NEW ZEALAND: Core Eases But Non-Tradeables Proving Sticky
The RBNZ’s sector factor model estimate of Q4 core inflation eased 0.2pp to 3.1% y/y, close to the top of the 1-3% target band. Q3 was revised down 0.1pp to 3.3%. Given that headline was impacted by volatile components such as air fares, the move lower in underlying inflation is good news and another 50bp rate cut in February remains the base case. But underlying non-tradeables inflation is proving sticky and will continue to be watched closely.
NZ core CPI y/y% (RBNZ sector factor model)
- Moderation in core non-tradeable inflation remains slow and it was down only 0.1pp to 4.6% y/y, the lowest since Q1 2022 but still elevated. The series average is 3.3%. Its moderation from the peak remains significantly less than the overall core, but restrictive monetary policy and weak demand should help to bring it still lower.
- Core tradeables inflation was only 0.2% y/y in Q4 after 0.4%. The headline number picked up driven by volatile second-hand car prices. The drop in the underlying measure signals that weak discretionary spending is weighing.
NZ core CPI y/y% (RBNZ sector factor model)
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JGBS: Futures Track Recent Ranges, 10yr Yield Up From Post BoJ Lows
JGB futures rest at 142.45, -.02 versus settlement levels at the Monday lunchtime break. Ranges have been fairly narrow in the first part of Monday trade (142.41-142.63). US TSY futures are also close to unchanged in the first part of Monday trade.
- Broadly we sit within Dec ranges to date. Post BoJ highs for the March future rest 142.72. Recent lows were at 141.87, post the hawkish Fed cut earlier last week.
- Technicals for JGB futures still point south for JGB futures, with eyes on a break sub last week's lows.
- In the cash JGB space, yields are little changed in the first part of Monday dealing. The 10yr is up around 1.07% levels, off post BoJ lows (near 1.04%), but still seeing upside resistance above 1.10%. Swap yields are a touch higher.
- The data calendar is largely empty until the services PPI prints on Christmas day. BoJ Governor Ueda also delivers a speech that day.
CHINA: CGB Bond Yields Continue to Fall
- Despite efforts last week to halt the move lower in yields, China’ s bond yields dropped in this morning’s trading.
- CGB 10YR has fallen 3bps in early trading to be at 1.689%.
- The 10YR breached the 2.00% in early trading December and has progressively moved lower since.
- There are expectations that in the new year the authorities will reduced monetary policy and make RRR cuts to support the economy.
ASIA STOCKS: Asian Equities Higher, Tech Stocks Lead the Way
Asian equities are higher this morning, buoyed by a lower-than-expected US core PCE inflation reading, which increased hopes for more Fed rate cut in 2025. The MSCI Asia Pacific Index snapped a six-day losing streak as US equity futures pointed higher. Despite today’s gains, markets remain cautious. Focus this week will be on upcoming inflation data in Tokyo, Singapore, and minutes from the Reserve Bank of Australia's dovish policy meeting.
- Japanese equities are higher across the board with the Topix is up 0.75% while the Nikkei 225 advanced 0.95%. Recruit holdings is up 3.65% while Tokyo Electron is benefitting from a 1.50% jump higher in the SOX on Friday, with the stock last up 1.46%.
- China & Hong Kong equities are all higher, with HSI up 0.85%, banking stocks are the top performers with the HS Banking Index 1.20% higher, followed by HS Property Index which trades up 1.15%. In China mainland equities consumers discretionary is the top performing sector, the CSI 300 was last up 0.50%.
- The tech heavy markets in Taiwan and South Korea have surged higher today, after seeing heavy selling on Friday. The TAIEX is 2% higher with TSMC up 2.90% & Hon Hai up 2.50%, while in South Korea the KOSPI is 1.30% higher after Samsung jumped 1.70%.
- Australian equities are trading 1% higher, although still trades 4% lower for the month. Financials are the top performing sector today, followed by Real Estate stocks. New Zealand, NZX50 is trading 0.10% lower after Fisher & Paykel dropped 1.15%.
