Asian stocks end week's slide despite lower US equities overnight

Asia Market Update: Asian stocks end week's slide despite lower US equities overnight; Markets confused by complex Trump Trade factoring?; Focus on US Oct Retail Sales + Industrial Production.

General trend

- Despite lower US equities overnight compounded by lower US equity FUTs during the Asian day, Nikkei + Kospi + ASX all up handily, with Kospi rebounding +1.3%. Asian stocks were coming off significant losses during the week on Trump trades and expected US tariffs and a higher USD. Conversely, US equities the past two trading sessions appearing to reassess Trump Trade effects in the US markets.

- Chances of the US Fed holding rates steady (no cut) in Dec rose from 17.5% to 40.9% during Asian trading.

- Tech stocks weighed down by AMAT (Applied Materials) -6% after earnings. Also China's JD.com -6.5%, Lenovo -1.0%.

- Yesterday after the close Japan's three megabanks were expected to post over ¥2.0T ($13B) in aggregate H1 Net income. They indeed delivered a total of ¥2.55T ($16.7B); with Mitsubishi UFJ Net ¥1.26T, Sumitomo Mitsui Net ¥725B and Mizuho Net ¥566B. (Last year for comparison saw an all-time-high of ¥3.1T ($20.2B). Today Mizuho and Mitsubishi UFJ +5%, Sumitomo Mitsui +0.3%.

- Japan Q3 GDP expanded by 0.3%, ending two quarters of y/y declines.

- USD/JPY kept rising well into the 156 handle in early Asian trading, but pared gains after it was announced that BOJ Gov Ueda would speak and give a news conference on Mon, Nov 18th. Later, various JP officials also expressed concern with 'one-sided, sharp' FX moves, adding to the slight pullback.

- Further, JBG's extended losses as OIS swaps priced in a greater chance of a BOJ 25bp hike in Dec; 52% chance v 32% at beginning of Nov. [Reminder Nov 6th; Former BOJ board member Sakurai: BOJ may hold till Jan 2025 given political, market uncertainty; Renewed yen falls could prod BOJ to hike as soon as Dec 2024].

- Japan 5-year JGB yield remained higher on session post auction results: +1.7bps at 0.713%.

- China data dump saw home prices continue to fall during October in 67 of 70 cities, with Shanghai again the only bright spot with a marginal increase. However, Retail Sales was a bright spot, heading back up nearly to the 5% handle, 1% higher than expected in October. Industrial production was more or less line, but did record further increases in Chip production +11.8% and Auto production +4.8% y/y (likely intensifying further global fears of over-production).

- Wall Street Sell-side on China said that earlier policy measures have proven to help domestic demand stabilization, and expects near-term growth to be sustained.

- China PBOC Net injection in today's OMO ops was a record amount of nearly CNY 1.0T (prior record CNY733B in Oct 2023), with the PBOC saying that today's cash injection to counteract factors including maturing MLF loans and tax payments.

- Samsung Electronics up over 6% after reaching a preliminary deal with its Korean labor union for a 5.1% pay increase. Samsung had been trading at 2020 lows this week. Hynix also +3%.

- US equity FUTs -0.5% to -0.7% during the Asia session, but pared some losses just prior to publication.

Looking ahead (Asian time zone)

- Fri Nov 15th (Fri eve UK Q3 prelim GDP, Fri night US Oct Retail Sales + Industrial Production).

Holidays in Asia this week

- Fri Nov 15th India.

Headlines/economic data

Australia/New Zealand

- ASX 200 +0.2% at 8,236.

- Australia sells A$700M vs. A$700M indicated in 4.75% Apr 2027 bonds; Avg Yield: 4.1874% v 3.8542% prior, bid-to-cover: 4.66x v 6.43x prior.

- New Zealand Oct Manufacturing PMI: 45.8 v 47.0 prior (20th month of contraction).

- New Zealand govt to review performance of the electricity industry; To look at regulations, market design - financial press.

China/Hong Kong

- Hang Seng opens +0.3% at 19,503; Shanghai Composite opens -0.3% at 3,369.

- CHINA OCT INDUSTRIAL PRODUCTION Y/Y: 5.3% V 5.6%E.

- CHINA OCT RETAIL SALES Y/Y: 4.8% V 3.8%E.

- CHINA OCT YTD FIXED URBAN ASSETS Y/Y: 3.4% V 3.5%E.

- China Oct YTD Property Investment Y/Y: -10.3% v -9.9%e.

- China Oct New Home Prices M/M: -0.5% v -0.7% prior.

- China Oct Surveyed Jobless Rate: 5.0% v 5.1%e.

- China MOFCOM: China Pres Xi: To push for an open Asia Pacific economy - comments from Lima, Peru (APEC Summit).

- China sells Special 30-year Bonds; Avg Yield: 2.2741% v 2.2987% prior.

- US Nat Sec Advisor Sullivan: US Pres Biden working to institutionalize trilateral ties with Japan and South Korea as an enduring feature of US policy.

- REP. JOHN MOOLENAAR (R-MICH.) IS UNVEILING A NEW BILL TO REVOKE NORMAL TRADE RELATIONS WITH CHINA, WHICH WOULD TRIGGER MAJOR TARIFFS AND LIKELY SET OFF A NEW TRADE WAR – PUNCHBOWL.

- China PBOC sets Yuan reference rate: 7.1992 v 7.1966 prior.

- China PBOC Open Market Operation (OMO): Injects CNY981B in 7-day reverse repos; Net injects CNY969B v net injects CNY309B prior (fresh record net injection).

Japan

- Nikkei 225 opens +0.6% at 38,749.

- JAPAN Q3 PRELIMINARY GDP Q/Q: 0.2% V 0.2%E; ANNUALIZED GDP Q/Q: 0.9% V 0.7%E.

- Japan Sept Tertiary Industry Index M/M: -0.2% v +0.2%e.

- Japan Sept Final Industrial Production M/M: 1.6% v 1.4% prelim; Y/Y: -2.6% v -2.8% prelim.

- JAPAN SELLS ¥2.3T VS. ¥2.3T INDICATED IN 5-YEAR JGB BONDS; AVG YIELD: 0.7060% V 0.5620% PRIOR, BID-TO-COVER: 3.81X V 3.73X PRIOR.

- Japan sells ¥4.3T v ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.1276% v 0.0257% prior; bid-to-cover: 2.85x v 2.40x prior.

- Japan Industrial Union [UA Zensen] Chief: Real wage growth is required before BOJ will likely hike - US financial press.

- Japan Economy Min Akazawa: Need to carefully monitor downside risks from overseas economies and volatility in financial, capital markets - comments on Q3 prelim GDP figures (financial press).

- Japan Fin Min Kato: Reiterates sees one-sided, sharp moves in FX markets; Watching with extremely high sense of urgency.

- Japan PM Ishiba: Want to develop Japan, US and South Korea cooperation.

Korea

- Kospi opens -0.2% at 2,413.

Other Asia

- Thailand PM Top Aide Prommin: Sees no risk to government from legal petitions.

- Thailand Dep Fin Min: Current level of THB currency (Baht) is supporting exports.

North America

- (US) BIden Admin Officials; Decision on expanding US nuclear weapons force will be left to Pres-elect Trump; Say must be prepared to expand to deter China, North Korea, Russia - WSJ.

- (US) Senate Majority Leader Sen John Thune (R-SD): Should "defer to a President" on Cabinet member choices - financial press.

- (US) Pres-elect Trump names further Admin Picks: Doug Collins as US Sec for Veterans Affairs and Todd Blanche as Dep Attorney General - financial press.

- (US) OCT PPI FINAL DEMAND M/M: 0.2% V 0.2%E; Y/Y: 2.4% V 2.3%E; (ex-food/energy) M/M: 0.3% v 0.2%e; Y/Y: 3.1% v 3.0%e.

- (US) INITIAL JOBLESS CLAIMS: 217K V 220KE; CONTINUING CLAIMS: 1.873M V 1.873ME.

- (US) Fed’s Barkin (voter for 2024; non-voter for 2025): Last 30 years highly conducive to low inflation; Next 10 years might be more inflationary with deficits, de-globalization and aging populations - Q&A comments.

- (US) Fed refuses to back Basel climate plan, which leaves talks in limbo.

- (US) WEEKLY EIA NATURAL GAS INVENTORIES: +42 BCF VS. +43 BCF TO +45 BCF INDICATED RANGE.

- (US) Fed Chair Powell: Recent US economic performance is remarkably good; Economy not signaling that the Fed needs to hurry on rate cuts; Today's PPI was slightly more of an upward bump; We see inflation continue on its bumpy path; Must be mindful of risks we go too far and too fast, and that we don't go far enough; Today's inflation data was a bigger bump than expected.

Europe

- (UK) BOE’s Mann (dissenter): Activist strategy on monetary policy is appropriate; Activist policy means holding rate firmly until sufficient evidence appears showing diminished inflation persistence, then can move forcefully.

- (EU) ECB "insiders" reportedly point out that after 25bps cut in Dec, ECB tilting toward cutting again 25bps in Jan and can do "multiple" back-to-back cuts in 2025 - Econostream.

- EURO TESTS BELOW 1.05 LEVEL AGAINST US DOLLAR FOR THE 1ST TIME SINCE OCT 2023.

- (EU) ECB ACCOUNT OF OCT. 16-17 MEETING (MINUTES): Disninflation process was well on track; initial signs of improvement in services.

Levels as of 01:20 ET

- Nikkei 225 +1.0%, ASX 200 +0.7%, Hang Seng +0.5%; Shanghai Composite flat; Kospi +1.3%.

- Equity S&P500 Futures -0.3%; Nasdaq100 -0.4%; Dax flat; FTSE100 flat.

- EUR 1.0524-1.0547; JPY 156.22 -156.75; AUD 0.6445-0.6469; NZD 0.5840-0.5867.

- Gold -0.1% at $2,570/oz; Crude Oil -0.9% at $68.10/brl; Copper +0.5% at $4.0992/lb.