ASIA STOCKS: Scope Remains For A Further Recovery In Inflow Momentum

Yen has outperformed so far in Tuesday trade, with USD/JPY back testing under 152.00 and up around 0.60% in yen terms so far today. US-Japan meetings have dominated the headlines (with Bessent remarks aiding yen gains), while we also saw some verbal FX jawboning from Japan's economic minister, which has also likely helped at the margins. The BBDXY index is down 0.205 to 1209.15. 

• The readout from the meeting between the US Tsy Secretary and the Japan FinMin highlighted: ""Bessent highlighted the “important role of sound monetary policy formulation and communication in anchoring inflation expectations and preventing excess exchange rate volatility, as conditions are substantially different twelve years after the introduction of Abenomics,” (via BBG). So, whilst the upcoming Thursday monetary policy meeting wasn't discussed, Bessent is stating the different macro landscape between now and when Abenomics and that FX volatility will pick up if monetary policy is not conducted properly, which will likely concern the US authorities.
• Still, USD/JPY is some distance from the 50-day EMA, which is still back under 150.00.
• CHF has also risen, last 0.7930/35, up 0.25%. Lower US yields from Monday have also likely aided safe haven gains today. US equity futures are little changed.
• AUD and NZD are higher, although more so the Kiwi. NZD/USD was last 0.5780, looking to establish a base above the 20-day EMA. NZ front yield ends are drifting a little higher, with some data outcomes helping these trends. AUD/USD is a little higher last 0.6560, still above all key EMAs, as focus shifts to tomorrow's key Q3 CPI outcome.
• Later August US S&P Cotality & FHFA house prices, October Richmond & Dallas Fed indices and October Conference Board consumer confidence as well as German November GfK consumer confidence and ECB bank lending survey are released.

Aussie 3yr (YM) bond futures underperformed, last 96.545, off 3.5bps. 10yr futures were up a touch to 95.815. The bias in US Tsy futures has been to nudge higher, support the Aussie 10yr but the 3yr is likely reflecting near term uncertainties around the RBA outlook, with tomorrow's Q3 CPI print in focus. ACGB yields are mixed, as the curve flattens, the front end 3yr establishing itself back above 3.40% (last 3.44%), while the 10yr has drifted lower to 4.165%. This leaves the 3/10s curve at +72bps, flatter by 5bps. 

• The AU-US 10yr spread is near +19bps, so back towards the upper ends of its recent range. We see spread compression trades re-emerge above +30bps, but a lot depends on tomorrow's Australian Q3 CPI print.
• Key watch points for CPI tomorrow are as follows: Bloomberg consensus expects trimmed mean to print at 0.8% q/q & 2.7% y/y, which would see a pickup in the 2q/2q annualised rate to 2.8% from 2.6%. This outcome could argue for a hold or a cut dependent on the revised outlook and services inflation result. This week Bullock reiterated that labour data are volatile and while the 0.2pp rise in the September unemployment rate to 4.5% was surprising, it could fall again in October. Thus she would like more information.
• Market pricing has around 10bps of easing priced in for Nov, we were around 16bps at the end of last week. A full cut is priced by the Feb meeting next year. 

Gold range traded during today’s APAC session with breaks above $4000 continuing to be temporary. Prices have just dipped and are down 0.3% to $3970.0 after a high of $4019.68 and intraday low at $3964.01. It found some support from the weaker US dollar (BBDXY -0.2%) while US yields are steady. There was little news to drive safe-haven flows in either direction ahead of Wednesday’s Fed decision.

• Gold has held above support at $3944.9, 9 October low, but remains well below initial resistance at $4186.4, 17 October low. Bullion continues to be in overbought territory despite the recent correction.
• Central bank buying, especially from the PBoC, has provided medium-term support to gold prices and this is generally expected to continue. In line with this, the Bank of Korea said today that it is considering extra purchases for its reserves over the medium- to long-term which would be the first time in 10 years.
• Silver is down 0.3% to $46.68 and has also been in a narrow range between $46.620 and $47.227, below initial support at $47.55, 22 October low. The trend also remains overbought and the current decline is seen as corrective.
• Equities are mixed with the S&P e-mini flat, KOSPI down 1.2% but CSI 300 up 0.2%. Oil prices are lower with WTI -0.2% to $61.16/bbl. Copper is down 0.6%.
• Later August US S&P Cotality & FHFA house prices, October Richmond & Dallas Fed indices and October Conference Board consumer confidence as well as German November GfK consumer confidence and ECB bank lending survey are released.