JAPAN DATA: Local Investors Buy Offshore Bonds, Indifferent On Equities
In terms of Japan outbound flows, local investors returned to offshore bond purchases last week. This marked net buying in 4 out of the last 5 weeks. Since the start of Oct, cumulative net flows for this segment are still negative though. Global bond returns have largely tracked sideways over this period and remain sub 2025 highs. Focus will be on whether we see a move higher into year end following the overnight Fed outcome, although the market may await for 2026 data trends to break us out of recent ranges for longer dated UST yields. In the equity space, we saw local investors sell down offshore holdings, but only modestly. Net flows have been quite modest over the past few weeks.
- In terms of inflows into Japan assets, we saw continued net buying of local stocks, but at a reduced pace. The general trend since the start of Q4 has been net buying in this space, as Japan stocks have remain supported on dips. The NKY 225 remains off early Nov highs.
- In the bond space offshore investors sold local bonds, although this only partially unwound the prior week inflow. Cumulative inflows have been evident since the start of Q4, but not to the same degree as bond inflows.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending Dec 5 | Prior Week |
| Foreign Buying Japan Stocks | 96.8 | 655.7 |
| Foreign Buying Japan Bonds | -442.6 | 1065.8 |
| Japan Buying Foreign Bonds | 452.9 | -771.3 |
| Japan Buying Foreign Stocks | -64.5 | 78.8 |
Source: Bloomberg Finance L.P./MNI
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US STOCKS: S&P(ESZ5)-Builds On Gains Back Above 6800, Is That Low Into Year-End?
The S&P(ESZ5) overnight range was 6792.75 - 6865.75, SPX closed +1.54%, Asia is currently trading around 6865.00. Risk built on its early gains overnight as sentiment turns positive on the shutdown ending. This morning stocks have opened a little higher, E-minis(S&P) +0.10%, NQZ5 +0.12%. There are quite a few commentators calling that the low last week and this should now be the catalyst to start the year end “Santa Rally”. For my mind the issues that contributed to last week's pullback are still alive and kicking but this year it has been prudent to not fight this bull market when it goes on a run. Should risk build on this return of positive sentiment then dips should be supported and we could have another look at the year's highs in the year-end rally.
- Lance Roberts points out on X that, “Perfect timing to end the Government shutdown as today starts the strongest part of the year-end run. Look for a dip in early December as mutual funds distribute gains and income.” See Graph Below.
- Bloomberg is reporting that, “Corporate buybacks are tracking close to last quarter’s levels even before Nvidia reports results, signaling continued momentum for the stock market into year-end.” {NSN T5IL79GPL3YW <GO>}
Fig 1: S&P 500 Index Daily Chart
Source: MNI - Market News/@LanceRoberts
AUSTRALIA DATA: Sentiment Jumps, Higher Inflation & On Hold Rates Ignored
Despite lower rate cut and higher inflation expectations, Westpac consumer confidence surprisingly jumped 12.8% m/m to 103.8 in November, the highest since January 2022 and the largest monthly rise since Covid-impacted September 2020. Finally optimists exceeded pessimists, reflected in the “time to buy a major item” rising almost 15%. If sustained, then it is likely to reflect further recovery in the domestic economy and possibly a wealth effect from rising house prices.
- On Monday, RBA Deputy Governor Hauser noted that growth is already close to potential and thus the economy to capacity. While these concepts are difficult to estimate, any pickup in growth could potentially add to inflation. This large jump in confidence adds to the risk of that and the chance that rates won’t be cut further.
- Consumers don’t always behave in line with their survey responses and so monthly household spending data will be monitored closely to see if there is an increase in expenditure consistent with the pickup in confidence. October prints on 4 December with November 12 January.
- House prices are expected to rise with expectations +0.3% m/m to 172.4, a new record high. However, time to buy a home remains soft at 96.4.
Australia Westpac consumer confidence
Source: MNI - Market News/LSEG
MNI: UK BRC OCT BY VALUE SHOP SALES LFL +1.5% Y/Y, TOTAL +1.6% Y/Y
- MNI: UK BRC OCT BY VALUE SHOP SALES LFL +1.5% Y/Y, TOTAL +1.6% Y/Y
