GOLD: Gold Moderates Despite Equity Weakness, Remains Overbought

TYZ5 is dealing at 112-26, -0-05+ from closing levels in today's Asia-Pac session, as risk turns down, led by Bitcoin. 

• Stocks have extended Monday's weakness in today’s Asia-Pac session. Chip makers led declines yesterday, followed by financials. Investors all of a sudden appear wary of lofty tech valuations, ahead of Nvidia Corp.’s earnings and a key US jobs report later this week.
• Cash US tsys are 2-3bps richer, with a steepening bias, in today's Asia-Pac session.
• However, JGBs have bear-steepened in today's session. "A “sell Japan” trend is likely to persist across equities, bonds and the yen unless Tokyo de-escalates its ongoing diplomatic spat with China, according to Tomo Kinoshita, global market strategist at Invesco." - BBG
• Tuesday's data schedule is light, with markets gearing up for the now-much-delayed September NFP print due this Thursday.

All the major indices are down in Asia Pac so far today, with tech sensitive plays the worst hit. Japan markets off over 2%, likewise Taiwan, while the South Korean Kospi is down around 3%. Focus remains on the crypto space, where Bitcoin is under 90k, which is fresh lows back to April of this year. Markets will be mindful of deleveraging if we see further downside and spill over to broader risk trends. US equity futures are off, Eminis down close to 0.60%, while Nasdaq futures sit down over 0.750%.  Eminis are at levels last seen in mid Oct. The next downside target may be the 100-day EMA near 6586 (we were last around 6654)

• Japan markets are off over 3%, with the NKY 225 testing under 49000. This is an important support area in light of the recent step uptrend. USD/JPY is back under 155.00 amid the risk off mood. Japan is also looking to mend ties with China - via BBG: "Foreign Minister Toshimitsu Motegi told lawmakers on Tuesday that Tokyo has been working on multiple fronts to clarify Takaichi’s remarks, including sending a senior diplomat to Beijing this week. “Our stance is being conveyed clearly at various levels,” Motegi said.
• We also have the meeting later at 3:30pm local time between PM Takaichi and BoJ Governor Ueda.
• In Hong Kong the HSI is off around 1.5%, while the CSI 300 is down a more modest 0.22% at the lunch time break (as is typical for risk off days).
• The Taiex is down over 2%, while the Kospi has fallen by over 3%, continuing its high beta/vol trend of late. This puts the index back under the 4000 level. The other focus point for chip/AI related markets is Nvidia results on Wednesday. Tech is seen as susceptible to further risk off though as this is where we have seen strong outperformance so far in 2025.
• In South East Asia markets are weaker, we are down, but losses are generally more modest, and less than 1% at this stage. In Australia the ASX 200 is down 2%. 

ACGBs (YM +4.0 & XM +3.5) are richer and at session highs as risk turns down, led by Bitcoin.

• Cash US tsys are 2-3bps richer, with a steepening bias, in today's Asia-Pac session.
• Cash ACGBs are 4bps richer with the AU-US 10-year yield differential at +32bps.
• Today’s Jun-54 bond auction saw the weighted average yield print 0.18bps through prevailing mids. However, demand weakened dramatically, as reflected by a cover ratio of 2.8500x, down from 4.0533x from the previous auction.
• The AOFM plans to sell A$1000mn of the 2.75% 21 June 2035 bond tomorrow and A$700mn of the 1.25% 21 May 2032 bond on Friday.
• The November meeting minutes reiterated that the RBA's central scenario is "in balance" with risks to both the downside and upside. With core inflation above target and ongoing signs of a recovery in demand, policy is likely to be on hold in December and into early 2026, depending on the data.
• RBA-dated OIS pricing is softer today, showing a 25bp rate cut in December at a 5% probability, with a cumulative 15bps of easing priced by mid-2026.
• The bills strip has bull-flattened, with pricing +3 to +5.
• Tomorrow, the local calendar will see the Wage Price Index and the Westpac Leading Index. 

Bloomberg Finance LP