BONDS: ACGBs Yields Jump Following Strong Employment Data
Dec-12 04:55
Focus was on the stronger-than expected employment data today, which saw yields rise. Yield curves have bear-flattened slightly, with the 3yr underperforming across the curve.
- Australia's unemployment rate unexpectedly fell to 3.9% in November, defying forecasts and highlighting labor market resilience despite high interest rates. The stronger-than-expected jobs data, driven entirely by full-time employment gains (FT +52.6k, PT -17k), led markets to scale back the probability of a February rate cut from 74% to 50%.
- ACGBs were already on the back foot after US tsys yields rose 1-6.5bps overnight. The Aussie 2yr is trading +10.4bps at 3.886%, 3yr +11.3bps at 3.834%, while the 10yr is the best performing, trading +9.5bps at 4.277%. The 2s10s is -2bps at 37.66, while the 3s10s is -2.25bps at 43.20 erasing Wednesday's steepening move.
- ACGBS futures are currently YM -11.4 & XM -9.3
- Swaps are trading +8 to +12bps, with the short-end underperforming, curve has flattened.
- Bills strip is trading -2 to -10
- RBA-date OIS pricing has cooled 5-10bps, with the April meeting now pricing in just 24bps of cuts, down from 32bps of cuts prior to Employment. The first cut is priced in for May, with 43bps priced, while further out the curve there are 73bps of cumulative cuts priced by November.
- The AU-US 10yr spread is off monthly lows and now trades flat.
- There calendar is empty for tomorrow.
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ASIA STOCKS: Asian Equities Mostly Lower As Semiconductors Struggle
Nov-12 04:52
Asian equities are mostly lower today. Japanese equities have given back session gains to now trade mixed with tech stocks underperforming. Hong Kong listed equities have seen a sharp drop due to concerns about domestic macroeconomic conditions and rising geopolitical tensions, headlines out earlier supporting the China property market have done little to push equities higher. Asian tech stocks are the worst performing today, with the large-cap semiconductor stocks leading the losses. US Tsys yields rose, driving funds into the dollar and pressuring emerging Asian currencies, with the Thai baht and Indonesian rupiah weakening.
- Asia tech is struggling, tracking moves made overnight in the Philadelphia SE Semiconductor Index. Investors are now looking to key earnings reports from Tencent and Alibaba to gauge the impact of business streamlining efforts, and whether consumer spending will recover with potential Beijing stimulus.
- China mainland equities are outperforming Hong Kong listed equities, with the CSI 300 +0.40%, while the HSI is -1.75%, HSTech Index is -2.50%.
- Japanese equities are off earlier highs, with the TOPIX now just 0.10% higher for the day, Recruit Holdings surged 8.20% in early morning trading following better-than-expected operating profit for 2Q however most of those gains have now been erased and trades just 2.5% higher. The Nikkei has erased earlier gains and now trades down 0.70%, with Tokyo Electron (-3.20%) struggling.
- South Korea’s Kospi is trading 1.30% lower, marking a third straight session of losses, driven by foreign and local fund selling, while retail investors stepped in to buy. Taiwan's TAIEX is trading 1.70% lower, largely due to a 2.30% drop from TSMC following a 2.54% fall in the Philadelphia SE Semiconductor Index overnight.
- Australia's ASX 200 is 0.2% lower, primarily impacted by declines in gold miners as bullion prices retreated following volatility in the US. Meanwhile, Australian consumer confidence rose in November, as households appeared less worried about future interest rate hikes.
FOREX: USD Mostly Higher, A$ Weaker On Yuan Loss Spillover
Nov-12 04:38
The USD is tracking higher against all the major currencies, with the exception of the yen, as the first part of Tuesday trade unfolds. The BBDXY index was last near 1275.5, not too far off Monday intra-session highs (1276.43).
- AUD/USD is the weakest performer, last near 0.6555 and off close to 0.35%. Post election lows in the pair (0.6513) remain intact. Spill over from the break higher in USD/CNH, which is threatening a test of 7.2500, is weighing on the AUD.
- Earlier we had brief respite on BBG headlines that China is considering reducing property taxes to aid the sector, but the positive follow through provided short lived. At the break the CSI 300 is up modestly, the Shanghai Composite close to flat.
- Reports from the NYT and WSJ suggest foreign policy hawks could fill key Trump administration positions (Marco Rubio for Secretary of State and former veteran Republican Mike Waltz for National Security Adviser) is likely also in focus.
- US Tsy yields have resumed trading, with a curve flattening bias. The 2yr is up to 4.28%, +3bps, the 10yr sits off earlier highs, last near 4.32%. US equity futures are down slightly, while regional equity sentiment has seen some negative tech spill over.
- USD/JPY spiked above 154.00 earlier, but now sits back at 153.50/55, slightly firmer in yen terms for the session.
- Earlier data showed both consumer and business confidence in Australia rising, but the market impact was negligible. NZ spending data pointed to some improvement in consumer spending trends.
- Looking ahead, the Fed’s Waller, Barkin, Kashkari and Harker speak and the Senior Loan Officer Survey is published. US October small business optimism and NY Fed 1-yr inflation expectations plus UK labour market data and euro area November ZEW print. ECB’s Cipollone and BoE’s Pill appear.
EQUITIES: Consumer Discretionary Stocks Outperform Staples
Nov-12 04:32
- S&P 500 Consumer Discretionary stocks have surged higher following the US election.
- The Discretionary verse Staples spread is the widest since November 2021
- Tesla is the top performing in the discretionary index, jumping 9% on Monday and up 44% over the past 5 trading sessions, with travel/holiday stocks also performing well.
Chart. S&P 500 Consumer Discretionary vs Staples Stocks
