Source: MNI - Market News/Bloomberg
UK
FISCAL (BBG): “Chancellor of the Exchequer Rachel Reeves sought to reassure the financial markets after her budget on Wednesday triggered a selloff in UK bonds, saying that the “No. 1 commitment” of the Labour government is “economic and fiscal stability.”
EU
INFLATION (MNI INTERVIEW): The inflation expectations of eurozone consumers are surprisingly in line with macroeconomic developments and can provide a useful reality check to professional forecasts, European Central Bank economist Omiros Kouvavas told MNI.
GEOPOLITICS (BBG): "Viktor Orban held a phone call with Donald Trump on Thursday, raising concerns among some European Union officials that the Hungarian premier may be planning to invite him to dial into an upcoming EU meeting should he win next week’s US election."
UKRAINE (RTRS): "The United States expects North Korean troops in Russia's Kursk region to enter the fight against Ukraine in the coming days, U.S. Secretary of State Antony Blinken said on Thursday as he pressed China to use its influence to rein in Pyongyang."
US
FISCAL (MNI INTERVIEW): Ballooning U.S. deficits and a lack of political resolve to tackle them are pushing the American economy toward a situation of fiscal dominance that make it harder for the Federal Reserve to control inflation, Eric Leeper, a former Fed economist and adviser to global central banks, told MNI.
ECONOMY (MNI): The Chicago Business Barometer™, produced with MNI, dropped 5.0 points to 41.6 in October after edging up for two consecutive months, making the barometer the lowest since May 2024, and 1.6 points below the year-to-date average.
CORP (BBG): “Amazon.com Inc. reported strong results that showed a company humming on all cylinders, a testament to its efforts to cut and reallocate costs and put the cloud computing and e-commerce giant on sounder footing.”
CORP (BBG): “Apple Inc., heading into its most critical sales period of the year, sparked fresh concerns about revenue growth and lingering weakness in an intensely competitive China market.”
CORP (BBG): “Boeing Co. and union leaders representing 33,000 striking workers reached a tentative agreement to end a lengthy labor dispute that’s crippling the company’s commercial airplane manufacturing.”
OTHER
OIL (BBG): “Oil jumped after a report that Iran could be preparing to attack Israel from Iraqi territory in the coming days, jolting the market’s attention back to a potential flare-up of Middle East hostilities.”
GEOPOLITICS (RTRS): “The United States has received information that indicates that "right now" there are 8,000 North Korean troops in Russia's Kursk region, deputy U.S. Ambassador to the United Nations Robert Wood told the Security Council on Thursday.”
SOUTH KOREA (RTRS): “South Korea's export growth slowed to a seven-month low in October, missing market expectations, in a sign cooling global demand and U.S. election uncertainty are undermining an already shaky economic recovery.”
JAPAN (MNI BRIEF): Japan's economy for the July-September period is expected to post its second straight quarterly rise up 0.2% q/q, or an annualised 0.8%, but slowed from the previous quarter's 0.7% q/q increase due to weaker private consumption and capital investment, according to private economist forecasts.
CHINA
PROPERTY (BBG): “China’s residential property sales rose in October, the first year-on-year increase of 2024, as the government’s latest stimulus blitz brought back buyers.”
MANUFACTURING (MNI BRIEF): China's Caixin manufacturing PMI registered 50.3 in October, up from September’s 49.3, rising back to the expansionary zone above the 50 mark, the financial publisher said on Friday. Supply increased while demand turned slightly expansionary from contraction with the new orders sub-index rising to the highest level since July. But external demand weakened amid a slowing global economy, with the new export orders sub-index lingering below the breakeven 50 for the third consecutive month.
MANUFACTURING (21ST Century Business Herald): “China’s PMI will likely remain within expansionary territory for the remainder of Q4, after reaching 50.1 in October, the first time above the breakeven handle in five consecutive months, experts interviewed by 21st Century Business Herald said.”
MARKETS (CSJ): “China’s stock market is likely to continue rising should institutional funds increase investment once additional policies are fully implemented and price signals verified, China Securities Journal reported, citing Qin Peijing, chief strategy analyst of CITIC Securities.”
CHINA MARKETS
MNI: PBOC Net Drains CNY275.5 Bln via OMO Friday
The People's Bank of China (PBOC) conducted CNY17.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY275.5 billion after offsetting the maturity of CNY292.6 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5200% at 09:37 am local time from the close of 1.7044% on Thursday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on Thursday, compared with the close of 47 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1135 Fri; +2.83% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1135 on Friday, compared with 7.1250 set on Thursday. The fixing was estimated at 7.1250 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND SEP BUILDING PERMITS M/M 2.6%; PRIOR -5.2%
AUSTRALIA SEP HOME LOANS M/M -0.3%; MEDIAN 1.0%; PRIOR 2.1%
AUSTRALIA SEP HOUSEHOLD SPENDING M/M -0.1%; PRIOR 0.2%
AUSTRALIA SEP HOUSEHOLD SPENDING Y/Y 1.3%; PRIOR 2.7%
AUSTRALIA Q3 PPI Q/Q 0.9%; PRIOR 1.0%
AUSTRALIA Q3 PPI Y/Y 3.9%; PRIOR 4.8%
AUSTRALIA OCT F JUDO BANK PMI MFG 47.3; PRIOR 46.6
JAPAN OCT F JIBUN BANK PMI MFG 49.2; PRIOR 49.0
CHINA CAIXIN PMI MFG 50.3; MEDIAN 49.7; PRIOR 49.3
SOUTH KOREA OCT EXPORTS Y/Y 4.6%; MEDIAN 7.0%; PRIOR 7.5%
SOUTH KOREA OCT IMPORTS Y/Y 1.7%; MEDIAN 2.2%; PRIOR 2.2%
SOUTH KOREA OCT TRADE BALANCE $3167MN; MEDIAN $4100MN; PRIOR $6656MN
SOUTH KOREA OCT S&P PMI MFG 48.3; PRIOR 48.3
MARKETS
US: Morning Pullback Postponed as Futures Move Higher.
- Having retreating somewhat in Asian morning trading, the US 10YR Dec24 future has fought its way back to flat in this afternoon’s trade.
- Cash markets too have turned around and are trading with moderately positive tone with all maturities seeing lower yields. The 2YR (T4.125 ‘ 26 is at 4.172 (-0.2bp) and the 10YR (T 3.875% 34 at 4.279% (-0.9bp).
- Volumes appear light which is unsurprising ahead of tonight’s key data releases.
- Whilst US trading desks were largely seen as short covering, it it wasn’t the case in the morning session in Asian trading, but that has turned around after lunch.
- Tonight’s major release is the Non-Farm Payroll which surveys expect a mere +100k expansion.
- Other key data events will be the MNI Chicago PMI and the Unemployment Rate.
- Fed fund futures remain steady across the next few meetings, with 23.6bps priced for November, 42.9bps for December, and 58.2bps for January.
JGBS: Twist-Flattener Ahead Of US Payrolls
JGB futures are weaker but at session highs, -14 compared to settlement levels, as the market digests yesterday’s BoJ Policy Decision and Governor Ueda’s remarks.
- Outside of the previously outlined Jibun Bank PMI Mfg, there hasn't been much by way of domestic drivers to flag.
- BoJ-dated OIS pricing has firmed across meetings following the BoJ’s highly anticipated decision to hold rates steady yesterday. Prices have firmed by 2-5bps compared to Wednesday’s closing levels.
- “The BoJ may have to raise interest rates to 0.75% next year if the government comes up with a large fiscal stimulus, Morgan Stanley MUFG Securities economists say. "An expansionary fiscal policy is likely to boost not only consumption next year but, given supply-side constraints like the structural labor shortage, inflation as well," the economists say in a note.” (per DJ)
- Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session. Yesterday, US tsys finished 1-3bps richer. Trading desks noted modest short covering from proprietary/trading accounts ahead of today's US Nonfarm Payrolls.
- Cash JGBs have twist-flattened, pivoting at the 7-year, with yields 2bps higher to 1bp lower.
- Swap rates are flat to 2bps lower, with a flattening bias.
- The local market is closed on Monday.
AUSSIE BONDS: Heavy & Near Session Lows Ahead Of US Payrolls
ACGBs (YM -6.0 & XM -4.0) are cheaper and at/near Sydney session lows.
- Today’s domestic data drop (PPI, household spending, house prices, home loans and Judo Bank Mfg PMI) failed to move the market.
- Cash US tsys are flat to 2bps richer, with a flattening bias, in today’s Asia-Pac session. Yesterday, US tsys finished 1-3bps richer. Trading desks noted modest short covering from proprietary/trading accounts looking to square up positions ahead of the release of US Nonfarm Payrolls later today.
- Nonfarm payroll growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout.
- Cash ACGBs are 4-5bps cheaper with the AU-US 10-year yield differential at +27bps.
- Swap rates are flat to 1bp higher, with EFPs 4bps tighter.
- The bills strip has bear-steepened, with pricing flat to -3.
- RBA-dated OIS pricing is flat to 2bps firmer for 2025 meetings. A cumulative 2bps of easing is priced by year-end.
- On Monday, the local calendar will see Melbourne Institute Inflation and ANZ-Indeed Job Advertisements data alongside the AOFM’s planned sale of A$700mn of the 2.75% 21 November 2027 bond. The AOFM also plans to sell A$800mn of the 2.75% 21 June 2035 bond on Friday.
NZGBS: Slightly Richer, Narrow Ranges Ahead Of US Payrolls
NZGBs closed 1bp richer after being 1bp cheaper earlier in the session. Nevertheless, the 2bp range across benchmarks highlighted a willingness to stay on the sidelines ahead of the release of US Non-Farm Payrolls data for October later today.
- Nonfarm payroll growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout.
- The Fed’s Waller has previously estimated this could drag 100k from payrolls this month although that appears right at the top end of analyst expectations. (See MNI NFP Preview here)
- Locally, house prices and building approvals failed to be market moving, as expected.
- NZ’s National Institute for Water and Atmospheric Research said there is a 53% chance that La Niña developing by the end of 2024, down from 60% reported in early October.
- Swap rates closed flat to 3bps firmer, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 3-9bps firmer, with the later meetings leading. A cumulative 96bps of easing is priced by February, with 55bps by year-end.
- The local calendar is empty on Monday, ahead of the RBNZ’s release of its Financial Stability Report on Tuesday.
FOREX: USD/JPY Firms, Steady Trends Elsewhere, Implied Vols Surging At 1wk Tenor
The USD BBDXY index sits higher in latest dealings, last near 1259.75, largely thanks to a weaker yen trend as the Friday Asia Pac session has unfolded.
- USD/JPY was softer earlier, perhaps reflecting carry over from Thursday's session, but was supported sub 152.00. The pair last tracked 152.50, off around 0.30% in yen terms, and around session highs.
- Cross asset sentiment, particularly from an equity market standpoint may be weighing on yen against crosses. Hong Kong and China equities are a clear standout in terms of posting solid gains. This followed the stronger than expected Caixin Manufacturing PMI, which rose back above 50.0.
- US equity futures are also holding in positive territory, Amazon rose in late Thursday US trade, post earnings, although Apple tracked lower.
- AUD/USD and NZD/USD are closed to unchanged against the USD, the A$ last near 0.6580, NZD, 0.5980. This leaves both currencies outperforming yen modestly. Neither FX reacted much at the time of the PMI beat in China
- We had a number of Australian data releases, second tier in nature, which didn't shift A$ sentiment. The household spending gauge was softer though.
- US yields have largely tracked sideways. Oil prices spiked amid fears Iran may strike Israel via proxies (such as Iraq). Brent was last above $74/bbl.
- 1 week implied vols are very elevated across the G10, with USD/JPY the highest at +18%. NZD/USD is at 15.75%, AUD is next 15.7%, as next week's US election comes into focus.
- Looking ahead, Swiss CPI cross Friday before the US jobs data. Nonfarm payrolls growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout.
ASIA STOCKS: China Up on Further Stimulus Hopes ("Title Correction")
- Equity indices were weaker across the region today, with China bucking the trend.
- As the Party Congress Meeting starts next week in China, there are renewed hopes for further stimulus measures to be announced.
- The CSI300 was up +0.85%, Shanghai Comp +0.60%, Hang Seng +1.50% whilst the Shenzhen Comp was off -0.70%.
- Data released in China today saw the Caixin PMI move into expansion territory; a sign that the stimulus is starting to impact the broader economy.
- In Indonesia, the CPI release was the weakest since October 2021 and may point to a further cut from the Central Bank at their meeting later this month.
- Equity markets brushed that aside as the Jakarta Composite was lower by -0.70%.
- South Korea saw their PMI contract for the third consecutive month, potentially paving the way for further rate cuts.
- Equity markets shrugged this to move moderately lower by -0.10%
- Markets have had generally light volumes across the region as the markets pause ahead of significant US data releases tonight.
OIL: Prices Consolidate Following Iranian News.
- Rumours are circulating of a potential attack by Iran on Israel following on from Israel’s attack on Iran’s military targets.
- News of the attacks initially calmed oil markets as fears were held as to the potential interruption from oil supply.
- The primary concern as to the rumours circulating is that Iran is planning the attack via Iraq based militia groups they support.
- This would potentially open up Iraq as a target for Israel and as a major OPEC producer, could have implications for the production and supply to global oil.
- News of the potential attack took WTI from US$69.10 through $70.50 before backing off during the Asian session to $70.41.
- WTI has had a volatile week trending down to be just on 1.9% lower.
- Brent’s ascent has been far more gradual having touched US$72.25 it has progressively moved higher to $73.92.
- Brent too has had a volatile week trending down to be -2.80% lower.
- At time when the Middle East tensions are adding volatility to oil prices, US production is steadily ramping up.
- US oil production hit a monthly record of 13.4 million barrels in August, driven by a rapid expansion of production in Texas.
General risk-off sentiment on Thursday, emphasised by the sharp weakness for major equity benchmarks, prompted a solid pullback for gold. The spot price declined 1.5%, unwinding an overbought condition for the yellow metal.
- Bullion is steady in today’s Asia-Pac session ahead of the release of US Non-Farm Payrolls later today. Nonfarm payroll growth is expected to slow materially to circa 100k in October after a booming 254k in September, with significant disruption from strikes and potential hurricane fallout.
- The Fed’s Waller has previously estimated this could drag 100k from payrolls this month although that appears right at the top end of analyst expectations. (See MNI NFP Preview here)
- The US Fed’s next policy meeting is on November 6-7. Traders continue to price in a roughly 90% chance of a 25bp cut next week. Lower rates are typically positive for gold, which doesn’t pay interest.
- According to MNI’s technicals team, the trend condition in Gold is unchanged and bulls remain in the driver’s seat. The latest climb has resulted in a breach of $2685.6, the Sep 26 high, confirming a resumption of the primary uptrend and maintaining the price sequence of higher highs and higher lows.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 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) |
| 01/11/2024 | 1400/1000 | *** | US | ISM Manufacturing Index |
| 01/11/2024 | 1400/1000 | * | US | Construction Spending |