- It has been a very slow session for US tsys, we do trade just off session lows. The USD has been supported on dips, but aggregate moves have been modest.
- Japan export growth was firmer than forecast, while as expected the China loan prime rates were held steady.
- Commodities are mostly higher.
- Looking ahead, the main focus will be UK CPI. We also hear from ECB and Fed speakers.
MARKETS
- It has been a very slow session for tsys we do trade just off session lows, although ranges have been narrow, while volumes are below averages. The front-end of the cash tsys curve is unchanged, while the longer end is trades slightly cheaper. TU is -00¾ at 102-21+, while TY is -04 at 109-23, both trading within Tuesday's ranges.
- There is nothing on the data calendar tonight, with focus turning to US jobless claims figures Thursday, as well as speeches this week from Fed officials such as Michael Barr, Lisa Cook, Michelle Bowman and Susan Collins.
- Overnight moves higher were driven by risk aversion after Ukraine hit Russia with US missiles and Russian President Vladimir Putin approved an updated nuclear doctrine expanding the conditions for using atomic weapons, however those moves have largely been erased. There was no reaction to Biden approving Ukraine for the use of anti-personal landmines.
- Cash tsys curve has steepened slightly, the front-end is unchanged, while the 10yr is trading +0.6bps at 4.402%.
- Projected rate cuts into early 2025 receded overnight vs. Tuesday levels (*) : Dec'24 cumulative -14.7bp (-15.4bp), Jan'25 -21.7bp (-24.0bp), Mar'25 -36.0bp (-39.5bp), May'25 -43.9bp (-48.2bp).
JGBS: Cash Bonds Twist-Flatten, 20Y Supply Tomorrow, Natl. CPI Friday
JGB futures have swung into negative territory, -2 compared to settlement levels, after closing stronger overnight.
- Outside of the previously outlined trade balance data, there hasn't been much by way of domestic drivers to flag.
- No. of condominium units supplied in Tokyo and surrounding areas rose 23.4% from a year earlier to 23 units in October. Machine Tool Orders data is due later.
- Cash US tsys are flat to 1bp cheaper, with a slight steepening bias, in today’s Asia-Pac session after yesterday’s modest haven demand-induced gains.
- Cash JGB curve has twist-flattened, with yields 2bps higher to 2bps lower. The benchmark 20-year yield is 0.5bp lower at 1.890%.
- The swaps curve has bear-steepened, with rates flat to 4bps higher. Swap spreads are mostly wider.
- Tomorrow, the local calendar will see weekly International Investment Flows alongside 20-year supply. National CPI is due for release on Friday.
JAPAN DATA: Exports & Imports Post Modest Upside Surprise
Japan exports rose 3.1%y/y in Oct, above market expectations of a 1.0% gain. The prior outcome was -1.7% in y/y terms. Some tick up is not surprising given other trends in export linked economies in North East Asia. The chart below plots export growth for Japan (the red line, along with China, South Korea, Singapore and Taiwan. Only Singapore looks weaker, relative to the other country trends.
- Exports may have received some benefit due to front loading ahead of the US election, although exports to the US were still -6.2%y/y. Exports to the EU were -11.3%y/y, while to the China rose +1.5%y/y and were positive to Asia more broadly.
- Imports rose 0.4%y/y, versus a -1.9%y/y contraction. This modest upside surprise left trade positions in deficit and slightly wider than forecast. We were at -¥461.2bn, which was consistent with recent trends.
Fig 1: Japan Export Growth (red line) Firms Modestly In Oct
Source: MNI - Market News/Bloomberg
AUSSIE BONDS: Little Changed, RBA Governor Speech Tomorrow
ACGBs (YM -1.0 & XM +0.5) are slightly mixed, with a flattening bias, in today’s data-light Sydney session.
- "Investors such as UBS Asset Management and Jamieson Coote Bonds Pty see value in Australian bonds as the global debt selloff looks stretched and anticipation of a policy pivot grows." (See link)
- The latest round of ACGB Dec-35 supply showed strong pricing, with the weighted average yield printing 0.47bp through prevailing mids. The higher outright yield and steep curve likely aided the absorption of today’s ACGB supply. However, the notable worsening in global bond sentiment likely weighed on demand at today’s auction.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest haven demand-induced gains.
- Cash ACGBs are flat, with the AU-US 10-year yield differential at +16bps.
- Swap rates are little changed.
- The bills strip is slightly cheaper across contracts, with pricing flat to -3.
- RBA-dated OIS pricing shows no easing by year-end. A 25bps rate cut is not fully priced until July.
- Tomorrow, the local calendar will see a speech by RBA Governor Bullock at the Women In Payments Conference.
AUSSIE BONDS: AU-US 1Y3M Spread Drives 10Y Diff. Tighter
The AU-US 10-year cash yield differential is at +15bps today, roughly 15bps narrower than levels observed in the lead-up to the US presidential election. Prior to the election, the differential was near the upper end of the +/-30bps range that has largely prevailed since November 2022.
- A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is close to fair value, estimated at +13bps.
- The 1Y3M differential serves as a proxy for the anticipated relative policy trajectory over the next 12 months.
- Since mid-September, the AU-US 1Y3M differential has narrowed by approximately 50bps.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: MNI – Market News / Bloomberg
BONDS: NZGBS: Bull-Flattens, Tracking US Tsys
NZGBs closed showing a bull-flattener, with benchmark yields 1-3bps lower. With the domestic calendar light again, the local market has simply tracked developments abroad.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest haven demand-induced gains.
- NZ-US and NZ-AU 10-year yield differentials closed unchanged.
- Westpac has upgraded its milk price forecast. This follows the solid auction overnight. "We have increased our farmgate milk price forecast for this season to $10.00/kg (previously $9.00/kg). This would be a new record milk price in dollar terms, though not after adjusting for inflation or the trend increase in farmers’ costs. Chinese buyers are facing a substantial challenge to rebuild their stocks of milk powders in particular.
- Swap rates closed flat to 1bp lower, with the implied short-end swap spread wider.
- RBNZ dated OIS pricing closed slightly softer. A cumulative 93bps of easing is priced by February, with 52bps by year-end.
- The local calendar is light for the remainder of the week. The next key release will be Q3 Retail Sales ex Inflation on Monday.
- Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 3.0% Apr-29 bond, NZ$225mn of the 2.0% May-32 bond and NZ$75mn of the 1.75% May-41 bond.
FOREX: USD Supported On Dips, But Aggregate Moves Modest, USD/JPY Around 155.00
The earlier outperformance from risk currencies has given way to a firmer USD backdrop as Wednesday trade has unfolded. The USD BBDXY index was last around 1279.20, a touch higher for the session. Earlier lows in the index were at 1277.22.
- Aggregate FX moves are not large at this stage. USD/JPY has traded with a positive bias, getting to highs of 155.14, but we sit back closer to 155.00 in latest dealings, around 0.25% weaker in yen terms. Earlier data showed slightly stronger than expected export growth, but a still persistent trade deficit in Japan
- US yields sit close to unchanged, albeit with a slight bias to move higher at the back end.
- US equity futures are off earlier highs but still sit in positive territory, last +0.15%. This comes ahead of the key Nvidia earnings release. Regional equities are mixed, but aggregate moves aren't much beyond 0.50% at this stage.
- AUD and NZD sit off earlier highs, but are only down 0.10% at this stage. AUD/USD last near 0.6525, NZD just under 0.5910. EUR/USD has slipped back under 1.0600.
- We remain within broader ranges though, as markets await fresh catalysts. Technical indicators still suggest USD dips will be supported.
- Looking ahead, the main focus will be UK CPI. We also hear from ECB and Fed speakers.
EQUITIES: China & HK Equities Trade In Narrow Ranges Ahead Of Nvidia Earnings
Hong Kong and China equities are mostly higher today, with earlier losses now being erased. China's central bank kept its loan prime rates unchanged, in line with expectations. The HSI is trading flat with losses in Geely Automobile, Xiaomi, and Alibaba offsetting wider gains, while the CSI 300 now trades 0.2% higher. Investors remained cautious ahead of Nvidia's earnings, which could serve as a key catalyst for global sentiment. Meanwhile, Chinese tech stocks faced uncertainty amid geopolitical concerns tied to the next Trump administration.
- China healthcare stocks are the top performing today, the CSI 300 Healthcare Index is 2.45% higher with Tigermed jumping 8%. Small & mid-cap stocks out outperforming large-cap today, with the CSI 2000 up 2.50%, while the CSI 1000 trades 1.60% higher.
- Hong Kong listed equities are trading in narrow ranges today, with major benchmarks trading little changed.
Equities Mixed, As Geopol Tensions Rise, Nvidia's Earnings Tomorrow
Asian equities are mixed today as investors await Nvidia's earnings for fresh direction, with the chipmaker's outlook expected to influence global sentiment. Japanese stocks fluctuated amid concerns over the Russia-Ukraine war and its potential impact on energy prices, while South Korea's KOSPI edged higher, led by gains in tech and financial shares. In China, the CSI300 is trading 0.25% lower, while the HSI trades 0.15% lower. Australia's ASX200 retreated from record highs, weighed down by geopolitical jitters, with tech stocks leading losses.
- In what has been a very quiet data week, drivers of price have been macro based, overnight we saw Russia/Ukraine tensions picked-up with Biden approving Ukraine's use of US missiles on Russia, while he also approved used of anti-personal landmines earlier today, this caused equities to sell-off, however the move was quickly reversed.
Nvidia is set to report Q3 results on Nov 21 with consensus revenue at $33.25b, driven by strong AI hardware demand, though manufacturing delays for its new Blackwell chips add uncertainty. The market expected Nvidia to exceed estimates by up to $2b in Q3 and potentially guide $4b higher for Q4, with FY2025 revenue projected at $126.58b.
EQUITIES: Taiwan Equities Await Nvidia Earnings Amid Growing Outflows
Taiwan's equities have faced pressure recently from rising outflows amid geopolitical tensions, potential US-China tariffs, and reports of restricted TSMC chip shipments to China. The market is eagerly awaiting and hoping for strong Nvidia results due out later this week. The Taiex has seen a 27% ytd rally, although the majority of that has come on the back of TSMC 82% rally.
- Gains in global semiconductor stocks are becoming more and more concentrated. Taking a look at Philadelphia SE Semiconductor Index members, only 5 companies have returns of over 50% for the year with TSMC being one of them, Nvidia is the top performing up almost 200%.
- The TAIEX hit all-time-highs in July, before a sharp 20% fall following rising middle east tensions, the Index quickly reversed those gains, however still trades 6.5% off the July highs.
- The AI boom has supported sentiment, although memories of the 2018 trade war which saw the Taiex drop almost 15% are seen to be weighing on investor confidence.
- Foreign investors have sold $3.7b of local stocks so far this month, following a $1.1b inflow in October.
ASIA STOCKS: Asian Equity Flows Mixed, Philippines Continue To See Outflows
Taiwan saw its largest inflows since the US election, dip buyers emerged in Asia semiconductors stocks. Indonesia has now seen 10 straight sessions of outflows, while Philippines have seen 16 straight sessions of outflows.
- South Korea: Recorded outflows of -$37m yesterday, with a 5-day total of -$506m. YTD flows remain positive at +$5.65b. The 5-day average is -$101m, better than the 20-day average of -$156m but worse than the 100-day average of -$107m.
- Taiwan: Posted inflows of +$527m yesterday, totaling -$1.81b over the past 5 days. YTD flows remain negative at -$14.59b. The 5-day average is -$363m, worse than the 20-day average of -$216m and the 100-day average of -$212m.
- India: Experienced outflows of -$240m yesterday, with a 5-day outflow of -$284m. YTD flows are negative at -$2.47b. The 5-day average is -$57m, better than the 20-day average of -$251m but worse than the 100-day average of -$9m.
- Indonesia: Posted outflows of -$47m yesterday, bringing the 5-day total to -$235m. YTD flows remain positive at +$1.83b. The 5-day average is -$47m, slightly worse than the 20-day average of -$55m but better than the 100-day average of +$22m.
- Thailand: Recorded outflows of -$13m yesterday, with a total outflow of -$80m over the past 5 days. YTD flows are negative at -$3.69b. The 5-day average is -$16m, better than the 20-day average of -$27m but worse than the 100-day average of -$6m.
- Malaysia: Posted inflows of +$15m yesterday, reducing the 5-day outflow to -$19m. YTD flows remain positive at +$242m. The 5-day average is -$4m, better than the 20-day average of -$21m but worse than the 100-day average of +$4m.
- Philippines: Saw outflows of -$20m yesterday, with net outflows of -$111m over the past 5 days. YTD flows remain negative at -$232m. The 5-day average is -$22m, worse than the 20-day average of -$17m and the 100-day average of +$3m.
Table 1: EM Asia Equity Flows
OIL: Prices Steady Ahead of Report Tonight on US Inventory Levels.
- Wednesday in the US will see the release of the Energy Information Administration report on inventories and it expected to show that the US has built up their inventories in recent months.
- Volatility for oil was driven by news overnight that Ukraine fired US missiles into Russia was followed by Vladimir Putin’s approval of a nuclear doctrine that lowers the threshold for using atomic weapons.
- Additionally, Iran announced that that it had agreed to stop producing uranium enriched for nuclear weapons.
- Also Lebanon and Hezbollah militia have agreed to a US proposal for a cease fire with Israel according to Reuters, yet this was rejected by US officials saying that discussions were ongoing.
- WTI whipped around during the US session only to finish higher on the day at $69.39, having been as low as $68.45 earlier. It has opened in the Asian trading session marginally higher and traded in a tight range around $69.50.
- Brent finished at US$73.30 having been as low as $72.61. It has opened in Asian trading higher before settling around $73.25 in a very low volume day
GOLD: Geopolitical Tensions Extend The Rebound
Gold is 0.3% higher in today’s Asia-Pac session, after closing 0.8% higher at $2632.08 on Tuesday, amid the escalation in geopolitical tensions between Russia and the West.
- Heightened geopolitical tensions lent support to haven trades after Ukraine launched US made long range missiles into Russia. Despite President Putin's move to revise Russia's nuclear doctrine, however, US State Department Spokesperson Matthew Miller told reporters that the US has seen no reason to adjust its own nuclear posture.
- Short end rates then pushed higher in the second half of the NY session, as projected rate cut pricing into early 2025 was tempered. Lower rates are typically positive for gold, which doesn’t pay interest.
- KC Fed Schmid said "now is the time to dial back restrictiveness of policy". Schmid repeated "While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle."
- According to MNI’s technicals team, the technicals for gold remain bullish, with eyes on the 20-day EMA at $2,651.1. A clear break above this average would highlight a possible reversal and signal the end of the recent bearish corrective cycle. This would open $2,710.4, the Nov 11 high.
CHINA: US Treasury Holdings Continue to Decline.
- China reduced its holdings of US Treasuries for a third straight month in September data shows.
- China’s US Treasury holdings fell by USD2.6bn to USD772bn.
- Only April and May this year saw marginal increases in China’s US Treasury Holdings with each of the other months in 2024 seeing a decrease.
- Japan, the world’s largest holders of US Treasuries also reduced their holdings in September.
CHINA: Country Wrap: Prime Rates Unchanged
- China left their 1 and 5-year Loan Prime Rates Unchanged today as expected.
- Data from the US indicated a further reduction in China’s holdings of US Treasuries in September (source: BBG).
- Shenzhen (+1.25%), Shanghai (+0.50%) and CSI300 (+0.25%) all positive today whilst Hang Seng was down -0.12%.
- CNY - Yuan Reference Rate at 7.1935 Per USD; Estimate 7.2374.
- Bonds: 10-year yields were marginally lower, down by 1bp to 2.092%
SOUTH KOREA: Producer Prices Up for October.
- South Korea’s Producer prices rose +1.0% for October, in line with September.
- The month-on-month figure declined -0.2%.
- Agriculture, forestry and marine products declined -8.7% MoM whilst Manufacturing expanded +0.2% and the Services sector expanded +0.2%.
- The Bank of Korea meets next week on the 28th for their final monetary policy meeting of the year and market expectations are mixed as to their decision.
SOUTH KOREA: Country Wrap: Growth Outlook Cut by IMF.
- South Korea’s Producer prices rose +1.0% for October, in line with September.
- Korean Growth Outlook Cut by IMF (source: BBG).
- Korea’s KOSPI continues to perform again today up +0.60%.
- KRW – has traded in very tight ranges in recent days and continued today at 1,390, following yesterday’s close of 1,392.80.
- Bonds: Korean Government bonds were well supported on the back of the IMF downgrade with yields across the curve lower, the 5-year the outperformer down 6.5bps to 2.955%.
INDIA: Country Wrap: Pressure Mounting on RBI over Rates.
- India Finance Chief Urges Lower Rates as RBI Keeps Inflation Aim (source BBG).
- Chief Economic Advisor (CEA) stated that retail inflation is largely driven by a few key commodities— namely tomato, onion, potato (TOP), gold, and silver and that excluding these items gives a more effective reflection for interest rates (source: The Hindu Business Line).
- Having recorded seven straight down days, India’s NIFTY 50 bucked that trend to finish +0.28% higher on Tuesday and early indications are that it will open positive today also.
- INR – the Rupee continues be very stable at present, finishing at 84.4137 yesterday marginally weaker than Monday’s close.
- Bonds: Bond yields have been very resilient in recent sessions with the 10-year yield down 1bp yesterday to 6.84%.
ASIA FX: Won Outperforms Softer CNH & JPY Trends
USD/CNH has drifted a little higher in the first part of Wednesday trade, last near 7.2415. Onshore spot is close by, also above 7.2400, with this pair closer its recent highs (7.2470) relative to USD/CNH (7.2665). Tighter liquidity may aiding CNH at the margins. The PBoC sold yuan bills for 3 month and 1yr tenors in Hong Kong today. As expected the China LPR's were left unchanged. The PBOC fixing maintained a firm negative bias.
- Spot KRW has modestly outperformed the moves higher in both USD/JPY and USD/CNH so far today. Spot USD/KRW is back under 1390, up around 0.25% so far in won terms. We are close to testing downside support at the 20-day EMA (near 1388.5). Local equities are higher, but without offshore inflows (-$167.9mn sold so far by foreign investors). Earlier data showed a steady PPI at 1% y/y, while short term external debt rose to 37.8% of FX reserves, versus 34.4% in Q2. The IMF also nudged down BoK's GDP forecast for 2025, with downside risks.
- USD/TWD has firmed in the first part of Wednesday trade, last near 32.47. Earlier Nov highs remain intact at 32.61. Like most other USD/Asia pairs, USD/TWD remains above all key EMAs. Later on, we get Taiwan export orders for Oct. The market looks for a 3.8% y/y outcome, versus 4.6% prior. The other focus point will be Nvidia's upcoming results, to gauge broader chip/tech related sentiment.
ASIA FX: USD/IDR Drifts Higher Ahead Of BI, USD/PHP Approaching YTD Highs
In South East Asia FX, trends have been mixed, albeit with modest aggregate moves overall. This is consistent with fairly modest moves in the G10 FX pairs as well.
- Coming up we have the BI decision in Indonesia, no change is expected, but some forecasters are calling for a rate cut. Our bias is for no change with still continued focus on USD/IDR stability. This pair was a touch higher in latest dealings, last 15860/65, up 0.20% for the session. Recent highs rest at 15943. Earlier Nov lows were close to 15600.
- USD/PHP has edged higher. Upside focus rests on a test of 59.00 (last near 58.90). There is speculation that intervention will ramp up on any strong break of the 59.00 figure level. BSP Governor Remolona was on the wires. A Dec could happen amid softer growth outcomes, but the BSP is also mindful of inflation risks, so isn't on a predetermined path at this stage. The next CPI print is on Dec 5.
- USD/THB got to earlier lows of 34.485, but found support, last near 34.56. Earlier lows were around the simple 100-day MA. Economic growth is expected to be stronger next year, aided by fresh stimulus.
- USD/MYR is a touch lower but has found some support sub 4.4700 in dealings so far today.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 20/11/2024 | 0700/0800 | ** |  DE | PPI |
| 20/11/2024 | 0700/0700 | *** |  GB | Consumer inflation report |
| 20/11/2024 | 0700/0700 | *** | GB | Producer Prices |
| 20/11/2024 | 1000/1100 | ** |  EU | Construction Production |
| 20/11/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 20/11/2024 | 1300/1400 | EU | ECB's Lagarde address on financial stability | |
| 20/11/2024 | 1500/1000 | US | Fed Vice Chair Michael Barr | |
| 20/11/2024 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 20/11/2024 | 1600/1600 | GB | BOE's Ramsden speech on monetary policy | |
| 20/11/2024 | 1600/1100 | US | Fed Governor Lisa Cook | |
| 20/11/2024 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 20/11/2024 | 1715/1215 | US | Fed Governor Michelle Bowman | |
| 20/11/2024 | 1800/1900 | EU | ECB's De Guindos speech on financial stability | |
| 20/11/2024 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 20/11/2024 | 2100/1600 | US | Boston Fed's Susan Collins | |
| 21/11/2024 | 0700/0700 | *** | GB | Public Sector Finances |
| 21/11/2024 | 0745/0845 | ** |  FR | Manufacturing Sentiment |
| 21/11/2024 | 0830/0930 | EU | ECB's Cipollone at ECRB meeting | |
| 21/11/2024 | 1100/0600 | *** |  TR | Turkey Benchmark Rate |
| 21/11/2024 | 1100/1100 | ** | GB | CBI Industrial Trends |
| 21/11/2024 | 1330/0830 | *** | US | Jobless Claims |
| 21/11/2024 | 1330/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 21/11/2024 | 1330/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 21/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 21/11/2024 | 1345/0845 | US | Cleveland Fed's Beth Hammack |