Markets movements have been modest across equities, rates and currencies. Japan's 10-year JGB auction drew solid demand, a relief to the market; rising expectations of a BoJ rate hike have done little to support the yen

Markets movements have been modest across equities, rates and currencies.

As US markets opened overnight, risk appetite was higher, with a strong recovery in bitcoin, which has sustained a lift of 6% to be back over USD91k.  US equities opened stronger, with the more speculative areas outperforming, including IT stocks. In early afternoon trading the S&P500 is up 0.4%.

US Treasuries have traded a tight range and the 10-year rate is barely higher from the NZ close at 4.09%. President Trump said he will announce the new Fed Chair “probably” early 2026.  Prediction markets give Kevin Hassett, who has a close relationship with Trump, about an 80% probability of getting the job.

Yesterday, Japan’s auction of 10-year JGBs drew solid demand, which was a relief to the market after the recent market selloff that has taken yields across the curve to multi-decade highs, ahead of another massive supplementary Budget and increased chance of the BoJ hiking rates later this month.  Yesterday, Japan’s finance and economic ministers didn’t indicate any objections to a possible interest rate increase after BoJ Governor Ueda’s clearest hints yet on Monday that a December rate hike was live. Market pricing for a December rate hike has pushed higher to 21bps, implying about an 85% probability.

Rising expectations of a BoJ rate hike have done little to support the yen.  Some strength on Monday after Ueda’s messaging has reversed and USD/JPY trades around 156.  A 25bps hike would leave real Japanese rates at deeply negative levels. Stronger risk appetite early in NY trading helped the NZD lift to 0.5745 but this move faded somewhat, and the currency is back to 0.5730.  Still, commodity currencies have performed a little better than others, and the NZD is slightly higher on crosses against JPY, EUR and GBP, but moves have been insignificant.

Euro area CPI inflation ticked up to 2.2% y/y in November, one-tenth higher than expected, while the core figure was steady at 2.4%, as expected. With the picture remaining one of relatively steady inflation, close to target, ECB monetary policy, which has remained on hold since June, looks likely to remain that way for some time. Market pricing is consistent with unchanged policy through 2026, with a modest chance of a final cut at some stage.

In its quarterly update, the OECD said the global economy has proved more resilient than expected this year, supported by improved financial conditions, rising AI-related investment and trade, and macroeconomic policies.  Global GDP growth is projected to ease from 3.2% in 2025 to 2.9% in 2026 and then strengthen slightly to 3.1% in 2027. GDP growth forecasts for many regions were nudged higher for this year and next year.

Following a spate of attacks on Russian commercial ships, President Putin warned that Russia may consider striking the ships of countries supporting Russia if these attacks continue. Putin is currently meeting the US on next stages in a possible Ukraine-Russia peace deal.  Earlier, Putin said Europeans were hindering a deal, “they are on the side of war” as they are seeking demands that are not acceptable to Russia. There has been a little intraday volatility in oil prices, but Brent crude is modestly weaker for the day, trading just below USD63 per barrel.

Dairy prices continue to fall at GDT auctions.  The GDT price index now shows eight consecutive declines, with a trend of progressively greater falls over recent events, including a 4.3% fall at the overnight auction.  Increasing global supply has been the key driver and there is no sign of this abating.

Global forces were largely responsible for lifting NZGB yields yesterday, driven by the long end.  The 10-year rate rose 5bps to 4.37%.  The 10-year swap rate also rose 5bps to 4.05%.  The short end of the market was still experiencing some decent positioning adjustments in the wake of the RBNZ’s hawkish cut last week. The 2-year rate was higher through most of the session before a late dip into the close and it ended the day down 3bps to 2.86%.

On her second day on the job, RBNZ Governor faced Parliament’s Finance and Expenditure Committee, where she reiterated that under her leadership the Bank would be “laser focused” on low and stable inflation, adding “please, please remember how hurtful high inflation is for households”.  It was good to see these inflation-fighting credentials on display early in her term.

On the economic calendar today, Australian Q3 GDP is released, with the consensus sitting at 0.7% q/q, which would take annual growth to 2.2%.  Tonight, the US ADP private payrolls and ISM services survey will be closely watched.

Jason Wong is the Senior Markets Strategist at BNZ Markets.