CNH: Steady, Implied Vols Low Ahead Of Key US-China Meetings Next Week

Yesterday saw some standout flows in South East Asian markets. Indonesia's +$333mn in net inflows saw the 5-day sum push above $500mn. Yesterday's daily inflow was the strongest since mid September 2024. The local JCI index outperformed, rising a further 1% to push above 8100, which is fresh cycle highs. Gains were fairly broad based, while the debut of resource company Merdeka Gold Resources, also aided sentiment. Equities appear to happy to run with the government's pro growth agenda (although we continue to see IDR FX weakness).  

• The Philippines was the other highlight from an inflow standpoint. The $123mn in inflows yesterday was the strongest daily inflow since end July 2023. Interestingly though, local equities struggled, the PCOMP down 1.55% and unwinding a good chunk of the recent gains seen. PHP FX also tracked weaker. Local media highlighted on-going corruption concerns as an equity market headwind.
• Elsewhere we saw modest outflows from Malaysia and Thailand.
• South Korea and Taiwan had better inflow days yesterday, although the 5-day sums for both markets remains well off earlier September highs. Overnight we saw a pause in terms of the US tech equity rally. 

Table 1: Asian Markets Net Equity Flows

Source: Bloomberg Finance L.P./MNI 

The train finally ran out of steam and the stock market finally had a pullback after momentum stalled overnight. This morning US futures are trading slightly lower, E-minis(S&P) -0.05%, NQZ5 -0.05%. The AUD continues to pullback slightly across the board, having seen its upward momentum last week stall and top out.

• EUR/AUD - Overnight range 1.7837 - 1.7919, Asia is currently trading around 1.7905. The pair has pushed through the sellers just above the 1.7800 area. Price is still within its recent 1.7600 -1.8100 range. Expect sellers to remerge initially towards the next resistance area around 1.7950/1.8000.
• GBP/AUD - Overnight range 2.0436 - 2.0525, Asia is trading around 2.0500. The pair topped out around 2.0550 last week, I suspect rallies back to 2.0550/0650 will continue to be met with supply initially. The price action of the pair is looking potentially exhaustive but a sustained break sub 2.03/2.04 is needed to open up a deeper pullback towards 1.9800/2.0000. 
• AUD/JPY - Overnight range 97.25 - 97.72, Asia is trading around 97.35. The pair has stalled towards 98.50, dips back towards 96.50/97.00 should be expected to be supported now first up.
• AUD/NZD -  Overnight range 1.1255 - 1.1280, the cross is dealing in Asia around 1.1265. The Cross has broken above the multiple highs around the 1.1200 area and is looking to accelerate higher on the back of some very poor NZ Q2 GDP data last week. Dips should now continue to be supported as the market turns its focus towards the 1.1400/1.1500 area.

Fig 1: AUD/NZD spot Weekly Chart

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

TYZ5 is trading 112-29+, down 0-01+ from its close. 

• The US 2-year yield opens around 3.563%, down 0.02 from its close.
• The US 10-year yield opens around 4.106%.
• 10-Year’s found some buyers back towards 4.15%. Is that the top, I suspect we test the 4.20% area at some point where demand should again return. A sustained break through 4.00% is needed for the focus to then turn towards the 3.80% area.
• MNI FED: Gov Bowman: Concerned Will Need Faster And Bigger Cuts. Gov Bowman warns that bigger, faster cuts may be warranted with the possibility that the Fed has fallen behind the curve on weakening labor market conditions. She's definitely one of the 9 rate dots at 3.6% for end-2025, and we would guess she's one of the 5 who are either at 2.6% or 2.9% (3-4 additional cuts) in 2026, though she may have more to say in Q&A
• MNI FED: Chicago's Goolsbee Eyes Neutral Rates 100-125bp Lower. Chicago Fed's Goolsbee (2025 voter) in a CNBC interview calls current policy "mildly restrictive" and points to a neutral rate 100-125bp lower than current rates. However he says that rates should come down at a "gradual" pace and with inflation stubbornly above target, the Fed needs to be "a little careful". In sum it wouldn't surprise us if his rate outlook was for another 2 cuts this year (in line with the median 3.6% dot submitted in September) and for another 2-3 cuts next year for a total 125-150bp of easing to 2.9 or 3.1% by end-2026 including the 25bp delivered last week.
• Data/Events: MBA Mortgage Applications, Building Permits, New Home Sales