Global Market Quick Take: Asia – November 20, 2023

US Equities: Small-cap companies outperformed during a subdued trading session on Friday. The Russell 2000 gained 1.4%, while the S&P 500 edged up 0.1%, and the Nasdaq moved sideways. Within the S&P 500 sectors, energy stocks took the lead, rising over 2%, amid a rally in crude oil prices. Retailers also fared well, with Gap soaring by an impressive 30.7% after the new management delivered robust Q3 results. Powell’s dovish shift, coupled with softer inflation and employment data, a better-than-expected 4.3% Y/Y Q3 earnings growth for S&P500 companies, and favorable seasonality, is expected to uphold US equity markets for the rest of the year.

Fixed income: The 2-year Treasury notes sold off by 5bps, finishing at 4.89%, due to robust housing data and a rally in crude oil prices. Traders took some profits on rate-cut bets, further fuelling the selling. The 10-year yield remained unchanged at 4.44%. On Monday, the Treasury is scheduled to auction $15 billion of 20-year bonds.

China/HK Equities: Alibaba tumbled by 10% after the Chinese internet giant abruptly cancelled the full spin-off of its cloud unit, sparking investors' concerns about issues in business strategy execution. The disclosure of a selling plan from Jack Ma’s family trust also negatively impacted sentiment. Other Chinese internet mega-cap names were dragged down by 2%-5%, except for NetEase, which gained 2.1% after reporting robust Q3 earnings and a solid game pipeline. The Hang Seng Index declined by 2.1% to 17,454. In the mainland, A-shares rebounded in the afternoon, with the CSI300 finishing the session only 0.1% lower than the previous day. Pharmaceuticals, autos, telecommunications, and machinery stocks led the rally. Chinese Financial regulators told the country’s leading financial institutions in a meeting on Friday to meet the reasonable demand for funding from property developers. Overnight, November Hang Seng Futures recovered by 1%. Xiaomi is scheduled to report Q3 results on Monday.

FX: The dollar index continued to be sold on Friday, and DXY closed below 104 for the first time since end-August. Immediate focus now turns to 200DMA at 103.62 and 50% retracement at 103.46. The rebound in oil prices helped NOK to be the best performer in G10 while USDJPY also dropped to sub-150 levels with market expecting the Fed to have ended in rate hike cycle. AUDUSD still above 0.65 but resistance at 0.6523 continues to hold up, and RBA minutes this week could be a key test. EURUSD rose above 1.09 and may get a further push with Moody’s upgrading Portugal and reaffirming Italy’s rating while upgrading its outlook to Stable from Negative. EURGBP stays above 0.8750 and could get test 0.88.

Commodities: Crude oil prices saw a sharp rebound on Friday, rising over 4% as Brent got back above $80/barrel. With demand concerns in focus last week bringing a heavy technical selling earlier in the week, focus has turned to OPEC acting to support prices once again. OPEC and its allies are scheduled to meet next weekend and markets are anticipating production cuts for next year. Metals will be in focus today as China announces loan prime rate especially with Copper up close to 4% last week and iron ore up 1.3%. Gold and silver also had a strong performance last week with silver markedly outshining with gains of 6.5%.

Macro:

• The People’s Bank of China, the National Administration of Financial Regulation, and the China Securities Regulatory Commission held a meeting with the 18 largest Chinese banks, five asset management companies, and four securities firms to ensure the stability of credit growth for the remainder of the year and early next year. The financial regulators also highlighted the need to resolve local government debts and meet the reasonable demand for funding from both state-owned property developers and private property developers.
• UK retail sales unexpectedly fell in October. Retail sales ex-auto fuel was down 0.1% MoM (exp +0.5%, prev -1.3%) and 2.4% YoY (exp -1.5%, prev -1.5%). While weather may have some impact, the print also emphasizes cost of living pressures plaguing the UK economy.

Macro events: PBoC LPR; German Producer Prices (Oct), New Zealand Trade Balance (Oct)

Earnings: Xiaomi, TRIP.COM, British American Tobacco, Compass, Jonson Controls, Zoom

In the news:

• Ousted OpenAI CEO Altman discusses possible return, mulls new AI venture (Reuters)
• Portugal Rating Upgraded Two Levels by Moody’s (Moody’s)
• Argentina elects 'shock therapy' libertarian Javier Milei as president (Reuters)
• UK’s Hunt says won’t implement tax cuts that fuel inflation (CNBC)

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

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