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Japan core CPI surprised modestly higher, with services prices ticking up. This keeps Dec rate hike prospects live, but the follow through to yen and JGB futures has been very limited.
US TSY futures are slightly higher, but remain within Thursday ranges. The USD has again been supported on dips. NZD/USD hit fresh YTD lows, as the AUD/NZD cross tested higher. AUD/USD has weakened this afternoon though as China equities fall amid earnings pressure.
Looking ahead, we have UK retail sales coming up. There will also be focus on flash UK and EU PMIs. We also get US flash PMIs, along with U. of Mich Consumer Sentiment (final reading). Fed speak from Bowman also crosses.
Slow session in tsys futures today, they are trading slightly higher but within Thursday's ranges, trading has been largely focused on rolls. TU is +00¾ at 102-18+, while TY is trading +03+ at 109-19+, both trading just off session highs.
Cash tsys curve has steepened slightly throughout the session, with yields trading 0.5 to 1.5bps lower. The 2yr is -1.4bps at 4.335%, while the 10yr is -1.2bps at 4.41%. Yields have been rangebound recently with the 10yr note stabilizing near 4.41%, aligned with its 9-day moving average. The lack of key economic data and ongoing political uncertainties are keeping yields steady.
Projected rate cuts have firmed slightly acorss the next two meetings vs Thursday morning levels (*): Dec'24 cumulative -14.9bp (-13.1bp), Jan'25 -20.3bp (-19.5bp), Mar'25 -33.6bp (-33.8bp), May'25 -40.1bp (-41.4bp).
Later today we have preliminary PMIs for November, with the final November UMichigan survey also of note, while the only Fed speaker scheduled is Gov Bowman after hours, but we've already heard from her this week.
In the $-bloc, rate expectations through July 2025 remained largely steady over the past week, with the exception of Canada, which saw a 13bps firming. The U.S. firmed by 3bps, while Australia and New Zealand softened slightly, by 1-2bps.
The standout event was the release of hotter-than-expected Canadian CPI data for October. Annual CPI rose to 2%, up from 1.6% in September, exceeding the median forecast of 1.9% in a Bloomberg survey. The BOC’s two preferred core inflation measures also accelerated, averaging 2.55% on a yearly basis, up from 2.35% previously and surpassing expectations.
After a relatively quiet week, $-bloc markets are poised for increased activity with key events ahead, including Wednesday’s RBNZ policy decision, Australia’s October CPI release, and the U.S. PCE Deflator for October.
Looking ahead to July 2025, the projected official rates and cumulative easing across the $-bloc are as follows: U.S. (FOMC): 4.05%, -57bps; Canada (BoC): 3.09%, -66bps; Australia (RBA): 4.05%, -27bps; and New Zealand (RBNZ): 3.53, -122bps.
JGB futures are stronger and at Tokyo session highs, +10 compared to settlement levels, despite a slight beat for the core measures in today’s national CPI release.
Japan's nationwide Oct CPI prints were a little above market expectations. The headline printed in line with consensus at 2.3%y/y, versus 2.5% prior. The core ex-fresh food measure was 2.3%y/y, against a 2.2% forecast and 2.4% prior outcome. The core measure which also excludes energy was 2.3%y/y against a 2.2% forecast and 2.1% prior.
Services rose 1.5% y/y and 0.4% m/m against September's 1.3% and -0.4% as firms transferred higher labour costs to retail prices. The increase was largely in line with the lower end of the BOJ's forecast.
Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest bear-steepener.
Cash JGBs have twist-flattened across benchmarks beyond the 1-year, pivoting at the 5-year, with yields 1bp higher to 1bp lower. The benchmark 10-year yield is 1.1bps lower at 1.085% versus the cycle high of 1.108%.
Swaps are dealing mixed, with rates 2bps lower (5-10-year zone) to 3bps higher (20-30-year zone). Swap spreads are mixed.
On Monday, the local calendar will see Coincident & Leading Indices and Nationwide Dept Sales alongside an Enhanced Liquidity Auction covering 1-5-year JGBs.
Japan nationwide Oct CPI prints were a little above market expectations. The headline printed in line with consensus at 2.3%y/y, versus 2.5% prior. The core ex fresh food measure was 2.3%y/y, against a 2.2% forecast and 2.4% prior outcome. The core measure which also excludes energy was 2.3%y/y against a 2.2% forecast and 2.1% prior.
In m/m terms, headline CPI rose 0.4%, while goods and services prices were up this much as well in seasonally adjusted terms. The core ex fresh food measure rose 0.3%, while the ex energy measure was +0.4%m/m.
The measure which excludes all food and energy rose 0.4%, but remained fairly benign in y/y terms at 1.6%.
The sub-category details were all quite firm in m/m terms. We saw either the same m/m rise as Sep or a stronger pace for all categories except for clothing and fresh food. Entertainment rose 0.8%m/m, after a -1.8% dip last month. Utilities rose 0.6%m/m after a -7.1% fall in Sep as well.
Utilities in y/y terms eased to 3.2% from 8.8% in Sep, with base effects and government action on subsidies last year having an impact. Other y/y outcomes were mostly similar to the Sep outcome by sub-category.
Overall, the data will add to focus on the Dec BoJ meeting outcome, particularly in light of Ueda's comments yesterday( cannot predict the outcome of the meeting). The core measures holding above 2%, with the ex fresh food/energy measure trending a little higher may give the central bank more confidence in the inflation outlook, see the chart below (this measure is the white line on the chart).
Fig 1: Japan CPI, Core Measures Holding Above 2% Y/Y
ACGBs (YM +1.0 & XM +2.0) are slightly stronger and at Sydney session highs on a data-light session. Ranges have been, however, relatively narrow.
Cash tsys curves are 1-2bps richer across benchmarks.
“The Australian dollar’s resilience looks set to sustain heading into the final weeks of the year with the RBA’s determined push-back against bets on rate cuts finally starting to gain traction with traders. That’s making AUD/USD something of a haven at a time when peers such as NZD, EUR and GBP face rough economic and/or geopolitical outlooks.”
Cash ACGBs are 2bps richer, with the AU-US 10-year yield differential at +15bps.
Swap rates are flat to 1-2bps lower, with the 3s10s curve flatter.
The bills strip is flat to +2 across contracts, with a flattening bias.
RBA-dated OIS pricing is 1-2bps softer for late 2025 meetings. No easing is priced by year-end, with a 25bps rate cut not fully priced until July.
The local calendar is empty until October’s CPI on Wednesday.
Next week, the AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond on Wednesday and A$700mn of the 1.50% 21 June 2031 bond on Friday.
NZGBs closed on a strong note, with benchmark yields 4-7bps lower, led by the belly of the curve.
With the domestic calendar light again today, the strong move appears to reflect anticipation that the RBNZ may cut by more than 50bps next Wednesday or possibly signal a more aggressive easing profile looking ahead.
All economists surveyed by Bloomberg are looking for a 50bp cut. That said, our policy team noted earlier this week that an ex-RBNZ economist said the central bank would consider a 75bps cut.
The AUD/NZD cross continues to push higher, last near 1.1140. We are within striking distance of earlier YTD highs (1.1152). The NZDUSD fell to a one-year low.
The next key release in NZ will be Q3 Retail Sales ex-Inflation on Monday.
Swap rates closed 4-5bps lower, with implied swap spreads tighter.
RBNZ-dated OIS pricing closed 3-9bps softer across 2025 meetings. A cumulative 95bps of easing is priced by February, with 54bps for next Wednesday.
By July, New Zealand’s official cash rate is projected to be 64bps lower than Australia’s, despite currently sitting at +43bps. For context, back in late October, the NZ-AU official rate differential was expected to reach -75bps.
The main focus in the first part of G10 FX trading for Friday has been JPY gains and NZD losses. At this stage, the BBDXY USD index is little changed, last near 1286.6. Moves elsewhere have been very muted.
USD/JPY saw a brief dip under 154.00 not long after we had slightly stronger than expected Oct National CPI print (for core measures, headline was as expected). This reinforced the potential live nature of the Dec BoJ meeting, coming after Ueda's comments late yesterday.
There was little follow through though and overnight lows in USD/JPY at 153.91 remained intact. The pair was last near 154.30/35, up a modest 0.15% in yen terms for the session.
NZD weakness was associated with a break higher in the AUD/NZD cross. This cross got to 1.1180, fresh YTD highs, amid AU-NZ yield differential support. The respective central bank outlooks are divergent in the near term. The RBNZ meets next week (50bps cuts expected), while we also have the Oct CPI in Aust. The cross is a little lower now, last near 1.1140/45.
NZD/USD fell to fresh YTD lows of 0.5829, but we sit back above 0.5840 in latest dealings. Next downside target is likely to be round figure support at 0.5800, last tested in Nov last year.
AUD/USD has been mostly steady, last down a touch to 0.6505/10.
Looking ahead, we have UK retail sales coming up. There will also be focus on flash UK and EU PMIs. We also get US flash PMIs, along with U. of Mich Consumer Sentiment. Fed speak from Bowman also crosses.
Bitcoin surged toward $100,000, reaching a record $98,400, fueled by optimism over President-elect Donald Trump's pro-crypto stance and the potential for supportive US regulations. The crypto market has gained $900 billion since Trump’s election win, with speculation growing about a White House role dedicated to digital-asset policy. SEC Chair Gary Gensler’s upcoming resignation is expected to ease regulatory pressures. However, uncertainties remain, as Trump's setbacks, such as his failed attempt to appoint Matt Gaetz as attorney general, suggest he may face challenges in fully implementing his agenda. Any signs of stricter regulations could dampen the current optimism in the crypto market.
MicroStrategy completed a $3b convertible debt offering, the zero-interest notes, maturing in 2029. The conversion rate of 1.4872 shares per $1,000 principal represents a 55% premium over the stock’s recent price. The firm now holds 331,200 BTC worth over $30b, purchased at an average price of $49,874 per coin, with a total cost of $16.5b. Despite its Bitcoin-driven strategy, the stock dropped 20% to $397.28 on Thursday after Citron Research criticized its valuation and disclosed a short position.
Bitcoin focused ETFs continue to draw inflows with the iShares Bitcoin ETF seeing $7.3b in inflows the past month, pushing total assets to $45.5b.
Asian equities are mostly higher today, tracking gains made overnight in the US following renewed optimism about Nvidia’s growth prospects, while crypto continues to tick higher with bitcoin now eyeing $100,000. China 7 Hong Kong equities have struggled following poor results from Baidu.
Japan did report CPI at 2.3% y/y for October, Jibun Bank PMI was mixed with Mfg dropping to 49.0 from 49.2, although services PMI rose to 50.2 from 49.7, while equities pushed higher ahead of a $140b government stimulus announcement, and a slight strengthening of the yen following comments from Bank of Japan Governor Kazuo Ueda limited further gains. The TOPIX is 0.65% higher, while the Nikkei trades up 0.90%.
China & Hong Kong equities have struggled today, with property the worst performing sector, the Mainland Property Index is down 2.30%, while tech stocks struggle following Baidu's shares dropping sharply following a revenue decline, adding to weakness in the sector following on from Alibaba’s lackluster performance after its recent earnings report. The CSI 300 is 1% lower, while the HSI is trading 1.30% lower.
South Korean equities are higher as, SK Hynix surges 5% benefitting from the Philadelphia SE Semiconductor Index trading 1.60% higher overnight, Samsung which is trading just off four-year lows is trading unchanged. The KOSPI is 1% higher, while the KOSDAQ is 0.50% lower. Taiwan equities have also benefitted from higher global semiconductor prices with TSMC jumping 3%, which has helped the TAIEX rise 1.70%.
Australia's ASX 200 is trading 0.95% higher, with Financials contributing the most to the index gains, tech stocks in Australia are struggling following Wisetech dropping 12% following disappointing earnings guidance. In New Zealand, the NZX50 jumped 2.20%, following Fisher & Paykel jumping 4.30% and A2Milk jumping 18%.
Asian EM equities are mostly higher, India is up 1% however trades 10% off cycle highs following consistent selling from foreign investors recently, elsewhere Indonesia's JCI is up 0.80%, while Philippines PSEi is the worst performing with the index down 0.95%.
The HSTech Index is losing momentum as Baidu's shares drop sharply following a revenue decline, adding to weakness in the sector following on from Alibaba’s lackluster performance after its recent earnings report.
Alibaba's stock remains under pressure, last down 3.30%, despite appointing a veteran executive to lead its e-commerce operations, as its core Chinese e-commerce growth was just 1% in the September quarter. Without afternoon support from local investors, the tech index is unlikely to end the week positively.
Baidu's Q3 earnings showed revenue of ¥33.56b (-2.6% YoY), slightly exceeding estimates of ¥33.53 billion, with Baidu Core revenue flat at ¥26.52bi while iQIYI revenue missing forecasts at ¥7.2b. Adjusted profit per ADR came in at ¥16.60, missing the ¥17.73 estimate and declining from ¥20.40 a year earlier, while adjusted operating profit fell 7.7% YoY to ¥7.01b, though it beat expectations of ¥6.36b. Monthly active users reached 704m, and cash reserves totaled ¥144.5b. Management cited weakness in online marketing but highlighted growth in AI Cloud and increasing adoption of its ERNIE AI model.
Foreign investors have continued their selling of Asian equities with majority of the outflows coming from Taiwan & South Korean tech stocks, with Samsung now trading near 2023 lows.
South Korea: Saw outflows of -$348m yesterday, with the past 5 sessions reaching -$1.22b, while YTD flows are +$10.14b. The 5-day average is -$245m, below both the 20-day average of -$302m and the 100-day average of -$48m.
Taiwan: Saw outflows of -$860m yesterday, with the past 5 sessions netting -$2.83b, while YTD flows are -$13.43b. The 5-day average is -$567m, below the 20-day average of +$8m, and the 100-day average of -$147m.
India: Saw outflows of -$968m yesterday, with the past 5 sessions netting -$5.35b, while YTD flows are +$19.45b. The 5-day average is -$1.15b, below both the 20-day average of +$12m and the 100-day average of +$85m.
Indonesia: Saw outflows of -$11m yesterday, with the past 5 sessions netting -$209m, while YTD flows are +$3.07b. The 5-day average is -$42m, below the 20-day average of +$51m, but above the 100-day average of +$31m.
Thailand: Saw outflows of -$10m yesterday, with the past 5 sessions totaling -$322m, while YTD flows are -$2.96b. The 5-day average is -$64m, below the 20-day average of -$5m and the 100-day average of -$11m.
Malaysia: Saw inflows of $10m yesterday, with the past 5 sessions netting -$211m, while YTD flows are +$580m. The 5-day average is -$42m, below both the 20-day average of -$16m and the 100-day average of +$7m.
Philippines: Saw inflows of $8m yesterday, with the past 5 sessions totaling +$57m, while YTD flows are +$87m. The 5-day average is +$11m, below both the 20-day average of +$18m and the 100-day average of +$4m.
Having retreated yesterday on news of growing inventories in the US, Oil turned its attention to the escalation in Ukraine.
Having fired US and UK manufactured long dated missile into Russia, Ukraine was at the receiving end as Russia launched their new ballistic missile at the city of Dnipro.
WTI had hovered around US$69 for some time before the news, then spiking to $70.38.
Following a retreat to $69.40, oil again rose to finish trading in US hours at $70.14 before settling around $72.22 in Asia trading.
WTI has performed strongly this week, up almost 5%.
Brent’s price action was somewhat similar having traded around $73 into the US open, it popped on the news to a high of $74.40, before retreating do $73.50.
Further headlines from Ukraine saw a resurgence in Brent up to $74.30 for the close and has traded around $74.35 during Asia trading.
Brent will see a 4.6% increase over the course of the week.
China’s economic malaise has been a drag on oil prices this year and data out yesterday was watched keenly by oil markets and particularly OPEC+.
With the market facing a sizeable supply glut in 2025 markets await a decision from OPEC+ on plans to revive idled production which signs of an improvement in China could thwart.
Road congestion and new vehicle registrations rose to the highest levels seen in several years.
In Brazil, Petrobras announced plans to invest $111bn over the next five years.
As oil begins to trade in the Asia region, traders are clearly mindful of the Geopolitics driving markets with prices ticking marginally higher in early trading.
Gold is 0.7% higher in today’s Asia-Pac session, after closing 0.7% higher at $2669.72 on Wednesday, its fourth consecutive daily gain.
The move brings the yellow metal to its highest since Nov 11, amid continued safe-haven demand following the further escalation of geopolitical tensions.
As a result, the 20-day EMA at $2,653.1 has been breached. This highlights a stronger reversal for gold and signals the end of the recent bearish corrective cycle, opening $2,710.4, the Nov 11 high, according to MNI’s technicals team.
Traders also weighed yesterday’s comments from Fed Bank of Chicago President Austan Goolsbee, who said he sees interest rates moving “a fair bit lower” and expressed confidence inflation is easing toward the central bank’s target. Lower rates typically benefit bullion as it doesn’t pay interest.
The Chosun Daily reports that the “Korean Government is contemplating a supplementary budget for 2025 to counter weak domestic demand and a contraction in GDP.”.
President Yoon has long positioned himself as being fiscally prudent but may be forced into a more proactive fiscal response given the slowdown.
In September the government submitted to National Assembly a 2024 budget plan to the value of KRW677 trillion.
In the time since it’s submission the economic data has softened, prompting speculation for further fiscal intervention.
This week the IMF released their updated forecasts for Korea, downgrading their expectations for 2025.
Supplementary budgets would need to be funded via the bond market.
Currently the market has 75bps of monetary policy easing priced in.
The 2/10 Korean curve is very flat with only a 8bp premium for the 10-year over the 2-year, being historical lows .
New issuance would logically be longer and could see the Korean curve steepen should the stimulus be approved.
Claiming an exclusive, Chosun’s article may have touched a nerve as the Finance Minister in an emailed reply stated “South Korea’s finance ministry is not considering drafting extra budget for next year.” (per BBG)
RBI deputy Patra defended the Central Bank’s defence of the currency.
The rupee has declined -1.5% this year, outperforming many of its Asean neighbours several of which have declined over 5%.
The RBI is being criticised for using approximately US$30bn of the FX reserves to keep the Rupee stable.
The RBI stated in its monthly bulletin that their aim is to insulate the economy from global spillovers and financial stability risks through intervening in the currency to ensure volatility is supressed.
India has faced in recent months, significant outflows from its bond and equity markets as foreign investors withdraw.
This puts pressure on the currency leading to the Governor noting on multiple occasions ‘ that India’s reserves are built after meeting all current and capital financing to act as an umbrella for rainy days.’ (as per BBG)
Singapore’s third quarter GDP YoY rebounded to +5.4% from +4.1% in 2Q.
Seasonally adjusted this equated to a +3.2% YoY result versus +2.1% in 2Q.
The Data showed that manufacturing and good producing industries were behind the rise whereas most other sectors were flat.
The Government has upgraded is 2024 full year forecast to around +3.5% from the 2%-3% prior suggesting that as one of Asia’s most open economies, positive signs for the island state bode well for the broader region.
In North Asia FX, trends have been relatively steady in the first part of Friday trade, although remain close to recent highs. USD/CNH has had a little under 70pip range. We were last near 7.2530, little changed for the session. The USD/CNY fixing error remained wide. The USD/CNH-USD/CNY basis has re-widened, although spot USD/CNY got close to 7.2500 in earlier dealings.
China tech related equities are softer, amid weaker earnings. There has been little negative spillover to CNH though. Hong Kong equities are also down.
Spot USD/KRW has drifted too far away from the 1400 level. Local equities are higher, the Kospi back above 2500, amid domestic buying support, although foreign investors are still skewed towards outflows, even with modest inflows so far today (+$124mn, but still -$1.76bn in outflows so far in Nov. Earlier onshore media reports suggested the South Korean government would consider an extra budget in early 2025 to aid softer domestic economic conditions. The FinMin later denied this report though.
USD/TWD is steady as well, last near 32.55. The Taiex is up nearly 1.9%, with the index close to 23000. Recent highs are still some distance away though.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.
Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
MNI (SYDNEY)
Japan core CPI surprised modestly higher, with services prices ticking up. This keeps Dec rate hike prospects live, but the follow through to yen and JGB futures has been very limited.
US TSY futures are slightly higher, but remain within Thursday ranges. The USD has again been supported on dips. NZD/USD hit fresh YTD lows, as the AUD/NZD cross tested higher. AUD/USD has weakened this afternoon though as China equities fall amid earnings pressure.
Looking ahead, we have UK retail sales coming up. There will also be focus on flash UK and EU PMIs. We also get US flash PMIs, along with U. of Mich Consumer Sentiment (final reading). Fed speak from Bowman also crosses.
Slow session in tsys futures today, they are trading slightly higher but within Thursday's ranges, trading has been largely focused on rolls. TU is +00¾ at 102-18+, while TY is trading +03+ at 109-19+, both trading just off session highs.
Cash tsys curve has steepened slightly throughout the session, with yields trading 0.5 to 1.5bps lower. The 2yr is -1.4bps at 4.335%, while the 10yr is -1.2bps at 4.41%. Yields have been rangebound recently with the 10yr note stabilizing near 4.41%, aligned with its 9-day moving average. The lack of key economic data and ongoing political uncertainties are keeping yields steady.
Projected rate cuts have firmed slightly acorss the next two meetings vs Thursday morning levels (*): Dec'24 cumulative -14.9bp (-13.1bp), Jan'25 -20.3bp (-19.5bp), Mar'25 -33.6bp (-33.8bp), May'25 -40.1bp (-41.4bp).
Later today we have preliminary PMIs for November, with the final November UMichigan survey also of note, while the only Fed speaker scheduled is Gov Bowman after hours, but we've already heard from her this week.
In the $-bloc, rate expectations through July 2025 remained largely steady over the past week, with the exception of Canada, which saw a 13bps firming. The U.S. firmed by 3bps, while Australia and New Zealand softened slightly, by 1-2bps.
The standout event was the release of hotter-than-expected Canadian CPI data for October. Annual CPI rose to 2%, up from 1.6% in September, exceeding the median forecast of 1.9% in a Bloomberg survey. The BOC’s two preferred core inflation measures also accelerated, averaging 2.55% on a yearly basis, up from 2.35% previously and surpassing expectations.
After a relatively quiet week, $-bloc markets are poised for increased activity with key events ahead, including Wednesday’s RBNZ policy decision, Australia’s October CPI release, and the U.S. PCE Deflator for October.
Looking ahead to July 2025, the projected official rates and cumulative easing across the $-bloc are as follows: U.S. (FOMC): 4.05%, -57bps; Canada (BoC): 3.09%, -66bps; Australia (RBA): 4.05%, -27bps; and New Zealand (RBNZ): 3.53, -122bps.
JGB futures are stronger and at Tokyo session highs, +10 compared to settlement levels, despite a slight beat for the core measures in today’s national CPI release.
Japan's nationwide Oct CPI prints were a little above market expectations. The headline printed in line with consensus at 2.3%y/y, versus 2.5% prior. The core ex-fresh food measure was 2.3%y/y, against a 2.2% forecast and 2.4% prior outcome. The core measure which also excludes energy was 2.3%y/y against a 2.2% forecast and 2.1% prior.
Services rose 1.5% y/y and 0.4% m/m against September's 1.3% and -0.4% as firms transferred higher labour costs to retail prices. The increase was largely in line with the lower end of the BOJ's forecast.
Cash US tsys are ~1bp richer in today’s Asia-Pac session after yesterday’s modest bear-steepener.
Cash JGBs have twist-flattened across benchmarks beyond the 1-year, pivoting at the 5-year, with yields 1bp higher to 1bp lower. The benchmark 10-year yield is 1.1bps lower at 1.085% versus the cycle high of 1.108%.
Swaps are dealing mixed, with rates 2bps lower (5-10-year zone) to 3bps higher (20-30-year zone). Swap spreads are mixed.
On Monday, the local calendar will see Coincident & Leading Indices and Nationwide Dept Sales alongside an Enhanced Liquidity Auction covering 1-5-year JGBs.
Japan nationwide Oct CPI prints were a little above market expectations. The headline printed in line with consensus at 2.3%y/y, versus 2.5% prior. The core ex fresh food measure was 2.3%y/y, against a 2.2% forecast and 2.4% prior outcome. The core measure which also excludes energy was 2.3%y/y against a 2.2% forecast and 2.1% prior.
In m/m terms, headline CPI rose 0.4%, while goods and services prices were up this much as well in seasonally adjusted terms. The core ex fresh food measure rose 0.3%, while the ex energy measure was +0.4%m/m.
The measure which excludes all food and energy rose 0.4%, but remained fairly benign in y/y terms at 1.6%.
The sub-category details were all quite firm in m/m terms. We saw either the same m/m rise as Sep or a stronger pace for all categories except for clothing and fresh food. Entertainment rose 0.8%m/m, after a -1.8% dip last month. Utilities rose 0.6%m/m after a -7.1% fall in Sep as well.
Utilities in y/y terms eased to 3.2% from 8.8% in Sep, with base effects and government action on subsidies last year having an impact. Other y/y outcomes were mostly similar to the Sep outcome by sub-category.
Overall, the data will add to focus on the Dec BoJ meeting outcome, particularly in light of Ueda's comments yesterday( cannot predict the outcome of the meeting). The core measures holding above 2%, with the ex fresh food/energy measure trending a little higher may give the central bank more confidence in the inflation outlook, see the chart below (this measure is the white line on the chart).
Fig 1: Japan CPI, Core Measures Holding Above 2% Y/Y
ACGBs (YM +1.0 & XM +2.0) are slightly stronger and at Sydney session highs on a data-light session. Ranges have been, however, relatively narrow.
Cash tsys curves are 1-2bps richer across benchmarks.
“The Australian dollar’s resilience looks set to sustain heading into the final weeks of the year with the RBA’s determined push-back against bets on rate cuts finally starting to gain traction with traders. That’s making AUD/USD something of a haven at a time when peers such as NZD, EUR and GBP face rough economic and/or geopolitical outlooks.”
Cash ACGBs are 2bps richer, with the AU-US 10-year yield differential at +15bps.
Swap rates are flat to 1-2bps lower, with the 3s10s curve flatter.
The bills strip is flat to +2 across contracts, with a flattening bias.
RBA-dated OIS pricing is 1-2bps softer for late 2025 meetings. No easing is priced by year-end, with a 25bps rate cut not fully priced until July.
The local calendar is empty until October’s CPI on Wednesday.
Next week, the AOFM plans to sell A$800mn of the 3.50% 21 December 2034 bond on Wednesday and A$700mn of the 1.50% 21 June 2031 bond on Friday.
NZGBs closed on a strong note, with benchmark yields 4-7bps lower, led by the belly of the curve.
With the domestic calendar light again today, the strong move appears to reflect anticipation that the RBNZ may cut by more than 50bps next Wednesday or possibly signal a more aggressive easing profile looking ahead.
All economists surveyed by Bloomberg are looking for a 50bp cut. That said, our policy team noted earlier this week that an ex-RBNZ economist said the central bank would consider a 75bps cut.
The AUD/NZD cross continues to push higher, last near 1.1140. We are within striking distance of earlier YTD highs (1.1152). The NZDUSD fell to a one-year low.
The next key release in NZ will be Q3 Retail Sales ex-Inflation on Monday.
Swap rates closed 4-5bps lower, with implied swap spreads tighter.
RBNZ-dated OIS pricing closed 3-9bps softer across 2025 meetings. A cumulative 95bps of easing is priced by February, with 54bps for next Wednesday.
By July, New Zealand’s official cash rate is projected to be 64bps lower than Australia’s, despite currently sitting at +43bps. For context, back in late October, the NZ-AU official rate differential was expected to reach -75bps.
The main focus in the first part of G10 FX trading for Friday has been JPY gains and NZD losses. At this stage, the BBDXY USD index is little changed, last near 1286.6. Moves elsewhere have been very muted.
USD/JPY saw a brief dip under 154.00 not long after we had slightly stronger than expected Oct National CPI print (for core measures, headline was as expected). This reinforced the potential live nature of the Dec BoJ meeting, coming after Ueda's comments late yesterday.
There was little follow through though and overnight lows in USD/JPY at 153.91 remained intact. The pair was last near 154.30/35, up a modest 0.15% in yen terms for the session.
NZD weakness was associated with a break higher in the AUD/NZD cross. This cross got to 1.1180, fresh YTD highs, amid AU-NZ yield differential support. The respective central bank outlooks are divergent in the near term. The RBNZ meets next week (50bps cuts expected), while we also have the Oct CPI in Aust. The cross is a little lower now, last near 1.1140/45.
NZD/USD fell to fresh YTD lows of 0.5829, but we sit back above 0.5840 in latest dealings. Next downside target is likely to be round figure support at 0.5800, last tested in Nov last year.
AUD/USD has been mostly steady, last down a touch to 0.6505/10.
Looking ahead, we have UK retail sales coming up. There will also be focus on flash UK and EU PMIs. We also get US flash PMIs, along with U. of Mich Consumer Sentiment. Fed speak from Bowman also crosses.
Bitcoin surged toward $100,000, reaching a record $98,400, fueled by optimism over President-elect Donald Trump's pro-crypto stance and the potential for supportive US regulations. The crypto market has gained $900 billion since Trump’s election win, with speculation growing about a White House role dedicated to digital-asset policy. SEC Chair Gary Gensler’s upcoming resignation is expected to ease regulatory pressures. However, uncertainties remain, as Trump's setbacks, such as his failed attempt to appoint Matt Gaetz as attorney general, suggest he may face challenges in fully implementing his agenda. Any signs of stricter regulations could dampen the current optimism in the crypto market.
MicroStrategy completed a $3b convertible debt offering, the zero-interest notes, maturing in 2029. The conversion rate of 1.4872 shares per $1,000 principal represents a 55% premium over the stock’s recent price. The firm now holds 331,200 BTC worth over $30b, purchased at an average price of $49,874 per coin, with a total cost of $16.5b. Despite its Bitcoin-driven strategy, the stock dropped 20% to $397.28 on Thursday after Citron Research criticized its valuation and disclosed a short position.
Bitcoin focused ETFs continue to draw inflows with the iShares Bitcoin ETF seeing $7.3b in inflows the past month, pushing total assets to $45.5b.
Asian equities are mostly higher today, tracking gains made overnight in the US following renewed optimism about Nvidia’s growth prospects, while crypto continues to tick higher with bitcoin now eyeing $100,000. China 7 Hong Kong equities have struggled following poor results from Baidu.
Japan did report CPI at 2.3% y/y for October, Jibun Bank PMI was mixed with Mfg dropping to 49.0 from 49.2, although services PMI rose to 50.2 from 49.7, while equities pushed higher ahead of a $140b government stimulus announcement, and a slight strengthening of the yen following comments from Bank of Japan Governor Kazuo Ueda limited further gains. The TOPIX is 0.65% higher, while the Nikkei trades up 0.90%.
China & Hong Kong equities have struggled today, with property the worst performing sector, the Mainland Property Index is down 2.30%, while tech stocks struggle following Baidu's shares dropping sharply following a revenue decline, adding to weakness in the sector following on from Alibaba’s lackluster performance after its recent earnings report. The CSI 300 is 1% lower, while the HSI is trading 1.30% lower.
South Korean equities are higher as, SK Hynix surges 5% benefitting from the Philadelphia SE Semiconductor Index trading 1.60% higher overnight, Samsung which is trading just off four-year lows is trading unchanged. The KOSPI is 1% higher, while the KOSDAQ is 0.50% lower. Taiwan equities have also benefitted from higher global semiconductor prices with TSMC jumping 3%, which has helped the TAIEX rise 1.70%.
Australia's ASX 200 is trading 0.95% higher, with Financials contributing the most to the index gains, tech stocks in Australia are struggling following Wisetech dropping 12% following disappointing earnings guidance. In New Zealand, the NZX50 jumped 2.20%, following Fisher & Paykel jumping 4.30% and A2Milk jumping 18%.
Asian EM equities are mostly higher, India is up 1% however trades 10% off cycle highs following consistent selling from foreign investors recently, elsewhere Indonesia's JCI is up 0.80%, while Philippines PSEi is the worst performing with the index down 0.95%.
The HSTech Index is losing momentum as Baidu's shares drop sharply following a revenue decline, adding to weakness in the sector following on from Alibaba’s lackluster performance after its recent earnings report.
Alibaba's stock remains under pressure, last down 3.30%, despite appointing a veteran executive to lead its e-commerce operations, as its core Chinese e-commerce growth was just 1% in the September quarter. Without afternoon support from local investors, the tech index is unlikely to end the week positively.
Baidu's Q3 earnings showed revenue of ¥33.56b (-2.6% YoY), slightly exceeding estimates of ¥33.53 billion, with Baidu Core revenue flat at ¥26.52bi while iQIYI revenue missing forecasts at ¥7.2b. Adjusted profit per ADR came in at ¥16.60, missing the ¥17.73 estimate and declining from ¥20.40 a year earlier, while adjusted operating profit fell 7.7% YoY to ¥7.01b, though it beat expectations of ¥6.36b. Monthly active users reached 704m, and cash reserves totaled ¥144.5b. Management cited weakness in online marketing but highlighted growth in AI Cloud and increasing adoption of its ERNIE AI model.
Foreign investors have continued their selling of Asian equities with majority of the outflows coming from Taiwan & South Korean tech stocks, with Samsung now trading near 2023 lows.
South Korea: Saw outflows of -$348m yesterday, with the past 5 sessions reaching -$1.22b, while YTD flows are +$10.14b. The 5-day average is -$245m, below both the 20-day average of -$302m and the 100-day average of -$48m.
Taiwan: Saw outflows of -$860m yesterday, with the past 5 sessions netting -$2.83b, while YTD flows are -$13.43b. The 5-day average is -$567m, below the 20-day average of +$8m, and the 100-day average of -$147m.
India: Saw outflows of -$968m yesterday, with the past 5 sessions netting -$5.35b, while YTD flows are +$19.45b. The 5-day average is -$1.15b, below both the 20-day average of +$12m and the 100-day average of +$85m.
Indonesia: Saw outflows of -$11m yesterday, with the past 5 sessions netting -$209m, while YTD flows are +$3.07b. The 5-day average is -$42m, below the 20-day average of +$51m, but above the 100-day average of +$31m.
Thailand: Saw outflows of -$10m yesterday, with the past 5 sessions totaling -$322m, while YTD flows are -$2.96b. The 5-day average is -$64m, below the 20-day average of -$5m and the 100-day average of -$11m.
Malaysia: Saw inflows of $10m yesterday, with the past 5 sessions netting -$211m, while YTD flows are +$580m. The 5-day average is -$42m, below both the 20-day average of -$16m and the 100-day average of +$7m.
Philippines: Saw inflows of $8m yesterday, with the past 5 sessions totaling +$57m, while YTD flows are +$87m. The 5-day average is +$11m, below both the 20-day average of +$18m and the 100-day average of +$4m.
Having retreated yesterday on news of growing inventories in the US, Oil turned its attention to the escalation in Ukraine.
Having fired US and UK manufactured long dated missile into Russia, Ukraine was at the receiving end as Russia launched their new ballistic missile at the city of Dnipro.
WTI had hovered around US$69 for some time before the news, then spiking to $70.38.
Following a retreat to $69.40, oil again rose to finish trading in US hours at $70.14 before settling around $72.22 in Asia trading.
WTI has performed strongly this week, up almost 5%.
Brent’s price action was somewhat similar having traded around $73 into the US open, it popped on the news to a high of $74.40, before retreating do $73.50.
Further headlines from Ukraine saw a resurgence in Brent up to $74.30 for the close and has traded around $74.35 during Asia trading.
Brent will see a 4.6% increase over the course of the week.
China’s economic malaise has been a drag on oil prices this year and data out yesterday was watched keenly by oil markets and particularly OPEC+.
With the market facing a sizeable supply glut in 2025 markets await a decision from OPEC+ on plans to revive idled production which signs of an improvement in China could thwart.
Road congestion and new vehicle registrations rose to the highest levels seen in several years.
In Brazil, Petrobras announced plans to invest $111bn over the next five years.
As oil begins to trade in the Asia region, traders are clearly mindful of the Geopolitics driving markets with prices ticking marginally higher in early trading.
Gold is 0.7% higher in today’s Asia-Pac session, after closing 0.7% higher at $2669.72 on Wednesday, its fourth consecutive daily gain.
The move brings the yellow metal to its highest since Nov 11, amid continued safe-haven demand following the further escalation of geopolitical tensions.
As a result, the 20-day EMA at $2,653.1 has been breached. This highlights a stronger reversal for gold and signals the end of the recent bearish corrective cycle, opening $2,710.4, the Nov 11 high, according to MNI’s technicals team.
Traders also weighed yesterday’s comments from Fed Bank of Chicago President Austan Goolsbee, who said he sees interest rates moving “a fair bit lower” and expressed confidence inflation is easing toward the central bank’s target. Lower rates typically benefit bullion as it doesn’t pay interest.
The Chosun Daily reports that the “Korean Government is contemplating a supplementary budget for 2025 to counter weak domestic demand and a contraction in GDP.”.
President Yoon has long positioned himself as being fiscally prudent but may be forced into a more proactive fiscal response given the slowdown.
In September the government submitted to National Assembly a 2024 budget plan to the value of KRW677 trillion.
In the time since it’s submission the economic data has softened, prompting speculation for further fiscal intervention.
This week the IMF released their updated forecasts for Korea, downgrading their expectations for 2025.
Supplementary budgets would need to be funded via the bond market.
Currently the market has 75bps of monetary policy easing priced in.
The 2/10 Korean curve is very flat with only a 8bp premium for the 10-year over the 2-year, being historical lows .
New issuance would logically be longer and could see the Korean curve steepen should the stimulus be approved.
Claiming an exclusive, Chosun’s article may have touched a nerve as the Finance Minister in an emailed reply stated “South Korea’s finance ministry is not considering drafting extra budget for next year.” (per BBG)
RBI deputy Patra defended the Central Bank’s defence of the currency.
The rupee has declined -1.5% this year, outperforming many of its Asean neighbours several of which have declined over 5%.
The RBI is being criticised for using approximately US$30bn of the FX reserves to keep the Rupee stable.
The RBI stated in its monthly bulletin that their aim is to insulate the economy from global spillovers and financial stability risks through intervening in the currency to ensure volatility is supressed.
India has faced in recent months, significant outflows from its bond and equity markets as foreign investors withdraw.
This puts pressure on the currency leading to the Governor noting on multiple occasions ‘ that India’s reserves are built after meeting all current and capital financing to act as an umbrella for rainy days.’ (as per BBG)
Singapore’s third quarter GDP YoY rebounded to +5.4% from +4.1% in 2Q.
Seasonally adjusted this equated to a +3.2% YoY result versus +2.1% in 2Q.
The Data showed that manufacturing and good producing industries were behind the rise whereas most other sectors were flat.
The Government has upgraded is 2024 full year forecast to around +3.5% from the 2%-3% prior suggesting that as one of Asia’s most open economies, positive signs for the island state bode well for the broader region.
In North Asia FX, trends have been relatively steady in the first part of Friday trade, although remain close to recent highs. USD/CNH has had a little under 70pip range. We were last near 7.2530, little changed for the session. The USD/CNY fixing error remained wide. The USD/CNH-USD/CNY basis has re-widened, although spot USD/CNY got close to 7.2500 in earlier dealings.
China tech related equities are softer, amid weaker earnings. There has been little negative spillover to CNH though. Hong Kong equities are also down.
Spot USD/KRW has drifted too far away from the 1400 level. Local equities are higher, the Kospi back above 2500, amid domestic buying support, although foreign investors are still skewed towards outflows, even with modest inflows so far today (+$124mn, but still -$1.76bn in outflows so far in Nov. Earlier onshore media reports suggested the South Korean government would consider an extra budget in early 2025 to aid softer domestic economic conditions. The FinMin later denied this report though.
USD/TWD is steady as well, last near 32.55. The Taiex is up nearly 1.9%, with the index close to 23000. Recent highs are still some distance away though.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
22/11/2024
0700/0800
***
DE
GDP (f)
22/11/2024
0700/0700
***
GB
Retail Sales
22/11/2024
0815/0915
**
FR
S&P Global Services PMI (p)
22/11/2024
0815/0915
**
FR
S&P Global Manufacturing PMI (p)
22/11/2024
0830/0930
**
DE
S&P Global Services PMI (p)
22/11/2024
0830/0930
**
DE
S&P Global Manufacturing PMI (p)
22/11/2024
0830/0930
EU
ECB's Lagarde on Europe and New World Order
22/11/2024
0840/0940
EU
ECB's De Guindos at Foro Observatorio Económico
22/11/2024
0900/1000
**
EU
S&P Global Services PMI (p)
22/11/2024
0900/1000
**
EU
S&P Global Manufacturing PMI (p)
22/11/2024
0900/1000
**
EU
S&P Global Composite PMI (p)
22/11/2024
0930/0930
***
GB
S&P Global Manufacturing PMI flash
22/11/2024
0930/0930
***
GB
S&P Global Services PMI flash
22/11/2024
0930/0930
***
GB
S&P Global Composite PMI flash
22/11/2024
1330/0830
**
CA
Retail Trade
22/11/2024
1330/0830
**
CA
Retail Trade
22/11/2024
1445/0945
***
US
S&P Global Manufacturing Index (Flash)
22/11/2024
1445/0945
***
US
S&P Global Services Index (flash)
22/11/2024
1500/1000
**
US
U. Mich. Survey of Consumers
22/11/2024
1545/1645
EU
ECB's Schnabel in panel on MonPol
22/11/2024
2315/1815
US
Fed Governor Michelle Bowman
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EU
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