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Oil prices are down sharply, as Israel reportedly told the US it would not target Iran’s oil and nuclear infrastructure but would focus on military sites. US Tsys futures are off earlier highs, the long-end is outperforming as the curve twist-flattened throughout the session.
Yen is outperforming in the G10 space, with higher beta plays weaker. Hong Kong and China equities are weaker, as uncertainty continues over China's fiscal impulse. USD/CNH has pushed through its 50-day EMA resistance.
Looking ahead, the Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
Tsys futures are off earlier highs, the long-end is outperforming as the curve twist-flattening throughout the session. TU is trading +02 at 103-13+, while TY is +06+ at 112-02.
It's been a rather slow session, US equity futures are slightly higher, there was a brief dip following news the US may look to limit Chip sales to certain regions, while focus will turn to corporate earnings which are about to kick off over the next few days, while eyes will also be on China where investors are eagerly waiting for further news on more stimulus. Oil continues to tick lower after Netanyahu told US officials that Israel will strike Iranian military targets and not nuclear or oil locations.
Earlier there was a seller of SFRZ4 95.500/95.375/95.250 put ladder, trading at 1.75 in x4140
Cash tsys curve is flatter, yields are +1bp to -2.5bps. The 2yr is +0.7bps at 3.962%, while the 10yr is -1bps at 4.090%
Fed funds are pricing 21.7bps or an 86% chance of a 25bps cut in November, and 44.3bps of cuts through to years end down slightly from 46.3bps of cuts late last week. Further out to October next year, the market sees 142bps of total cuts.
There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic.
It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
JGB futures are weaker and at session lows, -21 compared to settlement levels.
The final estimate of Japan’s Aug. industrial production was unchanged at -3.3%. Japan’s operating ratio fell to 97.6 in Aug. compared to 103.1 in the previous month.
There is also a Liquidity Enhancement Auction for 5-15.5-year OTR JGBs later today.
Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session after being closed yesterday for Columbus Day. There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
The cash JGBs curve has bear-flattened, with yields 4bps higher (1-year) to flat (40-year). The benchmark 10-year yield is 2.0bps higher at 0.972% versus the cycle high of 1.108%.
Swap rates are 1-5bps higher, with a steeper curve. Swap spreads are generally wider beyond the 1-year.
Tomorrow, the local calendar will see Core Machine Orders data alongside a speech by BoJ Board Adachi in Kagawa.
ACGBs (YM flat & XM +2.5) are stronger but off Sydney session highs.
With the domestic calendar empty today, the local market’s strength has been driven by cash US tsys, which are flat to 3bps richer, with a flattening bias, in today’s Asia-Pac session after yesterday’s Columbus Day holiday.
There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +16bps.
The bills strip has bull-flattened, with pricing +1 to +2 across contracts.
RBA-dated OIS pricing is little changed across meetings. A cumulative 7bps of easing is priced by year-end.
Today’s auction of A$100mn of the 0.25% 21 November 2032 Index-Linked bond cleared at 1.8566%, 0.5bp through the prevailing mids, with a cover ratio of 4.61x.
Tomorrow, the local calendar will see the Westpac Leading Index and a speech by RBA Hunter at the Citi Australia & New Zealand Investment Conference.
The AOFM plans to sell A$700mn of the 3.75% 21 May 2034 bond tomorrow.
NZGBs closed on a strong note, with benchmark yields 3-7bps lower. The 2/10 curve steepened.
RBNZ Deputy Governor Christian Hawkesby commented at the INFINZ conference that the OCR “is headed more toward neutral”. Adding that the pace of decline “is really around how things evolve from here” in terms of what information and data come up.
Regarding the banking system, he added that RBNZ doesn’t have much control over competition but can have an influence and can help improve competition with current legislation.
“Lower interest rates mean families get to keep more of their money and they increase the opportunities for businesses to invest, innovate and expand,” Finance Minister Nicola Willis told a finance sector conference Tuesday in Auckland. (per BBG)
However, with the NZ-US and NZ-AU 10-year yield differentials little changed, today’s NZGB strength reflects global market developments. Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session after being closed yesterday for Columbus Day.
Swap rates closed 5-6bps lower.
RBNZ dated OIS pricing is little changed. 53bps of easing is priced for the November meeting, with a cumulative 91bps by February.
The USD has remained on the front foot for the first part of Tuesday trade, although overall moves are very modest at this stage. The USD BBDXY index sits around fresh highs back to mid August, last near 1248.1.
Yuan weakness has been a focus point, with USD/CNH pushing back above 7.1250, weaker by around 0.45% in CNH terms. Onshore equities (along with the HK HSI) are down at the lunchtime break (CSI 300 off 0.47%). Onshore speculation continues around stimulus size and needs.
This has likely weighed on AUD and NZD at the margins. AUD/USD last near 0.6710/15, off close to 0.20%, while NZD is down by a similar amount to 0.6080/85. RBNZ Deputy Governor Christian Hawkesby commented that the OCR “is headed more toward neutral”. Adding that the pace of decline “is really around how things evolve from here” in terms of what information and data come up.
Recent lows in AUD are close to 0.6700, for NZD is it at 0.6053.
Oil is weaker as Israel will reportedly not strike Iran nuclear or energy facilities (WTI down 3%).
US equity futures sit slightly higher. We saw an earlier dip on headlines the US authorities may curb Nvidia overseas sales more. US yields have returned from yesterday's holiday, with back end yields slightly lower, while the front end is steady.
USD/JPY has been quite steady, the pair little changed, last near 149.70.
Looking ahead, The Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
Asian markets are higher today, driven by gains in the technology sector, following record highs on Wall Street. The MSCI Asia Pacific Index climbed 0.7%, led by contributions from major chipmakers like TSMC, Tokyo Electron & SoftBank Group. Japan’s Nikkei 225 reached its highest level since July, bolstered by optimism in its undervalued stocks, while Australian shares also hit a new record high.
China and Hong Kong stocks slipped as investors await more substantial stimulus measures. Concerns about the strength of China’s economic recovery were heightened by mixed export growth data, although we saw record exports in cars and ships for September, however overall export growth slowed to just 2.4% y/y adding to concerns about the broader economic recovery. China A shares continue to performing better than H shares with the CSI 300 is -0.50%, while the HSI is -1.35%.
Japanese stocks surged today, with the Nikkei 225 reaching its highest level since July, driven by gains in the technology and chip sectors. Optimism over the undervaluation of Japanese stocks helped lift sentiment, as key contributors like SoftBank Group and other major players in tech led the advance. Tokyo Metro’s successful IPO, which raised ¥348.6bi ($2.3b), also reflected robust demand, adding to market confidence. A weaker yen continues to provide support for exporters, although investors are closely watching for possible intervention as the yen hovers near the key 150 level against the dollar. The Nikkei +1.35%, while the Topix is +1.05%.
South Korean semiconductor-related exports showed signs of slowing, which could be an early warning for the broader global chip market, with the country's economy remaining heavily linked to its strong memory-chip sector. The KOSPI is little changed today.
Taiwan's TAIEX is 1.45%, with TSMC +2.40% & Hon Hai +3.50% contributing most to the index gains.
The Australian share market hit a record high today, with the benchmark ASX200 climbing above 8,300 for the first time. The rise was led by strength in the financial and mining sectors, with major banks such as Westpac and CBA posting significant gains, alongside miners like BHP and Fortescue. However, the energy sector lagged behind as oil prices dropped to a 12-day low, weighed down by easing concerns over potential disruptions from Israel-Iran tensions.
The rotation out of EM Asian equities continues, albeit it small sizes.
South Korea: Saw inflows of +$29m yesterday, but over the past 5 sessions netted outflows of -$583m, while YTD flows remain positive at +$9.82b. The 5-day average is -$117m, which is higher than the 20-day average of -$246m but below the 100-day average of -$53m.
Taiwan: Recorded outflows of -$113m yesterday, with the past 5 sessions bringing in +$344m, while YTD flows are still negative at -$12.53b. The 5-day average is +$69m, below the 20-day average of +$165m, and above the 100-day average of -$169m.
India: Experienced outflows of -$480m Friday, with the past 5 sessions totaling -$3.09b, while YTD flows stand at +$4.33b. The 5-day average is -$618m, higher than the 20-day average of -$131m but above the 100-day average of +$73m.
Indonesia: Saw outflows of -$19m yesterday, bringing the past 5 sessions to -$259m, with YTD flows at +$2.83b. The 5-day average is -$52m, lower than the 20-day average of -$27m but slightly above the 100-day average of +$28m.
Thailand: Recorded outflows of -$35m Friday, market was closed on Monday. The past 5 sessions netting -$190m, while YTD flows are -$3.10b. The 5-day average is -$38m, which is below both the 20-day average of -$20m and the 100-day average of -$13m.
Malaysia: Posted outflows of -$15m yesterday, with the past 5 sessions netting -$26m, while YTD flows are +$544m. The 5-day average is -$5m, better than the 20-day average of -$19m and in line with the 100-day average of +$5m.
Philippines: Saw outflows of -$9m yesterday, bringing the past 5 sessions to -$10m, while YTD flows remain positive at +$69m. The 5-day average is -$2m, lower than the 20-day average of +$16m, but above the 100-day average of +$4m.
Oil prices have held onto the majority of the losses that eventuated after the release of news that Israel told the US that it would not target Iran’s oil and nuclear infrastructure but would focus on military sites (Washington Post). Crude markets had built in a geopolitical risk premium on worries that Iran’s oil production could be impacted by an Israeli retaliation. Iran is the third largest producer in OPEC.
WTI is down 2.9% to $71.66/bbl today, a clear break below support at $72.33 20-day EMA. The benchmark is off its intraday low of $71.37 reached early in the session. The USD index is 0.1% higher.
Brent is 3.0% lower at $75.17/bbl after a low of $74.99. It has also spent the session trading below the 20-day EMA of $75.81.
With geopolitical worries easing, the focus is likely to centre on the supply/demand outlook, especially for China. Disappointing fiscal announcements and trade data have weighed on commodities. OPEC’s downward revision to the 2024 and 2025 demand outlook for the third straight month also pressured oil prices.
The Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
Gold is steady in today’s Asia-Pac session, after closing 0.3% lower at $2648.54 on Monday.
Monday's gains, building on strong advances from Thursday and Friday, have brought bullion close to its all-time closing high of $2,672.38.
With US data light and the US bond market closed for the Columbus Day holiday yesterday, Fed speakers took centre stage. Minneapolis's Kashkari added little new to previous comments, Fed Gov Waller triggered an initial hawkish reaction with his call for "more caution" on the pace of rate cuts in contrast to his relative dovishness last month.
There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
Lower rates are typically positive for gold, which doesn’t pay interest.
“Gold purchases from central banks have been a key driver in bullion’s record-smashing rally this year. But officials rarely signal ahead of time when buying is top of mind. In a break to that form, reserve managers from the central banks of Mexico, Mongolia and the Czech Republic on Monday sang the praises of bigger holdings.” (Per BBG)
In its September statement, BI said that FX stability and appreciation were required for there to be another opportunity to “lower the policy rate”. Thus, recent rupiah depreciation, including on a trade weighted basis, may mean that BI remains on hold in October following its surprise 25bp easing in September, although it is a close call with 10 out of 38 on Bloomberg forecasting another cut.
We believe that BI won't want to risk destabilising the rupiah as USDIDR is up 1.4% since BI’s September 18 meeting and around 3.0% since September 26 peak. Also, the JP Morgan NEER is down 0.4% since that meeting.
Inflation is contained within the band and growth remains robust, also BI has macroprudential tools to support the economy. But there are reasons to continue easing but also to wait until November.
September's CPI was the slowest level since May 2020, with all items in the CPI basket were weaker.
At the August meeting, the Central Bank' statement noted 'The balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025'.
The softening in pricing pressures opens the door for a further rate cut this month, following the BSP's cut at its August meeting.
We expect the Bank of Thailand to keep rates unchanged at 2.5% at its October meeting as policy isn’t restrictive and reducing the household debt ratio remains a key goal. 5 out of the 28 Bloomberg analysts are forecasting a 25bp rate cut.
There is a material chance that BoT turns dovish with forecast changes and more votes for easing. If this occurs, then a 25bp rate cut at the December 18 meeting is possible.
In the August statement, BoT sounded more concerned and was going to monitor financial conditions, “macroeconomic and financial developments, as well as the interlinkages between them”, as well as downside risks to consumption and private investment. While tourist arrivals remain robust, private consumption is weak and consumer confidence has deteriorated. Also, the digital wallet scheme no longer includes all adult Thais.
USD/CNH has had a strong start to this week, up over 0.75% at this stage. This puts the pair back above its 50-day EMA resistance (near 7.1060), which we haven't been above since July this year. We are also above the simple 50-day MA as well. The pair was last near 7.1250, just off session highs.
CNH weakness looks to reflect uncertainty around domestic fiscal stimulus, while BBG also notes that local banks may further cut deposit rates this week. Onshore media/analysts continue to weigh in on potential stimulus sizes and options. For USD/CNH Sep 11 highs at 7.1367 aren't too far away. The 100-day EMA is near 7.1500.
Spot USD/KRW has mostly tracked higher with USD/CNH. The pair last near 1363, off nearly 0.40%. This is fresh highs back to mid August for the pair. Earlier August highs around 1380 may now in play. Earlier data showed trade prices softening for Sep, likely helping onshore price pressures. Onshore equities are slightly higher, the Kospi +0.20% following a positive US lead. Headlines that the US may curb offshore Nvidia sales may have dented sentiment at the margin. USD/TWD spot is little changed, the pair last near 32.18. Onshore equities continue to recover, up a further 1.40% amid positive global tech trends. Military exercises from China continue around the island.
Some resilience was evident for South East Asia FX in the first part of Tuesday dealings, but this has given way to a firmer USD backdrop as the session has progressed.
The weaker yuan, which has fallen 0.40% against the USD is weighing on broader regional sentiment. China equity markets are down to the lunchtime break as speculation continues around fresh fiscal stimulus measures.
USD/MYR has pushed above 4.3000 for the first time since mid September. Historically the ringgit has had a reasonable correlation with CNY moves.
USD/IDR was initially lower, but from 15535 we sit back at 15565 now, little changed for the session. Early positive sentiment reflected policy continuity, with current Finance Minister Indrawati asked to be part of the new administration. The BI is expected to hold rates steady tomorrow.
PHP is off 0.45% to be the weakest performer in the EM Asia space so far today. We were last in the 57.70/75 region. Cross-asset headwinds are in play for PHP, like they are elsewhere in the region. The BSP is expected to cut rates by 25bps tomorrow.
USD/THB is also higher, last near 33.40, off nearly 0.20% in baht terms. The BoT is seen on hold tomorrow, albeit with risks of a dovish outlook.
China May Add 6 Trillion Yuan in Treasury Bonds to Buttress Economy (source: Caixin).
China Banks Mull Cutting Deposit Rates as Early as This Week (source: BBG).
PBOC’s Equity Support Mechanism Passes First Test (source: BBG).
Following the positivity of recent sessions equity markets lost ground today with the Hang Seng down -1.3%, the CSI300 -0.45%, and Shanghai Composite -0.52%.
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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)
Oil prices are down sharply, as Israel reportedly told the US it would not target Iran’s oil and nuclear infrastructure but would focus on military sites. US Tsys futures are off earlier highs, the long-end is outperforming as the curve twist-flattened throughout the session.
Yen is outperforming in the G10 space, with higher beta plays weaker. Hong Kong and China equities are weaker, as uncertainty continues over China's fiscal impulse. USD/CNH has pushed through its 50-day EMA resistance.
Looking ahead, the Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
Tsys futures are off earlier highs, the long-end is outperforming as the curve twist-flattening throughout the session. TU is trading +02 at 103-13+, while TY is +06+ at 112-02.
It's been a rather slow session, US equity futures are slightly higher, there was a brief dip following news the US may look to limit Chip sales to certain regions, while focus will turn to corporate earnings which are about to kick off over the next few days, while eyes will also be on China where investors are eagerly waiting for further news on more stimulus. Oil continues to tick lower after Netanyahu told US officials that Israel will strike Iranian military targets and not nuclear or oil locations.
Earlier there was a seller of SFRZ4 95.500/95.375/95.250 put ladder, trading at 1.75 in x4140
Cash tsys curve is flatter, yields are +1bp to -2.5bps. The 2yr is +0.7bps at 3.962%, while the 10yr is -1bps at 4.090%
Fed funds are pricing 21.7bps or an 86% chance of a 25bps cut in November, and 44.3bps of cuts through to years end down slightly from 46.3bps of cuts late last week. Further out to October next year, the market sees 142bps of total cuts.
There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic.
It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
JGB futures are weaker and at session lows, -21 compared to settlement levels.
The final estimate of Japan’s Aug. industrial production was unchanged at -3.3%. Japan’s operating ratio fell to 97.6 in Aug. compared to 103.1 in the previous month.
There is also a Liquidity Enhancement Auction for 5-15.5-year OTR JGBs later today.
Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session after being closed yesterday for Columbus Day. There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
The cash JGBs curve has bear-flattened, with yields 4bps higher (1-year) to flat (40-year). The benchmark 10-year yield is 2.0bps higher at 0.972% versus the cycle high of 1.108%.
Swap rates are 1-5bps higher, with a steeper curve. Swap spreads are generally wider beyond the 1-year.
Tomorrow, the local calendar will see Core Machine Orders data alongside a speech by BoJ Board Adachi in Kagawa.
ACGBs (YM flat & XM +2.5) are stronger but off Sydney session highs.
With the domestic calendar empty today, the local market’s strength has been driven by cash US tsys, which are flat to 3bps richer, with a flattening bias, in today’s Asia-Pac session after yesterday’s Columbus Day holiday.
There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
Cash ACGBs are 1-2bps richer with the AU-US 10-year yield differential at +16bps.
The bills strip has bull-flattened, with pricing +1 to +2 across contracts.
RBA-dated OIS pricing is little changed across meetings. A cumulative 7bps of easing is priced by year-end.
Today’s auction of A$100mn of the 0.25% 21 November 2032 Index-Linked bond cleared at 1.8566%, 0.5bp through the prevailing mids, with a cover ratio of 4.61x.
Tomorrow, the local calendar will see the Westpac Leading Index and a speech by RBA Hunter at the Citi Australia & New Zealand Investment Conference.
The AOFM plans to sell A$700mn of the 3.75% 21 May 2034 bond tomorrow.
NZGBs closed on a strong note, with benchmark yields 3-7bps lower. The 2/10 curve steepened.
RBNZ Deputy Governor Christian Hawkesby commented at the INFINZ conference that the OCR “is headed more toward neutral”. Adding that the pace of decline “is really around how things evolve from here” in terms of what information and data come up.
Regarding the banking system, he added that RBNZ doesn’t have much control over competition but can have an influence and can help improve competition with current legislation.
“Lower interest rates mean families get to keep more of their money and they increase the opportunities for businesses to invest, innovate and expand,” Finance Minister Nicola Willis told a finance sector conference Tuesday in Auckland. (per BBG)
However, with the NZ-US and NZ-AU 10-year yield differentials little changed, today’s NZGB strength reflects global market developments. Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session after being closed yesterday for Columbus Day.
Swap rates closed 5-6bps lower.
RBNZ dated OIS pricing is little changed. 53bps of easing is priced for the November meeting, with a cumulative 91bps by February.
The USD has remained on the front foot for the first part of Tuesday trade, although overall moves are very modest at this stage. The USD BBDXY index sits around fresh highs back to mid August, last near 1248.1.
Yuan weakness has been a focus point, with USD/CNH pushing back above 7.1250, weaker by around 0.45% in CNH terms. Onshore equities (along with the HK HSI) are down at the lunchtime break (CSI 300 off 0.47%). Onshore speculation continues around stimulus size and needs.
This has likely weighed on AUD and NZD at the margins. AUD/USD last near 0.6710/15, off close to 0.20%, while NZD is down by a similar amount to 0.6080/85. RBNZ Deputy Governor Christian Hawkesby commented that the OCR “is headed more toward neutral”. Adding that the pace of decline “is really around how things evolve from here” in terms of what information and data come up.
Recent lows in AUD are close to 0.6700, for NZD is it at 0.6053.
Oil is weaker as Israel will reportedly not strike Iran nuclear or energy facilities (WTI down 3%).
US equity futures sit slightly higher. We saw an earlier dip on headlines the US authorities may curb Nvidia overseas sales more. US yields have returned from yesterday's holiday, with back end yields slightly lower, while the front end is steady.
USD/JPY has been quite steady, the pair little changed, last near 149.70.
Looking ahead, The Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
Asian markets are higher today, driven by gains in the technology sector, following record highs on Wall Street. The MSCI Asia Pacific Index climbed 0.7%, led by contributions from major chipmakers like TSMC, Tokyo Electron & SoftBank Group. Japan’s Nikkei 225 reached its highest level since July, bolstered by optimism in its undervalued stocks, while Australian shares also hit a new record high.
China and Hong Kong stocks slipped as investors await more substantial stimulus measures. Concerns about the strength of China’s economic recovery were heightened by mixed export growth data, although we saw record exports in cars and ships for September, however overall export growth slowed to just 2.4% y/y adding to concerns about the broader economic recovery. China A shares continue to performing better than H shares with the CSI 300 is -0.50%, while the HSI is -1.35%.
Japanese stocks surged today, with the Nikkei 225 reaching its highest level since July, driven by gains in the technology and chip sectors. Optimism over the undervaluation of Japanese stocks helped lift sentiment, as key contributors like SoftBank Group and other major players in tech led the advance. Tokyo Metro’s successful IPO, which raised ¥348.6bi ($2.3b), also reflected robust demand, adding to market confidence. A weaker yen continues to provide support for exporters, although investors are closely watching for possible intervention as the yen hovers near the key 150 level against the dollar. The Nikkei +1.35%, while the Topix is +1.05%.
South Korean semiconductor-related exports showed signs of slowing, which could be an early warning for the broader global chip market, with the country's economy remaining heavily linked to its strong memory-chip sector. The KOSPI is little changed today.
Taiwan's TAIEX is 1.45%, with TSMC +2.40% & Hon Hai +3.50% contributing most to the index gains.
The Australian share market hit a record high today, with the benchmark ASX200 climbing above 8,300 for the first time. The rise was led by strength in the financial and mining sectors, with major banks such as Westpac and CBA posting significant gains, alongside miners like BHP and Fortescue. However, the energy sector lagged behind as oil prices dropped to a 12-day low, weighed down by easing concerns over potential disruptions from Israel-Iran tensions.
The rotation out of EM Asian equities continues, albeit it small sizes.
South Korea: Saw inflows of +$29m yesterday, but over the past 5 sessions netted outflows of -$583m, while YTD flows remain positive at +$9.82b. The 5-day average is -$117m, which is higher than the 20-day average of -$246m but below the 100-day average of -$53m.
Taiwan: Recorded outflows of -$113m yesterday, with the past 5 sessions bringing in +$344m, while YTD flows are still negative at -$12.53b. The 5-day average is +$69m, below the 20-day average of +$165m, and above the 100-day average of -$169m.
India: Experienced outflows of -$480m Friday, with the past 5 sessions totaling -$3.09b, while YTD flows stand at +$4.33b. The 5-day average is -$618m, higher than the 20-day average of -$131m but above the 100-day average of +$73m.
Indonesia: Saw outflows of -$19m yesterday, bringing the past 5 sessions to -$259m, with YTD flows at +$2.83b. The 5-day average is -$52m, lower than the 20-day average of -$27m but slightly above the 100-day average of +$28m.
Thailand: Recorded outflows of -$35m Friday, market was closed on Monday. The past 5 sessions netting -$190m, while YTD flows are -$3.10b. The 5-day average is -$38m, which is below both the 20-day average of -$20m and the 100-day average of -$13m.
Malaysia: Posted outflows of -$15m yesterday, with the past 5 sessions netting -$26m, while YTD flows are +$544m. The 5-day average is -$5m, better than the 20-day average of -$19m and in line with the 100-day average of +$5m.
Philippines: Saw outflows of -$9m yesterday, bringing the past 5 sessions to -$10m, while YTD flows remain positive at +$69m. The 5-day average is -$2m, lower than the 20-day average of +$16m, but above the 100-day average of +$4m.
Oil prices have held onto the majority of the losses that eventuated after the release of news that Israel told the US that it would not target Iran’s oil and nuclear infrastructure but would focus on military sites (Washington Post). Crude markets had built in a geopolitical risk premium on worries that Iran’s oil production could be impacted by an Israeli retaliation. Iran is the third largest producer in OPEC.
WTI is down 2.9% to $71.66/bbl today, a clear break below support at $72.33 20-day EMA. The benchmark is off its intraday low of $71.37 reached early in the session. The USD index is 0.1% higher.
Brent is 3.0% lower at $75.17/bbl after a low of $74.99. It has also spent the session trading below the 20-day EMA of $75.81.
With geopolitical worries easing, the focus is likely to centre on the supply/demand outlook, especially for China. Disappointing fiscal announcements and trade data have weighed on commodities. OPEC’s downward revision to the 2024 and 2025 demand outlook for the third straight month also pressured oil prices.
The Fed’s Daly and Kugler appear and US October Empire manufacturing and September NY Fed inflation expectations as well as UK employment/wages, ECB bank lending survey, euro area October ZEW & August IP, and September Canadian CPI print.
Gold is steady in today’s Asia-Pac session, after closing 0.3% lower at $2648.54 on Monday.
Monday's gains, building on strong advances from Thursday and Friday, have brought bullion close to its all-time closing high of $2,672.38.
With US data light and the US bond market closed for the Columbus Day holiday yesterday, Fed speakers took centre stage. Minneapolis's Kashkari added little new to previous comments, Fed Gov Waller triggered an initial hawkish reaction with his call for "more caution" on the pace of rate cuts in contrast to his relative dovishness last month.
There will be more fed speakers later today with SF's Daly, Gov Kugler, and Atlanta's Bostic on tap. It will be another slow data session with just Oct Empire Manufacturing and NY Fed inflation expectations.
Lower rates are typically positive for gold, which doesn’t pay interest.
“Gold purchases from central banks have been a key driver in bullion’s record-smashing rally this year. But officials rarely signal ahead of time when buying is top of mind. In a break to that form, reserve managers from the central banks of Mexico, Mongolia and the Czech Republic on Monday sang the praises of bigger holdings.” (Per BBG)
In its September statement, BI said that FX stability and appreciation were required for there to be another opportunity to “lower the policy rate”. Thus, recent rupiah depreciation, including on a trade weighted basis, may mean that BI remains on hold in October following its surprise 25bp easing in September, although it is a close call with 10 out of 38 on Bloomberg forecasting another cut.
We believe that BI won't want to risk destabilising the rupiah as USDIDR is up 1.4% since BI’s September 18 meeting and around 3.0% since September 26 peak. Also, the JP Morgan NEER is down 0.4% since that meeting.
Inflation is contained within the band and growth remains robust, also BI has macroprudential tools to support the economy. But there are reasons to continue easing but also to wait until November.
September's CPI was the slowest level since May 2020, with all items in the CPI basket were weaker.
At the August meeting, the Central Bank' statement noted 'The balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025'.
The softening in pricing pressures opens the door for a further rate cut this month, following the BSP's cut at its August meeting.
We expect the Bank of Thailand to keep rates unchanged at 2.5% at its October meeting as policy isn’t restrictive and reducing the household debt ratio remains a key goal. 5 out of the 28 Bloomberg analysts are forecasting a 25bp rate cut.
There is a material chance that BoT turns dovish with forecast changes and more votes for easing. If this occurs, then a 25bp rate cut at the December 18 meeting is possible.
In the August statement, BoT sounded more concerned and was going to monitor financial conditions, “macroeconomic and financial developments, as well as the interlinkages between them”, as well as downside risks to consumption and private investment. While tourist arrivals remain robust, private consumption is weak and consumer confidence has deteriorated. Also, the digital wallet scheme no longer includes all adult Thais.
USD/CNH has had a strong start to this week, up over 0.75% at this stage. This puts the pair back above its 50-day EMA resistance (near 7.1060), which we haven't been above since July this year. We are also above the simple 50-day MA as well. The pair was last near 7.1250, just off session highs.
CNH weakness looks to reflect uncertainty around domestic fiscal stimulus, while BBG also notes that local banks may further cut deposit rates this week. Onshore media/analysts continue to weigh in on potential stimulus sizes and options. For USD/CNH Sep 11 highs at 7.1367 aren't too far away. The 100-day EMA is near 7.1500.
Spot USD/KRW has mostly tracked higher with USD/CNH. The pair last near 1363, off nearly 0.40%. This is fresh highs back to mid August for the pair. Earlier August highs around 1380 may now in play. Earlier data showed trade prices softening for Sep, likely helping onshore price pressures. Onshore equities are slightly higher, the Kospi +0.20% following a positive US lead. Headlines that the US may curb offshore Nvidia sales may have dented sentiment at the margin. USD/TWD spot is little changed, the pair last near 32.18. Onshore equities continue to recover, up a further 1.40% amid positive global tech trends. Military exercises from China continue around the island.
Some resilience was evident for South East Asia FX in the first part of Tuesday dealings, but this has given way to a firmer USD backdrop as the session has progressed.
The weaker yuan, which has fallen 0.40% against the USD is weighing on broader regional sentiment. China equity markets are down to the lunchtime break as speculation continues around fresh fiscal stimulus measures.
USD/MYR has pushed above 4.3000 for the first time since mid September. Historically the ringgit has had a reasonable correlation with CNY moves.
USD/IDR was initially lower, but from 15535 we sit back at 15565 now, little changed for the session. Early positive sentiment reflected policy continuity, with current Finance Minister Indrawati asked to be part of the new administration. The BI is expected to hold rates steady tomorrow.
PHP is off 0.45% to be the weakest performer in the EM Asia space so far today. We were last in the 57.70/75 region. Cross-asset headwinds are in play for PHP, like they are elsewhere in the region. The BSP is expected to cut rates by 25bps tomorrow.
USD/THB is also higher, last near 33.40, off nearly 0.20% in baht terms. The BoT is seen on hold tomorrow, albeit with risks of a dovish outlook.
China May Add 6 Trillion Yuan in Treasury Bonds to Buttress Economy (source: Caixin).
China Banks Mull Cutting Deposit Rates as Early as This Week (source: BBG).
PBOC’s Equity Support Mechanism Passes First Test (source: BBG).
Following the positivity of recent sessions equity markets lost ground today with the Hang Seng down -1.3%, the CSI300 -0.45%, and Shanghai Composite -0.52%.
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