Sector bets related to the US Democrats midterm election win drive today’s trading session

Asia market update: Sector bets related to the US Democrats midterm election win drive today’s trading session; Oil and gov’t bond yields extend declines on hopes for diplomacy, USD remains under pressure; Toyota results in focus.

General trends and developments

- Asian equity markets are mixed as sectors are being impacted to varying degrees, as the recent US midterm election results continue to be assessed. Data center and AI stocks have lagged on possible regulatory risks. Interestingly, South Korea’s Fin Min is on alert regarding changes in US policy on AI after the midterm elections.

- Australian data center name NextDC stated Ackland conducted an aftermarket bookbuild acquisition offer, targeting up to 9.9% of shares at A$9.50/share.

- As oil prices have declined on the possibility for changes in Trump’s foreign policy, the weakness seen in defense and shipping names in NY trading has extended into Asia.

- Speculation regarding how the elections could impact Trump’s trade policy has also had an impact on specific sectors. Hence, Japanese and South Korean automakers traded higher, even before Toyota’s figures.

- Toyota’s shares later extended gains, following the earnings report. Focal points included the co’s higher profitability and margin guidance, along with its updated robotics strategy.

- The continued decline in oil prices has remained supportive for government bonds. Hence, NZ saw higher demand at this week’s May 2032 debt sale. The auction was perhaps lent some support from yesterday disappointing jobs figures out of New Zealand. JGB yields also remained lower despite the softer 10-year auction results

- There was not too much news in the Sept BOJ minutes: Japan September 17-18th BoJ MPM Minutes reiterated the BoJ’s hawkish policy stance. Members agreed that it was appropriate that the bank continue to raise the policy interest rate and adjust the degree of monetary accommodation, with two member stating that there is a shift in phase of monetary policy and it is important to stabilize price trend around 2%. Japanese 10-year JGB auction results came in at an average yield of 2.7680% (vs. 3.1010% prior), reflecting the overall global risk sentiment in the bond markets. December BoJ OIS pricing indicates an 80% probability of a +25bp rate hike at 1.4275%, unchanged from Friday, January OIS pricing indicates a 105% probability at 1.4900%, “largely“ unchanged from Friday.

Looking ahead (Asian-weighted focus, using EST/EDT time-zone)

- Mon Nov 2nd: Global EMEA Oct S&P/HCOB Mnfg PMI, Global AMER Oct S&P/ISM Mnfg PMI, (Mon night, KR Oct CPI, VN Oct CPI & Industrial Production & Retail Sales & Trade Balance & FDI - USD, AU RBA Interest Rate Decision + Statement, HK Q3 Preliminary GDP & Sept Retail Sales)

- Tue Nov 3rd: FR Sept Government Budget Balance, US Sept JOLTS, KR Oct FX Reserves - USD, (Tue night, NZ Q3 Unemployment Rate, Global APAC Oct S&P/RatingDog/HSBC Svcs PMI, JP Oct Monetary Domestic Base)

- Wed Nov 4th: Global EMEA Oct S&P/HCOB Svcs/Cmps PMI, EU Oct Preliminary CPI & Core CPI, US Oct ADP Nonfarm Employment Change, US Sept Trade Balance, CA Sept Trade Balance, Global AMER Oct S&P/ISM Svcs/Cmps PMI, BR BCB Interest Rate Decision, (Wed night, KR Sept Current Account, JP Sept 17-18th BoJ MPM Minutes, AU Sept Trade Balance, PH Oct CPI & Core CPI, TH Oct CPI & Core CPI, JP 10-Year JGB Auction, SG Q3 GDP & Sept Retail Sales, MY BNM Interest Rate Decision, TW Oct CPI & FX Reserves - USD)

- Thu Nov 5th: FR 10-Year OAT Auction, EU Sept PPI, UK BoE Interest Rate Decision + Statement, BR Sept Industrial Production, US Q3 Preliminary Nonfarm Productivity & Unit Labor Costs, MX BdeM Interest Rate Decision, (Thu night, PH Sept Industrial Production, ID Oct FX Reserves - USD)

- Fri Nov 6th: DE Sept Industrial Production, HK FX Reserves - USD, EU Sept Retail Sales, PH Oct FX Reserves - USD, US Oct Unemployment Rate, CA Oct Unemployment Rate, US Nov Preliminary Michigan Inflation Expectations, UR Oct FX Reserves - USD (Fri night, CN Oct FX Reserves - USD)

Holidays in Asia this week

- Mon Nov 2nd: Philippines

-Tue Nov 3rd: Japan

Headlines/economic data

Australia/New Zealand

-(AU) ASX 200 Index opens +1.4% at 8,957.

-(AU) Australia Sept Trade Balance (A$): 2.8B v 1.0Be.

-(AU) NXT.AU Statement: Understands that Ackland conducted an aftermarket book build on November 4th. Ackland sought to buy up to 9.9% NextDC shares. Aftermarket book build seeking to acquire NextDC shares at A$9.50/share.

-(NZ) New Zealand sells NZ$350M vs. NZ$350M indicated in 2032, 2037 and 2051 bonds.

China/Hong Kong

-(CN) Shanghai Composite Index opens -1.1% at 3,647; (HK) Hang Seng Index opens +1.7% at 24,317.

-(CN) China PBOC sets the yuan mid-point at 6.7156 v 6.7180 prior.

-(CN) China Foreign Minister Wang Yi met with North Korea delegation in Beijing led by North Korean Politician Kim Song-Nam - Xinhua.

-(CN) China PBOC reverse repo move aims to curb 'fast' short-rate declines; notes the decision by the central bank to trim its 3-month outright RRP rollover - Chinese press.

-(CN) China PBOC Open Market Operation (OMO): Sells CNY263B in 1-day Overnight Reverse Repo; Net drains CNY110B v drains CNY515B prior.

Japan

-(JP) Nikkei 225 Index opens +0.3% at 62,385.

-(JP) Japan sells ¥2.60t vs. ¥2.60t indicated in 10-yearJGB bonds; AVG yield: 2.7680% v 3.1010% prior; bid-to-cover: 3.21x v 3.76x prior.

-(JP) Japan BOJ Sept Minutes (2 decisions ago): Members agreed it was appropriate that the bank continue to raise the policy interest rate and adjust the degree of monetary accommodation. According to two BoJ members, there is a shift in phase of monetary policy and it is important to stabilize price trend around 2%.

-(JP) Japan Oct Final Services PMI: 51.7 v 52.0 prelim (confirms 24th month of expansion).

-(JP) Japan Chief Cabinet Sec Kihara: Countering cyberattacks with measures available - Tokyo, Japan.

Korea

-(KR) Kospi Index opens -1.8% at 5,580.

-(KR) South Korea Sept Current Account Balance: $61.5B v $46.1B prior [record high monthly surplus].

-(KR) South Korean Finance Minister: South Korea to prepare for financial market volatility increase - Markets Review Meeting.

-(KR) Korea Exchange activates sidecar following Kospi 200 FUTs falling by -5%, programme trading halted for five-minutes.

-(KR) Korea Exchange activates sidecar on Kosdaq following Kosdaq 150 FUTs falling by -6% and Kosdaq 150 Spot Index falling by -3%, programme trading halted for five-minutes.

-(KR) South Korea's Cheonghae Navy Unit to expand operations into sea near Strait of Hormuz - Yonhap.

Other Asia

-(ID) Indonesia Q3 GDP Q/Q: 1.6% v 1.3%e; Y/Y: 5.5% v 5.2%e.

-(PH) Philippines Oct CPI M/M: 0.7% v 0.6%e; Y/Y: 7.8% v 7.6%e.

-(TH) Thailand PM Anutin: Tariff rate with US likely unchanged around 19%. Hope to meet with Trump during ASEAN, APEC meetings.

North America

-(US) OCT ISM SERVICES INDEX: 54.5 V 54.8E; Prices Paid: 73.0 v 74.6e [US market close].

-(US) Sept trade balance: -$105.0B V -$107.9BE [US market close].

-(US) Oct monthly ADP employment change: +86K V +67KE; Job changers earnings growth highest since March 2024 [US market close].

-(US) VP Vance: Republicans lost the race because of the Iran war; Felt negative going into the election night, but was shocked by the results; Everyone knows why we lost [US market close].

-(US) DOE CRUDE: -0.9M V +1ME; GASOLINE: -0.2M V 0ME; DISTILLATE: -3.6M V 0ME [US market close].

-(US) Treasury quarterly refunding announcement: To sell $58B in 3-year notes; $42B in 10-year notes and $25B IN 30-YEAR BONDS; To hold its coupon issuance and floating-rate note issuance steady “for the next several quarters" v "at least next several quarters" [US market close].

-(US) Senate Democratic Leader Schumer: Will launch probes if Trump defies the will of the people; We will end the war, some Republicans have joined our efforts [US market close].

-(US) Current House Speaker Johnson (R-LA) reportedly does not plan to run for House minority leadership following House shift to Dem majority - press [US market close].

-(US) Apple reportedly cuts internal AI usage budgets to reduce spending; Plans to cut daily spending cap for some engineers using AI models from $300 to $200, and will employ additional cuts in the future - press [US market close].

-(US) MCD Reports Q3 $3.57 v $3.36e, Rev $7.16B v $7.28Be [US market close].

-(US) QCOM Reports Q4 $2.17 v $2.16e, Rev $10.44B v $10.1Be [US market close].

-(US) UBER Reports Q3 $0.88 adj v $0.94e, Rev $14.8B v $14.7Be; Guides Q4 profits below est [US market close].

-(US) W Reports Q3 $0.93 v $0.83e, Rev $3.42B v $3.36Be; Notes momentum on orders and customers give confidence that share gains are structural [US market close].

-(US) ARM Reports Q2 $0.52 v $0.48e, Rev $1.44B v $1.38Be [US market close].

-(US) INTC CEO Lip Bu Tan discloses purchase of 150K shares at $64.73/shr on 11/2 - filing [US market close].

-(US) RYTM AstraZeneca said to have made $10B or $124/shr offer to acquire Rhythm Pharma last month - WSJ [US market close].

-(US) QCOM Supplies Dragonwing platforms for Starlink Mobile’s US terrestrial 5G network; Deployment to begin in 2027 [US market close].

-(CA) Canada Sept int'l merchandise trade (CAD): 5.4B V 5.0BE [US market close].

-(CA) Canada Trade Min with US: Will speak with Lutnick and Greer in the coming days [US market close].

-(MX) Mexico Oct Domestic Vehicle Sales: 137.4K v 129.7K prior [US market close].

Europe

-(EU) ECB's Kazaks (Latvia): Rates need to rise if inflation risks are spreading; There could be a gradual rise in interest rates.

-(PL) Poland central bank (NBP) leaves base rate unchanged at 3.75%; as expected.

-(IE) Ireland Oct Unemployment Rate: 4.8% v 4.7% prior.

Middle East

-(IR) US Pres Trump: It's largely true that the GOP lost the race due to the Iran war, 'it was worth it'; Would 'destroy the Democratic party' if they attempt to impeach him; Restates that GOP would have won if 'he was on the ballot' [US market close].

-(IR) IRGC: Two tankers and tugboats caught fire in Strait of Hormuz on Wednesday night.

Levels as of 01:20 am EDT

Nikkei 225 -1.7%; ASX 200 +2.6%; Hang Seng +3.4%; Shanghai Composite -0.1%; Kospi -5.3%.

Equity S&P500 Futures -0.2%; Nasdaq100 -1.2%; DAX +0.4%; FTSE100 +1.0%.

EUR 1.1269-1.1226; JPY 158.44-157.79; AUD 0.7022-0.7000; NZD 0.5658-0.5619.

Gold +1.6% at $4,124/oz; BTC +3.2% at $80,542; WTI Crude Oil -1.3% at $86.99/bbl; Copper -0.4% at $6.3880/lbs.