MNI EUROPEAN MARKETS ANALYSIS: All Eyes On US CPI Later

• US Tsy yields and broader dollar trends are little changed in the first part of Thursday trade, as markets await the US CPI print later.
• On the data front, Japan's PPI was close to forecast, while Australian consumer inflation expectations were steady in Q3. The South Korean President sees local equity markets as undervalued and sees a role for fiscal policy to boost growth.
• US Headline CPI is forecast to rise 0.2pp to 2.9% y/y in August while core is expected to be stable at 3.1% y/y, well above the Fed’s 2% target (see Hidden PDF).
• In addition to the CPI, US August real earnings, jobless claims and August budget print. The ECB is expected to leave rates unchanged at its decision later.

MARKETS

US TSYS: Asia Wrap - Quiet Session Ahead Of US CPI

The TYZ5 range has been 113-13+ to 113-15+ during the Asia-Pacific session. It last changed hands at 113-14, down 0-04+ from the previous close. 

• The US 2-year yield is trading around 3.542%.
• The US 10-year yield has edged higher trading around 4.052%, up 0.01 from its close.
• 10-Year Yields should continue to see demand on bounces now as the market reacts to a labour market that is rapidly cooling. The first buy-zone is now back towards 4.20%, having basically reached the first target towards the 4.00% zone, the CPI tonight will determine if the market begins to look towards the 3.80% area.
• MNI US PREVIEW: August CPI: Risks Seen Skewed To Core Tickup To 0.4% M/M. Despite coming in softer than expected on the headline reading, the PPI release doesn't appear to have a significant impact on expectations for Thursday's CPI (0830ET).
• Consensus (Bloomberg median) is for core CPI to come in at 0.3% M/M rounded in August, same as July (0.32% unrounded). Unrounded core CPI expectations suggest a slight skew toward risks of a rounded-up 0.4%, with an unrounded MNI median of 0.32% and range of estimates of 0.29% to 0.36%. That would be steady from 0.32% in July for the joint-highest M/M since January.
• (Bloomberg) -- Bond traders are girding for a high-stakes US inflation report that has the potential to dent their wagers on a deep series of Federal Reserve interest-rate cuts starting this month and extending into 2026.
• Data/Events: CPI, Initial Jobless Claims, Household Change in Net Worth, Federal Budget Balance

Fig 1: 10-Year US Yield Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

India-Russia Trade May Come Into Focus Again After Poland Incident

Following Russian drones violating Poland’s (NATO member) airspace, further discussions around punitive tariffs for purchasers of Russian energy are likely to come to the fore again. Increased sanctions on Russia were already being discussed with President Trump saying the US would follow the EU. He has already added a 25% punitive duty on imports from India but there is a risk now that could rise but he also said this week he had spoken with his “good friend” Indian PM Modi and that trade negotiations were ongoing.

• Before Russia invaded Ukraine in February 2022, less than 1% of India’s oil imports came from Russia with the bulk from the Middle East. Visual Capitalist noted that in May it had risen to 40% with the Middle East around the same at 39%, as the former is priced at a discount to the latter. India has to import around 85% of its crude.
• This has driven Russia’s share of Indian imports to around 9% of the 2024 total up from 1.5% in 2021. 

India imports % total

Source: MNI - Market News/LSEG (IMF DOTS)

• China remains the main source at 15% in 2024 and this year to date has trended marginally higher. China’s share of Indian exports more than halved between 2020, when there were significant border skirmishes, and 2022 from 6.9% to 3.3%. Recent meetings between PM Modi and President Xi may change that.
• The US is India’s primary export destination and that share has risen in H1 2025 to around 23% from 2024’s 18% due to frontloading of shipments ahead of US import duties. The euro area is the next largest accounting for 15.9% in 2024 followed by the Middle East at 15.7%. 

India export destinations % 2024 total

Source: MNI - Market News/LSEG (IMF DOTS)

JGBS: Twist-Flattening Ahead of US CPI Data

JGB futures are slightly weaker and hovering just above session lows, -11 compared to the settlement levels.

• (MNI) Japan’s corporate goods price index rose 2.7% y/y in August, accelerating from July’s revised 2.5%, driven by beverages and foods (+5.0% vs +4.7%) and nonferrous metals (+6.2% vs +0.3%). On a monthly basis, CGPI fell 0.2% in August after a 0.3% gain in July, the first decline in two months.
• Japanese automakers continued to slash U.S. export prices, with automobiles down 19.9% y/y on a yen basis and 20.5% on a contract currency basis, following July’s -24.4% and -18.4% respectively, pointing to squeezed profit margins.
• Cash US tsys are little changed in today's Asia-Pac session ahead of today's US CPI data.
• Cash JGBs are mixed across benchmarks with yields 1bp higher to 2bps lower and the curve flatter. The benchmark 10-year yield is 0.5bp higher at 1.576% versus the cycle high of 1.649%.
• Swap rates are 1-2bps higher. Swap spreads are wider.
• Tomorrow, the local calendar will see IP and Capacity Utilisation data alongside an Auction for Enhanced-Liquidity 5-15.5 YR.

JAPAN DATA: PPI Close To Expectations, Import Prices Up M/M For 2nd Month

The Japan August PPI was close to market expectations. In m/m terms we were -0.2%, against a -0.1% forecast, although the July outcome was revised up to 0.3%m/m (from 0.2% originally reported). In y/y terms we were +2.7%, same as the consensus forecast, while the July outcome was revised down a touch to +2.5%. 

• The chart below overlays the PPI versus headline Japan CPI, both in y/y terms. Both measures are comfortably off earlier 2025 highs, albeit with the PPI showing some signs of stability. As we approach end 2025 base effects are likely to bias the PPI y/y lower (all else equal).
• In terms of the detail, manufacturing PPI rose 0.1%m/m, after a 0.2% gain in July. In y/y terms most sub-categories are positive, with the main negatives being iron and steel, along with petroleum and coal.
• On the trade price side, import prices were up 0.5%m/m, following a 2.4% gain in July. We are still off -3.9% in y/y terms, although this is up from the -10.3% July pace. This is consistent with less impetus around yen gains, with y/y USD/JPY momentum turning positive in recent months. 

Fig 1: PPI Y/Y Ticks Up In Aug But Off 2025 Highs 

Source: Bloomberg Finance L.P./MNI 

JAPAN DATA: Local Investors Buy Offshore Equities & Bonds

Japan outbound investment flows were positive in the week ending Sep 5. We saw a second consecutive week of net buying in the offshore bond space, albeit at a more modest pace compared to the previous week. This is consistent with rising global bond returns, aided by rising Fed easing expectations amid softer data outcomes. Local investors also purchased offshore equities for the second straight week and in bigger size compared to the prior week. Again, similar factors may be in play, with global equity returns on the improve in recent weeks. 

• In terms of inflows into Japan bonds/equities, offshore investors purchased a modest amount of local stocks. This ends a two week run of outflows in this space (which came after a long period of inflows).
• On the bond side, offshore investors sold local bonds. Rising yields, amid fiscal outlook concerns, may be tempering return expectations for offshore investors in this space.  

Table 1: Japan Offshore Weekly Investment Flows  

Source: Bloomberg Finance L.P./MNI 

AUSSIE BONDS: Modest Bull-Flattener Ahead Of US CPI Data

ACGBs (YM +2.0 & XM +4.0) are modestly stronger after today's inflation expectations data.

• Melbourne Institute consumer inflation expectations jumped back to 4.7% in September, in line with July, after moderating in August to 3.9%. Q3 averaged 4.4% unchanged from Q2, signalling no progress on this front with the series zigzagging sideways for over a year. While petrol prices declined in August and September, they were little changed on the quarter in Q3. The widely reported July CPI jumped 0.9pp to 2.8% y/y with the trimmed mean up 0.6pp to 2.7%, which Westpac noted may have been driven by consumer expectations for the lower economic outlook in September.
• Cash US tsys are little changed in today's Asia-Pac session ahead of today's US CPI data.
• Cash ACGBs are 2-3bps richer with the AU-US 10-year yield differential at +19bps.
• The bills strip is little changed, with a slight flattening bias.
• A 25bp rate cut in September is given a 12% probability, with a cumulative 29bps of easing priced by year-end (based on an effective cash rate of 3.59%).
• Tomorrow, the local calendar will be empty apart from RBA Brad Jones' appearance at the FINSIA Regulators Conference.

AUSTRALIA DATA: Inflation Expectations Unchanged In Q3 At 4.4%

Melbourne Institute consumer inflation expectations jumped back to 4.7% in September, in line with July, after moderating in August to 3.9%. Q3 averaged 4.4% unchanged from Q2, signalling no progress on this front with the series zigzagging sideways for over a year. While petrol prices declined in August and September, they were little changed on the quarter in Q3. The widely-reported July CPI jumped 0.9pp to 2.8% y/y with the trimmed mean up 0.6pp to 2.7%, which Westpac noted may have been driven consumer expectations for the economic outlook lower in September. However in terms of news recall in the survey, inflation was at its lowest level for four years.

Australia CPI y/y% vs MI consumer inflation expectations

BONDS: NZGBS: RBNZ Gov Still Expects Another 50bps Of Easing By YE

NZGBs closed showing a modest bull-flattener, with benchmark yields 2-4bps lower.

• MNI AU - RBNZ Still Sees 2.5% OCR Trough Depending On Data: Governor Hawkesby noted at the Financial Services Council conference today that the economy has looked better in July and there are signs that growth will pick up in H2, as was expected. He also stuck with the August projection that the OCR will trough at 2.5% but said that "could occur faster or slower depending on how the economic recovery evolves", ie remains data dependent. The RBNZ expects Q2 GDP to fall 0.3% q/q (released September 18) but then recover to +0.3% in Q3 and +0.8% in Q4. 25bp rates cuts in October and November are expected.
• Westpac now expects New Zealand house prices to rise just 0.6% in 2025, down from an earlier projection of a 3.6% gain, Chief New Zealand economist Kelly Eckhold said in an emailed note. “The 3.6% gain we previously projected now looks optimistic given the recent momentum in prices,” Eckhold wrote. – per BBG
• RBNZ dated OIS closed showing 22bps of easing priced for October, with a cumulative 39bps by November 2025.
• Tomorrow, the local calendar will see BusinessNZ Manufacturing PMI and Card Spending data.

RBNZ Still Sees 2.5% OCR Trough Depending On Data

Governor Hawkesby noted at the Financial Services Council conference today that the economy has looked better in July and there are signs that growth will pick up in H2, as was expected. He also stuck with the August projection that the OCR will trough at 2.5% but said that “could occur faster or slower depending on how the economic recovery evolves”, ie remains data dependent. The RBNZ expects Q2 GDP to fall 0.3% q/q (released September 18) but then recover to +0.3% in Q3 and +0.8% in Q4. 25bp rates cuts in October and November are expected.

• Acting Governor Hawkesby’s term is due to end early next month, although it can be extended for another 3 months and he has also applied for the position. He stated today that despite the turnover in leadership, the well-established MPC has the “continuity to push ahead with an ongoing emphasis on delivering our mandate”. Former Governor Orr’s official replacement is yet to be announced.
• The RBNZ continues to monitor the second-round effects from higher US tariffs and that the bank was surprised by the impact of their announcement on NZ consumer and businesses in Q2 and resultant stalling in growth.
• He also observed that higher inflation but lower house prices had weighed on consumer confidence. 

FOREX: Asia FX Wrap - USD Holds Above Support Heading Into US CPI

The BBDXY has had a range of 1200.24 - 1201.45 in the Asia-Pac session, it is currently trading around 1201, +0.05%. The USD is consolidating around the 1200 area. The market will be focused on the US inflation data tonight looking for the green light to test the lows again. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows towards 1180 where demand should return initially. A break sub 1180 would be extremely bearish, should the USD start another leg lower it would have big implications for FX and potentially see a lot of the recent ranges in G10 broken.

• EUR/USD -  Asian range 1.1693 - 1.1707, Asia is currently trading 1.1700. The pair’s momentum higher stalled towards the 1.1800 area and then turned back lower. EUR is still within its wider 1.1350-1.1850 range with a bias to the topside.
• GBP/USD - Asian range 1.3523 - 1.3540, Asia is currently dealing around 1.3525. The pair failed back towards 1.3600 and is back in the middle of its recent 1.3350-1.3650 range.
• USD/CNH - Asian range 7.1144 - 7.1211, the USD/CNY fix printed 7.1034, Asia is currently dealing around 7.1200. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX +0.01%, Gold $3632, US 10-Year 4.05%, BBDXY 1201, Crude Oil $63.53
• Data/Events : EZ ECB Deposit Facility Rate, Germany Current Account Balance

Fig 1: BBDXY Spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

JPY: Asia Wrap - USD/JPY Consolidates On A 147 Handle Heading Into US CPI

The USD/JPY range has been 147.28-147.48 in the Asia-Pac session, it is currently trading around 147.45, +0.01%. USD/JPY traded sideways overnight caught between a heavy USD and its own political upheaval. The price remains in the middle of its recent 146-149 range, with US CPI to potentially test that tonight. CFTC data shows leveraged funds again added a decent clip to their short JPY position last week so they will be hoping the inflation data tonight keeps this support intact. A move back below 145/146 is needed to potentially start seeing these positions being flushed out.

• MNI Brief: Japan Aug CGPI Rises 2.7% Y/Y; Import Price Drops. Japan’s corporate goods price index rose 2.7% y/y in August, accelerating from July’s revised 2.5%, driven by beverages and foods(+5.0% vs +4.7%) and nonferrous metals(+6.2% vs +0.3%).
• Japan automakers continued to slash US export prices, with automobiles down 19.9% y/y on a yen basis and 20.5% on a contract currency basis, pointing to squeezed profit margins.
• Local Investors Buy Offshore Equities & Bonds : We saw a second consecutive week of net buying in the offshore bond space, albeit at a more modest pace compared to the previous week. This is consistent with rising global bond returns, aided by rising Fed easing expectations amid softer data outcomes. Local investors also purchased offshore equities for the second straight week and in bigger size compared to the prior week. Again, similar factors may be in play, with global equity returns on the improve in recent weeks.
• Options : Close significant option expiries for NY cut, based on DTCC data: 145.75($1.09b), 147.50($896m), 150.00($1.11b).Upcoming Close Strikes : 147.40($1.46b Sept 12), 150.00($1.49b Sept 16)  - BBG.
• CFTC data shows last week asset managers again added to their JPY longs after a consistent period of reduction +78427( Last +76761), leveraged funds though again used the dip to add a decent clip to their newly built short JPY position -66914(Last -52275). One of them is going to be wrong.

Fig 1 : USD/JPY Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

AUD: Asia Wrap - AUD/USD Probes Above 0.6600 Heading Into US CPI

The AUD/USD has had a range of 0.6608 - 0.6622 in the Asia- Pac session, it is currently trading around 0.6610, -0.05%. US stocks make new all-time highs again overnight, nothing stops this train. The AUD has grinded higher now probing the important 0.6650 area after the US PPI came in soft, can the US CPI tonight give it the momentum it needs to sustain a break through here. The AUD remains in its recent multi-month range of 0.6350-0.6650, should the USD break and extend lower we could potentially see the AUD break back above 0.6650. Should this occur it could provide the upward momentum to target levels back towards 0.6900/0.7000. Although still in the range the bias will be for dips back to 0.6500 to be supported for now with Asset managers boosting currency hedges adding to the bid tone.

• MNI AU - Inflation Expectations Unchanged In Q3 At 4.4%. Melbourne Institute consumer inflation expectations jumped back to 4.7% in September, in line with July, after moderating in August to 3.9%. Q3 averaged 4.4% unchanged from Q2, signalling no progress on this front with the series zigzagging sideways for over a year. While petrol prices declined in August and September, they were little changed on the quarter in Q3.
• The widely reported July CPI jumped 0.9pp to 2.8% y/y with the trimmed mean up 0.6pp to 2.7%, which Westpac noted may have been driven by consumer expectations for the economic outlook lower in September. However, in terms of news recall in the survey, inflation was at its lowest level for four years.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6535(AUD331m), 0.6650(AUD597m), 0.6800(AUD579m). Upcoming Close Strikes : 0.6575(AUD377m Sept 12) - BBG
• AUD/JPY - Asia-Pac range 97.45 - 97.60, Asia is trading around 97.50. The pair pushed above 97.50 overnight, a sustained break above 97.50/98.00 is needed to reignite the upward trend. This would turn the focus towards the 99.00/100.00 area.

Fig 1: AUD/USD spot Weekly Chart

Source: MNI - Market News/Bloomberg Finance L.P

NZD: Asia Wrap - NZD/USD Trades Sideways Around 0.5950, Awaits US CPI

The NZD/USD had a range of 0.5934 - 0.5947 in the Asia-Pac session, going into the London open trading around 0.5835, -0.07%. US stocks make new all-time highs again overnight, nothing stops this train. The NZD momentum higher has stalled in what should be the perfect zone to fade for bears, the price action for the USD though gives me pause. US CPI tonight will have a say in whether this area holds or not. CFTC Data shows light positioning in a market that is struggling for a strong trend as we move back into the middle of the recent 0.5800-0.6100 range.

• MNI AU - RBNZ Still Sees 2.5% OCR Trough Depending On Data: Governor Hawkesby noted at the Financial Services Council conference today that the economy has looked better in July and there are signs that growth will pick up in H2, as was expected. He also stuck with the August projection that the OCR will trough at 2.5% but said that “could occur faster or slower depending on how the economic recovery evolves”, ie remains data dependent. The RBNZ expects Q2 GDP to fall 0.3% q/q (released September 18) but then recover to +0.3% in Q3 and +0.8% in Q4. 25bp rates cuts in October and November are expected.
• Friday sees August BusinessNZ manufacturing PMI which returned above the breakeven-50 mark in July after two months of contraction. August card transaction data also prints on Friday. The retail data is showing some recovery in spending but it remains soft. It underestimated nominal Q1 & Q2 retail sales substantially.
• AUD/NZD range for the session has been 1.1126 - 1.1140, currently trading 1.1135. The Cross is consolidating above 1.1100, dips back towards 1.1000/1.1050 should be supported now. A break above the multiple highs towards the 1.1200 area is needed to regain the momentum higher.

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

ASIA STOCKS: KOSPI Gives Back Early Gains as NIKKEI Reaches New Highs.

The KOSPI has benefitted of late on the hope that the President may drop a plan to lower the threshold for capital gains on stock holdings.  The President today said today he did not see the point in holding onto this proposal, yet fell short of dropping it and instead handed the decision over to the National Assembly. In China pharmas are under pressure after an article in the New York Times suggested the Trump administration is considering restrictions on medicines from Asian nations. 

• The NIKKEI was up again today, by +0.85% and at 44,213 has reached a new all time high.  
• The onshore /offshore dived was clear today as the Hang Seng declined, whilst the onshore major bourses delivered strong gains.  The HSI is down -0.29%, CSI 300 +1.77%, Shanghai +1.12% and Shenzhen +1.92%.
• The TAIEX in Taiwan posted modest gains of +0.25% as it also posted new highs of 25,248.
• The KOSPI gave back some of the earlier gains, yet remains up +0.40% Thursday.
• The FTSE Malay KLCI is one of the few of the major bourses declining, with falls of -0.52%.
• The Jakarta Composite is up strongly by +0.79%, yet remains lower for the week.  
• The NIFTY 50 has done nothing so far today, seemingly taking a breather after six days of gains.  

ASIA STOCKS: Taiwan Inflows Remain Very Strong, South Korea Inflows +1$bn

Yesterday saw strong inflow momentum into both South Korean and Taiwan equity markets. Taiwan remains the standout for the past 5 trading days, with over $5bn in net inflows. This has also driven a strong rise in YTD inflows. Via BBG: " Taiwan Semiconductor Manufacturing Co. posted a 34% rise in August revenue, signaling sustained global demand for cutting-edge AI silicon." This is likely aiding inflows into tech bellwether TSMC. Overnight we also had strong rises in the SOX and MSCI IT indices. Expectations of easier Fed policy will be boosting sentiment in this space. 

• For South Korea, the Kospi surged yesterday to fresh cycle highs through 3300. Sentiment was aided by local media reports yesterday: "- South Korea likely to scrap its plan to lower the threshold of large shareholders subject to capital gains tax to 1b won, DongA Ilbo newspaper reports" (via BBG). President Lee may make the announcement today, he speaks at 10am local time.
• Elsewhere, we saw mostly outflow pressures. Focus remains on Indonesia, where the changing of the FinMin is creating uncertainty around the fiscal outlook, even with pledges to maintain fiscal discipline.
• We also saw outflows from Thailand, with the 5 day rolling sum also now comfortably negative. 

Table 1: Asian Markets Offshore Net Equity Flows 

Source: Bloomberg Finance L.P./MNI 

OIL: Crude Holds Onto Gains As Watches Global Events

Oil rose 1.8% on Wednesday and has held onto most of these gains during today’s APAC session as the market awaits US August CPI and further geopolitical developments in Europe and the Middle East, which could cause some market volatility. WTI is down 0.2% to $63.52/bbl, close to the intraday low, after reaching $3649.09 earlier. Brent is 0.2% lower at $67.35/bbl after a high of $67.62. The USD index is slightly higher.

• After Russian drones violated Poland’s airspace, it asked NATO to invoke Article 4, the clause allowing members to report security concerns to the group. US President Trump reacted on Truth Social saying “What’s with Russia violating Poland’s airspace with drones? Here we go!”.
• The EU had already been looking at further sanctions on Russian banks and energy and the incursion into Poland makes their implementation more likely with Trump saying the US will follow the EU.
• OPEC and the generally less optimistic IEA both publish their monthly reports including market projections today. The IEA has been expecting a record global surplus in 2026.
• Headline CPI is forecast to rise 0.2pp to 2.9% y/y in August while core is expected to be stable at 3.1% y/y, well above the Fed’s 2% target (see Hidden PDF).
• In addition to the CPI, US August real earnings, jobless claims and August budget print. The ECB is expected to leave rates unchanged at its decision later. 

GOLD: Bullion Slightly Lower Ahead Of US CPI Release

Gold, the US dollar and Treasury yields are little changed ahead of August US CPI data released today. Bullion is down 0.2% to $3633.0/oz after rising to $3649.09 and then falling to $3630.02. The inflation data will be monitored for signs of pass through of the higher tariffs to consumers, especially as the market has over 25bp of easing priced in for the 17 September Fed decision. 

• Headline CPI is forecast to rise 0.2pp to 2.9% y/y in August while core is expected to be stable at 3.1% y/y, well above the Fed’s 2% target (see Hidden PDF).
• Silver is down 0.2% to $41.10 after a low of $41.067 and high of $41.249.
• Equities are mixed with the S&P e-mini up 0.1% and CSI 300 +1.8% but Hang Seng down 0.3% and ASX -0.5%. Oil prices are lower with Brent -0.2% to $67.38/bbl. Copper is down 0.3%.
• In addition to the CPI, US August real earnings, jobless claims and August budget print. The ECB is expected to leave rates unchanged at its decision later. 

SOUTH KOREA: President Lee: Fiscal Stimulus To Boost Growth, Kospi Undervalued

South Korean President Lee has marked his first 100 days in office with a press conference, where a wide range of issues have been discussed - fiscal stimulus to boost growth, the local property market, trade negotiations with the US, along with the outlook for the stock market. 

• The President is clearly in favor of more fiscal stimulus. He noted now is the time to focus on growth and not worry about debt levels. Lee added the time is for fiscal policy to expand to boost growth even if it means higher national debt levels.
• Such comments are unlikely to surprise the market. The 2026 budget called for a 8.1% rise in government spending (from late August). The South Korean government 2/10s bond curve is also off recent highs, flatter back to +42bps. We have struggled to steepen beyond +50bps for this metric (although we are up firmly since the start of the year from around +10bps).
• Lee did state that some economic indicators are picking up.
• On the housing side, Lee stated: "*LEE: A FEW MEASURES ALONE CANNOT SOLVE HOUSING MARKET ISSUES" - BBG, suggesting more measures are likely to cool the housing market.
• On the equity market: "*LEE: I THINK KOSPI IS SIGNIFICANTLY UNDERVALUED" - BBG, while noting tax changes should designed to boost the market. He added *LEE: NO NEED TO STICK TO 1B WON THRESHOLD ON CAPITAL GAINS TAX LEE: WILL LEAVE IT TO PARLIAMENT FOR DISCUSSION ON STOCK TAX" - BBG.
• Speculation yesterday that proposed changes to the capital gains tax threshold would be scrapped aided Kospi sentiment. The Kospi is still up today, but off earlier highs, with Lee's comments not providing a clear outlook for proposed tax changes related to capital gains tax.
• On the US-South Korea trade deal - "*LEE: STILL HAVE ALOT MORE NEGOTIATIONS WITH US ON TARIFFS,*LEE: WON'T MAKE DECISION THAT RUN COUNTER TO NATIONAL INTERESTS" - BBG, along with "SOUTH KOREA'S LEE: IMMIGRATION RAID CAN BE DIRECTLY IMPACTING KOREAN INVESTMENTS IN U.S. - [RTRS]"
• South Korean officials will travel again to the US for trade talks. Earlier in the week, one area of concern was the pledge for South Korean investment flows into the US and how that might impact USD/KRW (it would bias it higher, which is not something the US authorities would like in the context of the trade balance). 

INDONESIA: What Could the New FinMin Mean for the Bond Curve

• A yield curve steepens when long-term interest rates rise faster than short-term rates, or when short-term rates fall faster than long-term rates. This typically signals expectations of strong economic growth and potentially higher future inflation, leading investors to demand higher compensation for longer-term bonds due to increased risk. Yet in Indonesia, since the start of the year, inflation has been declining as curves steepened.  
• Since the peak of 6.25% last year, the BI-Rate has been cut 125bps.  It is clear that the relationship between the 2-Yr and the BI is strong, with the 2-Yr tracking lower as rates have been cut. 

• The 2-Yr yield is lower by -130bps from the January highs, representing a near 1-to-1 correlation whereas the 10-Yr is lower by -85bps.  
• The result has been a Bull Steepener  which occurs when short-term interest rates fall faster than long-term rates

• Yet as always, we ask ourselves what happens next given the new Finance Minister's appointment and his belief that the country could grow faster than the current 5%.
• Just a few months before being named Indonesia's new finance minister, Purbaya Yudhi Sadewa, raised eyebrows in markets by calling the International Monetary Fund "stupid" for cutting its growth outlook for Southeast Asia's largest economy.  
• Mr Purbaya said on Sept 8 it was “not impossible” to grow at 8 per cent and said he would target 6 per cent to 7 per cent in the shorter term, on the back of increased government and private sector participation in the economy.
• From yesterday, via BBG: "- Indonesia’s new finance minister unveiled a roughly $12 billion cash injection to stimulate lending, proving his commitment to President Prabowo Subianto’s growth agenda barely two days into the job." (see this link for more details).
• This points to a strong emphasis from the new finance minister on boosting growth.
• More broadly, what other levers does he have to pull and what should markets be wary of?
• Firstly, Central Bank independence may be challenged.  The BI today is regarded as a professional Central Bank, with the tools, people and understanding of how to manage financial markets.  Markets expect further cuts from the BI and will be watched closely to see if the new FinMin attempts to exert higher levels of influence over the 'independent' central bank.  
• Government bond issuance / higher fiscal deficits.  The new FinMin has 'committed' to the the 3% deficit target yet with the current fiscal position not too far away from that target, where does that leave room to supersize growth, especially in an 'increased government' model.  
• One of these two forces may need to change from the current pace / pathway; with changes to both representing challenges to the bond market.
• Quite likely, either or bother could result in steeper curves; potentially hitting levels not seen since the COVID period.  

THAILAND: Consumer Confidence Weakens Further Signalling Slower Spending

Thailand’s University of the Thai Chamber of Commerce consumer confidence index fell to 50.1 in August from 51.7, around neutral. Economic conditions declined 1.5 points to 44.1, signalling that private consumption growth slowed further in the quarter. Political uncertainty likely added to pessimism regarding the economy, as former PM Paetongtarn was suspended on July 1 but wasn’t officially removed until August 29. The new PM has promised elections within four months and so political instability looks likely to continue for now. 

• Both consumer expectations and the present situation deteriorated in August to 57.3 from 58.9 and 35.4 from 36.7 respectively.
• Real household expenditure growth peaked in Q3 2022 at 9.2% y/y and has been slowing since. It moderated to 2.1% y/y in Q2 this year from 2.5% y/y in Q1 and 3.4% y/y in Q4 2024.
• July private consumption fell 0.2% m/m, third consecutive monthly seasonally-adjusted decline, bringing the annual rate to -0.3% y/y, the first contraction since November 2021.
• The strong baht has weighed on the important tourism sector with arrivals down 15.9% y/y in July, the largest decline since the pandemic.
• Employment remains soft falling 0.9% y/y in July. The jobs component of consumer confidence fell 1.6 points to 48.3 in August, while future income was down 1.6 points to 58.0.

Thailand consumer confidence vs consumption y/y%

Source: MNI - Market News/LSEG

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
11/09/2025	0600/0800	***	SE	Final Inflation Report
11/09/2025	0600/0800	***	SE	Final Inflation Report
11/09/2025	1100/0700	***	TR	Turkey Benchmark Rate
11/09/2025	-	***	CN	Money Supply
11/09/2025	-	***	CN	New Loans
11/09/2025	-	***	CN	Social Financing
11/09/2025	1215/1415	***	EU	ECB Deposit Rate
11/09/2025	1215/1415	***	EU	ECB Main Refi Rate
11/09/2025	1215/1415	***	EU	ECB Marginal Lending Rate
11/09/2025	1230/0830	***	US	Jobless Claims
11/09/2025	1230/0830	**	US	WASDE Weekly Import/Export
11/09/2025	1230/0830	*	CA	Household debt-to-income
11/09/2025	1230/0830	***	US	CPI
11/09/2025	1230/0830	***	US	CPI
11/09/2025	1230/0830	***	US	CPI
11/09/2025	1245/1445		EU	ECB Press Conference
11/09/2025	1415/1615		EU	ECB Lagarde Presents Rate Decision on ECB Podcast
11/09/2025	1430/1030	**	US	Natural Gas Stocks
11/09/2025	1530/1130	*	US	US Bill 08 Week Treasury Auction Result
11/09/2025	1530/1130	**	US	US Bill 04 Week Treasury Auction Result
11/09/2025	1700/1300	***	US	US Treasury Auction Result for 30 Year Bond
11/09/2025	1800/1400	**	US	Treasury Budget
12/09/2025	0430/1330	**	JP	Industrial Production
12/09/2025	0600/0700	***	GB	UK Monthly GDP
12/09/2025	0600/0700	**	GB	Trade Balance
12/09/2025	0600/0700	**	GB	Index of Services
12/09/2025	0600/0700	**	GB	Index of Production
12/09/2025	0600/0800	***	DE	Germany CPI (f)
12/09/2025	0600/0700	**	GB	Output in the Construction Industry
12/09/2025	0600/0800	***	DE	Germany CPI (f)
12/09/2025	0645/0845	***	FR	HICP (f)
12/09/2025	0700/0900	***	ES	HICP (f)
12/09/2025	0830/0930	**	GB	Bank of England/Ipsos Inflation Attitudes Survey
12/09/2025	0900/1100		EU	Labour Market Quarterly Statistics
12/09/2025	1230/0830	*	CA	Building Permits