JPY extends gains on hot Tokyo core CPI, AU RBA independence threatened

Asia Market Update: JPY extends gains on hot Tokyo core CPI; AU RBA independence threatened; Light trading on US Thanksgiving holiday.

General trend

- Hottest Tokyo Nov Core CPI since Aug saw JPY extend gains against all majors, breaking 150 against USD for first time since Oct 20th. Note Kirin, Ajinomoto, Fujiya and other companies in Japan recently seen significantly increasing prices by as much as 20-30% for first time in more than 30 years. Financial press poll of traders now sees 60% chance of a BOJ rate hike on Dec 19th.

- Japan Oct Retail Sales and Industrial production both below expectations.

- 52 week high for 2 yr JGB yield at 0.602%, close to 2007 high.

- JP carmakers fall; Toyota -2%; Nissan -3%; Honda -0.6% [strong Yen, and weak production data overnight]. JP financials up amid higher yields.

- On the other hand, JP Nov Consumer Confidence still shows fairly depressed levels.

- CN/HK stocks outperform Asia, with Shanghai Composite +1.5%.

- A large omnibus package of ~30 bills was bull-rushed through Australian parliament by the ruling Labour party ahead of year-end (speculated to be a strategic ‘clearing of the decks’ ahead of a potential early election next year), with support from the hard-left Green party (who have held back their supply support to Labour until now). The series of bills included the anticipated overhaul of the RBA board to split into two expert panels; one for governance and one for interest rates and keeping the potential of the Treasurer to override RBA rate decisions. (Speculation that the Greens may force usage of the never-used clause). Also passed a controversial, world-first Social Media ban for under-16’s, with concerns about invasion of privacy for adult users in proving their age.

- RBA Gov Bullock last night affirmed there is little chance of any rate cuts in the near future with core inflation between 2-3% or higher, with most analysts pushing out to May 2025 any expectations of a cut by the RBA.

Note early month-end today (29th Nov)

- US equity FUTs +0.3% to +0.5% during the Asia session, despite the holiday in the US.

Looking ahead (Asian time zone)

- Fri Nov 29th (Fri eve EU Nov CPI).

- Sat Nov 30th CN NBS Nov Manufacturing PMI.

Holidays in Asia this week

- Thu Nov 28th (US time) Thanksgiving.

- Fri Nov 29th (US time) Early close at 13:00ET.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,440.

- Australia Oct Private Sector Credit M/M: 0.6% v 0.5%e; Y/Y: 6.1% v 5.8% prior.

- New Zealand Nov ANZ Consumer Confidence: 99.8 v 91.2 prior.

- RBNZ: New Zealand Oct Residential Lending +3.5% y/y [fastest pace since Mar 2023].

- Australia sells A$700M vs. A$700M indicated in 1.50% Jun 2031 bonds; Avg Yield: 4.1626% v 4.0954% prior; bid-to-cover 3.80x v 2.99x prior.

- Australia Govt YTD underlying cash deficit -A$23B - financial press.

- Follow up: Australia PM Albanese: Social media platforms now have a responsibility to ensure safety of our kids is a priority for them; Note: earlier, Australia Senate passes bill banning social media for children under 16 in world's first;

- Australia Treasurer Chalmers: RBA reforms are expected to apply after Feb meeting.

- Reserve Bank of Australia (RBA) Gov Bullock: No near-term rate cut with core inflation above 2-3%; Provided inflation keeps slowing, we can hold rates where they are for time being [overnight update].

- Australia Senate passes bill to overhaul Reserve Bank board - press [**Note: RBA reform will split the board into two expert panels; one for governance and one for interest rates, following a major review of the Central Bank released last year] [overnight update].

- RBNZ Dep Gov Hawkesby: Has clearly signaled another 50bps cut in Feb 2025; New Zealand economy is turning corner.

China/Hong Kong

- Hang Seng opens -0.1% at 19,346; Shanghai Composite opens flat at 3,295.

- China Finance Ministry (MOF): Oct Net Local Government Debt Issuance (CNY): 338.5B v 1.14T m/m ; net local gov't special bond issuance 299.1B v 1.03T m/m.

- China Commerce Ministry (MOFCOM): Imposing tariffs will not solve US trade issues [overnight update].

- China issues document on digital trade: To actively develop digital trade and ease market access in the sector [overnight update].

- China PBOC sets Yuan reference rate: 7.1877 v 7.1894 prior (strongest since Nov 11th).

- China PBOC Open Market Operation (OMO): Injects CNY479B in 7-day reverse repos; Net drains CNY156B v net drains CNY280B prior.

Japan

- Nikkei 225 opens -0.4% at 38,205.

- JAPAN NOV TOKYO CPI Y/Y: 2.6% V 2.2%E; CPI (EX-FRESH FOOD) Y/Y: 2.2% V 2.0%E (highest core since Aug at 2.4%).

- JAPAN OCT PRELIMINARY INDUSTRIAL PRODUCTION M/M: 3.0% V 4.0%E; Y/Y: 1.6% V 2.0%E.

- JAPAN OCT RETAIL SALES M/M: 0.1% V 0.4%E; Y/Y: 1.6% V 2.0%E.

- Japan Econ Min Muto: Confirms support of up to ¥100B for 8 chip projects - financial press.

- JAPAN SELLS ¥2.6T VS. ¥2.6T INDICATED IN 2-YEAR JGB BONDS; AVG YIELD: 0.5820% V 0.4540% PRIOR; BID-TO-COVER: 3.63X V 4.87X PRIOR.

- Japan sells ¥4.3T vs. ¥4.3T indicated in 3-Month Bills; Avg Yield: 0.1270% v 0.1210% v 0.1276% prior; bid-to-cover: 2.74x v 2.65x prior.

- Japan reportedly to conduct sampling inspection on new cars – Nikkei [overnight update].

Korea

- Kospi opens -0.3% at 2,496.

- South Korea Oct Industrial Production M/M: 0.0% v 0.2%e; Y/Y: 6.3% v 2.2e.

- South Korea Tax Rev –KRW11.7T through Oct; cites ‘weak’ corporate earnings – South Korea press.

Other Asia

- Singapore Govt reported to issue one-off property tax rebates in 2025 - local press.

North America

(Thanksgiving holiday in US overnight).

- (BR) Former Brazil Pres Jair Bolsonaro says plans to again run for President in 2026, despite ban put in place by current govt – WSJ.

- (CA) Alberta, CA Premier: Alberta to work with Canada's Federal authorities on US border - press.

- (BR) Brazil Central Bank (BCB) Incoming Gov Galipolo: May need higher rates for longer; Labor market is tight and 2024 economic growth exceeds forecasts - financial press.

Europe

- (IL) Axios' reporter Barak Ravid: IDF says it attacked a Hezbollah compound in Lebanon after it identified "terrorist activity in a facility where rockets are deployed"; This is the first such Israeli attack since the ceasefire took effect on Wednesday morning.

- (FR) France PM Barnier: Will not increase electricity taxes; Will do everything to bring 2025 deficit to ~5% - French press interview.

- France Fin Min Armand: Cannot compare France to Greece (follows French 10-year Bond Yield matching Greece's for first time); Ready to make concessions on electricity taxes to ensure budget passes; Risk losing control if budget is not passed.

- (RU) Russia Pres Putin: If Ukraine becomes a nuclear power, Russia will use all means of destruction.

- OPEC+ delays online meeting from Dec 1st to Dec 5th – press.

- (DE) GERMANY NOV PRELIMINARY CPI M/M: -0.2% V -0.2%E; Y/Y: 2.2% V 2.3%E (highest annual pace since July); CPI EU Harmonized M/M: -0.7% v -0.5%e; Y/Y: 2.4% v 2.6%e.

- (FR) Eurasia Group's Rahman: Still think PM Barnier's minority Govt will hold and the 2025 budget will pass - but just Marine Le Pen's strategy is clearly evolving; There are 2 key votes next week & the crunch vote on 20 Dec. So suspect French borrowing costs still have some way to rise.

- (EU) ECB's Villeroy (France): Rates should clearly go to neutral level; Wouldn't exclude rates below neutral level; Negative rates should remain in toolkit.

- (EU) ECB's Knot (Netherlands): Must take close look at supply shocks to the economy and react forcefully if there is risk of expectations de-anchoring - Paris conf.

- (BE) ECB's Wunsch (Belgium): ECB may be able to keep cutting interest rates "in a gradual manner" as inflation eases and could ultimately lower them to “somewhere close to 2%" - Nikkei.

- (ES) SPAIN NOV PRELIMINARY CPI M/M: 0.2% V 0.2%E; Y/Y: 2.4% V 2.3%E.

Levels as of 00:20 ET

- Nikkei 225 -0.3%, ASX 200 -0.1%, Hang Seng +0.7%; Shanghai Composite +1.5%; Kospi -1.3%.

- Equity S&P500 Futures 0.3%; Nasdaq100 +0.5%; Dax flat; FTSE100 +0.1%.

- EUR 1.0549-1.0577; JPY 149.76 -151.56; AUD 0.6492-0.6524; NZD 0.5886-0.5917.