ASIA STOCKS: Asia Stocks Showing Signs that Rally is Faltering
Asian equities were mixed Friday as the FED decision gets closer, and concerns continue to grow for a BOJ rate rise, causing the NIKKEI to fall. The KOSPI is holding onto strong gains for the week as the AI / tech rally is supported by upcoming government policy on dividends. A surge in the share price for China's chipmaker Moore Threads in its trading debut sees tech investors assessing valuations of China's tech compared to Japan and Korea. India's Central Bank the RBI cut rates as expected whilst reducing their outlook for inflation and moving to neutral with their outlook for rates. Following the impact of US data overnight on bonds, eyes turn tonight back to US economic releases following Labour Market data overnight as markets look to firm up pricing for a cut.
- The NIKKEI is down -1.40% today and is barely clinging onto a weekly gain as the KOSPI roared again up by 1% and over 3.6% for the week.
- China's bourses are mixed with the Hang Seng down -0.25% today and flat for the week whilst the CSI 300 is up marginally and holding onto a 0.50% weekly gain. Shenzhen and Shanghai are up but on track for a weekly fall.
- The NIFTY 50 is up marginally post the RBI by +0.20% yet remains down -0.3% for the week with profit taking driving things following recent new highs in place.
- SE Asia's major bourses have delivered positive gains for the week with yet again the Jakarta Comp leading the way with gains of +1.7%, with the SE Thai +1.7% and FTSE Malay KLCI up +0.50%.
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US TSYS: TYZ5 Bounces from Key Tech Level, Gives Back Early Gains
Bond futures took the overnight lead and rallied strongly in the morning session, but failed to hold above a key technical, falling back in the afternoon. TYZ5 is up +0.05 at 115-23+, after a high of 115-29+ earlier, just above the 20-day EMA of 115-28+.
Cash has been strong also with yields 1-2bps lower across the curve.
- The 2-Yr fell -1.6bps to 3.561%
- The 5-Yr is down -1.7bps at 3.68%
- The 10-Yr is lower by -1.6bps at 4.072%
- The 30-Yr is down -1bps at 4.657%.
The bond market has been starved of data but will get some non-government led releases tonight in the ADP Employment Change (consensus 30k; prior -32k) S&P Global US Services PMI (forecast 55.2; prior 55.2) and ISM Services Index (forecast 50.8; prior 50.0).
For issuance, the focus tonight remains on bill issuance with a US$95bn 6-week bill auction ahead of the US Treasury Quarterly Funding announcement.
GOLD: Firms On Risk Aversion, Correlation With USD Eyed
Gold is tracking higher in latest dealings, last near $3970, up around 1% from end Tuesday levels. Focus from a technical standpoint, the retracement since Oct 20 has allowed an overbought trend condition to unwind. The 20-day EMA has been breached, signalling scope for a test of the 50-day EMA, at $3864.7. Clearance of this EMA would strengthen a short-term bear theme. Initial resistance is at $4161.4, the Oct 22 high.
- Gold support is likely emerging from the risk off tone in markets, although sentiment has stabilized as the session has progressed. US equity futures and bitcoin are comfortably up from earlier lows.
- The USD is also off earlier highs, the BBDXY last near 1225.6, after getting to 1226.35 earlier. This has also likely lent some support to gold as well.
- To the extent the market is still maintaining core long gold positions, this may limit the extent of gold upside, particularly if we see broader USD gains. The recent move lower in gold has coincided with some dollar stability, see the chart below. Note the BBDXY index is inverted on the chart.
Fig 1: Gold & USD BBDXY Index (Inverted) Trends
Source: Bloomberg Finance L.P./MNI
JGBS: Little Changed But Weaker After Tepid Demand At Today's 10Y Auction
JGB futures are stronger, +15 compared to settlement levels.
- Japanese bond futures trimmed earlier gains after a key measure of demand at today’s 10-year auction fell to its lowest since May, though they remain slightly higher amid a global bond rally.
- Demand at Japan’s 10-year government bond auction was subdued, as investors weighed the risk of a near-term BOJ rate hike despite the central bank’s cautious stance, while fiscal concerns also dampened sentiment. The average bid-to-cover ratio declined to 2.9734x from 3.3356x at the previous auction in October. Moreover, the low price failed to meet expectations at 100.34, according to the Bloomberg dealer poll. However, the tail shortened to 0.13 from 0.19.
- Cash JGBs are 1bp richer to 1bp cheaper, with a steepening bias. The benchmark 10-year yield is 0.2bp lower at 1.670% versus the cycle high of 1.705%.
- Swap rates are flat to 1bp lower.
- Tomorrow, the local calendar will see Cash Earnings, S&P Global Composite & Services PMIs and Tokyo Avg Office Vacancies data.
Source: Bloomberg Finance LP
