Asia-Pacific stocks traded mixed on Wednesday, following a choppy performance on Wall Street, where stocks wavered, Treasuries rallied, and the dollar dipped on dovish Fed rhetoric. The Reserve Bank of New Zealand (RBNZ) opted for a hawkish hold, keeping rates unchanged but slightly raising its OCR forecasts from March 2024 to March 2025. In a significant development, Israeli negotiators are reportedly offering Hamas a further three days of ceasefire through to Sunday morning if the group releases all the remaining women and children they believe it is holding. In a somber note, Berkshire Hathaway's Charlie Munger passed away peacefully at the age of 99.
The Australian ASX 200 index edged higher on Wednesday, buoyed by encouraging economic data, including better-than-expected Construction Work Done figures, which bodes well for next week's GDP release. Softer monthly CPI data further reinforced expectations of a pause at the December RBA meeting. The Japanese Nikkei 225 index fluctuated between gains and losses, initially facing pressure from a firmer currency before rebounding off lows. BoJ Adachi's dovish comments, reiterating the need for patience with easy policy and the willingness to take additional easing steps if necessary, provided some support. In contrast, the Hang Seng and Shanghai Composite indexes declined, with Hong Kong underperforming following recent rises in domestic money market rates. The PBoC's open market operations resulted in a net daily drain, adding to the cautious sentiment. European equity futures are indicative of a slightly lower open, with the Euro Stoxx 50 index down 0.1%. This cautious mood follows the cash market's 0.2% decline yesterday.
FX The US Dollar Index (DXY) traded rangebound on Wednesday, fluctuating around the 102.50 level following dovish comments from Fed hawk Waller, who suggested the possibility of a rate cut next year if inflation continues to decline. It was also reported that Pershing Square's Bill Ackman is betting on a Fed rate cut as early as Q1. EUR/USD marginally extended its gains from the previous day, having reclaimed the 1.1000 level. GBP/USD edged higher towards the 1.2700 handle, building on the previous day's advances and hawkish BoE rhetoric. USD/JPY initially dipped below 147.00 on yield differentials but recovered from its lows after BoJ's Adachi reiterated the bank's dovish stance. NZD/USD gained ground following the RBNZ's announcement, which kept rates unchanged but signaled risks of a future hike. AUD/USD remained contained following mixed data, including softer-than-expected monthly CPI.
FIXED INCOME 10-year UST futures remained supported after the previous day's bull-steepening, driven by dovish rhetoric from Fed's Waller, which dragged yields to multi-month lows. The 10-year yield settled below 4.30%. Bund futures extended their gains above the 132.00 level ahead of today's German states CPI data and Bund auction. 10-year JGB futures tracked the advances in counterparts, supported by the BoJ's presence in the market and dovish comments from board member Adachi.
COMMODITIES Crude oil futures traded sideways, with Brent and WTI crude futures hovering above USD 81/bbl and USD 76/bbl, respectively. Price action remained muted amid ongoing uncertainty regarding OPEC+ output quotas and with private sector inventory data showing no significant surprises. US Energy Inventory Data (bbls): Crude -0.8mln (exp. -0.9mln), Gasoline -0.9mln (exp. +0.2mln), Distillate +2.8mln (exp. +0.4mln), Cushing -0.5mln.Spot gold extended its recent gains, briefly climbing above the USD 2,050/oz level before facing some resistance. Copper futures paused around the USD 3.80/lb level after climbing the previous day on supply-related disruptions.
Looking ahead, key highlights include German Prelim. CPI, German Import Prices, Spanish CPI, Italian Consumer Confidence, UK Mortgage Lending, EZ Economic Sentiment, US MBA's, GDP Estimates, PCE Prices, Advance Goods Trade Balance, Japanese Industrial Production, Fed Beige Book, Speeches from BoE's Bailey & Fed's Mester, and Supply from UK, Germany & Italy.