Global Market Quick Take: Asia – December 6, 2023

US Equities: Mixed equity performance underpinned by weak labor data in the US but ISM services still holding up well and in expansion. S&P 500 closed marginally lower but NASDAQ 100 pushed up by 0.2% as tech stocks were supported by slipping yields. Apple was up 2% as it reached the $3 trillion club once again. Bitcoin still in focus after it briefly topped $44k on ETF optimism, and continued to push crypto-related stocks higher.

Fixed income: Soft labor market data from the US JOLTS report put pressure on Treasury yields. 2yr yields were down 6bps to 4.58%, staying above Friday’s lows of 4.54% as ISM services delivered an upside surprise. 10yr yields slipped 9bps. UK gilts rallied sharply with 10yr yields falling to 4.09% and Bunds were also higher with ECB Schnabel’s comments that further rate hikes are unlikely.

China/HK Equities: Chinese equities extended their decline despite Caixin services PMI coming in higher than expectations at 51.5 in November from 50.4 previously. Moody’s downgrade of China outlook to negative from stable is further spooking debt concerns, and adding to the headwinds for the Chinese economy and pushing investors away despite the cheap valuation.

FX: The dollar gained further on Tuesday as it continued to recover from the declines of last three weeks and downside surprise from JOLTS data was somewhat reversed by ISM upside. DXY index could target 104.50 as focus turns to ADP data today. AUD was the underperformer, with AUDUSD sliding below 0.6560, AUDNZD below 1.07 and AUDJPY pushing below 96.50 to test the 50DMA as RBA fell short of expectations for a hawkish hold yesterday. EURUSD also made it way below 1.08 but yen was flattish against the USD and gained more on the crosses. USDCAD is rising back towards 1.36 and eyes on BOC rate decision today.

Commodities: Commodities extended their decline as dollar gained further. Concerns around China debt also underpinned after Moody’s outlook cut, and weighed on industrial metals. Copper was down 1.3% despite supply concerns, as China could likely continue to deter gains in metals as it continues to deleverage. Crude oil prices also slipped further with supply cuts remaining unconvincing for the markets and parts of US economic data, such as JOLTS jobs data last night, starting to show weakening demand outlook. Concerns around China’s respiratory illness are also pushing oil prices lower. Gold currently finding support at 61.8 fibo retracement around $2,009, a level that needs to hold to avoid speculative exodus.

Macro:

• US JOLTS Job Openings fell to 8.733mln in October from 9.35mln in September, well beneath the expected 9.3mln and the lowest since March 2021. Quits rate remained flat at 2.3% but the ratio of openings to unemployed workers fell to 1.34 from 1.47, the lowest level since August 2021 but still above pre-pandemic levels.
• Headline US ISM Services PMI for November accelerated to 52.7 from 51.8, above analyst forecasts of 52.0. Business activity increased to 55.1 from 54.1 while new orders saw further expansion at 55.5, matching the October figure. Employment accelerated to 50.7 from 50.2, while prices paid eased to 58.3 from 58.6.
• Australia Q3 GDP came in unchanged at 2.1% YoY, but slowed on a MoM basis to 0.2% from 0.4% earlier. Expectations were for 0.5% MoM and 1.9% YoY.

Macro events: BoC Policy Announcement, German Industrial Orders (Oct), EZ Retail Sales (Oct), US ADP (Nov)

In the news:

• Moody’s Cuts China Credit Outlook to Negative on Rising Debt (Bloomberg)
• Trucking firm XPO to buy bankrupt Yellow's service centers for $870 mln (Reuters)
• Japan manufacturers' mood jumps, second straight month of gains - Reuters Tankan (Reuters)
• P&G to record up to $2.5 bln in Gillette writedown, operations rejig (Reuters)
• Worsening China Earnings Are Giving Bears More Reasons to Sell (Bloomberg)
• Rio Tinto plans to spend $30bn over next 3 years (FT)

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

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