ASIA STOCKS: Stocks Subdued as US Ends Shutdown, Eyes on European Open

NZGB yields have held modestly softer across most of the benchmarks as Tuesday's session unfolded. Outside of a steady 2yr at 2.60%, most other parts of the curve are close to 1bps (although the 10yr is little changed at 4.075%). This comes despite US Tsys resuming cash trading with a firmer bias, this has faded as the session progressed, with fresh China shipping curbs on the US weighing on risk appetite (10yr back under 4.04%). Earlier data showed card transactions falling in Sep, while the RBNZ adjusted loan regulations (essentially easing NZ financial conditions), helping relative NZ yield trends. 

• The NZ-US 10yr rate differential is slightly lower, last at +5bps, up a touch from recent lows sub 0bps. So far in Oct, this spread hasn't been able to sustain +10bps levels.
• New Zealand 2yr swap is near 2.37%, little changed for the session, but still close to recent lows near 2.35% and maintaining a downtrend bias.
• September retail card transactions fell 0.5% m/m after rising 0.6%, the first negative after three consecutive increases. Annual growth slowed to 1.2%. Despite the soft end to Q3, the quarter saw a 0.6% q/q increase in nominal retail spending.
• The Reserve Bank of New Zealand will ease mortgage loan-to-value ratio (LVR) restrictions from Dec 1, increasing the share of new lending allowed at higher LVRs, the central bank said in a statement Tuesday. For owner-occupiers, the limit on loans with an LVR above 80% will rise to 25% from 20%, while for investors, the limit on loans with an LVR above 70% will increase to 10% from 5%.
• Looking ahead, Thursday delivers Sep food prices, ahead of the all important Q3 CPI, out next Monday. 

Aussie is underperforming pressured by weaker China/HK equities and US-China tensions over shipping duties due to be implemented Tuesday. China has not only retaliated with a fee on US ships docking at its ports but is also introducing restrictions on Chinese shipping companies’ US divisions. Risk appetite remains very sensitive to US-China developments. AUDUSD breached 0.6500 and is currently 0.5% lower at 0.6482, close to the intraday trough at 0.6481. The USD index is only slightly lower.

• US-China working-level trade talks occurred on Monday and China reiterated today its right to control rare earth exports and that the US should negotiate.
• Kiwi is also impacted by the pullback in risk but less than Aussie leaving AUDNZD down 0.2% to 1.1358, close to the intraday low. It reached a high of 1.1395 following weak NZ consumption data and the RBNZ announcing an easing of LVR requirements. The share of loans with an LVR above 80% will be increased to 25% from 1 December.
• AUDJPY is down 0.8% to 98.436 in the weaker risk environment. It reached 99.485 earlier. AUDEUR is 0.6% lower at 0.5595 and AUDGBP -0.6% to 0.4856.
• The ASX is up 0.1%, Hang Seng down 0.2% and S&P e-mini is flat. Oil prices are now flat with WTI around $59.53/bbl. Copper is down 0.5% and iron ore is around $104/t.
• Later Fed Chair Powell speaks on the economic outlook and monetary policy. The Fed’s Bowman, Waller and Collins, ECB’s Machado, Cipollone and Donnery, and BoE’s Bailey and Taylor also appear. US September NFIB small business optimism prints. On Wednesday, RBA Assistant Governor Hunter speaks and Westpac’s lead indicator for September is released.

Risk off is emerging China headlines around sanctioning US units of Hanwha Ocean and a broader announcement on charging US ships entering China ports. This comes after risk appetite improved on Monday as China looked to play down the impact of its rare earth export curbs, while US officials (including US President Trump) struck a more conciliatory tone around US-China relations (after Trump's Friday tariff threat hit market sentiment). 

• Via Xinhua - "China's Ministry of Transport on Tuesday revealed a detailed document regarding measures to charge special port fees on ships owned or operated by U.S. enterprises, organizations and individuals." It adds: "These detailed measures were unveiled following the ministry's announcement on Oct. 10 that China will charge special port fees on U.S. ships starting Oct. 14 -- in response to the U.S. move to impose additional port fees on Chinese ships after a Section 301 investigation".
• This points to some tit for tat escalation in the shipping space.
• US eminis are down in the red, off 0.4%, while Bitcoin is down 2% for the session.   USD/JPY is back under 152.00 (against earlier highs of 152.61). USD/CNH is back above 7.1400.