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China equities have rebounded today, aided by the PBoC launch of a swap facility designed to aid local equity market liquidity (the scheme was announced on Sep 24). Hopes of further fiscal stimulus also continue.
This strength has spilled over into other asset classes, with higher beta plays benefiting in the G10 FX space. Oil has also recovered some ground as well.
JGB futures are holding weaker, -10 compared to settlement levels, after dealing in a relatively narrow range in today’s Tokyo session. In NZ, yields are higher, with a weaker fiscal position helping drive the move.
Coming up we will hear from the BoJ Deputy Governor in Tokyo at a BBG function. Also, the RBA's Assistant Governor Hunter will appear on a panel session. Later on, we have the US CPI print and more Fed speak in focus.
Tsys futures are slightly weaker today although have traded in tight ranges, the long-end has underperformed ahead of the 30y auction and CPI later today. TU is unch at 103-11⅛, while TY is trading -02+ at 112-04 just off session lows.
Volumes are down on prior sessions, while only trade of note has been a TU/FV Block steepener $190k DV01.
A bear threat in tsys remains present with Dec'24 10y trading at its recent lows. The latest sell-off has resulted in a break of the 100-day EMA and now trades just above key support & 200-day EMA at 112-00, while a move back above 113-12 (Sep 3 lows) is key resistance.
Cash tsys curve has twist-steepened throughout the session, with yields +0.5bps to -1bps. The 2yr is trading -1bps at 4.012%, while the 10yr is +0.2bps at 4.075% with the 2s10s rising 1.181bps to 5.865.
The Fed's Daly earlier highlighted that the aggressive 50bp rate cut in September was a necessary "recalibration" rather than an indication of future cuts. She mentioned that the Fed could make one or two more rate cuts by the end of the year, depending on economic conditions. Daly emphasized that the September cut was designed to align policy rates with the economy's needs, avoiding overtightening, which could harm the labor market. She expressed confidence in achieving the Fed’s 2% inflation target
Fed funds futures are little changed today, with 21.4bps for November, and 46.6bps of cuts priced by the December meeting. The market has a total of 135bps of cuts priced in through to October 2025
Looking ahead focus will turn to CPI which is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34. We also have Jobless claims, 30y Bond Auction and more fed speakers to come.
JGB futures are holding weaker, -10 compared to settlement levels, after dealing in a relatively narrow range in today’s Tokyo session.
Outside of the previously outlined PPI and International Investment Flows data, there hasn't been much by way of domestic drivers to flag.
Today's 5-year bond auction presented mixed demand metrics. The auction price exceeded dealer expectations but the cover ratio was relatively stable and the auction tail was marginally longer than last month.
Cash US tsys are flat to 2bps richer across benchmarks, with a steepening bias, in today’s Asia-Pac session after yesterday’s heavy session. The market’s focus is on today’s US CPI data. Weekly Jobless claims, a few more Fed speakers (Cook, Barkin, and Williams), and the re-opening of the 30Y Bond auction are also on tap.
Cash JGBs are mostly cheaper across benchmarks, with yields flat (2-3-year) to 3bps higher (1-year). The benchmark 5-year yield is 0.4bp higher at 0.553% after today’s supply.
Swap rates are flat to 1bp higher out to the 30-year and 5bps higher beyond. Swap spreads are generally tighter apart from the 40-year.
Tomorrow, the local calendar will see M2 & M3 Money Stock data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year JGBs.
Japan's September PPI came in above market expectations. In m/m terms we were flat, against a -0.3% forecast, (prior was -0.2%). The y/y outcome rose to 2.8%, against a 2.6% Aug gain and consensus expectation of 2.3%
The chart below plots the y/y PPI against CPI y/y (nationwide). The PPI holding up from recent lows near flat at the start of the year is consistent with the CPI maintaining recent trends around recent levels, which is comfortably above the 2% long term BoJ target.
In terms of the detail, manufacturing edged up slightly (0.1%), while other positives were textiles (+0.9%m/m) and petroleum, coal (+0.9%m/m). Drags came from wood, chemicals and non-ferrous metals.
Japan weekly investment flows were firmer across the board in absolute terms for the week ending Oct 4, see the table below. There was a pick up in offshore purchases of both local bonds and local equities. The further recovery into local equities from offshore investors looks to reflect catch up with the rebound in headline Japan equity indices, albeit which are still short of YTD highs.
On the bond front, this was also the second straight week of net inflows. Last week the new Japan government cautioned against further BoJ rate rises in the near term.
In terms of Japan outbound flows, we saw a return to offshore purchases of overseas debt. This marks 3 out of the last 4 weeks we have seen positive outflows. Still, given the sell-off in US fixed income since last week's US NFP report, such trends may be more muted for this week.
Purchases of offshore equities continued by local residents.
ACGBs (YM -5.0 & XM -3.0) are holding cheaper after dealing in narrow ranges in today’s Sydney session.
Outside of the previously outlined Melbourne Institute Inflation Gauge, there hasn't been much by way of domestic drivers to flag.
Cash US tsys are flat to 2bps richer across benchmarks, with a steepening bias, in today’s Asia-Pac session after yesterday’s heavy session. The market’s focus is on today’s US CPI data. Core non-housing service CPI inflation is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34.
Weekly Jobless claims, a few more Fed speakers (Cook, Barkin, and Williams), and the re-opening of the 30Y Bond auction are also on tap.
Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +15bps.
Swap rates are 3-4bps higher.
The bills strip has bear-steepened, with pricing -1 to -5.
RBA-dated OIS pricing is 1-4bps firmer for 2025 meetings. A cumulative 7bps of easing is priced by year-end.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$1.0bn of the 2.75% 21 November 2028 bond.
The RBNZ increased its pace of easing by cutting the OCR 50bp to 4.75% yesterday, as expected, after starting the easing cycle with 25bp in August. The MPC felt that “restraint” could be lessened as inflation is “within” the 1-3% target range and approaching the mid-point.
The next RBNZ decision is on November 27 and then there isn’t a meeting until February 19. There are already expectations for another 50bp cut next month and there was nothing in today’s statement to temper that view.
Thus, it looks like they will ease by this size again especially given the close to two month gap before the next meeting and that rates are still well above neutral.
NZGBs closed sharply cheaper although off worst levels, with benchmark yields 5-8bps higher.
NZGBs 2bps opened cheaper following a negative lead in from US tsys yesterday. However, the release of the NZ Government’s annual budget extended the selling.
The deficit widened by more than forecast as high inflation increased the cost of government services and welfare support. The deficit was NZ$12.85 billion in the year ended June 30, compared to the NZ$11.07 billion projected in the May budget. The deficit grew from NZ$9.45 billion in 2023.
Today’s weekly auctions showed mixed results, with cover ratios across the lines ranging from 1.74x (May-34) to 3.10x (May-41).
Swap rates closed 2-6bps higher, with the 2s10s curve steeper.
RBNZ dated OIS pricing closed mixed today but remained 5-15bps softer across meetings out to May-25 than pre-RBNZ levels. 53bps of easing is priced for November (4.22%), with a cumulative 93bps of easing priced for Feb-25 (3.82%) and 152bp by July-25 (3.23%).
It is also worth noting that the NZ official rate is now anticipated to be 10bps below Australia’s (4.32%) in November.
Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI, Food Prices and Net Migration data.
The USD BBDXY index sits off its recent highs, albeit marginally. The index last near 1243.75. Intra-session highs from Wednesday trade came close to 1244.5, which was fresh highs back to mid August and a test above the 200-day EMA.
A slight USD pull back today has been aided by the better China/HK equity tone. The PBoC announced it has opened applications for a swap facility that is aimed at supporting local equity markets. The scheme was originally announced on Sep 24. However, it could be expanded beyond the initial size of CNY 500bn and broadened in terms of acceptable collateral as well (per onshore media).
The CSI 300 is up 2.85%, while the HSI in HK is up over 4% at this stage.
NZD/USD is outperforming in the G10 space, up around 0.40%, putting the pair last near 0.6085/90. We are still sub pre RBNZ levels from yesterday of 0.6135.
AUD/USD is also higher, but lagging NZD at the margins, the pair last near 0.6735. Inflation expectations fell to a multi year low of 4.0%y/y earlier.
Yen has faltered modestly. USD/JPY unable to breach 149.00 on the downside, the pair is tracking just under session highs (149.55), last near 149.45.Upside targets will now rest above 150.00 (150.76 50.0% retracement of the Jul 3 - Sep 16 bear leg).
Earlier data showed firmer than expected PPI for Sep in Japan but this did not give a lasting boost to JPY sentiment.
Coming up we will hear from a BoJ official in Tokyo at a BBG function. Also the RBA's Assistant Governor Hunter will appear on a panel session. Later on we have the US CPI print and more Fed speak in focus.
Trump looks to have swung back ahead of Harris in the betting markets over the past few days. Polymarket has Trump at 53.5% vs 46% for Harris. PredicIt has the pair even, although this implies a 7pt swing in Trump's favor over the past two weeks.
Taking a look at BoFA's Democratic & Republican victory beneficiaries basket, stocks look to agree with the move in betting markets. The basket of Republican Party stocks has pushed ahead of Democratic party stocks for the first time since the Debate on Sept 10th.
The top Republican beneficiaries are seen as healthcare names UnitedHealth Group & Humana while Investment Banks (MS, HLI, JEF, EVR, LAZ, GS) & Crypto/Trading/Payments (COIN, MARA, HOOD, PYPL & SQ) also look to benefit from a victory.
The top seven beneficiaries of a Democrat victory are all healthcare names (THC, USH, CHA, CNC, MOH, ELV, OSCR).
Chart. Republican vs Democratic Stock Basket Performance
Chinese equities continue to rally following earlier headlines and hopes that the country’s finance ministry will announce fresh stimulus during a briefing Saturday.
Utilities, Consumer Staples & Discretionary stocks are the top performing mainland equity sectors today. Hong Kong listed equities have outperformed mainland peers ahead of a public holiday on Friday, with the HSTech Index +4.15%, Mainland Property Index +5.10%.
The Beijing Stock Exchange 50 Index is the top performing major benchmark up 5.86%
Stock specific moves have seen Alibaba jumped 4.5% following price targets from some Investment banks, citing higher forecast revenues, Guotai Junan and Haitong Securities rallied after the two brokers disclosed the terms of their proposed merger,
Brent crude has pushed back above $77/bbl in the first part of Thursday dealings. We are up close to 0.80%, which is completely offsetting Wednesday's drop at this stage. WTI was last near $73.80/bbl, up by the same amount, although we haven't been able to test above $74/bbl so far.
Better China related asset sentiment has likely helped oil at the margins today. Onshore China equities (and in HK) are up firmly. Today the PBoC opened applications for a swap facility that is aimed at supporting local equity markets. This comes ahead of Saturday's fiscal briefing from the MoF.
Crude was under pressure through Wednesday US trade, as a report showed US stockpiles rose nearly 6mln barrels last week. The firmer USD/US yield backdrop was also a headwind.
The other watch point for markets remains Middle East tensions, with Israel's retaliation against Iran still awaited.
For Brent, intra-session lows from Wednesday came near $75/bbl. This was right on the 20-day EMA. Recent highs remain intact just above $81/bbl.
Upcoming macro focus will rest on the US CPI print later.
Gold is 0.3% in today’s Asia-Pac session, after closing 0.5% lower at $2607.77 on Wednesday.
Yesterday’s move was the sixth consecutive daily loss, bringing the yellow metal to its lowest since Sept 20.
Bullion was pressured by the FOMC minutes, which showed "some" voting members failed to sway the 50bp cut majority at the September policy meeting.
"Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision," the report said.
US yields rose across benchmarks ahead of today’s US CPI data. Lower rates are typically positive for gold, which doesn’t pay interest. Weekly US Jobless claims and a few more Fed speakers (Cook, Barkin and Williams) are also on tap.
According to MNI’s technicals team, the latest short-term retracement in gold is considered corrective. The trend condition is unchanged, and bulls remain in the driver’s seat.
A resumption of gains would refocus attention on $2,690.2, a Fibonacci projection. Firm support at $2,615.7, the 20-day EMA, has been pierced. A clear break would signal the scope for a deeper retracement to $2,584.9, the Sep 20 low.
South Korean sovereign bonds have cheapened sharply in recent days ahead of tomorrow’s Bank of Korea (BoK) policy decision, primarily due to a rise in global rates following last Friday’s US non-farm payrolls data rather than a change in expectations for domestic policy.
Although last week’s CPI data shifted consensus toward a 25bp cut tomorrow, the market has been pricing in an aggressive easing cycle for some time.
The KORIBOR curve (1-month vs. 12-month) continues to bull-flatten to historically inverted levels, even with a cut tomorrow likely.
At -25bps, the curve is now substantially lower than mid-2019 levels, just after the BoK began its previous easing cycle.
Chart 1: BoK Official Rate (%) vs. KORIBOR (1-mth vs. 12-mth) Curve (%)
North East Asian FX trends are mixed in the first part of Thursday trade. USD/CNH is back to the low 7.0700 region, around 0.30% stronger in CNH terms. The yuan may be receiving some support from the firmer G10 FX tone against the USD, although overall moves are modest at this stage. The BBDXY is down around 0.05%.
China equities were volatile at the start of trade, but traded up strongly into the lunch time break. The PBoC stated financial institutions are open to apply to a new swap window, which is designed to provide liquidity support to local stock markets. The scheme was first announced on Sep 24, but could be expanded beyond the initial size of CNY 500bn and broadened in terms of acceptable collateral as well (per onshore media). USD/CNH lows were just under 7.0700.
Spot USD/KRW has drifted a little higher, but recent highs above 1352 remain intact. The pair was last near 1349.5. the South Korean Finance Minister stated earlier that inflation is stabilizing at downward trend. This comes ahead of tomorrow's BoK decision, where a 25bps cut is expected.
USD/TWD is steady last near 32.20. Both South Korean and Taiwan equities are higher, but gains are modest at this stage.
South East Asia FX is mostly on the front foot from a USD standpoint, although this largely reflects USD gains post onshore closes from yesterday. Losses haven't extended much beyond 0.30%. Regional equities are mixed, with the strongest gains seen in HK and China markets. SEA equity trends are more mixed.
USD/THB appears to be finding some selling interest above 33.50, although remains close to recent highs. Today's highs in the pair were marked near 33.57, just short of Oct 8 highs. The pair was last 33.50/55, still wedged between the 20 and 50-day EMAs. As we noted late yesterday, official push back around FX outperformance appears to be growing with the Finance Ministry stating the FX rate should be 34.5. Consumer confidence numbers fell for Sep, with economic confidence to 48.8 from 50.2. This continues the recent trend move down. It also underscores the need for stimulus to support growth.
Spot USD/PHP is up a further 0.30% to 56.15/20. We are off earlier highs though near 57.29. The 1 month NDF tracks near 57.20. Earlier data showed the August trade deficit was very close to forecasts, printed just under $4.4bn. Exports rose 0.3%y/y (against a -7.1% forecast), but imports were also above expectations at +2.74% y/y.
USD/IDR is up to 15655, so consolidating the recent move back above 15600. The 1 month NDF is around 0.20% stronger in IDR terms though, last near 15680/85, after ending Wednesday NY trade at 15714. The better regional equity tone is likely helping IDR at the margins.
USD/MYR is holding above 4.2900, but hasn't tested above 4.3000 at this stage. Like USD/THB this pair remains wedged between its 20-day EMA on the downside (near 4.2450) and the 50-day on the topside (4.3330).
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Please enter your details below.
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)
China equities have rebounded today, aided by the PBoC launch of a swap facility designed to aid local equity market liquidity (the scheme was announced on Sep 24). Hopes of further fiscal stimulus also continue.
This strength has spilled over into other asset classes, with higher beta plays benefiting in the G10 FX space. Oil has also recovered some ground as well.
JGB futures are holding weaker, -10 compared to settlement levels, after dealing in a relatively narrow range in today’s Tokyo session. In NZ, yields are higher, with a weaker fiscal position helping drive the move.
Coming up we will hear from the BoJ Deputy Governor in Tokyo at a BBG function. Also, the RBA's Assistant Governor Hunter will appear on a panel session. Later on, we have the US CPI print and more Fed speak in focus.
Tsys futures are slightly weaker today although have traded in tight ranges, the long-end has underperformed ahead of the 30y auction and CPI later today. TU is unch at 103-11⅛, while TY is trading -02+ at 112-04 just off session lows.
Volumes are down on prior sessions, while only trade of note has been a TU/FV Block steepener $190k DV01.
A bear threat in tsys remains present with Dec'24 10y trading at its recent lows. The latest sell-off has resulted in a break of the 100-day EMA and now trades just above key support & 200-day EMA at 112-00, while a move back above 113-12 (Sep 3 lows) is key resistance.
Cash tsys curve has twist-steepened throughout the session, with yields +0.5bps to -1bps. The 2yr is trading -1bps at 4.012%, while the 10yr is +0.2bps at 4.075% with the 2s10s rising 1.181bps to 5.865.
The Fed's Daly earlier highlighted that the aggressive 50bp rate cut in September was a necessary "recalibration" rather than an indication of future cuts. She mentioned that the Fed could make one or two more rate cuts by the end of the year, depending on economic conditions. Daly emphasized that the September cut was designed to align policy rates with the economy's needs, avoiding overtightening, which could harm the labor market. She expressed confidence in achieving the Fed’s 2% inflation target
Fed funds futures are little changed today, with 21.4bps for November, and 46.6bps of cuts priced by the December meeting. The market has a total of 135bps of cuts priced in through to October 2025
Looking ahead focus will turn to CPI which is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34. We also have Jobless claims, 30y Bond Auction and more fed speakers to come.
JGB futures are holding weaker, -10 compared to settlement levels, after dealing in a relatively narrow range in today’s Tokyo session.
Outside of the previously outlined PPI and International Investment Flows data, there hasn't been much by way of domestic drivers to flag.
Today's 5-year bond auction presented mixed demand metrics. The auction price exceeded dealer expectations but the cover ratio was relatively stable and the auction tail was marginally longer than last month.
Cash US tsys are flat to 2bps richer across benchmarks, with a steepening bias, in today’s Asia-Pac session after yesterday’s heavy session. The market’s focus is on today’s US CPI data. Weekly Jobless claims, a few more Fed speakers (Cook, Barkin, and Williams), and the re-opening of the 30Y Bond auction are also on tap.
Cash JGBs are mostly cheaper across benchmarks, with yields flat (2-3-year) to 3bps higher (1-year). The benchmark 5-year yield is 0.4bp higher at 0.553% after today’s supply.
Swap rates are flat to 1bp higher out to the 30-year and 5bps higher beyond. Swap spreads are generally tighter apart from the 40-year.
Tomorrow, the local calendar will see M2 & M3 Money Stock data alongside BoJ Rinban Operations covering 1-3-year and 5-25-year JGBs.
Japan's September PPI came in above market expectations. In m/m terms we were flat, against a -0.3% forecast, (prior was -0.2%). The y/y outcome rose to 2.8%, against a 2.6% Aug gain and consensus expectation of 2.3%
The chart below plots the y/y PPI against CPI y/y (nationwide). The PPI holding up from recent lows near flat at the start of the year is consistent with the CPI maintaining recent trends around recent levels, which is comfortably above the 2% long term BoJ target.
In terms of the detail, manufacturing edged up slightly (0.1%), while other positives were textiles (+0.9%m/m) and petroleum, coal (+0.9%m/m). Drags came from wood, chemicals and non-ferrous metals.
Japan weekly investment flows were firmer across the board in absolute terms for the week ending Oct 4, see the table below. There was a pick up in offshore purchases of both local bonds and local equities. The further recovery into local equities from offshore investors looks to reflect catch up with the rebound in headline Japan equity indices, albeit which are still short of YTD highs.
On the bond front, this was also the second straight week of net inflows. Last week the new Japan government cautioned against further BoJ rate rises in the near term.
In terms of Japan outbound flows, we saw a return to offshore purchases of overseas debt. This marks 3 out of the last 4 weeks we have seen positive outflows. Still, given the sell-off in US fixed income since last week's US NFP report, such trends may be more muted for this week.
Purchases of offshore equities continued by local residents.
ACGBs (YM -5.0 & XM -3.0) are holding cheaper after dealing in narrow ranges in today’s Sydney session.
Outside of the previously outlined Melbourne Institute Inflation Gauge, there hasn't been much by way of domestic drivers to flag.
Cash US tsys are flat to 2bps richer across benchmarks, with a steepening bias, in today’s Asia-Pac session after yesterday’s heavy session. The market’s focus is on today’s US CPI data. Core non-housing service CPI inflation is expected to ease modestly in September from the 0.33% in August, with seven analysts eyeing an average 0.27% M/M from a range of 0.20-0.34.
Weekly Jobless claims, a few more Fed speakers (Cook, Barkin, and Williams), and the re-opening of the 30Y Bond auction are also on tap.
Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +15bps.
Swap rates are 3-4bps higher.
The bills strip has bear-steepened, with pricing -1 to -5.
RBA-dated OIS pricing is 1-4bps firmer for 2025 meetings. A cumulative 7bps of easing is priced by year-end.
Tomorrow, the local calendar is empty apart from the AOFM’s planned sale of A$1.0bn of the 2.75% 21 November 2028 bond.
The RBNZ increased its pace of easing by cutting the OCR 50bp to 4.75% yesterday, as expected, after starting the easing cycle with 25bp in August. The MPC felt that “restraint” could be lessened as inflation is “within” the 1-3% target range and approaching the mid-point.
The next RBNZ decision is on November 27 and then there isn’t a meeting until February 19. There are already expectations for another 50bp cut next month and there was nothing in today’s statement to temper that view.
Thus, it looks like they will ease by this size again especially given the close to two month gap before the next meeting and that rates are still well above neutral.
NZGBs closed sharply cheaper although off worst levels, with benchmark yields 5-8bps higher.
NZGBs 2bps opened cheaper following a negative lead in from US tsys yesterday. However, the release of the NZ Government’s annual budget extended the selling.
The deficit widened by more than forecast as high inflation increased the cost of government services and welfare support. The deficit was NZ$12.85 billion in the year ended June 30, compared to the NZ$11.07 billion projected in the May budget. The deficit grew from NZ$9.45 billion in 2023.
Today’s weekly auctions showed mixed results, with cover ratios across the lines ranging from 1.74x (May-34) to 3.10x (May-41).
Swap rates closed 2-6bps higher, with the 2s10s curve steeper.
RBNZ dated OIS pricing closed mixed today but remained 5-15bps softer across meetings out to May-25 than pre-RBNZ levels. 53bps of easing is priced for November (4.22%), with a cumulative 93bps of easing priced for Feb-25 (3.82%) and 152bp by July-25 (3.23%).
It is also worth noting that the NZ official rate is now anticipated to be 10bps below Australia’s (4.32%) in November.
Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI, Food Prices and Net Migration data.
The USD BBDXY index sits off its recent highs, albeit marginally. The index last near 1243.75. Intra-session highs from Wednesday trade came close to 1244.5, which was fresh highs back to mid August and a test above the 200-day EMA.
A slight USD pull back today has been aided by the better China/HK equity tone. The PBoC announced it has opened applications for a swap facility that is aimed at supporting local equity markets. The scheme was originally announced on Sep 24. However, it could be expanded beyond the initial size of CNY 500bn and broadened in terms of acceptable collateral as well (per onshore media).
The CSI 300 is up 2.85%, while the HSI in HK is up over 4% at this stage.
NZD/USD is outperforming in the G10 space, up around 0.40%, putting the pair last near 0.6085/90. We are still sub pre RBNZ levels from yesterday of 0.6135.
AUD/USD is also higher, but lagging NZD at the margins, the pair last near 0.6735. Inflation expectations fell to a multi year low of 4.0%y/y earlier.
Yen has faltered modestly. USD/JPY unable to breach 149.00 on the downside, the pair is tracking just under session highs (149.55), last near 149.45.Upside targets will now rest above 150.00 (150.76 50.0% retracement of the Jul 3 - Sep 16 bear leg).
Earlier data showed firmer than expected PPI for Sep in Japan but this did not give a lasting boost to JPY sentiment.
Coming up we will hear from a BoJ official in Tokyo at a BBG function. Also the RBA's Assistant Governor Hunter will appear on a panel session. Later on we have the US CPI print and more Fed speak in focus.
Trump looks to have swung back ahead of Harris in the betting markets over the past few days. Polymarket has Trump at 53.5% vs 46% for Harris. PredicIt has the pair even, although this implies a 7pt swing in Trump's favor over the past two weeks.
Taking a look at BoFA's Democratic & Republican victory beneficiaries basket, stocks look to agree with the move in betting markets. The basket of Republican Party stocks has pushed ahead of Democratic party stocks for the first time since the Debate on Sept 10th.
The top Republican beneficiaries are seen as healthcare names UnitedHealth Group & Humana while Investment Banks (MS, HLI, JEF, EVR, LAZ, GS) & Crypto/Trading/Payments (COIN, MARA, HOOD, PYPL & SQ) also look to benefit from a victory.
The top seven beneficiaries of a Democrat victory are all healthcare names (THC, USH, CHA, CNC, MOH, ELV, OSCR).
Chart. Republican vs Democratic Stock Basket Performance
Chinese equities continue to rally following earlier headlines and hopes that the country’s finance ministry will announce fresh stimulus during a briefing Saturday.
Utilities, Consumer Staples & Discretionary stocks are the top performing mainland equity sectors today. Hong Kong listed equities have outperformed mainland peers ahead of a public holiday on Friday, with the HSTech Index +4.15%, Mainland Property Index +5.10%.
The Beijing Stock Exchange 50 Index is the top performing major benchmark up 5.86%
Stock specific moves have seen Alibaba jumped 4.5% following price targets from some Investment banks, citing higher forecast revenues, Guotai Junan and Haitong Securities rallied after the two brokers disclosed the terms of their proposed merger,
Brent crude has pushed back above $77/bbl in the first part of Thursday dealings. We are up close to 0.80%, which is completely offsetting Wednesday's drop at this stage. WTI was last near $73.80/bbl, up by the same amount, although we haven't been able to test above $74/bbl so far.
Better China related asset sentiment has likely helped oil at the margins today. Onshore China equities (and in HK) are up firmly. Today the PBoC opened applications for a swap facility that is aimed at supporting local equity markets. This comes ahead of Saturday's fiscal briefing from the MoF.
Crude was under pressure through Wednesday US trade, as a report showed US stockpiles rose nearly 6mln barrels last week. The firmer USD/US yield backdrop was also a headwind.
The other watch point for markets remains Middle East tensions, with Israel's retaliation against Iran still awaited.
For Brent, intra-session lows from Wednesday came near $75/bbl. This was right on the 20-day EMA. Recent highs remain intact just above $81/bbl.
Upcoming macro focus will rest on the US CPI print later.
Gold is 0.3% in today’s Asia-Pac session, after closing 0.5% lower at $2607.77 on Wednesday.
Yesterday’s move was the sixth consecutive daily loss, bringing the yellow metal to its lowest since Sept 20.
Bullion was pressured by the FOMC minutes, which showed "some" voting members failed to sway the 50bp cut majority at the September policy meeting.
"Noting that inflation was still somewhat elevated while economic growth remained solid and unemployment remained low, some participants observed that they would have preferred a 25 basis point reduction of the target range at this meeting, and a few others indicated that they could have supported such a decision," the report said.
US yields rose across benchmarks ahead of today’s US CPI data. Lower rates are typically positive for gold, which doesn’t pay interest. Weekly US Jobless claims and a few more Fed speakers (Cook, Barkin and Williams) are also on tap.
According to MNI’s technicals team, the latest short-term retracement in gold is considered corrective. The trend condition is unchanged, and bulls remain in the driver’s seat.
A resumption of gains would refocus attention on $2,690.2, a Fibonacci projection. Firm support at $2,615.7, the 20-day EMA, has been pierced. A clear break would signal the scope for a deeper retracement to $2,584.9, the Sep 20 low.
South Korean sovereign bonds have cheapened sharply in recent days ahead of tomorrow’s Bank of Korea (BoK) policy decision, primarily due to a rise in global rates following last Friday’s US non-farm payrolls data rather than a change in expectations for domestic policy.
Although last week’s CPI data shifted consensus toward a 25bp cut tomorrow, the market has been pricing in an aggressive easing cycle for some time.
The KORIBOR curve (1-month vs. 12-month) continues to bull-flatten to historically inverted levels, even with a cut tomorrow likely.
At -25bps, the curve is now substantially lower than mid-2019 levels, just after the BoK began its previous easing cycle.
Chart 1: BoK Official Rate (%) vs. KORIBOR (1-mth vs. 12-mth) Curve (%)
North East Asian FX trends are mixed in the first part of Thursday trade. USD/CNH is back to the low 7.0700 region, around 0.30% stronger in CNH terms. The yuan may be receiving some support from the firmer G10 FX tone against the USD, although overall moves are modest at this stage. The BBDXY is down around 0.05%.
China equities were volatile at the start of trade, but traded up strongly into the lunch time break. The PBoC stated financial institutions are open to apply to a new swap window, which is designed to provide liquidity support to local stock markets. The scheme was first announced on Sep 24, but could be expanded beyond the initial size of CNY 500bn and broadened in terms of acceptable collateral as well (per onshore media). USD/CNH lows were just under 7.0700.
Spot USD/KRW has drifted a little higher, but recent highs above 1352 remain intact. The pair was last near 1349.5. the South Korean Finance Minister stated earlier that inflation is stabilizing at downward trend. This comes ahead of tomorrow's BoK decision, where a 25bps cut is expected.
USD/TWD is steady last near 32.20. Both South Korean and Taiwan equities are higher, but gains are modest at this stage.
South East Asia FX is mostly on the front foot from a USD standpoint, although this largely reflects USD gains post onshore closes from yesterday. Losses haven't extended much beyond 0.30%. Regional equities are mixed, with the strongest gains seen in HK and China markets. SEA equity trends are more mixed.
USD/THB appears to be finding some selling interest above 33.50, although remains close to recent highs. Today's highs in the pair were marked near 33.57, just short of Oct 8 highs. The pair was last 33.50/55, still wedged between the 20 and 50-day EMAs. As we noted late yesterday, official push back around FX outperformance appears to be growing with the Finance Ministry stating the FX rate should be 34.5. Consumer confidence numbers fell for Sep, with economic confidence to 48.8 from 50.2. This continues the recent trend move down. It also underscores the need for stimulus to support growth.
Spot USD/PHP is up a further 0.30% to 56.15/20. We are off earlier highs though near 57.29. The 1 month NDF tracks near 57.20. Earlier data showed the August trade deficit was very close to forecasts, printed just under $4.4bn. Exports rose 0.3%y/y (against a -7.1% forecast), but imports were also above expectations at +2.74% y/y.
USD/IDR is up to 15655, so consolidating the recent move back above 15600. The 1 month NDF is around 0.20% stronger in IDR terms though, last near 15680/85, after ending Wednesday NY trade at 15714. The better regional equity tone is likely helping IDR at the margins.
USD/MYR is holding above 4.2900, but hasn't tested above 4.3000 at this stage. Like USD/THB this pair remains wedged between its 20-day EMA on the downside (near 4.2450) and the 50-day on the topside (4.3330).
UP TODAY (TIMES GMT/LOCAL)
Date
GMT/Local
Impact
Country
Event
10/10/2024
0600/0800
***
NO
CPI Norway
10/10/2024
0600/0800
**
SE
Private Sector Production m/m
10/10/2024
0600/0800
**
DE
Retail Sales
10/10/2024
0800/1000
*
IT
Industrial Production
10/10/2024
1230/0830
***
US
Jobless Claims
10/10/2024
1230/0830
**
US
WASDE Weekly Import/Export
10/10/2024
1230/0830
***
US
CPI
10/10/2024
1315/0915
US
Fed Governor Lisa Cook
10/10/2024
1430/1030
**
US
Natural Gas Stocks
10/10/2024
1430/1030
US
Richmond Fed's Tom Barkin
10/10/2024
1500/1100
US
New York Fed's John Williams
10/10/2024
1530/1130
**
US
US Bill 04 Week Treasury Auction Result
10/10/2024
1530/1130
*
US
US Bill 08 Week Treasury Auction Result
10/10/2024
1700/1300
***
US
US Treasury Auction Result for 30 Year Bond
10/10/2024
1800/1400
**
US
Treasury Budget
11/10/2024
0600/0700
**
GB
UK Monthly GDP
11/10/2024
0600/0700
**
GB
Trade Balance
11/10/2024
0600/0700
**
GB
Index of Services
11/10/2024
0600/0700
***
GB
Index of Production
11/10/2024
0600/0700
**
GB
Output in the Construction Industry
11/10/2024
0600/0800
***
DE
HICP (f)
11/10/2024
-
***
CN
Money Supply
11/10/2024
-
***
CN
New Loans
11/10/2024
-
***
CN
Social Financing
11/10/2024
1230/0830
***
US
PPI
11/10/2024
1230/0830
*
CA
Building Permits
11/10/2024
1230/0830
***
CA
Labour Force Survey
11/10/2024
1345/0945
US
Chicago Fed's Austan Goolsbee
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