ASIA STOCKS: Stocks Extend Gains, AI / Tech Remain Focus
Asian equity markets are broadly higher today largely extending gains from the previous session driven by momentum from Wall Street and optimism around Artificial Intelligence (AI) related stocks as Tesla and Nvidia gained. Major indices in Japan, Korea and Hong Kong advanced whilst China's indices were more muted. Ahead of the advanced US GDP report, a report in the Shanghai Securities news citing the Chief Macro Analyst from Golden Credit Rating suggests that cuts to rates and RRR's will come in Q1 2026 in China, boosting sentiment. China's embattled property developer China Vanke appears to have won a last minute reprieve from creditors to extend the grace period for a bond due to Jan 28, whilst the proposal to defer principal payment for 12 months was unsuccessful.
- The NIKKEI has done very little today, hovering around 50,374 where it opened. Yesterday's gains took the NIKKEI back above all major moving averages.
- The KOSPI is up +0.43% to 4,123 as it too consolidates above all major moving averages.
- China's major bourses were all up modestly today with the CSI 300 leading gains. Up +0.50% at 4,635, the CSI 300 has consolidated above all major moving averages.
- India's NIFTY 50 failed to capitalize on yesterday's gains of +0.79% and is down -0.10% today and at 26,147 is near to the November high of 26,215.
- Both the Jakarta Composite and the FTSE Malay KLCI are down modestly today. The JCI is down -0.30% at 8,621 and is near to the 20-day EMA 8,600, having last traded below it in October.
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RATINGS: Moody's Upgrades Italy To Baa2 From Baa3, Still A Notch Below Others
The Moody's upgrade to Italy's credit rating announced late Friday was the first from the agency since 2002 but shouldn't be considered a major surprise. Among the 3 major ratings agencies, Moody's had the lowest rating on Italy - by two notches (Fitch and S&P both BBB+).
- So this upgrade to Baa2 from Baa3 represents something of a closing of that gap rather than a major breakthrough for Italy.
- From the release:
- "The rating upgrade reflects a consistent track-record of political and policy stability which enhances the effectiveness of economic and fiscal reforms and investment implemented under the National Recovery and Resilience Plan (NRRP). It also points to prospects of further policy actions supporting growth and fiscal consolidation beyond the plan's deadline in August 2026. As a result, we expect that Italy's high government debt burden will gradually decline from 2027 onwards."
FED: Heading Into Its Final Weeks, QT Pace Remains At $20B/Month (2/2)
On the asset side of the Fed balance sheet, we saw a $25B drop in assets, of which just $2B could be attributed to QT in one of its final weeks (ends Dec 1).
- Instead it was a $6B drop in dealer repo operations vs a week earlier, and $17B in "other" areas that aren't related directly to monetary policy and typically don't have any significant impact on the size of the balance sheet (such changes are largely due to items such as bank premises, accrued interest, and other accounts receivable.)
- Discount window takeup edged up $0.3B to $6.1B but remains relatively low.
- QT has totaled just under $21B over the last month, around the expected pace, though as noted this will flatline in December with a pickup in net bills as MBS proceeds are rolled over into T-bills.
LOOK AHEAD: US Week Ahead: Retail Sales, PPI & Claims Headline Thanksgiving Week
A Thanksgiving-condensed week sees data highlights from delayed retail sales and PPI reports for September on Tuesday (Nov 25) before a Wednesday release for weekly jobless claims (Nov 26). Aside, the Fed’s Beige Book should also offer another important update on Wednesday for latest liaison reporting, with no Fedspeak currently scheduled around the holiday and the FOMC media blackout due to start on Saturday, Nov 29.
- As we regularly comment in this weekly publication, Redbook and Chicago Fed CARTS indicators point to solid nominal growth in retail sales, something broadly reflected in analyst consensus for the release.
- PPI inflation will offer a useful albeit not overly timely update on input cost pressures.
- Jobless claims will be watched particularly closely, both for latest initial claims for signs of layoffs and a notable update for continuing claims. The latter covers the payrolls reference period for November and will be an important reference point for FOMC members trying to get a sense of latest unemployment rate clues with the next payrolls reports coming after the Dec 9-10 FOMC decision (going into it with this week’s 0.12bp rise to 4.44% back in September).
