Source: MNI - Market News/Bloomberg
UK
DEBT (MNI INTERVIEW): Increases to the UK’s issuance plans to fund the government’s 2024-25 budget were influenced by investor appetite for longer-term debt, Debt Management Office CEO Jessica Pulay told MNI on Wednesday.
BUDGET (BBC): “Chancellor Rachel Reeves has told the BBC that she hopes Labour's first Budget since taking power, which includes massive tax increases, would be a one-off. "This is not the sort of Budget we would want to repeat," she told the BBC's political editor Chris Mason.”
BUDGET (BBC): “Businesses have warned tax hikes announced in the Budget offer nothing but "pain" and will leave employers with less cash to give pay rises and create new jobs. Chancellor Rachel Reeves has decided firms will bear the brunt of her £40bn total tax rise by increasing the National Insurance rate as well as reducing the threshold that employers start paying it at.”
BUDGET (BBC): “Chancellor Rachel Reeves repeatedly called this a "Budget for growth". Is it? Over the next two years, yes. But the UK's official independent forecaster's verdict is that all the measures in the Budget do not boost the economy in the next three to five years."
POLITICS (POLITICO): “Kemi Badenoch closed her run for the leadership of the U.K. Conservative Party with a last-ditch appeal to members who haven’t yet voted to plump for her over rival Robert Jenrick. Badenoch told POLITICO’s Power Play podcast that the two remaining hopefuls had fundamentally different approaches. “One of the differences between us is that he takes a lawyer’s view of reform and I take an engineer’s view,” she said.
EU
FISCAL (MNI BRIEF): Germany must be a role model among EU member states by sticking to ambitious debt and spending limits, Bundesbank chair Joachim Nagel said in a speech on Wednesday, but weaknesses in the bloc's new fiscal rules mean they may not prove a “sure-fire success.”
ECB (MNI BRIEF): Bank of France Governor Francois Villeroy said Wednesday that maintaining the ECB's medium-term approach to hitting its 2% inflation objective is his preferred option for the central bank's upcoming strategy review.
ECB (MNI BRIEF): Euro area financial conditions have eased, with real rates approaching neutral levels, European Central Bank Executive Board member Isabel Schnabel said in a presentation on Wednesday.
FRANCE (ECONOMIST): “On Thursday Marine Le Pen’s hard-right party will attempt to overthrow France’s new pension rules in parliament, reversing President Emmanuel Macron’s reform that increased the minimum pension age from 62 years to 64. Her attempt stands little chance of passing without the left, which will not back a measure sponsored by the hard right.”
HUNGARY (POLITICO): “NATO allies’ frustration with Hungary is reaching boiling point as the country continues to flirt with Russia. The split widened on Wednesday as Hungarian officials snubbed an invitation to join a Budapest meeting of all ambassadors and military advisers from NATO countries stationed in Hungary. The aim was to discuss Budapest’s policy of encouraging ties with Russia and China.”
EU (POLITICO): ““Due to the course of action taken by the Georgian government, EU leaders have stopped Georgia’s access process,” the EU’s Ambassador to Georgia Pawel Herczynski said Wednesday as the EU published its final enlargement report.”
UKRAINE (FRANCE24): “The United States and South Korea on Wednesday urged North Korea to withdraw its troops from Russia, expressing concerns that they could engage in the Ukraine conflict. Russian UN envoy Vassily Nebenzia dismissed these concerns as "mere assertions."”
UKRAINE (POLTICO): “Ukraine’s allies in the West did not have a “strong enough” reaction to North Korean soldiers actively joining Russia’s side in the war, President Volodymyr Zelenskyy said Wednesday.”
US
TECH (BBG): “Microsoft Corp. shares dropped in late trading after the software maker forecast slower quarterly cloud revenue growth, reflecting the company’s struggle to bring data centers online fast enough to keep up with demand for artificial intelligence services.”
POLITICS (BBG): "Vice President Kamala Harris said she “strongly” disagreed with comments made by President Joe Biden that have been seized on by Republicans as insulting to Donald Trump’s supporters, seeking to distance herself from a brewing controversy that threatens to undercut her momentum in the final week of campaigning."
OTHER
JAPAN (MNI BRIEF): The Bank of Japan board on Thursday left its policy interest rate at 0.25% as the outlook for the economy and prices, as well as financial markets, remained uncertain, and despite economic activity and prices continuing as expected.
JAPAN (MNI BRIEF): The Bank of Japan board maintained its prediction for the core-core inflation rate in fiscal 2025 and 2026 at 1.9% and 2.1%, unchanged from July’s forecasts, but revised up its outlook for this fiscal year 2.0% from July’s 1.9%.
JAPAN (MNI BRIEF): Japan's industrial output rose 1.4% m/m in September for the first rise in two months following August's 3.3% drop, thanks to higher production of motor vehicles and electric machinery and electronics, data released by the Ministry of Economy, Trade and Industry showed on Thursday.
AUSTRALIA (MNI BRIEF): Australian retail sales rose 0.1% m/m over September, 20 basis points lower than expected, and 60bp down from August, data from the Australian Bureau of Statistics showed Thursday.
CANADA (MNI BRIEF): Bank of Canada Governor Tiff Macklem said Wednesday the country's dollar hasn't weakened much over a time when domestic interest rates have declined more than in the United States.
SOUTH KOREA (BBG): “Profit at Samsung Electronics Co.’s mainstay chip operations missed market expectations, reflecting the Korean tech leader’s struggles to catch up in lucrative AI chips.”
NORTH KOREA (BBG): “North Korea fired a suspected intercontinental ballistic missile toward waters off its east coast, further raising tensions in the region after the US warned that its dispatch of troops to Russia could widen the war in Ukraine.”
CHINA
MANUFACTURING (MNI BRIEF): China's Manufacturing Purchasing Managers Index rose by 0.3 points to 50.1 in October, rising above the 50 mark for the first time in six months, as additional pro-growth policies kicked in, data from the National Bureau of Statistics showed Thursday.
PROPERTY (Centaline Property Agency): “Home sales in first-tier cities Shenzhen and Shanghai showed strong momentum in October following the stimulus released end-September, the Paper reported. New home sale contracts signed online in Shenzhen reached 3,211 by Oct 28, with the monthly total expected to hit the highest since 2022, the newspaper said, citing data by Centaline Property Agency.”
CHINA/EU (China Chamber of Commerce): “Technical teams from China and the EU are currently conducting a new stage of consultations regarding EV tariffs, according to the China Chamber of Commerce for Machinery and Electronics. The Chamber will continue to represent Chinese industry in negotiating price commitments and safeguarding rights and interests, a notice from the organisation said.”
CHINA MARKETS
MNI: PBOC Net Drains CNY471.3 Bln via OMO Thursday
The People's Bank of China (PBOC) conducted CNY327.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY471.3 billion after offsetting the maturity of CNY798.9 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6568% at 10:00 am local time from the close of 1.7211% on Wednesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Wednesday, compared with the close of 46 on Tuesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1250 Thurs; +2.75% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1250 on Thursday, compared with 7.1390 set on Wednesday. The fixing was estimated at 7.1244 by Bloomberg survey today.
MARKET DATA
NZ ANZ OCT. BUSINESS CONFIDENCE 65.7; PRIOR 60.9
NZ ANZ OCT. BUSINESS ACTIVITY OUTLOOK 45.9; PRIOR 45.3
AUSTRALIA SEPT. RETAIL SALES +0.1% M/M; EST. +0.3%; PRIOR +0.7%
AUSTRALIA Q3 RETAIL SALES VOLUMES +0.5% Q/Q; EST. +0.5%; PRIOR -0.4%
AUSTRALIA SEPT. BUILDING APPROVALS +4.4% M/M; EST. +2.1%; PRIOR -3.9%
AUSTRALIA SEPT. PRIVATE-SECTOR HOME APPROVALS +2.2% M/M; PRIOR +2.3%
AUSTRALIA Q3 EXPORT PRICES -4.3% Q/Q; EST. -4.0%; PRIOR -5.9%
AUSTRALIA Q3 IMPORT PRICES -1.4% Q/Q; EST. -0.3%; PRIOR +1.0%
AUSTRALIA SEPT. PRIVATE SECTOR CREDIT +0.5% M/M; EST. +0.5%; PRIOR +0.5%
AUSTRALIA SEPT. PRIVATE SECTOR CREDIT +5.8% Y/Y; PRIOR +5.7%
JAPAN SEPT. INDUSTRIAL +RISES 1.4% M/M; EST. 0.8%; PRIOR -3.3%
JAPAN SEPT. INDUSTRIAL OUTPUT -2.8% Y/Y; EST. -3.2%; PRIOR -4.9%
JAPAN SEPT. RETAIL SALES -2.3% M/M; EST. -0.3%; PRIOR +1.0%
JAPAN SEPT. RETAIL SALES +0.5% Y/Y; EST. +2.1%; PRIOR +3.1%
SOUTH KOREA SEPT. INDUSTRIAL OUTPUT -0.2% M/M; EST. +1.2%; PRIOR +4.4%
SOUTH KOREA SEPT. INDUSTRIAL OUTPUT -1.3% Y/Y; EST. +0.5%; PRIOR +3.8%
SOUTH KOREA SEPT. CYCLICAL LEADING INDEX UNCHANGED M/M; PRIOR -0.1%
CHINA OCT. MANUFACTURING PMI 50.1; EST. 49.9; PRIOR 49.8
CHINA OCT. NON-MANUFACTURING PMI 50.2; EST. 50.3; PRIOR 50.0
CHINA OCT. COMPOSITE PMI 50.8; PRIOR 50.4
MARKETS
US TSYS: Tsys Futures Slightly Higher, Ranges Narrow Ahead Of Data
- Tsys futures are slightly off session highs, however ranges have been narrow. TU +01⅜ at 103-04⅞, while TY is +06+ at 110-30+ with initial resistance at 111-14 (Oct 25 high)
- There was an earlier block buy of UXY, DV01 $405k, and a large TY 113 call, x30,000, delta 21%
- Overall, Investors remain bearish ahead of the US presidential election, betting on further bond losses and increased volatility. Yields have already surged, with options traders targeting a potential 4.5% yield on the 10-year note. Elevated open interest in 10yr December 109.5 put options reflects hedging against a deeper bond selloff.
- Overnight In tsys options there was demand during US morning for volatility hedging, with stand-out flows including a $5m premium strangle position via TY Week 1 options. The BofA move Index has now reached it's highest in 12 month, as traders expected volatility to increase heading into the election.
- Cash tsys yields are flat to 1bps lower today, with the curve slightly flatter. The 2yr is -0.4bps at 4.092%, while the 10yr is -0.8bps at 4.246%.
- Focus turns to ADP employment data, GDP and Pending Home Sales.
JGBS: Cash Bonds Little Changed As BoJ Delivers Expected Decision
JGB futures have nudged higher, +3 compared to settlement levels, after the BoJ policy decision.
- At its October 30-31 meeting, the BoJ Policy Board unanimously (9-0) decided to keep the policy rate at 0.25%, as expected, amid heightened economic uncertainty and concerns over government stability following the ruling coalition’s weakest electoral outcome since 2009.
- The decision aligned with expectations from all but one of the 53 analysts surveyed by Bloomberg, as well as with market pricing.
- Notably, the BoJ reaffirmed its commitment to raise rates if inflation targets are met, a pledge that was absent in the September meeting.
- The BoJ has trimmed its inflation outlook for next fiscal year, from 2.1% in July to 1.9% today. The following year is also projected to be 1.9%.
- Officials see next year’s GDP slightly stronger at 1.1% vs a 1% prior estimate. Core consumer prices are also seen slightly higher this year at 2% vs a 1.9% prior estimate.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s bear-flattener. Focus now turns to today’s weekly claims, personal income/spending and MNI’s Chicago PMI data.
- Cash JGBs and swaps are little changed across benchmarks.
- Tomorrow, the local calendar will see Jibun Bank PMI Mfg.
AUSSIE BONDS: Cheaper, Narrow Ranges, Bldg Apps On The Move
ACGBs (YM -7.0 & XM -5.0) are cheaper after dealing in relatively narrow ranges in today’s Sydney session.
- Outside of the previously outlined domestic data drop (Retail Sales, Terms of Trade, Building Approvals and Private Sector Credit), there hasn't been much by way of domestic drivers to flag.
- Building approvals are finally gathering momentum in a housing market characterised by low stocks. But the total continues to be below the level in January 2020 despite an 8.7% increase in the working-age population since then. Continued pressure on the housing market is likely to drive further home price and rental increases.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session.
- Cash ACGBs are 5-6bps cheaper with the AU-US 10-year yield differential at +23bps.
- Swap rates are 5bps higher.
- The bills strip has bear-steepened, with pricing -1 to -8.
- RBA-dated OIS pricing has firmed by 1-7bps, with gains led by later meetings. Today’s movements place 2025 meetings 3-8bps above pre-CPI levels from yesterday. Just 2bps of easing is priced in by year-end.
- Tomorrow, the local calendar will see CoreLogic Home Value, Judo Bank PMI Mfg, Household Spending, PPI and Home Loans Value data alongside AOFM’s planned sale of A$800mn of the 3.50% 21 December 2034 bond.
NZGBS: Closed Cheaper But Mid-Range, Bounce In Bus. Conf.
NZGBs closed mid-range, 2bps cheaper across benchmarks. The NZ-US 10-year yield differential narrowed 1bp to +19bps.
- NZ business confidence jumped further in October as firms factored in an outlook that is likely to include more blockbuster interest-rate cuts. Business confidence rose 5 points to +66 points in October, while firms reported the highest level of activity since March, according to a survey by the ANZ bank. (per DJ)
- New Zealand’s moribund housing market will need a summer sales surge to eat into a backlog of listings if prices are to stage a sustained recovery in 2025, according to ANZ Bank. (per BBG)
- Today’s weekly supply saw solid demand with cover ratios across the three lines ranging from 2.97x to 3.19x.
- Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s bear-flattener. Focus now turns to today’s weekly claims, personal income/spending and MNI’s Chicago PMI data.
- Swap rates closed 2bps higher.
- RBNZ dated OIS pricing closed little changed across meetings. A cumulative 99bps of easing is priced by February, with 55bps by year-end.
- Tomorrow, the local calendar will see CoreLogic Home Value and Building Permits data.
FOREX: Yen Modestly Firmer Post BoJ, Lower Equities/US Yields Help
Modest yen gains have been evident post the on hold BoJ outcome. USD/JPY is back under 153.00, around 0.35% stronger in yen terms. CHF is also modestly stronger, USD/CHF last near 0.8655 (up around 0.15%).
- Cross asset signals have supported the safe havens, with US equity futures in the red led by tech. Nasdaq futures were last off 0.60%, which follows late earning results from Microsoft in Wednesday US trade.
- We also have a downtick in US yields, with the back end off 2bps.
- USD/JPY last tracked near 152.85/90, which is close to recent lows. On Monday the pair dipped briefly under 152.50. 151.46 is the low from Oct 25.
- The BoJ kept rates on hold as expected, but had some hawkish undertones in terms of the statement (even if the 2025 core CPI forecast was nudged down), leaving the rate hike path intact (albeit with uncertainty around timing). Focus will be on Governor Ueda's press conference, and whether Bank has "sufficient time" to watch economic activity and risk developments, and not rule out a rate hike in December at a post-meeting press conference."
- AUD and NZD have been range bound. AUD/USD last near 0.6565/70, while NZD/USD is near 0.5970. We had a host of Australian data earlier, albeit largely second tier. Retail sales for Sep were sub market expectations.
- The China PMIs were better for the manufacturing side, moving back into expansion territory but this had a lasting impact on hgiehr beta FX.
- Later US Q3 ECI, September PCE prices, personal income/spending, October job cuts and jobless claims are released. Also euro area October preliminary CPI and German September retail sales print.
ASIA STOCKS: China & HK Equities Heads Higher, China Mfg PMI Above 50
Chinese and Hong Kong equities are higher today, as investors reacted positively to a report showing Chinese manufacturing data expanding for the first time since April, suggesting that recent stimulus measures may be starting to boost growth momentum in the manufacturing industry. BYD beat Tesla in quarterly revenue for the first time, but its shares slumped as traders focused on weaker net sales per vehicle. Despite mixed corporate earnings, the report on manufacturing uplifted market sentiment in both regions.
- Chinese property developer shares rose for the second consecutive session, driven by optimism following reports that China is considering a 4b yuan special bond issuance to support the struggling sector. The BBG China Property Developer Gauge is 4% higher, Mainland Property Index +2.60% while the CSI 300 Real Estate Index is 2.30% higher.
- Chinese banks posted modest profit gains in Q3 2024, despite challenges from a slowing economy and low margins. ICBC reported a 3.8% profit increase, while Agricultural Bank of China, Bank of Communications, Bank of China and China Construction Bank saw gains ranging from just above 1% to nearly 6%. Banking stocks were mixed, with the Mainland Banking Index down 0.45%.
- BYD surpassed Tesla in quarterly revenue for the first time, posting $28.2b in sales versus Tesla’s $25.2b, driven by strong demand for its hybrid vehicles. Despite a record net income of $1.6b, Tesla still leads in profitability with $2.2b. BYD's vertically integrated supply chain and dominance in China’s EV market have helped cushion it from global headwinds, positioning it well for continued growth.
- China's Manufacturing PMI for October rose to 50.1, slightly above market expectations of 49.9 and following September's decline of 49.8. The Non-manufacturing PMI also printed at 50.1, up from 50.0 last month. This marks the first expansion after five months of contraction, indicating early positive signs from stimulus measures ahead of next week's National People's Congress.
ASIA STOCKS: Asian Equities Lower As Corporate Earnings Weigh On Sentiment
Asian equities are lower today, heading for their worst monthly performance since August 2023, as concerns over corporate earnings and upcoming US elections weighed on sentiment. Stocks in Japan, Australia, and South Korea fell, contributing to a regional downtrend. The MSCI Asia Pacific Index is down 0.4%, driven by declines in Hitachi and SK Hynix.
- Chinese and Hong Kong equities rose, buoyed by Chinese manufacturing data showing unexpected expansion for the first time since April, hinting that recent stimulus efforts may be taking effect. Chinese property developer shares rose for the second consecutive session, driven by optimism following reports that China is considering a 4b yuan special bond issuance to support the struggling sector. The BBG China Property Developer Gauge is 4.20% higher.
- Japanese equities are slightly lower today following concerns over corporate earnings, Hitachi dropped 8% following disappointing guidance, with investors now turning their attention to key earnings from Nomura and Takeda, which are expected this week. There was little surprise from the BoJ's after they kept rates unchanged, the yen was little changed post the announcement.
- South Korea equities are lower today, strong earnings from Samsung did little to push the KOSPI into positive territory, with SK Hynix dropping 3.30%, foreign investors have been selling local stocks with a total outflow of roughly $300m so far today.
OIL: Crude Gradually Trending Higher, Upcoming Event/Data Risk
Oil prices are moderately higher today driven by a crude inventory drawdown in the US last week. With the geopolitical risk premium unwinding, focus has returned to supply/demand fundamentals. There are also growing expectations that OPEC will push out its planned supply increase into 2025. But the Middle East continues to be monitored closely as little has been resolved. The USD index is slightly higher.
- WTI is 0.6% higher at $69.01 after a low of around $68.75, while the Brent January contract is up 0.5% to $72.55/bbl after falling to about $72.35.
- Rystad Energy believes that OPEC won’t begin to gradually increase output in December as planned, as the group is “making huge money” at current levels (BBG).
- EIA reported crude inventories fell 515k last week after a 5.47mn build. Gasoline fell 2.71mn and distillate 977k. Refinery utilisation was down 0.4pp to 89.1%.
- Friday’s US October payrolls are an important data point for oil as it refocuses on the demand outlook. Tuesday’s US election and next week’s Standing Committee of National People’s Congress meeting in China will also be focal points.
- Later US Q3 ECI, September PCE prices, personal income/spending, October job cuts and jobless claims are released. Also euro area October preliminary CPI and German September retail sales print.
GOLD: A New All-Time High Despite Higher US Yields
Gold is steady in today’s Asia-Pac session, after closing at a new all-time high of 2787.61, 0.5% higher, on Wednesday.
- Gold climbed to a record, boosted by haven demand and shrugging off data that could influence the size of Fed rate cuts this year. Lower rates are typically positive for gold, which doesn’t pay interest.
- US Treasury yields finished with a bear-flattener following stronger-than-expected ADP jobs data. The ADP jobs gain for October was 233k (cons 111k), its strongest monthly print since Jul’23. The data also came with an upward revision to the prior, 159k versus 143k.
- The US economy expanded at a 2.8% annual rate in the September quarter, underpinned by strong consumer spending, which grew by 3.7% and is the fastest pace in over a year. The core PCE deflator increased 2.2% in Q3, marginally above expectations, but still representing a significant slowing from the 3.3% average in the first half of 2024.
- Meanwhile, US pending home sales printed stronger than expected with the best single monthly increase since June 2020.
- Focus now turns to today’s weekly claims, personal income/spending and MNI’s Chicago PMI data, not to mention Friday's October employment data and next Tuesday's Presidential Election.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 31/10/2024 | 0700/0800 | ** |  DE | Retail Sales |
| 31/10/2024 | 0700/0800 | ** | DE | Import/Export Prices |
| 31/10/2024 | 0745/0845 | *** |  FR | HICP (p) |
| 31/10/2024 | 0745/0845 | ** | FR | PPI |
| 31/10/2024 | 1000/1100 | *** |  EU | HICP (p) |
| 31/10/2024 | 1000/1100 | ** | EU | Unemployment |
| 31/10/2024 | 1000/1100 | *** |  IT | HICP (p) |
| 31/10/2024 | 1000/1000 |  GB | BOE's Breeden speech on emerging technologies | |
| 31/10/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 31/10/2024 | 1230/0830 | *** | US | Personal Income and Consumption |
| 31/10/2024 | 1230/0830 | *** | US | Employment Cost Index |
| 31/10/2024 | 1230/0830 | *** |  CA | Gross Domestic Product by Industry |
| 31/10/2024 | 1230/0830 | * | CA | Payroll employment |
| 31/10/2024 | 1230/0830 | ** | US | WASDE Weekly Import/Export |
| 31/10/2024 | 1230/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/10/2024 | 1345/0945 | *** | US | MNI Chicago PMI |
| 31/10/2024 | 1430/1030 | ** | US | Natural Gas Stocks |
| 31/10/2024 | 1530/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 31/10/2024 | 1530/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 01/11/2024 | 2200/0900 | ** |  AU | S&P Global Manufacturing PMI (f) |
| 01/11/2024 | 0030/1130 | * | AU | Producer price index q/q |
| 01/11/2024 | 0030/1130 | ** | AU | Lending Finance Details |
| 01/11/2024 | 0030/0930 | ** |  JP | S&P Global Final Japan Manufacturing PMI |
| 01/11/2024 | 0145/0945 | ** |  CN | S&P Global Final China Manufacturing PMI |
| 01/11/2024 | 0730/0830 | *** |  CH | CPI |
| 01/11/2024 | 0730/0830 | ** | CH | Retail Sales |
| 01/11/2024 | 0930/0930 | ** | GB | S&P Global Manufacturing PMI (Final) |
| 01/11/2024 | - | *** | US | Domestic-Made Vehicle Sales |
| 01/11/2024 | 1230/0830 | *** | US | Employment Report |
| 01/11/2024 | 1345/0945 | *** | US | S&P Global Manufacturing Index (final) |