EQUITIES: Asian Equities Mixed As Market Remains Cautious Ahead Of US CPI

Q4 inflation expectations from the RBNZ’s business survey showed that they remain well anchored close to the mid-point of the target band. 1-year out they moderated to 2.05% from 2.4% while 2-years out they were slightly higher at 2.1% from 2.0%. 1-year out has a 90% correlation with headline inflation and 78% with core, so the RBNZ should be assured that the former will stay in the band and that the latter should return soon. Another 50bp of easing is likely at its November 27 meeting.

• RBNZ research found that household 1-year ahead inflation expectations had the best relationship with core. Our estimated correlation is higher for household than for business expectations at 85% versus 78%. Q4 household inflation expectations print on November 19.
• The business survey also includes the “perception of monetary conditions”, while they are expected to be less tight at the end of 2024 than they were at end-2023, they are still seen as tighter than end-2022. But by the end of 2025, they are perceived to be stimulatory. 

NZ CPI vs RBNZ 1-year inflation expectations y/y%

ACGBs (YM -4.0 & XM -0.5) are slightly weaker, having given up early gains on a data-light Sydney session. 

• US cash tsys are closed today for the Veterans Day holiday, while Treasury futures (TYZ4) are trading at 110-02, down 0-07 from Friday's close.Fed speakers resume Tuesday in addition to the Senior Loan Officer Opinion Survey on Bank Lending Practices.
• The local calendar is empty today, ahead of Consumer and Business Confidence tomorrow.  The Q3 Wage Price Index is released on Wednesday followed by the Employment Report for October on Thursday.
• Cash ACGBs are 1-4bps cheaper with the AU-US 10-year yield differential at +28bps.
• Swap rates are 1-4bps higher, with the 3s10s curve flatter.
• The bills strip is slightly cheaper, with pricing -1 to -5.
• RBA-dated OIS pricing is 1-4bps firmer today, with no easing by year-end. A 25bps rate cut is not fully priced until July. 

AUDUSD has held onto most of Friday’s 1.4% losses rising only 0.1% to 0.6592 during today’s APAC session. With equities selling off and commodities mixed, the move higher may be driven by market participants taking advantage of the low level following Friday’s move. The USD index is flat. 

• After outperforming at the end of last week, yen is underperforming today leaving AUDJPY up 0.5% to 100.95, close to the intraday high.
• AUDNZD is little changed up 0.1% to 1.1045. AUDEUR is 0.1% higher at 0.6147 and AUDGBP +0.1% to 0.5102.
• Equities are weaker with the ASX down 0.4% and Hang Seng -1.8% but the S&P e-mini is 0.2% higher. Oil prices are lower with WTI -0.3% to $70.16/bbl. Copper is up 0.4% though, while iron ore is down slightly at around $100-101/t.
• There are no data in the US or Europe with Veterans/Remembrance Day observed in a number of countries. ECB’s McCaul speaks later.