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China property related equities have struggled post the onshore housing briefing. Commodities are weaker in the metals space as well.
This has curbed the AUD gain, which rallied post the stronger than expected Sep jobs data. This has pushed out RBA easing expectations. RBA-dated OIS pricing is 7-10bps firmer for 2025 meetings after the data.
Later the Fed’s Goolsbee speaks and the ECB decision is announced followed by President Lagarde’s press conference. It is expected to cut rates 25bp. In terms of data, US September retail sales, budget & IP, October Philly Fed & NAHB housing index, August inventories and jobless claims print. There’s also euro area September CPI and August trade.
Tsys futures have edged slightly lower throughout the day, we trade just off session's worst and testing Wednesday's lows. TU is -00⅞ at 103-14¾, while TY is -03 at 112-14.
Focus in the region was on China's housing briefing, although the market seemed to be underwhelmed with property stocks trading off 2-10%. Australia had stronger-than-expected employment data, which saw rate cuts pushed further out, while the 2yr yields jumped 5bps.
The world's largest chipmaker TSMC will release earnings shortly, a miss could see risk assets sell off heavily, following the reaction to ASML's lower-than-expected sales guidance on Tuesday.
Earlier, Kamala Harris interviewed on Fox, where she emphasized that her presidency would not be a continuation of Biden’s, as she would bring her own life experiences and fresh ideas. Betting markets edged slightly further in Trumps direction during the interview, while PredictIt was unchanged.
Cash tsy curve has bear-steepened today, yields are +0.5bps to 2bps higher. The 2yr is trading +0.9bps at 3.947%, while the 10yr is +1.8bps at 4.03%. The 2s10s is +0.704 at 7.952.
Fed fund futures are pricing in 23.6bps or 95% chance of a cut at the November meeting, and 45.5bps of cuts by the December meeting both little changed over the past few sessions. Looking further out the curve there is 145bps priced in through to October 2025.
Data picks up today with two key reports: weekly jobless claims (following up from the previous week's hurricane-impacted upside surprise) and retail sales. Chicago Fed Pres Goolsbee also makes an appearance at a careers event so unlikely to be a market-mover.
JGB futures are weaker, currently trading at session lows in Tokyo, down 7 points from settlement levels.
A report indicating that Japan's Rengo union will seek wage hikes of at least 5% next year appears to have triggered a sharp reversal in JGB futures. Futures closed the overnight session up 26 points compared to settlement levels.
In 2024, negotiated wage gains tracked by the Rengo Federation reached a 33-year high of 5.1%.
However, part of today's selloff in the Tokyo session can be attributed to the US Treasury market, with yields trading 1-2bps higher and showing a steepening bias in the Asia-Pacific session.
Outside of the previously outlined trade balance data, there hasn't been much by way of domestic data drivers to flag. The Tertiary Industry Index fell 1.1% m/m in August.
The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 3bps higher to 3bps lower.
The MoF accepted Y399.3bn at today’s Liquidity Enhancement Auction.
Swap rates are flat to 4bps higher, with a steepening bias. Swap spreads are tighter out to the 5-year and wider beyond.
Tomorrow, the local calendar will see National CPI and Weekly International Investment Flow data alongside BoJ Rinban Operations covering 1-10-year and 25-year+ JGBs.
Japan September trade figures saw export growth drop into negative y/y territory (-1.7%, against a 0.9% forecast and 5.5% prior). This was the weakest export growth print since the early stages of 2021 (in y/y terms). Imports held up at 2.1%y/y, albeit still below market expectations (+2.8%, prior +2.3%). The trade balances remained in negative territory, -¥187.2bn, but this was better than forecast (-¥521bn and prior was -¥472bn).
Exports to all the major economies/regions fell in y/y terms. -2.4% for the US, -7.3% for China and -9% for the EU. In volume terms exports were down -6.9%y/y. China export volumes fell -15.1% y/y.
The slower export backdrop is consistent with other North East Asia economies, see the chart below (Japan is the red line).
Weaker export growth will at the margin give the BOJ more caution around the growth/rate outlook.
The trade deficit remains negative but has seen trend improvement in recent months (on a seasonally adjusted basis).
ACGBs (YM -5.0 & XM -3.0) are 5-8bps lower after a strong Employment Report, though they have recovered slightly from the session's worst levels.
RBA officials often speak of the labour market. Today’s September data plus what appears to be a turn in the trend since mid-year will likely confirm its view that the labour market is tighter than implied by full employment estimates and that firms are “labour hoarding”. The gradual deterioration in some of its metrics appears to have stalled or turned, thus policy is likely to “need to be sufficiently restrictive” for now.
Cash US tsys are 1-2bps cheaper, with a steepening bias, in today’s Asia-Pac session after yesterday’s modest gains.
Cash ACGBs are 3-4bps cheaper, with the AU-US 10-year yield differential 3bps wider to +21bps.
Swap rates are 2-3bps higher, with the 3s10s curve flatter.
The bills strip is cheaper, with pricing -4 to -6., but well off worst levels.
RBA-dated OIS pricing is 7-10bps firmer for 2025 meetings after the data. A cumulative 5bps of easing is priced by year-end versus -8bps pre-data.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$500mn of the 4.75% 21 April 2027 bond.
RBA-dated OIS pricing is 7-10bps firmer for 2025 meetings after today’s Employment Report. A cumulative 5bps of easing is priced by year-end versus -8bps pre-data.
Job growth printed higher than expected again in September. Employment rose 64.1k after a downwardly revised 42.6k in August.
The unemployment rate was revised down to 4.1% and held steady at a lower rate in September. The participation rose 0.1pp to 67.2%, a new high.
The continued strength in the labour market is likely going to keep the RBA on hold for now.
Jobs growth printed higher than expected again in September. Employment rose 64.1k after a downwardly-revised 42.6k in August. The unemployment rate was revised down to 4.1% and held steady at the lower rate in September. The participation rose 0.1pp to 67.2%, a new high. The continued strength in the labour market is likely going to keep the RBA on hold for now.
Australia employment vs hours worked 3m/3m average annualised %
Source: MNI - Market News/ABS
The strength in September new jobs was driven by full-time (FT +51.6k), which has seen a recovery and signals some optimism regarding the outlook. Part-time (PT) jobs rose 12.5k after a 48.5k increase in August.
Employment grew at 3.1% y/y in September up from 2.4% in June, the highest in 10 months. There were 155.6k new jobs in Q3 up from 111.7k in Q2 and there has been 373.8k YTD up from 316.7k in first 9 months of 2023. Both FT and PT employment saw a quarterly rise in Q3. The employment-to-population ratio is at a high of 64.4% signalling that those who want work are finding it.
There was a significant chance of a downward revision to the August unemployment rate because it originally printed at 4.156% and is now 4.143%. September printed down further at 4.067%, the lowest since May. The Q3 unemployment rate was slightly higher than Q2 but both printed at 4.1% rounded. The number of unemployed fell for the second straight month in September.
Even though working age population growth is slowing, the labour force increased at 3.6% y/y, fastest pace since October 2023, signalling confidence that jobs can be found.
Hours worked rose 0.3% m/m to be up 2.4% y/y in September from 0.2% y/y in June with FT +1.9% y/y (-0.8%) and PT +4.5% (+5.4%).
RBA officials often speak on the labour market and today’s September data plus what appears to be a turn in the trend since mid-year will likely confirm its view that the labour market is tighter than implied by full employment estimates and that firms are “labour hoarding”. The gradual deterioration in some of its metrics appears to have stalled or turned, thus policy is likely to “need to be sufficiently restrictive” for now.
The September underemployment rate fell to 6.3% from 6.5% resulting in the Q3 average 0.2pp below Q2 at 6.4%. The latest reading is still 0.5pp above the February 2023 trough but remains low and now appears to be improving again.
The rise in the youth unemployment rate appears also to have stalled. It is seen as a leading indicator of the labour market. It fell 0.8pp in September to 9.1%, lowest since February, and Q3 was down 0.1pp on Q2. It remains 2pp above the July 2022 trough.
Australia unemployment rate 15-24 years %
Source: MNI - Market News/ABS
Vacancies as a share of unemployment are off the 2022 highs and continue to moderate but remain above the series average. In Q3 the ratio moderated 4.8pp to 52.7%, lowest since Q3 2021 but not yet normalised. SEEK reported a 0.5% m/m increase in September job ads with Q3 +1.3% q/q, but they were down 11.1% y/y.
Hours worked are also recovering growing at 2.4% y/y in September up from 0.2% y/y in June.
The moderation in NAB’s labour shortages being a significant constraint on output measure also seems to have stalled with both Q2 and Q3 2024 sitting slightly above Q1 and still around 20 points higher than the series average.
Australia NAB quarterly business survey - labour shortages
NZGBs ended the day near the middle of their trading range, with the 2/10 curve experiencing a bull-steepening. Benchmark yields ranged from flat to 2bps lower, with the 2-year yield sitting 7bps below its pre-CPI level yesterday, while the 10-year yield is unchanged.
It was a mixed session for the NZGB 10-year on a relative basis within the $-bloc. The NZ-US yield differential widened by 1bp to +38bps, while the NZ-AU differential lower by 2bps to -17bps. Australian yields rose sharply following a strong September Employment Report.
The weekly bond supply was adequately absorbed, with cover ratios ranging from 2.22x to 2.93x.
Cash US tsys are 1-2bps cheaper, with a steepening bias, in today’s Asia-Pac session after yesterday’s modest gains. US data picks up today, with two key reports: weekly jobless claims (following up from the previous week's hurricane-impacted surprise) and retail sales. Chicago Fed Pres Goolsbee also makes an appearance.
Swap rates closed flat to 4bps lower, with the 2s10s curve steeper.
RBNZ-dated OIS pricing is 1-5bps softer across meetings. Following yesterday's Q3 CPI data, a cumulative 99bps of easing is priced by February, with 57bps in November.
The USD BBDXY index sits close to unchanged in latest dealings, last near 1253.25. This is up from earlier lows of 1251.53. Risk sentiment has softened post the China Housing Ministry led press briefing.
AUD/USD got to highs of 0.6710, but sits back near 0.6685/90 in latest dealings, still up 0.30% for the session. A$ sentiment was buoyed by the much stronger than expected September jobs data, which has pushed out RBA easing risks.
We also tracking higher during the early stages of the China press briefing as China/HK equity sentiment pushed higher. However, this gave way to a more cautious tone, as the main focus of the press briefing was reiterating already announced policies and expanding credit for troubled property development projects.
As China real estate equities rolled over so too did iron ore, another constraint on AUD gains.
NZD/USD got dragged higher by AUD initially but now sits back at 0.6060, little changed for the session.
USD/JPY has tracked familiar ranges, the pair last near 149.50, little changed for the session. Earlier data showed a slowdown in export growth, back into negative territory.
In the cross asset space, US equity futures sit -0.20-0.30% weaker, while US yields are up a touch, led by the back end.
Looking ahead, the ECB decision is announced followed by President Lagarde’s press conference. It is expected to cut rates 25bp. In terms of data, US September retail sales, budget & IP, October Philly Fed & NAHB housing index, August inventories and jobless claims print. There’s also euro area September CPI and August trade. The Fed's Goolsbee also speaks.
AUD/NZD has jumped 0.25% higher to 0.1040, underperforming the move in AUD/USD. The cross remains trading with Wednesday's ranges for now.
There could be further upside for the cross following NZ CPI falling to multi-year lows on Wednesday, which saw RBNZ dated OIS price in 100bps of cuts across the next two meetings, while RBA dated OIS is now pricing 7.8bps of cuts across the next two meetings.
The cross found support at 1.1006 (61.8% of the July 30-Sep 6 move), with a break back above 1.1050 needed to resume the upward trend, key resistance is seen at 1.1100, with a break here opening a move to test yearly highs at 1.1144 (July 29 highs).
The AU-NZ 2yr swap is 9bps higher at 41bps, and trading just below the 2013 highs of 44bps.
China is expanding its "white list" credit program for property projects to 4tr yuan by the end of 2024, up from 2.23t yuan currently. This program is designed to provide credit support for developers, helping them complete unfinished housing projects, particularly those that have caused unrest due to delays. Minister Ni also highlighted plans to renovate 1 million homes in "urban villages," using local government special bonds for funding. Additionally, banks are being urged to expedite loans for stalled projects, aiming to deliver homes to buyers.
Local governments are also empowered to buy back idle land parcels where developers are unwilling or unable to proceed with construction. Measures to stabilize the housing market in key cities such as Beijing, Shanghai, Guangzhou, and Shenzhen were also emphasized, with steps like easing home purchase restrictions and lowering mortgage rates.
Investors saying the update doesn't seem to fix the underlying problem that there seems to currently be an over supply of property and/or home buyers don't have the ability/want to purchase properties at the moment, the recently announced measures look to be just transferring the risk from some developers onto local governments.
Market Reaction:
Despite these support measures, market sentiment remains weak. The CSI 300 which initially showed gains of up to 1.3%, erased those gains during the briefing and now trades flat. Property stocks, particularly those focused on developers, saw significant declines. A Bloomberg gauge tracking developer shares dropped around 7.5% with major onshore developers like Sunac (-20%), Vanke (-10%), Longfor (-9%), the moves reflecting investor skepticism about the effectiveness of the government's efforts.
The offshore yuan also pared some morning gains as officials spoke, signaling cautious market reactions, while in the commodity space Iron ore and steel futures in both Singapore and Shanghai also weakened.
Asian equities are mixed today, with no clear direction, tech stocks are underperforming following ASML's lower-than-expected sales guidance on Tuesday, which looks to have added to concerns ahead of earnings from TSMC the world's largest chipmaker. China's equities market has seen increased volatility, with the market disappointed with the housing briefing, property benchmarks swung from +1.5% to -3%. Elsewhere, Australia's employment data was stronger-than-expected, with the ASX200 making new record highs.
Outside of the China Housing briefing the market has been rather quiet, the US announced they had conducted strikes on weapon storage facilities in Yemen, although this did little to move markets.
Japanese equities are mixed, with the Nikkei trading down 0.50% following a 2.75% drop from Tokyo Electron, while the TOPIX is trading flat, with banks outperforming (TOPIX Banks Index +1.60%)
Taiwan's TAIEX & South Korea's KOSPI are both little changed today, with the market eagerly awaiting TSMC earnings which are due out at 1700 AEST / 1400 HKT.
Australian equities have hit new all time highs following much stronger-than-expected employment data. Australia's labor market remained robust in September, with employment growth surpassing expectations. The economy added 64.1k jobs, driven mainly by full-time positions (+51.6k), while part-time employment also increased by 12.5k. This followed a revised gain of 42.6k jobs in August. The unemployment rate held steady at 4.1%, the lowest since May, and the participation rate reached a new high of 67.2%. Banks are the top performing stocks, closing followed by real estate. Tech stocks struggle, although they only make up a small portion of the index, ASX 200 is currently 0.62% higher.
As expected there was a total reversal in the Tech heavy markets with South Korea & Taiwan experiencing strong outflows on Wednesday, while Thailand ended the 14-day run of outflows with its largest inflow since Sept 6th.
South Korea: Recorded outflows of -$582m yesterday, bringing the 5-day total to -$705m. However, YTD flows remain positive at +$9.43b. The 5-day average is -$141m, better than the 20-day average of -$216m but worse than the 100-day average of -$58m.
Taiwan: Experienced significant outflows of -$1.14b yesterday, although the 5-day figure shows inflows of +$829m. YTD flows are deeply negative at -$12.6b. The 5-day average is +$166m, higher than the 20-day average of +$110m and much better than the 100-day average of -$168m.
India: Saw outflows of -$182m Tuesday with the past 5 sessions showing a more substantial -$2.09b in outflows. YTD inflows are +$3.72b. The 5-day average is -$418m, worse than both the 20-day average of -$225m and the 100-day average of +$71m.
Indonesia: Recorded outflows of -$22m yesterday and -$87m over the past 5 days. YTD flows are positive at +$2.83b. The 5-day average is -$17m, below both the 20-day average of -$34m and the 100-day average of +$29m.
Thailand: Posted inflows of +$127m yesterday, though the past 5 sessions saw outflows of -$89m. YTD flows are negative at -$3.04b. The 5-day average is -$18m, similar to the 20-day average of -$17m, and worse than the 100-day average of -$11m.
Malaysia: Recorded inflows of +$20m Tuesday, bringing the 5-day figure to -$16m. YTD inflows stand at +$564m. The 5-day average is -$3m, better than the 20-day average of -$20m and in line with the 100-day average of +$5m.
Philippines: Posted inflows of +$15m yesterday and a 5-day total of +$15m, with YTD flows at +$95m. The 5-day average is +$3m, below the 20-day average of +$16m but slightly better than the 100-day average of +$4m.
Crude has risen slightly today to add to Wednesday’s moderate gains. It rose earlier in the session but then more than gave up those advances as markets were disappointed with China’s support measures for the property sector announced today and there was a general pullback in risk. The USD index is flat.
WTI is up 0.3% to $70.60/bbl off the intraday low of $70.52 but below today’s high of $71.11. The benchmark rose 0.2% on Wednesday after Tuesday’s sharp fall.
Brent is 0.3% higher at $74.43/bbl today after rising to $74.92 and then falling to $74.31. It rose 0.5% on Wednesday.
Conflict in the Middle East continued with the US striking Houthi weapons storage facilities in Yemen. The Iran-backed group has significantly disrupted shipping in the Red Sea over the last year.
Bloomberg reported that US crude inventories fell 1.6mn barrels when a rise had been expected, according to people familiar the API data. Gasoline stocks fell 5.9mn and distillate 2.7mn. The official EIA figures are out today.
Later the Fed’s Goolsbee speaks and the ECB decision is announced followed by President Lagarde’s press conference. It is expected to cut rates 25bp. In terms of data, US September retail sales, budget & IP, October Philly Fed & NAHB housing index, August inventories and jobless claims print. There’s also euro area September CPI and August trade.
Gold has hit a new all-time high of 2684.95 in today’s Asia-Pac session, after closing 0.4% higher at $2673.83 on Wednesday.
Bullion, up nearly 30% year-to-date, is among the top-performing commodities in 2024. Optimism surrounding rate cuts has fueled recent gains, especially after the US Federal Reserve initiated its easing cycle last month. However, traders have tempered their expectations regarding the size and pace of rate cuts following mixed US economic data. Lower interest rates typically benefit gold, which doesn’t offer a yield.
Attention is now focused on today’s US retail sales and jobless data, as traders seek further insights into the US Fed’s easing trajectory.
Robust central bank purchases and rising geopolitical tensions have also bolstered gold prices.
According to MNI’s technicals team, the trend condition in gold remains bullish, with sights still on $2,690.2, a Fibonacci projection.
USD/CNH sits up from earlier lows, last near 7.1365, which leaves us little changed for the session. China/Hong Kong equities have moved off earlier highs, as the market digests the housing briefing outcome.
Ensuring completion of unfinished onshore projects (through expanding the 'white list') is a likely welcome development onshore but markets will be likely looking for firmer timelines and details around planned stimulus measures in the fiscal space. The authorities seem to be focused on risk mitigation rather seeing the sector expand rapidly once again (in terms of property). Property related equity indices have all fallen sharply.
Spot USD/KRW got to fresh highs near 1370, but sits slightly lower now, last near 1368. Onshore equities are struggling for upside, while offshore investors continue to sell local stocks.
USD/TWD is a touch higher, last near 32.20. Headlines have just crossed of the TSMC earnings beat for Q3. This is more likely to be important for global equities rather than TWD, although it may encourage some fresh offshore inflows.
South East Asia currencies are mixed in the first part of Thursday trade. MYR and THB weaker, while PHP is close to steady.
Market sentiment has been focused on digesting yesterday's central bank decisions. BoT was the biggest surprise, with an unexpected cut, although fallout for THB has been very muted. The pair sits at 33.24 in latest dealings, with highs from yesterday near 33.40. The general sell-side viewpoints are that this is not the start of an aggressive easing cycle from the BoT.
USD/THB does look a little lower relative US-TH 2yr government bond yield spreads, but onshore equities are continuing to track higher, up a further 0.7% today, and yesterday saw strong offshore inflow momentum.
USD/MYR is back towards recent highs, the pair closing in on 4.3100. USD/CNH has rebounded from earlier lows, although remains sub 7.1400, as markets assess the housing market briefing. Real estate equity indices are off sharply at the lunch time break.
USD/PHP is little changed in the 57.70/75 region. The BSP is likely to continue to ease, but in 25bps increments.
USD/IDR is back to 15515/20 towards the bottom end of recent ranges. We are little changed on the day, following yesterday's on hold BI outcome.
China to double Loans for Unfinished Properties to $562 Billion (source: BBG).
A release from the China Reat Estate Information Corp (CRIC) reporting that land buyers spent CNY73bn in September, a 92% month on month increase and that Golden Week saw China’s largest state-owned developers experience a significant pick up in contracted sales (source CRIC).
Equity markets gave a muted response to the press conference from the Housing Minister with all major indices barely positive.
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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)
China property related equities have struggled post the onshore housing briefing. Commodities are weaker in the metals space as well.
This has curbed the AUD gain, which rallied post the stronger than expected Sep jobs data. This has pushed out RBA easing expectations. RBA-dated OIS pricing is 7-10bps firmer for 2025 meetings after the data.
Later the Fed’s Goolsbee speaks and the ECB decision is announced followed by President Lagarde’s press conference. It is expected to cut rates 25bp. In terms of data, US September retail sales, budget & IP, October Philly Fed & NAHB housing index, August inventories and jobless claims print. There’s also euro area September CPI and August trade.
Tsys futures have edged slightly lower throughout the day, we trade just off session's worst and testing Wednesday's lows. TU is -00⅞ at 103-14¾, while TY is -03 at 112-14.
Focus in the region was on China's housing briefing, although the market seemed to be underwhelmed with property stocks trading off 2-10%. Australia had stronger-than-expected employment data, which saw rate cuts pushed further out, while the 2yr yields jumped 5bps.
The world's largest chipmaker TSMC will release earnings shortly, a miss could see risk assets sell off heavily, following the reaction to ASML's lower-than-expected sales guidance on Tuesday.
Earlier, Kamala Harris interviewed on Fox, where she emphasized that her presidency would not be a continuation of Biden’s, as she would bring her own life experiences and fresh ideas. Betting markets edged slightly further in Trumps direction during the interview, while PredictIt was unchanged.
Cash tsy curve has bear-steepened today, yields are +0.5bps to 2bps higher. The 2yr is trading +0.9bps at 3.947%, while the 10yr is +1.8bps at 4.03%. The 2s10s is +0.704 at 7.952.
Fed fund futures are pricing in 23.6bps or 95% chance of a cut at the November meeting, and 45.5bps of cuts by the December meeting both little changed over the past few sessions. Looking further out the curve there is 145bps priced in through to October 2025.
Data picks up today with two key reports: weekly jobless claims (following up from the previous week's hurricane-impacted upside surprise) and retail sales. Chicago Fed Pres Goolsbee also makes an appearance at a careers event so unlikely to be a market-mover.
JGB futures are weaker, currently trading at session lows in Tokyo, down 7 points from settlement levels.
A report indicating that Japan's Rengo union will seek wage hikes of at least 5% next year appears to have triggered a sharp reversal in JGB futures. Futures closed the overnight session up 26 points compared to settlement levels.
In 2024, negotiated wage gains tracked by the Rengo Federation reached a 33-year high of 5.1%.
However, part of today's selloff in the Tokyo session can be attributed to the US Treasury market, with yields trading 1-2bps higher and showing a steepening bias in the Asia-Pacific session.
Outside of the previously outlined trade balance data, there hasn't been much by way of domestic data drivers to flag. The Tertiary Industry Index fell 1.1% m/m in August.
The cash JGB curve has twist-flattened, pivoting at the 20-year, with yields 3bps higher to 3bps lower.
The MoF accepted Y399.3bn at today’s Liquidity Enhancement Auction.
Swap rates are flat to 4bps higher, with a steepening bias. Swap spreads are tighter out to the 5-year and wider beyond.
Tomorrow, the local calendar will see National CPI and Weekly International Investment Flow data alongside BoJ Rinban Operations covering 1-10-year and 25-year+ JGBs.
Japan September trade figures saw export growth drop into negative y/y territory (-1.7%, against a 0.9% forecast and 5.5% prior). This was the weakest export growth print since the early stages of 2021 (in y/y terms). Imports held up at 2.1%y/y, albeit still below market expectations (+2.8%, prior +2.3%). The trade balances remained in negative territory, -¥187.2bn, but this was better than forecast (-¥521bn and prior was -¥472bn).
Exports to all the major economies/regions fell in y/y terms. -2.4% for the US, -7.3% for China and -9% for the EU. In volume terms exports were down -6.9%y/y. China export volumes fell -15.1% y/y.
The slower export backdrop is consistent with other North East Asia economies, see the chart below (Japan is the red line).
Weaker export growth will at the margin give the BOJ more caution around the growth/rate outlook.
The trade deficit remains negative but has seen trend improvement in recent months (on a seasonally adjusted basis).
ACGBs (YM -5.0 & XM -3.0) are 5-8bps lower after a strong Employment Report, though they have recovered slightly from the session's worst levels.
RBA officials often speak of the labour market. Today’s September data plus what appears to be a turn in the trend since mid-year will likely confirm its view that the labour market is tighter than implied by full employment estimates and that firms are “labour hoarding”. The gradual deterioration in some of its metrics appears to have stalled or turned, thus policy is likely to “need to be sufficiently restrictive” for now.
Cash US tsys are 1-2bps cheaper, with a steepening bias, in today’s Asia-Pac session after yesterday’s modest gains.
Cash ACGBs are 3-4bps cheaper, with the AU-US 10-year yield differential 3bps wider to +21bps.
Swap rates are 2-3bps higher, with the 3s10s curve flatter.
The bills strip is cheaper, with pricing -4 to -6., but well off worst levels.
RBA-dated OIS pricing is 7-10bps firmer for 2025 meetings after the data. A cumulative 5bps of easing is priced by year-end versus -8bps pre-data.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$500mn of the 4.75% 21 April 2027 bond.
RBA-dated OIS pricing is 7-10bps firmer for 2025 meetings after today’s Employment Report. A cumulative 5bps of easing is priced by year-end versus -8bps pre-data.
Job growth printed higher than expected again in September. Employment rose 64.1k after a downwardly revised 42.6k in August.
The unemployment rate was revised down to 4.1% and held steady at a lower rate in September. The participation rose 0.1pp to 67.2%, a new high.
The continued strength in the labour market is likely going to keep the RBA on hold for now.
Jobs growth printed higher than expected again in September. Employment rose 64.1k after a downwardly-revised 42.6k in August. The unemployment rate was revised down to 4.1% and held steady at the lower rate in September. The participation rose 0.1pp to 67.2%, a new high. The continued strength in the labour market is likely going to keep the RBA on hold for now.
Australia employment vs hours worked 3m/3m average annualised %
Source: MNI - Market News/ABS
The strength in September new jobs was driven by full-time (FT +51.6k), which has seen a recovery and signals some optimism regarding the outlook. Part-time (PT) jobs rose 12.5k after a 48.5k increase in August.
Employment grew at 3.1% y/y in September up from 2.4% in June, the highest in 10 months. There were 155.6k new jobs in Q3 up from 111.7k in Q2 and there has been 373.8k YTD up from 316.7k in first 9 months of 2023. Both FT and PT employment saw a quarterly rise in Q3. The employment-to-population ratio is at a high of 64.4% signalling that those who want work are finding it.
There was a significant chance of a downward revision to the August unemployment rate because it originally printed at 4.156% and is now 4.143%. September printed down further at 4.067%, the lowest since May. The Q3 unemployment rate was slightly higher than Q2 but both printed at 4.1% rounded. The number of unemployed fell for the second straight month in September.
Even though working age population growth is slowing, the labour force increased at 3.6% y/y, fastest pace since October 2023, signalling confidence that jobs can be found.
Hours worked rose 0.3% m/m to be up 2.4% y/y in September from 0.2% y/y in June with FT +1.9% y/y (-0.8%) and PT +4.5% (+5.4%).
RBA officials often speak on the labour market and today’s September data plus what appears to be a turn in the trend since mid-year will likely confirm its view that the labour market is tighter than implied by full employment estimates and that firms are “labour hoarding”. The gradual deterioration in some of its metrics appears to have stalled or turned, thus policy is likely to “need to be sufficiently restrictive” for now.
The September underemployment rate fell to 6.3% from 6.5% resulting in the Q3 average 0.2pp below Q2 at 6.4%. The latest reading is still 0.5pp above the February 2023 trough but remains low and now appears to be improving again.
The rise in the youth unemployment rate appears also to have stalled. It is seen as a leading indicator of the labour market. It fell 0.8pp in September to 9.1%, lowest since February, and Q3 was down 0.1pp on Q2. It remains 2pp above the July 2022 trough.
Australia unemployment rate 15-24 years %
Source: MNI - Market News/ABS
Vacancies as a share of unemployment are off the 2022 highs and continue to moderate but remain above the series average. In Q3 the ratio moderated 4.8pp to 52.7%, lowest since Q3 2021 but not yet normalised. SEEK reported a 0.5% m/m increase in September job ads with Q3 +1.3% q/q, but they were down 11.1% y/y.
Hours worked are also recovering growing at 2.4% y/y in September up from 0.2% y/y in June.
The moderation in NAB’s labour shortages being a significant constraint on output measure also seems to have stalled with both Q2 and Q3 2024 sitting slightly above Q1 and still around 20 points higher than the series average.
Australia NAB quarterly business survey - labour shortages
NZGBs ended the day near the middle of their trading range, with the 2/10 curve experiencing a bull-steepening. Benchmark yields ranged from flat to 2bps lower, with the 2-year yield sitting 7bps below its pre-CPI level yesterday, while the 10-year yield is unchanged.
It was a mixed session for the NZGB 10-year on a relative basis within the $-bloc. The NZ-US yield differential widened by 1bp to +38bps, while the NZ-AU differential lower by 2bps to -17bps. Australian yields rose sharply following a strong September Employment Report.
The weekly bond supply was adequately absorbed, with cover ratios ranging from 2.22x to 2.93x.
Cash US tsys are 1-2bps cheaper, with a steepening bias, in today’s Asia-Pac session after yesterday’s modest gains. US data picks up today, with two key reports: weekly jobless claims (following up from the previous week's hurricane-impacted surprise) and retail sales. Chicago Fed Pres Goolsbee also makes an appearance.
Swap rates closed flat to 4bps lower, with the 2s10s curve steeper.
RBNZ-dated OIS pricing is 1-5bps softer across meetings. Following yesterday's Q3 CPI data, a cumulative 99bps of easing is priced by February, with 57bps in November.
The USD BBDXY index sits close to unchanged in latest dealings, last near 1253.25. This is up from earlier lows of 1251.53. Risk sentiment has softened post the China Housing Ministry led press briefing.
AUD/USD got to highs of 0.6710, but sits back near 0.6685/90 in latest dealings, still up 0.30% for the session. A$ sentiment was buoyed by the much stronger than expected September jobs data, which has pushed out RBA easing risks.
We also tracking higher during the early stages of the China press briefing as China/HK equity sentiment pushed higher. However, this gave way to a more cautious tone, as the main focus of the press briefing was reiterating already announced policies and expanding credit for troubled property development projects.
As China real estate equities rolled over so too did iron ore, another constraint on AUD gains.
NZD/USD got dragged higher by AUD initially but now sits back at 0.6060, little changed for the session.
USD/JPY has tracked familiar ranges, the pair last near 149.50, little changed for the session. Earlier data showed a slowdown in export growth, back into negative territory.
In the cross asset space, US equity futures sit -0.20-0.30% weaker, while US yields are up a touch, led by the back end.
Looking ahead, the ECB decision is announced followed by President Lagarde’s press conference. It is expected to cut rates 25bp. In terms of data, US September retail sales, budget & IP, October Philly Fed & NAHB housing index, August inventories and jobless claims print. There’s also euro area September CPI and August trade. The Fed's Goolsbee also speaks.
AUD/NZD has jumped 0.25% higher to 0.1040, underperforming the move in AUD/USD. The cross remains trading with Wednesday's ranges for now.
There could be further upside for the cross following NZ CPI falling to multi-year lows on Wednesday, which saw RBNZ dated OIS price in 100bps of cuts across the next two meetings, while RBA dated OIS is now pricing 7.8bps of cuts across the next two meetings.
The cross found support at 1.1006 (61.8% of the July 30-Sep 6 move), with a break back above 1.1050 needed to resume the upward trend, key resistance is seen at 1.1100, with a break here opening a move to test yearly highs at 1.1144 (July 29 highs).
The AU-NZ 2yr swap is 9bps higher at 41bps, and trading just below the 2013 highs of 44bps.
China is expanding its "white list" credit program for property projects to 4tr yuan by the end of 2024, up from 2.23t yuan currently. This program is designed to provide credit support for developers, helping them complete unfinished housing projects, particularly those that have caused unrest due to delays. Minister Ni also highlighted plans to renovate 1 million homes in "urban villages," using local government special bonds for funding. Additionally, banks are being urged to expedite loans for stalled projects, aiming to deliver homes to buyers.
Local governments are also empowered to buy back idle land parcels where developers are unwilling or unable to proceed with construction. Measures to stabilize the housing market in key cities such as Beijing, Shanghai, Guangzhou, and Shenzhen were also emphasized, with steps like easing home purchase restrictions and lowering mortgage rates.
Investors saying the update doesn't seem to fix the underlying problem that there seems to currently be an over supply of property and/or home buyers don't have the ability/want to purchase properties at the moment, the recently announced measures look to be just transferring the risk from some developers onto local governments.
Market Reaction:
Despite these support measures, market sentiment remains weak. The CSI 300 which initially showed gains of up to 1.3%, erased those gains during the briefing and now trades flat. Property stocks, particularly those focused on developers, saw significant declines. A Bloomberg gauge tracking developer shares dropped around 7.5% with major onshore developers like Sunac (-20%), Vanke (-10%), Longfor (-9%), the moves reflecting investor skepticism about the effectiveness of the government's efforts.
The offshore yuan also pared some morning gains as officials spoke, signaling cautious market reactions, while in the commodity space Iron ore and steel futures in both Singapore and Shanghai also weakened.
Asian equities are mixed today, with no clear direction, tech stocks are underperforming following ASML's lower-than-expected sales guidance on Tuesday, which looks to have added to concerns ahead of earnings from TSMC the world's largest chipmaker. China's equities market has seen increased volatility, with the market disappointed with the housing briefing, property benchmarks swung from +1.5% to -3%. Elsewhere, Australia's employment data was stronger-than-expected, with the ASX200 making new record highs.
Outside of the China Housing briefing the market has been rather quiet, the US announced they had conducted strikes on weapon storage facilities in Yemen, although this did little to move markets.
Japanese equities are mixed, with the Nikkei trading down 0.50% following a 2.75% drop from Tokyo Electron, while the TOPIX is trading flat, with banks outperforming (TOPIX Banks Index +1.60%)
Taiwan's TAIEX & South Korea's KOSPI are both little changed today, with the market eagerly awaiting TSMC earnings which are due out at 1700 AEST / 1400 HKT.
Australian equities have hit new all time highs following much stronger-than-expected employment data. Australia's labor market remained robust in September, with employment growth surpassing expectations. The economy added 64.1k jobs, driven mainly by full-time positions (+51.6k), while part-time employment also increased by 12.5k. This followed a revised gain of 42.6k jobs in August. The unemployment rate held steady at 4.1%, the lowest since May, and the participation rate reached a new high of 67.2%. Banks are the top performing stocks, closing followed by real estate. Tech stocks struggle, although they only make up a small portion of the index, ASX 200 is currently 0.62% higher.
As expected there was a total reversal in the Tech heavy markets with South Korea & Taiwan experiencing strong outflows on Wednesday, while Thailand ended the 14-day run of outflows with its largest inflow since Sept 6th.
South Korea: Recorded outflows of -$582m yesterday, bringing the 5-day total to -$705m. However, YTD flows remain positive at +$9.43b. The 5-day average is -$141m, better than the 20-day average of -$216m but worse than the 100-day average of -$58m.
Taiwan: Experienced significant outflows of -$1.14b yesterday, although the 5-day figure shows inflows of +$829m. YTD flows are deeply negative at -$12.6b. The 5-day average is +$166m, higher than the 20-day average of +$110m and much better than the 100-day average of -$168m.
India: Saw outflows of -$182m Tuesday with the past 5 sessions showing a more substantial -$2.09b in outflows. YTD inflows are +$3.72b. The 5-day average is -$418m, worse than both the 20-day average of -$225m and the 100-day average of +$71m.
Indonesia: Recorded outflows of -$22m yesterday and -$87m over the past 5 days. YTD flows are positive at +$2.83b. The 5-day average is -$17m, below both the 20-day average of -$34m and the 100-day average of +$29m.
Thailand: Posted inflows of +$127m yesterday, though the past 5 sessions saw outflows of -$89m. YTD flows are negative at -$3.04b. The 5-day average is -$18m, similar to the 20-day average of -$17m, and worse than the 100-day average of -$11m.
Malaysia: Recorded inflows of +$20m Tuesday, bringing the 5-day figure to -$16m. YTD inflows stand at +$564m. The 5-day average is -$3m, better than the 20-day average of -$20m and in line with the 100-day average of +$5m.
Philippines: Posted inflows of +$15m yesterday and a 5-day total of +$15m, with YTD flows at +$95m. The 5-day average is +$3m, below the 20-day average of +$16m but slightly better than the 100-day average of +$4m.
Crude has risen slightly today to add to Wednesday’s moderate gains. It rose earlier in the session but then more than gave up those advances as markets were disappointed with China’s support measures for the property sector announced today and there was a general pullback in risk. The USD index is flat.
WTI is up 0.3% to $70.60/bbl off the intraday low of $70.52 but below today’s high of $71.11. The benchmark rose 0.2% on Wednesday after Tuesday’s sharp fall.
Brent is 0.3% higher at $74.43/bbl today after rising to $74.92 and then falling to $74.31. It rose 0.5% on Wednesday.
Conflict in the Middle East continued with the US striking Houthi weapons storage facilities in Yemen. The Iran-backed group has significantly disrupted shipping in the Red Sea over the last year.
Bloomberg reported that US crude inventories fell 1.6mn barrels when a rise had been expected, according to people familiar the API data. Gasoline stocks fell 5.9mn and distillate 2.7mn. The official EIA figures are out today.
Later the Fed’s Goolsbee speaks and the ECB decision is announced followed by President Lagarde’s press conference. It is expected to cut rates 25bp. In terms of data, US September retail sales, budget & IP, October Philly Fed & NAHB housing index, August inventories and jobless claims print. There’s also euro area September CPI and August trade.
Gold has hit a new all-time high of 2684.95 in today’s Asia-Pac session, after closing 0.4% higher at $2673.83 on Wednesday.
Bullion, up nearly 30% year-to-date, is among the top-performing commodities in 2024. Optimism surrounding rate cuts has fueled recent gains, especially after the US Federal Reserve initiated its easing cycle last month. However, traders have tempered their expectations regarding the size and pace of rate cuts following mixed US economic data. Lower interest rates typically benefit gold, which doesn’t offer a yield.
Attention is now focused on today’s US retail sales and jobless data, as traders seek further insights into the US Fed’s easing trajectory.
Robust central bank purchases and rising geopolitical tensions have also bolstered gold prices.
According to MNI’s technicals team, the trend condition in gold remains bullish, with sights still on $2,690.2, a Fibonacci projection.
USD/CNH sits up from earlier lows, last near 7.1365, which leaves us little changed for the session. China/Hong Kong equities have moved off earlier highs, as the market digests the housing briefing outcome.
Ensuring completion of unfinished onshore projects (through expanding the 'white list') is a likely welcome development onshore but markets will be likely looking for firmer timelines and details around planned stimulus measures in the fiscal space. The authorities seem to be focused on risk mitigation rather seeing the sector expand rapidly once again (in terms of property). Property related equity indices have all fallen sharply.
Spot USD/KRW got to fresh highs near 1370, but sits slightly lower now, last near 1368. Onshore equities are struggling for upside, while offshore investors continue to sell local stocks.
USD/TWD is a touch higher, last near 32.20. Headlines have just crossed of the TSMC earnings beat for Q3. This is more likely to be important for global equities rather than TWD, although it may encourage some fresh offshore inflows.
South East Asia currencies are mixed in the first part of Thursday trade. MYR and THB weaker, while PHP is close to steady.
Market sentiment has been focused on digesting yesterday's central bank decisions. BoT was the biggest surprise, with an unexpected cut, although fallout for THB has been very muted. The pair sits at 33.24 in latest dealings, with highs from yesterday near 33.40. The general sell-side viewpoints are that this is not the start of an aggressive easing cycle from the BoT.
USD/THB does look a little lower relative US-TH 2yr government bond yield spreads, but onshore equities are continuing to track higher, up a further 0.7% today, and yesterday saw strong offshore inflow momentum.
USD/MYR is back towards recent highs, the pair closing in on 4.3100. USD/CNH has rebounded from earlier lows, although remains sub 7.1400, as markets assess the housing market briefing. Real estate equity indices are off sharply at the lunch time break.
USD/PHP is little changed in the 57.70/75 region. The BSP is likely to continue to ease, but in 25bps increments.
USD/IDR is back to 15515/20 towards the bottom end of recent ranges. We are little changed on the day, following yesterday's on hold BI outcome.
China to double Loans for Unfinished Properties to $562 Billion (source: BBG).
A release from the China Reat Estate Information Corp (CRIC) reporting that land buyers spent CNY73bn in September, a 92% month on month increase and that Golden Week saw China’s largest state-owned developers experience a significant pick up in contracted sales (source CRIC).
Equity markets gave a muted response to the press conference from the Housing Minister with all major indices barely positive.
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