EXECUTIVE SUMMARY
- It was a rather slow session in Asia today, equities were weaker following concerns around further China stimulus. Additionally, election-related uncertainty in the US with polling suggesting a tight race between Donald Trump and Kamala Harris, has been impacting broader global sentiment, contributing to market caution across the region.
- G10 FX traded in narrow ranges, JPY was the top performer although still trades roughly 0.70% weaker vs the USD than a day ago. FX moves were largely due to consolidation in the USD after strong outperformance of late.
- Japan saw a decent drop in Jiban Bank PMIs with services coming in at 49.3 vs 53.1 prior
MARKETS
US TSYS: Tsys Futures Edge Higher, Curve Flattens Ahead Of Jobless Data
- Tsys futures are edging slightly higher over the first half of the session, and are on track to snap their three day decline. Tsys futures are now trading back at the highs made during the US session overnight. Flows have been slightly down on recent averages, earlier there was a 5s30s block steepener, which saw the 5yr outperform through the middle of the session.
- TU was last +01⅝ at 103-06¼, while TY is +04+ at 111-05+, with all contracts trading near session best.
- The cash tsys curve has seen better buying through the 3-10yr tenors. The 2yr is +1.8bps at 4.059% while the 10yr is -2.8bps at 4.216%. The 2s10s is -1bps at 15.417
- Fed fund futures have held relatively steady over the past few session, the market is pricing in 23bps of cuts at November or a 92% chance of a cut, while there is currently 41bps of cuts priced by December.
- Today we have weekly jobless claims, flash PMIs, New Home Sales, regional Fed data from Chicago and Kansas City
AUSSIE BONDS: Flat, Subdued Session, Focus On US Jobless Claims
ACGBs (YM flat & XM flat) are little changed after rebounding off Sydney session lows. Outside of the previously outlined Judo Bank PMIs, there hasn't been much by way of domestic drivers to flag.
- The bounce of lows reflects a strengthening in cash US tsys, benchmarks 1-2bps richer, in today’s Asia-Pac session after yesterday’s heaviness. Today's focus in the US will be weekly Jobless Claims, Flash PMIs, New Home Sales and Regional Fed data from Chicago and Kansas City.
- Cash ACGBs are little changed with the AU-US 10-year yield differential at +24bps.
- Swap rates are flat to 1bp lower, with EFPs slightly tighter.
- The bills strip is slightly richer with prices flat to +1.
- RBA-dated OIS pricing is steady. A cumulative 3bps of easing is priced by year-end.
- Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$300mn of the 4.25% 21 June 2034 bond.
- TCV has priced an A$1.25bn increase of the 5.00% 20 November 2040 fixed rate benchmark bond via syndication, taking the total outstanding to A$2.266 billion, according to Westpac. Bond priced with a re-offer spread of +128bps over the 10-year futures contract, equivalent to +99.7bps over the ACGB 2.75% 21 May 2041, a re-offer yield of 5.76%. (per BBG)
BONDS: NZGBS: Closed Slightly Richer, Gov. Orr Weighs On OIS Pricing
NZGBs closed 1-2bps richer. Benchmarks finished off their worst levels but ranges were narrow.
- Outside of remarks at the Peterson Institute by RBNZ Governor Orr, there hasn't been much by way of domestic drivers to flag.
- To recap, Governor Orr stated that the MPC is still considering lingering price pressures, even as it cuts interest rates to reflect a lower inflation outlook. “In New Zealand, uncertainties about firms’ price-setting behaviour and the persistence of inflation continue to influence the MPC’s thinking,” Orr said. He added, “However, these uncertainties are now set against a lower central outlook for inflation.”
- RBNZ dated OIS pricing closed 3-8bps firmer across meetings. A cumulative 99bps of easing is priced by February, with 54bps by year-end.
- New residential mortgage lending rose 6.9% m/m after seasonal adjustments: RBNZ.
- Cash US tsys are 2-3bps richer in today’s Asia-Pac session after yesterday’s heaviness. Today's focus in the US will be weekly jobless claims, flash PMIs, New Home Sales, regional Fed data from Chicago and Kansas City.
- Swap rates closed flat to 2bps lower, with the 2s10s curve flatter.
- Tomorrow, the local calendar will see ANZ Consumer Confidence data.
JGBS: Little Changed, Looks Past Poor 20Y Auction, Tokyo CPI Tomorrow
JGB futures are stronger and at Tokyo session highs, +19 compared to settlement levels, after brushing off the weakness associated with the results of the 20-year auction.
- The 20-year JGB auction showed weak demand, with several key metrics deteriorating versus last month. The low price fell short of dealer expectations, the cover ratio dropped to 3.0369x from 3.4749x, and the auction tail lengthened.
- Afternoon strength in JGB futures coincided with a strengthening in cash US tsys, benchmarks 2-3bps richer, in today’s Asia-Pac session. Today's focus in the US will be weekly Jobless Claims, Flash PMIs, New Home Sales and Regional Fed data from Chicago and Kansas City.
- Overnight, BoJ Gov Ueda spoke in Washington where he mentioned that further interest rate hikes are likely, with the challenge being to determine the right timing and size of these increases.
- Cash JGBs are flat to 2bps richer beyond the 1-year. The benchmark 20-year yield is 0.4bp lower at 1.783% after today’s supply.
- Swap rates are ~1bp lower out to the 30-year but 2bps higher beyond.
- Tomorrow, the local calendar will see Tokyo CPI, PPI Services and Dept Store Sales data alongside Coincident and Leading Indices.
ASIA STOCKS: Asian Equities Broadly Lower, Tech Stocks Lead Sell-Off
Asian equity markets are broadly lower today with moves being driven by several key factors. Concerns about China's economic outlook and doubts over whether recent government stimulus will be enough to boost growth have weighed on investor sentiment, Hong Kong listed equities are slightly underperforming with the HSI trading 1% lower, while the CSI 300 is down 0.80% with Property (Mainland Property Index -2.90%) and Tech (HSTech Index -1.80%) the worst performing.
- In Japan, disappointing PMI data pointed to a downturn in manufacturing and services, causing the market to trade slightly lower today although we are well off morning lows with the TOPIX -0.30%, while the Nikkei is 0.20% lower. The weakening yen is now doing little to support the local equity market, with exporters largely underperforming the market this morning (Toyota -1%, Honda -0.80%, Suzuki -1.30%). Elsewhere, Japan's SoftBank has dropped about 4% early, however has recovered to trade just 2.5% lower, after ARM Holdings which is 88% owned by Softbank dropped 6.7% overnight, with the sell-off in Arm Holdings influenced by their ongoing legal dispute with Qualcomm.
- Foreign investors are back selling South Korean equities, with tech stocks seeing the bulk of the selling. The KOSPI is 0.60% lower today, led by a 3% sell-off in Samsung, SK Hynix is 2% higher following an earnings beat. Taiwan's TAIEX is 0.50% lower, with Hon Hai down 1.85%, while TSMC trades flat.
- Australia's ASX200 is little changed today with gains in Financials being offset by losses in Miners & Tech. New Zealand's NZX50 is 0.20% higher.
- Additionally, election-related uncertainty in the US with polling suggesting a tight race between Donald Trump and Kamala Harris, which has been impacting broader global sentiment, contributing to market caution across the region.
ASIA STOCKS: Foreign Investors Sell Asian Equities
Flow were negative on Thursday, with Indonesia seeing a large $175m outflow, while India's trend of foreign investors selling stocks returned on Tuesday, with a $455m outflow.
- South Korea: Recorded outflows of -$188m yesterday, bringing the 5-day total to -$657m. YTD flows remain positive at +$8.776b. The 5-day average is -$131m, similar to the 20-day average of -$156m and worse than the 100-day average of -$66m.
- Taiwan: Experienced outflows of -$224m yesterday, totaling +$2.194b over the past 5 days. YTD flows are negative at -$10.406b. The 5-day average is +$439m, better than the 20-day average of +$161m but worse than the 100-day average of -$166m.
- India: Saw outflows of -$455m Tuesday, with a total outflow of -$967m over the past 5 days. YTD inflows stand at +$2.753b. The 5-day average is -$193m, better than the 20-day average of -$412m but worse than the 100-day average of +$54m.
- Indonesia: Posted outflows of -$174m yesterday, bringing the 5-day total to -$65m. YTD flows remain positive at +$2.761b. The 5-day average is -$13m, better than the 20-day average of -$44m and close to the 100-day average of +$31m.
- Thailand: Was out for King Chulalongkorn Day on Wednesday. The past 5 trading session have seen a outflow of $29m. YTD flows are negative at -$3.2b. The 5-day average is -$6m, better than the 20-day average of -$34m and the 100-day average of -$12m.
- Malaysia: Experienced outflows of -$11m yesterday, contributing to a 5-day inflow of +$103m. YTD flows stand at +$676m. The 5-day average is +$21m, better than the 20-day average of -$12m and the 100-day average of +$7m.
- Philippines: Saw minimal outflows of -$3m yesterday, with net inflows of +$2m over the past 5 days. YTD flows are +$97m. The 5-day average is $0m, close to the 20-day average of +$8m and the 100-day average of +$4m.
Table 1: EM Asia Equity Flows
ASIA FX: Currencies Perform in the Face of USD Strength.
- Looking set to have one of its best months in some time, the USD took a breather today giving Asian currencies a rare day to perform.
- As the US election draws nearer the ‘flight to quality bid’ that the USD enjoys is evidence that investors expect volatility.
- Additionally, bond traders have repriced FED rate expectations now pricing in a slower pace of rate cuts the prior.
- Despite what was a see of red for equity markets in Asia today, Asian FX performed well.
- All currencies were up on the day with the exception being the Ringgit which hovered around flat to marginally weaker.
- Best performers intraday were KRW and IDR, both +0.20% higher with THB close behind.
- With no key data out in Asia today and no Central Bank meetings, the calendar remains light into the end of the week before gearing up for month end.
FOREX: G10 FX Rangebound, JPY Finds Some Support
The Yen has found some support throughout the day, after hitting a new cycle lows vs the USD overnight, the currency trades 0.33% higher at 152.26 and is the top performing currency, closely followed by the AUD & NZD. The BBDXY has seen an impressive rally of about 4% this month, and trades just off the recent highs at 1,259.50, down 0.07% for the session.
- It has been a largely uneventful session for G10 FX, with no major data or headlines out. We did see flash PMI out of Australia with Judo Bank Australia PMI Composite edging slightly higher to 49.8 from 49.6 prior, while Japan's Jibun Bank PMI saw a decent drop with composite falling to 49.4 from 52 prior, largely led by a drop in services PMI from 53.1 to 49.3, although there was no reaction in the FX market to either data release.
- AUD & NZD are both trading slightly firmer, although the moves seems to be largely on the back USD weakness, higher US equity futures could also been seen as supportive, although regional Asian equity markets all trading lower today. The AUD/USD was last 0.20% higher to trade at 0.6650, while the NZD/USD hovers above 0.60, to trade 0.15% for the session.
- US yields are 1-3bps richer across the Tsy benchmarks, curves have flattened, with the 2yr -1.4bps at 4.064%, while the 10yr last trades -2.4bps at 4.22%
The euro has traded steady throughout the session consolidating just below the 1.08 level as traders await upcoming Eurozone PMI data. Earlier ECB's Holzman, said that the ECB could hold in December although a 25bps cut is probable, while a 50bps cut was unlikely and that inflation could still prove stronger than expected. The GBP/USD is steady and holds above 1.29.
OIL: Oil Price Rebounds Despite US Stockpile News.
- WTI declined in late trading following the release of US government figures showing that stockpiles rose 5.47 million barrels against an expected rise of 1.6 million.
- WTI’s prompt spread (difference between its two closest contracts) fell to the lowest level since the beginning of this month, a potential sign of a supply overhang with crude processing now at levels last seen in 2018 in the US.
- Having touched US$71.40 earlier in the session, WTI briefly traded down to $70.20 before reversing the downward trend touching $71.70 in Asia’s afternoon.
- Brent followed a similar pattern, having been as high as US$75.60, falling through $74.75 before recovering to $75.80.
- In the Middle East the US Secretary of State Antony Blinken met with Israeli PM Netanyahu and both agreed that the killing of Hamas leader Yahya Sinwar ‘opened the door to possibilities’ for ending the conflict in Gaza.
- Despite the surprise pick up in inventories and the rise in processing, data out shows that traders are holding record numbers of option contracts to protect against sudden oil price rises.
GOLD: Sharp Pullback From Its All-Time High
Gold is 0.3% higher in today’s Asia-Pac session, after closing 1.2% lower at $2715.55 on Wednesday, as the yellow metal has pulled back from the fresh record high of $2,758.5 it reached earlier in the session.
- Wednesday’s weakness in bullion coincided with another heavy session for US Treasuries. US 2- and 10-year yields finished the NY session 5bps and 4bps higher respectively. Lower rates are typically positive for gold, which doesn’t pay interest.
- Despite today’s profit-taking, following the recent run-up in prices, analysts at Standard Chartered expect further gains in the coming weeks, with price averaging $2,800 in Q4, and $2,900 in Q1 2025.
- In terms of the technicals, the recent extension in gold reinforces the bullish theme, according to MNI’s technicals team. Sights are on $2,767.1 next, a Fibonacci projection point, ahead of the $2,800.0 handle. Firm support is at $2,666.4, the 20-day EMA.
JAPAN DATA: Foreign Investors Bought Local Equities, Sold Bonds
For the week ended October 18, Japan saw a total net inflow of ¥3.48t in securities transactions.
- Japanese investors sold ¥384.8b in overseas stocks & ¥613b in overseas bonds for a net outflow of ¥929.4b abroad.
- Foreign investors purchased ¥580.4b in Japanese stocks but sold ¥487.5b in Japanese bonds, leading to a net inflow of ¥2.55t from foreign investments in Japan.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 24/10/2024 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 24/10/2024 | 0715/0915 | ** | FR | S&P Global Services PMI (p) |
| 24/10/2024 | 0715/0915 | ** | FR | S&P Global Manufacturing PMI (p) |
| 24/10/2024 | 0730/0930 | ** |  DE | S&P Global Services PMI (p) |
| 24/10/2024 | 0730/0930 | ** | DE | S&P Global Manufacturing PMI (p) |
| 24/10/2024 | 0800/1000 | ** |  EU | S&P Global Services PMI (p) |
| 24/10/2024 | 0800/1000 | ** | EU | S&P Global Manufacturing PMI (p) |
| 24/10/2024 | 0800/1000 | ** | EU | S&P Global Composite PMI (p) |
| 24/10/2024 | 0830/0930 | *** |  GB | S&P Global Manufacturing PMI flash |
| 24/10/2024 | 0830/0930 | *** | GB | S&P Global Services PMI flash |
| 24/10/2024 | 0830/0930 | *** | GB | S&P Global Composite PMI flash |
| 24/10/2024 | 1000/1100 | ** | GB | CBI Industrial Trends |
| 24/10/2024 | - | EU | ECB's Lagarde and Cipollone in G20 FMs and CB governors meeting | |
| 24/10/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 24/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 24/10/2024 | 1245/0845 | US | Cleveland Fed's Beth Hammack | |
| 24/10/2024 | 1300/1400 | GB | BOE's Mann panellist at Reinventing Bretton Woods session | |
| 24/10/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (Flash) |
| 24/10/2024 | 1345/0945 | *** | US | S&P Global Services Index (flash) |
| 24/10/2024 | 1400/1000 | *** | US | New Home Sales |
| 24/10/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 24/10/2024 | 1500/1100 | ** | US | Kansas City Fed Manufacturing Index |
| 24/10/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 24/10/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 24/10/2024 | 1700/1900 | EU | ECB's Lane remarks at 'Inflation: Drivers and Dynamics' event | |
| 24/10/2024 | 1700/1300 | ** | US | US Treasury Auction Result for TIPS 5 Year Note |
| 25/10/2024 | 2301/0001 | ** | GB | Gfk Monthly Consumer Confidence |
| 25/10/2024 | 2330/0830 | ** |  JP | Tokyo CPI |
| 25/10/2024 | 0600/0800 | ** |  SE | PPI |
| 25/10/2024 | 0645/0845 | ** | FR | Consumer Sentiment |
| 25/10/2024 | 0700/0900 | ** |  ES | PPI |
| 25/10/2024 | 0800/1000 | ** | EU | M3 |
| 25/10/2024 | 0800/1000 | ** |  IT | ISTAT Business Confidence |
| 25/10/2024 | 0800/1000 | ** | IT | ISTAT Consumer Confidence |
| 25/10/2024 | 0800/1000 | *** | DE | IFO Business Climate Index |
| 25/10/2024 | 0800/1000 | ** | EU | ECB Consumer Expectations Survey |
| 25/10/2024 | 1230/0830 | ** |  CA | Retail Trade |
| 25/10/2024 | 1230/0830 | ** | US | Durable Goods New Orders |
| 25/10/2024 | 1230/0830 | ** | CA | Retail Trade |
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