- The main macro focus today has been around the weekend news of loosening property restrictions in 3 large China cities. The market continues to digest China stimulus announcements. In the equity space, we saw very large gains for China/HK markets particularly in property related areas.
- China September PMIs were mostly weaker than forecast but this was largely ignored by the market.
- Iron ore surged to multi month highs. This benefited the AUD, although NZD was up by just as much. Yen was an early underperformer, but this wasn't sustained. It has been a very slow session in Asia today for US tsys, ranges have been very tight.
- Looking ahead, we have the second UK GDP estimate, along with regional EU inflation details (with German figures out). In the US session, we have the MNI Chicago PMI print, as well as hearing from Fed Chair Powell.
MARKETS
US TSYS: Tsys Futures Little Changed, MNI Chicago PMI Later Today
- It has been a very slow session in Asia today for US tsys, ranges have been very tight. TU is -00+ at 104-09⅜ while TY is trading -02+ at 114-21.
- Focus in Asia today has all been on equities with Chinese stocks surging higher after further easing of homebuying restrictions, while Japanese equities have plunged after after Ishiba was elected new prime minister
- The tsys curve is little changed with yields flat to 0.5bps higher. The 2yr is trading near recent lows at 3.563% while the 10yr is trading +0.5bps at 3.754%.
- Friday's data underscored a rise in projected rate cuts into early 2025 gained vs. pre-data levels (*): Nov'24 cumulative -38.5bp (-37.2bp), Dec'24 -76.8bp (-73.9bp), Jan'25 -109.5bp (-104.5bp).
- Looking ahead: relatively quiet start to the week with MNI Chicago PMI later today
JGBS: Cash Bond Bear-Flattener, Labour Market Data & Tankan Report Tomorrow
JGB futures are sharply cheaper and near session lows, -68 compared to settlement levels.
- Outside of the previously outlined IP and Retail Sales data, the market has had news of a general election on October 27th to digest. The new LDP leader Shigeru Ishiba will dissolve the lower house on October 9th (per BBG/NHK).
- Cash US tsys are little changed in today’s Asia-Pac session after Friday’s post-PCE deflator gains. The US calendar this week will see MNI Chicago PMI today, ISMs tomorrow, ADP private employment data on Wednesday, and the September jobs report on Friday.
- Cash JGBs are flat to 4bps cheaper across benchmarks, with a flattening bias. The benchmark 2-year yield is 2.4bps higher at 0.391% after today’s supply.
- The 2-year bond auction demonstrated mixed demand metrics, with the low price meeting dealer expectations, but the cover ratio decreasing to 3.8149x from 5.542x in August. The auction tail was also longer than last month.
- Swap rates are little changed out to the 30-year and 4bps higher beyond. Swap spreads are mixed.
- Tomorrow, the local calendar will see the Jobless Rate, Job-To-Applicant Ratio, and Jibun Bank PMI Mfg data alongside the Q3 Tankan Report.
AUSSIE BONDS: Flat But At Session Cheaps As IO Surges
ACGBs (YM flat & XM -0.5) are flat but dealing at Sydney session cheaps.
- Outside of the previously outlined private sector credit, there hasn't been much by way of domestic drivers to flag.
- (AFR) "Iron ore has surged 10 per cent today after three of China’s largest cities eased rules for home buyers, triggering a rally in mining stocks and helping the ASX set a record high." (See link)
- China's Mfg PMIs were mixed for September. The official index firmed to 49.8 from 49.1 in August (consensus was 49.4), while the Caixin index printed well below analyst forecasts at 49.3 versus 50.5 forecast and 50.4 prior.
- Cash US tsys are little changed in today’s Asia-Pac session.
- Cash ACGBs are flat to 1bp richer, with the AU-US 10-year yield differential at +20bps.
- Swap rates are flat to 1bp higher, with the 3s10s curve steeper.
- The bills strip is little changed.
- RBA-dated OIS pricing is 1-2bps softer across meetings. A cumulative 15bps of easing is priced by year-end.
- Tomorrow, the local calendar will see CoreLogic Home Value, Judo Bank PMI Mfg and Building Approvals data.
- On Wednesday, the AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond.
NZGBS: Slightly Cheaper But Off Best Levels After Strong Bus. Conf.
NZGBs closed slightly cheaper, with benchmark yields 1bp higher. This however masked the sharp reversal cheaper following NZ business confidence data.
- NZ business confidence rose to a fresh 10-year high in September as the prospect of further interest-rate cuts stoked optimism: ANZ. “The economy’s response to lower interest rates could be more vigorous than is generally expected,” ANZ NZ Chief Economist Sharon Zollner said.
- “If confidence about the economic outlook continues to grow rather than petering out, that certainly raises the possibility that investment could recover more quickly than we or the Reserve Bank are anticipating.” (per BBG)
- Cash US tsys are little changed in today’s Asia-Pac session after Friday’s post-PCE deflator gains. The US calendar this week will see MNI Chicago PMI today, ISMs tomorrow, ADP private employment data on Wednesday, and the September jobs report on Friday.
- The NZ-US 10-year yield differential finished 5bps wider at +49bps.
- Swap rates closed 1bp higher.
- RBNZ dated OIS pricing closed little changed. A cumulative 88bps of easing is priced by year-end.
- Tomorrow, the local calendar will see Building Permits and NZIER Business Opinion Survey.
FOREX: Antipodean FX Outperforms Amid Further China Equity Surge
The top performers in the G10 FX space today have been AUD and NZD, which are both up close to 0.45% firmer versus the USD. Further strong China equity gains, coupled with higher metal prices (particularly for iron ore) have been key drivers. This follows the weekend news of easing property restrictions in 3 large China cities. Yen and CHF are weaker, but away from worst levels.
- The BBDXY USD index sits little changed last near 1219.10/15, with all of today's focus in the crosses. US equity futures are close to flat, while US yields are a touch higher.
- USD/JPY got to highs of 142.95, but sits back near 142.25 in latest dealings, only modestly weaker in yen terms.
- New PM Ishiba is expected to call an election for Oct 27th, per onshore media sources. Local equities are sharply lower, with policy continuity seen from Ishiba in the near term (and likely continued BoJ normalization).
- Japan IP data was softer, but is expected to improve from the auto side for the next print. Retail sales were close to expectations and in positive territory.
- AUD/USD was last near the 0.6930/35 level, so just short of recent highs, close to 0.6940. Bulls will target a move towards 0.7000, as China ramps up efforts to boost the economy/property sector. Iron ore has surged higher (last near $112/ton, fresh multi month highs), in line with surging China property equity gains.
- NZD/USD is around 0.6370, just off highs of 0.6375, which marginally breached late Dec highs from 2023. The ANZ business sentiment readings improved further pointing to an improved outlook, although this is more likely for 2025.
- Looking ahead, we have the second UK GDP estimate, along with regional EU inflation details (with German figures out). In the US session, we have the MNI Chicago PMI print, as well as hearing from Fed Chair Powell.
ASIA STOCKS: Chinese Equities Surge Following Further Stimulus Measures
- Asian markets are trading mixed today with Chinese equities have surging again today with property shares experienced a significant rally. The Bloomberg property gauge is up 14% after Shanghai, Shenzhen, and Guangzhou eased homebuying restrictions as part of the government's efforts to stabilize the struggling real estate sector. This follows the announcement of a major stimulus package aimed at addressing the prolonged property slump, with top leaders committing to halt the market's decline.
- The CSI 300 surged more than 6.20%, ChiNext up 11.4%, fueled by recent stimulus measures aimed at tackling China’s property crisis. While in Hong Kong the HSI is up 3.35%, Mainland Property Index is 8.36% higher and the HSTech Index up 7.15%.
- Earlier, China's factory activity contracted for the fifth consecutive month in September, with the Mfg PMI coming in at 49.8 although slightly better than economists' expectations of 49.4.
- Elsewhere Japan’s Nikkei slumped nearly 4.5%, while the Topix dropped over 3%, driven by investor repositioning after Shigeru Ishiba's victory in the ruling party's leadership race. South Korea ( KOSPI -1%) & Taiwan (Taiex -1.50%) have both struggled today with tech stocks lower, while Indian equities are under pressure with the Nifty 50 down 0.5% this has been due to a decline in IT, automotive, and banking stocks. Australia's ASX200 is 0.75% higher, on the back of higher commodity prices after Iron Ore jumped 10%.
ASIA: Asian Equity Flows Mixed, Taiwan Sees Strong Inflows Last Week
Philippines has now seen 20 straight sessions of inflows, while Indonesia has seen some large outflows over the past three sessions.
- South Korea: Saw inflows of $144m Friday, with the past 5 sessions reaching -$528m, while YTD flows are +$11.36b. The 5-day average is -$106m, below both the 20-day average of -$286m and the 100-day average of -$26m.
- Taiwan: Saw inflows of $549m Friday, with the past 5 sessions netting +$3.03b, while YTD flows are -$10.6b. The 5-day average is +$606m, above the 20-day average of -$53m, but below the 100-day average of -$111m.
- India: Saw inflows of $1.02b Thursday, with the past 5 sessions netting +$2.83b, while YTD flows are +$24.76b. The 5-day average is +$253m, below both the 20-day average of +$452m and the 100-day average of +$116m.
- Indonesia: Saw outflows of $33m Friday, with the past 5 sessions netting -$223m, while YTD flows are +$3.45b. The 5-day average is -$45m, below the 20-day average of +$117m, but above the 100-day average of +$29m.
- Thailand: Saw outflows of $56m Friday, with the past 5 sessions totaling -$22m, while YTD flows are -$2.55b. The 5-day average is -$4m, below the 20-day average of +$45m, but above the 100-day average of -$7m.
- Malaysia: Saw outflows of $24m Friday, with the past 5 sessions netting -$127m, while YTD flows are +$867m. The 5-day average is -$25m, below both the 20-day average of +$13m and the 100-day average of +$13m.
- Philippines: Saw inflows of $3m Friday, with the past 5 sessions totaling +$190m, while YTD flows are +$21m. The 5-day average is +$38m, above both the 20-day average of +$17m and the 100-day average of +$3m.
Table 1: EM Asia Equity Flows
OIL: Firmer But Mostly Underperforming Other Commodities
Oil prices are tracking modestly higher in the first part of Monday trade. The active WTI was last near $68.40/bbl, while Brent (for Dec Delivery) was close to $71.90/bbl. This leaves both benchmarks around 0.35-0.45% higher and building on modest gains from Friday's session.
- WTI couldn't get above $69/bbl in earlier trade. recent lows just under $67/bbl remain intact, beyond that lies the earlier September lows near $65/bbl. Hence we remain reasonably close to recent lows.
- Sentiment is likely be aided, at the margins, by positive China related asset gains. This follows last week's stimulus announcements and then the weekend news of easier housing restrictions in 3 major cities. This offset mixed PMI prints from China, with the official manufacturing read improving but still remaining sub 50.0. The Caixin PMI slumped comfortably back below this point.
- Still, oil's gains today compared to more metal related products remains much more modest.
- On-going focus remains on Middle East tensions following Israel's killing of Hezbollah's leader, while Israel also bombed targets in Yemen. The response from Iran will be in focus, although with the conflict nearly coming up to a 1yr anniversary, the market may keep odds of a significant escalation in the conflict as fairly low at this stage.
IRON ORE: Close To Early July Highs Amid China Housing Optimism
The active SGX iron ore futures sits around $111/ton in latest dealings, remain up close to 9% for the session. Intra-session highs came just shy of $113/ton, which was close to highs from the early July period ($113.45/ton). A clean break higher could see the $120/ton region targeted, levels which were last seen in May.
- Iron ore futures are moving in lock step with China real estate stocks, see the chart below. The weekend news around Shanghai, Shenzhen, and Guangzhou easing homebuying restrictions is clearly aiding sentiment. Indeed, Guangzhou has become the first tier-1 city to remove all homebuyer eligibility checks. The market may be speculating other cities follow suit.
- Not surprisingly, onshore steel futures are higher as well, albeit to a slightly reduced magnitude (+7% for hot rolled coil and rebar).
- Broader sentiment hasn't been impacted by the generally softer PMI outcomes earlier (although the official manufacturing PMI did rise). These outcomes have largely been taken over by the events of the last week around stimulus measures/rate cuts etc and then the weekend announcement of easier housing restrictions.
- Early focus may rest on the upcoming holiday spending/travel trends, with China onshore markets closed from tomorrow until next Tuesday for the National Day holiday period.
- On Friday, we saw another slightly positive with lower inventory levels at China port, although we are still elevated from an historical standpoint.
Fig 1: China Real Estate Equities & Iron Ore Futures
Source: MNI - Market News/Bloomberg
GOLD: Pullbacks From All-Time High
Gold is 0.2% lower in today’s Asia-Pac session, after closing 0.5% lower at $2658.24 on Friday.
- As a result, bullion currently sits some $30 lower than Thursday’s all-time high of $2685.
- The softer performance for the yellow metal came despite a benign US inflation, consumption, and PCE inflation report underpinned expectations for more rate cuts from the FOMC ahead, including the potential for another -50 bps in November.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, last week’s move 0.9% move higher confirmed a resumption of the primary uptrend, with focus on $2675.5 next, a Fibonacci projection. Firm support lies at $2583.9, the 20-day EMA.
- After reaching its highest level since end 2012 yesterday, silver underperformed on Friday, down by ~1.5%. For silver, bullish conditions remain intact and this week’s climb reinforces this set-up. Clearance of next key resistance at $32.518, would open $33.880, a Fibonacci projection. Firm support lies at $29.69, the 50-day EMA.
CHINA DATA: PMIs Underscore Policy Stimulus Needs, Manufacturing In Contraction
China's official PMIs were mixed for September. The manufacturing index firming to 49.8 from 49.1 in August (consensus was 49.4), while services eased to 50.0 versus 50.3 prior (50.4 was the consensus). The Caixin PMIs were both well below analysts forecasts - manufacturing at 49.3 versus 50.5 forecast and 50.4 prior, while services printed at 50.3, against a 51.6 forecast and 51.6 prior.
- On balance, the data underscored the need for further policy stimulus, which the authorities stepped up last week. We saw clear softness in the services side of the economy, which related to consumer spending/domestic confidence. Even on the manufacturing side, while the official read improved more than expected, both it and the Caixin manufacturing read sit in contraction territory.
- In terms of the detail on the manufacturing side, output rebounded strongly to 51.2, while the new orders to inventory ratio also rose, pointing to near term resilience for the index.
- Still, external conditions deteriorated, with export orders down to 47.5 from 48.7. Pricing measures rose but still remain comfortably sub 50.0.
- On the services side, it was weakness across the board in terms of new orders, employment and pricing measures.
ASIA FX: USD/CNY Steady Ahead Of Onshore Holiday, KRW & TWD Firmer
North Asia currencies have seen a similar trajectory to Friday's session in some respects. CNH has struggled for further gains, while KRW and TWD have been biased higher against the USD. Equity sentiment has been mixed, with China/HK gains the standout but mostly weaker trends elsewhere.
- The surge in equity gains seen in China/HK, which follows the weekend announcement of easier housing restrictions in 3 large cities (Shanghai, Shenzhen, and Guangzhou) hasn't done much for CNH. USD/CNH couldn't test recent lows near 6.9700 though, with the pair back above 6.9900 in latest dealings. Onshore spot has been very steady, holding above the 7.0100 level, after a close to neutral fixing outcome. The authorities may not want to see further fresh yuan appreciation ahead of the National Day holiday period, with markets out from tomorrow until next Tuesday. The PMI prints were released for Sep and were mostly below expectations, except for the official manufacturing PMI.
- Spot USD/KRW is lower, the pair last near 1307 (+0.30% firmer in won terms). Earlier we got to fresh lows of 1303.4, levels last seen in January of this year. The won has moved higher with AUD, another China proxy play, while some offset has come from weaker onshore equities, with the Kospi down over 1% at this stage. Earlier data showed IP figures rebounding, but this followed a number of months of decline.
- Spot USD/TWD got to fresh lows of 31.57 in early dealings, but sits slightly firmer now, last near 31.63. Like USD/KRW though, the trend in USD/TWD appears skewed to the downside. Local equities have fallen today, off 1.6%.
ASIA FX: MYR & THB Ending September As Outperformers
As has been the case through much of September, in South East Asia FX, the MYR and THB FX have been the standouts. This trend has continued today, with both currencies up around the 0.50% level against the USD. For September as a whole both currencies are up over 5% versus the USD.
• For USD/THB we were last in the 32.20/25 region. The trend is pushing for a test of 32.00, where we may see more official resistance to continued baht gains. Local exporters have already warned around this issue. We do have August trade figures coming up later, with export growth, along with external balances likely to be in focus. The overall BoP balance has been trending higher in recent months. Even gold prices moving off recent highs hasn't dented the positive THB trend.
• USD/MYR got to fresh lows of 4.0947. but sits back around 4.1050 in latest dealings. The last time we were sub the 4.1000 handed was in the first half of 2021. At some stage it will be expected that offshore repatriation inflows start to moderate. Malaysia's macro backdrop is fairly resilient though.
• IDR has underperformed somewhat. USD/IDR is little changed, last near 15120. The softer regional equity tone (outside of China/HK gains) may be weighing at the margins. Recent lows at 15070 remain intact for now. USD/PHP is back sub 56.00, but like USD/IDR has not challenged recent lows.
SOUTH KOREA: IP Rises, But Y/Y Momentum Well Off Cycle Highs
South Korea Industrial production for August was stronger than the consensus estimate. We rose 4.1% m/m, against a 2.8% forecast, while the July drop was revised down to -3.9% m/m. In y/y terms growth was 3.8%, also above expectations, but we are comfortably off cycle highs for the metric (+12.9%y/y printed in January this year). The cyclical leading index was -0.1, after a flat outcome in July. Like IP, it sits off its cyclical highs, but equally is not suggesting a sharp slowdown, see the chart below (the cyclical index is the orange line).
- IP is following the export trajectory reasonably closely, which in headline terms was softer in September but the daily average trend was still strong.
- Other data showed retail sales 1.7% m/m, but this doesn't completely offset the July decline of 2%. Facilities investment fell a little over 5%, but this follows July's +10% rise.
- BoK Governor Rhee, along with Finance Minister Choi will reportedly have a town hall meeting today (per BBG). This comes ahead of next week's BoK decision, where there will be some speculation that the central bank starts its easing cycle.
Fig 1: South Korean IP & Cyclical Leading Index
Source: MNI - Market News/Bloomberg
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 30/09/2024 | 0600/0700 | *** |  GB | GDP Second Estimate |
| 30/09/2024 | 0600/0700 | * | GB | Quarterly current account balance |
| 30/09/2024 | 0600/0800 | ** |  DE | Import/Export Prices |
| 30/09/2024 | 0600/0800 | ** |  SE | Retail Sales |
| 30/09/2024 | 0700/0900 | ** |  CH | KOF Economic Barometer |
| 30/09/2024 | 0800/1000 | *** | DE | North Rhine Westphalia CPI |
| 30/09/2024 | 0800/1000 | *** | DE | Bavaria CPI |
| 30/09/2024 | 0830/0930 | ** | GB | BOE M4 |
| 30/09/2024 | 0830/0930 | ** | GB | BOE Lending to Individuals |
| 30/09/2024 | 0900/1100 | *** |  IT | HICP (p) |
| 30/09/2024 | 0900/1100 | *** | IT | HICP (p) |
| 30/09/2024 | 1200/1400 | *** | DE | HICP (p) |
| 30/09/2024 | 1300/1500 |  EU | ECB's Lagarde at ECON hearing | |
| 30/09/2024 | 1345/0945 | *** |  US | MNI Chicago PMI |
| 30/09/2024 | 1430/1030 | ** | US | Dallas Fed manufacturing survey |
| 30/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 30/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 30/09/2024 | 1600/1200 | ** | US | USDA GrainStock - NASS |
| 30/09/2024 | 1755/1355 | US | Fed Chair Jerome Powell | |
| 30/09/2024 | 2010/2110 | GB | BOE's Greene panellist on 'Perspectives on global MonPol' |