JPY strength weighs on Nikkei, automakers – RBNZ cuts another 50bps

Asia market update: JPY strength weighs on Nikkei, automakers; RBNZ cuts another 50bps; Focus on US Oct Core PCE, US Q3 GDP 2nd est; BOK rate decision tomorrow.

General trend

- Japanese Yen steadily strengthened to nearly reach the 151 handle and threatening its highs of early Nov. Japanese automakers did not like the strength, with Toyota down nearly 4% and Honda -3%, chipmaker Advantest -3.4%.

- Kospi under-performed Asia along with the Nikkei, with chipmaker Hynix -4.8% while Samsung down over -3% as it announced a management shake-up, with the head of the chip division who apologized for technical issues at the Q3 earnings call last month taking the co-CEO role at the giant chipmaker and device maker.

- CN and HK stocks higher, although EU official said an EV deal with China still not in sight after weeks of negotiations.

- RBNZ cut by 50bps as expected, with the official Statement saying that CPI is close to midpoint of the 1-3% target. Also forecasts recession in Q2 and Q3 of 2024 but economic growth expected to recover over 2025. The kiwi dollar initially spiked +0.7%.

- However, Gov Orr at his later press conference hit back at NZ's yield curve flattening post-decision, saying it was a "misnomer" that the RBNZ forward projections showed a slower pace of cuts. Kiwi dollar quickly gave back about half of its earlier gains. Orr also said the Committee had "very limited" consideration of a 75bps or 25 bps cut. Overall, NZD and NZ bond yields pared their rise on RBNZ Orr press conference comments, with yield curve reversing the earlier flattening. RNBZ expects neutral rate to be 'around neutral' by end-2025, somewhere between 2.5-3.5%.

- Australian CPI for October came in less than expected, but with the monthly figures being goods-heavy the RBA looks to January’s quarterly CPI for truer inflation guidance.

- Weak 40-yr JGB auction after warning overnight from bond dealers to BOJ of oversupply of 40 year JGBs.

- KRW (below 1,400 against USD) and South Korea Pension still in the headlines.

- Huawei increasingly looking to develop all-in-China tech stack and employee base through Western poaching.

- USTR Rep named as the former trade rep Robert Lighthizer’s deputy from Trump’s first Admin, Jamieson Greer.

- Month-end flows in sharper focus with US Thanksgiving on Thu/Fri?

- US equity FUTs flat to slightly down during the Asia session.

Looking ahead (Asian time zone)

- Wed Nov 27th (Wed night US Oct Core PCE, US Q3 GDP 2nd est.).

- Thu Nov 28th KR BOK rates, (Thu eve DE Nov CPI).

- Fri Nov 29th JP Nov Consumer Confidence, JP Oct Industrial Production & Oct Retail Sales, (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 +0.2% at 8,377.

- Australia Oct CPI Y/Y: 2.1% V 2.3%E.

- Australia Q3 Construction Work Done: 1.6% v 0.4%e.

- Australia sells A$800M vs. A$800M indicated in 3.50% Dec 2034 bonds; Avg Yield: 4.4329% v 4.5499% prior; bid-to-cover: 2.84x v 3.21x prior.

- New Zealand central bank (RBNZ) cuts official cash rate (OCR) by 50BPS to 4.25%; as expected.

- RBNZ Gov Orr: A "misnomer" that our forward projections show a slower pace of cuts - post rate decision press conference.

China/Hong Kong

- Hang Seng opens +0.1% at 19,187; Shanghai Composite opens -0.3% at 3,250.

- China Oct Industrial Profits Y/Y: -10.0% v -27.1% prior.

- (EU) Follow up: EU trade official Weyand said EV deal with China is not close after 50 hours of negotiations – SCMP.

- China’s Defense Minister Admiral Dong Jun said to be placed under investigation for corruption – FT.

- Huawei said to stop using Android in its devices from next year - financial press.

- (DE) Huawei said to be "stepping up" attempts to poach tech workers in the West, including Germany; Triggers German Intelligence -investigation - WSJ.

- G7 Foreign Min Statement: We'll take appropriate measures, consistent with legal systems, and against actors in China and other third world countries that materially support Russia's war; China's expansive claims in South China Sea have no legal basis, maintaining peace and stability across the Taiwan Strait is indispensable to international security and prosperity [overnight update].

- China Commerce Ministry (MOFCOM): US entity list is 'economic coercion'; There is no forced labor in Xinjiang [overnight update].

- China Vice-President: Willing to work to promote an open world economic system [overnight update].

- China Ministry of Foreign Affairs (MOFA): To respond later on Trump's tariffs comments; Open to dialogue in principle [overnight update].

- China Finance Ministry: Jan-Oct State-owned Firms Profits Y/Y: -1.1%; Rev Y/Y: +0.9% [overnight update].

- China PBOC sets Yuan reference rate: 7.1982 v 7.1910 prior.

- China PBOC Open Market Operation (OMO): Injects CNY268B in 7-day reverse repos; Net drains CNY34B v net injects CNY11B prior.

Japan

- Nikkei 225 opens -0.3% at 38,327.

- Japan sells ¥700B VS. ¥700B indicated in 40-year JGB bonds; yield at lowest accepted price: 2.5500% V 2.34% prior; bid-to-cover: 2.24X V 2.58X.

- Japan SEAJ Oct Chip-Making Equipment Billings Y/Y: +33.4% y/y v +23.4% y/y prior [overnight update].

- Japan Ministry of Finance (MOF): Japan bond dealers say 40-year sales should be reduced [overnight update].

Korea

- Kospi opens flat at 2,518.

- South Korea Dec Business Manufacturing Survey: 66 v 71 prior (update).

- Follow up: South Korea National Pension Fund said to have sold USD in onshore FX market "in recent weeks" - financial press, citing sources.

- Follow up: South Korea reported to be planning (further) protection of minority shareholders - Korean press.

- South Korea plans $10B policy support for chipmakers in 2025 - press.

Other Asia

- Singapore MAS Financial Stability Review: Singapore corporate, household and financial sectors "look resilient".

- Hong Kong Oct Trade Balance (HK$): -31.0B v -23.7Be [overnight update].

North America

- (US) US Trump team said to be preparing to announce former USTR Lighthizer’s Chief of Staff Jamieson Greer as US Trade Representative (USTR) - financial press, citing sources.

- US) Pres-elect Trump confirms Kevin Hassett as Dir of WHNEC as well as other senior staff - financial press.

- (US) Pres-elect Trump said to be considering naming an AI czar in the White House to coordinate federal policy and governmental use of the emerging technology - Axios.

- (CA) Bank of Canada (BOC) Dep Gov Mendes: Equally concerned about inflation above or below the 2% level; If economy evolves broadly in line with BOC forecast, it's reasonable to expect further rate cuts - speech text.

- (US) Nov Philadelphia Fed Non-Manufacturing Activity: -5.9 v +6.0 prior.

- (MX) Mexico Pres Sheinbaum: Sent letter to US Pres elect Trump on fentanyl and migration; It's not with threats nor with tariffs that migration nor drug consumption will be addressed.

- (US) Sept FHFA house price index M/M: 0.7% V 0.3%E; Q/Q: 0.7% V 0.9% prior.

- (US) Sept S&P corelogic house price city (20-CITY) M/M: 0.2% V 0.30%E; Y/Y: 4.6% V 4.70%E.

- (US) Nov Richmond Fed Manufacturing index: -14 V -11E; Volume of new orders: -19 v -17 prior.

- (US) Oct new Home Sales: 610K V 725KE; Months supply (seasonally adjusted): 9.5 v 7.6 prior.

- (US) Nov consumer confidence: 111.7 V 111.8E.

- (US) Nov Dallas Fed Services Activity: 9.8 v 2.0 prior.

- (US) Fed's Goolsbee (non-voter for 2024; voter for 2025): Makes sense to slow cuts as rates approach neutral - pre-recorded media interview.

- (US) FOMC Nov minutes: Some participants said easing could be accelerated if labor market weakened or economic activity faltered.

- (US) Treasury $70B 5-year note auction draws 4.197% V 4.138% prior, BTC 2.43 V 2.39 prior and 2.39 over the last 12.

Europe

- (IE) Ireland Nov Consumer Confidence Index: 74.1 v 74.1 prior.

- (IL) US Pres Biden: Thanks French Pres Macron for helping Israel and Lebanon reach a ceasefire agreement.

- (IL) Israel Security Cabinet approved Lebanon ceasefire deal - press.

- (UK) Nov CBI Retailing Reported Sales: -18 v -15e.

- (DE) German Foreign Min Baerbock: At critical point for Lebanon ceasefire - G7 comments.

- (EU) ECB's Kazaks (Latvia, voter, hawk): Falling PMI readings support more rate cuts.

- OPEC+ said to have begun talks on delaying oil production restart - press.

- (FR) France PM Barnier: Sees financial market 'storm' if budget not passed; Reiterates goal to cut budget deficit to ~5% of GDP - press interview.

- (IL) Israel PM Netanyahu: If Hezbollah chooses to re-arm, we'll attack; We'll now focus on the Iranian threat.

Levels as of 00:20 ET

- Nikkei 225 -1.0%, ASX 200 +0.6, Hang Seng +0.4%; Shanghai Composite +0.4%; Kospi -1.0%.

- Equity S&P500 Futures flat; Nasdaq100 -0.1%; Dax -0.2%; FTSE100 -0.1%.

- EUR 1.0477-1.0497; JPY 152.25 -153.24; AUD 0.6463-0.6485; NZD 0.5826-0.5882.

- Gold +0.7% at $2,665/oz; Crude Oil +0.1% at $68.86/brl; Copper +0.4% at $4.1460/lb.