Relief rallies for foreign equities

Asia market update: Relief rallies for foreign equities (excl. CN/HK) and currencies amid Trump’s Treas Sec pick.

General trend

- Equities opened up across the board and the Euro gapped up at the week’s open, along with most other currencies, to recover all of Friday’s losses when EUR/USD plunged to 103.30 - a two-year low following weak PMIs out of Europe. [ECB futures on Friday priced a 50% chance (v 20% prior) for 50bps cut in Dec following the releases, backed up by ECB speakers suggesting further rate cuts in coming months].

- The moves coincided with UST 10-yrs falling 6bps today as Trump named Scott Bessent as Treasury Secretary over the weekend, with Bessent recommending a Japan PM Abe-inspired "3-3-3" policy (cutting the budget deficit to 3% of GDP by 2028, pushing GDP growth to 3% via deregulation and pumping out an extra 3M barrels of oil each day). WSJ then released an interview with Bessent today where he emphasized focus on keeping USD as world's reserve currency, delivering on Trump's various tax cut pledges and supporting Trump's trade tariffs.

- US equity FUT held gains: Nikkei pared from 2% higher but still led Asia, CN/HK erased earlier gains to continue their recent poor performance in Nov following the Sept/Oct stimulus announcements.

- JGB and UST yields diverged: 10 yr JGB yield is now fractionally higher: up by 0.0003 (near session highs); 2 yr JGB yield +1.5bps, 2yr JGB yield at 0.593%.

- As if echoing the sense of market relief, Elon Musk said Bessent as Treasury Secretary was a “business-as-usual choice”.

- China PBOC left the MLF one-year rate unchanged at 2.00%.

- Gold and Oil off their last week's highs on potential Israel-Lebanon ceasefire deal.

- Late Friday, just minutes after China's richest man Zhong Shanshan accused online shopping platforms industries (e.g. Temu, Shein, jd.cmo, Alibaba) of starting price wars that have damaged a wide range of companies, China’s cabinet was reported to be studying the platform economy - with increased guidance and policy support.

- Also late Friday the European Parliament Intl Trade Committee said it was close to agreement with China to abolish the EV import tariff, with instead China potentially committing to selling EVs at a minimum price in the EU.

- US equity FUTs +0.4% to 0.6% during the Asia session.

Looking ahead (Asian time zone)

- Mon Nov 25th (Mon eve DE Ifo Business Climate).

- Tue Nov 26th KR Nov Cons Conf, (Tue night FOMC Minutes).

- Wed Nov 27th RBNZ rates, AU Oct CPI, KR Biz Confidence, (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 +0.1% at 8,404.

- US Treasury Sec Yellen said to have "pressured" Australia Treasurer Chalmers on OECD corporate transfer pricing back on Oct 24th in Washington - Australian press (update).

- NZIER: Monetary Policy Shadow Board recommends that the Reserve Bank of New Zealand (RBNZ) ease the Official Cash Rate (OCR) by 50 basis points to 4.25 percent in the upcoming November Monetary Policy Statement.

- New Zealand Oct Trade Balance (NZD): -1.5B v -2.1B prior.

- New Zealand Q3 Retail Sales (Ex Inflation) Q/Q: -0.1% v -0.5%e.

China/Hong Kong

- Hang Seng opens +0.4% at 19,30; Shanghai Composite opens +0.2% at 3,274.

- China PBOC conducts CNY900B VS. CNY1.45T maturing in 1-year medium term lending facility (MLF): leaves rates unchanged at 2.00%.

- European Parliament Intl Trade Committee Chair Lange: Close to agreement with China to abolish EV import tariffs; China could commit to selling EVs in EU at a minimum price (ADD FXI).

- China cabinet: To be studying promoting platform economy; To increase guidance and policy support for healthy development of platform economy - Chinese press.

- China's richest man Zhong Shanshan: Accuses online shopping platforms of starting price wars that have damaged a wide range of companies and industries as the country tackles an economic slump - CNN.

- China MOFCOM to include more items in anti-subsidy probe over EU dairy product imports - press.

- China reportedly urges employers to ensure paying migrant workers timely – press.

- (US) Texas Gov Abbott orders Texas State Agencies to fully divest from China as soon as possible.

- China PBOC sets Yuan reference rate: 7.1918 v 7.1942 prior.

- China PBOC Open Market Operation (OMO): Injects CNY249B in 7-day reverse repos; Net injects CNY76B v net drains CNY346B prior.

Japan

- Nikkei 225 opens +1.0% at 38,679.

- Japan Sept Final Leading Index CI: 109.1 v 109.4 prelim; Coincident Index: 115.3 v 115.7 prelim.

- Japan govt said to aim to cut FY2035 greenhouse gas emissions by 60% from FY2013 levels - Nikkei (update).

- Charles Schwab's chief global investment strategist: Traders are piling up bets against the yen again, less than a month before the next BOJ meeting on Dec 19th when a hike like the last one in August could trigger a reversal.

- Japan sells ¥499.2B v ~¥500B indicated in 1-5 yr JGB's in liquidity enhancement auction: Avg accepted spread -0.009% v -0.008% prior, bid-to-cover: 3.91x v 3.60x prior (May 2nd, 2024).

- Japan Fin Min Kato: Govt aims to restore fiscal health while achieving economic turnaround.

- Japan cabinet formally approves ¥39T (~$140B) extra stimulus – press [weekend update].

Korea

- Kospi opens +0.9% at 2,534.

Other Asia

- Adani group stocks rise 1-5% following -20% falls late last week on founder’s US bribery charges.

- Singapore Oct CPI M/M: -0.3% v +0.1%e; Y/Y: 1.4% v 1.8%e.

North America

- (US) Newly nominated US Treas Sec Scott Bessent: Will focus on keeping USD as world's reserve currency and delivering on Trump's various tax cut pledges - WSJ interview.

- Follow up: "Salt Typhoon” hack of US telco’s now believed to have been undetected for over a year – financial press.

- *(US) Trump names several new senior officials and Cabinet nominees; Names Scott Bessent as Treasury Sec.

- (US) Nov final University of Michigan confidence: 71.8 V 73.9E.

- (US) Nov preliminary S&P Manufacturing PMI: 48.8 V 48.9E.

- (US) Fed semi-annual financial stability report: Asset valuation pressures remained elevated; Auto and credit card loan delinquencies are above pre-pandemic levels; Hedge fund leverage near. highest level since 2013

- (US) Supreme Court to decide legality of fund operated by FCC to expand telecom access; Case to test 'nondelegation doctrine,' could place new limits on federal regulatory agencies.

- (US) Fed's Bowman (voter): Must avoid the temptation to limit use of AI in finance, which could chill innovation in the banking system (update).

- (US) Reportedly Trump plans to form a special investigative team at DOJ to look for evidence of fraud in battleground states during the 2020 election - Washington Post.

Europe

- (UR) Ukraine said to have launched mass foreign-missile attack at Russia's Kursk region - financial press, citing military analyst.

- (IL) Israel ‘moving towards’ a ceasefire deal in Lebanon; cites a ‘senior’ Israeli official – Axios [update].

- EUR/USD *Hits two-year low following weak PMIs, particularly in services, as ECB futures now pricing 50% chance for 50bps cut in Dec v <20% chance before PMIs.

- ECB's Villeroy (France): ECB can cut independent of Fed's moves.

- ECB’s Nagel (Germany): PMI confirms that Germany is stagnating; Maybe we'll see further rate cuts in coming months; Inflation goal to be met by mid-2025 at latest.

- (RU) Russia Pres Putin: We will continue hypersonic ballistic missile tests - meeting with military commanders.

Levels as of 00:20 ET

- Nikkei 225 +1.4%, ASX 200 +0.3, Hang Seng -0.4%; Shanghai Composite -0.2%; Kospi +1.1%.

- Equity S&P500 Futures +0.4%; Nasdaq100 +0.6%; Dax +0.5%; FTSE100 +0.1%.

- EUR 1.0464-1.0501; JPY 153.55 -154.74; AUD 0.6518-0.6551; NZD 0.5847-0.5869.

- Gold -1.6% at $2,689/oz; Crude Oil -0.7% at $70.74/brl; Copper +0.4% at $4.1545/lb.