Global Market Quick Take: Asia – December 8, 2023

US Equities: The Nasdaq 100 added 1.5% to rally above 16,000 to finish at 16.022 on Thursday, driven by mega-cap tech stocks. Alphabet surged 5.3% after the launch of its Gemini large language model which will significantly enhance Google’s competitive position in generative AI once Gemini is made widely available early next year. AMD soared 9.9% after the chipmaker unveiled new AI chips and said Microsoft, Meta, and Oracle would adopt its AI chips. Nvidia rose 2.4%. The S&P500 gained 0.8% to 4,586, led by technology stocks.

Fixed income: The 10-year Treasury yield rose 5 bps to 4.15%, while the 2-year remained unchanged at 4.59% ahead of the US job data on Friday. The increase in Treasury yields was partly attributed to a 12 bps rise to 0.76% in the 10-year Japanese Government Bond (JGB) yield. On Thursday, during his testimony to the parliament, BoJ Governor Ueda said, 'the situation will become even more challenging from the end of the year to next year,' hinting that he was conscious of an exit from monetary easing. Later on Thursday, Ueda met with Prime Minister Kishida and reportedly exchanged views on monetary issues, according to Nikkei. Taken together with BoJ Deputy Governor Himion’s remarks that exiting the negative rate policy would have relatively little impact on Japan’s economy, these have raised market expectations of actions by the BoJ in its December 18-19 meeting. The results of the 30-year JGB auction on Thursday were very poor, with bonds awarded at over 7 bps higher than the level of the auction deadline.

China/HK Equities: The Hang Seng Index and the CSI300 declined again, finishing the session 0.7% lower at 16,346 and 0.2% lower at 3,391, respectively. China’s imports in November unexpectedly fell by 0.6% in USD terms, signalling weak domestic demand. Industrials and energy exerted downward pressure on the benchmark indices, while banks, internet, and EV stocks traded mixed.

FX: Dramatic move in JPY as traders boosted bets of a December policy tweak from Bank of Japan. USDJPY broke below its 200DMA before recovering slightly in late US session to move higher from lows of 141.71. Pair is now back around 144 as markets question whether an early policy move is really likely and position for the US jobs data due today. If however yen continued to strengthen, there is a risk of forced unwinding in carry trades and significant bond volatility. EURJPY is down to 155-levels and AUDJPY plunged to 95. The move in yen pushed the dollar lower, and AUDUSD rose to 0.66 handle while EURUSD tested a break above 1.08.

Commodities: Crude oil prices steadied with WTI still below $70/barrel raising risks of an emergency OPEC+ meeting. Focus turns to US NFP data today and what signals it can bring for the demand outlook. Iron ore gained after China’s exports rose for the first time in seven months and Copper pushed higher on imports also rising strongly with refined copper imports touching the highest levels this year as strong demand from energy transition underpins. Gold continues to find support at the $2,009 area and big test comes today from the monthly US job report.

Macro:

• Massive yen strength came on the back of comments from Bank of Japan governor Ueda’s parliamentary hearing. While he maintained that BOJ will continue patient monetary easing, there were elements of hawkishness such as a comment that it will become even more challenging to maintain easy policy towards the end of this year and into early 2024. He also said that BOJ has not decided whether to keep interest rate at zero or move it up to 0.1%, and at what pace short-term rates will be hiked after ending negative rate policy. This pushed the markets to price in odds of a tweak at the BOJ’s December 19 meeting.
• Weekly US jobless claims ticked up to 220k, in line with expectations, while continuing claims fell more than expected to 1.86 million. Headline figure could still be impacted by Thanksgiving holiday, and likely to smoothen into the new year.
• China’s November trade data fell below expectations, with imports showing a year-on-year decline of -0.6% in USD terms (compared to the consensus of +3.9%), reflecting weak domestic demand. In volume terms, crude oil imports decreased by -9.2% Y/Y (previously +13.5%), and the volume growth in copper imports slowed to +2.0% Y/Y (previously +23.7%), while iron ore slowed to +3.9% (previously +4.6%). Meanwhile, coal imports' volume picked up to +34.7% Y/Y (previously +23.3%). On the other hand, exports in USD terms improved to +0.5% in November from -6.4% in October, surpassing the projected zero growth. This better-than-expected performance was driven by a return to growth in exports to the US and a pick-up in growth in exports to Russia.

Macro events: German HICP Final (Nov), US  Employment Report (Nov), University of Michigan (Dec P)

In the news:

• Yen climbs to 141 in volatile trading after BOJ hints at policy shift (Nikkei)
• Japan PM Kishida resigns as ruling party faction head amid funds scandal(Kyodo)
• Elon Musk's SpaceX Valued at $175 Billion or More in Tender Offer (Bloomberg)
• Tesla’s Dojo Supercomputer Head Exits in Blow to Efforts (Bloomberg)
• Talks on EU's AI Act to resume Friday after marathon debate (Reuters)
• Ukraine Funding Fight Stokes New Fears Over US Reliability (Bloomberg)

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

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