US TSYS: Marginally Richer In Asia

TYZ3 deals at 108-13+, +0-06+, a 0-07 range has been observed on volume of ~74k.

• Cash tsys sit 2-3bps richer across the major benchmarks, light bull flattening has been observed.
• Tsys have firmed through the Asian session today, ticking higher in early trade as perhaps participants used yesterday's cheapening as an opportunity to square shorts/add fresh longs in early trade.
• Gains marginally extended as risk off flows were evident, Chinese Home Prices fell the most in 8 years. The USD ticked higher and US Equity Futures and Regional Equities were pressured.
• The move higher hasn't yet followed through and narrow ranges have persisted for the most part.
• There is a light docket in Europe today. Further out initial jobless claims and industrial production are due. Fedspeak from Cleveland Fed President Mester, New York Fed President Williams and Fed VC Barr crosses.

JGBS: Futures Drifting Higher, But US-JP 10yr Differential Narrows Modestly

JGBs are slightly higher post the lunchtime break, but overall ranges remain contained. We last tracked at 145.28, +.03. In recent trading the 145.10 region has seen support emerge, while recent highs at 145.55 remain intact.

• JGB futures have outperformed a positive US Tsy backdrop (last at 108-13, +06+). US-JP 10yr government bond yields have drifted a touch lower on this basis, but only marginally. At +370bps, we are still comfortably above post US CPI lows (around +360bps).
• The outright 10yr JGB yield sits just under 0.80%, close to unchanged for the session. 10yr swaps are at 0.985%. We have seen slightly firmer yield gains in the 20-40yr swap tenor (1-2bps).
• 1yr supply was digested with a similar bid to cover ratio to the prior auction (3.7 today, versus 3.8 prior).
• Tomorrow, the data calendar is empty, but we have 3 month bill supply on tap.

AUSSIE BONDS: Erase Early Losses

ACGBs sit little changed across the major benchmarks, Aussie Yields erased their early gains and are now flat. XM (-0.015) and YM (0.00) are also little changed this afternoon.

• The space was supported in early trade as risk off flows were evident, there was little reaction to the October Jobs data which was consistent with the RBA's view that “conditions in the labour market eased but they remain tight”.
• ACGBs held richer dealing in narrow ranges in the latter half of the session.
• RBA dated futures remain stable, a terminal rate of 4.45% is seen in May 24 with ~20bps of cuts by Dec 24.
• The local docket is empty tomorrow.

AUSTRALIAN DATA: Labour Market Tight, Shift To Part-Time Jobs Continued

Employment growth in October was stronger than expected at 55k after 7.8k but given some volatility around school holidays it is worth looking at the average of the two months which is 31.4k about 5k below the 2023 average. The data show a tight labour market that has eased moderately since the start of the year. Thus this and historically high wage increases mean that labour data still needs to be monitored closely and tightening is yet to impact it materially.

• The unemployment and participation rates returned to their August levels of 3.7% and 67% respectively after falling in September to 3.6% and 66.8%. The labour force grew 3.4% y/y, fastest rate in around a year, which reflects strong working-age population growth of 2.9% y/y. While the number of unemployed is up 13.2% y/y, the steady unemployment rate shows that the labour market is strong enough to absorb most of the new labour force participants.

Source: MNI - Market News/ABS

• One sign of labour market easing is the switch to part-time jobs since mid-year. Overall employment growth remained steady at around 3% y/y in October but full-time (FT) employment has moderated to 2.2% y/y from 4.1% in July and part-time (PT) has risen to 4.9% y/y from flat. October FT jobs rose 17k after falling 36.5k but PT rose another 37.9k after 44.3k.
• This shift is also reflected in hours worked but the underemployment rate is lower than 3-months ago. While hours rose 0.5% m/m in October, they are now up only 1.7% y/y down from 2.9% and the lowest rate since March 2022. The moderation has been driven by FT hours (+0.9% y/y) whereas PT is seeing a renewed pickup (+6.2% y/y).

AUSTRALIAN DATA: Consumer Inflation Expectations Struggling To Moderate

Melbourne Institute November consumer inflation expectations ticked up 0.1pp to 4.9%, the second straight increase and another signal that disinflation has slowed. It led monthly headline CPI down and now appears to have stabilised since its trough in April and has been unable to take another step down towards its 4.4% average since 2000. This is a development that should continue to be monitored.

• There were a number of factors since the start of the month that may have pushed inflation expectations higher including the RBA hike and pushing out the return to target, higher-than-expected Q3/September CPI data and the pickup in petrol prices to over $2/L last week. Cost-of-living pressures remain the main concern for households.

Source: MNI - Market News/Refinitiv

NZGBS: Curve Steepens On Thursday

NZGBs sit 1bp richer to 5bps cheaper across the major benchmarks, the curve has twist steepened pivoting on 10s.

• NZGBs have ticked away from early session lows as risk off flows added support through the session. Regional equities have been pressured, Chinese Home Prices fell the most in 8 years, and the USD is a touch firmer.
• 10 Year NZ US Swaps have narrowed a touch through the session and sit at +48bps.
• RBNZ dated OIS have seen rate cut expectations for 2024 marginally today. A terminal rate of 5.55% is seen in Feb with ~55bps of cuts by Oct 24.
• A reminder that on the wires early in today's session REINZ House Sales rose 8.0% Y/Y in October. The median time to sell a house was 37 days, the lowest since March 2022, down from the peak of 60 days in February.
• Looking ahead, tomorrow Q3 PPI is due.

EQUITIES: Asia Pac Markets Lower, China Related Bourses Weighed By House Price Drop

Regional equities are under pressure in Asia Pac trade in the first part of Thursday trade. The major indices are all lower with China related indices underperforming. An accelerated fall in October house prices in China weighing on sentiment. US futures are also tracking lower. Eminis last near 4511, off 0.18%. Nasdaq futures are of by slightly more, down nearly 0.30%. Disappointing earnings from Cisco weighing on sentiment in this space.

• The President Xi-President Biden summit has come and gone, with much focus on curbing fentanyl risks and improving military communication. Not much economic headway was made, but expectations on this front were fairly low.
• Oct house prices in China fell 0.38%, the steepest drop since 2015. House price falls broadened slightly and were evident in the major cities (ex Shanghai).
• The CSI 300 real estate is -1.25% lower the back, albeit up from session lows. The headline CSI 300 index is off nearly 1%. In Hong Kong, the HSI is down 1.65%, the HS China Enterprise index off by a similar amount.
• In Tokyo, The Topix is off by around 0.40% at this stage. The South Korean Kospi and Taiwan Taiex have seen smaller losses at this stage.
• Australia's ASX 200 is off 0.7%, with mining and bank stocks dragging the index lower.
• For SEA, most markets are down, but losses are under 0.50%. The Philippines bourse is flat, ahead of the upcoming BSP decision, where the consensus expects no changes in rates.

FOREX: Antipodeans Pressured In Asia

The Antipodeans have been pressured in Asia as risk off flows were evident through the session. Chinese Home Prices fell the most in 8 years, e-minis were down ~0.2% and the Hang Seng sits ~1.5% lower. BBDXY is up ~0.1% and US Tsy Yields are lower.

• The Kiwi is the weaker performer in the G-10 space, NZD/USD is down ~0.7% and now sits below the $0.60 handle. On the downside bears look to target the 20-Day EMA ($0.5925), which opens the low from 14 Nov at $0.5864.
• AUD/USD is also pressured, the pair is down ~0.6% and is now comfortably below the $0.65 handle. Technically the bull cycle is still in play, resistance comes in at $0.6522 high from Aug 30 and $0.6582 50.0% retracement of Jul 13 - Oct 26 bear leg.
• Both AUD/JPY and NZD/JPY have ticked away from cycle highs, both crosses had registered multi-year highs in recent dealing.
• The Yen is little changed, there was little reaction to the latest round of Japanese data. Technically the trend outlook for USD/JPY is bullish, resistance comes in at ¥151.95 high from Oct 2022. Support is at ¥150.16 Nov 14 low.
• Elsewhere in G-10 the Scandies are also pressured however liquidity is generally poor in Asia.
• A reminder the docket is thin in Europe today.

JAPAN DATA: Offshore Inflows Into Local Equities Continues For 7th Straight Week

Offshore buying of Japan equities continued last week. We saw ¥388.4bn on net inflows, slightly above the pace of the prior week. This marks the 7th straight week of inflows, with nearly ¥3700bn in inflows over this period. The see-saw pattern in terms of flows in Japan bonds continued, with -¥296.2bn in net selling last week. The trend has been skewed towards net selling in recent months though, with just over -¥4000bn in outflows since mid-September.

• In terms of Japan outbound flows. Local investors sold both foreign bonds, -¥68.2bn, and offshore equities -¥73bn.
• On the equity side, this ends a run of purchases to this segment for Japan investors over the 6 prior weeks.

Table 1: Japan Weekly Investment Flows

Source: MNI - Market News/Bloomberg

OIL: Oil Prices Continue Declining As Fundamentals Look Looser

After falling around 2% on Wednesday, oil price are down almost another percent with a pullback in risk during the APAC session and a significant US inventory build reported yesterday weighing on crude. WTI fell through $76 earlier but is now trading around $76.06 to be down 0.8%, off the intraday low of $75.87. Brent is 0.7% lower at $80.58. The USD index is 0.1% higher.

• Prices remain off support levels of $74.91 for WTI and $79.20 for Brent.
• The market remains focused on supply and demand fundamentals with inventory, import and shipping data key, as well as projections. This week the IEA said it expected Q4 to be looser than originally thought due to increased supply. But market participants expect Saudi Arabia to extend its output cuts into 2024.
• The US EIA reported two weeks of data as it upgrades its systems. There was a crude build of 17.5mn barrels since October 27 but the level remains below its 5-year average. In the latest week gasoline inventories fell 1.5mn barrels and distillate -1.4mn, there was also reduced demand for both.
• WTI’s prompt spread is pointing to looser market conditions.
• The Fed’s Barr, Mester, Williams, Waller and Cook are all on the schedule and on the data front there are US October trade prices, jobless claims, November NY, Kansas & Philly Fed indices, and October IP. ECB’s President Lagarde makes pre-recorded comments and Enria and de Guindos participate in panels.

GOLD: Gold Little Changed, Fed Speakers Coming Up

Gold prices are little changed during APAC trading today rising only 0.1% to $1962.10/oz after falling 0.2% yesterday following stronger US retail data signalling economic resilience. It is now down 1.1% this month. Bullion is close to its intraday high of $1962.37 but well off Wednesday’s $1975.07. Resistance is at $1978.40. Earlier today it fell to $1956.52 but recovered as risk sentiment deteriorated and drove equity markets lower. The USD index is 0.1% higher.

• Fed speakers are likely to be important for bullion later today. The Fed’s Barr, Mester, Williams, Waller and Cook are all on the schedule and on the data front there are US October trade prices, jobless claims, November NY, Kansas & Philly Fed indices, and October IP. ECB’s President Lagarde makes pre-recorded comments and Enria and de Guindos participate in panels.

US-CHINA: Fentanyl & Restored Military Dialogue Major Focus Points From Xi-Biden Meeting

MNI (Australia): The meeting between China President Xi and US President Biden has concluded. Some of the major headlines out of the announcement were already announced prior to the meeting. US officials noted that one of the major objectives of the meeting was getting China to help combat the fentanyl problem. They are now looking for China action on this front.

• The other major hope from the meeting was a restoration of military ties between US and China. This appears to have been achieved, with both sides agreeing to restore high-level military communications. Biden also asked Xi to formalize bilateral military ties between the two countries.
• The US side believes that a degree of stability between the two countries will ensue following this meeting (BBG), although there are no further plans for a follow up meeting at this stage.
• Taiwan was a discussion point, with Xi stating that China has no plans for military action against Taiwan in coming years. However, Xi reportedly laid out conditions that might prompt military action (RTRS).
• The sides still appear some distance apart on economic issues, with Xi stating that US export curbs are harmful, while Biden stated that forced repatriation of intellectual property was discouraging investment (RTRS).
• In the AI/tech space, both sides agreed that further discussions on the risks involved would be beneficial.

CHINA DATA: House Price Fall Accelerates In October

China house prices fell -0.38% m/m in October, versus a -0.30% fall in September. This was the 5th straight month of falls (the measure tracks prices across 70 cities for newly built commercial residential buildings).

• October's fall was the largest since 2015, although it only marginally eclipses falls seen in 2022 and 2021. In the secondary market the price drop was larger at -0.58% m/m, which is the largest drop since 2014.
• By major city, we only saw Shanghai record a rise, with Beijing, Guangzhou and Shenzhen all recording falls.
• This data reinforces yesterday's softer housing market trends in the activity/investment update for October (see this link).

ASIA FX: USD/Asia Pairs Mostly Higher, KRW Outperforms

Most USD/Asia pairs are higher, in line with a broader recovery in USD sentiment and a weaker regional equity backdrop. KRW has outperformed though. USD/CNH is firmer but off highs. Still to come is the BSP decision in the Philippines, no change is expected. Tomorrow, we get Malaysia Q3 GDP, the data calendar is quiet otherwise.

• USD/CNH got close to 2.2700 in earlier trade. The pai last near 7.2625. Warm remarks from President Xi in terms of the outlook for US-China relations this afternoon has likely aided CNH sentiment at the margins. This followed a positive leaders meeting with Biden earlier, albeit without any major economic breakthroughs. Earlier a 0.38% drop in house prices, the steepest since 2015, weighed on both local equities and the yuan.
• USD/KRW 1 month has tracked lower this afternoon. After spiking above 1307.50 in earlier trade we last tracked near 1299, around 0.30% firmer in won terms than NY closing levels. The won has shrugged off weaker higher beta FX trends elsewhere, and an indifferent local equity market lead.
• The Rupee has opened dealing a touch softer than yesterday's closing levels however we remain well within recent ranges in a steady start to Thursday's trade. USD/INR prints at 83.20/21, ~0.1% above Wednesday's close. A reminder that yesterday the October Trade Balance printed at -$31.46bn, a deficit of $20.4bn had been expected.
• Ringgit has been pressured in Thursday's early dealing as onshore participants digest yesterday's rise in US Tsy Yields. USD/MYR is up ~0.9% and sits a touch below the 20-Day EMA (4.7178), last printing at 4.7125/60. Looking ahead; the docket is empty until tomorrow's Q3 GDP print, a rise of 3.2% Y/Y is expected. Q3 Current Account Balance is also due.
• The SGD NEER (per Goldman Sachs estimates) has ticked higher this morning, the measure was pressured through yesterdays session after printing a fresh cycle high in Wednesday's early trade. We are ~0.3% below the top of the band. USD/SGD is ~0.1% firmer this morning last printing at $1.3510/15 as broader USD trends dominate. The 200-Day EMA comes in at $1.3546 and is in view for bulls.
• USD/PHP sits in the 55.85/90 region in latest dealings. This is slightly weaker in PHP terms versus Wednesday closing levels. We are above Wednesday lows of 55.75, as broader USD sentiment has improved. Recent highs come in near 56.10, while the 100-day EMA is at 56.25 (the 200-day is close to current spot levels 55.95). Focus will rest on the BSP decision due later. Our bias is for no change Note BSP Governor Remolona noted late yesterday in San Francisco the BSP is within striking distance of its 2-4% inflation target (RTRS).