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Risk off gripped markets early on, as headlines crossed of Trump tariff plans against China, Canada and Mexico. USD/CAD rose to multi year highs, while USD/MXN got close to post US election highs. The USD is firmer against all the major currencies except the yen. US cash Tsy yields sit slightly higher.
Helping the yen was a stronger services PPI print. PM Ishiba also spoke about stronger wages growth. JGBS are richer though.
Later the FOMC November meeting minutes are published and the ECB’s McCaul and BoE’s Pill speak. US September house prices, October new home sales, November consumer confidence and November Richmond, Philly and Dallas Fed indices print.
Cash tsys yields are trading slightly higher this morning, however ranges well inside Monday's. The curve has flattened, the 2s10s inverted briefly overnight, however now trades +1.6bps higher at 1.4bps.
The 2yr is +1.7bps at 4.286%, while the 10yr is +1.2bps at 4.285%. The 10yr is now -16.5bps since closing at its recent highs of 4.45% on Nov 13th, while the 2yr has only tightened 2.5bps.
Tsys futures are trading lower with TU -01⅛ at 102-21, while TY is -05 at 110-12
Earlier, Trump stated "we will be charging China an additional 10% Tariff, above any additional Tariffs, on all of their many products coming into the United States of America." He also said he would hit Canada & Mexico with a 25% tariff on “ALL products,” until such time as they stop drugs in particular "fentanyl" and "all Illegal Aliens" from entering the US. MXN & CAD plunged on these headlines while the BBDXY now trades 0.45% higher.
Fed Funds implied rates are little changed for the near-term but the broader rally increasingly weighs further out into 2025. It leaves 14bp of cuts for Dec before a cumulative 20bp for Jan and 56bp for June.
Later today we have New Home sales, Conf. Board Consumer Confidence followed by FOMC minutes, a 2yr & 5yr Tsys auction and there will also be a string of Fed speakers ahead of a shortened Thanksgiving week.
JGB futures are stronger and near Tokyo session highs, +15 compared to settlement levels, after reversing early losses seen after the PPI Services beat.
Outside of the previously outlined PPI Services, there hasn't been much by way of domestic drivers to flag.
Japan shouldn’t rush changes in monetary and fiscal policies, according to Yuichiro Tamaki, head of Democratic Party for the People. Tightening policy too much can send Japan back to deflation, Tamaki said Tuesday at a press conference. (per BBG)
Cash US tsys are 1-2bps cheaper in today’s Asia-Pac session after news of President-elect Donald Trump’s threat to add another 10% to existing tariffs on China and impose 25% import tariffs on Canada and Mexico.
Today in the US will see FOMC minutes after a string of hawkish Fedspeak and 5Y supply. It’s followed by GDP/PCE data and 7Y supply on Wed before Thanksgiving closures.
Cash JGBs are 1-2bps richer across benchmarks, with a slight flattening bias. The benchmark 10-year yield is 1.6bps lower at 1.060% versus the cycle high of 1.108%.
The swaps curve has twist-steepened, pivoting at the 20-year, with rates 1bp lower to 3bps higher. Swap spreads are generally wider.
Tomorrow, the local calendar is empty apart from 40-year supply.
The Japan services PPI print was stronger than forecast for Oct. It rose 2.9% y/y, against a 2.5% forecast and a revised 2.8% gain in Sep (the original print was +2.6%y/y). In m/m terms we rose 0.8%.
At face value, this points to a supportive backdrop for headline CPI in Japan. The chart below overlays the services PPI y/y (which is the white line) against headline CPI y/y. Recently we have seen a modest divergence between the two series, but the historical direction correlation is firm.
Services/domestic related inflation has been a key focus point for the BoJ as it looks for a durable inflation backdrop around its 2% inflation target. Today's data helps this case at the margin. Last week BoJ Governor Ueda stated the outcome of the Dec meeting couldn't be predicted, which suggests it will be a live meeting.
ACGBs (YM +6.0 & XM +5.5) are stronger, though off their best levels from the Sydney session in what has been a data-light local trading day.
The market took a positive cue from yesterday’s sharp rally in US tsys. The rally began during the Asia-Pacific session in response to President-elect Trump’s selection of Scott Bessent as Treasury Secretary and extended further in the NY session.
Cash US tsys are trading flat to 1bp cheaper in today’s Asia-Pacific session following news of President-elect Trump’s threats to increase tariffs on China by 10% and impose 25% import tariffs on Canada and Mexico.
Cash ACGBs are 5-6bps richer with the AU-US 10-year yield differential at +15bps.
Swap rates are 3-4bps lower.
The bills strip has bull-flattened with pricing flat to +4.
RBA-dated OIS pricing is flat to 4bps softer across 2025 meetings. A 25bps rate cut is not fully priced until July.
The local calendar tomorrow will see October’s CPI ahead of RBA Governor Bullock’s speech at the CEDA Conference on Thursday.
Across the ditch, the RBNZ policy decision is due tomorrow, with all economists surveyed by Bloomberg looking for at least a 50bp cut.
The AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond tomorrow and A$700mn of the 1.50% 21 June 2031 bond on Friday.
NZGBs closed 5-6bps richer but slightly off the local session’s best levels.
The local market opened stronger on the back of a sharp rally in US tsys. The rally had started in yesterday’s Asia-Pac session in response to President-elect Trump’s selection of Scott Bessent for Treasury Secretary. The rally then extended in the NY session.
Cash US tsys are flat to 1bp cheaper in today’s Asia-Pac session after news of President-elect Donald Trump’s threat to add another 10% to existing tariffs on China and impose 25% import tariffs on Canada and Mexico.
Swap rates are 3-5bps lower.
Tomorrow sees the RBNZ’s policy decision. All but one of the economists surveyed by Bloomberg are looking for a 50bp cut. One economist is looking for a 75bp cut. Our policy team noted early last week that an ex-RBNZ economist said that the central bank would consider a 75bps cut.
RBNZ dated OIS pricing is flat to 2bps softer across meetings. A cumulative 97bps of easing is priced by February, with 55bps priced for tomorrow’s meeting.
On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.0% Apr-29 bond, NZ$175mn of the 3.5% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.
NZGBs closed 5-6bps richer but slightly off the local session’s best levels ahead of tomorrow’s RBNZ policy decision.
The NZ–US 10-year yield differential currently stands at approximately 15bps, near its narrowest level since mid-2021.
A simple regression analysis using the 3-month forward swap rate spread (1Y3M) over the past year suggests that the 10-year yield differential is about 14bps wider than its estimated fair value of +1bp.
Notably, the regression error has fluctuated within a range of ±20bps over the past year, highlighting some variability in the relationship.
The 1Y3M differential is a proxy for the expected relative policy path over the next 12 months.
The RBNZ is widely expected to cut rates 50bp at its November meeting that also includes updated staff forecasts. The discussion could be centred around 25bp, 50bp or even 75bp of easing though.
Inflation is in the RBNZ's target band, and weak growth & excess capacity persist, and so there is no reason to slowdown to 25bp. Monthly data are signalling that while the economy is still soft, it may be stabilising, and so there is no need to panic and cut by 75bp.
The updated OCR projections should give an indication if the RBNZ is considering slowing the pace of easing in H1 2025.
The market currently anticipates a 55bp cut at tomorrow's policy meeting, with a cumulative 98bps of easing by February and 147bps by July.
The USD BBDXY index sits up 0.25% for the first part of Tuesday trade, last near 1288.2. We are off earlier highs in the index though, which printed at 1293.55 (which was also just short of recent YTD highs close to 1295).
Broader risk sentiment has stabilized somewhat after the earlier headlines around 25% tariffs on Canada and Mexico, along with an additional 10% tariff on China, drove sharp risk off moves in the FX space.
USD/CAD got to fresh multi year highs of 1.4178, but we sit back closer to 1.4100 in latest dealings, still around 0.80% weaker in CAD terms. USD/MXN is up over 1% to 20.53, but is off earlier highs of 20.7504. USD/CNH got above 7.2700, but sits back at 7.2635 in latest dealings.
US equity futures are back to being modestly in the green, Eminis were off at one stage by 0.60%. Regional equity sentiment is mixed, with Hong Kong and China markets up at the lunch time break. Fresh US tariffs may evoke fresh stimulus from the authorities. US yields are up, but away from best levels for the session.
USD/JPY is tracking under 154.00, last near 153.75/80, up around 0.30% in yen terms. Yen is the only G10 currency firmer against the USD so far today. The early risk off tone on tariff headlines was supportive, although equity markets are away from worst levels. The other positive was the firmer PPI services print, which reinforces the live nature of the upcoming Dec BoJ meeting.
We also had comments from PM Ishiba, stating he wanted bigger wage gains next year compared to this year.
The A$ got to lows of 0.6434, but sits back at 0.6490/95 in latest dealings, only down modestly for the session. NZD/USD touched sub 0.5800 (fresh YTD low), but is back to 0.5840/45 now, close to flat.
AUD/JPY got to lows of 99.07, but sits back at 99.85/90 now.
Later the FOMC November meeting minutes are published and the ECB’s McCaul and BoE’s Pill speak. US September house prices, October new home sales, November consumer confidence and November Richmond, Philly and Dallas Fed indices print.
Asian stocks declined on Tuesday as traders weighed the potential impact of additional US tariffs on China, Mexico, and Canada, with the MSCI Asia Pacific Index down 0.5%. Japan, Taiwan, and South Korea led losses, with tech hardware and financials dragging the regional gauge. Chinese stocks recovered slightly after three days of losses amid expectations of potential fiscal easing from Beijing.
President-elect Donald Trump's comments on imposing a 10% tariff on Chinese goods and a 25% tariff on goods from Canada and Mexico triggered market caution, particularly for export-driven companies. Defense stocks in South Korea and Japan also fell as reports suggested Israel and Hezbollah were nearing a cease-fire deal. Investors are now focused on the Federal Reserve’s upcoming meeting minutes and its preferred inflation gauge for further policy clues.
US equity futures have erased earlier losses to trade flat to slightly higher, Dow and S&P futures are flat, while Nasdaq 100 futures are +0.06% after earlier being down 0.80%.
Japanese equities are the worst performing market in the region today, as exporter trade lower on the tariff news. The TOPIX was 1.40% lower, while the Nikkei is 1.30% lower.
Foreign investors have again been better sellers of South Korean equities today, although outflows look to be slowly with just $64m of outflows so far today, with healthcare and chemical names seeing the majority of the outflows.
Tech stocks are mixed today, with the HSTech Index +0.43% led by Baidu after it jumped 5.40% on reports of its autonomous ride-hailing trial in Hong Kong, BBG Semiconductor Index fell 0.50% with Tokyo Electron leading the declines, last down 2.80%. Tech stocks have been trading in a range since mid August now.
Chinese and Hong Kong markets showed resilience on Tuesday, recovering from earlier losses as investors weighed the potential impact of President-elect Donald Trump's proposed tariffs on Chinese imports. The HSI is trading 0.3% higher, Baidu surged by a 5% on reports of its autonomous ride-hailing trial in Hong Kong. Onshore, the CSI 300 and Shanghai Composite indices are both trading about 0.2% higher, driven by optimism in sectors such as Macau casinos, with Sands China up 3.4%.
Trump’s tariff threats, including an additional 10% levy on Chinese goods and a possible universal 60% rate, spurred caution, though investors noted the importance of implementation details and magnitude, while it was widely expected tariffs would be in trumps plans, anything below 60% was largely seen as positive.
Looking at onshore markets today, healthcare and consumer staples are the top performing sectors, small-caps are underperforming slightly with the CSI 1000 & 2000 trading about 0.30% lower. Overall markets are trading slightly higher however ranges are narrow.
Equity flows were muted on Monday, small inflows into Taiwan largely just on the back of stronger global semiconductor prices. Outflows from Thailand, Indonesia, Malaysia & The Philippines continues to hover around their 5-day averages, all negative post the US election.
South Korea: Recorded outflows of -$10m yesterday, with a 5-day total of -$532m. YTD flows remain positive at +$5.41b. The 5-day average is -$106m, slightly better than the 20-day average of -$132m but worse than the 100-day average of -$117m.
Taiwan: Experienced inflows of +$211m yesterday, but the 5-day total shows outflows of -$738m. YTD flows remain deeply negative at -$15.85b. The 5-day average is -$148m, better than the 20-day average of -$285m and the 100-day average of -$198m.
India: Posted inflows of +$127m yesterday, with a 5-day total of -$360m. YTD flows are negative at -$2.42b. The 5-day average is -$72m, better than the 20-day average of -$259m but worse than the 100-day average of -$15m.
Indonesia: Recorded outflows of -$36m yesterday, with a 5-day total of -$204m. YTD flows remain positive at +$1.68b. The 5-day average is -$41m, slightly better than the 20-day average of -$50m but worse than the 100-day average of +$19m.
Thailand: Posted outflows of -$59m yesterday, bringing the 5-day total to -$82m. YTD flows are negative at -$3.76b. The 5-day average is -$16m, better than the 20-day average of -$26m and the 100-day average of -$5m.
Malaysia: Experienced outflows of -$48m yesterday, with a 5-day total of -$83m. YTD flows remain positive at +$144m. The 5-day average is -$17m, better than the 20-day average of -$23m but worse than the 100-day average of +$3m.
Philippines: Posted outflows of -$5m yesterday, with a 5-day total of -$33m. YTD flows remain negative at -$245m. The 5-day average is -$7m, better than the 20-day average of -$17m but worse than the 100-day average of +$3m.
Oil prices have trended higher since the US dollar turned down again after rising strongly earlier in the session following US President-elect Trump announcing that one of the first things he’ll do in office is add another 10% to existing tariffs on China and introduce 25% on Mexico and Canada (USD BBDXY +0.3%). WTI is up 0.3% to $69.12/bbl, close to the intraday high, and Brent is 0.3% higher at $73.26/bbl.
US oil imports from Canada would be impacted by the tariff announcement as it stands.
Despite the recent risk to Russian oil infrastructure from the escalation in the Ukraine/Russia conflict, and optimism that a ceasefire deal between Israel and Hezbollah is imminent, supply/demand fundamentals remain in focus. US industry-based inventory data print later today with official EIA figures on Wednesday and the OPEC+ meeting on the weekend.
A representative from Iran said that the non-OPEC supply outlook means that the group has little room to reduce output cuts, according to Bloomberg.
The prospect of a truce for Lebanon drove a sharp fall in oil prices on Monday and they now stand up less than a percent on the month.
Later the FOMC November meeting minutes are published and the ECB’s McCaul and BoE’s Pill speak. US September house prices, October new home sales, November consumer confidence and November Richmond, Philly and Dallas Fed indices print.
Gold is steady in today’s Asia-Pac session after falling earlier on President-elect Donald Trump’s threat of 25% import tariffs on Canada and Mexico buoyed the dollar.
Yesterday, bullion closed 3.4% lower at $2625 as some of the geopolitical risk premium surrounding the Israel-Lebanon conflict was removed.
Gold had already slipped on the back President-elect Trump nominating Scott Bessent for Treasury Secretary, with his policy preferences deemed less inflationary than some of the alternatives. Lower rates are typically positive for gold, which doesn’t pay interest.
In terms of the prevailing technicals, the trend remains bullish for now, according to MNI’s technicals team. However, yesterday’s move has brought gold through initial support at the 50-day EMA at $2,638.9, increasing the bearish threat, with the next support at $2,610.5, the Nov 19 low.
Similarly, silver declined over 3%. Medium-term bullish conditions in silver remain intact and the bear cycle that started on Oct 23 still appears to be a correction. However, price has recently breached the 20- and 50-day EMAs exposing $28.446, a Fibonacci retracement. Initial firm resistance to watch is $31.315, the 20-day EMA.
Ahead of this week’s BOK decision, today’s consumer confidence numbers will be watched closely by the voting members.
The consumer has been at the forefront of the concerns held by authorities as cost-of-living pressures, particularly housing, have seen confidence levels decline.
November’s consumer confidence release came in at 100.7 (down from 101.7 prior) and barely above the 100 reading. (A reading above 100 indicates more households are positive).
Respondents’ inflation expectations for the next 12 months remain unchanged at +2.8%.
HSBC likes the debt of Asian financial institutions, Indian and Indonesian local-currency notes, dollar-denominated high-quality IG bonds of quasi-sovereigns in Indonesia, according to 2025 outlook report. (source: BBG)
Indonesian equities saw the 14th straight day of net selling on Nov. 25 (source: BBG).
Indonesia’s Jakarta Composite gave back some of yesterday’s very strong rally to be down -0.30%.
IDR- the rupiah suffered on rumours of US trade tariffs falling -0.25% today.
BONDS: did very little with the 10-year unchanged at 6.91%.
Spot USD/CNH got too fresh multi month highs of 7.2728, as headlines crossed of Trump threatening a further 10% rise in tariff levels on China. This relates to drug flows, with Trump also threatening tariffs on imports from Mexico and Canada for the same issue and also related to migration flows.
The pair sits lower now, last near 7.2630. USD/CNY spot is higher but found some selling interest above 7.2550. Markets may wait for clarification around the tariff issue, in terms of whether it applies on current tariffed imports from China or all imports from China.
Some offset for CNH has come from the slightly firmer onshore equity backdrop.
Spot USD/KRW is back under 1400, albeit remaining within recent ranges. We got to highs above 1407 on the tariff headlines, but support emerged when headlines crossed from the BoK and the National Pension Service around expanding their swap facility. The firmer yen track is also helping this afternoon. We were last under 1395, up around 0.40% for the session.
In South East Asia FX, the early trend was very much for a firmer USD backdrop. This followed headlines around Trump tariff threats for China, Mexico and Canada (which could be enacted soon after Trump takes office in early 2025). We sit away from highs though for USD/Asia pairs, with some recovery in broader risk appetite, particularly in the equity space, weighing on USD gains.
USD/PHP sits very close to record highs near 59.00, but hasn't convincingly broken through this figure level. Headlines crossed from the Budget Secretary that they may have to revise the growth target amid a weak PHP backdrop (per BBG).
USD/IDR spot is above 15900, around 0.25% weaker in rupiah terms. Earlier highs were at 15938. Recent highs just above 15950 remain intact. Ringgit is off by slightly more last near 4.4640/45. Earlier highs were marked at 4.4700 in the pair.
USD/THB got to 34.78 in the first part of trade, but now sits back near 34.69, close to unchanged versus the USD. Trade data showed both exports and import growing much stronger than forecast on a customs basis (up +14.6%y/y for exports). The trade deficit was slightly wider than forecast though (-$794mn versus -$402mn predicted).
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
26/11/2024
0700/0800
**
SE
PPI
26/11/2024
1100/1100
**
GB
CBI Distributive Trades
26/11/2024
1305/0805
CA
BOC Deputy Mendes speech in PEI.
26/11/2024
1330/0830
**
US
Philadelphia Fed Nonmanufacturing Index
26/11/2024
1355/0855
**
US
Redbook Retail Sales Index
26/11/2024
1400/0900
**
US
S&P Case-Shiller Home Price Index
26/11/2024
1400/0900
**
US
FHFA Home Price Index
26/11/2024
1400/0900
**
US
FHFA Home Price Index
26/11/2024
1400/0900
**
US
FHFA Quarterly Price Index
26/11/2024
1400/0900
**
US
FHFA Quarterly Price Index
26/11/2024
1500/1000
***
US
New Home Sales
26/11/2024
1500/1000
***
US
Conference Board Consumer Confidence
26/11/2024
1500/1000
**
US
Richmond Fed Survey
26/11/2024
1500/1500
GB
BOE's Pill at Economic Affairs Committee
26/11/2024
1530/1030
**
US
Dallas Fed Services Survey
26/11/2024
1630/1130
*
US
US Treasury Auction Result for Cash Management Bill
26/11/2024
1630/1130
**
US
US Treasury Auction Result for 52 Week Bill
26/11/2024
1800/1300
*
US
US Treasury Auction Result for 5 Year Note
26/11/2024
1800/1300
**
US
US Treasury Auction Result for 2 Year Floating Rate Note
Sign up now for free trial access to this content.
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.
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