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Japan data saw household spending print better than expected, but it remains in negative y/y territory. Japan local investors sold a record amount of offshore debt last week.
US yields were close to unchanged with the Fed staying the course in terms of its near term outlook.
There was a risk off tone in FX, as China/HK equities track modestly weaker ahead of the upcoming NPC briefing. Officials from the NPC and Ministry of Finance will brief the press and answer questions concerning the State Council bill on raising the ceiling on local government debt to replace hidden debt.
Outside of NPC related headlines coming up, we have central bank speak, including Bowman from the Fed. On the data front, in the US the U. of Mich Sentiment print is out. In Canada jobs data is due. Note tomorrow, Oct inflation figures print in China.
In the $-bloc, rate expectations through July 2025 remain mostly steady since the start of the week, with New Zealand as an exception, showing a 10bp increase.
Yesterday, the FOMC delivered the expected 25bp cut. The Fed has maintained a steady outlook on the economy and rate trajectory since September, emphasising that “nothing in the economic data suggests the committee needs to hurry” toward a neutral stance.
Conversely, the RBA on Tuesday highlighted its commitment to returning inflation to target, stressing vigilance against upside risks. Although headline inflation has moderated, underlying inflation remains high, prompting the RBA to keep policy restrictive until inflation shows sustainable progress toward the target, with decisions based on evolving data and risks.
In New Zealand, the key release was the Q3 Employment Report, revealing a softening labour market as the economy weakens. Employment fell 0.5% q/q, with annual growth down 0.4%. However, the unemployment rate rose less than expected due to a larger-than-anticipated drop in participation. Wage growth slowed as labour market pressures eased.
Looking ahead to July 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 3.85%, -77bps; Canada (BoC): 2.83%, -92bps; Australia (RBA): 4.04%, -28bps; and New Zealand (RBNZ): 3.48%, -127bps.
JGB futures are stronger but off session bests, +15 compared to settlement levels.
Outside of the previously outlined Household Spending and International Investment Flows, there hasn't been much by way of domestic drivers to flag. Coincident and Leading Indices for September have just printed slightly above expectations.
Finance Minister Katsunobu Kato said Japan will take appropriate action against any excessive forex moves, reiterating comments made by the chief currency official Thursday.
Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s strong reversal off Wednesday's post-election cheaps.
Cash JGBs have bull-flattened across benchmarks beyond the 1-year, with yields flat to 3bps lower. The benchmark 10-year yield is 1bp lower at 1.00% versus the cycle high of 1.108%.
Swap rates are flat to 1bp lower. Swap spreads are mostly wider.
Over the Weekend, BoJ Governor Ueda will join ECB officials in the closing event `Climate risks, adaptation and mitigation: what do central banks make of their economic effects?' at Green Swan Conference 2024.
On Monday, the local calendar will see the BoJ Summary of Opinions (Oct. MPM) alongside Current Account Balance and Bank Lending data. The MoF also plans to sell Y250bn of 10-year Inflation-Linked Bonds.
Japan Sep household spending was -1.1% y/y, better than the -1.8%y/y consensus forecast. Spending was down -1.3% in m/m terms.
Whilst the headline result is better than expected, real spending trends remain in negative territory. The chart below plots spending in y/y terms (the white line) against real cash earnings growth, which printed yesterday. Spending has barely been positive in recent years, albeit we aren't as negative as we were in 2023.
The authorities will continue to hope for better outcomes, with the aim of positive real wages boosting spending outcomes.
For the BoJ, at the margin, the data is likely to add to the wait and see approach, with more information on 2025 wage gains likely to materialize in the first part of next year.
Fig 1: Real Household Spending (White Line) & Real Labor Earnings
Last week's offshore investment flows were dominated by local investors dumping offshore investments. The biggest flow was in terms of net selling around offshore bonds, with -¥4.5trln in this segment, see the table below. This was a record for weekly net selling. The rolling 3 month sum of flows into offshore bonds is still positive, but down trending sharply back to flat, as global bond returns roll back over. This is presented in the chart below. Bond returns have suffered amid a resilient US data backdrop and hopes for an economic soft landing in 2025.
Local Japan investors were also strong net sellers of offshore equities last week, which marked the 4th straight week of net selling in this segment.
In terms of offshore inflows into Japan, they were relatively muted last week. We did see offshore investors continue to buy local stocks, but the pace has moderated in recent weeks.
Table 1: Japan Weekly Offshore Investment Flows
Billion Yen
Week ending Nov 1
Prior Week
Foreign Buying Japan Stocks
139.4
10.3
Foreign Buying Japan Bonds
-42.6
277.9
Japan Buying Foreign Bonds
-4457.9
-897.1
Japan Buying Foreign Stocks
-1173.6
-397.6
Source: MNI - Market News/Bloomberg
Fig 1: Japan Offshore Bond Investments & Global Bond Returns
ACGBs (YM +6.0 & XM +8.5) are stronger after dealing in relatively narrow ranges in today’s data-light Sydney session.
(AFR) The total cost of public servant wages grew faster than it has in 15 years last financial year to $232 billion, fuelling economists’ warnings that government spending is helping to keep interest rates higher for longer. Employee expenses are one of the fastest growing areas of government spending, rising 8 per cent over the 2023-24 financial year. (see link)
Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s strong reversal off Wednesday's post-election cheaps.
Cash ACGBs are 6-8bps richer with the AU-US 10-year yield differential at +23bps.
Swap rates are 6-7bps lower, with the 3s10s curve flatter.
The bills strip has twist-flattened, with pricing -1 to +6.
RBA-dated OIS pricing shows no easing by year-end. A 25bps rate cut is not fully priced until July.
On Monday, the local calendar is empty, ahead of Consumer and Business Confidence on Tuesday. The Q3 Wage Price Index is released on Wednesday followed by the Employment Report for October on Thursday.
Next week, the AOFM plans to sell A$800mn of the 2.50% 21 May 2030 bond on Wednesday and A$700mn of the 4.75% 21 April 2027 bond on Friday.
NZGBs closed 2-5bps richer, but off session bests. The NZ-US 10-year differential closed 6bps wider at +25bps after US tsys rebounded from Wednesday’s post-election lows. Cash US tsys are ~1bp cheaper in today’s Asia-Pac session.
Today’s local data calendar was empty, but on Monday, we’ll see the release of 2-year Inflation Expectations, followed by Card Spending data on Tuesday.
Finance Minister Nicola Willis doesn’t want the nation’s smaller deposit takers to pay as much into a proposed deposit insurance scheme as their small size may warrant, the NZ Herald reports citing an interview. (per BBG)
Swap rates closed 2-4bps lower, with the 2s10s curve flatter.
RBNZ dated OIS pricing closed 1-4bps softer across meetings. A cumulative 93bps of easing is priced by February, with 53bps by year-end.
In the $-bloc, rate expectations through July 2025 remain mostly steady since the start of the week, with New Zealand as an exception, showing a 10bp increase.
This came despite the key release of the week, the Q3 Employment Report, revealing a softening labour market as the economy weakens. Employment fell 0.5% q/q, with annual growth down 0.4%. Wage growth also slowed as labour market pressures eased. However, the unemployment rate rose less than expected due to a larger-than-anticipated drop in participation.
As we approach the London/EU crossover, earlier trends in G10 FX are holding, with the BBDXY index up modestly, but with a risk off tone in terms of yen crosses.
The USD BBDXY index was last just above 1261, still down modestly for the week. In the cross asset space, US equity futures are close to flat, while US yields are unchanged. The early impetus in yields was higher, but there was no follow through.
USD/JPY got to lows of 152.55 a little while ago (last near 152.70/75). This is lows back to early Wednesday trade (as US election results started filtering in). Earlier data showed firmer than expected household spending, but still negative in y/y terms.
We had fresh rhetoric on FX markets as well - warning on excessive moves in the short term. However, important local political member, Tamaki, who heads the DPP party, reiterated that the BoJ shouldn't act in the near term, while also noting Trump related policies may weaken yen.
Yen has outperformed on crosses, as China and Hong Kong equities have given back some of yesterday's gains. Major indices are still up for the week, but we await further stimulus details at the conclusion of the NPC. A press conference is to be held in Hong Kong at 4pm to discuss the raising of the ceiling on local government debt to replace hidden debt.
AUD/USD is back to 0.6650, off around 0.40%, NZD has fallen 0.30% to 0.6005/10. AUD/JPY is back to 101.55, nearly 100pips of recent highs.
Outside of NPC related headlines, we have central bank speak, including Bowman from the Fed. On the data front, in the US the U. of Mich Sentiment print is out. In Canada jobs data is due. Note tomorrow, Oct inflation figures print in China.
Yesterday saw very strong equity markets in China, with the Hang Seng up over 2% following very strong export data and expectations for further stimulus measures to be announced at the conclusion of the National Party Congress.
The market gave back some of that performance today again with the Hang Seng leading the way down -0.90%, the CSI 300 down -0.77%, the Shanghai Comp down -0.50% and Shenzhen Comp -0.12%.
The KOSPI has over recent sessions been relatively correlated with the moves in China and this broke down today with the KOSPI down only -0.05%.
Other parts of Asia had a strong day with the Jakarta Comp up +0.95%, Singapore’s FTSE Straits up +1.5%, Taiwan up +.45% and India’s Nifty 50 opening up positive.
Key decliners today were the Philippines (again) down -0.90% and Thailand down -0.35% respectively.
Uncertainty as to the outcome of the US Election drove volatility in the region and a flight to USD resulted in consistent and strong outflows from Asia equities over the week.
With the exception of South Korea, all flows were negative for the week, the largest being India.
The Trump administration and the potential for tariffs will continue to influence investor decision in the near term with flows into the region to remain volatile.
Yesterday saw further significant outflows across the region with India the biggest decline to extend the outflows two eleven consecutive trading days.
Korea has had a turnaround in the last 5-days to turning positive following a very weak period.
South Korea: Recorded inflows of +$72m yesterday, bringing the 5-day total to +$49b. YTD flows remain positive at +$7.153b. The 5-day average is +$10m, the 20-day average is -$132m and the 100-day average of -$72m.
Taiwan: Experienced inflows of +$46m yesterday, with total outflows of -$762m over the past 5 days. YTD flows are negative at -$11,628b. The 5-day average is -$152m, the 20-day average of+$90m and the 100-day average of -$131m.
India: Saw outflows of -$441m as of Wednesday, with a total outflow of -$1,968b over the previous 5 days. YTD inflows stand at +$2,325m. The 5-day average is -$394m, the 20-day average of -$345m and the 100-day average of +$27m.
Indonesia: Posted outflows of -$104m yesterday, bringing the 5-day total to -$153m. YTD flows remain positive at +$2.378b. The 5-day average is -$31m, the 20-day average is -$24m the 100-day average of +$29m.
Thailand: Recorded outflows of -$51m yesterday, totaling -$131m over the past 5 days. YTD flows are negative at -$3.557b. The 5-day average is -$26m, the 20-day average of -$30m the 100-day average of -$9m.
Malaysia: Experienced outflows of -$84m yesterday, contributing to a 5-day outflow of -$81m. YTD flows stand at +$313m. The 5-day average is -$16m, the 20-day average of -$14m the 100-day average of +$3m.
Philippines: Saw outflows of -$67m yesterday, with net outflows of -$123m over the past 5 days. YTD flows are negative at -$56m. The 5-day average is -$25m, the 20-day average of -$7m the 100-day average of +$4m.
Oil markets in Asia have consolidated today as they try to extrapolate Trump’s victory and the potential impact.
During Trump’s prior Presidency, key policies were aimed at limiting Iran exports and expectations are that a return to this type of approach is likely.
Data out showed that China’s slowdown has had a material impact on oil demand with imports down in October by 2%.
The US Fed cut rates by 25bps noting that ‘labour market conditions had eased rather than slowed whilst re-iterating that the incoming US administration will have no impact on the FED’s policy decisions.
WTI strengthened into the US close rising from $70.75 to $72.85 trading down to $71.81 in Asia trading.
WTI for the week was up +3.3%
Brent spoked also from $74.10 to $76 before gently declining during Asia trading to reach $75.15.
Brent for the week was up +2.8%
Market strategists in Asia are following their US counterparts publishing their view on oil given his policies for growth with a diverse set of outcomes.
The Hurricane in the Gulf has hit Cuba and on current projections is unlikely to materially impact oil production.
Gold is 0.3% lower in today’s Asia-Pac session, after closing 1.8% higher at $2706.71 following the US FOMC decision. Thursday’s gains partially unwound Wednesday’s losses when the yellow metal fell by over 3% in the aftermath of the US election.
Yesterday, the FOMC delivered the expected 25bp cut. The Fed has maintained a steady outlook on the economy and rate trajectory since September, emphasising that “nothing in the economic data suggests the committee needs to hurry” toward a neutral stance.
The FOMC gave away few new signals over the future rate path at the November meeting, with Chair Powell once again emphasising data dependence in setting policy while shrugging off recent volatility in inflation and employment readings.
Accordingly, rates markets were little changed, with terminal Fed funds rates seen at 3.72% (roughly 86bp of further cuts to come), roughly the same as pre-decision.
Lower rates are typically positive for gold, which doesn’t pay interest.
Citi analysts see gold trading weak in the near term but believe that structural drivers remain in place.
According to MNI’s technicals team, the trend condition in gold is still bullish and a continuation higher would refocus attention on the bull trigger at $2,790.1, the Oct 31 high. On the downside, attention is on a key support at $2,645.4, the 50-day EMA.
A press conference is to be held in Hong Kong this afternoon where expectations are that announcements over the bond issuance program will be announced (source MNI – Market News)
Hong Kong Cuts Rate as Trump’s Return Raises Fed Uncertainties (source: BBG)
Several major Chinese banks are exploring proposals to increase their core tier 1 capital, following Beijing’s pledge to recapitalize its biggest lenders for the first time in over a decade according to Financial News (source : BBG)
Equity markets gave back some of yesterday’s rally with the CSI300 down -0.7% and the Hang Seng down -.89%.
Next week's data may give insight as to whether the impact of the stimulus is filtering through to the economic data.
Aggregate financing YTD and New Yuan denominated loans will give a snapshot of demand for credit, a measure of individuals and company's willingness to invest.
With stimulus measures predominantly focused on the property sector and the encouraging data out on new home sales; it is anticipated that both of these releases will be strong with current surveys suggesting a meaningful increase.
Of interest also will be New and Used home prices month on month. There has been a multiyear decline for the property sector and with buyers emerging post stimulus, chances are we may start to see some form of bounce for property prices.
The other two key data releases will be Industrial Production and Retail Sales.
Industrial production has been quite resilient given the state of the economy, oscillating around 5% YoY for the monthly figure. Market surveys suggest this could rise to +5.7% for October.
Retail sales has hovered around a 3% expansion month on month for much of 2024 and the market will be looking for signs that stimulus is breathing confidence into the consumer. Market expectations are retail sales could rise +3.8% for October with perhaps a chance of it being better than forecast.
Finally, we will see property investment YTD which current forecasts will see it remain firmly negative.
Bank of Korea’s Deputy Governor Ryoo suggested that ‘uncertainties are running high surrounding global growth and inflation, as well as monetary policy paths for major nations’ during a meeting Friday morning.
Ryoo added ‘we cannot rule out the possibility of volatility in foreign exchange and financial markets growing further,’ as per BBG.
Ryoo went further to add ‘the BOK will strengthen market monitoring to assess the impact of potential policy changes under the new U.S administration and be fully prepared for timely response when needed.’
The comments came following similar statements from the finance minister on Thursday that ‘If the policy stance that has been stressed by president-elect Trump becomes realized, the impact on the Korean economy is expected to be significant,’ reported Yonhap.
The US Election saw a rally in the USD with the KRW falling dramatically.
Given Korea’s reliance on imports for their energy needs, their economy is exposed to FX and commodity price volatility and tariffs proposed by the incoming President could have material impact on both going forward.
Malaysia’s Industrial Production for September surprised to the downside.
Against an expectation of a rise of +3.5%, it only rose by +2.3%.
This came following the prior month result of +4.1%
The decline in manufacturing was the biggest drag down to +3.2% from +6.5%.
Earlier this week the BNM Governor gave an indication that they are comfortable with monetary policy and believe that the longer term outlook for the economy remains strong.
USD/CNH has edged a little higher through the first part of Friday trade. We were last near 7.1580, close to 0.15% weaker in CNH terms. The CNY fixing was again close to neutral. Both China and Hong Kong equities have softened in the first half of the session, but are still up for the week. The market awaits details around further stimulus details at the conclusion of the NPC. A press conference is to be held in Hong Kong at 4pm to discuss the raising of the ceiling on local government debt to replace hidden debt.
Intra-session lows from Thursday were at 7.1415, while post US election highs printed at 7.2132. There are the levels to be mindful of. Also note we get Oct inflation figures in China out tomorrow.
Spot USD/KRW has been range bound. We were last near 1386, little changed for the session. Officials repeated remarks around financial market volatility and being prepared to act. BoK Governor Rhee stated that 1-2 weeks are needed to assess the US election impact for local policy (per BBG).
Spot TWD is firmer by around 0.50%, as onshore markets play catch up with USD losses. USD/TWD was last near 32.05/10.
In South East Asia, most currencies are higher, reflecting catch up gains as well. We are away from best levels though for some pairs. USD/THB was under 34.00 but now sits higher.
USD/PHP is back above 58.40, while USD/IDR is around 15670, up 0.30% so far today.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
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.
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.
Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI (SYDNEY)
Japan data saw household spending print better than expected, but it remains in negative y/y territory. Japan local investors sold a record amount of offshore debt last week.
US yields were close to unchanged with the Fed staying the course in terms of its near term outlook.
There was a risk off tone in FX, as China/HK equities track modestly weaker ahead of the upcoming NPC briefing. Officials from the NPC and Ministry of Finance will brief the press and answer questions concerning the State Council bill on raising the ceiling on local government debt to replace hidden debt.
Outside of NPC related headlines coming up, we have central bank speak, including Bowman from the Fed. On the data front, in the US the U. of Mich Sentiment print is out. In Canada jobs data is due. Note tomorrow, Oct inflation figures print in China.
In the $-bloc, rate expectations through July 2025 remain mostly steady since the start of the week, with New Zealand as an exception, showing a 10bp increase.
Yesterday, the FOMC delivered the expected 25bp cut. The Fed has maintained a steady outlook on the economy and rate trajectory since September, emphasising that “nothing in the economic data suggests the committee needs to hurry” toward a neutral stance.
Conversely, the RBA on Tuesday highlighted its commitment to returning inflation to target, stressing vigilance against upside risks. Although headline inflation has moderated, underlying inflation remains high, prompting the RBA to keep policy restrictive until inflation shows sustainable progress toward the target, with decisions based on evolving data and risks.
In New Zealand, the key release was the Q3 Employment Report, revealing a softening labour market as the economy weakens. Employment fell 0.5% q/q, with annual growth down 0.4%. However, the unemployment rate rose less than expected due to a larger-than-anticipated drop in participation. Wage growth slowed as labour market pressures eased.
Looking ahead to July 2025, the projected official rates and cumulative easing across the $-bloc are as follows: US (FOMC): 3.85%, -77bps; Canada (BoC): 2.83%, -92bps; Australia (RBA): 4.04%, -28bps; and New Zealand (RBNZ): 3.48%, -127bps.
JGB futures are stronger but off session bests, +15 compared to settlement levels.
Outside of the previously outlined Household Spending and International Investment Flows, there hasn't been much by way of domestic drivers to flag. Coincident and Leading Indices for September have just printed slightly above expectations.
Finance Minister Katsunobu Kato said Japan will take appropriate action against any excessive forex moves, reiterating comments made by the chief currency official Thursday.
Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s strong reversal off Wednesday's post-election cheaps.
Cash JGBs have bull-flattened across benchmarks beyond the 1-year, with yields flat to 3bps lower. The benchmark 10-year yield is 1bp lower at 1.00% versus the cycle high of 1.108%.
Swap rates are flat to 1bp lower. Swap spreads are mostly wider.
Over the Weekend, BoJ Governor Ueda will join ECB officials in the closing event `Climate risks, adaptation and mitigation: what do central banks make of their economic effects?' at Green Swan Conference 2024.
On Monday, the local calendar will see the BoJ Summary of Opinions (Oct. MPM) alongside Current Account Balance and Bank Lending data. The MoF also plans to sell Y250bn of 10-year Inflation-Linked Bonds.
Japan Sep household spending was -1.1% y/y, better than the -1.8%y/y consensus forecast. Spending was down -1.3% in m/m terms.
Whilst the headline result is better than expected, real spending trends remain in negative territory. The chart below plots spending in y/y terms (the white line) against real cash earnings growth, which printed yesterday. Spending has barely been positive in recent years, albeit we aren't as negative as we were in 2023.
The authorities will continue to hope for better outcomes, with the aim of positive real wages boosting spending outcomes.
For the BoJ, at the margin, the data is likely to add to the wait and see approach, with more information on 2025 wage gains likely to materialize in the first part of next year.
Fig 1: Real Household Spending (White Line) & Real Labor Earnings
Last week's offshore investment flows were dominated by local investors dumping offshore investments. The biggest flow was in terms of net selling around offshore bonds, with -¥4.5trln in this segment, see the table below. This was a record for weekly net selling. The rolling 3 month sum of flows into offshore bonds is still positive, but down trending sharply back to flat, as global bond returns roll back over. This is presented in the chart below. Bond returns have suffered amid a resilient US data backdrop and hopes for an economic soft landing in 2025.
Local Japan investors were also strong net sellers of offshore equities last week, which marked the 4th straight week of net selling in this segment.
In terms of offshore inflows into Japan, they were relatively muted last week. We did see offshore investors continue to buy local stocks, but the pace has moderated in recent weeks.
Table 1: Japan Weekly Offshore Investment Flows
Billion Yen
Week ending Nov 1
Prior Week
Foreign Buying Japan Stocks
139.4
10.3
Foreign Buying Japan Bonds
-42.6
277.9
Japan Buying Foreign Bonds
-4457.9
-897.1
Japan Buying Foreign Stocks
-1173.6
-397.6
Source: MNI - Market News/Bloomberg
Fig 1: Japan Offshore Bond Investments & Global Bond Returns
ACGBs (YM +6.0 & XM +8.5) are stronger after dealing in relatively narrow ranges in today’s data-light Sydney session.
(AFR) The total cost of public servant wages grew faster than it has in 15 years last financial year to $232 billion, fuelling economists’ warnings that government spending is helping to keep interest rates higher for longer. Employee expenses are one of the fastest growing areas of government spending, rising 8 per cent over the 2023-24 financial year. (see link)
Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s strong reversal off Wednesday's post-election cheaps.
Cash ACGBs are 6-8bps richer with the AU-US 10-year yield differential at +23bps.
Swap rates are 6-7bps lower, with the 3s10s curve flatter.
The bills strip has twist-flattened, with pricing -1 to +6.
RBA-dated OIS pricing shows no easing by year-end. A 25bps rate cut is not fully priced until July.
On Monday, the local calendar is empty, ahead of Consumer and Business Confidence on Tuesday. The Q3 Wage Price Index is released on Wednesday followed by the Employment Report for October on Thursday.
Next week, the AOFM plans to sell A$800mn of the 2.50% 21 May 2030 bond on Wednesday and A$700mn of the 4.75% 21 April 2027 bond on Friday.
NZGBs closed 2-5bps richer, but off session bests. The NZ-US 10-year differential closed 6bps wider at +25bps after US tsys rebounded from Wednesday’s post-election lows. Cash US tsys are ~1bp cheaper in today’s Asia-Pac session.
Today’s local data calendar was empty, but on Monday, we’ll see the release of 2-year Inflation Expectations, followed by Card Spending data on Tuesday.
Finance Minister Nicola Willis doesn’t want the nation’s smaller deposit takers to pay as much into a proposed deposit insurance scheme as their small size may warrant, the NZ Herald reports citing an interview. (per BBG)
Swap rates closed 2-4bps lower, with the 2s10s curve flatter.
RBNZ dated OIS pricing closed 1-4bps softer across meetings. A cumulative 93bps of easing is priced by February, with 53bps by year-end.
In the $-bloc, rate expectations through July 2025 remain mostly steady since the start of the week, with New Zealand as an exception, showing a 10bp increase.
This came despite the key release of the week, the Q3 Employment Report, revealing a softening labour market as the economy weakens. Employment fell 0.5% q/q, with annual growth down 0.4%. Wage growth also slowed as labour market pressures eased. However, the unemployment rate rose less than expected due to a larger-than-anticipated drop in participation.
As we approach the London/EU crossover, earlier trends in G10 FX are holding, with the BBDXY index up modestly, but with a risk off tone in terms of yen crosses.
The USD BBDXY index was last just above 1261, still down modestly for the week. In the cross asset space, US equity futures are close to flat, while US yields are unchanged. The early impetus in yields was higher, but there was no follow through.
USD/JPY got to lows of 152.55 a little while ago (last near 152.70/75). This is lows back to early Wednesday trade (as US election results started filtering in). Earlier data showed firmer than expected household spending, but still negative in y/y terms.
We had fresh rhetoric on FX markets as well - warning on excessive moves in the short term. However, important local political member, Tamaki, who heads the DPP party, reiterated that the BoJ shouldn't act in the near term, while also noting Trump related policies may weaken yen.
Yen has outperformed on crosses, as China and Hong Kong equities have given back some of yesterday's gains. Major indices are still up for the week, but we await further stimulus details at the conclusion of the NPC. A press conference is to be held in Hong Kong at 4pm to discuss the raising of the ceiling on local government debt to replace hidden debt.
AUD/USD is back to 0.6650, off around 0.40%, NZD has fallen 0.30% to 0.6005/10. AUD/JPY is back to 101.55, nearly 100pips of recent highs.
Outside of NPC related headlines, we have central bank speak, including Bowman from the Fed. On the data front, in the US the U. of Mich Sentiment print is out. In Canada jobs data is due. Note tomorrow, Oct inflation figures print in China.
Yesterday saw very strong equity markets in China, with the Hang Seng up over 2% following very strong export data and expectations for further stimulus measures to be announced at the conclusion of the National Party Congress.
The market gave back some of that performance today again with the Hang Seng leading the way down -0.90%, the CSI 300 down -0.77%, the Shanghai Comp down -0.50% and Shenzhen Comp -0.12%.
The KOSPI has over recent sessions been relatively correlated with the moves in China and this broke down today with the KOSPI down only -0.05%.
Other parts of Asia had a strong day with the Jakarta Comp up +0.95%, Singapore’s FTSE Straits up +1.5%, Taiwan up +.45% and India’s Nifty 50 opening up positive.
Key decliners today were the Philippines (again) down -0.90% and Thailand down -0.35% respectively.
Uncertainty as to the outcome of the US Election drove volatility in the region and a flight to USD resulted in consistent and strong outflows from Asia equities over the week.
With the exception of South Korea, all flows were negative for the week, the largest being India.
The Trump administration and the potential for tariffs will continue to influence investor decision in the near term with flows into the region to remain volatile.
Yesterday saw further significant outflows across the region with India the biggest decline to extend the outflows two eleven consecutive trading days.
Korea has had a turnaround in the last 5-days to turning positive following a very weak period.
South Korea: Recorded inflows of +$72m yesterday, bringing the 5-day total to +$49b. YTD flows remain positive at +$7.153b. The 5-day average is +$10m, the 20-day average is -$132m and the 100-day average of -$72m.
Taiwan: Experienced inflows of +$46m yesterday, with total outflows of -$762m over the past 5 days. YTD flows are negative at -$11,628b. The 5-day average is -$152m, the 20-day average of+$90m and the 100-day average of -$131m.
India: Saw outflows of -$441m as of Wednesday, with a total outflow of -$1,968b over the previous 5 days. YTD inflows stand at +$2,325m. The 5-day average is -$394m, the 20-day average of -$345m and the 100-day average of +$27m.
Indonesia: Posted outflows of -$104m yesterday, bringing the 5-day total to -$153m. YTD flows remain positive at +$2.378b. The 5-day average is -$31m, the 20-day average is -$24m the 100-day average of +$29m.
Thailand: Recorded outflows of -$51m yesterday, totaling -$131m over the past 5 days. YTD flows are negative at -$3.557b. The 5-day average is -$26m, the 20-day average of -$30m the 100-day average of -$9m.
Malaysia: Experienced outflows of -$84m yesterday, contributing to a 5-day outflow of -$81m. YTD flows stand at +$313m. The 5-day average is -$16m, the 20-day average of -$14m the 100-day average of +$3m.
Philippines: Saw outflows of -$67m yesterday, with net outflows of -$123m over the past 5 days. YTD flows are negative at -$56m. The 5-day average is -$25m, the 20-day average of -$7m the 100-day average of +$4m.
Oil markets in Asia have consolidated today as they try to extrapolate Trump’s victory and the potential impact.
During Trump’s prior Presidency, key policies were aimed at limiting Iran exports and expectations are that a return to this type of approach is likely.
Data out showed that China’s slowdown has had a material impact on oil demand with imports down in October by 2%.
The US Fed cut rates by 25bps noting that ‘labour market conditions had eased rather than slowed whilst re-iterating that the incoming US administration will have no impact on the FED’s policy decisions.
WTI strengthened into the US close rising from $70.75 to $72.85 trading down to $71.81 in Asia trading.
WTI for the week was up +3.3%
Brent spoked also from $74.10 to $76 before gently declining during Asia trading to reach $75.15.
Brent for the week was up +2.8%
Market strategists in Asia are following their US counterparts publishing their view on oil given his policies for growth with a diverse set of outcomes.
The Hurricane in the Gulf has hit Cuba and on current projections is unlikely to materially impact oil production.
Gold is 0.3% lower in today’s Asia-Pac session, after closing 1.8% higher at $2706.71 following the US FOMC decision. Thursday’s gains partially unwound Wednesday’s losses when the yellow metal fell by over 3% in the aftermath of the US election.
Yesterday, the FOMC delivered the expected 25bp cut. The Fed has maintained a steady outlook on the economy and rate trajectory since September, emphasising that “nothing in the economic data suggests the committee needs to hurry” toward a neutral stance.
The FOMC gave away few new signals over the future rate path at the November meeting, with Chair Powell once again emphasising data dependence in setting policy while shrugging off recent volatility in inflation and employment readings.
Accordingly, rates markets were little changed, with terminal Fed funds rates seen at 3.72% (roughly 86bp of further cuts to come), roughly the same as pre-decision.
Lower rates are typically positive for gold, which doesn’t pay interest.
Citi analysts see gold trading weak in the near term but believe that structural drivers remain in place.
According to MNI’s technicals team, the trend condition in gold is still bullish and a continuation higher would refocus attention on the bull trigger at $2,790.1, the Oct 31 high. On the downside, attention is on a key support at $2,645.4, the 50-day EMA.
A press conference is to be held in Hong Kong this afternoon where expectations are that announcements over the bond issuance program will be announced (source MNI – Market News)
Hong Kong Cuts Rate as Trump’s Return Raises Fed Uncertainties (source: BBG)
Several major Chinese banks are exploring proposals to increase their core tier 1 capital, following Beijing’s pledge to recapitalize its biggest lenders for the first time in over a decade according to Financial News (source : BBG)
Equity markets gave back some of yesterday’s rally with the CSI300 down -0.7% and the Hang Seng down -.89%.
Next week's data may give insight as to whether the impact of the stimulus is filtering through to the economic data.
Aggregate financing YTD and New Yuan denominated loans will give a snapshot of demand for credit, a measure of individuals and company's willingness to invest.
With stimulus measures predominantly focused on the property sector and the encouraging data out on new home sales; it is anticipated that both of these releases will be strong with current surveys suggesting a meaningful increase.
Of interest also will be New and Used home prices month on month. There has been a multiyear decline for the property sector and with buyers emerging post stimulus, chances are we may start to see some form of bounce for property prices.
The other two key data releases will be Industrial Production and Retail Sales.
Industrial production has been quite resilient given the state of the economy, oscillating around 5% YoY for the monthly figure. Market surveys suggest this could rise to +5.7% for October.
Retail sales has hovered around a 3% expansion month on month for much of 2024 and the market will be looking for signs that stimulus is breathing confidence into the consumer. Market expectations are retail sales could rise +3.8% for October with perhaps a chance of it being better than forecast.
Finally, we will see property investment YTD which current forecasts will see it remain firmly negative.
Bank of Korea’s Deputy Governor Ryoo suggested that ‘uncertainties are running high surrounding global growth and inflation, as well as monetary policy paths for major nations’ during a meeting Friday morning.
Ryoo added ‘we cannot rule out the possibility of volatility in foreign exchange and financial markets growing further,’ as per BBG.
Ryoo went further to add ‘the BOK will strengthen market monitoring to assess the impact of potential policy changes under the new U.S administration and be fully prepared for timely response when needed.’
The comments came following similar statements from the finance minister on Thursday that ‘If the policy stance that has been stressed by president-elect Trump becomes realized, the impact on the Korean economy is expected to be significant,’ reported Yonhap.
The US Election saw a rally in the USD with the KRW falling dramatically.
Given Korea’s reliance on imports for their energy needs, their economy is exposed to FX and commodity price volatility and tariffs proposed by the incoming President could have material impact on both going forward.
Malaysia’s Industrial Production for September surprised to the downside.
Against an expectation of a rise of +3.5%, it only rose by +2.3%.
This came following the prior month result of +4.1%
The decline in manufacturing was the biggest drag down to +3.2% from +6.5%.
Earlier this week the BNM Governor gave an indication that they are comfortable with monetary policy and believe that the longer term outlook for the economy remains strong.
USD/CNH has edged a little higher through the first part of Friday trade. We were last near 7.1580, close to 0.15% weaker in CNH terms. The CNY fixing was again close to neutral. Both China and Hong Kong equities have softened in the first half of the session, but are still up for the week. The market awaits details around further stimulus details at the conclusion of the NPC. A press conference is to be held in Hong Kong at 4pm to discuss the raising of the ceiling on local government debt to replace hidden debt.
Intra-session lows from Thursday were at 7.1415, while post US election highs printed at 7.2132. There are the levels to be mindful of. Also note we get Oct inflation figures in China out tomorrow.
Spot USD/KRW has been range bound. We were last near 1386, little changed for the session. Officials repeated remarks around financial market volatility and being prepared to act. BoK Governor Rhee stated that 1-2 weeks are needed to assess the US election impact for local policy (per BBG).
Spot TWD is firmer by around 0.50%, as onshore markets play catch up with USD losses. USD/TWD was last near 32.05/10.
In South East Asia, most currencies are higher, reflecting catch up gains as well. We are away from best levels though for some pairs. USD/THB was under 34.00 but now sits higher.
USD/PHP is back above 58.40, while USD/IDR is around 15670, up 0.30% so far today.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
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
08/11/2024
1500/1000
**
US
U. Mich. Survey of Consumers
08/11/2024
1600/1100
US
Fed Governor Michelle Bowman
08/11/2024
1700/1200
***
US
USDA Crop Estimates - WASDE
08/11/2024
1930/1430
US
St. Louis Fed's Alberto Musalem
09/11/2024
0130/0930
***
CN
CPI
09/11/2024
0130/0930
***
CN
Producer Price Index
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