JGBS: Yield Rise Tapered After 40Y Auction, BOJ Noguchi Speech Tomorrow

Oil prices rallied at the start of Monday’s APAC trading as the market was relieved by news that a draft US-China trade deal had been reached which would avoid 100% US tariffs on November 1. Increased protectionism is a negative for energy demand. However, crude has given up most of the early gains as excess supply worries pressure markets again.

• On the one hand new US/EU sanctions may weigh on Russian exports, but on the other hand OPEC could continue to increase its output target. 
• WTI is 0.4% higher at $61.74/bbl off the intraday low of $61.49 and above initial support at $55.96. It reached $62.17 earlier, remaining below initial resistance at $62.34. The USD index is flat.
• Brent is up 0.2% to $66.06/bbl after falling to $65.95 but well above support at $60.17. It rose to $66.64 at the start of trading, just above resistance at $66.58 but the break wasn’t held.
• The focus this week is on Wednesday’s Fed decision. The USD OIS market has a 25bp cut priced in with another one at the 10 December meeting.
• Later October Dallas Fed manufacturing and October German Ifo survey are released. The ECB’s Elderson and Tuominen speak.

Japan's NIKKEI traded above 50,000 and the KOSPI through 4,000 as US - China tensions appear to be easing.  The discussions between US and China ahead of the leaders meeting this week has seen some positive outcomes with an initial consensus reached on various bilateral issues including agriculture, according to a statement from the Chinese Ministry of Commerce.  Chinese officials said the two sides reached a preliminary consensus on further topics including export controls, fentanyl and shipping levies, while US Treasury Secretary Scott Bessent said Trump's threat of 100% tariffs on Chinese goods "is effectively off the table".  This comes ahead of the Thursday meeting with US President Trump and China President Xi in South Korea, on the sidelines of APEC summit. The weekend talks are expected to pave the way for a deal/agreement at the Thursday meeting between the two leaders and Trump expressed confidence in such an outcome.  Tech stocks like Samsung in Korea surged by almost 2.9% and Taiwan's TSMC +2.7% whilst some regional defense and ship builders saw gains.  

• The NIKKEI hit 2025 lows in April of 31,136 as the trade war kicked off in earnest, yet since then has rallied over 60% to 50,340.
• The KOSPI over that same period is up 75% with the added kicker of tax reform on dividends.  
• China's major bourses are up only modestly today with the Hang Seng +1.05%, CSI 300 +1.05%, Shanghai Comp +1.1% and Shenzhen +0.95%.  The major China bourses have appeared less correlated to tariff headlines of late as the ongoing surge in new retail equity accounts underpins strong fundamental demand for stocks, amidst growing belief in the economy.  
• The outlier today is the Jakarta Composite which is down -3.2% for its biggest one day fall since early September, breaking below the 20-day EMA of 8,117 and below 8,000.  At 7,993 is is near to the 50-day EMA of 7,963 which it last traded below in July.
• The NIFTY 50 is up +0.55% in morning trade hitting a new all time high of 25,935.

The morning's sell off moderated into the afternoon, but the damage was done with bond futures all lower.  TYZ5 is down -08 at 113-05+, breaking below the 20-day EMA of 113-07+ 

Cash bonds remain weak with yields across the curve 2-3bps higher.  

• The US 2-Yr is at 3.51% (+2.5bps today)
• The US 5-Yr is at 3.63% (+3bps today)
• The 10-Yr is at 4.03% (+3bps today)
• The 30-Yr is at 4.62% (+3bps) today.  

Tonight sees multiple bill issuance, 2-Yr notes, 5-Yr notes as the key auctions for markets.

Key focus for data tonight is Durable Goods, Dallas Fed Mfg,  and Capital Goods orders.