Global Market Quick Take: Asia – May 10, 2024

Equities: US stocks closed higher with the S&P 500 Index cresting past a one-month high, spurred by a deceleration in the labor market and dovish remarks from Fed President Mary Daly, which stoked speculation of potential policy loosening. The S&P 500 notched up by 0.5%, breaching the 5,200 level, with the real estate and energy sectors at the forefront. Both the Nasdaq 100 and Dow Jones saw upticks by 0.2% and 0.8%, respectively. Equities reached peak gains later in the day following Daly's hint at adaptive rate measures should labor conditions weaken. This followed the release of unemployment claims data indicating a rise to a multi-month high.

Utility sector equities are experiencing a notable rally, driven by bullish investor sentiment on the prospects of data centers and AI technology ramping up electricity consumption, alongside sustained interest in the sector's conventional role as a safe haven asset.

Apple Inc. is gearing up to enhance its AI offerings using its proprietary chips in data centers for complex tasks, paralleling its strategy for personal devices. This aligns with Tim Cook's vision of AI as a competitive edge and sets the stage for a bold AI roadmap to be unveiled at Apple's Worldwide Developers Conference on June 10, signaling its entry into the generative AI space and intensifying competition with tech giants.

Roblox stock nosedives 21% following Q2 bookings guidance that fell short of consensus analyst expectations, signaling potential headwinds for the gaming company's revenue growth.

FX: The US dollar slumped yesterday after remaining steady in the last few days as higher-than-expected US jobless claims data signaled a cooling labor market and fueled expectations that the wage growth and inflation will slow to allow Fed to cut rates later this year. Japanese yen however underperformed in the G10 currency space, with USDJPY still pinned at 155+ levels despite weakness in the dollar. Meanwhile, AUD outperformed with AUDUSD rising back above 0.66 handle to erase post-RBA losses from this week. Sterling wobbled, and GBPUSD slid to lows of 1.2446 with a dovish BOE but rebounded to 1.2520+ as the dollar weakened later. GBPAUD remained a better way to play the BOE, as was discussed in this article. GBPAUD printed 4-month lows at 1.8909. EURUSD remained short of testing 1.08.

Commodities: U.S. WTI crude oil futures settled at $79.26/bbl, marking a 0.34% increase, while Brent Crude futures settled at $83.88/bbl, reflecting a 0.36% rise. Natural gas prices climbed by 5.21% to $2.3010 per million British thermal units, reaching their highest levels since late January. The EIA reported a larger-than-expected decrease of -1.4 million barrels in crude inventories. Additionally, gold prices rose by $18.00, settling at $2,340.30 per ounce. Silver saw a 3.6% increase, and copper rose close to 1%.

Fixed income: Treasuries rallied (yields were lower) following an increase in jobless claims hinting at a loosening jobs market as well as a strong 30-year auction. The rally in gilts was however more measured despite the BOE’s dovishness as markets await data to further price in UK rate cuts.

Macro:

• US jobless claims for the week of May 4 shot up to 231k from 209k previously, coming in above expectations of 215k. This is the highest print since August 2023, and the largest weekly increase since January, which was weather related, and is a signal that labor market in the US is clearly cooling down after NFP also missed expectations last week. Meanwhile, Fed's Daly (voter) noted Q1 inflation data has left considerable uncertainty about the next few months of inflation, she acknowledged that policy is restrictive, but it may still take time to bring inflation down. Her comments were neutral, much like Powell’s last week.
• BOE Review: As expected, the Bank of England kept rates unchanged at 5.25%, while the vote split shifted dovish to 7-2 as Dave Ramsden joined Swati Dhingra to vote for a cut. Governor Bailey said that the MPC will need to lower rates in the coming quarters and rates may need to be cut by more than currently priced in by the market. Market pricing for June rate cut has increased slightly to over 55%, and inflation data will be the single biggest catalyst from here for further dovish repricing of the BOE curve. UK Q1 GDP is out today, followed by labor data on May 14 and CPI on May 22.
• China's Hangzhou city removed all curbs on home purchases, following on from other major cities like Chengdu and partial relaxations in Beijing, Shanghai and Shenzhen. China's April trade data also improved with exports up 1.5% YoY from -7.5% last month and imports up a strong 8.4% YoY from -1.9% in March.

Macro events: ECB Minutes; Japan’s Current Account (Mar), UK GDP Estimate (Mar), UK GDP Prelim. (Q1), Norway CPI (Apr), Canada Employment (Apr), US UoM Prelim. (May), China M2 (Apr). Speakers: ECB’s Cipollone, Elderson; BoE’s Pill; Fed’s Goolsbee, Bowman, Logan, Kashkari, Barr

Earnings: NTT, Honda, KDDI, Tokyo Electron, Enbridge, Li Auto

News:

• Apple to power AI servers with its own high end processors (Reuters)
• Iron Ore rebounds above $100 on China’s surging steel exports, factory activity and hopes for more policy support (Bloomberg)
• Chinese EV maker Zeekr prices IPO at $21, at the top end of range, reports say (CNBC)
• Spanish bank BBVA caught markets by surprise in a rare takeover bid (CNBC)

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

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