MNI EUROPEAN MARKETS ANALYSIS: Asia Core Price Pressures Ease Further, Fed Speak In Focus Later

US TSYS: Futures Move Above Wednesday Highs, But No Follow Through, Fed Speak Later

After a brief spike to 108-17 in early trade (above Wednesday session highs), futures have reverted back to late NY session ranges from Wednesday this afternoon. We last tracked at 108-14 +03, on volumes of just over 101k.

• The earlier spike appeared to coincide with comments from the Fed's Harker, where the Philadelphia Fed President again argued the Federal Reserve should stop raising interest rates and hold them at their current 22-year highs, while warning rate cuts are not forthcoming in the near future.
• The weaker than expected China headline CPI may have also aided the bid tone, but there was little follow through.
• In the cash space, tight ranges have prevailed. 10yr yields are a touch higher, last near 4.50%, the 2yr yield is sub 4.93%, but little changed.
• Looking ahead we have initial jobless claims later on, Fedspeak in terms of the Barkin MNI Webcast, followed by Powell comments later on. Bill and 30yr bond sales are also on tap.

JGBS: Futures Near Session Highs, 30yr Auction Sees Rise in Bid To Cover Ratio

Futures sit at 144.83 +.16, which is below session highs (144.89), but dips are generally being supported and remain shallow.

• BoJ Governor's second appearance at parliament in as many days hasn't shed any new light (at this stage) on the BoJ outlook, with similar comments to yesterday. Critically, the central bank doesn't have enough certainty around attaining the price goals yet (BBG).
• Earlier the BoJ summary of opinions from the October policy meeting produced a wide variety of views and justification for the YCC shift, but didn't shift the sentiment needle.
• Reuters noted an ex central bank executive suggests the BoJ may end negative rates in January of next year (see this link for more details).
• In the cash JGB space, yields are mostly lower. 10yr sits at 0.84%, for swaps it is a similar story, the 10yr at 1.01%.
• 30yr debt supply saw a 3.60 bid to cover ratio, the highest since Jan 2022 (see this BBG link). Earlier sell-side analysts noted Japan lifers may support this debt sale.
• Tomorrow on the data calendar we just have Oct money supply figures.

AUSSIE BONDS: 10yr Yields Lower, AU-US10yr Spread Narrows, RBA SoMP Out Tomorrow

ACGBs have exhibited the same flattening trend evident elsewhere in the bond space. 10yr futures opened higher, but couldn't breach the 95.50 level. We last tracked at 95.46, +.05, largely holding on to Wednesday gains. 3yr futures have tracked slightly lower, last at 95.82, -.01, largely moving sideways in recent sessions.

• In the cash space, the 10-30yr segments are down around 5bps in yield terms. The 10yr yield now back to 4.53%, close to mid-October levels.
• AU-US 10yr spreads have retreated further, back to +4bps, well off earlier Nov highs above +20bps.
• There has been little in the way of domestic news flow, with RBA watchers waiting for updated forecast projections from tomorrow's quarterly monetary policy statement.
• RBA terminal rate hikes expectations remain near 4.46%, so around half another hike priced in between now and May next year.

NZGBS: Yields Tracking Lower, 10yr Yield Back To Mid September Levels

NZGBS have seen lower yields through Thursday Asia Pac trade. This follows weaker core yields in Wednesday offshore trade, with little in the way of fresh domestic news flow.

• The fiscal deficit to end Q3 was slightly better than expected, by a little over NZ$220mn. BNZ also noted a pull back in October job ads (-5.6%). This is consistent with NZ Treasury analysis around a softening labor market backdrop. Weaker headline China CPI may have also helped at the margins.
• The 10yr yield is back sub 5.00% (last 4.8%), off a little over 8 bps. This is back to mid September lows. 2yr yields were also lower, but only marginally, settling just under 5.30% (-1bps).
• This left the 2/10s curve in a continued flattening trend. We are back to -31bps, after being near flat at the start of the month.
• Tomorrow on the data front we have the October manufacturing PMI out, the last print was 45.3.

FOREX: NZ$ & A$ Outperform, Others Little Changed

G10 currencies are little changed during APAC trading today and have been moving in narrow ranges. Aussie and kiwi have outperformed and are trading close to intraday highs. The USD index is flat but off the day’s lows. Brent crude rose above $80 earlier but is currently up only 0.1% to $79.64/bbl. US Treasury yields are little changed.

• AUDUSD is up 0.2% to 0.6415 but given no Aussie data has been in a narrow range of 0.6401/17 finding support at 64c.
• NZD has outperformed today against the greenback with NZDUSD up 0.3% to 0.5929, close to high of 0.5930. It fell to 0.5907 early in the session. AUDNZD is down 0.1% to 1.0821 but has traded between 1.0814/1.0844 today.
• USDJPY is little changed at 150.93 after range trading between 150.83/151.00.
• European currencies are almost unchanged against the dollar with EURUSD at 1.0709, GBPUSD 1.2286 and USDSEK 10.894.
• Later there are more Fed speakers with Chairman Powell scheduled to participate on a panel discussing monetary policy challenges at the IMF research conference at 1900 GMT. Harker, Bostic, Barkin and Paese are also on today’s calendar. The ECB’s Lagarde and Lane are due to appear.

JAPAN DATA: Offshore Investors Continue To Buy Local Stocks

Last week saw a turnaround in foreign buying of local bonds. This somewhat reversed the trend of the prior two weeks (albeit only partially), which saw large outflows, see the table below. Offshore buying of local equities continued, rising to ¥313.5bn, marking the 6th straight week of inflows into this space.

• In terms of Japan outbound flows. Local investors sold offshore bonds (-¥388.4bn), but the trend for this segment has been mixed in recent weeks.
• Outbound flows to overseas stocks continued, marking the 6th straight week of outflow to this sector.

Table 1: Weekly Investment Flows

JAPAN DATA: Trade Surplus At Multi-Year Highs

Japan September trade and current account figures printed fairly close to expectations. The trade balance was ¥341.2bn, versus ¥244.5bn forecast (prior was -¥749.5bn). This is the highest surplus since Q3 2021, slightly beating the June result from this year.

• The current account (adjusted) printed slightly below expectations (¥2010.9bn, versus ¥2297bn forecast). This largely owed to slightly lower primary income receipts, ¥3076.4bn in September, versus ¥3557.6bn prior.
• Current account figures are close to recent highs and well above recent lows from 2023. This is in line with the sharp improvement in the terms of trade over this period.
• This has done little to improve yen sentiment though, as Fed-BOJ policy divergences remain wide.

EQUITIES: Weaker China CPI & Property Sector Headwinds Weigh On China Related Bourses

Regional equity markets are mixed in Thursday trade to date. Hong Kong and China markets are struggling for positive direction amid renewed property headwinds. There are more positive trends elsewhere, but they aren't evident across the board. US futures sit slightly lwoer at this stage. Eminis last near 4396, down 0.08%, Nasdaq futures are slightly worse, down 0.10%.

• China October inflation data showed a slip back into negative territory for headline CPI in y/y terms, although this was largely due to lower food prices. Still, easing core inflation and a PPI dragged down by weaker consumer related is not painting a very strong domestic demand picture.
• The data should, at the margins, raise monetary easing hopes. At the break the CSI 300 is +0.09% higher while the Hang Seng is down 0.31%. The properties sub index is off nearly 1%. Fresh concerns for troubled developer Country Garden have weighed (Ping An denied it would take over the company late yesterday).
• Japan markets have recovered some ground, the Topix up 0.70%, the Nikkei 225 around 1% at this stage. Gains are fairly broad based, with the transport sector leading the way.
• South Korea's Kospi is +0.40% higher, but the Kosdaq is down 1%. The Taiex index is slightly weaker in Taiwan.
• In SEA, Philippines stocks were aided at the margin by a better than expected Q3 GDP result, but are away from session highs, last +0.50%. Thailand stocks are off by over 1%. Local company JKN Global fell sharply after it filed a petition in bankruptcy court.

OIL: Crude Off Highs Following Soft China CPI, US & China Remain The Focus

Oil prices rose close to a percent today on better risk sentiment following US equities trending higher this month. They gave up most of those gains following CPI data showing that China has returned to deflation and are now only around 0.3% higher in the session. WTI reached a high of $76.06/bbl but is now down to $75.60. Brent rose to $80.27 but is now back below the $80-level at around $79.78. The USD index is flat but off the intraday lows.

• What the Fed is thinking of doing next has been a focus of the market this week, with some officials saying that the inflation fight is not over yet. Yesterday Powell didn’t comment on the outlook for policy or the economy. He is speaking again today, as well as a number of others. The other areas to continue to monitor are activity in China and oil & product inventories.
• The MNI Commodity Weekly looks at how Saudi’s output cuts have been mainly negated by higher output from Russia and Iran.
• Later there are more Fed speakers with Chairman Powell scheduled to participate on a panel at the IMF conference at 1900 GMT. Harker, Bostic, Barkin and Paese are also on today’s calendar. The ECB’s Lagarde and Lane are due to appear. The focus is on central bankers as in terms of data there are only US jobless claims.

GOLD: Bullion Slightly Lower Again, Upcoming Fed Comments Important

Gold is down slightly during the APAC session after rising to $1954.62/oz. It is currently trading around $1949.44/oz, close to the intraday low of $1947.86. It is 2.2% lower this week as comments from Fed officials suggesting that there could be further tightening weighed on bullion. Yesterday Powell didn’t comment on the outlook for policy or the economy, but he is speaking again today, as well as a number of others. The USD index is flat but off session lows.

• The USD OIS market has very little priced in for the December and January Fed meetings, which should be supportive of gold, but any change in this position would be significant for bullion.
• Gold has also begun to trend lower as the conflict in the Middle East currently looks contained and so the flight-to-quality flows that followed the October 7 Hamas attack are unwinding.
• Later there are more Fed speakers with Chairman Powell scheduled to participate on a panel discussing monetary policy challenges at the IMF research conference at 1900 GMT. Harker, Bostic, Barkin and Paese are also on today’s calendar. The ECB’s Lagarde and Lane are due to appear. The focus is on central bankers as in terms of data there are only US jobless claims.

CHINA DATA: CPI Dips Back Into Negative Y/Y Territory On Food Drag, PPI Deflation Continues

China October inflation data was close to expectations. Headline CPI fell to -0.2% y/y, versus -0.1% forecast and flat prior. The PPI was -2.6% y/y, versus -2.7% forecast and -2.5% prior.

• Recall that the recent PMI prints suggested reduced price pressures in October, so this result is consistent with that. M/M CPI fell -0.1%, versus a 0.2% rise last month. Core CPI slipped back to 0.6% y/y (from 0.8% prior), but remains within 2023 ranges.
• In terms of the detail, food was a big drag, down -4.0%, while non-food was steady at 0.7%. Elsewhere, most sub-categories saw inflation at similar to September levels.
• Outside of the food result, today's data is not suggesting a sharp slowdown in inflation pressure but equally we remain at depressed levels in terms of core CPI trends, so that shouldn't stop any further easing steps by the authorities.
• On the PPI side, the detail was a little softer. The drag from the mining and raw materials side softened.
• However, consumer goods were weaker, down -0.9% y/y, from -0.3%, led durables at -2.0% (prior -1.2%).

Fig 1: China CPI and PPI Y/Y

Source: MNI - Market News/Bloomberg

ASIA DATA: Core Price Pressures Ease Further In October

Asian CPI inflation has generally moderated in October but with a number of countries seeing higher headline rates. Underlying price pressures were either little changed or lower though, which should be good news for the region’s central banks. Lower oil prices should put downward pressure on headline in the coming months but processed rice prices are currently 9.4% higher in November to date.

• October CPI data showed that China fell back into deflation with headline down to -0.2% y/y from zero. Core remained positive but eased 0.2pp to 0.6%. This has driven non-Japan Asian CPI down 0.1pp to 1.6%, helped by Thailand and the Philippines. Whereas there was higher inflation in Korea, Taiwan and Indonesia. Asian core inflation was down 0.2pp to 1.2%, the lowest since June 2021.
• Excluding China headline was steady at 3.8%, 1.6pp below the September 2022 peak, assuming the countries that are yet to release data are steady at the September rate. Core eased to 2.7% y/y from 2.8% and down 1.5pp from the January peak.

Source: MNI - Market News/Refinitiv/IMF

ASIA FX: CNH Underperforms, PHP, THB and HKD Higher

USD/Asia pairs have tracked reasonably tight ranges, although there have been some pockets of strength. CNH is underperforming marginally, as the weaker CPI and softer equity backdrop weigh. PHP and THB are outperforming, while spot USD/HKD has fallen to fresh multi-month lows. Tomorrow, we have Indian IP growth, along with Hong Kong Q3 GDP revisions. Also note that China aggregate credit figures/new loans data is due between now and the 15th of November.

• USD/CNH is close to session highs in recent dealings, last near 7.2900. We are well above yesterday's sub 7.2700 lows. The weaker CPI, which fell back into negative territory, arguably hasn't done monetary easing prospects any harm. Local equities have also struggled for positive traction, although are only down slightly.
• 1 month USD/KRW has tracked recent ranges, last near 1306. Dips towards the 1300 level were supported, while moves above 1310 are drawing selling interest. Local equities are firmer from a Kospi standpoint, +0.65%, in line with gains in global tech shares.
• Spot USD/HKD is tracking lower, last near 7.8100, which is fresh lows in the pair back to early August. The US-HK 3 month yield differential has fallen to fresh 3 month lows, near +7bps. The 3 month Hibor fix rose 6bps today. This comes as US front end yields have edged down from recent highs.
• Spot USD/PHP is tracking lower, last under 55.90, around 0.25% stronger in PHP terms. Recent lows near 55.80 remain intact. Onshore equities are +0.40% higher (albeit away from highs), as Q3 GDP came out stronger than expected, +3.3% q/q growth, albeit with investment spending slowing.
• USD/THB is lower as well, tracking under 35.50, but support evident ahead of 35.40, which is close to lows from the start of the week. Consumer sentiment rose further to 60.2 from 58.7. Onshore equities are down sharply, the SET off nearly 1.3% but this looks more company specific factors driven rather than broader macro headwinds. Weaker oil prices will likely be aiding PHP and THB are the margins.