ASIA STOCKS: UEDA Spooks Japanese Stocks; Korea and Taiwan Follow Suit
Global rate expectations continue to impact investor optimism with risk appetite strong in most major bourses today. Whilst US rate sensitive markets continue to position for a rate cut in the US, markets are seeing a potential BOJ rate hike in December, which has caused the yen to firm and the Nikkei to fall. Governor Kazuo Ueda has indicated the bank will consider the pros and cons of an increase. In India, stronger than expected GDP results came ahead of this week's Reserve Bank of India's decision on rates which is widely expected to see a rate cut to stem the decline in inflation. The focus on AI tech remains a key thematic with names like TSMC's fall today a key driver to the decline of the TAIEX in what local press are suggesting is profit taking. This is likely to be an ongoing theme into year end given the extraordinary run up in recent months of AI / Tech names like TSMC and key equities in Korea and Japan.
- UEDA's comments wasn't well received by the NIKKEI with it starting the month and the week off with a fall of -1.8%, dragging the KOSPI with it with falls of -0.16%.
- China's major bourses are all up with the Hang Seng leading the way with gains of +0.80%, followed by the CSI 300 up +0.75%
- The TAIEX in Taiwan is down modestly by -0.44% with risk sentiment looking less robust into year end.
- The NIFTY 50 was buoyed by the better than expected GDP and talk of a rate cut this week sees it start Monday up +0.28% to a new high of 26,278
- SE Asia' s bourses are starting the month off strongly with the FTSE Malay KLCI leading the way up +1.1% following better than expected Manufacturing PMIs.
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AUSSIE 10-YEAR TECHS: (Z5) Returns Lower
- RES 3: 95.982 - 76.4% retracement Sep’24 - Nov’24 downleg
- RES 2: 95.960 - High Apr 7 (cont.)
- RES 1: 95.900 - High Oct 17
- PRICE: 95.670 @ 16:16 GMT Oct 31
- SUP 1: 95.510 - Low Sep 3
- SUP 2: 95.415/95.300 - Low May 15 / Low Jan 14
- SUP 3: 95.275 - Low Nov 14 (cont) and a key support
Aussie 10-yr futures slipped lower Wednesday on the back of hotter-than-expected Australian inflation. This returned prices lower despite nascent signs of a technical recovery as recently as last week. The sustainability of the pullback will be dependent on prices holding above key short-term support at 95.510, the Sep 3 low. Near-term resistance remains 95.780, the Sep 12 high. A clear break of this level signals scope for a continuation higher and opens 95.960, the 76.4% retracement level for the Sep’24 - Nov’24 downleg.
AUSSIE 3-YEAR TECHS: (Z5) Struck by Strong CPI
- RES 3: 97.796 - 1.618 proj of the Sep 3 - 12 - 15 price swing
- RES 2: 96.780 - High Jun 26 (cont)
- RES 1: 96.700 - High Sep 12
- PRICE: 96.375 @ 16:13 GMT Oct 31
- SUP 1: 96.280 - Low May 15 (cont.)
- SUP 2: 95.900 - Low Jan 14 (cont.)
- SUP 3: 95.760 - Low 14 Nov ‘24
Having bounced well on the back of the mild US CPI print, Aussie 3-yr futures reversed course Wednesday on strong domestic inflation data containing RBA cut pricing through 2026. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 96.280 as the next major support.
FED: Gov Waller: Still Advocating For A December Rate Cut
Gov Waller, one of the FOMC's more prominent doves, makes clear in an appearance on Fox Business that he supports a follow-up rate cut in December. He makes reference to Chair Powell's press conference comment that the Fed could skip a cut at the December meeting due in part to a lack of official government data during the federal shutdown (Powell: “what do you do if you are driving in the fog? You slow down").
- Waller says today: "Right now, we know that the labor market has been weak... We know inflation is going to come back down. Inflation expectations are anchored, and in that world, the standard of central bank wisdom is to look through it and proceed with worrying about the labor market. So in my view, we should just look at what the data is telling us and proceed on policy that way.... So this is why I'm still advocating that we cut policy rates in December, because that's what all the data is telling me to do. The fog might tell you to slow down. It doesn't tell you to pull over to the side of the road. You still have to go. You may want to be careful, but it doesn't mean to stop, and ... the right thing to do with policy is to continue cutting."
- This is of particular interest since he appeared to suggest he would have a more cautious outlook on further easing after cutting in October.
