Markets cautious ahead of US election tomorrow morning

Asia market update: Markets cautious ahead of US election tomorrow morning (Asia time); RBA holds; US Oct Services ISM tonight.

General trend

- Australia RBA left rates on hold, as expected, while continuing to warn against inflation remaining “too high”. Reiterated “not ruling anything in or out”. Aussie dollar and yields little changed in the aftermath. SOMP comments assumed that the cash rate has peaked, and to begin to decline around mid-2025, to around 3.5% by end-2026. This is a little higher than the assumption underpinning the forecasts in August. Gov Bullock’s press conference then reiterated Services inflation as being too high.

- Prior to the RBA rate decision; 3-yrs +6bps with 10-yrs +1bp, further flattening the curve.

- China Oct Caixin Services PMI outperformed expectations to jump up to the 52 handle in the highest reading since July. Chinese and HK equities rose from underwater to +1.4% to +1.9% after the Caixin release.

- Nikkei catch up after Monday holiday, +1.3% (following on from Friday’s steep fall of -2.6%).

- Australia’s weekly Consumer Confidence has risen 7.5 points since early July to the late 80’s range.

- South Korea CPI weakest in four years, potentially setting stage for more rate cuts.

- Former Pres Trump threatened both Mexico and China with tariffs ‘of 25% or so’ if Fentanyl keeps coming into the US through Mexico. Podcaster Joe Rogan also endorsed Trump.

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

Looking ahead (Asian time zone)

- Tue Nov 5th (Tue night/Wed morning US Elections, US Oct Services ISM).

- Wed Nov 6th CN NPC-SCM , JP BOJ MPM Minutes, US Elections results continue through Wed Asia time.

- Thu Nov 7th CN NPC-SCM , AU Sept Trade Bal, Sept JP Wage numbers, CN Trade Bal, (Thu night BOE & FOMC policy decisions).

- Fri Nov 8th CN NPC-SCM Final Day, (Fri night US Nov prelim Michigan Consumer Sentiment).

- Sat Nov 9th CN CPI/PPI.

Holidays in Asia this week

- Mon Nov 4th Japan.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens +0.1% at 8,160.

- Reserve Bank of Australia (RBA) leaves cash rate target unchanged at 4.35%; as expected.

- RBA-statement on monetary policy (SOMP).

- RBA Gov Bullock: The last part of bringing down inflation 'not easy' - post-rate decision press conference.

- Australia Oct Final PMI Services: 51.0 v 50.6 prelim (confirms 9th month of expansion) (update).

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 86.5 v 86.4 prior (update).

- New Zealand Oct ANZ Commodity Price M/M: 1.4% v 1.8% prior.

- RBNZ Gov Orr: Real economy is lagging reduction in interest rates and that is a concern.

- New Zealand (Central Bank RBNZ) Bi-Annual Financial Stability Report: Risks to New Zealand's financial system remain contained.

China/Hong Kong

- Hang Seng opens -0.8% at 20,409; Shanghai Composite opens -0.1% at 3,306.

- China Oct Caixin PMI services: 52.0 V 50.5E (21st month of expansion and highest since July).

- Hong Kong Oct PMI (whole economy): 52.2 v 50.0 prior (moves back into expansion).

- China to issue up to $2.0B in dollar bonds in Saudi Arabia during week of Nov 11th - financial press.

- China Premier Li Qiang: Unilateralism is on the rise; China has fiscal and monetary tools at its disposal; reiterates confident of meeting 2024 GDP growth target.

- Hong Kong Monetary Authority (HKMA) on Nov 4th lent HK$443M to banks through discount window facility.

- China Premier Li Qiang: China is seeking more foreign investment - China Intl Import Expo [overnight update].

- US semiconductor toolmakers said to end ties with Chinese suppliers, which can't have Chinese components or investors- WSJ [overnight update].

- China MOFCOM: Files case to WTO on EU's EV tariffs [overnight update].

- China National People's Congress said to be reviewing local govt debt swaps - financial press [overnight update].

- China PBOC sets Yuan reference rate: 7.1016 v 7.1203 prior.

- China PBOC Open Market Operation (OMO): Injects CNY18B in 7-day reverse repos; Net drains CNY365B v net drains CNY225B prior.

Japan

- Nikkei 225 opens +0.6% at 38,274 (post-holiday).

- Japan Oct Monetary Base Y/Y: -0.3% v -0.1% prior.

- Japan opposition CDP Head Noda: Told DPP's Noda that will cooperate on raising tax ceiling - press.

- Japan DPP Head Tamaki: Wants to discuss policies today with Noda of the CDP; Reiterates monetary policy in Japan should Not be changed, for 'a little longer'.

Korea

- Kospi opens -0.7% at 2,570.

- South Korea Oct CPI M/M: 0.0% V 0.2%E; Y/Y: 1.3% V 1.4%E [slowest annualized pace since early 2021].

- South Korea Oct Foreign Reserves: $415.7B v $420.0B prior (update).

- Bank of Korea (BOK) Gov Rhee: Excessive funds and borrowing in property sector can lead to crisis - speech text.

- South Korea Vice Min: South Korean inflation showed downward stability.

- Follow up: North Korea may have fired multiple ballistic missiles - Japanese press.

- US and Korea said to reach provisional agreement on nuclear cooperation - press.

Other Asia

- Singapore Sept Retail Sales M/M: 0.4% v 0.8% prior; Y/Y: 2.0% v 0.7% prior (revised higher).

- Philippines Oct CPI M/M: 0.2% v 0.3%e; Y/Y: 2.3% v 2.4%e.

- Singapore Oct PMI (whole economy): 55.5 v 56.6 prior.

North America

- Boeing: *IAM union votes to accept 38% pay increase offer spread over 4 years; ends 53-day strike - press.

- Former Pres Trump says will put tariffs on Mexico unless they stop sending Fentanyl into US - financial press.

- (US) Sept final Durable Goods orders: -0.7% V -0.8%E; Durable (EX-TRANSPORTATION): 0.5% V 0.4%E.

- (US) Sept factory orders: -0.5% V -0.5%E.

- (BR) Brazil govt reportedly to announces spending cut plan as early as today - Brazil press.

- (US) US semiconductor toolmakers said to be ending ties with Chinese suppliers; US chip toolmakers say suppliers can't have Chinese components or investors - WSJ.

- (MX) Mexico Pres Sheinbaum: Mexico is working to prove the improve the USMCA.

Europe

- (IE) Ireland Oct PMI Services: 53.8 v 55.7 prior (43rd month of expansion).

- (UK) Oct British Retail Consortium (BRC) LFL Sales Y/Y: 0.3% v 1.4%e [matches the slowest pace since Jul].

Levels as of 01:20 ET

- Nikkei 225 +1.4%, ASX 200 -0.4%, Hang Seng +1.4%; Shanghai Composite +1.9%; Kospi -0.6%.

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

- EUR 1.072-1.0881; JPY 151.10-152.55; AUD 0.6579-0.6602; NZD 0.5967-0.5986.

- Gold -0.1% at $2,743/oz; Crude Oil -0.1% at $71.43/brl; Copper +0.6% at $4.4570/lb.