Source: MNI - Market News/Bloomberg
UK
BONDS (BBG): "Bank of England officials said the UK bond selloff that followed last week’s budget announcement was exacerbated by investor positioning, a signal they believe the worst of the slide is over."
EU
ECB (MNI SOURCES): A 25-basis-point cut by the European Central Bank next month looks almost assured after a push by some officials for 50 failed to gain momentum, with the ECB likely also to retain its meeting-by-meeting approach as it weighs significant risks from U.S. trade policy and a sickly German economy, Eurosystem officials told MNI.
ECB (MNI BRIEF): The European Central Bank should not change its policy approach “before we see declarations from the new [U.S.] president,” Bank of Greece Governor Yannis Stournaras said on Thursday.
ECB (MNI BRIEF): The spillovers from the U.S. election from a stronger dollar and higher Federal Reserve rates higher than initially expected are “not only in one direction” of more eurozone inflation, European Central Bank executive board member Philip Lane said on Thursday.
GERMANY (BBG): "Traders braced for the possibility of more bond sales in Germany after a government figurehead for fiscal conservatives was sacked, leading some in the market to contemplate a new administration that could be more tolerant of higher debt."
US
FED (MNI FED WATCH): President-Elect Donald Trump's promises to tighten immigration and impose across-the-board tariffs will have no impact on the Federal Reserve's plan to reduce interest rates in the near term, Fed Chair Jerome Powell said Thursday after the FOMC cut rates for a second straight meeting.
FED (MNI): Attached is a rough transcript of Fed Chair Jerome Powell's November press conference.
FED MNI REVIEW (MNI): The FOMC gave away few new signals over the future rate path at the November meeting, with Chair Powell once again emphasizing data dependence in setting policy while shrugging off recent volatility in inflation and employment readings.
POLITICS (RTRS): “President-elect Donald Trump on Thursday announced that Susie Wiles, one of his two campaign managers, will be his White House chief of staff, entrusting a top position to a political operative who helped the Republican win election.”
POLITICS (RTRS): “Donald Trump's Republicans were projected to pick up another U.S. Senate seat on Thursday and appeared to be retaining their narrow hold on the House of Representatives, putting them on track to control both chambers of Congress next year.”
POLITICS/TECH (BBG): “The Biden administration is racing to complete Chips Act agreements with companies like Intel Corp. and Samsung Electronics Co., aiming to shore up one of its signature initiatives before President-elect Donald Trump enters the White House.”
OTHER
JAPAN (MNI INTERVIEW): BOJ Jan Hike Most Likely, But Yen Crucial
JAPAN (BBG): “Japan’s potential kingmaker Yuichiro Tamaki faces a hazardous path as he looks to remain a power broker well beyond Monday’s vote to decide the fate of Prime Minister Shigeru Ishiba.”
JAPAN (BBG): “Japan said it stepped into the foreign exchange market twice last quarter, as speculation grows that more moves may be brewing given the recent bout of renewed yen weakness.”
AUSTRALIA (MNI): RBA Could Hike Again - Former Economist
CHINA
STIMULUS (SECURITIES TIMES): “Beijing’s policy stimulus has invigorated the capital market and boosted investor confidence, as fund inflows have increased and mergers and acquisitions heat up, Securities Times reported.”
PRIVATE SECTOR (SHANGHAI SECURITIES NEWS): “China’s central and local governments are shoring up support for the private sector by implementing Beijing’s recent stimulus measures, Shanghai Securities News reported.”
INVESTMENT FLOWS (CSJ): “China’s top securities regulator said it will facilitate cross-border investment and financing, expand the scope of investment targets of Stock Connect, optimise the mutual recognition arrangement of funds between the mainland and Hong Kong and support the launch of more cross-border ETF products, China Securities Journal reported citing a speech by Li Ming, vice chairman of the China Securities Regulatory Commission.”
ECONOMY (ECONOMIC DAILY): “The national corporate sales revenue rose by 1.3 percentage points month-on-month in October, as additional pro-growth policies started to take effect, Economic Daily reported citing the value-added tax invoice data by the State Administration of Taxation.”
BANKS (FINANCIAL NEWS): “Several major Chinese banks are exploring proposals to increase their core tier 1 capital, following Beijing’s pledge to recapitalize its biggest lenders for the first time in over a decade, Financial News reported, citing their 3Q earnings releases.”
CHINA MARKETS
MNI: PBOC Net Drains CNY4.9 Bln via OMO Friday
The People's Bank of China (PBOC) conducted CNY12.2 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY4.9 billion after offsetting the maturity of CNY17.1 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5218% at 09:35 am local time from the close of 1.6040% on Thursday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 52 on Thursday, compared with the close of 49 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1433 Fri; +1.74% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1433 on Friday, compared with 7.1659 set on Thursday. The fixing was estimated at 7.1441 by Bloomberg survey today.
MARKET DATA
JAPAN SEP HOUSEHOLD SPENDING Y/Y -1.1%; MEDIAN -1.8%; PRIOR -1.9%
MARKETS
US TSYS: Cash Yields Continue Lower During Asia Trading.
- Following yesterday’s move lower in yield, Asian cash trading saw a modest amount of follow on with yields across several maturities moving lower.
- Short and long end bonds were the biggest movers with the 2YR down -0.4bp to 4.198% and the 30YR down -0.4bp to 4.528%.
- Other maturities were generally flat with the 10YR at 4.33%.
- With most of the moves in cash futures were very stable with the US 10YR Dec24 trading in a range of 110-06 to 110-09.
JGBS: Bull Flattener To End A Volatile Week, BoJ’s SoO On Monday
JGB futures are stronger but off session bests, +15 compared to settlement levels.
- Outside of the previously outlined Household Spending and International Investment Flows, there hasn't been much by way of domestic drivers to flag. Coincident and Leading Indices for September have just printed slightly above expectations.
- Finance Minister Katsunobu Kato said Japan will take appropriate action against any excessive forex moves, reiterating comments made by the chief currency official Thursday.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s strong reversal off Wednesday's post-election cheaps.
- Cash JGBs have bull-flattened across benchmarks beyond the 1-year, with yields flat to 3bps lower. The benchmark 10-year yield is 1bp lower at 1.00% versus the cycle high of 1.108%.
- Swap rates are flat to 1bp lower. Swap spreads are mostly wider.
- Over the Weekend, BoJ Governor Ueda will join ECB officials in the closing event `Climate risks, adaptation and mitigation: what do central banks make of their economic effects?' at Green Swan Conference 2024.
- On Monday, the local calendar will see the BoJ Summary of Opinions (Oct. MPM) alongside Current Account Balance and Bank Lending data. The MoF also plans to sell Y250bn of 10-year Inflation-Linked Bonds.
AUSSIE BONDS: Richer, Narrow Ranges, Wages & Jobs Data Next Week
ACGBs (YM +6.0 & XM +8.5) are stronger after dealing in relatively narrow ranges in today’s data-light Sydney session.
- (AFR) The total cost of public servant wages grew faster than it has in 15 years last financial year to $232 billion, fuelling economists’ warnings that government spending is helping to keep interest rates higher for longer. Employee expenses are one of the fastest growing areas of government spending, rising 8 per cent over the 2023-24 financial year. (see link)
- Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s strong reversal off Wednesday's post-election cheaps.
- Cash ACGBs are 6-8bps richer with the AU-US 10-year yield differential at +23bps.
- Swap rates are 6-7bps lower, with the 3s10s curve flatter.
- The bills strip has twist-flattened, with pricing -1 to +6.
- RBA-dated OIS pricing shows no easing by year-end. A 25bps rate cut is not fully priced until July.
- On Monday, the local calendar is empty, ahead of Consumer and Business Confidence on Tuesday. The Q3 Wage Price Index is released on Wednesday followed by the Employment Report for October on Thursday.
- Next week, the AOFM plans to sell A$800mn of the 2.50% 21 May 2030 bond on Wednesday and A$700mn of the 4.75% 21 April 2027 bond on Friday.
NZGBS: Closed Richer But Off Bests, RBNZ Infl. Exp. On Monday
NZGBs closed 2-5bps richer, but off session bests. The NZ-US 10-year differential closed 6bps wider at +25bps after US tsys rebounded from Wednesday’s post-election lows. Cash US tsys are ~1bp cheaper in today’s Asia-Pac session.
- Today’s local data calendar was empty, but on Monday, we’ll see the release of 2-year Inflation Expectations, followed by Card Spending data on Tuesday.
- Finance Minister Nicola Willis doesn’t want the nation’s smaller deposit takers to pay as much into a proposed deposit insurance scheme as their small size may warrant, the NZ Herald reports citing an interview. (per BBG)
- Swap rates closed 2-4bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 1-4bps softer across meetings. A cumulative 93bps of easing is priced by February, with 53bps by year-end.
- In the $-bloc, rate expectations through July 2025 remain mostly steady since the start of the week, with New Zealand as an exception, showing a 10bp increase.
- This came despite the key release of the week, the Q3 Employment Report, revealing a softening labour market as the economy weakens. Employment fell 0.5% q/q, with annual growth down 0.4%. Wage growth also slowed as labour market pressures eased. However, the unemployment rate rose less than expected due to a larger-than-anticipated drop in participation.
FOREX: Yen Outperforms AUD, China/HK Equities Lower
As we approach the London/EU crossover, earlier trends in G10 FX are holding, with the BBDXY index up modestly, but with a risk off tone in terms of yen crosses.
- The USD BBDXY index was last just above 1261, still down modestly for the week. In the cross asset space, US equity futures are close to flat, while US yields are unchanged. The early impetus in yields was higher, but there was no follow through.
- USD/JPY got to lows of 152.55 a little while ago (last near 152.70/75). This is lows back to early Wednesday trade (as US election results started filtering in). Earlier data showed firmer than expected household spending, but still negative in y/y terms.
- We had fresh rhetoric on FX markets as well - warning on excessive moves in the short term. However, important local political member, Tamaki, who heads the DPP party, reiterated that the BoJ shouldn't act in the near term, while also noting Trump related policies may weaken yen.
- Yen has outperformed on crosses, as China and Hong Kong equities have given back some of yesterday's gains. Major indices are still up for the week, but we await further stimulus details at the conclusion of the NPC. A press conference is to be held in Hong Kong at 4pm to discuss the raising of the ceiling on local government debt to replace hidden debt.
- AUD/USD is back to 0.6650, off around 0.40%, NZD has fallen 0.30% to 0.6005/10. AUD/JPY is back to 101.55, nearly 100pips of recent highs.
- Outside of NPC related headlines, we have central bank speak, including Bowman from the Fed. On the data front, in the US the U. of Mich Sentiment print is out. In Canada jobs data is due. Note tomorrow, Oct inflation figures print in China.
ASIA STOCKS: China Equities Give Back Some of Yesterday’s Rally.
- Yesterday saw very strong equity markets in China, with the Hang Seng up over 2% following very strong export data and expectations for further stimulus measures to be announced at the conclusion of the National Party Congress.
- The market gave back some of that performance today again with the Hang Seng leading the way down -0.90%, the CSI 300 down -0.77%, the Shanghai Comp down -0.50% and Shenzhen Comp -0.12%.
- The KOSPI has over recent sessions been relatively correlated with the moves in China and this broke down today with the KOSPI down only -0.05%.
- Other parts of Asia had a strong day with the Jakarta Comp up +0.95%, Singapore’s FTSE Straits up +1.5%, Taiwan up +.45% and India’s Nifty 50 opening up positive.
- Key decliners today were the Philippines (again) down -0.90% and Thailand down -0.35% respectively.
Oil Up on the Week as World Focuses on Growth.
- Oil markets in Asia have consolidated today as they try to extrapolate Trump’s victory and the potential impact.
- During Trump’s prior Presidency, key policies were aimed at limiting Iran exports and expectations are that a return to this type of approach is likely.
- Data out showed that China’s slowdown has had a material impact on oil demand with imports down in October by 2%.
- The US Fed cut rates by 25bps noting that ‘labour market conditions had eased rather than slowed whilst re-iterating that the incoming US administration will have no impact on the FED’s policy decisions.
- WTI strengthened into the US close rising from $70.75 to $72.85 trading down to $71.81 in Asia trading.
- WTI for the week was up +3.3%
- Brent spoked also from $74.10 to $76 before gently declining during Asia trading to reach $75.15.
- Brent for the week was up +2.8%
- Market strategists in Asia are following their US counterparts publishing their view on oil given his policies for growth with a diverse set of outcomes.
- The Hurricane in the Gulf has hit Cuba and on current projections is unlikely to materially impact oil production.
GOLD: Sharp Rebound After Wednesday’s Post-Election Dump
Gold is 0.3% lower in today’s Asia-Pac session, after closing 1.8% higher at $2706.71 following the US FOMC decision. Thursday’s gains partially unwound Wednesday’s losses when the yellow metal fell by over 3% in the aftermath of the US election.
- Yesterday, the FOMC delivered the expected 25bp cut. The Fed has maintained a steady outlook on the economy and rate trajectory since September, emphasising that “nothing in the economic data suggests the committee needs to hurry” toward a neutral stance.
- The FOMC gave away few new signals over the future rate path at the November meeting, with Chair Powell once again emphasising data dependence in setting policy while shrugging off recent volatility in inflation and employment readings.
- Accordingly, rates markets were little changed, with terminal Fed funds rates seen at 3.72% (roughly 86bp of further cuts to come), roughly the same as pre-decision.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- Citi analysts see gold trading weak in the near term but believe that structural drivers remain in place.
- According to MNI’s technicals team, the trend condition in gold is still bullish and a continuation higher would refocus attention on the bull trigger at $2,790.1, the Oct 31 high. On the downside, attention is on a key support at $2,645.4, the 50-day EMA.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 08/11/2024 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 08/11/2024 | 0745/0845 | * |  FR | Foreign Trade |
| 08/11/2024 | 0900/1000 | * |  IT | Industrial Production |
| 08/11/2024 | 0900/1000 |  EU | ECB's Cipollone moderating event on Italy and the World Bank Group | |
| 08/11/2024 | 1000/1100 | * | IT | Retail Sales |
| 08/11/2024 | 1110/0610 |  CA | BOC Deputy Gravelle speaks on panel at ECB conference. | |
| 08/11/2024 | 1215/1215 |  GB | BOE's Pill and Shortfall hold MPC Agency briefing | |
| 08/11/2024 | 1330/0830 | *** | CA | Labour Force Survey |
| 08/11/2024 | 1500/1000 | ** |  US | U. Mich. Survey of Consumers |
| 08/11/2024 | 1600/1100 | US | Fed Governor Michelle Bowman | |
| 08/11/2024 | 1700/1200 | *** | US | USDA Crop Estimates - WASDE |
| 08/11/2024 | 1930/1430 | US | St. Louis Fed's Alberto Musalem | |
| 09/11/2024 | 0130/0930 | *** |  CN | CPI |
| 09/11/2024 | 0130/0930 | *** | CN | Producer Price Index |