日本大企业信心升至八年新高，市场预期BOJ加息

[music] Bloomberg Audio Studios podcasts radio news. [music] Welcome to the Daybreak Asia podcast. I'm Doug Krer. Today we begin in Japan where confidence among large manufacturers rose to the highest level in more than 8 years. This is the BOJ's quarterly ton business survey. It also shows firms projecting an annual pace of inflation at 2 and a half% five years ahead. Now the previous report had that rate at 2.6%. For a closer look at market action in the APAC region, let's bring in Bloomberg's David Finerity.

He is Markets Live rates and FX strategist and he joins from Singapore. Thank you for being here. So you look at that Ton Khan data and you see continued resilience, can we say that among Japanese companies and I'm wondering whether any of this kind of changes expectations that the BOJ is going to raise rates again at least by December. Would you say that's a safe bet?

Um well in this market I don't think [laughter] anything is a safe bet. But um I look I think at the end of the day the market I don't think that's made much of a difference. The market is looking for BOJ hikes. So I think it's as simple as that. Um you know the market is split out. You know when is the next hike? Is it December? Is it January? But I think the key thing is the market's going look we are in a series of hikes.

If you don't give us that we will punish the yen. Uh which obviously I think certainly one thing that the ministry of finance and mostly the BOJ doesn't want either. So you know it does become a bit of time of like when is it you know is it December or is it the first meeting or journey? I think either way the market's going look the pressure is on you too high and we expect you to hike BJ.

So what do you make of the volatility in the foreign exchange right now? I think through the month of September the end was stronger by roughly 1 and a.5% against the greenback. Right now we're trading just under a 158 handle. Is this a way for traders to make money when you have this kind of volatility or should we be more concerned that something else is happening underneath the the hood so to speak? Well, talking to a lot of dollaren traders, um, unfortunately, they would go, it's not been a good time for them to trade.

I think the ch volatility generally is good, but when you get the chopfest, that's not good. And what you've really had at the moment, if we're honest, is dollar there was a lot of bias towards dollaren going higher. Then that got there was a big unwind down a few weeks back down to the 152 area. And once particularly once it broke below 155 people like okay there's a bit of a fundamental change going on here particularly after what Scott Bessant said and everything we go okay let's start shorting dollar yen of course it hit 152 in change and now it's back up to 158 so it's one of those scenarios where with dolly in particular where if you've bought it or sold it there's a very high probability unfortunately that you've been the wrong way.

Um, so a lot of people have certainly got their fingers burnt on deleen at the moment and it's not one that they're really jumping to trade towards. If there is a trade out there on the idea being that this renewed dollar strength, the favorite one of the G10 space definitely seems to be the euro euro downside. That's definitely a much more popular and it's seen as a more cleaner trade. You've got the dollar side of the equation going higher.

Euros being weighed down by obviously what's going on in France um with the upcoming ele presidential election the oat spreads weakening because why of the fiscal deficit and also even you look at earlier this week uh president Lagard was out saying look with the rising rates that may mean that eur US growth is slower so again euro zone growth slower not good we've seen US GDP yesterday very strong so again if you're looking at it from a growth divergence a rate divergence to some degree because ECB is still expected to hike but overall the market goes if I've got to trade dollar higher in the G10 space the cleanest easiest way to do at the moment without these chopfest is via Euro downside

I want to talk about the dollar in a bit particularly as it relates to some of the US data and Fed policy but I think we need to recognize the fact that we've got market holidays today on the mainland in China and in Hong Kong has that contributed to a reduction in liquidity today or is that not really a factor?

It's it has reducted a little bit of liquidity. I mean in FX in Asia, Singapore's the main hub, but certainly Hong Kong is definitely a hub without question. So it has helped to produce some liquidity. I think also be honest you you've got the start of the quarter and you got US payrolls looming tomorrow. So no one's really in a hurry to go unless you got some real conviction of how payrolls is going to come out. I don't think anyone's in a real hurry to put on a trade like as of today.

I think they're quite happy to if they have the trade on the fine let it play out. Um if not they're like let's baby put on tomorrow if they want to go ahead of payrolls. I think a lot of people a lot of people are waiting to see what the payroll data is to see if it adds this idea of the recent dollar strength that we've seen.

So you're in Singapore. It's Thursday. When you say tomorrow in the states Friday we have the payrolls data. Today we had the PCE data for the month of August. The core rate increased by only 2/10 of 1% and we had a downward revision in the prior month. We know that this metric is kind of what the Fed likes to use when it measures inflation. And I'm wondering if you look at what money markets are now pricing a less than 40% probability of a rate hike in October.

Do you stick with that or do you think this is maybe a little bit of an anomaly and you really come back to this notion that sticky inflation in the US is the story and you have to be on alert for the fact that rates could bump up more from where we are currently.

Yeah, I think you've got to go with the latter one. I think yes, the PCA came in slightly below estimates certainly on a month-to-month basis, but at the end of the day, it's still above 3%. you know, it's still elevated and I think based off that you're going to go it's still sticky. And I think the key thing to focus on is if you look at the Fed dot plot, you know, the majority were like, hey, look, we'll do another hike this year.

I do agree with Williams that realistically the better. It's more likely be in December than in October. I think the Fed can go, look, we can wait a bit more to see a bit more data before make a decision. I don't think they feel a rush to make it. I think they can go look if we do it in October, December, you know, there's six weeks difference. Is there really could be that much of a difference? So, they could play that hand if they wish to.

And I think overall that December is more likely. But I think at the moment, you know, unless the the data suddenly came very weak, which is unlikely, uh that a hike in December is uh very high probability. So we heard uh on Wednesday in the US from the head of the Minneapolis Fed Neil Qashqari and he was saying essentially that AI is not the only driver of US economic growth and I bring that up because we did hear from Micron Technology after the bell.

This company is the largest US maker of memory chips. We know what the story on the buildout of the AI story has been like and I'm looking at the positivity that we're seeing right now in the Japanese equity market. A lot of the chip stocks are responding to the Micron news. I'm wondering how you feel about the narrative here that AI is really the only driver of growth. We are is that too narrow-minded?

Yeah, I think it is too narrowminded. Is it a driver of growth? Absolutely. I don't think anyone's going to question that. But if you're saying it's the only driver, I disagree with that one. I think if you look at