Rise and shine everyone

Markets in Asia showed mixed performance as the Japanese yen strengthened further, nearing the 151 handle and threatening its early November highs. This put pressure on Japanese automakers, pushing the Nikkei lower.

The Kospi also underperformed, with South Korea’s Hynix down 4.8% and Samsung slipping over 3%. Samsung announced a management shake-up, appointing the head of its chip division—who apologized for technical issues at the Q3 earnings call—as co-CEO.

Chinese and Hong Kong equities posted gains despite EU officials indicating no progress on an EV deal with China. Huawei continued its push towards an all-China tech stack and workforce strategy, aggressively recruiting Western talent.

In New Zealand, the RBNZ delivered an expected 50bps rate cut, bringing the cash rate closer to neutral. While the kiwi dollar initially spiked 0.7% on the decision, Governor Orr’s comments at a press conference reversed much of the momentum. Orr pushed back against interpretations of slower rate cuts, calling such projections a “misnomer.”

Australian CPI for October came in below expectations. However, its goods-heavy composition keeps the RBA’s focus on January’s quarterly CPI, which is expected to provide a clearer inflation picture. Japanese bond markets struggled, with a weak 40-year JGB auction weighed down by oversupply warnings.

In Europe, indices opened mixed amid ongoing tariff uncertainties and geopolitical risks. French/German 10-year spreads widened to over 90bps, reflecting concerns over potential financial instability in France. S&P may downgrade France’s credit rating later this week, with analysts raising the prospect of a snap election in 2025.

Global chipmakers faced pressure after a post by the new DOGE Department pick Vivek Ramaswamy suggested wasteful subsidies under the IRA and Chips Act were being rushed ahead of the upcoming administration change.

With the earnings calendar quiet, focus remains on economic data releases and month-end flows. The dollar softened while gold and oil gained, supported by easing tensions in the Middle East after Israel and Hezbollah agreed to a 60-day ceasefire.

US markets are bracing for a data-heavy session ahead of the Thanksgiving holiday. Key releases include the second reading of Q3 GDP, jobless claims, and the PCE deflator—one of the Fed’s favored inflation measures.

FOMC Meeting Minutes - A Summary

Rate Cuts Ahead

• Officials anticipate a gradual move to a neutral policy stance if inflation continues to decline and the economy remains near maximum employment.

• Some officials mentioned the possibility of pausing rate cuts to keep borrowing costs at restrictive levels if inflation persists.

• Some participants indicated that rate cuts could be accelerated if economic activity weakens or the labor market deteriorates.

Inflation

• Inflation has eased significantly from its peak, with confidence growing that it is moving sustainably toward the 2% target. However, the core PCE measure, which excludes volatile food and energy prices, remains somewhat elevated. A few participants acknowledged that the process could take longer than expected, warranting continued caution.

• Housing services prices remain somewhat elevated, but slower rent increases for new tenants are expected to ease these pressures further.

Labor Market

• The labor market remains solid, though job gains have moderated and firms are becoming more selective in hiring.

• Layoffs remain low, with businesses managing workforce size through attrition rather than direct cuts.

• Risks of a labor market downturn are seen as lower compared to September, with officials expecting labor conditions to remain robust under appropriate monetary policy.

Liquidity

• Short-term funding markets were stable, with ON RRP usage declining as Treasury bill yields became more attractive.

• The FOMC discussed lowering the ON RRP rate by 5 basis points as a technical adjustment to better align it with the lower bound of the federal funds rate.

• Liquidity conditions remain ample, with the Federal Reserve continuing to monitor money market dynamics

Chart of the Day

Long Mag 7 still remains the most crowded trade.

Calendars

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