Daily Brief Macro: Asian Equities: A Correction and more

• Combination of concerns about Fed rate trajectory, AI capex monetization, Chinese growth slowdown and Japanese Yen carry trade unwinding brought the US and Asian markets 4-5% down since late October.
• Expensive valuations are now justifiably correcting. Notwithstanding worries about a December cut, the interest rate trajectory remains resolutely downwards. Asian disinflation offers several central banks further room for monetary easing. 
• AI capex monetization worries will wax and wane. But Asian AI enablers’ cash flows seem safe and valuations inexpensive. Corporate earnings environment is solid in US and recovering in Asia.

• Sentiment in Japan has reversed sharply showing strains in the JPY and JGB markets.  The Nikkei 225 has retraced all its gains since the election of Prime Minister Takaichi.
• The market is nervous about the size of Takaichi’s economic package, which will be ¥21.3 trillion; 27%. more than her predecessor pledged. It will increase bond issuance substantially.
• Tensions from Takaichi’s provocation of China show no sign of easing.  China has started economic and other measures to respond. The US has removed a missile launcher from Japan.

• US payroll data revealed resilience going into the US government shutdown, with jobs growth the strongest since April and annualising to a pace capable of plateauing growth.
• Surging labour force participation drove unemployment up in the least disappointing way, with the employment to population ratio making a contradictory improvement.
• Jobless claims suggest stability into the shutdown’s end, besides noisy federal claims. The FOMC may not get the evidence it needs to cut again in December. It may not exist.

Highlights

• Choppy and rangebound price movement expected in November 

• Narrowing SIR 20 vs INE spread could encourage substitution

• September import and export trend diverged

• Downstream restocking was selective rather than programmatic, leaving spot premiums capped

• In Depth: China’s Pharma Pioneers in Africa Dig In for the Long Haul
• AI and Data Offer China, EU Space to Cooperate as Trade Tensions Rise
• China’s State-Owned Financial Institutions Brace for Pay Cuts

Highlights

• Ambitious yield goals target 1120 kg/ha

• China still takes around three-quarters

• Replanting financing remains a pivotal constraint

Production and yield dynamics in 2025 show rubber remains one of Myanmar’s industrial cornerstone crops. Available estimates place annual output around 300,000-350,000 metric tons, out of a total plantation area of over 600,000 hectares.

• Crude oil futures closed slightly lower Thursday following another choppy session amid huge uncertainty around sanctions on Russia, plus a mooted peace deal.
• Front-month Jan26 ICE Brent futures were trading at $63.34/b (1953 GMT) versus the prior settle of $63.51/b, while Jan25 NYMEX WTI was at $59.01/b against a previous close of $59.25/b.
• Benchmarks again tested one-week lows on rising US inventories and reports that the US was brokering a Russia-Ukraine truce, a move that would lower the geopolitical risk premium.