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BoJ Governor Ueda maintained his stance that the bank will continue to raise the policy rate if the economy realises the BOJ's outlook for economic activity and prices, he slightly downplayed an imminent hike, noting the timing of adjustments "will continue to depend on developments in economic activity and prices as well as financial conditions going forward.”
Yen is slightly weaker after a more than 100pip range so far today. JGB futures are holding stronger, +6 compared to the settlement levels. It has been an uneventful day in US Tsys so far, ranges have been narrow, with little in the way of headlines.
Gold is trading 1% higher in today’s Asia-Pacific session, recovering some ground after closing marginally unchanged on Friday. Oil prices are a touch higher.
Later the Fed’s Goolsbee speaks and November NY Fed services and NAHB housing indices print. We also hear from the RBA's Kent. The ECB’s Lagarde, de Guindos, Lane and Buch also appear and euro area September trade data are out. BoE’s Greene speaks.
It has been an uneventful day in Tsys so far, range have been narrow, with little in the way of headlines. TU is -00¼ at 102-20⅝, while TY is -02 at 109-15, the contract remains in a bear trend, key support is 108-18+ (1.236 proj of the Oct 1 - 10 - 16 price swing), while resistance is seen at 109-30+ (Nov 13 highs).
Cash tsys curves steepened heading into Friday's close, with yields -4.5bps to +3bps, there has been little to note during the Asian session today, with yields flat to 1bps lower. The 2yr is 0.4bps at 4.299% holding steady in the middle of the past weeks range, the 10yr is -0.4bps at 4.435%, after briefly hitting 4.50% on Friday. The 2s10s is unchanged at 13.193 after steepening +4.5bps on Friday, while the 5s30s is +1bp 31.558.
Trump is deliberating his Treasury Secretary pick, with Kevin Warsh and Marc Rowan emerging as contenders alongside prior frontrunners Howard Lutnick and Scott Bessent. Trump seeks a candidate with significant wealth and Wall Street status while avoiding choices that could disrupt market momentum or oppose his economic agenda.
The data calendar is light tonight, there will be a 3m & 6m note auction while Goolsbee is schedule to speak.
The US ETF market has set a new annual record with $913b in net inflows for 2024 and has now surpassed the 2021 high, fueled by a bull market and post-election optimism following Donald Trump’s victory, with total ETF assets reaching $10t in September. Active funds, now nearly half of all ETFs, are projected to grow further.
The iShares Bitcoin ETF led crypto inflows, attracting $7.5b over the past month, the next closest is Fidelity's Wise Origin Bitcoin Fund which has seen $715m followed by the iShares Ethereum ETF with $501m.
In the equity space the SPDR S&P 500 ETF has seen the largest inflows with $22.2b, following by Vanguard S&P 500 with $17.16b over the past month. The iShares Russell 2000, Invesco's equal weighted S&P 500 and SPDR Financials Select Sector ETFs, which are the ETFs with the 4th, 5th & 6th largest inflows for the past month have now starting to see selling heading into the end of last week. Financial stocks were seen as a large beneficiary of a Trump win.
Fixed income flows are been more mixed than other asset classes, with inflows well below both equities and crypto. There has been decent selling in the iShares 20+ year Treasury ETF, with $3.15b of outflows over the past week as yields on long-dated treasuries rose 10-15bps. The ETF still has net inflows for the past month, however just $1.5b now. Corporate bond ETF have continued to see inflows, however the rate of inflows is slowing, with funds tracking the BBG US Aggregate Index seeing the largest of inflows.
Spreads on US IG corporate bonds are now trading at the tightest levels since 1997, spreads on US HY bonds are the tightest since the GFC, while spreads on Distressed are trading back at 2021 lows.
JGB futures are holding stronger, +6 compared to the settlement levels, after shifting higher on BOJ Governor Ueda’s remarks to business leaders today.
While Ueda maintained his stance that the bank will continue to raise the policy rate if the economy realises the BOJ's outlook for economic activity and prices, he slightly downplayed an imminent hike, noting the timing of adjustments "will continue to depend on developments in economic activity and prices as well as financial conditions going forward.”
At a press conference underway in Nagoya, Governor Ueda emphasised the importance of carefully calibrated monetary policy. Key remarks included: "Rapid hikes could be needed without the right policy steps"; "The BOJ will examine the impacts of FX on the economic outlook" and "We will assess risks at every meeting and decide on policy accordingly." These comments underscore the BOJ’s cautious approach to navigating economic uncertainties.
Cash US tsys are slightly richer across benchmarks in today’s Asia-Pac session.
Cash JGBs are slightly cheaper across benchmarks. The benchmark 10-year yield is 0.5bp higher at 1.078% versus the cycle high of 1.108%.
The swaps curve has twist-steepened, pivoting at the 20-year, with rates 3bps lower to 1bp higher. Swap spreads are tighter out to the 10-year.
Tomorrow, the local calendar is empty apart from 1-year supply.
Japan's September core machine orders were below market expectations. They printed at -0.7% m/m, against a market expectation of a +1.5% rise. The prior month was a -1.9% dip. We fell through all the months of Q3.
In y/y terms, core machine orders were down to -4.8%. This is well off the Q2 highs, but still above earlier 2024 lows sub -10%y/y.
The chart below overlays the core machine order in y/y terms against capital spending (ex software) for Japan.
The softening momentum in core machine orders through Q3 points to some downside risks to capital spending for Q3, although there has been some disconnect between the two series in recent years.
Note the Q3 capital spending data is due on Dec 2.
Fig 1: Japan Core Machine Orders (White Line) & Capital Spending Y/Y
ACGBs (YM +5.0 & XM +3.0) are richer after dealing in narrow ranges in today’s data-light Sydney session.
"Australia and other countries in the Asia-Pacific bloc must raise revenue and cut spending to ensure their budgets are prepared for the next global shock, and they need to embrace “ambitious” reform to lift growth and productivity, the International Monetary Fund says." (per AFR)
"Goldman Sachs is urging investors to choose copper and aluminium over iron ore in 2025 as weak demand from China collides with an excess supply of Australia’s key export, keeping prices below $US100 a tonne." (per AFR)
Cash US tsys are little changed across benchmarks in today’s Asia-Pac session after Friday’s bull-steepening.
Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at +17bps.
Swap rates are 3-5bps lower, with the 3s10s curve steeper.
The bills strip has bull-flattened, with pricing +1 to +6.
RBA-dated OIS pricing is 1-6bps softer across meetings for 2025. No easing is priced by year-end, with a 25bp rate cut not fully priced until July.
RBA Minutes for the November meeting are to be released tomorrow.
The RBNZ began its easing cycle in August driven by the deterioration in high frequency indicators. It included a box on these variables in the accompanying Monetary Policy Statement with charts of the performance of manufacturing and services indices as they showed that activity was contracting. Both those indices remained under the breakeven-50 level in October where they have essentially been through 2024. Thus the RBNZ is likely to again cut rates 50bp at its November 27 meeting.
The October Business NZ performance of services index (PSI) improved to 46.0 from 45.7 thus signalling that activity continued to contract but at a slower pace. The outlook improved though with new orders higher. However, employment and sales continued to fall.
The share of negative comments remained around 59% with the pessimism driven by the soft economic climate and cost-of-living issues.
The Business NZ manufacturing PMI has signalled contracting activity in the sector since March 2023. It had been improving since June 2024 but deteriorated again in October falling to 45.8 from 47.0. The downward move was driven by production (-3.4 points) and employment (-1pt) and deliveries (-1pt).
There was some good news for manufacturing though with new orders up 1.1 points to 49, close to the breakeven-50 mark and the highest since May 2023. Also BNZ reported a 10pp drop in negative comments to 53.5%.
The ANZ business survey paints a more positive picture than the PSI and PMI.
The BBDXY USD index is down modestly, but up from session lows. We were last near 1285, only off 0.05% versus Friday NY closing levels. Lows were near 1283 earlier, while we aren't too far away from session highs. Highs from last week in the index remain intact (around 1290).
USD/JPY has seen the largest degree of volatility today, more than a 100pip range. Early bias, ahead of BoJ Governor Ueda's speech was lower, but we found support at 153.80/85 and rebounded to 155.14 as Ueda spoke. We sit back near 154.45 in latest dealings, only down a touch in yen terms for the session.
The BoJ Governor spoke about further policy adjustments, if forecasts are realised, but didn't give a sense of urgency. This may mean a wait and see approach through the December meeting. The new year may provide more information around the 2025 wage outlook as well.
US yields are down slightly at the front end of the curve, but not displaying sharp shifts. US equity futures are up after cash losses in Friday US trade
AUD/USD is a touch higher, but has been range bound, last near 0.6465/70. It may be receiving modest support from higher commodity prices, with gold and iron ore up (the latter supported by firmer China steel production).
NZD/USD is down a little, last near 0.5860. We had second tier data outcomes earlier, with the services PMI remaining in contraction territory.
Later the Fed’s Goolsbee speaks and November NY Fed services and NAHB housing indices print. We also hear from the RBA's Kent. The ECB’s Lagarde, de Guindos, Lane and Buch also appear and euro area September trade data are out. BoE’s Greene speaks.
Asian equities are mixed today. Japan's stocks fell as disappointing corporate earnings and caution ahead of the BoJ Governor's speech weighed on sentiment, alongside US Fed rate uncertainty. South Korea's Samsung surged on a surprise stock buyback, offsetting broader weakness in semiconductor stocks following concerns about Nvidia’s chip issues. Chinese and Hong Kong markets saw earlier losses however have seen traded higher, lingering concerns surrounding geopolitical tensions, deflation worries, and reduced optimism over Beijing's stimulus clouding sentiment have limited further upside so far though. In Australia, miners and gold stocks rose, supported by strong commodity prices, but banking sector losses capped gains.
Japanese tech stocks are struggling today with Tokyo Electron down 2.25%, following concerns around Nvidia's chip issues, the Nikkei is 0.80% lower, while the broader TOPIX is 0.50% lower. Earlier, BoJ's Ueda spoke, he maintained a cautious, data-dependent stance on monetary policy, avoiding clear signals of a December rate hike, he emphasized that the timing of policy adjustments will depend on economic and price developments, as well as financial conditions.
Chinese and Hong Kong stocks have rebounded following last week’s sharp declines, as optimism grew around China’s earnings and stimulus prospects. The HS China Enterprises Index is up 2%, led by gains in ENN Energy and JD.com, while the HSI advanced 1.7%, driven by Tencent, China Construction Bank, and HSBC. China onshore equities saw the CSI 300 Index climbed 1.6%, snapping a two-day loss after its worst weekly drop since July. The improvements in retail sales and property data, along with strong tech earnings look to be the major drivers for the moves, though continued concerns surrounding Trump's nominations could be limiting further upside.
Foreign investors have been slightly better buyers of South Korea stocks this morning, however have been net sellers of tech stocks. The majority of inflows have been focused on financial stocks. The KOSPI is 2.10% higher, largely due to the jump higher from Samsung, which last trades up 5%. Taiwan equities are lower, as TSMC & Hon Hai trade lower following the 3.42% drop in the Philadelphia SE Semiconductor Index on Friday.
There have been some large losses in US semiconductor stocks over the past week, The Philadelphia Stock Exchanged Semiconductor Index (SOX) fell 3.42% on Friday and down 8.64% for the past week. Nvidia fell 3.26% on Friday, although remains the top performing stock in the index this year and one of the top performing stocks in the SOX over the past week even following new of chips issues, while Monolithic Power Systems the worst performing, down 24.68% for the week.
It has been reported Nvidia is making late design changes to server racks for its new Blackwell graphics processing unit due to overheating issues, raising concerns about potential delays. While Nvidia has not notified customers of any delays, earlier engineering challenges already pushed back the Blackwell chip's release by at least a quarter. Nvidia has yet to made any public statements in relation to the claims, while quarterly earnings are scheduled for release on November 20.
Friday saw Applied Materials (AMAT) fall 9.20% following a disappointing revenue forecast for its fiscal first quarter, The company projected sales of $7.15 billion missing estimates and reflecting slowing demand from industrial and vehicle chipmakers and reduced orders from China. Revenue from China, once a major growth driver, fell to 30% of sales last quarter, down from 44% a year ago, though demand for AI-related chips remains robust.
Asian semiconductors stocks are trading better than their American peers today, with Samsung trading 5.50% higher following news they will be doing a share buyback, however the stocks still trades near the recent four year lows. The Bloomberg Asian Semiconductor Index is 0.25% lower.
Flows were muted on Friday, with no clear direction. Indonesia, Thailand, Malaysia & Philippines continue to see outflows post the US election.
South Korea: Recorded inflows of +$15m yesterday, with a 5-day total of -$1.23b. YTD flows remain positive at +$6.003b. The 5-day average is -$246m, worse than the 20-day average of -$138m and the 100-day average of -$106m.
Taiwan: Posted inflows of +$98m yesterday, totaling -$3.078b over the past 5 days. YTD flows remain negative at -$14.783b. The 5-day average is -$616m, worse than the 20-day average of -$116m and the 100-day average of -$208m.
India: Experienced outflows of -$160m yesterday, with a 5-day outflow of -$956m. YTD flows are negative at -$2.573b. The 5-day average is -$191m, better than the 20-day average of -$299m but worse than the 100-day average of -$9m.
Indonesia: Posted outflows of -$33m yesterday, bringing the 5-day total to -$293m. YTD flows remain positive at +$1.943b. The 5-day average is -$59m, worse than the 20-day average of -$49m but better than the 100-day average of +$23m.
Thailand: Recorded outflows of -$28m yesterday, with a total outflow of -$123m over the past 5 days. YTD flows are negative at -$3.726b. The 5-day average is -$25m, better than the 20-day average of -$30m but worse than the 100-day average of -$7m.
Malaysia: Experienced outflows of -$5m yesterday, contributing to a 5-day outflow of -$59m. YTD flows are positive at +$229m. The 5-day average is -$12m, better than the 20-day average of -$20m but worse than the 100-day average of +$4m.
Philippines: Saw outflows of -$15m yesterday, with net outflows of -$102m over the past 5 days. YTD flows remain negative at -$190m. The 5-day average is -$20m, worse than the 20-day average of -$14m but better than the 100-day average of +$3m.
After falling sharply on Friday oil prices are moderately higher today as commodity prices rise and the US dollar is little changed. WTI is up 0.4% to $67.27/bbl after a high of around $67.30 and Brent has risen 0.4% to $71.34, close to the intraday high. Crude has struggled to make up losses as supply/demand fundamentals continue to look weak with a market surplus forecast for 2025.
With the appointment of fracking chief Wright as the next US energy secretary, an increase in US oil output looks even more likely under the next administration. OPEC may also increase its supply in 2025 as it delayed its own production increase to the end of December 2024.
Apparently there is increasing pressure on Ukraine’s Zelensky to find a way to a peace deal with Russia. But Russia attacked Ukraine’s energy infrastructure across the country on the weekend and the US has given Ukraine permission to use its missiles to strike some sites on Russian territory.
The market remains concerned over the strength of China’s crude demand. October product exports were weak with diesel shipments down 57.2% y/y and gasoline -12.8% y/y.
Later the Fed’s Goolsbee speaks and November NY Fed services and NAHB housing indices print. The ECB’s Lagarde, de Guindos, Lane and Buch also appear and euro area September trade data are out. BoE’s Greene speaks.
Gold is trading 1% higher in today’s Asia-Pacific session, recovering some ground after closing marginally unchanged on Friday at $2,563.25. Despite the modest Friday performance, the metal ended the week around 4.5% lower, marking its largest weekly decline since 2021, driven by a stronger US dollar.
On Friday, US Treasuries rallied off session cheaps as US equities weakened. The US 10-year rate was fractionally higher by the close at 4.44% after testing 4.50% early in Friday’s NY session. The US 2-year finished 4bps lower at 4.30% as rate-cut bets crept back in. Lower rates are typically positive for gold, which doesn’t pay interest.
Fast two-way trade as US Treasury yields see-sawed higher on Friday after stronger than expected Retail Sales for October and up-revisions for prior. Meanwhile, import/export price indexes come out higher than expected, while Empire Mfg jumps to late 2021 levels.
According to MNI’s technicals team, the move down has resulted in a breach of the 20- and 50-day EMAs, signalling scope for a deeper retracement towards $2,511.1 next, the Sep 18 low.
Last week’s China data releases have some positives within it with Industrial Production robust, retail sales better than expected whilst property related data remains poor.
This week the key data will be 1-year and 5-year Loan Prime Rates with no change expected.
China will likely raise its deficit ratio next year to above 3% of its gross domestic product after Finance Minister Lan Fo’an pledged to implement more “forceful” fiscal policies, China Securities Journal reported Monday (source:BBG)
China’s key stock markets had a challenging week with the CSI300 down -3.29%, the Hang Seng down -6.2%, Shanghai Comp down -3.5% and Shenzhen down 4%.Markets are opening positive for the week all up over 1% except Shenzhen which is down -0.2%.
CNY : finished the week 0.63% weaker at 7.2294 and has traded higher again.
Bonds continue to be resilient with the China 10-year yield barely moving over the week to finish 2.086% and has climbed 1bp higher in today’s trading.
Q3 Thai GDP printed higher than expected rising 1.2% q/q to be up 3.0% y/y after 0.8% q/q and 2.2% y/y in Q2. The consumer continued to slow but there was a pickup in government spending and capex growth. Services exports remained strong driven by tourism. Going forward 2024 growth is officially expected to be 2.6% and 2025 between 2.3-3.3%.
Thailand GDP % sa
Source: MNI - Market News/Refinitiv
The Bank of Thailand next meets on December 18 and is likely to be on hold given the better Q3 GDP print and its desire to keep rates close to neutral after its surprise October 25bp cut.
Annual Q3 GDP growth was its strongest for two years as government spending rose 6.3% y/y after 0.3% y/y in Q2. GFCF also recovered from a number of negative quarters rising 5.2% y/y in Q3.
As a result domestic demand grew 4.3% y/y up from 1.6% in Q2 even though private consumption growth eased to 3.4% y/y from 4.9%, the slowest since Q1 2022.
Goods and services exports rose 10.5% y/y up from 4.7% as services picked up 21.9% y/y. Imports of goods and services also saw robust growth up 9.6% y/y following 1.3%, in line with stronger domestic demand growth.
The National Economic and Social Development Council expects government spending and capex to drive 2025 growth with private consumption forecast to slow to 3.0% from 4.8% despite the government expecting a strong boost from the digital wallet scheme.
Singapore’s non-oil exports YoY contracted -4.6% in October and September’s numbers were revised down from +2.7% to 0.9%.
The month-on-month figure saw a larger decline to -7.4% for October and the September release revised down from +1.1% to -0.6%.
Electronic exports YoY maintained their positive momentum for October at +2.6%, whilst there was a material revision down to the prior month from +4.0% to -0.7%.
Singapore’s non-oil exports to China declined -22.3% (from -0.1%), exports to the EU declined -21.4% (from +37.4%) and to Emerging Markets nations down -11.1% (from +0.8%).
The only bright spot from a country perspective was exports to the US climbed +7.6%, from (-20.8% the month prior).
As one of the most open economies in the region, Singapore’s trade data is watched carefully as a reflection of sentiment for Asia.
Apartment prices in Seoul slipped for the first time in nine months, in the latest data supporting the Bank of Korea’s policy pivot last month and foreshadowing the potential for an acceleration of monetary easing next year source: BBG).
South Korea Assembly Considers Bill to Partially Amend VAT Act (source: BBG)
Key data out this week will be PPI, Early Imports and Exports and Retail Sales which are all vitality important ahead of November 28 BOK meeting.
Korea’s KOSPI had a tough week last week, falling -5.63%. It has had a strong start to the week up very strongly +1.90%
KRW – The Won was steady last week, despite volatility seen in other markets down -0.18%. It has started the week on a stronger note
Bonds: Bond yields drifted marginally higher last week with the 10yr up 3bps to 3.08% and has started the week slightly stronger at 3.07%.
Asian currencies have had a reasonably quiet start to the week. Outside of some firmer price action in the won in the first part of trade, we have largely tracked recent ranges in most USD/Asia pairs.
Spot USD/KRW got to lows of 1387.9 in the first part of dealing, just short of the 20-day EMA support point. Local equities surged at the open, post Samsung buy back news from late last week. The Kospi sits off best levels but is still 1.70% higher. Offshore investors have still sold local shares today. The pair last sat back at 1393.5, still up 0.35% for the session. Earlier headlines crossed that the BoK/NPS would likely extend their swap agreement, which was another won positive.
Spot USD/CNH has crept higher as the session progressed. We were last near 7.2455, but still well within recent ranges. The softer yen backdrop hasn't helped CNH. The fixing bias has remained skewed against yuan depreciation pressures as well.
Spot USD/THB sits lower, last near 34.76. Earlier the pair got to 34.72. A slightly stronger than expected Q3 GDP print helped sentiment. We saw growth rise 1.2%q/q, versus 0.8% forecast. Still the positive impact on THB was only fleeting.
USD/MYR is slightly lower, last under 4.4700, positive onshore economic sentiment helping. Recent highs were marked at 4.4913.
In Singapore we saw slower export growth for Oct. This is likely to continue to see calls for easing in early 2025 from the MAS. USD/SGD remains off recent highs but is finding support near 1.3400, the pair last near 1.3430/35.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
18/11/2024
0815/0915
EU
ECB's De Guindos speech at 27th Euro Finance Week
18/11/2024
1000/1100
*
EU
Trade Balance
18/11/2024
1300/1400
EU
ECB's Lane lecture on Inflation Expectations
18/11/2024
1315/0815
**
CA
CMHC Housing Starts
18/11/2024
1330/0830
*
CA
International Canadian Transaction in Securities
18/11/2024
1500/1000
**
US
NAHB Home Builder Index
18/11/2024
1500/1000
US
Chicago Fed's Austan Goolsbee
18/11/2024
1630/1130
*
US
US Treasury Auction Result for 13 Week Bill
18/11/2024
1630/1130
*
US
US Treasury Auction Result for 26 Week Bill
18/11/2024
1830/1930
EU
ECB's Lagarde on economic and human challenges
18/11/2024
1830/1830
GB
BOE's Greene Fireside Chat On The Future of Inflation
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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)
BoJ Governor Ueda maintained his stance that the bank will continue to raise the policy rate if the economy realises the BOJ's outlook for economic activity and prices, he slightly downplayed an imminent hike, noting the timing of adjustments "will continue to depend on developments in economic activity and prices as well as financial conditions going forward.”
Yen is slightly weaker after a more than 100pip range so far today. JGB futures are holding stronger, +6 compared to the settlement levels. It has been an uneventful day in US Tsys so far, ranges have been narrow, with little in the way of headlines.
Gold is trading 1% higher in today’s Asia-Pacific session, recovering some ground after closing marginally unchanged on Friday. Oil prices are a touch higher.
Later the Fed’s Goolsbee speaks and November NY Fed services and NAHB housing indices print. We also hear from the RBA's Kent. The ECB’s Lagarde, de Guindos, Lane and Buch also appear and euro area September trade data are out. BoE’s Greene speaks.
It has been an uneventful day in Tsys so far, range have been narrow, with little in the way of headlines. TU is -00¼ at 102-20⅝, while TY is -02 at 109-15, the contract remains in a bear trend, key support is 108-18+ (1.236 proj of the Oct 1 - 10 - 16 price swing), while resistance is seen at 109-30+ (Nov 13 highs).
Cash tsys curves steepened heading into Friday's close, with yields -4.5bps to +3bps, there has been little to note during the Asian session today, with yields flat to 1bps lower. The 2yr is 0.4bps at 4.299% holding steady in the middle of the past weeks range, the 10yr is -0.4bps at 4.435%, after briefly hitting 4.50% on Friday. The 2s10s is unchanged at 13.193 after steepening +4.5bps on Friday, while the 5s30s is +1bp 31.558.
Trump is deliberating his Treasury Secretary pick, with Kevin Warsh and Marc Rowan emerging as contenders alongside prior frontrunners Howard Lutnick and Scott Bessent. Trump seeks a candidate with significant wealth and Wall Street status while avoiding choices that could disrupt market momentum or oppose his economic agenda.
The data calendar is light tonight, there will be a 3m & 6m note auction while Goolsbee is schedule to speak.
The US ETF market has set a new annual record with $913b in net inflows for 2024 and has now surpassed the 2021 high, fueled by a bull market and post-election optimism following Donald Trump’s victory, with total ETF assets reaching $10t in September. Active funds, now nearly half of all ETFs, are projected to grow further.
The iShares Bitcoin ETF led crypto inflows, attracting $7.5b over the past month, the next closest is Fidelity's Wise Origin Bitcoin Fund which has seen $715m followed by the iShares Ethereum ETF with $501m.
In the equity space the SPDR S&P 500 ETF has seen the largest inflows with $22.2b, following by Vanguard S&P 500 with $17.16b over the past month. The iShares Russell 2000, Invesco's equal weighted S&P 500 and SPDR Financials Select Sector ETFs, which are the ETFs with the 4th, 5th & 6th largest inflows for the past month have now starting to see selling heading into the end of last week. Financial stocks were seen as a large beneficiary of a Trump win.
Fixed income flows are been more mixed than other asset classes, with inflows well below both equities and crypto. There has been decent selling in the iShares 20+ year Treasury ETF, with $3.15b of outflows over the past week as yields on long-dated treasuries rose 10-15bps. The ETF still has net inflows for the past month, however just $1.5b now. Corporate bond ETF have continued to see inflows, however the rate of inflows is slowing, with funds tracking the BBG US Aggregate Index seeing the largest of inflows.
Spreads on US IG corporate bonds are now trading at the tightest levels since 1997, spreads on US HY bonds are the tightest since the GFC, while spreads on Distressed are trading back at 2021 lows.
JGB futures are holding stronger, +6 compared to the settlement levels, after shifting higher on BOJ Governor Ueda’s remarks to business leaders today.
While Ueda maintained his stance that the bank will continue to raise the policy rate if the economy realises the BOJ's outlook for economic activity and prices, he slightly downplayed an imminent hike, noting the timing of adjustments "will continue to depend on developments in economic activity and prices as well as financial conditions going forward.”
At a press conference underway in Nagoya, Governor Ueda emphasised the importance of carefully calibrated monetary policy. Key remarks included: "Rapid hikes could be needed without the right policy steps"; "The BOJ will examine the impacts of FX on the economic outlook" and "We will assess risks at every meeting and decide on policy accordingly." These comments underscore the BOJ’s cautious approach to navigating economic uncertainties.
Cash US tsys are slightly richer across benchmarks in today’s Asia-Pac session.
Cash JGBs are slightly cheaper across benchmarks. The benchmark 10-year yield is 0.5bp higher at 1.078% versus the cycle high of 1.108%.
The swaps curve has twist-steepened, pivoting at the 20-year, with rates 3bps lower to 1bp higher. Swap spreads are tighter out to the 10-year.
Tomorrow, the local calendar is empty apart from 1-year supply.
Japan's September core machine orders were below market expectations. They printed at -0.7% m/m, against a market expectation of a +1.5% rise. The prior month was a -1.9% dip. We fell through all the months of Q3.
In y/y terms, core machine orders were down to -4.8%. This is well off the Q2 highs, but still above earlier 2024 lows sub -10%y/y.
The chart below overlays the core machine order in y/y terms against capital spending (ex software) for Japan.
The softening momentum in core machine orders through Q3 points to some downside risks to capital spending for Q3, although there has been some disconnect between the two series in recent years.
Note the Q3 capital spending data is due on Dec 2.
Fig 1: Japan Core Machine Orders (White Line) & Capital Spending Y/Y
ACGBs (YM +5.0 & XM +3.0) are richer after dealing in narrow ranges in today’s data-light Sydney session.
"Australia and other countries in the Asia-Pacific bloc must raise revenue and cut spending to ensure their budgets are prepared for the next global shock, and they need to embrace “ambitious” reform to lift growth and productivity, the International Monetary Fund says." (per AFR)
"Goldman Sachs is urging investors to choose copper and aluminium over iron ore in 2025 as weak demand from China collides with an excess supply of Australia’s key export, keeping prices below $US100 a tonne." (per AFR)
Cash US tsys are little changed across benchmarks in today’s Asia-Pac session after Friday’s bull-steepening.
Cash ACGBs are 3-5bps richer with the AU-US 10-year yield differential at +17bps.
Swap rates are 3-5bps lower, with the 3s10s curve steeper.
The bills strip has bull-flattened, with pricing +1 to +6.
RBA-dated OIS pricing is 1-6bps softer across meetings for 2025. No easing is priced by year-end, with a 25bp rate cut not fully priced until July.
RBA Minutes for the November meeting are to be released tomorrow.
The RBNZ began its easing cycle in August driven by the deterioration in high frequency indicators. It included a box on these variables in the accompanying Monetary Policy Statement with charts of the performance of manufacturing and services indices as they showed that activity was contracting. Both those indices remained under the breakeven-50 level in October where they have essentially been through 2024. Thus the RBNZ is likely to again cut rates 50bp at its November 27 meeting.
The October Business NZ performance of services index (PSI) improved to 46.0 from 45.7 thus signalling that activity continued to contract but at a slower pace. The outlook improved though with new orders higher. However, employment and sales continued to fall.
The share of negative comments remained around 59% with the pessimism driven by the soft economic climate and cost-of-living issues.
The Business NZ manufacturing PMI has signalled contracting activity in the sector since March 2023. It had been improving since June 2024 but deteriorated again in October falling to 45.8 from 47.0. The downward move was driven by production (-3.4 points) and employment (-1pt) and deliveries (-1pt).
There was some good news for manufacturing though with new orders up 1.1 points to 49, close to the breakeven-50 mark and the highest since May 2023. Also BNZ reported a 10pp drop in negative comments to 53.5%.
The ANZ business survey paints a more positive picture than the PSI and PMI.
The BBDXY USD index is down modestly, but up from session lows. We were last near 1285, only off 0.05% versus Friday NY closing levels. Lows were near 1283 earlier, while we aren't too far away from session highs. Highs from last week in the index remain intact (around 1290).
USD/JPY has seen the largest degree of volatility today, more than a 100pip range. Early bias, ahead of BoJ Governor Ueda's speech was lower, but we found support at 153.80/85 and rebounded to 155.14 as Ueda spoke. We sit back near 154.45 in latest dealings, only down a touch in yen terms for the session.
The BoJ Governor spoke about further policy adjustments, if forecasts are realised, but didn't give a sense of urgency. This may mean a wait and see approach through the December meeting. The new year may provide more information around the 2025 wage outlook as well.
US yields are down slightly at the front end of the curve, but not displaying sharp shifts. US equity futures are up after cash losses in Friday US trade
AUD/USD is a touch higher, but has been range bound, last near 0.6465/70. It may be receiving modest support from higher commodity prices, with gold and iron ore up (the latter supported by firmer China steel production).
NZD/USD is down a little, last near 0.5860. We had second tier data outcomes earlier, with the services PMI remaining in contraction territory.
Later the Fed’s Goolsbee speaks and November NY Fed services and NAHB housing indices print. We also hear from the RBA's Kent. The ECB’s Lagarde, de Guindos, Lane and Buch also appear and euro area September trade data are out. BoE’s Greene speaks.
Asian equities are mixed today. Japan's stocks fell as disappointing corporate earnings and caution ahead of the BoJ Governor's speech weighed on sentiment, alongside US Fed rate uncertainty. South Korea's Samsung surged on a surprise stock buyback, offsetting broader weakness in semiconductor stocks following concerns about Nvidia’s chip issues. Chinese and Hong Kong markets saw earlier losses however have seen traded higher, lingering concerns surrounding geopolitical tensions, deflation worries, and reduced optimism over Beijing's stimulus clouding sentiment have limited further upside so far though. In Australia, miners and gold stocks rose, supported by strong commodity prices, but banking sector losses capped gains.
Japanese tech stocks are struggling today with Tokyo Electron down 2.25%, following concerns around Nvidia's chip issues, the Nikkei is 0.80% lower, while the broader TOPIX is 0.50% lower. Earlier, BoJ's Ueda spoke, he maintained a cautious, data-dependent stance on monetary policy, avoiding clear signals of a December rate hike, he emphasized that the timing of policy adjustments will depend on economic and price developments, as well as financial conditions.
Chinese and Hong Kong stocks have rebounded following last week’s sharp declines, as optimism grew around China’s earnings and stimulus prospects. The HS China Enterprises Index is up 2%, led by gains in ENN Energy and JD.com, while the HSI advanced 1.7%, driven by Tencent, China Construction Bank, and HSBC. China onshore equities saw the CSI 300 Index climbed 1.6%, snapping a two-day loss after its worst weekly drop since July. The improvements in retail sales and property data, along with strong tech earnings look to be the major drivers for the moves, though continued concerns surrounding Trump's nominations could be limiting further upside.
Foreign investors have been slightly better buyers of South Korea stocks this morning, however have been net sellers of tech stocks. The majority of inflows have been focused on financial stocks. The KOSPI is 2.10% higher, largely due to the jump higher from Samsung, which last trades up 5%. Taiwan equities are lower, as TSMC & Hon Hai trade lower following the 3.42% drop in the Philadelphia SE Semiconductor Index on Friday.
There have been some large losses in US semiconductor stocks over the past week, The Philadelphia Stock Exchanged Semiconductor Index (SOX) fell 3.42% on Friday and down 8.64% for the past week. Nvidia fell 3.26% on Friday, although remains the top performing stock in the index this year and one of the top performing stocks in the SOX over the past week even following new of chips issues, while Monolithic Power Systems the worst performing, down 24.68% for the week.
It has been reported Nvidia is making late design changes to server racks for its new Blackwell graphics processing unit due to overheating issues, raising concerns about potential delays. While Nvidia has not notified customers of any delays, earlier engineering challenges already pushed back the Blackwell chip's release by at least a quarter. Nvidia has yet to made any public statements in relation to the claims, while quarterly earnings are scheduled for release on November 20.
Friday saw Applied Materials (AMAT) fall 9.20% following a disappointing revenue forecast for its fiscal first quarter, The company projected sales of $7.15 billion missing estimates and reflecting slowing demand from industrial and vehicle chipmakers and reduced orders from China. Revenue from China, once a major growth driver, fell to 30% of sales last quarter, down from 44% a year ago, though demand for AI-related chips remains robust.
Asian semiconductors stocks are trading better than their American peers today, with Samsung trading 5.50% higher following news they will be doing a share buyback, however the stocks still trades near the recent four year lows. The Bloomberg Asian Semiconductor Index is 0.25% lower.
Flows were muted on Friday, with no clear direction. Indonesia, Thailand, Malaysia & Philippines continue to see outflows post the US election.
South Korea: Recorded inflows of +$15m yesterday, with a 5-day total of -$1.23b. YTD flows remain positive at +$6.003b. The 5-day average is -$246m, worse than the 20-day average of -$138m and the 100-day average of -$106m.
Taiwan: Posted inflows of +$98m yesterday, totaling -$3.078b over the past 5 days. YTD flows remain negative at -$14.783b. The 5-day average is -$616m, worse than the 20-day average of -$116m and the 100-day average of -$208m.
India: Experienced outflows of -$160m yesterday, with a 5-day outflow of -$956m. YTD flows are negative at -$2.573b. The 5-day average is -$191m, better than the 20-day average of -$299m but worse than the 100-day average of -$9m.
Indonesia: Posted outflows of -$33m yesterday, bringing the 5-day total to -$293m. YTD flows remain positive at +$1.943b. The 5-day average is -$59m, worse than the 20-day average of -$49m but better than the 100-day average of +$23m.
Thailand: Recorded outflows of -$28m yesterday, with a total outflow of -$123m over the past 5 days. YTD flows are negative at -$3.726b. The 5-day average is -$25m, better than the 20-day average of -$30m but worse than the 100-day average of -$7m.
Malaysia: Experienced outflows of -$5m yesterday, contributing to a 5-day outflow of -$59m. YTD flows are positive at +$229m. The 5-day average is -$12m, better than the 20-day average of -$20m but worse than the 100-day average of +$4m.
Philippines: Saw outflows of -$15m yesterday, with net outflows of -$102m over the past 5 days. YTD flows remain negative at -$190m. The 5-day average is -$20m, worse than the 20-day average of -$14m but better than the 100-day average of +$3m.
After falling sharply on Friday oil prices are moderately higher today as commodity prices rise and the US dollar is little changed. WTI is up 0.4% to $67.27/bbl after a high of around $67.30 and Brent has risen 0.4% to $71.34, close to the intraday high. Crude has struggled to make up losses as supply/demand fundamentals continue to look weak with a market surplus forecast for 2025.
With the appointment of fracking chief Wright as the next US energy secretary, an increase in US oil output looks even more likely under the next administration. OPEC may also increase its supply in 2025 as it delayed its own production increase to the end of December 2024.
Apparently there is increasing pressure on Ukraine’s Zelensky to find a way to a peace deal with Russia. But Russia attacked Ukraine’s energy infrastructure across the country on the weekend and the US has given Ukraine permission to use its missiles to strike some sites on Russian territory.
The market remains concerned over the strength of China’s crude demand. October product exports were weak with diesel shipments down 57.2% y/y and gasoline -12.8% y/y.
Later the Fed’s Goolsbee speaks and November NY Fed services and NAHB housing indices print. The ECB’s Lagarde, de Guindos, Lane and Buch also appear and euro area September trade data are out. BoE’s Greene speaks.
Gold is trading 1% higher in today’s Asia-Pacific session, recovering some ground after closing marginally unchanged on Friday at $2,563.25. Despite the modest Friday performance, the metal ended the week around 4.5% lower, marking its largest weekly decline since 2021, driven by a stronger US dollar.
On Friday, US Treasuries rallied off session cheaps as US equities weakened. The US 10-year rate was fractionally higher by the close at 4.44% after testing 4.50% early in Friday’s NY session. The US 2-year finished 4bps lower at 4.30% as rate-cut bets crept back in. Lower rates are typically positive for gold, which doesn’t pay interest.
Fast two-way trade as US Treasury yields see-sawed higher on Friday after stronger than expected Retail Sales for October and up-revisions for prior. Meanwhile, import/export price indexes come out higher than expected, while Empire Mfg jumps to late 2021 levels.
According to MNI’s technicals team, the move down has resulted in a breach of the 20- and 50-day EMAs, signalling scope for a deeper retracement towards $2,511.1 next, the Sep 18 low.
Last week’s China data releases have some positives within it with Industrial Production robust, retail sales better than expected whilst property related data remains poor.
This week the key data will be 1-year and 5-year Loan Prime Rates with no change expected.
China will likely raise its deficit ratio next year to above 3% of its gross domestic product after Finance Minister Lan Fo’an pledged to implement more “forceful” fiscal policies, China Securities Journal reported Monday (source:BBG)
China’s key stock markets had a challenging week with the CSI300 down -3.29%, the Hang Seng down -6.2%, Shanghai Comp down -3.5% and Shenzhen down 4%.Markets are opening positive for the week all up over 1% except Shenzhen which is down -0.2%.
CNY : finished the week 0.63% weaker at 7.2294 and has traded higher again.
Bonds continue to be resilient with the China 10-year yield barely moving over the week to finish 2.086% and has climbed 1bp higher in today’s trading.
Q3 Thai GDP printed higher than expected rising 1.2% q/q to be up 3.0% y/y after 0.8% q/q and 2.2% y/y in Q2. The consumer continued to slow but there was a pickup in government spending and capex growth. Services exports remained strong driven by tourism. Going forward 2024 growth is officially expected to be 2.6% and 2025 between 2.3-3.3%.
Thailand GDP % sa
Source: MNI - Market News/Refinitiv
The Bank of Thailand next meets on December 18 and is likely to be on hold given the better Q3 GDP print and its desire to keep rates close to neutral after its surprise October 25bp cut.
Annual Q3 GDP growth was its strongest for two years as government spending rose 6.3% y/y after 0.3% y/y in Q2. GFCF also recovered from a number of negative quarters rising 5.2% y/y in Q3.
As a result domestic demand grew 4.3% y/y up from 1.6% in Q2 even though private consumption growth eased to 3.4% y/y from 4.9%, the slowest since Q1 2022.
Goods and services exports rose 10.5% y/y up from 4.7% as services picked up 21.9% y/y. Imports of goods and services also saw robust growth up 9.6% y/y following 1.3%, in line with stronger domestic demand growth.
The National Economic and Social Development Council expects government spending and capex to drive 2025 growth with private consumption forecast to slow to 3.0% from 4.8% despite the government expecting a strong boost from the digital wallet scheme.
Singapore’s non-oil exports YoY contracted -4.6% in October and September’s numbers were revised down from +2.7% to 0.9%.
The month-on-month figure saw a larger decline to -7.4% for October and the September release revised down from +1.1% to -0.6%.
Electronic exports YoY maintained their positive momentum for October at +2.6%, whilst there was a material revision down to the prior month from +4.0% to -0.7%.
Singapore’s non-oil exports to China declined -22.3% (from -0.1%), exports to the EU declined -21.4% (from +37.4%) and to Emerging Markets nations down -11.1% (from +0.8%).
The only bright spot from a country perspective was exports to the US climbed +7.6%, from (-20.8% the month prior).
As one of the most open economies in the region, Singapore’s trade data is watched carefully as a reflection of sentiment for Asia.
Apartment prices in Seoul slipped for the first time in nine months, in the latest data supporting the Bank of Korea’s policy pivot last month and foreshadowing the potential for an acceleration of monetary easing next year source: BBG).
South Korea Assembly Considers Bill to Partially Amend VAT Act (source: BBG)
Key data out this week will be PPI, Early Imports and Exports and Retail Sales which are all vitality important ahead of November 28 BOK meeting.
Korea’s KOSPI had a tough week last week, falling -5.63%. It has had a strong start to the week up very strongly +1.90%
KRW – The Won was steady last week, despite volatility seen in other markets down -0.18%. It has started the week on a stronger note
Bonds: Bond yields drifted marginally higher last week with the 10yr up 3bps to 3.08% and has started the week slightly stronger at 3.07%.
Asian currencies have had a reasonably quiet start to the week. Outside of some firmer price action in the won in the first part of trade, we have largely tracked recent ranges in most USD/Asia pairs.
Spot USD/KRW got to lows of 1387.9 in the first part of dealing, just short of the 20-day EMA support point. Local equities surged at the open, post Samsung buy back news from late last week. The Kospi sits off best levels but is still 1.70% higher. Offshore investors have still sold local shares today. The pair last sat back at 1393.5, still up 0.35% for the session. Earlier headlines crossed that the BoK/NPS would likely extend their swap agreement, which was another won positive.
Spot USD/CNH has crept higher as the session progressed. We were last near 7.2455, but still well within recent ranges. The softer yen backdrop hasn't helped CNH. The fixing bias has remained skewed against yuan depreciation pressures as well.
Spot USD/THB sits lower, last near 34.76. Earlier the pair got to 34.72. A slightly stronger than expected Q3 GDP print helped sentiment. We saw growth rise 1.2%q/q, versus 0.8% forecast. Still the positive impact on THB was only fleeting.
USD/MYR is slightly lower, last under 4.4700, positive onshore economic sentiment helping. Recent highs were marked at 4.4913.
In Singapore we saw slower export growth for Oct. This is likely to continue to see calls for easing in early 2025 from the MAS. USD/SGD remains off recent highs but is finding support near 1.3400, the pair last near 1.3430/35.
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
18/11/2024
0815/0915
EU
ECB's De Guindos speech at 27th Euro Finance Week
18/11/2024
1000/1100
*
EU
Trade Balance
18/11/2024
1300/1400
EU
ECB's Lane lecture on Inflation Expectations
18/11/2024
1315/0815
**
CA
CMHC Housing Starts
18/11/2024
1330/0830
*
CA
International Canadian Transaction in Securities
18/11/2024
1500/1000
**
US
NAHB Home Builder Index
18/11/2024
1500/1000
US
Chicago Fed's Austan Goolsbee
18/11/2024
1630/1130
*
US
US Treasury Auction Result for 13 Week Bill
18/11/2024
1630/1130
*
US
US Treasury Auction Result for 26 Week Bill
18/11/2024
1830/1930
EU
ECB's Lagarde on economic and human challenges
18/11/2024
1830/1830
GB
BOE's Greene Fireside Chat On The Future of Inflation
18/11/2024
2100/1600
**
US
TICS
19/11/2024
0030/1130
AU
RBA Minutes
19/11/2024
0845/0945
EU
ECB's Elderson at 10th Green Finance Forum
19/11/2024
0900/1000
**
EU
EZ Current Account
19/11/2024
1000/1100
***
EU
HICP (f)
19/11/2024
1000/1000
**
GB
Gilt Outright Auction Result
19/11/2024
1000/1000
GB
BOE's Bailey, Lombardelli, Mann and Taylor at TSC
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EU
CA
US
GB
AU