BoK cuts unexpectedly as Trump continues to shake world trade order via social media posts

Asia market update: BOK cuts unexpectedly as Trump continues to shake world trade order via social media posts; USD retakes some ground even as USTs stay down.

General trend

- The Bank of Korea (BOK) unexpectedly cut its rates by 25bps to 3.00%. The Korean Won fell as much as 0.5% with 10-yr note FUTs rising to highest since 2022 and 3-yr T-bond FUTs +20 ticks, BOK also cut South Korea’s GDP and CPI outlook for the next couple of years. Korea’s 3-yr corporate bond yields fell nearly 9bps to 2.23%. BOK Gov Rhee later said that two out of six members dissented, with the Board split 50/50 on the possibility of any more cuts over the next 3 months. Also noted high uncertainty regarding trade and FX.

- US Pres-elect Trump again continued to move markets, and world leaders, with social media posts; Today posting that in a phone call with Mexico’s President that she had agreed to stop migration and illegal drugs through Mexico and into the US, effectively closing the Southern Border. Sheinbaum later pushed back somewhat by saying that her goal is “not to close borders but to build bridges". Meanwhile Canada appeared to tone down earlier rhetoric that Canada was considering tariffs following US Pres Trump's threats, by instead later saying “We agreed it's necessary to work in a united and coordinated way".

- More evidence of the "Trump Effect", with India Trade Min saying in reference to US tariffs that India is open to 'rightsizing' some import duties on some 'select items'.

- USD took back some losses from the past day or two, despite yields staying down around the 4.26% level for US 10-yrs, particularly against KRW (+0.5%) after the BOK rate cut and JPY(+0.4%).

- Separately, the US is expected to announce more AI sanctions against China on Monday according to US press.

- Australian Private Capex for third quarter rose slightly ahead of expectations, and well above the prior quarter’s negative number, which will feed into the next GDP figure out of Australia.

- The Australian RBA reform bill looks set to pass with the Greens party agrees to vote for Labor's RBA bill.

- RBNZ's Silk said that the RBNZ forecast shows slower pace of easing after the next meeting in February, and the RBNZ may incorporate pauses into the easing cycle.

- Speech by RBA Gov Bullock later at 05:55 ET / 10:55 GMT.

- US equity FUTs +0.1% to +0.2% during the Asia session.

Looking ahead (Asian time zone)

- Thu Nov 28th (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 +0.1% at 8,406.

- AUSTRALIA Q3 PRIVATE CAPEX: +1.1% V +1.0%E.

- Australian Greens party agrees to vote for Labor's RBA bill, enabling it to pass– Statement.

- RBNZ Assistant Gov Silk: RBNZ forecasts show slower pace of easing after Feb.

- New Zealand Nov ANZ Business Confidence: 64.9 v 65.7 prior.

- New Zealand Oct Filled Jobs M/M: -0.1% v 0.0% prior.

- New Zealand sells total NZ$500M vs. NZ$500M indicated in 2029, 2032 and 2041 bonds.

China/Hong Kong

- Hang Seng opens -0.2% at 19,588; Shanghai Composite opens -0.1% at 3,308.

- Hong Kong said to plan tax breaks for hedge funds, PE funds - FT.

- China VIce Min Liao Min: China willing to drive "healthy" US-China ties - financial press.

- Reportedly China's annual new drug negotiation leads to 63% price cut – press.

- HUAWEI.CN (CN) Follow up: US said to ready China chip curbs that stop short of early proposals- press.

- US expected to announce more AI sanctions against China on Monday - US tech press.

- China formulates action plan to reduce logistics costs; Will increase financing support for logistics companies - Chinese press [overnight update].

- China PBOC: To improve financial consumer protection mechanisms [overnight update].

- Alibaba: *Recent premarket strength in China-related names being attributed to apparent recirculation of UBS note from last month and subsequent market speculation that China may announce more stimulus next month at its annual Central Economic Work as a response to Trump's tariff threat [overnight update].

- TTN Research Alert: What is the current shape of China's chip industry amid Western curbs, as next year US may expand its China-related restrictions to include high-bandwidth memory (HBM) chips, which are crucial for advanced AI applications? And how Cerebras' approach might help China overcome new potential curbs in future? [overnight update].

- China Oct Smartphone Shipments Y/Y -1.1% y/y; Oct Sales of foreign-branded smartphones in China -44.3% y/y – CAICT [overnight update].

- China PBOC sets Yuan reference rate: 7.1894 v 7.1982 prior.

- China PBOC Open Market Operation (OMO): Injects CNY190B in 7-day reverse repos; Net CNY280B v net drains CNY34B prior.

Japan

- Nikkei 225 opens -0.5% at 37,935.94.

- Reportedly Japan likely to see current FY tax revenues hit fresh record high ~¥73.4T; Japan said to issue more than ¥6T in JGBs to fund extra budget - press reports from unnamed sources
[overnight update].

Korea

- Kospi opens -0.1% at 2,499.

- Bank of Korea (BOK) cuts 7-day repo rate by 25bps to 3.00%; not expected.

- Bank of Korea (BOK) Gov Rhee: Today's decision was not unanimous; Two members dissented and four called for rate cuts - post rate decision press conference.

- South Korea to extend fuel tax cuts by a further 2 months through mid-Feb - Korea press, citing Fin Min Choi.

Other Asia

- (IN) India Trade Min: On US Pres-elect Trump's stance on high tariffs, India is open to 'rightsizing' some import duties for select items - press.

North America

- (VE) Reportedly US oil execs and bond investors asking Pres-elect Trump to make a deal with Venezuela's Pres Maduro in a "oil for stop-migration" deal - WSJ.

- (MX) Follow up: Mexico Pres Sheinbaum: Mexico's strategy is not to close borders but "to build bridges" between governments, people - financial press.

- *(MX) US Pres Elect Trump had conversation with Mexico Pres Sheinbaum, in which she agrees to stop migration through Mexico and into the US, effectively closing the Southern Border - Truth Social Post.

- (CA) Canada Fin Min Freeland: After first meeting on Pres Elect Trump's tariff threat we agreed it's necessary to work in a united and coordinated way to meet this challenge.

- (US) Gail Slater said to be leading candidate to head US DOJ Antitrust unit - FT.

- (US) Canada considering tariffs following US Pres Trump's threat; Tariffs on US items would be retaliatory.

- (US) Punchbowl: Democratic challenger Adam Gray has taken a 182-vote lead over GOP incumbent John Duarte in California’s 13th District; If Gray were to win, House Republicans would hold 220 seats to 215 for Democrats heading into the next Congress. Then factor in the resignation of former Rep. Matt Gaetz (R-Fla.) and the looming departures of GOP Reps. Stefanik (N.Y.) and Waltz (R-Fla.) for Trump administration posts, the margin would be down to 217R-215D for several months (v existing 221R-214D split).

- (US) MBA Mortgage Applications w/e Nov 22nd: 6.3% v 1.7% prior (3rd straight weekly rise).

- (US) Q3 preliminary GDP annualized Q/Q: 2.8% V 2.8%E; personal consumption: 3.5% V 3.7%E.

- US) Oct preliminary Durable Goods Orders: 0.2% V 0.5%E; Durables (ex-transportation): 0.1% V 0.1%E; Capital Goods Orders (non-defense/ex-aircraft): -0.2% v +0.1%e.

- (US) Initial jobless claims: 213K V 215KE; continuing claims: 1.91M V 1.89ME.

- US) Oct preliminary wholesale inventories M/M: 0.2% V 0.1%E.

- (US) Oct advance goods trade balance: -$99.1B V -$102.7BE.

- (US) Q3 preliminary GDP price index: 1.9% V 1.8%E; Core PCE price index Q/Q: 2.1% V 2.2%E.

- (MX) Mexico Econ Min Ebrard: Tariffs will impact US automakers; Predicts the proposed tariffs would result in 400K job losses in the US.

- (US) Nov Chicago purchase manager’s index (PMI): 40.2 V 45.0E.

- (US) Oct personal income: 0.6% V 0.3%E; personal spending: 0.4% V 0.4%E.

- (US) Oct PCE deflator index M/M: 0.2% V 0.2%E; Y/Y: 2.3% V 2.3%E; Core PCE Deflator M/M: 0.3% v 0.3%e; Y/Y: 2.8% v 2.8%e.

- (US) Oct pending Home Sales M/M: +2.0% V -2.0%E; Y/Y: 6.6% V 0.2%E.

- (US) Doe Crude: -1.8M V -0.5ME; GASOLINE: +3.3M V -0.5ME; DISTILLATE: +0.4M V +0.5ME.

Europe

- (UR) US Biden Admin said to be preparing $725M in weapons for Ukraine - press.

- (RU) Russia Foreign Ministry: Committed to agreements with US on notification of missile test launches.

- (FR) France reportedly working on plans for zero-interest loans to finance construction of 6 nuclear reactors - press.

- (TR) Turkey Central Bank (CBRT) Gov Karahan: Reiterates that disinflation process continues; CBRT to maintain tight monetary policy.

- (UR) Russian Foreign Ministry: Deploying nuclear arms in Ukraine is 'insane' possibility; Irresponsible actions of Ukraine and West may bring world to brink of catastrophe.