Ahead Today
G3: US initial jobless claims
Asia: Singapore industrial production
Market Highlights
US rates declined and the Dollar softened, as news emerges that White House Council Director Kevin Hasset is seen as a frontrunner to be the next Fed Chair, a softening in US retail sales and consumer sentiment, coupled with continued good signals out of the US-China relationship. In particular, Kevin Hasset is perceived by the market as someone who is a close ally with President Trump and would as such bring his approach to interest rates to the Fed. In the betting markets, we saw pricing for Kevin Hasset to be the next Fed Chair rise to close to above 50% from 36% before the news came out. Meanwhile, US retail sales came in at +0.2%mom compared with the consensus expectations of +0.4%mom, while the Conference Board Consumer Confidence Index fell to 88.7 from 94.6 previously, and in totality perhaps highlighting some increasing pressure on US consumers from the impact of tariffs. On our end we do see more Fed rate cuts being delivered through 2026 as increasing signs of a softer labour market plays out and this is one key factor behind our expectations for the Dollar to soften and Asian currencies to strengthen modestly moving forward.
Meanwhile, US Treasury Secretary Scott Bessent said that Trump and Xi could meet four times next year, with Trump attending a APEC meeting in November 2026 in addition to his anticipated visit to Beijing in April, while Trump is also expected to host Xi in the US two times next year, including in Washington for an official state visit.
Across Asia, we had some trade and industrial production numbers from the likes of Thailand Taiwan for October. The overall picture seems to be one of modest softening in October so far, with Thailand’s exports moderating to 5.7%yoy (vs consensus for a 6.5%yoy rise) and Taiwan’s industrial production moderating to 14.5%yoy (again lower than consensus expectations for a 16.1%yoy rise. Meanwhile, Thailand’s imports rose quite sharply by 16%yoy from a 17%yoy increase the previous month, driven by stronger imports from China. As such, Thailand’s bilateral trade deficit with China has also risen further while its trade surplus with the US has also increased. While there are concerns that this could reflect transshipment activity, our analysis of HS 6 digit codes suggests that the most egregious transshipment activity makes up at most 10-20% of Thailand’s increase in exports to the US since Trump got elected. This picture is quite similar for other countries such as Vietnam as well. Nonetheless, this is not to say that value added is high, and as such how the Trump 2.0 administration defines rules of origin and domestic value added for transshipment tariffs could be crucial for Southeast Asian economies in 2026.
