Source: MNI - Market News/Bloomberg
UK
BOE (BBG): “Clearing houses pose a risk to the financial system if they are not robustly operated, Bank of England Governor Andrew Bailey said.”
DATA (MNI): UK GfK Consumer Confidence fell for the second consecutive month to -21 (vs -20 prior), making it the lowest since March 2024. 3 of 5 subcomponents fell. The key future indicators were broadly unchanged, with the major purchase index up by 2 points, whilst personal financial situation over the next year is up 1 point and general economic situation is down one point relative to September. It looks as though the trend in consumer confidence and CPI is breaking down as CPI returns closer to target, as it did between 2020 and 2021.
EU
ECB (BBG): “European Central Bank Governing Council member Pierre Wunsch said it’s far too early to start considering a half-point interest-rate reduction in December.”
GERMANY (MNI INTERVIEW): The fate of Europe’s biggest export-based manufacturing economy could be determined in the next five years, a leading German government adviser told MNI, with a new “Marshall Plan” needed to counter Chinese competition and declining U.S. demand for the country’s goods.
EU (MNI BRIEF): An ECB Banking Lending Survey showing a modest pick-up in loan demand for families, along with an improvement in euro area confidence indicators could mean that savings ratios are finding a peak which could be an early indicator of higher consumption in the coming future Bank of Latvia's Governor Martins Kazaks said Thursday.
NORWAY (MNI BRIEF): The weakness of the krone has stopped inflation in Norway from falling as fast as elsewhere, Norges Governor Ida Wolden Bache said at an event in Washington, with the central bank projecting its first rate cut this cycle in Q1 2025.
US
FED (MNI POLICY): Growing optimism within the Federal Reserve that the U.S. expansion will continue to create jobs without sparking new underlying inflation pressures bolsters the case for a steady series of quarter-point rate cuts over the next several meetings, even as investors second-guess how fast the Fed will ease policy.
OTHER
JAPAN (MNI BRIEF): The Tokyo core inflation rate slowed to 1.8% y/y in October from September’s 2.0% for the second straight deceleration and fell below the bank’s 2% target for the first time in five months, data from the Ministry of Internal Affairs and Communications showed on Friday.
JAPAN (MNI BRIEF): Japan’s services producer price index rose 2.6% y/y in September, slowing from August’s revised 2.8%, showing that corporate pass-through of cost increases remained solid despite the pace slowing due to the strengthening yen, preliminary data released by the Bank of Japan on Friday showed.
CANADA/CHINA (MNI BRIEF): Canada's Deputy Prime Minister Chrystia Freeland on Thursday accused China of seeking to disrupt Canada's development of competitive miners of critical minerals, telling a U.S. audience that groups like the G7 must come together on a response.
CANADA (MNI INTERVIEW): BOC Justified To Cut 50BPS More In Dec-Kronick
CHINA
POLICY (BBG): “China’s central bank kept its one-year policy rate unchanged, after slashing funding costs by the most on record a month ago, suggesting authorities are cautiously pacing monetary stimulus to support the economy.”
STIMULUS (BBG): “China’s recent barrage of fiscal measures fall short of what’s needed to address deflationary risks plaguing the world’s second-largest economy, according to one senior International Monetary Fund official.”
DEFAULTS (BBG): “Defaults in an opaque corner of China’s local debt market have surged to a record high, ensnaring investors who’d assumed the securities had an implicit guarantee from the state.”
CHINA MARKETS
MNI: PBOC Net Injects CNY184.2 Bln via OMO Friday
The People's Bank of China (PBOC) conducted CNY292.6 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net injection of CNY184.2 billion after offsetting the maturity of CNY108.4 billion today. PBOC also conducted another CNY700 billion via 1Y MLF with rate unchanged at 2.00%, draining CNY89 billion after hedging CNY789 billion matured earlier this month, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) rose to 1.7135% at 10:11 am local time from the close of 1.6363% on Thursday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Thursday, compared with the close of 48 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1090 Fri; +2.73% Y/Y
The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1090 on Friday, compared with 7.1286 set on Thursday. The fixing was estimated at 7.1102 by Bloomberg survey today.
MARKET DATA
NEW ZEALAND OCT ANZ CONSUMER CONFIDENCE M/M -4.1%; PRIOR 3.1%
NEW ZEALAND OCT ANZ CONSUMER CONFIDENCE -4.1%; PRIOR 3.1%
**MNI JAPAN OCT TOKYO CORE CPI +1.8% Y/Y; SEPT +2.0%
JAPAN OCT TOKYO CORE-CORE CPI +1.8% Y/Y; SEPT +1.6%
JAPAN OCT SERVICES PRICES +0.8% Y/Y; SEPT +0.6%
JAPAN SEPT SERVICES PPI -0.1% M/M: AUG REV +0.0%
**MNI: JAPAN SEPT SERVICES PPI +2.6% Y/Y; AUG REV +2.8%
MNI: UK OCT GFK CONSUMER CONFIDENCE INDEX -21
MARKETS
US TSYS: Tsys Futures Edge Slightly Higher On Low Volumes
- It has been a very uneventful session for us tsys, with futures edging slightly higher throughout the session, volumes are well below recent averages and we trade well within Thursday's ranges. TU is + 00⅛ at 103-06+ while TY +02 at 111-11.
- Across the APAC markets today, China & HK equities jumped on hopes of further stimulus updates, with tech and small-cap stocks leading the way. In Japan markets are trading lower ahead of this weekend's general election.
- The cash tsys curve has bull-flattened today with yields are trading 1.5-3bps lower. The 2yr is -1.9bps at 4.059%, while the 10yr is -2.6bps at 4.186%.
- Tsys are on track for two session of gains, the 10yr yield is 6.5bps lower than highs made on Wednesday, although still trades 10.5bps higher for the week. The 2s10s is trading flat for the week at 12.5bps, while the 5s30s curves has flattened about 8bps to 43.5bps.
- Flows in SOFR options were relatively light on Thursday, but the trend of downside protection continued as traders positioned for fewer rate cuts than currently priced into the front-end of the curve.
- Currently, the swaps market is pricing around 43bps of rate cuts across the two remaining Fed meetings this year, with a total of 138bps priced in by the end of 2025
- Later today we have Durables/Capital Goods and University of Michigan's sentiment/inflation outlook.
JGBS: Cash Bonds Bull Flatten, Core CPI < 2%, BoJ MPM Next Wed/Thu
JGB futures are stronger and at Tokyo session highs, +10 compared to settlement levels, despite Tokyo CPI's core measures surprising on the upside of expectations.
• The market focused on the fact that core inflation in Tokyo in October dipped below the central bank's 2% target for the first time in five months, potentially complicating the BoJ's quest to raise interest rates further.
• Moreover, the closely watched services inflation also slowed, casting doubt on the BoJ’s expectations that higher wages would broaden cost pressure beyond goods and keep price rises durably around its 2% target.
• Uncertainty over the outcome of the weekend’s lower house elections also likely supported JGBs. Opinion polls suggest the LDP could lose its majority, which may lead to a postponement of the BoJ’s policy normalisation.
• Cash US tsys, which are ~2bps richer in today’s Asia-Pac session, also assisted the move to yield lows.
• Cash JGBs are flat to 3bps richer across benchmarks, with a flattening bias. The benchmark 10-year yield is 1.0bp lower at 0.953% versus the cycle high of 1.108%.
• Swap rates are flat to 2bps lower, with the belly of the curve outperforming.
• On Monday, the local calendar is empty apart from BoJ Rinban Operations covering 3-25-year JGBs. The BoJ Policy Meeting is next Wednesday and Thursday.
AUSSIE BONDS: Richer But Subdued Dealings, Q3 CPI Next Wednesday
ACGBs (YM +2.0 & XM +3.0) are stronger but off Sydney session highs.
- With the domestic calendar light today, the local market likely eyed cash US tsys, which are ~2bps richer in today’s Asia-Pac session.
- Cash ACGBs are 2-3bps richer with the AU-US 10-year yield differential at +23bps.
- The 3/10 curve remains just below the upper range it has traded in since late 2022. The ACGB cash curve has closely tracked the recent upward pressure on the US 10-year yield. However, the local economic outlook may soon play a larger role, with the release of Q3 CPI data next Wednesday.
- Inflation is expected to move back to the top of the RBA’s 2%-3% target band for the first time since Q1-21. Consensus estimates inflation slowed to 3.0% y/y from 3.8% in Q2.
- Swap rates are 2-4bps lower, with the 3s10s curve flatter.
- The bills strip has bull-flattened, with pricing flat to +4.
- RBA-dated OIS pricing is 1-4bps softer for 2025 meetings. A cumulative 4bps of easing is priced by year-end.
- Next week, the AOFM plans to sell A$700mn of the 2.75% 21 November 2028bond on Monday and A$800mn of the 3.50% 21 December 2034bond on Friday.
NZGBS: Closed At Bests, Local Market Closed on Monday
NZGBs closed at the session’s best levels, with benchmark yields 5-7bps lower. On the domestic data front, NZGBs were supported by a fall in the consumer confidence index, which suggested interest rate relief won’t be immediate for many households, and that there are still plenty of challenges to navigate including near-term job insecurity.
- Cash US tsys, which are ~2bps richer in today’s Asia-Pac session, also assisted the move to yield lows. Today's US calendar will see Durables/Capital Goods and the University of Michigan's sentiment/inflation outlook. Next Friday sees employment data for October.
- Nevertheless, the NZGB 10-year outperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials 2-3bps tighter.
- Swap rates closed 5-8bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 1-4bps softer for 2025 meetings. A cumulative 100bps of easing is priced by February, with 54bps by year-end.
- The local market is closed on Monday for the Labour Day Holiday.
- Across the ditch, Australia will see the Q3 CPI report on Wednesday. Inflation is expected to move back to the top of the RBA’s 2%-3% target band for the first time since Q1-21. Consensus estimates inflation slowed to 3.0% y/y from 3.8% in Q2.
FOREX: AUD & NZD Eyeing Weekly Lows, Underperforming Yen
The USD BBDXY index is a touch higher, last near 1258.3. Most weakness today has been focused in AUD and NZD. Yen is marginally higher, but is within Thursday ranges.
- The AUD and NZD weakness doesn't appear to have had a direct catalyst. Broader technical trends remain weaker for both currencies. AUD/USD is very close to key Sep lows, last near 0.6620. NZD/USD is last at 0.5990, challenging week to date lows.
- Onshore China and HK equities are higher, up around 1% at this stage. Stimulus optimism and better housing data is aiding sentiment. Iron ore is higher, up 1.8%, but this is not benefiting the AUD so far.
- USD/JPY has been somewhat volatile, but within recent ranges, we were last 151.70. We had fresh FX rhetoric from the Chief FX Diplomat, but yen strength was limited. The Tokyo CPI for Oct showed firmer core price trends relative to expectations. Services prices rose firmly in the month. However, with BoJ Governor Ueda hinting at no changes next week, this may be limiting the data's impact.
- We also have the Japan lower house elections this weekend. Uncertainty rests over whether the ruling LDP will lose its outright majority. A broader coalition in Japan may temper the BoJ normalisation process, albeit at the margins.
- Looking ahead, we have US durable goods orders and the U. Of Mich sentiment final read as the main data points. The Fed's Collins also speaks.
EQUITIES: China & Hong Kong Equities Edge Higher On Stimulus Hopes
Chinese and Hong Kong markets traded higher on Friday, driven by optimism surrounding the real estate sector and potential government stimulus measures. The HSI is 1.20% higher, trimming its weekly decline to just 0.3%, while the CSI 300 trades 1.10% higher. A key factor was a 22% rise in residential presales in 30 major Chinese cities, with first-tier cities leading the gains, boosting investor sentiment.
- Solar stocks in China rebounded sharply, with Xinyi Solar jumping 11% and Xinyi Glass up 4.1%, following news that the US may consider cutting tariffs on Chinese solar products. Additionally, positive remarks from China’s Photo-voltaic Industry Association regarding pricing strategies in the sector helped lift stocks.
- EV Stocks have also rallied with the CSI New Energy Vehicle Index up 5.40% as traders remain hopeful about further policy support and better growth prospects in China.
China is launching 20 new equity funds linked to the recently created A500 index, which tracks 500 large-cap, highly liquid stocks from various industries. This move comes after 10 ETPs based on the A500 index raised 20b yuan ($2.8b) and saw rapid asset growth, doubling to 39b yuan within just seven trading days. The introduction of these mutual funds, backed by ETFs tracking the A500 index, is seen as part of broader government efforts to stabilize the economy and stock market, attracting investor confidence.
EQUITIES: Japanese Equities Lower Ahead Of Election
Japanese equities are lower today, ahead of this weekend's general election. The Topix Index & Nikkei 225 both dropped 1%, driven by concerns that the ruling Liberal Democratic Party and its coalition may lose their majority in the lower house. This uncertainty has led to a cautious mood among investors, despite support from a weaker yen.
- An inconclusive election result could delay the usual post-election fiscal stimulus, affecting stock sentiment. However, it may also pressure the BOJ to maintain its easy monetary policy, which would help weaken the yen further and improve corporate earnings, particularly in the upcoming earnings season.
- Rigaku Holdings, saw its shares fall as much as 15% on its debut after conducting Japan’s second-largest IPO of the year. Concerns also weighed on Canon, whose shares dropped 5% after cutting its full-year profit guidance.
- Investors are largely holding back until after the election, focusing on how the political outcome may impact fiscal and monetary policies moving forward.
- All sectors are in the red today, with financials contributing most to the days losses, the TOPIX Banks Index is 1.42% lower.
Oil Prices Consolidate Following Supply Led Concerns.
- With limited new news out of the Middle East markets returned their attention to the stockpile accumulation story from the US as the key driver in oil’s price decline overnight.
- US government figures showed a significant and unexpected pick up in stockpiles, reaching 5.47 million barrels when only 1.6 million was forecast.
- Yet despite this, data out shows that traders are positioning themselves against sudden oil price rises.
- WTI had paired back all of Wednesday’s decline in Thursday trading reaching US$72.34 before the refocus on the inventory accumulation.
- WTI then declined materially in late trading reaching $69.77 before steadying at $70.33.
- Oil has had a positive week after last week’s decline with WTI up +1.60%.
- Brent followed a similar trading pattern reaching US$76.54 before bouncing off $74.00 to steady at $74.56.
- Brent had a positive week also up just over +2.00%.
- In the Middle East, US Secretary of State Antony Blinken met with Saudi Crown Prince Mohammed bin Salman in efforts to find ways to move forward in the Israeli / Lebanon conflict.
- Blinken had pleaded with Israel to find ways that do not exacerbate hostilities with Iran or it’s militant groups.
GOLD: Buoyed By Weaker Dollar & Continued Have Demand
Gold is 0.3% lower in today’s Asia-Pac session, after closing 0.8% higher at $2736.17 yesterday.
- Bullion gained support from a weakening U.S. dollar yesterday and sustained safe-haven demand, pushing gold to record highs this week.
- One driver of this haven buying is the looming U.S. election, now less than two weeks away. Republican candidate Donald Trump's pledges to impose massive tariffs that could disrupt global trade have fueled market uncertainty, bolstering demand for gold.
- Despite expectations that the Federal Reserve will adopt a more gradual approach to cutting interest rates in the coming months, gold has continued to rise. Typically, lower interest rates are beneficial for gold, as it is a non-yielding asset, making it more attractive in a low-rate environment.
- According to MNI’s technicals team, gold bulls are still in the driver’s seat, with sights remaining on $2767.1, a Fibonacci projection point, ahead of the $2800.0 handle.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 25/10/2024 | 0600/0800 | ** |  SE | PPI |
| 25/10/2024 | 0645/0845 | ** |  FR | Consumer Sentiment |
| 25/10/2024 | 0700/0900 | ** |  ES | PPI |
| 25/10/2024 | 0800/1000 | ** |  EU | M3 |
| 25/10/2024 | 0800/1000 | ** |  IT | ISTAT Business Confidence |
| 25/10/2024 | 0800/1000 | ** | IT | ISTAT Consumer Confidence |
| 25/10/2024 | 0800/1000 | *** |  DE | IFO Business Climate Index |
| 25/10/2024 | 0800/1000 | ** | EU | ECB Consumer Expectations Survey |
| 25/10/2024 | 1230/0830 | ** |  CA | Retail Trade |
| 25/10/2024 | 1230/0830 | ** |  US | Durable Goods New Orders |
| 25/10/2024 | 1230/0830 | ** | CA | Retail Trade |
| 25/10/2024 | 1300/1500 | ** |  BE | BNB Business Sentiment |
| 25/10/2024 | 1400/1000 | ** | US | U. Mich. Survey of Consumers |
| 25/10/2024 | 1500/1100 | US | Boston Fed's Susan Collins | |
| 25/10/2024 | 1500/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) |