Global Market Quick Take: Asia – December 11, 2023

US Equities: Stocks shrugged off the rise in bond yields following a hotter employment report as investors eyed a Goldilocks environment for equities. The S&P500 and the Nasdaq 100 both added 0.4% to reach 4,604 and 16,084, the highest closing levels since March 2022 and January 2022, respectively. Lululemon gained 5.4% after analysts upgraded share price targets for the athleisure retailer post-results.

Fixed income: Treasuries sold off across the yield curve, with the short end being hit the most as traders pared the amount of rate cut priced in amid increases in headline payrolls surpassing expectations and an unexpected fall in the unemployment rate, as well as stronger hourly earnings. The 2-year yield surged 13 bps to 4.72%, and the 10-year rose 8 bps to 4.23%. Investors will focus on the CPI release this Tuesday ahead of the FOMC decision on Wednesday.

China/HK Equities: The Hang Seng Index ticked down 0.1% to 16,334 as investor sentiment remained downbeat in a lacklustre session. Sunny Optical gained 2.1%, topping the performance within the Hang Seng Index, after the tech hardware company announced a 29% year-on-year increase but a flat month-on-month performance in handset lens shipments in November. In the mainland, the CSI300 edged up 0.2% to 3,399.

FX: Dollar ended the week higher, after down for three straight weeks even as CFTC positioning data showed that dollar positioning turned to a short. A beat on NFP questioned the pace of rate cuts priced in for 2024 and odds of a March rate cut declined from 60%to 45%, boosting the greenback. JPY was a notable gainer too last week, although USDJPY returned to 145 handle on Friday after a sharp move lower to 141.71 the day before on expectations of a BOJ pivot as early as December. Kiwi remains the most vulnerable to a change in dollar trajectory, and came in as the worst G10 performer on Friday. NZDUSD slid lower to 0.6120-levels from 0.6170 while AUDUSD moved below 0.6580. EURUSD closed around its 100DMA at 1.0761 as Fed and ECB decisions come up this week while GBP is still finding support above its 200DMA at 1.2489.

Commodities: Energy and industrial metals found a bid on Friday despite a higher USD, although Gold slipped below the $2,009 support as NFP beat pushed yields higher. The $2000-barrier is still holding up and could be the key test in the heavy central bank week ahead. Crude oil recovered on reports of US refilling its strategic reserve, with the government saying they hope to buy 3mln bbls barrels of crude in March and will solicit bids for the following two months. Copper was boosted by China’s Politburo announced that fiscal policy would be stepped up appropriately and emphasised the importance of economic progress, although Saturday’s deflation report may raise concerns again about China’s slowing economic momentum.

Macro:

• US NFP surprised to the upside with 199k job adds in November against 185k expected and 150k prior. Unemployment rate also saw a notable move lower to 3.7% from 3.9%, even as the participation rate edged higher to 62.8% from 62.7%. Wages were also on the hot side, accelerating 0.4% MoM from the prior and expected 0.3%.
• US University of Michigan consumer sentiment survey for December saw a huge beat. Headline sentiment rose to 69.4 from 61.3, above the 62.0 forecast, driven by gains in both current conditions and the forward-looking expectations sub-index, although the latter saw a huge near 10 point jump rising to 66.4 from 56.8, above the 57.0 consensus. Current conditions rose to 74.0 from 68.3, well above the 68.5 forecast.
• The Chinese leadership discussed economic plans for 2024 in a Politburo meeting on Friday. The readout from the meeting highlighted 'stability' and 'proactive fiscal policies.' This discussion served as a prelude to the upcoming annual Central Economic Work Conference, expected to convene this week. The Central Economic Work Conference will formulate a blueprint for the economic plan for 2024.
• Notably, the CCP’s Politburo meeting readout did not announce the crucial Third Plenary Session of the 20th Central Committee. The Third Plenary Session, also known as the Third Plenum, typically defines China’s development strategy for the next five years and is usually held in the second year of a new Central Committee.
• China’s November CPI fell 0.5% Y/Y, a larger contraction than the -0.2% in the prior month and the median projection of -0.2%. On a month-on-month basis, CPI declined 0.5% as well. Excluding food and energy, the November Core CPI increased 0.6% Y/Y, the same as in October. PPI plunged 3.0% Y/Y in November, falling faster than the -2.8% projected and the -2.6% in October. On a month-on-month basis, PPI slid 0.3%.

Macro events: US New York Fed Consumer Expectations survey, Norway CPI (Nov)

Earnings: Oracle

In the news:

• Europe reaches a deal on the world’s first comprehensive AI rules (Associate Press)
• Macy’s Is Said to Get $5.8 Billion Offer From Investor Group (Bloomberg)
• China adds Nio, BMW-backed Spotlight to approved car manufacturers list (Reuters)
• Nvidia CEO aims to set up a base in Vietnam (Reuters)
• Standout Emerging-Market Bond Bet Set for Another Boost in 2024 (Bloomberg)
• India’s NSE set to take Hong Kong’s spot among world’s largest markets (FT)

For all macro, earnings, and dividend events check Saxo’s calendar.

For a global look at markets – go to Inspiration.