Global Market Quick Take: Asia – November 29, 2024

Key points:

• Macro: Japan’s Tokyo CPI overshoots expectations
• Equities: Dax gained 0.9% after two days of losses
• FX: Yen surges on higher Tokyo CPI fuelling BOJ rate hike bets
• Commodities: Both gold and oil remain subdued
• Fixed income: Cash trading in Treasuries to resume

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Disclaimer: Past performance does not indicate future performance.

Macro:

• Germany’s inflation remained steady at 2.4% YoY in November, undershooting expectations of a rise to 2.6% YoY. Spain’s inflation however rose as expected, coming in at 2.4% YoY from 1.8% prior. These prints increase the likelihood of a 25bps rate cut from the ECB at the 12 December meeting, given market was starting to price in more than a 25bps rate cut. Currently, 30bps of easing is priced in for the year end.
• Japan’s Tokyo CPI for November jumped higher to 2.6% YoY from 1.8% prior and 2.2% expected, stoking expectations of another BOJ rate hike in December. The core measure also came in above expectations and the core-core metric was higher at 1.9% YoY from 1.8% previously as expected. Shunto wage talks are also hinting at solid wage increases again this year, further cementing the case for BOJ to continue policy normalization.

Equities: 

• US – Markets closed for the Thanksgiving holiday.
• Germany - DAX rose 0.9% to 19,426, after two days of losses, amid a positive European market sentiment. The recovery was led by a surge in tech stocks, following reports that US restrictions on semiconductor equipment and AI memory chip sales to China would be less strict than expected.
• Earnings – Frontline, MiniSo

FX:

• JPY strengthened sharply in early Asian trading hours, with USDJPY dropping below 151 from 151.50 with higher-than-expected Tokyo CPI boosting the case for BOJ to continue policy normalization. EURJPY heading for a test of this week’s low of 159.10 ahead of two-month lows at 158.11.
• AUDUSD remains around the 0.65 handle despite RBA Governor’s hawkish comments yesterday, noting that core inflation is too high to consider rate cuts, spurring repricing of easing bets. The RBA is also getting a major shake-up, with changes include splitting the current RBA board into two groups with one dedicated to monetary policy and the other focusing on the central bank's governance and operations. Analysts are assuming the new monetary policy committee would have some new members, perhaps changing the outlook for interest rate cuts.

Commodities:

• Oil prices stayed steady as traders awaited more details on OPEC+'s production plans after a meeting delay. West Texas Intermediate remained below $69, and Brent crude closed above $73. The group will decide on December 5 whether to increase supplies or extend cuts into 2025 to avoid oversupply.
• Gold prices were stable amid light U.S. Thanksgiving trading, with investors considering Federal Reserve rate cuts and rising Ukraine tensions. Bullion traded near $2,640 an ounce, down about 3% for the week after an Israel-Hezbollah cease-fire reduced safe-haven demand.

Fixed income:

• Cash bonds were closed on Thursday due to a U.S. holiday. Australian bonds fell due to hawkish central bank comments, while Japanese bonds dipped on unexpected inflation data. Overnight-indexed swaps show a 57% chance of a Bank of Japan rate hike next month, up from 32%.
• French bonds outperformed euro-area peers as investors welcomed budget concessions by Prime Minister Michel Barnier. The Greek 10-year yield briefly matched the French yield for the first time.

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