Breakfast Bites - China's new stimulus may have potential

Rise and shine everyone.

It’s set to be a shorter week in the US with the Thanksgiving holiday on Thursday and early close on Friday. Markets will likely have low volume, which could exacerbates moves.

It’s a relatively quiet day for macro data in the US. We have a 20-year US Treasury Auction later at 1pm ET and then a 20Y Japanese Government Bond Auction later in the evening (US) / tomorrow morning (Asia). Zoom reports after the close today, and Nvdia reports tomorrow after the close.

US Equity Futures are trading marginally higher, even though rates are also somewhat higher across the curve. The US Dollar Index however, has pulled back to 103.59. Gold and Bitcoin are also off their highs, while Oil continues its Friday rally with news of an OPEC+ cut still floating around.

Asia and Australia

• Asian equities finished mixed Monday. Hong Kong saw strong gains led by property stocks, with mainland shares modestly higher. Seoul saw sharp gains while Taipei remained flat as domestic political developments weighed. Australia closed a few points higher, Southeast Asia was mixed with SingTel dragging Singapore lower. India holding opening losses. Japan ended lower after touching 33-year high first thing.

• While China held their 1-year and 5-year Loan Prime Rate steady, Chinese regulators are said to be drafting list of 50 private and state-owned developers that would be eligible for range of financing measures for financial support. This would certainly a welcome measure and some form of direct action being taken to help the property market. This is exactly the type of stimulus that we want to see, and now we need to hope that they follow through on it.

• India to extend rice export bans into 2024 with El Niño likely to tighten supplies further. India seen extending ban on certain rice exports well into 2024, potentially keeping global prices elevated after rice hit a 15-year high in August.

• Thailand's Q3 GDP grew 1.5% y/y versus expectations of 2.4%, and Q2's 1.8%. On q/q basis, growth was 0.8% versus 1.2% forecast. A sharp fall in exports offset the increase in imports and service sector gains from Tourism. Government spending contracted -4.9% y/y as Covid measures are being unwound.

• Bond giant Pimco starts buying yen to prepare for tighter BOJ monetary policy

Europe, Middle East, Africa

• European equity markets mostly higher. Follows strong gains last week.

• German officials and lawmakers preparing for painful budget cuts after constitutional court ruled last week that the country's €60B off-budget was unlawful.

• ECB said in its latest Financial Stability Review article cited by Reuters that low valuations for Eurozone bank stocks appear to reflect concerns about credit risk and shareholder payouts, likely weighing on future credit growth via stricter terms for borrowers.

• EU equity markets posted substantial rally over past three weeks helped by ~30bp decline in US 10-year real bond yield against backdrop of global equity risk premium remaining close to 15-year low and 12-month forward consensus EPS expectations remaining close to historical peak levels.

• Germany's Bayer has aborted a large late-stage trial testing a new anti-clotting drug due to lack of efficacy, dealing a fresh blow to the embattled drugmaker and throwing its most promising development project in doubt. Shares slid over 16%.

The Americas

• Argentina has a new right-wing libertarian president. It was a strong win for Javier Milei. According to Reuters, the people are rolling the dice on an outsider with radical views to fix an economy battered by triple-digit inflation, a looming recession and rising poverty. Today is a national holiday in Argentina but, tomorrow when markets open, this decision is set to weigh on the Peso while lifting Bond Yields.

• October housing starts up 1.9% m/m to a 1.372M pace, beating consensus for a 1.345M. Single family starts up 0.2% to 970K, highest since July, while multi-unit (5+ units) starts pace of 382K up 4.9% m/m, first increase since May. Building permits up 1.1% to a 1.487M print, also ahead of consensus for 1.446M pace.

• The big news over the weekend was the firing of OpenAI’s founder and CEO, Sam Altman. As of now, reports suggest that he and his team are joining Microsoft to spearhead a new AI research initiative.

Chart of the Day: Rate cuts being priced in by traders for 2024 are higher for the US and Europe vs. the UK.

Calendars

(news taken from Reuters, FT, Bloomberg; Calendar from Trading Economics)