's Cipollone speech on behavioural financial regulations
04/12/2024
0900/0900
GB
BOE's Bailey keynote interview at the FT Boardroom
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.
Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI (SYDNEY)
South Korean markets have been in focus as the authorities respond to the fall out from Tuesday's brief martial law period. Equities are weaker, but away from lows, while the KRW has rallied. The opposition parties have submitted an impeachment proposal for President Yoon this afternoon.
Elsewhere AUD and local yields were down sharply following the Q3 GDP miss, which showed weak private sector growth momentum. RBA easing odds for 2025 are higher.
Looking ahead, we have final PMI reads in the EU and UK. BoE speak, along with ECB speak. In the US the ADP prints, along with the services ISM. There is also Fed speak, headlined by comments from Fed Chair Powell.
After yesterday’s weak close in US time with yields 2-4bp higher into the Asia open, bonds then turned around today to finish lower in yield.
US 2YR 4.169% (-1.3bp), US 5YR 4.107% (-0.7bp), US 10YR 4.226% (unch) US 30YR 4.407% (+0.4bp)
Despite the movements in cash, and the uncertainty emanating from Korea, futures had a quiet day opening at 110-31 where they have stayed for most of the day.
In a week of data that will likely seal the rates decision, tonight sees a raft of data including ADP, PMIs, ISM, Factory Orders and Durable Goods.
Projected rate cuts into early 2025 look mixed after surging late Monday following Fed Gov Waller's comments but moved higher with the lower yields. Current levels as follows: Dec'24 cumulative -18.4bp, Jan'25 -24bp, Mar'25 -40bp, May'25 -48bp.
JGB futures are sharply stronger and near session highs, +31 compared to settlement levels, as domestic political uncertainty shifted back to centre stage.
Yuichiro Tamaki, a kingmaker for Japan’s minority government, will temporarily step down as his party’s leader amid a scandal over an alleged marital infidelity.
(MNI) The potential political reaction to rate hikes is making senior BOJ officials tend towards normalising policy more slowly, despite data showing it is moving towards achieving its inflation target, MNI understands.
The Bank’s concerns over politics, and also over how markets might react to higher rates, means that an increase to the 0.25% policy rate at the Dec 18-19 meeting will be unlikely unless the yen weakens to JPY160 against the dollar.
Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today. Fed Powell speaks at a policy discussion.
Cash JGBs are flat to 3bps richer across benchmarks, with a steepening bias. The benchmark 10-year yield is 3bps lower at 1.051%.
The swaps curve has twist-steepened, with rates 3bps lower to 1bp higher.
Tomorrow, the local calendar will see International Investment flows alongside 30-year supply. BOJ Board Nakamura will give a speech in Hiroshima.
ACGBs (YM +8.0 & XM +5.0) sharply richer after reversing early weakness following weaker-than-expected Q3 GDP.
The Australian economy grew at 0.3% in Q3, 20bps lower than expected, and 0.8% y/y. Growth was propped up by public sector expenditure, up 1.4%, with government consumption and public investment both contributing to the Q3 result. The RBA forecasts year-ended GDP to print at 1.5% in Q4.
GDP per hour worked, a measure of productivity which the RBA watches closely, fell 0.5% q/q, from Q2’s 0.8% decline, and was -0.8% y/y. Real unit labour costs, meanwhile, rose 0.5% q/q, down from Q2’s 1.5%.
Cash US tsys are 2bps richer to 1bp cheaper, with a steepening bias, in today’s Asia-Pac session. The focus now turns to ADP private employment and ISM data later today while Fed Chairman Powell speaks at a moderated policy discussion at 1340ET. US Non-Farm Payrolls are due on Friday.
Cash ACGBs are 5-9bps richer with the AU-US 10-year yield differential at +3bps.
Swap rates are 4-9bps lower.
The bills strip has cheapened, with pricing flat to -1.
RBA-dated OIS pricing is 5-13bps softer across 2025 meetings. Nevertheless, a 25bps rate cut is still not fully priced until May.
Tomorrow, the local calendar will see Household Spending and Trade Balance data.
Australian Q3 GDP was weaker than market forecasts. The economy expanded +0.3%q/q against a 0.5% forecast. In y/y terms were were up 0.8%, against a 1.1% forecast and prior of 1.0%. This is the softest y/y print since end 2020 (when the Covid pandemic impacted).
In terms of the detail, household spending was flat in the quarter, after a -0.3% dip in Q2. We slowed further in y/y terms to 0.4%.
General government spending was 1.4% in consumption terms, led by state governments. Broader government spending was also strong.
Dwelling and machinery and equipment investment rose in q/q terms, but again the government side was quite dominate. Private capital formation didn't make any contribution to GDP growth. Overall domestic demand rose 0.7% q/q, versus a 0.2% gain in Q2.
GDP per capita was down -0.3% continuing the negative trend.
Today's data doesn't paint a great picture for the domestic economy (outside of government expenditure). It is unlikely to shift near term RBA thinking though, with recent Oct data showing slightly firmer household spending trends. The central bank meets next Tuesday.
Fig 1: Australia GDP & Household Spending (orange line) Y/Y
The cross-market curve correlation between Australia and the U.S. has collapsed over the past week, indicating a shift in focus toward domestic factors rather than global or U.S.-centric drivers.
This marks the fourth such episode in 2024.
The previous three episodes coincided with key Australian CPI releases. The first occurred in late April, coinciding with the release of Q1 CPI data. The second followed the May Monthly CPI release in late June.
The third dip emerged in late September after the August Monthly CPI print.
This latest decline, however, appears to be driven by concerns over Australian economic growth, culminating in today’s weaker-than-expected Q3 GDP print.
In each of the previous instances, the cross-curve correlation quickly rebounded to near its peak levels, suggesting that short-lived dislocations have been the norm.
However, it’s worth noting that global yield curve correlations often weaken during transitions from synchronised policy tightening to divergent easing cycles. As central banks begin to chart different paths, the current low level of correlation may be more sustainable this time around.
Figure 1: Rolling 10-day Correlation – ACGB 3/10 Curve Vs. US Tsy 2/10 Curve
RBA-dated OIS pricing is 5-13bps softer across 2025 meetings after today’s weaker-than-expected Q3 GDP data.
The Australian economy grew at 0.3% in Q3, 20bps lower than expected, and 0.8% y/y. Growth was propped up by public sector expenditure, up 1.4%, with government consumption and public investment both contributing to the Q3 result. The RBA forecasts year-ended GDP to print at 1.5% in Q4.
GDP per hour worked, a measure of productivity which the RBA watches closely, fell 0.5% q/q, from Q2’s 0.8% decline, and was -0.8% y/y. Real unit labour costs, meanwhile, rose 0.5% q/q, down from Q2’s 1.5%.
Nevertheless, a 25bp rate cut remains only partially priced until May, with the April meeting currently reflecting a 95% probability of a 25bp reduction.
Notably, market expectations for the May meeting have softened by around 20bps over the past two weeks. Previously, a full 25bps cut wasn’t anticipated until August, highlighting a significant shift in rate cut expectations.
NZGBs closed showing a bear-flattener, with benchmark yields flat to 3bps.
Swap rates, however, closed flat to 5bps lower, with the 2s10s curve steeper and implied swap spreads significantly tighter.
Late session strength could be linked to positive spillover from ACGBs, which have rallied strongly following a disappointing Q3 GDP print.
Governor Adrian Orr told a parliamentary select committee that changing capital rules is unlikely to improve bank competition.
The ANZ World Commodity Price Index increased 2.9% m/m in November. In NZD terms, the index was up 5.2%. Dairy prices rose 5.4% amid a continued increase in demand and relatively stagnant supply. Notably, butter is at record prices and are up 44% in the past year, as per ANZ.
RBNZ dated OIS pricing is flat to 7bps softer across meetings, led by late 2025. 42bps of easing is priced for February, with a cumulative 101bps by November 2025.
The local calendar will see CoreLogic Home Values, Volume of All Buildings and NZ Government 4-Month Financial Statements tomorrow.
Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 3.00% Apr-29 bond, NZ$250mn of the 4.25% May-34 bond and NZ$50mn of the 2.75% Apr-37 bond.
The USD BBDXY index is little changed in the first part of Wednesday dealings. The index was last near 1281.25, but the main story has been AUD weakness post weaker than forecast Q3 GDP numbers.
AUD/USD got too fresh multi month lows of 0.6408. The pair sits slightly higher now, last near 0.6435, still off 0.80% for the session. We have seen a sharp move lower in local yields, while RBA pricing for cuts next year has firmed as well. A cut for the April meeting is now 95% priced. Downside focus for AUD/USD is likely to rest on a target south of 0.6400.
Q3 GDP for Australia showed flat consumer spending and little private sector growth elsewhere. Government spending boosted the headline of 0.3% growth, but this was still below market expectations.
NZD/USD got dragged lower as well, the pair last near 0.5855, off around 0.45%.
USD/JPY got to lows of 149.53, but sits back in the 149.90/95 in latest dealings. The leader of the DPP, Yucihiro Tamaki, will temporarily step down over a scandal related to an affair (per BBG). DPP is a key power broker for the minor led Ishiba government. It remains to be seen if this impacts legislation that needs to be passed by the Ishiba regime.
Spot USD/KRW is much lower, as the authorities try to contain fallout from the Tuesday martial law episode. It remains to be seen if President Yoon stays on, with the opposition calling for him to be impeached. The pair was last near 1412, up 1.20% for the session in won terms.
In the cross asset space, US yields have ticked down this afternoon, led by the front end, while US equity futures are higher.
Looking ahead, we have final PMI reads in the EU and UK. BoE speak, along with ECB speak. In the US the ADP prints, along with the services ISM. There is also Fed speak, headlined by comments from Fed Chair Powell.
The larger markets in the Asean region had a weak day today as Political Uncertainty in Korea boiled over and the outlook for the current President now uncertain.
The KOSPI fell in early trading and stayed negative all day to be down -1.92%, the largest underperformer of the major indices in the region.
China followed suit despite the CAIXIN composite PMI being up on prior month, with the CSI300 down -0.20%, Shanghai down -0.07%, Shenzhen down -0.38% and Hang Seng up +0.08%.
South East Asia bucked the negative trend with Malaysia’s FTSE Malay KLCI up +0.29%.
Indonesia’s Jakarta Composite rose +1.46% continuing on from yesterdays strong day following remarks from the Central Bank governor indicating rates could be on hold for some time.
India had a strong day yesterday up +0.75% and has opened strong today to be up +0.44%, marking a fourth successive day of positive returns.
Following a period of outflows yesterday saw strong inflows the larger economies.
South Korea: Recorded inflows of +$561m yesterday, bringing the 5-day total to -$705m. YTD flows remain positive at +$4.512bnbn. The 5-day average is -$141m, the 20-day average is -$134m and the 100-day average of -$139m.
Taiwan: Experienced inflows of +$1035m yesterday, with total outflows of -$503m over the past 5 days. YTD flows are negative at -$17.317bn. The 5-day average is -$101m, the 20-day average of -$286m and the 100-day average of -$221m.
India: Saw inflows of +$448m as of Monday, with a total outflow of -$351m over the previous 5 days. YTD inflows stand at +$1.799bn. The 5-day average is -$70m, the 20-day average of -$112m and the 100-day average of -$21m.
Indonesia: Posted inflows of +$130m yesterday, bringing the 5-day total to -$160m. YTD flows remain positive at +$1.517b. The 5-day average is -$32m, the 20-day average is -$51m the 100-day average of +$17m.
Thailand: Recorded inflows of +$41m yesterday, totaling -$36m over the past 5 days. YTD flows are negative at -$3.795bn. The 5-day average is -$7m, the 20-day average of -$17m the 100-day average of -$5m.
Malaysia: Experienced outflows of -$49m yesterday, contributing to a 5-day outflow of -$482m. YTD flows stand at -$410m. The 5-day average is -$96m, the 20-day average of -$39m the 100-day average of -$4m.
Philippines: Saw outflows of -$7m yesterday, with net outflows of -$58m over the past 5 days. YTD flows are negative at -$313m. The 5-day average is -$12m, the 20-day average of -$17m the 100-day average of +$2m.
OPEC+ delegates have provided some updates as to the ongoing discussions over the last week on supply for 2025, with an agreement likely to be reached to delay increasing oil production.
The US announced new sanctions against Iran targeting the shadow oil fleet that illegally transports Iranian oil to foreign markets.
Shipping firms and their management will be targeted by the new sanctions aimed at ‘imposing additional costs on Iran’s petroleum sector following Iran’s attack on Israel,’ the Treasury Department said in its statement.
This is the second time in two months the US has widened its approach to sanctions on Iran as the conflict in the Middle East continues.
Overnight news that Israel attacked and killed Hezbollah’s liaison to the Syrian army according to Israeli defense ministry release.
WTI had a very strong day in the US trading session yesterday, oil jumped 2.50% to close at US$69.9, and then continued rallying in Asia to be $70.08.
Brent followed suit up 2.35% to close at US$73.61, before continuing its rally to be $73.80.
Next week sees a significant gathering of Chinese leaders where it is intended to map out the strategy for the economic revival in 2025. China’s faltering growth has been a significant drag in 2024 on oil prices.
Gold enjoyed a safe haven bid today with the political turmoil in Korea with both countries facing serious political turmoil that could topple the government.
Gold rose during the last hours in US trade to a high of US$2,655.63 before giving back some of those gains to trade below $2,640, only to bounce back in the Asia afternoon to be at $2,648.70.
Gold markets will watch closely the array of data from the US to get a sense of whether the FED will cut rates at their last meeting of the year.
Bank Indonesia Says Ready to Intervene to Support Rupiah (source: BBG)
Indonesian Banks Cut Back Lending After Busy 2024: (source: BBG)
Indonesia Needs $850B in Investment to Hit 8% GDP Growth: (Source: Kompas)
Indonesia’s Jakarta Composite rose +1.46% continuing on from yesterday’s strong day following remarks from the Central Bank governor indicating rates could be on hold for some time.
IDR – withstood the volatile day relatively unscathed down just -0.03% at 15,950.
Bonds: most maturities saw higher yields today with the 10YR at 6.901%
Today’s HSBC India PMI Services is no exception and whilst very strong at +58.4, is has softened from the prior month’s reading of +59.2. (source: MNI – Market News).
India is prepared for a compromising approach while engaging with the incoming administration of Donald Trump to maintain its ties with the US, the South Asian nation’s foreign minister said. (source: BBG).
With some market participants suggesting the RBI will cut rates this week, India's NIFTY 50 has had a strong day yesterday up +0.75% and has opened strong today to be up +0.44%, marking a fourth successive day of positive returns.
INR – continues to be stable at 84.65.
Bonds: India’s 10-year is seeing strong demand with yields down almost 3bps at 6.687%.
USD/Asia pairs are mostly lower in the first part of Wednesday dealing. The standout has been the won, with USD/KRW down by over 1.2% at this stage. We opened sharply lower, getting to 1406.35 before rebounding. The pair was last near 1411. Intra-session highs from Tuesday were close to 1445. Pre martial law headlines were around the 1403 level.
There has been lots of regulatory/BoK meetings today, with the authorities pledging to provide unlimited liquidity. The BoK also noted it didn't discuss interest rates today.
For President Yoon, opposition parties are looking to submit an impeachment motion against President Yoon at 2:40pm local time today, which is right about now.
Elsewhere, spot USD/CNH is down around 0.20%, last near 7.2860/70. The CNY fixing was much stronger than forecast and remains sub 7.2000. We had the Caixin PMI for services print weaker than expected but that didn't impact greatly.
In South East Asia, all currencies except IDR are higher.
USD/MYR is away from recent highs, last near 4.4500, while USD/PHP is down 0.35% to sub 58.40. USD/THB is back near 34.30. Earlier data showed weaker than expected Thailand CPI for Nov, headline dipping m/m, while the y/y pace is still under 1%.
USD/IDR is relatively steady near 15950, it's likely to authorities are on guard against a sharp break through 16000.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
04/12/2024
0815/0915
**
ES
S&P Global Services PMI (f)
04/12/2024
0815/0915
**
ES
S&P Global Composite PMI (final)
04/12/2024
0845/0945
**
IT
S&P Global Services PMI (f)
04/12/2024
0845/0945
**
IT
S&P Global Composite PMI (final)
04/12/2024
0850/0950
**
FR
S&P Global Services PMI (f)
04/12/2024
0850/0950
**
FR
S&P Global Composite PMI (final)
04/12/2024
0855/0955
**
DE
S&P Global Services PMI (f)
04/12/2024
0855/0955
**
DE
S&P Global Composite PMI (final)
04/12/2024
0900/1000
**
EU
S&P Global Services PMI (f)
04/12/2024
0900/1000
**
EU
S&P Global Composite PMI (final)
04/12/2024
0900/1000
EU
ECB's Cipollone speech on behavioural financial regulations
04/12/2024
0900/0900
GB
BOE's Bailey keynote interview at the FT Boardroom
04/12/2024
0930/0930
**
GB
S&P Global Services PMI (Final)
04/12/2024
0930/0930
***
GB
S&P Global/ CIPS UK Final Composite PMI
04/12/2024
1000/1100
**
EU
PPI
04/12/2024
1000/1000
**
GB
Gilt Outright Auction Result
04/12/2024
1200/0700
**
US
MBA Weekly Applications Index
04/12/2024
1315/0815
***
US
ADP Employment Report
04/12/2024
1330/1430
EU
ECB's Lagarde statement at ECON hearing
04/12/2024
1345/0845
US
St. Louis Fed's Alberto Musalem
04/12/2024
1400/0900
US
Richmond Fed's Tom Barkin
04/12/2024
1445/0945
***
US
S&P Global Services Index (final)
04/12/2024
1445/0945
***
US
S&P Global US Final Composite PMI
04/12/2024
1500/1000
***
US
ISM Non-Manufacturing Index
04/12/2024
1500/1000
**
US
Factory New Orders
04/12/2024
1530/1030
**
US
DOE Weekly Crude Oil Stocks
04/12/2024
1845/1345
US
Fed Chair Jerome Powell
04/12/2024
1900/1400
US
Fed Beige Book
05/12/2024
0030/1130
**
AU
Trade Balance
05/12/2024
0645/0745
**
CH
Unemployment
05/12/2024
0700/0800
**
DE
Manufacturing Orders
05/12/2024
0700/0800
SE
Flash CPI
05/12/2024
0745/0845
*
FR
Industrial Production
05/12/2024
0800/0900
**
ES
Industrial Production
05/12/2024
0830/0930
**
EU
S&P Global Final Eurozone Construction PMI
05/12/2024
0930/0930
**
GB
S&P Global/CIPS Construction PMI
05/12/2024
0930/0930
GB
DMP Data
05/12/2024
1000/1100
**
EU
Retail Sales
05/12/2024
1330/0830
***
US
Jobless Claims
05/12/2024
1330/0830
**
US
Trade Balance
05/12/2024
1330/0830
**
CA
International Merchandise Trade (Trade Balance)
05/12/2024
1330/0830
**
US
WASDE Weekly Import/Export
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