Breakfast Bites - China sees deflation again

Rise and shine everyone.

The big news this morning is China’s inflation data coming in negative once again. The YoY CPI data has once again slipped lower to -0.2% YoY and - 0.1% MoM, after two months. While most Central Banks may see this deflation as a positive, since it could mean disinflation in their economies, growth concerns are now the major issue across China. Markets responded accordingly with Shanghai Composite and Hang Seng, both trading lower for the day.

Not much in terms of Macro Data released today. We have the jobless claims data coming out later and Fed Chair Powell speaking on an IMF panel discussion, yet again at 2pm ET. Yesterday, Chair Powell didn’t comment about the outlook on interest rates or the economy, but rather stuck to the topic at hand which was Forecasting Methods.

US Equity Futures are flat this morning. Yields are trading higher and we have 30Y Bond Auction of $24B at 1pm ET. The Yield Curve has inverted further to -0.41% and that may be keeping the US Dollar Index marginally bullish at $105.6. Gold is down while oil is off it’s lows this morning. Bitcoin surges past 36,700.

Asia and Australia

• Asian equities ended mixed Thursday. Japan's Nikkei outperformed by some distance with a 1.5% gain while there were smaller gains for Australia, South Korea and Taiwan. Greater China markets struggled after disappointing inflation data with Hong Kong closing lower once more. Southeast Asia was mixed with Thailand a notable decliner, India flat.

• While China’s Headline CPI fell driven largely by a -4% drop in Food prices, Core inflation rose 0.6% yoY, but lower than last month’s 0.8% increase.

• China's weak economy and property sector downturn has led to pick up in bad loans, putting scrutiny on bank balance sheets. Data shows Non-performing loans had risen CNY183.2B since beginning of year to CNY4T.

• The BOJ Summary of Opinions said its YCC tweak was aimed at mitigating side effects on market functioning and noted the rising likelihood of achieving inflation target in stable and sustainable manner. Meanwhile speaking at an FT conference, Governor Ueda said unwinding the central bank’s ultra-loose monetary policy will be a “serious challenge”, giving Japanese equities a lift.

• Philippines GDP grew 5.9% y/y in Q3 vs Q2's 4.3% growth and forecast 4.7%. Stronger-than-expected growth put down to high level of government spending, rise in fixed investments, growth in exports and simultaneous dip in imports during quarter.

Europe, Middle East, Africa

• EU equity markets higher, recovering early losses. Follows the first clearly positive close this week for Stoxx 600 on Wednesday, despite remaining below last week's high.

• Shares in ADYEN seen up over 24% in pre-market trade on Thursday as traders welcomed the Dutch payment company's new targets that were seen as more realistic. Adyen had shocked investors after profit warning in August, and cut medium-term sales target, earning praise from analysts who said the new forecast was more realistic.

The Americas

• Brazil Retail Sales improved last month coming in at 0.6% MoM vs. -0.1% last month and 3.3% YoY vs. 2.4% last month.

• Mexico’s inflation continues to decline coming in at 4.26% YoY vs. 4.45% for the previous month. Core inflation dropped to 5.5% YoY from 5.76% last month. Mexico’s interest rate decision is expected today and consensus is for the Central Bank to remain on hold.

• Disney beat on FQ4 EPS though revenue a bit light. Sports results helped by ESPN+ subscription revenue growth and lower production costs; Experiences saw continued strong international performance. Entertainment segment lagged, with some drag from Linear Networks (lower advertising and affiliate revenues). Big focus on talk of robust FCF in FY24, being helped by updates to company's cost-cutting program and $2B less in cash content spend.

• With no sign of a clear plan forward, rising chatter about a possible government shutdown after 17-Nov, when funding authorization from the 30-Sep stopgap bill expires.

• NY Fed’s quarterly report on Debt and Credit show that there continues to be upward trends for both new delinquencies and new serious delinquencies as a share of current outstanding debt, although figures remain below pre-pandemic levels.

Chart of the Day:

China’s PPI fell for 13th straight month at 2.6% y/y, versus consensus of a fall 2.7%, after a 2.5% drop in September. The drop was due to price volatility of global oil and nonferrous metals prices, high base effect. This however, is being considered a factor in helping disinflation in the US.

Calendar

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