ASIA STOCKS: Overnight Tech Falls Drag Asian Bourses Lower
Falls in US tech stocks overnight spilled over into Asia today with key AI tech names falling, dragging down key indexes. Japanese stocks had the dual pressure of an expected interest rate hike tomorrow from the BOJ and downward pressure from tech stocks, with key tech stock Softbank Group down -3.3%. The tech weakness spilled over into Korea with Samsung down -1.3% and SK Hynix down -5%. AI remains a major long-term structural theme for Asian tech manufacturers and is a key driver of performance, especially in the semiconductor sector but given the run up in stocks year to date, a correction was increasingly likely. Asia's equity markets and capital flows are impacted by US monetary policy and as such, eyes will be on the CPI release for November tonight.
- The NIKKEI is down -0.85% today and down over 3% for the week, whilst the KOSPI is down -1.3% and nearly 3% for the week as tech stocks struggle.
- China's bourses are mixed with the Hang Seng down -0.44%, CSI 300 down -056%, Shenzhen down -0.17% whilst the Shanghai Comp is up +0.16% as tech firms buck regional trends with modest gains.
- The NIFTY 50 is up modestly, though down for the week as foreign institutional investors continue to sell as valuations near 5-year peaks. The NIFTY 50 at 25,832 is near the 50-day EMA of 25,767 as downside resistance, with topside resistance from the 20-day EMA at 25,932.
- SE Asia's bourse seemingly have their focus on the US data release with Jakarta and KL near flat, whilst the SE Thai is down -0.20%.
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JGBS: Twist-Steepener, 2/30 YC Back Near Highs, PM/BOJ Meeting Due
JGB futures have clawed back to unchanged versus settlement levels.
- With the local calendar light, the domestic market, out to the futures-linked 7-year, has benefited from general global risk-off sentiment.
- "Japanese Prime Minister Sanae Takaichi is set to meet with Bank of Japan Governor Kazuo Ueda on Tuesday as she mulls support for an economy that shrank over the summer. The two will meet at 3:30 p.m. in Tokyo, according to the prime minister's office. - BBG
- Cash US tsys are 2-3bps richer in today's Asia-Pac session.
- JGBs have twist-steepened in today's session, with cash JGBs 1bp richer to 7bps cheaper across benchmarks. The benchmark 20-year yield is 3.6bps higher at 2.786% after setting a fresh cycle high of 2.816% ahead of tomorrow's supply.
- "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
- Today’s move also places the 2/30 curve within striking distance of its recent high. (see chart)
- Swaps have twist-steepened, with rates 1bp lower to 4bps higher.
- Tomorrow, the local calendar will see Trade Balance and Core Machine Orders data.
Source: Bloomberg Finance LP
GOLD: Weaker, Eyeing Sub $4000, Risk Off Doesn't Aid Sentiment
Gold is back close to $4010, off a further 0.90% so far today. the risk off evident in the crypto space and in equity markets has done little to aid gold safe haven related demand. Some offset is coming from a higher USD (albeit with mixed trends today, higher against higher beta plays, but safe havens, JPY and CHF are rising), as Fed easing expectations remain uncertain. A break under $4000 could bring the 50-day EMA support point into play, which comes in at $3927.5. Initial resistance is at $4264.7.
- FOMC members appear split between believing further easing is needed to restart the labour market and holding as inflation remains above target. The Fed’s Waller noted earlier today that the focus should be on jobs data and not inflation and that the fiscal position is not sustainable.
- US real 10yr yields remain elevated compared to recent history, last at 1.85% (recent lows were under 1.70%).
- Structural support for gold still appears evident from an asset allocation standpoint. Via BBG: "China added an estimated 15 tons of gold to its forex reserves in September as central banks accelerated their purchases of bullion after a seasonal summer lull, according to Goldman Sachs Group."
US TSYS: Risk-Off Pushes Yields Lower
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.
