- FED RATES WELL-POSITIONED TO RESPOND TO RISKS - BARKIN - MNI
- FED’S KASHKARI SAYS ONLY INFLATION COULD DERAIL DECEMBER CUT - BBG
- ELON MUSK TO LEAD ‘DEPARTMENT OF GOVERNMENT EFFICIENCY’ IN TRUMP ADMINISTRATION - POLITICO
- JAPAN OCT CGPI RISES 3.4% Y/Y, IMPORT PRICES DROP - MNI BRIEF
- AUSSIE Q3 WAGES PRINT AT 0.8% Q/Q, 3.5% Y/Y - MNI BRIEF
Fig. 1: Japan PPI Y/Y Accelerates
Source: MNI - Market News/Bloomberg
UK
CLIMATE (BBC): “Prime Minister Sir Keir Starmer has announced fresh climate change targets at a global summit, saying he wants the UK to lead on cutting emissions. The UK will now aim for an 81% cut in its emissions by 2035, he told the UN conference of parties (COP29) in Azerbaijan.”
EU
EU (POLITICS): “The Estonian foreign policy chief hopeful showed she was hawkish on Russia, supportive of Ukraine, demanding of the US as an ally, and cautious on the Middle East conflict.”
UKRAINE (POLITICO): “The latest sighs of (still cautious) relief came after news that President-elect Donald Trump tapped Rep. Michael Waltz (R-Fla.) to be his national security adviser and is planning to select Sen. Marco Rubio (R-Fla.) for secretary of State. Both lawmakers have hewed to the Trump-era America First foreign policy doctrine but are still ardent hawks when it comes to the U.S. approach to adversaries like China, Iran and Russia.”
GERMANY (BBG): “Germany’s election campaign kicks into high gear on Wednesday, when Chancellor Olaf Scholz makes his case in a public address for another term, despite polls showing voters are overwhelmingly looking for a change.”
US
FED (MNI): The Federal Reserve is well positioned to respond to either a U.S. labor market that continues to weaken or a scenario in which demand stays strong and upside inflation risks are revived, Richmond Fed President Tom Barkin said Tuesday.
FED (BBG): “Federal Reserve Bank of Minneapolis President Neel Kashkari said he’ll be looking at incoming inflation data to determine whether another interest-rate cut is appropriate at the US central bank’s December meeting.”
NY FED (MNI): U.S. consumers expect inflation will fall over the one-, three-, and five-year-horizons, according to the latest survey of consumer expectations from the Federal Reserve Bank of New York. Americans anticipate inflation over the next year will fall to 2.87%, the lowest level since October 2020.
FED (MNI): The official responsible for managing the Federal Reserve’s massive holdings of cash and bonds said Tuesday the most recent quarter-end saw elevated volatility that bears watching, but does not suggest anything other than abundant reserves in the financial system and room to run in shrinking the central bank balance sheet.
POLITICS (POLITICO): “Elon Musk will lead a newly created “Department of Government Efficiency” that will spearhead efforts to shrink the federal government, President-elect Donald Trump announced Tuesday. Musk will work with fellow Trump acolyte Vivek Ramaswamy to run DOGE and conclude their work by July 4, 2026, Trump said in a written statement.”
POLITICS (BBG): “Donald Trump is nominating Pete Hegseth, host of Fox News Channel’s weekend morning program and an Army National Guard officer, as his defense secretary, the president-elect said in a statement on Tuesday evening, putting another fierce loyalist in charge of the government’s biggest agency.”
OTHER
JAPAN (MNI BRIEF): Japan's corporate goods price index rose 3.4% y/y in October, accelerating from September’s revised 3.1%, and despite import prices posting their second straight drop, falling 2.2% y/y, data released by the Bank of Japan showed on Wednesday.
AUSTRALIA (MNI BRIEF): The Australian Wage Price Index for Q3 printed at 0.8% q/q, or 3.5% y/y, 10 basis points lower than expected, according to Australian Bureau of Statistics data published on Wednesday.
CHINA
STOCKS (Shanghai Securities News): “China’s household deposits fell by 570 billion yuan ($78.8 billion) in October as many savers diverted money out of their bank accounts into the stock market and mutual funds, according to a front-page report by Shanghai Securities News Wednesday.”
PROPERTY (CSJ): “First-tier cities are expected to scrap the distinction between ordinary and luxury homes, and lower value-added tax applied to high-end property owners, China Securities Journal reported, citing analysts.”
YUAN (21st Century Business Herald): “The People’s Bank of China is likely to consider the strength of the Yuan against the U.S. dollar and a basket of currencies when setting its currency strategy following Donald Trump’s election victory, FX traders at international banks told the 21st Century Business Herald.”
CHINA MARKETS
MNI: PBOC Net Injects CNY215.7 Bln via OMO Wednesday
The People's Bank of China (PBOC) conducted CNY233 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY215.7 billion after offsetting the maturity of CNY17.3 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5923% at 09:40 am local time from the close of 1.7261% on Tuesday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 48 on Tuesday, compared with the close of 49 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Higher At 7.1991 Weds; +0.73% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1991 on Wednesday, compared with 7.1927 set on Tuesday. The fixing was estimated at 7.2436 by Bloomberg survey today.
MARKET DATA
AUSTRALIA Q3 WAGE PRICE INDEX +0.8% Q/Q; EST. +0.9%; PRIOR 0.8%
AUSTRALIA Q3 WAGE PRICE INDEX +3.5% Y/Y; EST. +3.6%; PRIOR +4.1%
NEW ZEALAND NET MIGRATION SEP 2310; PRIOR 2010
NEW ZEALAND ANNUAL NET IMMIGRATION SLOWS TO 44,907
JAPAN OCT. PRODUCER PRICES +0.2% M/M; EST. 0%; PRIOR 0.3%
JAPAN OCT. PRODUCER PRICES +3.4% Y/Y; EST. +2.9%; PRIOR +3.1%
SOUTH KOREA OCT EXPORT PRICES IN KRW +2.0% Y/Y; PRIOR +1.0%
SOUTH KOREA OCT IMPORT PRICES IN KRW -2.5% Y/Y; PRIOR -3.7%
SOUTH KOREA UNEMPLOYMENT RATE OCT 2.7%; EST. 2.6%; PRIOR 2.5%
MARKETS
US TSYS: Tsys Futures Edge Lower, Focus On CPI Later
- Tsys futures are off session highs, and now trade slightly lower for the session. TU is -00⅝ at 102-18+ vs the overnight lows of 102-17⅝, TY is trading -01 at 109-12+ vs overnight lows of 109-10.
- 10yr Dec'24 futures remain in a bearish trend with last week’s move lower reinforces the downtrend and the contract is trading closer to its recent lows. A resumption of the bear leg would open 109-05 next, the 76.4% retracement of the Apr - Sep bull cycle (cont). The 109-00 handle remains exposed too. Initial firm resistance is seen at 111-29+, the 20-day EMA.
- Overnight the selloff led to a sharp tightening of SOFR 10yr swap spreads, which dropped around 3bps, marking the largest one-day tightening since March 2023. The spreads fell to -48bps after peaking at -46.8bps earlier in the session, the move follows a period of spread widening after the US election, reflecting investor reactions to potential deregulation.
- The cash tsys yields are slightly higher again today following overnight bear-steepening move where yields closed 8-13bps higher. The 2yr is 4.342%, while the 10yr is 4.429% only 5bps off the highs made on Nov 6. The 2s10s is -0.420 at 7.899, while ovenright the 2s7s30s fly cheapened 8bps.
- Projected rate cuts into early 2025 compared to early Tuesday levels (*): Dec'24 cumulative -15.5bp (-17.2bp), Jan'25 -23.0bp (-25.2bp), Mar'25 -36.0bp (-38.2bp), May'25 -41.8bp (-44.3bp).
- Later today we have MBZ Mortgage Applications, followed by CPI.
JGBS: Cheaper Ahead Of US CPI Data, Q3 GDP On Friday
JGB futures are sharply weaker but off session cheaps, -37 compared to settlement levels.
- Japan's October PPI was stronger than expected, up 0.2%m/m, versus a flat forecast. The prior month was also revised higher to a 0.3% gain (initially reported as flat). In y/y terms, we rose 3.4%, against a 2.9% forecast and 3.1% prior (initially reported as a 2.8% gain).
- Cash US tsys are slightly cheaper in today’s Asia-Pac session after yesterday’s heavy session. Key October US CPI inflation data will be released later today. From our October CPI preview, sequential core CPI is seen coming in basically the same as prior (roughly 0.30%), with headline edging up (0.20% vs 0.18% September).
- Cash JGBs are 2-3bps cheaper across benchmarks. The benchmark 30-year yield is 0.7bp higher at 2.278% after today’s supply.
- The 30-year auction saw mixed results, with the low price beating dealer expectations and the cover ratio edging up to 3.4353x from 3.3438x. However, the auction tail lengthened. A higher outright yield likely contributed to increased demand in today’s auction.
- Swap rate swings are bounded by +/- 1bp. Swap spreads are tighter.
- Tomorrow, the local calendar will see weekly International Investment flow data, ahead of Q3 GDP on Friday.
AUSSIE BONDS: Very Heavy Ahead Of US CPI Today & Jobs Tomorrow
ACGBs (YM -10.0 & XM -11.00) are sharply cheaper and at the Sydney session’s worst levels ahead of key US CPI data later today and October jobs tomorrow. 3-year yield climbs 10bps to 4.21%, the highest since 2023.
- Q3 WPI printed below expectations at 0.8% q/q and 3.5% y/y after 0.8% q/q and 4.1% y/y, lowest since Q4 2022.
- Cash US tsys are slightly cheaper in today’s Asia-Pac session after yesterday’s heavy session.
- Cash ACGBs are 10-11bps cheaper with the AU-US 10-year yield differential at +24bps.
- Swap rates are 9bps higher.
- The bills strip has sharply bear-steepened, with pricing -2 to -12.
- RBA-dated OIS pricing is 2-9bps firmer across the 2025 meeting. A 25bps rate cut is not fully priced until September.
- Analysts are again forecasting a 25k rise in employment tomorrow but with the unemployment rate steady at 4.1%. The labour market remains tight. The RBA noted in November that “some indicators have recently stabilised”, including hours worked, while the youth unemployment rate and underemployment have “declined”.
- QTC has priced an A$1.75bn increase of the 4.50% Aug-35 A$ bond. The transaction has a re-offer yield of 5.47%.
NZGBS: Heavy Session But Outperforms $-Bloc, Food Prices Tomorrow
NZGBs closed not far off session cheaps, with benchmark yields 7-9bps higher. The NZGB 10-year did however manage to outperform its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials 3-4bps tighter at +23bps and +1bp respectively.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s heavy session. Key October US CPI inflation data will be released later today.
- NZ new home loans rose 5.7% to NZ$6.55 billion in September from NZ$6.19 billion in August. In terms of debt to ratio (DTI), expressed as total yearly household income minus total debt, loans with more than five times the debt to ratio made up 27.8% of the housing loans made during the month. (per BBG)
- Swap rates closed 4-5bps higher.
- Tomorrow, the local calendar will see REINZ House Sales and Food Prices.
- Swap rates are 4-5bps higher, with the belly outperforming.
- RBNZ dated OIS pricing is 4-8bps firmer for 2025 meetings. A cumulative 86bps of easing is priced by February, with 52bps by year-end.
- Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 3.0% Apr-29 bond, NZ$250mn of the 4.5% May-35 bond and NZ$50mn of the 2.75% Apr-37 bond.
FOREX: Steady Trends Ahead Of US CPI, Firmer Yuan Helps A$
G10 FX moves have been very muted so far in Wednesday trade. The BBDXY index sits little changed in latest dealings, near 1280, modestly off cycle highs from Tuesday US trade. We have the US CPI print later.
- The early bias was for USD gains, albeit remaining within recent ranges. Sentiment started to stabilize after the stronger than expected CNY fixing, which aided the yuan.
- AUD/USD got to 0.6517, close to recent lows, but sits back at 0.6535/40 in latest dealings, little changed for the session. Earlier data showed Q3 wages print below expectations at 0.8% q/q and 3.5% y/y after 0.8% q/q and 4.1% y/y, lowest since Q4 2022. Tomorrow we have jobs data in Australia.
- NZD/USD is up a touch, last near 0.5930.
- In Japan, PPI data rose more than forecast and is back above 3% y/y, which should help underpin headline CPI momentum. Import prices were still down in y/y terms, but if USD/JPY holds around current levels, we could see that trend reverse by year end/early 2025.
- USD/JPY has drifted a little higher through the course of the session, but couldn't test through 155.00 (highs 154.94). The above data did little to boost yen sentiment.
- In the cross asset space, US equity futures sit modestly lower. The regional equity backdrop has mostly been weaker. US TSY yields are closed to unchanged.
- Later October US CPI prints and is expected to show a pickup in headline to 2.6% y/y while core should stay at 3.3%. There are also October real earnings and budget data, as well as France’s Q3 unemployment rate. The Fed’s Kashkari, Williams, Logan, Musalem, Schmid and BoE’s Mann appear.
ASIA STOCKS: Hong Kong Equities Continues Sell-Off, HSI below 20,000
China mainland equities are slightly higher today with the CSI 300 +0.10%, however the gains have been largely attributed to Telecom stocks, with most other sectors in the red. The HSI has dropped for a fourth consecutive day, and trading below 20,000 for the first time since late September, and losing 7.60% from Nov 8 highs. The decline was driven by concerns over Donald Trump’s re-election, which is expected to bring higher tariffs, trade protectionism, and increased inflation.
- China is expected to cut taxes on home purchases by the end of this year to support the real estate market, according to Securities Times. The government plans to remove the tax distinction between ordinary and luxury homes and implement policies to reduce home purchase and rental-related taxes. Additionally, authorities are exploring how to use funds from special bond issuance to acquire idle land. These measures aim to boost homebuyer demand, develop the rental market, and ease financial pressure on real estate companies. Some tax cuts will be introduced this year, with the rest expected by early 2025.
- China property stocks are struggling today with the Mainland Property Index -2.20%, HS Property Index -1.40%, while the BBG China Property Gauge -2.50%
- In October, China's household deposits dropped by 570b yuan ($78.8 billion) as savers shifted funds from bank accounts into the stock market and mutual funds, however, household deposits had still risen by 11.28t yuan in the first ten months of the year, compared to 11.85t yuan during the first nine months, as per BBG. The move comes after strong equity market returns following an array of stimulus measure from the government, while simultaneously lowering deposit savings rates to below 2%
ASIA STOCKS: Asian Equities Struggle, Tech Stocks Mixed, Samsung At 4yr Lows
Asian equities declined for a fourth consecutive day, with widespread losses driven by concerns over President-elect Donald Trump’s proposed tariffs and upcoming US inflation data. The MSCI Asia Pacific Index fell as much as 1.1%, with industrial and consumer discretionary sectors leading the drop. South Korea’s Kospi saw the sharpest decline, down 2%, with Samsung hitting a four-year low. Japan, Australia, and Hong Kong also experienced notable losses.
- Broad losses in Asian equities today, China's CSI 300 is slightly higher, however this is largely due to the Telecom sector, all other sectors in the red, the HSI is 0.65% lower.
- Asia semiconductor stocks are mixed today, with Tokyo Electron up 2.90% following strong 2Q results most other large cap names are flat to slightly higher apart from Samsung. The BBG Asia Semiconductor gauge is 1.05% lower.
- Japanese stocks have continued to sell-off throughout the session as the rally following the US election begins to lose momentum. Despite some support from positive earnings reports, after Tokyo Electron reporting better-than-expected 2Q results. The TOPIX is 1.05% lower, while the Nikkei is -1.4% lower
- South Korean equities are the worst performing in the region with the KOSPI -2.10%, while the KOSDAQ is -2.35%. Foreign investors continue to sell with a total $350m of net outflow today, majority of that from Samsung. Taiwan's TAIEX is little changed today, with TSMC unchanged and Hon Hai +0.90%
- Australian financials and mining stocks are weighing down the ASX200 (-0.85%). New Zealand equities closed 0.60% lower, with Healthcare stocks contributing most to the losses.
GOLD: Rebound After Another Heavy Session On Tuesday
Spot gold fell by another 0.8% to $2,598.39/oz on Tuesday, as higher US yields and pressure on major equity indices prompted further gains for the US dollar.
- However, bullion has recovered some of the lost ground in today’s Asia-Pac session, up 0.5%.
- It was a heavy session for US Treasuries on Tuesday in the lead-up to today’s key October CPI inflation data. It will be followed by PPI on Thursday.
- The US 10-year cheapened 12bps to 4.43% and the 2-year yield rose 9bps to 4.34%. Concerns over potentially inflationary aspects of Trump's fiscal policies likely exacerbated selling.
- Minneapolis Fed President Kashkari suggested on Tuesday that it could take significant upside inflation surprises in the next two months to cause the Fed to deviate from cutting rates a third consecutive time at the next meeting.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, yesterday’s move brought the yellow metal below the $2,600 level earlier for the first time since September 20, down more than 5% since last week’s US election.
- The latest pullback appears to be corrective, although recent weakness has resulted in a breach of the 50-day EMA, signalling scope for a deeper retracement towards $2,547.0, the Sep 18 low.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 13/11/2024 | 0945/0945 |  GB | BOE's Mann at Female Central Bankers panel | |
| 13/11/2024 | 1000/1000 | ** |  GB | Gilt Outright Auction Result |
| 13/11/2024 | 1200/0700 | ** |  US | MBA Weekly Applications Index |
| 13/11/2024 | 1330/0830 | *** |  US | CPI |
| 13/11/2024 | 1445/0945 |  US | Dallas Fed's Lorie Logan | |
| 13/11/2024 | 1800/1300 |  US | St. Louis Fed's Alberto Musalem | |
| 13/11/2024 | 1830/1330 |  US | Kansas City Fed's Jeffrey Schmid | |
| 13/11/2024 | 1900/1400 | ** |  US | Treasury Budget |
| 14/11/2024 | 0030/1130 | *** |  AU | Labor Force Survey |
| 14/11/2024 | 0700/0800 | *** |  SE | Inflation Report |
| 14/11/2024 | 0800/0900 | *** |  ES | HICP (f) |
| 14/11/2024 | 0830/0930 |  EU | ECB's De Guindos remarks at event organised by ABC and Deloitte | |
| 14/11/2024 | 1000/1100 | *** |  EU | GDP (p) |
| 14/11/2024 | 1000/1100 | ** |  EU | Industrial Production |
| 14/11/2024 | 1200/0700 |  US | Fed Governor Adriana Kugler | |
| 14/11/2024 | 1230/1330 |  EU | Publication of the ECB MonPol meeting account | |
| 14/11/2024 | - |  GB | Rachel Reeves’ debut Mansion House dinner speech as chancellor | |
| 14/11/2024 | 1300/1300 |  GB | BOE's Mann at Revitalising the global economy event | |
| 14/11/2024 | 1330/0830 | *** |  US | Jobless Claims |
| 14/11/2024 | 1330/0830 | *** |  US | PPI |