ASIA STOCKS: China Up on Further Stimulus Hopes ("Title Correction")
Nov-01 04:44
- Equity indices were weaker across the region today, with China bucking the trend.
- As the Party Congress Meeting starts next week in China, there are renewed hopes for further stimulus measures to be announced.
- The CSI300 was up +0.85%, Shanghai Comp +0.60%, Hang Seng +1.50% whilst the Shenzhen Comp was off -0.70%.
- Data released in China today saw the Caixin PMI move into expansion territory; a sign that the stimulus is starting to impact the broader economy.
- In Indonesia, the CPI release was the weakest since October 2021 and may point to a further cut from the Central Bank at their meeting later this month.
- Equity markets brushed that aside as the Jakarta Composite was lower by -0.70%.
- South Korea saw their PMI contract for the third consecutive month, potentially paving the way for further rate cuts.
- Equity markets shrugged this to move moderately lower by -0.10%
- Markets have had generally light volumes across the region as the markets pause ahead of significant US data releases tonight.
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NZD: NZD Edges Higher On Exporters Demand & China Equity Surge
Oct-02 04:41
- NZD is the top performing G10 currency today, with exporters demand and a surge in Hong Kong equities supporting the curreny. The NZD/USD is trading up 0.48% at 0.6311, although still well below Monday's highs of 0.6378.
- NZD/USD’s 1-week implied volatility has risen with the tenor now covering RBNZ meeting next week, the contract has jumped 12.18% today to 13.17, implying a 71.4% chance the spot price will remain within 0.6190-0.6418.
- Although off recent highs the pair remains in an uptrend, and trades comfortably above all key moving averages, initial resistance is seen at Monday's highs of 0.6378, while support is at 0.6253 (20-day EMA)
- ANZ has been the most recent bank to changed their view to a 50bps cut by the RBNZ next week, this follows BNZ, ASB and HSBC.
- Locally there has been little headlines today, later tonight we have CoreLogic Home Value and tomorrow ANZ Commodity Price, neither as expected to move prices.
BONDS: NZGBS: 44bps Of Easing Priced For RBNZ Next Week
Oct-02 04:39
NZGBs closed richer across benchmarks, with yields 1-3bps lower. Nevertheless, the local market finished well off the session’s best levels. With the domestic calendar empty today, the local market was on Middle East headlines watch following yesterday’s events.
- Cash US tsys are slightly cheaper, in today’s Asia-Pac session after yesterday’s haven-induced rally. The US calendar will see MBA Mortgage Applications and ADP Employment Change data later today.
- Swap rates closed flat to 1bps lower.
- RBNZ dated OIS pricing closed flat to 1bp softer across meetings, with 44bps or a 76% chance of a 50bp cut next week. The market is pricing in 92bps of cuts now by November.
- ANZ expects the RBNZ will cut the OCR by 50bps to 4.75% next week. “Now that most economists are calling it and the market is pretty much fully pricing it, one has to conclude that on balance the likeliest scenario is that the RBNZ will just take what’s on the table”. (per BBG)
- The calendar is light for the remainder of the week, with just ANZ Commodity prices tomorrow.
- Tomorrow, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond, NZ$200mn of the 4.25% May-34 bond and NZ$50mn of the 1.75% May-41 bond.
FOREX: Hong Kong Equity Surge Drives FX Risk On
Oct-02 04:35
Risk appetite has recovered in the FX space, aided by a further surge in Hong Kong equity markets, which have returned after yesterday's break. NZD//USD is up close to 0.40%, while the A$ and NOK are both up 0.30%. Yen has underperformed, down 0.20%, steady trends have been evident elsewhere.
- Early focus was on the potential Israel response to the overnight missile launches from Iran. Further fighting has taken place in Lebanon, but Israel has not retaliated directly against Iran yet. Oil prices are up, but away from Tuesday intra-session highs.
- So lack of fresh meaningful further escalation has likely been welcomed by the market. Returning Hong Kong equity markets have been the other positive for FX risk appetite. The main headline HSI is up 6%, with strong gains in China-related sub indices. Property gauges continue to surge as Beijing became the latest major city to ease home buying restrictions.
- NZD/USD is back up to 0.6305, so 0.40% stronger for the session. A 50bps cut from the RBNZ next is rapidly becoming a consensus view, this hasn't weighed on NZD though. Market pricing for a 50bps cut is close to fully priced (around -44bps off implied OIS).
- AUD/USD has lagged NZD gains slightly, but is still back above 0.6900 level, so still within striking distance of recent highs just above 0.6940.
- Yen has lost ground, last near 143.80/25. Some selling interest in the pair appears above 144.00. Outside of the risk one tone from HK equities, commentary from new government officials has been in focus, with on-going caution around further BoJ rate hikes, including from new PM Ishiba. This looks to be in line with BoJ thinking.
- Looking ahead, we have some ECB speak, EU unemployment figures, while in the US the ADP report will be in focus.
