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The USD has given up some of Wednesday's gains. AUD and NZD have been the strongest performers, aided by higher China/Hong Kong equities. US front end yields reversed earlier gains and sit slightly lower now. JGBs are lower, with a poor 10yr auction weighing.
Gold is steady, oil up, along with some metals. China trade data showed surging exports, but negative import growth.
The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.
UST’s have had their fortunes turnaround with buyers emerging and yields moving lower.
UST yields were +1 – 1.8bp lower across the curve.
US 2YR -1bp to 4.256%, US 5YR -1.4bp to 4.262%, US 10YR -1bp to 4.426% and US 30YR -0.8bp to 4.605%.
US 10YR Dec24 Future didn’t follow the lead from cash and moved up to 109-19 from its 109-16 open.
It is likely that cash investors now have turned their attention away from the election result with the next focal point the upcoming FED meeting and the accompanying statement.
Currently this week’s meeting has a cut priced in but for the following meeting on December 18, there is only 19bps priced in.
JGB futures are weaker and at Tokyo session lows, -24 compared to settlement levels.
Outside of the previously outlined cash earnings, there hasn't been much by way of domestic drivers to flag other than a poor 10-year auction.
The 10-year JGB auction showed weaker results, with the low price falling short of expectations. Moreover, the cover ratio declined to 3.133x from last month’s 3.529x, and the tail lengthened to 0.04 from 0.02.
This was despite the auction offering an outright yield 10-15bps higher than last month’s level and just 10bps below July's cyclical high.
Weak sentiment toward global long-end bonds impacted today’s auction.
Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
Cash JGBs are 2-3bps cheaper across benchmarks beyond the 1-year. The benchmark 10-year yield is 3.2bps higher at 1.011% versus the cycle high of 1.101%.
The swap curve has bear-steepened with rates 1-6bps higher. Swap spreads are mixed.
Tomorrow, the local calendar will see Household Spending and Weekly International Investment Flow data alongside the Coincident and Leading Indices.
Japan Sep labor earnings data was slightly below market forecasts. Cash earnings rose 2.8%y/y against a 3.0% forecast, the prior August print was also at 2.8%. In real terms, earnings were -0.1%y/y, against a 0.1% forecast, the August outcome was -0.8%. The Sep cash earnings, on a same sample base, was 2.9%y/y against a 3.5% forecast and 3.5% prior (which was revised higher). Scheduled full time pay on a same sample base was 2.9%y/y, in line with forecasts and 2.8% prior.
In terms of the detail, it still looked reasonable. Scheduled pay rose 2.6% y/y, bonus payments were up 16.1% y/y. Headwinds came from hours worked (-2.5%), with scheduled and overtime work was also down in y/y terms.
On a same sample basis we were generally close to August outcomes (except for the cash earnings headline).
The trends still appear positive, albeit volatile. The chart below plots real labor earnings against household spend. So whilst real wages remained just in negative territory (the orange line), we are still gradually trending higher, which should aid spending, all else equal.
At the margin though, today's data won't add any hawkishness to the BoJ's Dec meeting.
Fig 1: Japan Real Labor Earnings & Household Spending
ACGBs (YM -1.0 & XM -2.5) are slightly weaker after dealing in narrow ranges in today’s Sydney session.
RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.
Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
Cash ACGBs are flat to 2bps cheaper, with a steepening bias. The AU-US 10-year yield differential is at +22bps.
Swap rates are 1bp lower to 2bps higher, with the 3s10s steeper.
The bills strip is weaker, with pricing -1 to -2.
RBA-dated OIS pricing is flat to 2bps firmer today. 2025 meeting pricing remains 2-9bps higher than pre-RBA levels on Tuesday. No easing is priced for this year, with June 2025 being the first meeting where a 25bp rate cut is fully anticipated.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$800mn of the 2.75% 21 June 2035 bond.
RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.
The RBA focuses on headline inflation but as its return to the band will not be sustained due to the temporary nature of federal and state government rebates. Thus it is focusing on trimmed mean to gauge the underlying inflation trends which is expected to drive where headline is going once the subsidies expire.
Q4 2024 headline CPI is expected also to be impacted by electricity rebates. The RBA estimated that two-thirds of the 1pp drop in Q3 inflation was due to the government subsidies (0.45pp) and the fall in petrol prices (0.25pp).
There were questions on the impact of a Trump presidency. The RBA will wait until policies are passed and not just part of an election campaign before estimating their effect on the Australian economy.
If universal tariffs are at 10% and US government spending increases as planned, then the impact on Australia is likely to be minimal. Tariffs directed at China and China’s response are the key events that are likely to affect the Australian economy through commodities.
Bullock said in response to questions on Australian fiscal policy that she believes that the government’s “attitude” to spending is the “right one”.
The September merchandise trade surplus narrowed more than expected to $4.61bn from $5.28bn as the fall in exports outpaced imports. Coal and iron ore prices fell on the month. The surplus has been trending lower for around a year as commodity prices have eased but looking through the volatility it may be stabilising. Q3 data showed another terms of trade deterioration in the quarter.
Australia merchandise trade balance A$mn
Source: MNI - Market News/ABS
Exports fell 4.3% m/m to be down 10.2% y/y following -8.4% y/y with other mineral fuels weighing. The weakness was concentrated in non-rural goods (-4.2% m/m & 11.6% y/y), while rural rose 5.4% m/m but is still down 5.6% y/y. Australia’s main mining exports fell in September, except metals.
Imports declined 3.1% m/m to be 7.8% y/y lower with the weakness in fuels and lubricants. The data is nominal and so the fall in oil prices in September, Brent -7.5% m/m, pushed import values down. Lower petrol prices have helped to bring headline inflation down though.
Capital and intermediate goods imports were lower down 6.3% m/m and 4.6% m/m respectively with annual growth trending lower. The decline in capex goods was due to lower machinery & equipment, other capital and ADP equipment, while telecoms rose. It is signalling lacklustre investment.
Consumer goods imports rose 0.8% m/m to be down 2.1% y/y with the monthly increase driven by food & beverages and non-industrial transport equipment.
The prices of key Australian commodity exports were all lower in September weighing on merchandise exports. Quantities of commodity shipments were more mixed. Export growth to Australia’s key Asian destinations was generally weak.
While shipments to China rose in September they fell 16.2% y/y after -16.3%. They were down 16% y/y to Japan and 13.2% y/y to Korea. There has been a global trend of strong exports to the US and Australia’s rose 19.3% y/y but they are a small market compared with Asian countries.
The unit values of iron ore, coal and LNG exports all fell in September. Iron ore and hard coking coal had been down in August. Volumes of iron ore and hard coking coal rose in September predominantly driven by China but also Taiwan, and India and Turkey for the latter. Quantities fell for thermal & semi-soft coal due to Japan, India and the Netherlands. LNG was also lower.
NZGBs closed on a weak note, with benchmark yields 2-3bps higher. The NZGB 10-year has underperformed since yesterday’s close with the NZ-US and NZ-AU yield differentials 6-7bps tighter.
Donald Trump’s trade policies will add to global inflation pressures but won’t threaten financial stability unless retaliation spirals out of control, according to the RBNZ. During a briefing on financial stability, RBNZ deputy governor Christian Hawkesby told Parliament independent central banks could easily manage this extra inflation pressure.
Traders are now shifting attention to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are ~1bp richer in today’s Asia-pac session after yesterday’s savage post-election sell-off.
Today’s supply saw decent demand with cover ratios ranging from 2.45x (May-28) to 3.60x (May-54).
Swap rates closed 3-5bps higher, with the belly underperforming.
RBNZ dated OIS pricing closed 1-4bps firmer across meetings, with May 2025 leading. A cumulative 91bps of easing is priced by February, with 52bps by year-end.
The local data calendar is empty until next week's 2-year inflation expectations print.
The USD has given back part of Wednesday's gains in the first part of Thursday trade. The BBDXY index was last near 1268.3, off close to 0.15%. Gains have been dominated by AUD and NZD.
AUD/USD was last near 0.6620/25, up 0.80%. Note early highs from yesterday, pre US-election results, were around 0.6645, so we aren't too far away from those levels. NZD/USD was close to 0.5980/85 in latest dealings.
We saw Hong Kong and China equities rebound from early losses. The HSI last up +1.1%, CSI 300 up 0.7%. The real estate index is up nearly 2%. We should hear more about the local government debt relief tomorrow post the NPC meeting.
Iron ore and copper are both tracking slightly higher.
China trade data saw exports surge, but imports were -2.3%y/y, close to expectations, with key commodity imports all down m/m.
USD/JPY has drifted lower as the session has progressed, last near 154.10, off 0.35%. We had a step up in verbal FX rhetoric from FX diplomat Mimura, including that they will take appropriate action against excessive moves. Still, yen only really started moving this afternoon, with these earlier FX comments not providing lasting support.
US yields have also ticked down, but losses are less than 1bps for the most part at this stage.
Japan Sep labor earnings were below market expectations, but trends remain positive.
NZD/JPY has broken above 92.00, getting back to fresh highs since July. AUD/JPY has pushed above 102.00.
The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.
Equity markets in general across the region greeted the US Election result positively, trading higher throughout the day.
China had some very strong data out with Exports jumping +12.7% for October and the trade balance hitting $95bn.
This saw all of China’s major bourses up with CSI 300 +0.70%, Hang Seng +1.05%, Shanghai +.85% and Shenzhen +0.95%.
Singapore was the star performer with the FTSE Straits Times up over 2%.
In Korea, the KOSPI reacted too to the moves in China with the KOSPI up +0.50%.
However for Malaysia and Indonesia, their fortunes were different both down on the day with the FTSE Malay KLCI down -0.55% and the Jakarta Comp -1.0%.
The other underperformer on the day was the Philippines which fell -2.7% after data out saw GDP for the third quarter missing expectations.
With India just opening, it is starting off on a weaker note down -0.22%.
Some significant outflows across the region in Asia yesterday with India the biggest mover. Having had a sustained period of outflows, Malaysia flow turned positive yesterday.
South Korea: Recorded outflows of -$1m yesterday, bringing the 5-day total to -$93b. YTD flows remain positive at +$7.066b. The 5-day average is -$19m, the 20-day average is -$156m and the 100-day average of -$71m.
Taiwan: Experienced outflows of -$82m yesterday, with total outflows of -$914m over the past 5 days. YTD flows are negative at -$11,674b. The 5-day average is -$183m, the 20-day average of +$45m and the 100-day average of -$142m.
India: Saw outflows of -$207m as of Tuesday, with a total outflow of -$1.633b over the previous 5 days. YTD inflows stand at +$2,765m. The 5-day average is -$327m, the 20-day average of -$355m and the 100-day average of +$35m.
Indonesia: Posted outflows of -$73m yesterday, bringing the 5-day total to -$71m. YTD flows remain positive at +$2.481b. The 5-day average is -$14m, the 20-day average is -$22m the 100-day average of +$30m.
Thailand: Recorded outflows of -$52m yesterday, totaling -$93m over the past 5 days. YTD flows are negative at -$3.506b. The 5-day average is -$19m, the 20-day average of -$28m the 100-day average of -$9m.
Malaysia: Experienced inflows of +$21m yesterday, contributing to a 5-day outflow of -$105m. YTD flows stand at +$396m. The 5-day average is -$21m, the 20-day average of -$9m the 100-day average of +$4m.
Philippines: Saw outflows of -$19m yesterday, with net outflows of -$66m over the past 5 days. YTD flows are positive at +$11m. The 5-day average is -$13m, the 20-day average of -$4m but the 100-day average is +$5m.
After falling only moderately on Wednesday in the wake of the US election result, oil prices have rallied today on a slightly weaker US dollar (BBDXY -0.1%) and better risk appetite supported by news of China state banks selling USDCNY onshore. WTI is up 0.7% to $72.20/bbl, close to the intraday high, while Brent is 0.8% higher at $75.52/bbl.
Today the prospect of additional China demand is offsetting the possibility that there will be an increase in US oil output and Russian exports under a Trump administration. US demand for energy could also be higher if policies designed to boost growth are implemented but that would also strengthen the greenback.
Last week’s US crude inventory build announced yesterday also doesn’t seem to be weighing on oil prices.
Hurricane Rafael has passed through Cuba but is expected to wane as it heads to the US coast. Around 1.55mbd of Gulf of Mexico production is now estimated to be affected, down from 1.6mbd, according to Bloomberg.
The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.
Gold remains steady in today’s Asia-Pacific session after a 3.0% drop to $2,659/oz yesterday. This decline reflected pressure from rising U.S. yields, a stronger dollar, and heavy positioning following the U.S. election outcome.
Despite these pressures on gold, analysts at IG Asia say that this will be balanced with potential safe-haven demand in the event of any trade tensions arising from a Trump presidency.
Traders are now shifting attention to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Lower rates tend to benefit bullion, which doesn’t pay interest.
From a technical perspective, the trend condition in gold remains bullish and the latest pullback is considered corrective, according to MNI’s technicals team. However, an extension lower would signal the scope for a deeper correction, towards $2,643.6, the 50-day EMA.
Meanwhile silver has also fallen by 4.4% to $31.2/oz, its lowest level since Oct 15. Bullish conditions in silver remain intact and the bear cycle that started on Oct 23 is considered corrective, for now. However, a clear breach of the 50-day at $31.64, which has been pierced today, would signal scope for a deeper retracement towards $30.211, a trendline support.
China headline imports were down -2.3% y/y, close to market expectations. Import growth is up from 2023 lows, but the trend through 2024 has not been encouraging, with a flat to softer outcomes mostly evident in the past 6 months. This side of the economy is yet to see the benefits of stimulus measures and some improvement in survey measures like PMIs but also harder data like IP.
In terms of China commodity import volumes, we were down for coal in the month, along with oil, iron ore, soybeans, copper and natural gas. So every major commodity import category saw falls in m/m terms.
Most are still up in y/y terms. The y/y 3-mth MA trend is presented in the first figure below for coal, copper and iron ore. Only the coal trend looks positive at this stage, with iron ore and copper trending back towards 0%.
The second chart replicates the first but for oil and LNG. The LNG trend is more positive compared with oil at the moment.
Import trends will be watched for signs of greater stimulus traction as we progress towards the end of this year. In 2025 focus may also shift to trade tensions with the US under the new US Administration.
When Trump was last in the White House he pushed for China to purchase more US argicultural products, but actual volumes purchased were well below what was agreed.
Fig 1: China Commodity Imports - y/y% 3-mth ma, Iron ore, Coal & Copper
Source: MNI - Market News/Refinitiv Fig 2: China Commodity Imports - y/y% 3-mth ma, Oil & Natural Gas
The central bank still sees room for more rate cuts, the near-term focus will be on maintaining rupiah stability, Bank Indonesia Governor Perry Warjiyo told parliament on Wednesday (source: BBG).
Indonesia plans to cancel as much as $550 million of bad loans owed by small businesses to drive new lending and boost growth in Southeast Asia’s largest economy (source: BBG).
The equity market was very weak today with the Jakarta Composite down -1.18% as bond yields rose at the front end.
South Korea’s Yoon Discusses Pyongyang’s Troops with Trump (source BBG)
If the policy stance that’s been stressed by president-elect Trump becomes realized, the impact on our economy is expected to be significant,” Finance Minister Choi Sang-mok said Thursday in a meeting with other economic policymakers in Seoul. (source: BBG)
KOSPI took its lead from China today putting in a positive performance up +0.40% whilst bond yields declined.
USD/CNH got to fresh highs of 7.2132 not long after the USD/CNY fixing, which was set only a touch below market expectations and hence offered only limited push back to yesterday's USD surge. Onshore USD/CNY spot opened, but onshore state owned banks were reported USD sellers, which helped curb the rise.
From highs of 7.1870, onshore spot is now back to 7.1740. USD/CNH is back near 7.1890 close to 0.20% stronger in CNH terms. Equities are higher, the CSI 300 index up around 0.80% in latest dealings. Hopes of stimulus measures post the NPC meeting conclusion tomorrow are likely aiding sentiment. Property stocks are also up today. Trade data showed a bumper rise in exports, but uncertainty clouds the outlook given the Trump administration returning in 2025.
Spot USD/KRW made marginal new highs of 1404.45 but sits back at 1396 in latest dealings. The Finance Ministry said excessive volatility would be curbed. Onshore equities have risen slightly, reversing earlier losses. Trump and South Korean President Yoon spoke and plan to meet soon. Trump mentioned the US needs help from South Korean shipbuilders.
Spot USD/TWD is firmer for the session but at 32.24, sits off earlier highs near 32.32. Local equities are higher by around 1% at this stage.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
07/11/2024
0700/0800
**
DE
Trade Balance
07/11/2024
0700/0800
**
DE
Industrial Production
07/11/2024
0700/0800
SE
Flash CPI
07/11/2024
0800/0900
**
ES
Industrial Production
07/11/2024
0810/0910
EU
ECB's Schnabel remarks at Money Market conference
07/11/2024
0830/0930
***
SE
Riksbank Interest Rate Decison
07/11/2024
0830/0930
**
EU
S&P Global Final Eurozone Construction PMI
07/11/2024
0900/1000
***
NO
Norges Bank Rate Decision
07/11/2024
1000/1100
**
EU
Retail Sales
07/11/2024
1045/1145
EU
ECB's Elderson in panel on climate leadership
07/11/2024
1200/1200
***
GB
Bank Of England Interest Rate
07/11/2024
1200/1200
***
GB
Bank Of England Interest Rate
07/11/2024
1230/1230
GB
BoE Press Conference
07/11/2024
1330/0830
***
US
Jobless Claims
07/11/2024
1330/0830
**
US
Preliminary Non-Farm Productivity
07/11/2024
1330/0830
**
US
WASDE Weekly Import/Export
07/11/2024
1330/1430
EU
ECB's Lane speech on Public Debt
07/11/2024
1400/1400
GB
Monthly Decision Maker Panel Data
07/11/2024
1400/0900
CA
BOC Deputy Mendes gives opening remarks before a lecture.
07/11/2024
1430/1530
EU
ECB's Lane in panel on Lesson Learnt in Past Crises
07/11/2024
1500/1000
**
US
Wholesale Trade
07/11/2024
1530/1030
**
US
Natural Gas Stocks
07/11/2024
1630/1130
*
US
US Bill 08 Week Treasury Auction Result
07/11/2024
1630/1130
**
US
US Bill 04 Week Treasury Auction Result
07/11/2024
1900/1400
***
US
FOMC Statement
07/11/2024
2000/1500
*
US
Consumer Credit
08/11/2024
2330/0830
**
JP
Household spending
08/11/2024
0001/0001
**
GB
KPMG/REC Jobs Report
08/11/2024
0230/0230
GB
BOE's Breeden at Singapore Fintech Festival
08/11/2024
0700/0800
**
SE
Private Sector Production m/m
08/11/2024
0745/0845
*
FR
Foreign Trade
08/11/2024
0900/1000
*
IT
Industrial Production
08/11/2024
0900/1000
EU
ECB's Cipollone moderating event on Italy and the World Bank Group
08/11/2024
1000/1100
*
IT
Retail Sales
08/11/2024
1110/0610
CA
BOC Deputy Gravelle speaks on panel at ECB conference.
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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)
The USD has given up some of Wednesday's gains. AUD and NZD have been the strongest performers, aided by higher China/Hong Kong equities. US front end yields reversed earlier gains and sit slightly lower now. JGBs are lower, with a poor 10yr auction weighing.
Gold is steady, oil up, along with some metals. China trade data showed surging exports, but negative import growth.
The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.
UST’s have had their fortunes turnaround with buyers emerging and yields moving lower.
UST yields were +1 – 1.8bp lower across the curve.
US 2YR -1bp to 4.256%, US 5YR -1.4bp to 4.262%, US 10YR -1bp to 4.426% and US 30YR -0.8bp to 4.605%.
US 10YR Dec24 Future didn’t follow the lead from cash and moved up to 109-19 from its 109-16 open.
It is likely that cash investors now have turned their attention away from the election result with the next focal point the upcoming FED meeting and the accompanying statement.
Currently this week’s meeting has a cut priced in but for the following meeting on December 18, there is only 19bps priced in.
JGB futures are weaker and at Tokyo session lows, -24 compared to settlement levels.
Outside of the previously outlined cash earnings, there hasn't been much by way of domestic drivers to flag other than a poor 10-year auction.
The 10-year JGB auction showed weaker results, with the low price falling short of expectations. Moreover, the cover ratio declined to 3.133x from last month’s 3.529x, and the tail lengthened to 0.04 from 0.02.
This was despite the auction offering an outright yield 10-15bps higher than last month’s level and just 10bps below July's cyclical high.
Weak sentiment toward global long-end bonds impacted today’s auction.
Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
Cash JGBs are 2-3bps cheaper across benchmarks beyond the 1-year. The benchmark 10-year yield is 3.2bps higher at 1.011% versus the cycle high of 1.101%.
The swap curve has bear-steepened with rates 1-6bps higher. Swap spreads are mixed.
Tomorrow, the local calendar will see Household Spending and Weekly International Investment Flow data alongside the Coincident and Leading Indices.
Japan Sep labor earnings data was slightly below market forecasts. Cash earnings rose 2.8%y/y against a 3.0% forecast, the prior August print was also at 2.8%. In real terms, earnings were -0.1%y/y, against a 0.1% forecast, the August outcome was -0.8%. The Sep cash earnings, on a same sample base, was 2.9%y/y against a 3.5% forecast and 3.5% prior (which was revised higher). Scheduled full time pay on a same sample base was 2.9%y/y, in line with forecasts and 2.8% prior.
In terms of the detail, it still looked reasonable. Scheduled pay rose 2.6% y/y, bonus payments were up 16.1% y/y. Headwinds came from hours worked (-2.5%), with scheduled and overtime work was also down in y/y terms.
On a same sample basis we were generally close to August outcomes (except for the cash earnings headline).
The trends still appear positive, albeit volatile. The chart below plots real labor earnings against household spend. So whilst real wages remained just in negative territory (the orange line), we are still gradually trending higher, which should aid spending, all else equal.
At the margin though, today's data won't add any hawkishness to the BoJ's Dec meeting.
Fig 1: Japan Real Labor Earnings & Household Spending
ACGBs (YM -1.0 & XM -2.5) are slightly weaker after dealing in narrow ranges in today’s Sydney session.
RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.
Attention now turns to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are 1bp richer in today’s Asia-Pac session after yesterday’s savage post-US election sell-off.
Cash ACGBs are flat to 2bps cheaper, with a steepening bias. The AU-US 10-year yield differential is at +22bps.
Swap rates are 1bp lower to 2bps higher, with the 3s10s steeper.
The bills strip is weaker, with pricing -1 to -2.
RBA-dated OIS pricing is flat to 2bps firmer today. 2025 meeting pricing remains 2-9bps higher than pre-RBA levels on Tuesday. No easing is priced for this year, with June 2025 being the first meeting where a 25bp rate cut is fully anticipated.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$800mn of the 2.75% 21 June 2035 bond.
RBA Governor Bullock appeared before the Senate Economics Committee today and reiterated that inflation needs to return “sustainably” to target and that is its focus. She also noted that both survey and market measures of medium-term inflation expectations are around 2.5%, the mid-point of the band.
The RBA focuses on headline inflation but as its return to the band will not be sustained due to the temporary nature of federal and state government rebates. Thus it is focusing on trimmed mean to gauge the underlying inflation trends which is expected to drive where headline is going once the subsidies expire.
Q4 2024 headline CPI is expected also to be impacted by electricity rebates. The RBA estimated that two-thirds of the 1pp drop in Q3 inflation was due to the government subsidies (0.45pp) and the fall in petrol prices (0.25pp).
There were questions on the impact of a Trump presidency. The RBA will wait until policies are passed and not just part of an election campaign before estimating their effect on the Australian economy.
If universal tariffs are at 10% and US government spending increases as planned, then the impact on Australia is likely to be minimal. Tariffs directed at China and China’s response are the key events that are likely to affect the Australian economy through commodities.
Bullock said in response to questions on Australian fiscal policy that she believes that the government’s “attitude” to spending is the “right one”.
The September merchandise trade surplus narrowed more than expected to $4.61bn from $5.28bn as the fall in exports outpaced imports. Coal and iron ore prices fell on the month. The surplus has been trending lower for around a year as commodity prices have eased but looking through the volatility it may be stabilising. Q3 data showed another terms of trade deterioration in the quarter.
Australia merchandise trade balance A$mn
Source: MNI - Market News/ABS
Exports fell 4.3% m/m to be down 10.2% y/y following -8.4% y/y with other mineral fuels weighing. The weakness was concentrated in non-rural goods (-4.2% m/m & 11.6% y/y), while rural rose 5.4% m/m but is still down 5.6% y/y. Australia’s main mining exports fell in September, except metals.
Imports declined 3.1% m/m to be 7.8% y/y lower with the weakness in fuels and lubricants. The data is nominal and so the fall in oil prices in September, Brent -7.5% m/m, pushed import values down. Lower petrol prices have helped to bring headline inflation down though.
Capital and intermediate goods imports were lower down 6.3% m/m and 4.6% m/m respectively with annual growth trending lower. The decline in capex goods was due to lower machinery & equipment, other capital and ADP equipment, while telecoms rose. It is signalling lacklustre investment.
Consumer goods imports rose 0.8% m/m to be down 2.1% y/y with the monthly increase driven by food & beverages and non-industrial transport equipment.
The prices of key Australian commodity exports were all lower in September weighing on merchandise exports. Quantities of commodity shipments were more mixed. Export growth to Australia’s key Asian destinations was generally weak.
While shipments to China rose in September they fell 16.2% y/y after -16.3%. They were down 16% y/y to Japan and 13.2% y/y to Korea. There has been a global trend of strong exports to the US and Australia’s rose 19.3% y/y but they are a small market compared with Asian countries.
The unit values of iron ore, coal and LNG exports all fell in September. Iron ore and hard coking coal had been down in August. Volumes of iron ore and hard coking coal rose in September predominantly driven by China but also Taiwan, and India and Turkey for the latter. Quantities fell for thermal & semi-soft coal due to Japan, India and the Netherlands. LNG was also lower.
NZGBs closed on a weak note, with benchmark yields 2-3bps higher. The NZGB 10-year has underperformed since yesterday’s close with the NZ-US and NZ-AU yield differentials 6-7bps tighter.
Donald Trump’s trade policies will add to global inflation pressures but won’t threaten financial stability unless retaliation spirals out of control, according to the RBNZ. During a briefing on financial stability, RBNZ deputy governor Christian Hawkesby told Parliament independent central banks could easily manage this extra inflation pressure.
Traders are now shifting attention to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Cash US tsys are ~1bp richer in today’s Asia-pac session after yesterday’s savage post-election sell-off.
Today’s supply saw decent demand with cover ratios ranging from 2.45x (May-28) to 3.60x (May-54).
Swap rates closed 3-5bps higher, with the belly underperforming.
RBNZ dated OIS pricing closed 1-4bps firmer across meetings, with May 2025 leading. A cumulative 91bps of easing is priced by February, with 52bps by year-end.
The local data calendar is empty until next week's 2-year inflation expectations print.
The USD has given back part of Wednesday's gains in the first part of Thursday trade. The BBDXY index was last near 1268.3, off close to 0.15%. Gains have been dominated by AUD and NZD.
AUD/USD was last near 0.6620/25, up 0.80%. Note early highs from yesterday, pre US-election results, were around 0.6645, so we aren't too far away from those levels. NZD/USD was close to 0.5980/85 in latest dealings.
We saw Hong Kong and China equities rebound from early losses. The HSI last up +1.1%, CSI 300 up 0.7%. The real estate index is up nearly 2%. We should hear more about the local government debt relief tomorrow post the NPC meeting.
Iron ore and copper are both tracking slightly higher.
China trade data saw exports surge, but imports were -2.3%y/y, close to expectations, with key commodity imports all down m/m.
USD/JPY has drifted lower as the session has progressed, last near 154.10, off 0.35%. We had a step up in verbal FX rhetoric from FX diplomat Mimura, including that they will take appropriate action against excessive moves. Still, yen only really started moving this afternoon, with these earlier FX comments not providing lasting support.
US yields have also ticked down, but losses are less than 1bps for the most part at this stage.
Japan Sep labor earnings were below market expectations, but trends remain positive.
NZD/JPY has broken above 92.00, getting back to fresh highs since July. AUD/JPY has pushed above 102.00.
The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.
Equity markets in general across the region greeted the US Election result positively, trading higher throughout the day.
China had some very strong data out with Exports jumping +12.7% for October and the trade balance hitting $95bn.
This saw all of China’s major bourses up with CSI 300 +0.70%, Hang Seng +1.05%, Shanghai +.85% and Shenzhen +0.95%.
Singapore was the star performer with the FTSE Straits Times up over 2%.
In Korea, the KOSPI reacted too to the moves in China with the KOSPI up +0.50%.
However for Malaysia and Indonesia, their fortunes were different both down on the day with the FTSE Malay KLCI down -0.55% and the Jakarta Comp -1.0%.
The other underperformer on the day was the Philippines which fell -2.7% after data out saw GDP for the third quarter missing expectations.
With India just opening, it is starting off on a weaker note down -0.22%.
Some significant outflows across the region in Asia yesterday with India the biggest mover. Having had a sustained period of outflows, Malaysia flow turned positive yesterday.
South Korea: Recorded outflows of -$1m yesterday, bringing the 5-day total to -$93b. YTD flows remain positive at +$7.066b. The 5-day average is -$19m, the 20-day average is -$156m and the 100-day average of -$71m.
Taiwan: Experienced outflows of -$82m yesterday, with total outflows of -$914m over the past 5 days. YTD flows are negative at -$11,674b. The 5-day average is -$183m, the 20-day average of +$45m and the 100-day average of -$142m.
India: Saw outflows of -$207m as of Tuesday, with a total outflow of -$1.633b over the previous 5 days. YTD inflows stand at +$2,765m. The 5-day average is -$327m, the 20-day average of -$355m and the 100-day average of +$35m.
Indonesia: Posted outflows of -$73m yesterday, bringing the 5-day total to -$71m. YTD flows remain positive at +$2.481b. The 5-day average is -$14m, the 20-day average is -$22m the 100-day average of +$30m.
Thailand: Recorded outflows of -$52m yesterday, totaling -$93m over the past 5 days. YTD flows are negative at -$3.506b. The 5-day average is -$19m, the 20-day average of -$28m the 100-day average of -$9m.
Malaysia: Experienced inflows of +$21m yesterday, contributing to a 5-day outflow of -$105m. YTD flows stand at +$396m. The 5-day average is -$21m, the 20-day average of -$9m the 100-day average of +$4m.
Philippines: Saw outflows of -$19m yesterday, with net outflows of -$66m over the past 5 days. YTD flows are positive at +$11m. The 5-day average is -$13m, the 20-day average of -$4m but the 100-day average is +$5m.
After falling only moderately on Wednesday in the wake of the US election result, oil prices have rallied today on a slightly weaker US dollar (BBDXY -0.1%) and better risk appetite supported by news of China state banks selling USDCNY onshore. WTI is up 0.7% to $72.20/bbl, close to the intraday high, while Brent is 0.8% higher at $75.52/bbl.
Today the prospect of additional China demand is offsetting the possibility that there will be an increase in US oil output and Russian exports under a Trump administration. US demand for energy could also be higher if policies designed to boost growth are implemented but that would also strengthen the greenback.
Last week’s US crude inventory build announced yesterday also doesn’t seem to be weighing on oil prices.
Hurricane Rafael has passed through Cuba but is expected to wane as it heads to the US coast. Around 1.55mbd of Gulf of Mexico production is now estimated to be affected, down from 1.6mbd, according to Bloomberg.
The Fed decision is announced today followed by a press conference with a 25bp rate cut forecast (see MNI Fed Preview). Preliminary Q3 US productivity/ULC, jobless claims and September consumer credit are also released.
The BoE also announces and 25bp of easing is expected. In addition, September German trade & IP, Q3 French employment and September euro area retail sales print. BoE’s Bailey speaks as well as the ECB’s Lane, Buch, Schnabel and Elderson.
Gold remains steady in today’s Asia-Pacific session after a 3.0% drop to $2,659/oz yesterday. This decline reflected pressure from rising U.S. yields, a stronger dollar, and heavy positioning following the U.S. election outcome.
Despite these pressures on gold, analysts at IG Asia say that this will be balanced with potential safe-haven demand in the event of any trade tensions arising from a Trump presidency.
Traders are now shifting attention to the Federal Reserve’s interest-rate decision later today, where policymakers are expected to cut borrowing costs by 25bps. Lower rates tend to benefit bullion, which doesn’t pay interest.
From a technical perspective, the trend condition in gold remains bullish and the latest pullback is considered corrective, according to MNI’s technicals team. However, an extension lower would signal the scope for a deeper correction, towards $2,643.6, the 50-day EMA.
Meanwhile silver has also fallen by 4.4% to $31.2/oz, its lowest level since Oct 15. Bullish conditions in silver remain intact and the bear cycle that started on Oct 23 is considered corrective, for now. However, a clear breach of the 50-day at $31.64, which has been pierced today, would signal scope for a deeper retracement towards $30.211, a trendline support.
China headline imports were down -2.3% y/y, close to market expectations. Import growth is up from 2023 lows, but the trend through 2024 has not been encouraging, with a flat to softer outcomes mostly evident in the past 6 months. This side of the economy is yet to see the benefits of stimulus measures and some improvement in survey measures like PMIs but also harder data like IP.
In terms of China commodity import volumes, we were down for coal in the month, along with oil, iron ore, soybeans, copper and natural gas. So every major commodity import category saw falls in m/m terms.
Most are still up in y/y terms. The y/y 3-mth MA trend is presented in the first figure below for coal, copper and iron ore. Only the coal trend looks positive at this stage, with iron ore and copper trending back towards 0%.
The second chart replicates the first but for oil and LNG. The LNG trend is more positive compared with oil at the moment.
Import trends will be watched for signs of greater stimulus traction as we progress towards the end of this year. In 2025 focus may also shift to trade tensions with the US under the new US Administration.
When Trump was last in the White House he pushed for China to purchase more US argicultural products, but actual volumes purchased were well below what was agreed.
Fig 1: China Commodity Imports - y/y% 3-mth ma, Iron ore, Coal & Copper
Source: MNI - Market News/Refinitiv Fig 2: China Commodity Imports - y/y% 3-mth ma, Oil & Natural Gas
The central bank still sees room for more rate cuts, the near-term focus will be on maintaining rupiah stability, Bank Indonesia Governor Perry Warjiyo told parliament on Wednesday (source: BBG).
Indonesia plans to cancel as much as $550 million of bad loans owed by small businesses to drive new lending and boost growth in Southeast Asia’s largest economy (source: BBG).
The equity market was very weak today with the Jakarta Composite down -1.18% as bond yields rose at the front end.
South Korea’s Yoon Discusses Pyongyang’s Troops with Trump (source BBG)
If the policy stance that’s been stressed by president-elect Trump becomes realized, the impact on our economy is expected to be significant,” Finance Minister Choi Sang-mok said Thursday in a meeting with other economic policymakers in Seoul. (source: BBG)
KOSPI took its lead from China today putting in a positive performance up +0.40% whilst bond yields declined.
USD/CNH got to fresh highs of 7.2132 not long after the USD/CNY fixing, which was set only a touch below market expectations and hence offered only limited push back to yesterday's USD surge. Onshore USD/CNY spot opened, but onshore state owned banks were reported USD sellers, which helped curb the rise.
From highs of 7.1870, onshore spot is now back to 7.1740. USD/CNH is back near 7.1890 close to 0.20% stronger in CNH terms. Equities are higher, the CSI 300 index up around 0.80% in latest dealings. Hopes of stimulus measures post the NPC meeting conclusion tomorrow are likely aiding sentiment. Property stocks are also up today. Trade data showed a bumper rise in exports, but uncertainty clouds the outlook given the Trump administration returning in 2025.
Spot USD/KRW made marginal new highs of 1404.45 but sits back at 1396 in latest dealings. The Finance Ministry said excessive volatility would be curbed. Onshore equities have risen slightly, reversing earlier losses. Trump and South Korean President Yoon spoke and plan to meet soon. Trump mentioned the US needs help from South Korean shipbuilders.
Spot USD/TWD is firmer for the session but at 32.24, sits off earlier highs near 32.32. Local equities are higher by around 1% at this stage.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
07/11/2024
0700/0800
**
DE
Trade Balance
07/11/2024
0700/0800
**
DE
Industrial Production
07/11/2024
0700/0800
SE
Flash CPI
07/11/2024
0800/0900
**
ES
Industrial Production
07/11/2024
0810/0910
EU
ECB's Schnabel remarks at Money Market conference
07/11/2024
0830/0930
***
SE
Riksbank Interest Rate Decison
07/11/2024
0830/0930
**
EU
S&P Global Final Eurozone Construction PMI
07/11/2024
0900/1000
***
NO
Norges Bank Rate Decision
07/11/2024
1000/1100
**
EU
Retail Sales
07/11/2024
1045/1145
EU
ECB's Elderson in panel on climate leadership
07/11/2024
1200/1200
***
GB
Bank Of England Interest Rate
07/11/2024
1200/1200
***
GB
Bank Of England Interest Rate
07/11/2024
1230/1230
GB
BoE Press Conference
07/11/2024
1330/0830
***
US
Jobless Claims
07/11/2024
1330/0830
**
US
Preliminary Non-Farm Productivity
07/11/2024
1330/0830
**
US
WASDE Weekly Import/Export
07/11/2024
1330/1430
EU
ECB's Lane speech on Public Debt
07/11/2024
1400/1400
GB
Monthly Decision Maker Panel Data
07/11/2024
1400/0900
CA
BOC Deputy Mendes gives opening remarks before a lecture.
07/11/2024
1430/1530
EU
ECB's Lane in panel on Lesson Learnt in Past Crises
07/11/2024
1500/1000
**
US
Wholesale Trade
07/11/2024
1530/1030
**
US
Natural Gas Stocks
07/11/2024
1630/1130
*
US
US Bill 08 Week Treasury Auction Result
07/11/2024
1630/1130
**
US
US Bill 04 Week Treasury Auction Result
07/11/2024
1900/1400
***
US
FOMC Statement
07/11/2024
2000/1500
*
US
Consumer Credit
08/11/2024
2330/0830
**
JP
Household spending
08/11/2024
0001/0001
**
GB
KPMG/REC Jobs Report
08/11/2024
0230/0230
GB
BOE's Breeden at Singapore Fintech Festival
08/11/2024
0700/0800
**
SE
Private Sector Production m/m
08/11/2024
0745/0845
*
FR
Foreign Trade
08/11/2024
0900/1000
*
IT
Industrial Production
08/11/2024
0900/1000
EU
ECB's Cipollone moderating event on Italy and the World Bank Group
08/11/2024
1000/1100
*
IT
Retail Sales
08/11/2024
1110/0610
CA
BOC Deputy Gravelle speaks on panel at ECB conference.
08/11/2024
1215/1215
GB
BOE's Pill and Shortfall hold MPC Agency briefing
08/11/2024
1330/0830
***
CA
Labour Force Survey
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