KR autos up as 15% US tariff confirmed on light news day

Asia market update: KR autos up as 15% US tariff confirmed on light news day; Caution prevails for JP assets post-Ueda.

General trend and developments

- South Korea finally confirmed its lower 15% US tariff rate (incl. autos) and unstacking of Korea’s reciprocal rate to match Japan and the EU (15%), retroactively applied from Nov 1st via an X post from US Commerce Sec Lutnick. Hyundai +4.7%, Kia +3.5%, Hynix also +3.3% as Korea’s Kospi index outperformed Asia +2%.

- South Korea’s Nov CPI more or less in line with expectations, with November seeing a negative print.

- USD/JPY has now recovered well over half of yesterday’s losses, despite the Japanese yield curve continuing to tick up during morning trading in Asia, with 30-year JGBs hitting a fresh record high earlier.

- Overnight OIS chances of a BOJ December hike jumped up to 81.5% vs 56.5% last Friday following Gov Ueda yesterday leaving the possibility of a hike on the table for the BOJ’s Dec 19th meeting.

- Japanese yields then reversed earlier gains after a healthy 10-year JGB auction, with a smaller tail than last auction and a higher bid-to-cover than the 12-month average.

- Japanese consumer confidence at its highest since April, 2024, even amid 35-year high inflation and now regular double-digit prices increases by Japanese firms.

- New Zealand RBNZ’s new Governor Breman (from Sweden’s Riksbank) gave her maiden comments as Governor today: Key focus is to stay laser-focused on core mandate, but also mentioned a need for more transparency in 2026.

- Ahead of Australia’s Q3 GDP figures tomorrow, the Current Account Balance component saw a slightly worse deficit than forecast, with Net exports of GDP also slightly negative when flat was forecast.

- Amid worsening economic data the China Securities Journal confirmed today that local government firms in China are 'buying up' listed companies, reporting controlling stakes in at least 28 listed companies as at Nov 1st. Comes as troubled property developer Vanke continues to see bonds suspended from trading against big price falls and the company requesting of creditors a 12-month stay to extend payment terms.

- As Japanese company employees and management continue to reassess living and working in China amid the latest escalation in tension brought by Beijing against Japan, Honda now also planning to ”reorganize” its China engine unit and associated ventures.

- With ongoing reports of support intervention by India’s Central Bank, Indian rupee’s 1-month NDF fell past 90/USD, said to be noted as a key psychological level the RBI does not want to see breached.

- Another US govt equity stake to be taken by the Trump Admin in the strategic area of chips, investing $150M in startup Xlight, which produces Free Electron Lasers or FELs, an alternative to EUV lithography scanners (i.e. ASML). Exec Chair is former Intel CEO Pat Gelsinger. The award is the first from the Trump Administration’s CHIPS Research and Development Office (CRDO).

- The above US govt investment comes as the WSJ reported that China firms are developing 'workarounds' for curbs on rare earth magnets.

- US equity FUTs -0.1% during Asian trading.

Looking ahead (Asian-weighted releases, using Asian time zone)

- Tue Dec 2nd (Tue eve EU Nov CPI)- Wed Dec 3rd AU Q3 GDP, (Wed eve US Nov ISM Services PMI).

- Thu Dec 4th AU Oct Trade Balance.

- Fri Dec 5th JP Oct Household Spending, (Fri night US Sept Core PCE, Michigan Dec prelim Consumer Sent.

Holidays in Asia this week

- Fri Dec 5th Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.2% at 8,577.

- Australia Q3 Current Account Balance (A$): -16.6B v -13.0Be; Net Exports of GDP: -6.4% v 0.0%e.

- Australia Oct Building Approvals M/M: -6.4% v -4.5%e.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 85.5 v 87.1 prior (update).

- RBNZ Gov Breman: Key focus is to stay laser focused on core mandate; More to be done on transparency in 2026.

- New Zealand Q3 Terms of Trade Index Q/Q: -2.1% v +4.2% prior.

- RBNZ will commence weekly open-market operations (OMO) from Dec 4th; To update changes to format in Q1 2026.

China/Hong Kong

- Hang Seng opens +0.6% at 26,188; Shanghai Composite opens -0.2% at 3,908.

- China firms said to be developing 'workarounds' for curbs on rare earth magnets - WSJ.

- Local government firms in China 'buy up' listed companies - China Securities Journal.

- (HK) Hong Kong Oct Retail Sales Value Y/Y: 6.9% v 6.0% prior; Retail Sales Volume Y/Y: 5.3% v 3.7%e.

- (HK) Fitch: Hong Kong banks' strong capital buffers to cushion CRE asset quality 'woes'.

- China PBOC sets Yuan reference rate: 7.0794 v 7.0759 prior.

- China PBOC Open Market Operation (OMO): Injects CNY156B in 7-day Reverse Repos; Net drains CNY146B v drains CNY231B prior.

Japan

- Nikkei 225 opens +0.3%.

- Japan Nov Monetary Base Y/Y: -8.5% v -7.8% prior.

- Japan Nov Consumer Confidence: 37.5 v 36.2e (highest since Apr 2024).

- Japan sells ¥2.6T VS. ¥2.6T indicated in 10-year JGB bonds; AVG yield: 1.8720% V 1.6580% prior; bid-to-cover: 3.59X V 2.97X PRIOR.

- Japan 10-year JGB yield falls 1.5bps to 1.860%, following well-supported 10-year JGB auction.

- Japan 30-year JGB yield rises to 3.41%, fresh record high since debut in 1999.

- Japan MOF advisory panel says need to "secure fiscal room" ahead of annual budget for next FY.

- Japan Fin Min Katayama: Plans to streamline spending for the FY26 budget.

- Honda plans to reorganize China engine unit and associated ventures - Nikkei [update].

Korea

- Kospi opens +0.5% at 3,939.

- South korea NOV CPI M/M: -0.2% V -0.3%E; Y/Y: 2.4% V 2.3%E.

- (US) Commerce Sec Lutnick comments on US-Korea trade deal; U.S. will lower certain tariffs under the deal – including auto tariffs to 15%, effective November 1- X post (update)- South Korea sells 30-year Bonds: Avg Yield: 3.225% v 3.060% prior (Nov 4th).

- Parties in South Korea reach agreement on the 2026 budget – Yonhap.

- South Korea to maintain zero tariffs on crude oil, the government will try to manage food prices with the 'utmost vigilance' – Press.

- Bank of Korea (BOK) Need to monitor the impact of FX movement on CPI [follows Nov CPI data].

Other Asia

- India rupee 1-month NDF falls past key 90/USD level.

- Thailand Nov Business Sentiment Index: 50.0 v 48.7 prior [overnight update].

North America

- OpenAI CEO Altman: Declares "Code Red" to improve and combat threats to ChatGPT; To delay other initiatives, such as advertising - TheInformation.

- (US) White House: Pres Trump to hold cabinet meeting Tues 11:30am; To also make announcement at 14:00 [topic unspecified].

- (US) Trump Admin via Commerce Dept signs LOI to take equity stake of $150M in chip-related startup Xlight - WSJ.

- (US) FAA to 'ramp up' investigation into compliance with shutdown-related flights - WSJ.

- (US) Fed Chair Powell: No comment on monetary policy - remarks on panel at Hoover Institution, Stanford, CA, on topic "George Schultz and his Economic Policy Contributions".

- (US) Adobe: Consumers have already spent $9.1B online for Cyber Monday through 6:30 PM ET, +4.5% y/y.

- (UK) US-UK said to be set to agree on zero tariff deal on pharmaceuticals - press.

- (VE) Trump reportedly gave Venezuela's Maduro an ultimatum to leave the country immediately, before Trump announced the Venezuela's air space was closed - Fox.

- (VE) Trump to make announcement about Venezuela from the Oval Office later today; Secretaries Rubio and Hegseth and Joint Chiefs Chair Caine will be in attendance - CNN.

- (BR) Brazil Central Bank (BCB) Gov Galipolo: Hard to refute that job market is tight; Inflation expectations have improved but still not where our mandate dictates.

- (US) USTR: Confirms agreement in principle on US-UK pharma pricing; Agreement requires UK NHS to increase net price it pays for new medicines by 25%; Trump reviewing pharma pricing with many other US trade partners following UK deal; Hope that (those partners) will follow suit with constructive negotiations.

- (CA) Canada Nov Manufacturing PMI: 48.4 v 49.6 prior (10th straight contraction).

- (US) NOV ISM Manufacturing: 48.2 V 49.0E; New Orders: 47.4 v 49.4 prior; Prices Paid: 58.5 v 57.5e.

- (MX) Mexico Nov Manufacturing PMI: 47.3 v 49.5 prior.

- (US) Fed supervision report: US banking system continues to maintain strong capital and liquidity levels while maintaining strong profitability and healthy loan growth; US banks are well positioned to continue to support a growing economy.

- (CA) Canada Energy Min Hodgson: Govt will maximize output of Trans Mountain (TMX) pipeline [capacity 890K bpd] before selling - press interview.

- (MX) Mexico Nov IMEF Manufacturing Index: 45.5 v 47.1.

Europe

- (EU) ECB refuses to provide backstop for €140B Ukraine loan - FT.

- (UK) Nov BRC Shop Price Index Y/Y: 0.6% v 1.0% prior.

- (IE) Ireland Nov Preliminary CPI EU Harmonized M/M: -0.2% v +0.4% prior; Y/Y: 3.2% v 2.8% prior.

- (RU) Russia Dep PM Novak: Oil market situation stable thanks to OPEC+, Note that oil demand lower in winter; OPEC+ countries ~500K bpd behind their production targets.

- (SE) Sweden Central bank (Riksbank) Gov Thedeen: Q3 GDP a bit stronger than expected; Economic upturn may have come slightly earlier than our forecast.

- Ukraine Pres Zelenskiy: Reiterates Ukraine priorities are maintaining sovereignty and security guarantees; Territory issue is the most difficult theme in discussions; New peace plan looks better.

- (IT) Italy Nov New Car Registrations Y/Y: flat v -0.6% prior.

- (EU) ECB’s Kocher (Austria): Slight deviations above or below 2% target shouldn't trigger ECB rates move - newspaper interview.

Levels as of 01:20 ET

- Nikkei 225 +0.2%, ASX 200 +0.2%; Hang Seng flat; Shanghai Composite -0.5%; Kospi +2.0%.

- Equity S&P500 Futures -0.1%; Nasdaq100 -0.1%; DAX flat; FTSE100 +0.1%.

- EUR 1.1604-1.116.14; JPY 155.43-155.78; AUD 0.6538-0.6555; NZD 0.5719--5730.

- Gold -0.5% at $4,251/oz; BTC +1.1% at $87,156; Crude Oil +0.2% at $59.42bbl; Copper -0.7% at $5.2330/lb.