Trump shakes up markets again with "day one" tariff threats against CA, MX, CN

Asia market update: Trump shakes up markets again with "Day 1" tariff threats against CA, MX, CN; Focus on FOMC Minutes tonight.

General trend

- Pres-elect Trump reprised the ability from his first term to change the course of markets with a single post – this time from his Truth Social network; Threatening 25% tariffs "on Day One" against Mexico and Canada, and an additional 10% against China. Currencies immediately fell; Kiwi hitting a one-year low at 0.58c, Aussie falling 1% and the Canadian dollar falling to its lowest levels against the USD since the pandemic in 2020, nearly touching the 142 handle. Mexican Peso fared worst, -2%.

- Asian equities also hit, with rises expected at the open based on FUTs pricing to instead open down. Nikkei fared the worst, -1.7%.

- Bond yields fell; UST 30 years -0.2% while JP 10 yrs -2bps, NZ -5bps, AU 3-yr yields -7bps back below 4%. CN 10-yrs continued edging down, -2bps to 2.06%.

- Silver, Gold and WTI Oil also extended overnight losses, with WTI back below $69/bbl.

- China PBOC continued to fix the Yuan >400 bps stronger than estimates, and ~700bps stronger than the offshore Yuan market price as USD/CNH hit the 7.27 handle.

- However, as the session continued most currencies, equity indices, precious metals and WTI crude pared back the majority of earlier losses, with JPY actually recovering to be higher than before Trump's post. Bonds also added back around another 1bp of yield.

- Japan saw its October PPI Services y/y jump to nearly 3% handle, its highest since June.

- South Korea Oct Retail Sales were inline.

- US equity FUTs fell on the Trump comments but eventually +0.1% during the Asia session.

Looking ahead (Asian time zone)

- Tue Nov 26th (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 8,417.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 85.7 v 86.8 prior (update).

- China Ambassador to Australia: US policy on trade with China and other countries will have 'impact'.

- Internal RBA document forecasts weaker economic growth and lower interest rates under Trump administration – Sky News.

- AOFM [Australia debt agency]: Prices syndication of A$800M in 1.25% 21 August 2040 Treasury Indexed Bonds (TIB) v indication of ~A$1.0B; Real yield to maturity: 2.19%.

China/Hong Kong

- Hang Seng opens -0.5% at 19,054; Shanghai Composite opens -0.2% at 3,256.

- Chinese Embassy in Washington: No one will win a trade or tariff war - financial press.

- China debt swap bond issuance >CNY1.0T - China press.

- (US) FCC Chair nominee Carr: Plan to establish special operations to examine Chinese Communist Party (CCP) ties - Fox Business interview

- G-7 countries reportedly plan to boost pressure on China over its Russia support; Early draft of G-7 foreign ministers meeting's conclusions indicates stronger tone on China – press [overnight update].

- Chinese Premier Li Qiang: Country to promote high-level opening up and make greater effort to deepen global industrial chain cooperation [overnight update].

- China Commerce Ministry (MOFCOM): Willing to strengthen communication and expand cooperation with US; look to work to resolve differences [overnight update].

- China PBOC sets Yuan reference rate: 7.1910 v 7.1918 prior.

- China PBOC Open Market Operation (OMO): Injects CNY299B in 7-day reverse repos; Net injects CNY11B v net injects CNY76B prior.

Japan

- Nikkei 225 opens -0.5% at 38,596.

- Japan Oct PPI Services Y/Y: 2.9% v 2.5%e [highest since Jun].

- Japan PM Ishiba says has exchanged views on pay talks with business and union leaders – press.

- Japan business lobby Keidanren Chief Tokura: Seeking to achieve pay rises above prices - Japanese press.

- Japan DPP Head Tamaki (opposition party): Bank of Japan (BOJ) should judge policy with pay results of small firms - financial press.

Korea

- Kospi opens -0.5% at 2,521.

- South Korea Oct Retail Sales Y/Y: 6.7% v 6.7% prior.

- South Korea Nov Consumer Confidence: 100.7 v 101.7 prior (update).

- Follow Up: Bank of Korea (BOK) and South Korea National Pension (NPS) are considering extending FX swap agreement - South Korea press.

Other Asia

- Philippine Budget Sec Pangandaman: Govt considering to revise growth targets due to weak PHP currency (Peso).

- Taiwan Oct Industrial Production Y/Y: 8.9% v 9.2%e [overnight update].

North America

- (CA) Canadian Dep PM: Canada places highest priority on border security with the US [follows comments from Trump on tariffs].

*(US) Pres-elect Trump: On first day in office will charge Mexico and Canada 25% tariffs on all products coming into the US; Will charge China "an additional" 10% tariff - Truth Social post.

- (US) Fed's Kashkari (non-voter for 2024 and 2025): Need govt to put us on sustainable fiscal path.

- (US) reportedly Pres-elect Trump's transition team is putting together a wide-ranging energy package to roll out within days of his taking office that would approve export permits for new liquefied natural gas (lng) projects and increase oil drilling off the US coast and on federal lands - press.

- US 2-year/10-year spread reinverts for 1st time since early Sept.

- (US) Nov Dallas Fed Manufacturing activity: -2.7 V -2.4E.

- (US) Treasury $69B 2-year note auction draws 4.274% V 4.130% prior; bid-to-cover ratio: 2.77 V 2.50 prior and 2.61 over the last 12; When issued was 4.292% (stopped through 1.8bps).

Europe

- (RU) Russia Dep Foreign Min: Govt "thinking of putting missiles in Asia if the US keeps deploying the weapons systems that anger China" - US press.

- (UK) Nov BRC Shop Price Index Y/Y: -0.6% v -0.6%e.

- (DE) SPD party confirms to name Scholz as Chancellor candidate for snap election in Feb 2025 - press.

- (IL) More press reports that Israeli PM Netanyahu approved the emerging ceasefire deal with Hezbollah “in principle” during a security consultation with Israeli officials Sunday night; Ceasefire agreement will also need to be approved by the Israeli cabinet, which has not yet occurred - CNN.

- (EU) ECB’s Nagel (Germany):Rates are still restrictive at the moment.

Levels as of 00:20 ET

- Nikkei 225 -1.4%, ASX 200 -0.7, Hang Seng -0.3%; Shanghai Composite flat; Kospi -0.3%.

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

- EUR 1.0425-1.0501; JPY 153.64 -154.49; AUD 0.6434-0.6507; NZD 0.5797-0.5849.

- Gold +0.2% at $2,648/oz; Crude Oil +0.4% at $69.19/brl; Copper -0.6% at $4.1055/lb.

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