EQUITIES: Asian Equities Opening Higher, SK Equities Surge

Australian Q3 GDP was weaker than market forecasts. The economy expanded +0.3%q/q against a 0.5% forecast. In y/y terms were were up 0.8%, against a 1.1% forecast and prior of 1.0%. This is the softest y/y print since end 2020 (when the Covid pandemic impacted). 

• In terms of the detail, household spending was flat in the quarter, after a -0.3% dip in Q2. We slowed further in y/y terms to 0.4%.
• General government spending was 1.4% in consumption terms, led by state governments. Broader government spending was also strong.
• Dwelling and machinery and equipment investment rose in q/q terms, but again the government side was quite dominate. Private capital formation didn't make any contribution to GDP growth. Overall domestic demand rose 0.7% q/q, versus a 0.2% gain in Q2.
• GDP per capita was down -0.3% continuing the negative trend.
• Today's data doesn't paint a great picture for the domestic economy (outside of government expenditure). It is unlikely to shift near term RBA thinking though, with recent Oct data showing slightly firmer household spending trends. The central bank meets next Tuesday. 

Fig 1: Australia GDP & Household Spending (orange line) Y/Y

Source: MNI - Market News/Bloomberg 

ACGBs (YM flat & XM -1.5) remain slightly cheaper but are slightly stronger after Q3 GDP rose less than expected. 

• GDP rose 0.3% q/q (estimate +0.5%) in Q3 versus +0.2% in Q2. GDP rose 0.8% y/y (estimate +1.1%) versus +1.0% in Q2.
• Growth was driven by public sector expenditure with government consumption and public investment both contributing, Katherine Keenan, ABS head of National Accounts, said in a statement. GDP per capita slid for a seventh consecutive quarter, she added.
• Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s modest sell-off.
• Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential at +9bps.
• Swap rates are flat to 1bp higher.
• The bills strip has cheapened, with pricing flat to -1.
• RBA-dated OIS pricing is slightly softer after the data. Nevertheless, a 25bps rate cut is not fully priced until May. 

• MNI: AUSTRALIA Q3 GDP +0.3% Q/Q
• MNI: AUSTRALIA Q3 GDP +0.8% Y/Y