Breakfast Bites: Powell's cautious path

Rise and shine everyone.

Bitcoin surged past $100K for the first time, hitting over $104K from overnight lows of around $94K. The move comes amid Trump’s appointment of crypto-friendly Paul Atkins as SEC Chairman, fueling optimism among cryptocurrency investors.

In Korea, financial markets have steadied despite lingering political uncertainty following President Yoon’s failed attempt to impose martial law. Reports suggest the former Defense Minister may have been behind the recommendation, sparking further controversy. An impeachment vote for Yoon is now scheduled for Saturday. Korean bonds, equities, and FX stabilized, though financial stocks saw some pullback amid the ongoing fallout.

Asian equities traded mixed even as US stocks continued to climb to fresh record highs overnight. Japan’s Nikkei led gains, supported by dovish comments from BOJ’s Nakamura, who expressed doubts about inflation hitting the 2% target by FY25 and wage growth sustainability. Market expectations for a December rate hike from the BOJ dropped sharply, now sitting at just 37% compared to ~60% earlier in the week. Adding to the intrigue, Japanese PM Ishiba made a cryptic remark about considering the “suitable level” for JPY FX but did not elaborate further.

Australian markets remain in flux following weaker-than-expected GDP data, which showed the slowest quarterly growth since the pandemic. This has slightly increased the probability of an early RBA rate cut at its upcoming meeting, with odds climbing to 9% from 3% just two days ago. However, better-than-expected trade surplus, export, and household spending data today provided some relief, lifting Australian yields off earlier lows.

In China, 10-year yields continue to slide, touching a fresh record low of 1.967%. Similarly, yesterday’s sovereign debt auction saw 5-year yields hit a record low of 1.55%. Despite the rapid bond rally, there are no signs of intervention or warnings from authorities, unlike during the summer’s rally.

Meanwhile, attention remains firmly on French politics after the successful no-confidence vote against PM Barnier. He is expected to officially resign today, with President Macron now tasked with appointing a caretaker PM, a process that previously took two months. French assets have largely shrugged off the political turmoil, with the CAC-40 tracking broader European flows. The bond market has also unwound some of the earlier risk premium, narrowing the French-German 10-year spread back to 80bps. French banks rallied on optimism that Barnier’s proposed tax hikes will not move forward after the government’s collapse. However, analysts warn that finding a new PM who can avoid another no-confidence motion will be a difficult task. President Macron is expected to address the nation on Thursday at 14:00 ET (19:00 GMT).

Today’s focus will be the outcome of the OPEC+ meeting - a decision is to be made on whether production cuts should remain.

Earnings to watch - Kroger, Dollar General, Lululemon and Ulta

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