ASIA STOCKS: China & HK Equities Heads Higher, China Mfg PMI Above 50
Oct-31 04:49
Chinese and Hong Kong equities are higher today, as investors reacted positively to a report showing Chinese manufacturing data expanding for the first time since April, suggesting that recent stimulus measures may be starting to boost growth momentum in the manufacturing industry. BYD beat Tesla in quarterly revenue for the first time, but its shares slumped as traders focused on weaker net sales per vehicle. Despite mixed corporate earnings, the report on manufacturing uplifted market sentiment in both regions.
- Chinese property developer shares rose for the second consecutive session, driven by optimism following reports that China is considering a 4b yuan special bond issuance to support the struggling sector. The BBG China Property Developer Gauge is 4% higher, Mainland Property Index +2.60% while the CSI 300 Real Estate Index is 2.30% higher.
- Chinese banks posted modest profit gains in Q3 2024, despite challenges from a slowing economy and low margins. ICBC reported a 3.8% profit increase, while Agricultural Bank of China, Bank of Communications, Bank of China and China Construction Bank saw gains ranging from just above 1% to nearly 6%. Banking stocks were mixed, with the Mainland Banking Index down 0.45%.
- BYD surpassed Tesla in quarterly revenue for the first time, posting $28.2b in sales versus Tesla’s $25.2b, driven by strong demand for its hybrid vehicles. Despite a record net income of $1.6b, Tesla still leads in profitability with $2.2b. BYD's vertically integrated supply chain and dominance in China’s EV market have helped cushion it from global headwinds, positioning it well for continued growth.
- China's Manufacturing PMI for October rose to 50.1, slightly above market expectations of 49.9 and following September's decline of 49.8. The Non-manufacturing PMI also printed at 50.1, up from 50.0 last month. This marks the first expansion after five months of contraction, indicating early positive signs from stimulus measures ahead of next week's National People's Congress.
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BONDS: NZGBS: Closed On A Strong Note, NZIER Pricing Intentions Soften
Oct-01 04:39
NZGBs closed on a strong note, with benchmark yields 1-2bps lower, after being as much as 3bps higher earlier. This came despite a strengthening in business confidence.
- The NZIER Q3 Business Opinion Survey showed, after seasonal adjustment, a net 5% of businesses expect the economy to deteriorate versus a revised 40% in Q2. This was the strongest reading since Q2 2021.
- With cash US tsys little changed in today’s Asia-Pac session, the local market’s change in direction during the session appeared linked to NZIER pricing intentions.
- A net 3% of firms raised prices in Q3, which was the lowest reading since Q4 2020. Just 7% see price increases in Q4.
- NZIER expects a 25bp cut in the OCR next week but a case can be made for a bigger move given the decline in pricing expectations. BNZ has shifted to a 50bp cut next week.
- Swap rates closed 1-2bps lower, with the 2s10s curve flatter.
- RBNZ dated OIS pricing closed 1-3bps softer across meetings. A cumulative 91bps of easing is priced by year-end.
- Tomorrow, the local calendar is empty.
- Later today the US calendar flash PMI, JOLTS and ISMs data, and more Fed speak from Bostic, Barkin and Cook.
US TSYS: Tsys Futures Erase Earlier Gains, PMIs & More Fed Speak Later Today
Oct-01 04:36
- Tsys futures have reversed earlier gains and now trade near session lows although still well off the lows made overnight, as headlines out of the middle east have seem to slow while the USD saw buying following dovish comments from the BoJ.
- US Dockworkers strike set to go ahead after no deal announced, equities ticked slightly lower on these headlines but so far moves have been limited.
- TU is trading +00⅞ at 104-04¾, vs lows of 104-04⅜, while TY is now unchanged for the Asian session at 114-13, vs lows of 114-12
- The Fed's Powell reaffirmed that interest rates will be lowered "over time" as inflation continues to move toward the 2% target, while emphasizing that future rate decisions will depend on incoming economic data and the pace of labor market cooling. Powell noted the Fed is not rushing rate cuts, leaving the door open for gradual easing depending on economic conditions.
- Cash tsys curves have reversed their earlier flattening move and are twist steepening with the front-end outperforming, yields are +0.5bps to -1bps with the 2yr -0.6bps at 3.635%, while 10yr is +0.2bp at 3.783%.
- Later today we have flash PMI, JOLTS and ISMs and more Fed speak from Bostic, Barkin and Cook.
GOLD: Fed Chair Powell’s Comments Weigh
Oct-01 04:11
Gold is slightly higher in today’s Asia-Pac session, after closing 0.9% lower at $2634.58 on Monday.
- Bullion was pressured yesterday by Fed Chair Powell’s remarks at the NABE conference, where he stressed the Fed is not in a hurry to cut rates. He also emphasised that the overall US economy remains on solid footing.
- The US 2-year rate was up 8bps to 3.64%, while the 10-year was 3bps cheaper at 3.78%.
- Lower rates are typically positive for gold, which doesn’t pay interest.
- Today's US calendar will see flash PMI, JOLTS and ISMs data, and more Fed speak from Bostic, Barkin and Cook.
- According to MNI’s technicals team, last week’s move 0.9% move higher confirmed a resumption of the primary uptrend, with a focus on $2675.5 next, a Fibonacci projection. Firm support lies at $2583.9, the 20-day EMA.
