USD/JPY volatility on BoJ Gov Ueda – CN FDI could be negative for 2024

Asia market update: USD/JPY volatility on BOJ Gov Ueda; CN FDI could be negative for 2024; US inflation outlook tightens ahead of light data week.

General trend

- The USD/JPY rise post-US election peaked at 146.75 on Friday (just after Thu night 20:00 EST), when the BOJ announced that Gov Ueda would deliver a speech on Monday (today), eventually ending the week having pulled back to ~154.50.

- In the end, BOJ Gov Ueda’s comments today were interpreted by the market as slightly dovish, when he said that the actual timing of rate adjustments will continue to depend on developments in economic activity and prices as well as financial conditions going forward. USD/JPY spiked up 0.5% back to 155 handle, with 2 yr JGB yield slightly up at 0.561% (52-week high is 0.564%, which is the highest since 2008-09).

- Japan saw an unexpected drop in new machine orders for September.

- Kospi outperformed +2.3% on the back of Samsung Electronics +7% after announcing a $7.2B stock buyback after the close on Friday. The company had recently been trading at 2020 lows. Samsung affiliates also up, Samsung Life +11%. Note also that South Korea’s FSC also said that the recent stock sell-off was 'a bit excessive'; and asked institutional investors to take an active role in the stock market.

- New Zealand Q3 PPI and Oct Performance Services Index continued modest recovery over depressed levels earlier in the year.

- Gold and Silver both saw >1% recoveries in Asia trading to start the week.

Weekend updates

- China Oct YTD Foreign Direct Investment (FDI) continued to fall on a y/y basis by around -30%. Some China analysts have pointed out that if the current rate of decline continues through end-of-year that 2024 would be the first calendar year for China to see Net FDI OUTFLOW since FDI records began in the early 1990’s.

- With focus on potential US tariffs when Pres Trump takes office, China fired some trade shots of its own as it announced on Friday cancellation of export tax refunds for copper and aluminum from Dec 1st. Analysts concerned that the flow of China-related shipments overseas may be reduced with more of the metals remaining in China, tightening ex-China demand. Aluminum FUTs prices on the LME jumped as much as 8.5% to $2,730.

- Late Friday US inflation outlook heightened with surging Empire manufacturing to a 3-year high for November, alongside another strong US Retail Sales report, with US 10-yrs hitting 4.47%. Fed messaging has shifted to be non-committal on the rate of further cuts, including for the Dec FOMC meeting (still a 36% probability of the Fed holding rates according to CME rate tracker).

- In US semi-conductor news, TheInformation reported further details on Nvidia’s Blackwell chip reliability issues. Apparently customers are having issues around preventing Blackwell GPU’s for AI servers from overheating when connected together in the customized server racks it has designed. The issue may cause some customers to not have adequate time to get data servers up and running.

- US equity FUTs +0.3% to +0.7% during the Asia session.

Looking ahead (Asian time zone)

- Tue Nov 19th AU RBA Oct Minutes (Tue night US prelim Oct Building Permits).

- Wed Nov 20th JP Oct Trade Balance, CN LPR, ID Rate Decision (Wed eve UK Oct CPI).

- Thu Nov 21st JP BOJ Ueda speech, AU RBA Bullock speech.

- Fri Nov 22nd JP Oct National CPI, JP + AU + IN Flash Nov PMIs, (Fri eve UK Retail Sales, DEM Nov Flash PMI).

Holidays in Asia this week

- No holidays in Asia this week.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.1% at 8,278.

- (AU) Australia sells A$300M v A$300M indicated in 2.75% May 2041 Bonds; Avg Yield: 4.8759 v 4.3903% prior; bid-to-cover: 3.33x v 3.30x prior.

- New Zealand Q3 PPI Input Q/Q: 1.9% v 1.4% prior; Output Q/Q: 1.5% v 1.1% prior (update).

- New Zealand Oct Performance Service Index (PSI): 46.0 v 45.7 prior (update).

- New Zealand Oct Non Resident Bond Holdings: 62.0% v 61.3% prior.

China/Hong Kong

- Hang Seng opens +0.9% at 19,595; Shanghai Composite opens +0.4% at 3,344.

- Macau Q3 GDP Y/Y: 4.7% v 6.9% prior.

- China Offshore Yuan exchange rate seen as 'being stable' (inline) - China Securities Journal.

- China Pres Xi: China is ready to work with the new US administration to maintain communication, expand cooperation and manage differences - APEC conference [weekend update].

- China Commerce Min Wang Wentao message from Xi at APEC CEO Summit: Globalization faces severe challenges; We need more equitable globalization [weekend update].

- China Oct YTD Foreign Direct Investment (FDI) (CNY-denominated) Y/Y: -29.8% v -30.4% prior (second straight bounce in annual drop pace) [weekend update].

- China finance ministry: China cancels export tax refund on Copper and Aluminium; effective Dec 1st; also to reduce export tax rebate rate for some refined Oil products, batteries from 13% to 9% [weekend update].

- SAFE [China FX Regulator]: Oct Commercial Banks Net FX Purchase: $18.2B v $48.2B prior [weekend update].

- China MOFCOM: Releases dual-use item export control list, effective Dec 1st; List does not involve adjustment to specific scope of export controls [weekend update].

- Alibaba: Reports Q3 (CNY) 15.06 v 14.93e, Rev 236.5B v 224.8B y/y; More confident in its core businesses than ever; Notes AI-related product Rev grew at triple-digits y/y for the fifth consecutive quarter [weekend update].

- China PBOC sets Yuan reference rate: 7.1907 v 7.1992 prior.

- China PBOC Open Market Operation (OMO): Injects CNY173B in 7-day reverse repos; Net injects CNY39B v net injects CNY969B prior.

Japan

- Nikkei 225 opens -1.0% at 38,259.

- Japan Sept Core Machine Orders M/M: -0.7% v 1.5%e; Y/Y: -4.8% v 1.8%e.

- Bank of Japan (BOJ) Gov Ueda: The actual timing of rate adjustments will continue to depend on developments in economic activity and prices as well as financial conditions going forward - speech and Q&A at business leader meeting in Nagoya.

- Japan DPP will not back extra budget if its policy of raising the income tax-free ceiling is not debated – US financial press [update].

- Bank of Japan (BOJ) announcement related to outright bond buying operations: For 1-3 Years, 5-10 Years and 10-25 Years (Inline with prior purchases).

Korea

- Kospi opens +1.0% at 2,440.

- South Korea FSC says recent stock sell-off is 'a bit excessive'; Asks institutional investors to take active role in the stock market - financial press.

- Bank of Korea (BOK) and National Pension Fund may extend $50B FX wwap deal by a further one year - Korean press.

- South Korea Pres Yoon tells China's Xi that the two countries must cooperate for peace in the face of North Korea and Russian military cooperation - APEC summit [weekend update].

Other Asia

- Thailand Q3 GDP Q/Q: 1.2% v 0.8%e; Y/Y: 3.0% v 2.4%e.

- Singapore Oct Non-oil Domestic Exports M/M: -7.4% v 2.3%e; Y/Y: -4.6% v 4.0%e.

North America

- (US) Pres-elect Trump now seen to also consider Kevin Warsh, Marc Rowan for US Treasury Sec – NYT.

- (US) Pres-elect Trump announces Brendan Carr as Chairman of FCC - statement.

- *Nvidia customers said to have concerns about overheating servers associated with Co's new Blackwell AI chip servers - TheInformation.

- (US) Trump selects Liberty Energy CEO Chris Wright for Energy Secretary [weekend update].

- (US) Fed’s Barkin (voter for 2024; non-voter for 2025): Always have expected that core PCE would stay in high 2%s in H2 2024; Hope that in Q1 2025 inflation will come down - press interview [weekend update].

- (US) Fed's Goolsbee (non-voter for 2024; voter for 2025): Doesn't like tying our hands on Dec rate cut, still more data to come; Sees rate coming down along lines of dot plot - press interview [weekend update].

- (US) Sept business inventories: 0.1% V 0.2%E [weekend update].

- (US) Oct industrial production M/M: -0.3% V -0.4%E; capacity utilization: 77.1% V 77.1%E [weekend update].

- (US) Oct import price index M/M: 0.3% V -0.1%E;Y/Y: 0.8% V 0.3%E [weekend update].

- (US) Oct advance Retail Sales M/M: 0.4% V 0.3%E; Retail Sales (EX-AUTO) M/M: 0.1% V 0.3%E; Prior month revised higher [weekend update].

- (US) Nov empire Manufacturing: 31.2 V 0.0E (3-yr high and by far above all estimates); Notes price increases remained steady and modest [weekend update].

- (US) Tier1 week-to-Nov 14st US Truckload Demand Indicator at 58.3 v 56.0 prior (highest level since Jun 2022; above 54 avg freight recession level and nears historical growth signal level of 60) [weekend update].

Europe

- (UK) Nov Rightmove House Prices M/M: -1.4% v 0.3% prior; Y/Y: 1.2% v 1.0% prior.

- (RU) Russia Pres Putin and German Chancellor Scholz reportedly to hold first phone call in almost 2 years later today – press [weekend update].

- (IR) Reportedly Israeli attack on Iran in late October destroyed an active top secret nuclear weapons research facility in Parchin; Said to have destroyed sophisticated equipment used to design the plastic explosives that surround uranium in a nuclear device and are needed to detonate it – Axios [weekend update].

- (DE) Germany Govt Spokesperson: Focus of meeting between Chancellor Scholz and China Pres Xi at G20 will be on Ukraine and economic issues [weekend update].

- (RU) Russia Dep PM Novak: Russia and China are considering a new route for up to 35bcm of Russian gas supply through Kazakhstan - Russian press [weekend update].

Levels as of 01:20 ET

- Nikkei 225 -0.8%, ASX 200 +0.2%, Hang Seng +1.0%; Shanghai Composite +1.0; Kospi +2.0%.

- Equity S&P500 Futures +0.3%; Nasdaq100 +0.7%; Dax +0.3%; FTSE100 +0.1%.

- EUR 1.0530-1.0551; JPY 153.84 -155.14; AUD 0.6457-0.6480; NZD 0.5851-0.5876.

- Gold +1.0% at $2,595/oz; Crude Oil +0.4% at $67.19/brl; Copper +0.3% at $4.0825/lb.