Thai Baht Holds Steady, Stocks Jump after Surprise Rate Cut

Oil steadied on Wednesday, supported by Opec+ cuts and uncertainty over what may happen next in the Middle East conflict, after demand concerns knocked the market to its lowest since early October in the previous session.

Crude tumbled more than 4% to a near two-week low on Tuesday due to a weaker demand outlook and after a media report said Israel would not strike Iranian nuclear and oil sites, easing fears of supply disruptions.

Still, concern about an escalation in the conflict between Israel and Iran-backed militant group Hezbollah persists. Opec+ supply curbs remain in place until December when some members are scheduled to start unwinding one layer of cuts.

"The end of the current year could actually turn out to be tightish due to healthy consumption readings and Opec+ constraints," said Tamas Varga at oil broker PVM.

"2025, however, will be much better supplied than 2024 putting absolute and relative downward pressure on oil prices."

On the oil demand side, both the Organization of the Petroleum Exporting Countries and the International Energy Agency this week cut their 2024 global oil demand growth forecasts, with China accounting for the bulk of the downgrades.

Economic stimulus in China has failed to give oil prices much support. China may raise an additional six trillion yuan (US$850 billion or RM3.62 trillion) from special treasury bonds over three years to stimulate a sagging economy, local media reported.

Coming up is the latest US oil inventory data. The American Petroleum Institute's report is due later on Wednesday followed by the government's figures on Thursday. The reports are coming a day later than normal following a federal holiday.

Analysts polled by Reuters expected crude stockpiles rose by about 1.8 million barrels in the week to Oct 11.

Source: The edge markets

Approximately 140,000 more people found jobs last month compared to the same month last year, marking the third consecutive month of increases in the 100,000 range, according to Statistics Korea on Wednesday.

However, the latest data shows that the momentum regarding job creation has significantly slowed down, compared to the beginning of the year when the figure exceeded 300,000.

The number of jobs in the construction industry saw the largest decrease on record, reflecting sluggish domestic demand.

The data released by the statistics agency showed that the number of employed people aged 15 and older stood at 28.84 million in September, an increase of 144,000 compared to the same month last year.

The increase in the number of employed people was 80,000 in May and 96,000 in June. After recovering to 172,000 in July, it remained in the 100,000 range for three consecutive months, with 123,000 in August. Earlier in the year, the figure had exceeded 300,000.

By industry, the number of employed people in the construction sector decreased by 100,000, marking the largest drop on record since the industrial classification was revised to its current form in 2013.

This was attributed to a continued decline in orders resulting from high interest rates. Employment in the construction industry has been decreasing for five consecutive months.

In the retail and wholesale sector, there was a decrease in the number of employed people by 104,000, marking a decline for the seventh consecutive month. This drop is the largest since November 2021 when it fell by 123,000. This was attributed to structural changes such as the rise of e-commerce and unmanned sales, as well as the recent sluggish domestic demand.

The manufacturing sector experienced a decline of 49,000 employed people, marking the third consecutive month of decreasing employment.

In contrast, the information and communication sector saw an increase in employment by 105,000, followed by science and technical services with an increase of 83,000 and transportation and warehousing with 79,000.

By age group, there was an increase of 272,000 employed people aged 60 and older, continuing the trend of older adults leading employment growth.

However, the youth group aged between 15 and 29 saw a decrease of 168,000, while there was a decline of 62,000 among those in their 40s.

The economically inactive population increased by 54,000, reaching 16.21 million.

In particular, the number of people reporting they were not working but taking a break increased by 231,000. Among the youth, this figure rose by 69,000, representing the largest increase in 44 months since January 2021, when it climbed by 112,000.

“We assess the situation as positive as the increase in the number of employed people compared to the previous month has continued,” a government official said.

“However, challenges remain for those in the construction industry and young people. Therefore, we will strengthen tailored job support for these groups and enhance efforts to bolster domestic demand.”

Source: Koreatimes

Today’s release of Canada’s September CPI offers a decisive data point, in our view, that should see the Bank of Canada (BoC) step up the pace of monetary easing next week.

In addition to headline inflation surprising to the downside, broader underlying inflation pressures also remained contained. With activity data subdued overall, and with policy interest rates still some way above neutral and next week’s announcement accompanied by fully updated economic projections, we now forecast the BoC to cut its policy rate by 50 bps to 3.75% at its October 23 meeting.

We expect the BoC to revert to 25 bps rate cuts at its December, January, March and June meetings, for a terminal policy rate of 2.75% by the middle of next year. Relative to our prior forecast, we see the central bank lowering interest rates more quickly and, moreover, view the risks as tilted to even faster monetary easing if growth in economic activity disappoints.

Ongoing Disinflation Points to Faster Bank of Canada Rate Cuts

Today’s release of Canada’s September CPI offers a decisive data point, in our view, that should see the Bank of Canada (BoC) step up the pace of easing, and lower its policy interest rate by 50 bps at next week’s monetary policy announcement. September headline inflation slowed more than consensus economists expected to 1.6% year-over-year, and while that deceleration was driven by an 8.3% decline in energy prices, there were also indications that underlying price pressures are contained. Services inflation slowed to 4.0%, the smallest increase in services prices since September of last year. Meanwhile, the average core CPI remains close to the central bank’s 2% inflation target, rising 2.4% over the past 12 months, by a 2.4% annualized pace over the past six months, and by 2.1% annualized over the past three months.

Meanwhile, while Canadian activity data is a bit more mixed, we also believe it is consistent with a 50 bps rate cut next week. July GDP rose 0.2% month-over-month, although the advance estimate is for a flat outcome in August, which, if realized, would leave the level of July-August GDP just 0.25% above its April-June average—tracking well below the Bank of Canada’s Q3 growth forecast of around a 0.7% quarter-over-quarter (not annualized) gain. More recent activity and survey data are not quite as soft. September employment rose by 46,700, driven by full-time jobs, and the unemployment rate fell to 6.5%. Offsetting that strength to some extent, the labor report also showed that wage growth eased by more than expected, to 4.5% year-over-year. Finally, the BoC’s Q3 business outlook survey showed a modest improvement in expectations for future sales, and the headline business outlook indicator improved to -2.3, although that reading for the business outlook indicator is still reflective of overall net pessimism rather than net optimism.

A couple of other factors are also supportive of a larger rate cut at next week’s announcement. First, the policy interest rate remains some way above neutral, which the BoC estimates to be in a range of 2.25% to 3.25%. In addition, next week’s announcement will also be accompanied by fully updated economic projections. Both of these factors argue for a larger rate cut, considering the subdued economic backdrop. Accordingly, we now forecast the BoC will lower its policy rate by 50 bps to 3.75% at its October 23 announcement, and by a further 25 bps to 3.50% in December. In 2025, we expect 25 bps rate cuts in January, March and June, which would bring the policy rate to 2.75% by middle of next year. Among the factors we think will see the Bank of Canada revert back to smaller 25 bps increments following the October move are policy interest rates that are moving somewhat closer to neutral, hints of improvement in some of the more recent activity data, and the potential for (and desire to avoid) excessive Canadian currency weakness. That said, relative to our prior forecast we see the Bank of Canada lowering interest rates more quickly to the same 2.75% terminal rate we had previously anticipated. Moreover, we view the risks as still tilted toward even faster monetary easing should inflation remain contained, and if growth in economic activity disappoints.

Source: Euronews

Hong Kong eased its mortgage rules to allow homebuyers to fork out lower down payment, aiming to address a prolonged property slump in the city.

The loan-to-value (LTV) ratio for all residential properties is now set at 70%, Chief Executive John Lee said in his policy address on Wednesday. The change reduces the required down payment for homes valued above HK$35 million (US$4.5 million or RM19.35 million), which had a ratio of 60% previously. The LTV ratio for company-held properties rose to 70% from 60%.

The measures took effect on Wednesday, the Hong Kong Monetary Authority (HKMA) said in a statement. Citing the softening property market in recent months, the HKMA said “there is room to further adjust” the measures.

The city’s New Capital Investment Entrant Scheme will also be expanded to accept investment in homes at HK$50 million or above as qualified investments, with the amount of real estate investment to be counted towards the total capital investment capped at HK$10 million, Lee said.

Hong Kong’s Hang Seng Property Index rose as much as 3.9%, following the announcement of the measures, outperforming the main Hang Seng Index.

The moves mark the latest attempt by the Hong Kong government to perk up its property market. But the changes pale in comparison with last year’s, when it slashed extra stamp duties for some homebuyers.

The city’s real estate market continues to be pressured by high borrowing costs, a glut of home inventory and a weak economy. However, the lack of stimulus for the industry from the government shows that the administration has few options to boost the market after having removed all extra property taxes earlier this year.

Thomas Chak, the head of capital markets and investment services at Colliers International, said the new home investment policy will help attract high-net-worth individuals to the city and boost transaction volumes of luxury properties, but will have limited impact on the general residential market.

The recent reduction in interest rates in Hong Kong hasn’t translated into a market rebound. Developers are still pricing their projects modestly to absorb as much demand as possible amid an oversupply of homes. Used-home values are even lower than the level before the banks’ rate cut in September.

With housing inventory elevated, residential prices will likely remain under pressure in the near term despite the lower rates, according to Bank of America Corp. The backlog for unsold residential properties is at a 20-year high, data from Bloomberg Intelligence showed.

Source: The edge markets