Global Market Quick Take: Asia – November 23, 2023

US Equities: The S&P 500 and Nasdaq 100 added 0.4% each, reaching 4,557 and 16,001, respectively. All 11 S&P 500 sectors advanced, except for energy. eBay gained 3.1% on the sale of its stake in a Norwegian online classified company. AMD rose 2.8%, and Microsoft gained 1.3%. Deere plunged 3.1% after guiding for a sizable decrease in FY2024 profits. Nvidia fell 2.5% despite results beating estimates, due to warnings about a slower China business. The NYSE and Nasdaq are closed for Thanksgiving on Thursday.

Fixed income: A larger-than-expected decline in initial jobless claims and an unexpected rise in the 1-year inflation expectations in the University of Michigan survey, pushing 1-year inflation expectations to 4.5%, triggered some selling in Treasuries. This resulted in the 2-year yield rising by 3bps to 4.90% and the 10-year yield increasing by 1bp to 4.40%. The cash Treasury market is closed today for Thanksgiving, while futures will be open with an early close at midday New York time.

China/HK Equities: The Hang Seng Index ended the day flat following a volatile session. Weakness was observed in the healthcare, industrials, and renewables sectors. Baidu led in performance, fueled by robust quarterly results. According to Bloomberg, Country Garden, Sino-Ocean, and CIFI have reportedly been added to a whitelist of 50 developers eligible for government-directed financing support from banks. The CSI300 saw a decline, influenced by downturns in the renewable energy, machinery, autos, and non-ferrous metal sectors.

FX: The dollar was bid higher on Wednesday ahead of US and Japan Thanksgiving holiday amid higher consumer inflation expectations. Last week’s highs in the 104.50 area for DXY could be the first key barrier. USDJPY moved above 149.50 with EURJPY rising above 162.50 and Japan’s CPI will be in focus on Friday morning in Asia in the absence of US data for the rest of this week. Higher-than-expected Japan CPI will again boost speculation of a BOJ policy tweak and strengthen the yen. GBP was softer after the budget announcement as Gilts sold off on higher issuance. GBPUSD bounced back from 1.2450 lows to trade just below 1.25. EURUSD slumped below 1.09 while ERUGBP made its way back above 0.87 after a brief look below. AUDUSD still away from the 200DMA at 0.6587 as USDCNH rose back above 7.16.

Commodities: Crude oil prices tumbled again on Wednesday with Brent dipping below $79/barrel before a recovery in the late session on reports that the weekend OPEC meeting was postponed to 30 November. This is a crucial meeting for deciding production quotas for 2024, but disagreement among members raised uncertainty around deeper supply cuts by the group to support oil prices. Meanwhile, EIA data showed crude inventory build of 8.7mn barrels last week vs. expectations of 1.5mn barrels, its fifth straight increase. Metals softened due to the stronger USD, although iron ore continued its ascent. Gold returned to sub-2k levels amid higher consumer inflation expectations and higher USD.

Macro:

• Zhongzhi Enterprise Group, one of largest financial conglomerates in China’s shadow banking sector, disclosed a capital shortfall ranging from RMB 200 billion to RMB 260 billion.
• US initial jobless claims fell to 209k from 233k, significantly below the consensus, 226k. This comes after last week’s claims print was the highest in 12 week, and suggested that labor market is cooling. However, this week’s print is likely to be a seasonal adjustment ahead of Thanksgiving holiday and weakening trends could return from next week.
• The final reading of University of Michigan inflation expectations showed the year-ahead measure revised up to 4.5% from 4.4% and the 5-10yr measure remained unchanged at its highest levels since 2011 at 3.2%. Both measures were slightly higher than the consensus and sparked fears that higher inflation expectations are becoming embedded.
• UK Autumn Statement saw Jeremy Hunt announcing measures to reduce debt, push people to join the workforce, encourage corporate investment and cut taxes. The lowering of NI from 12% to 10% will take effect in January at the start of what is likely to be an election year. Other measures such as increased pensions and welfare benefits were also announced although opponents criticised that the Budget did not address the impact of higher inflation on public services expenditure that makes the rosier fiscal projections look unsustainable.

Macro events: US Thanksgiving (Market Holiday), Riksbank Policy Announcement, ECB Minutes (Oct), EZ & UK Flash PMIs (Nov), Japan Labor Thanksgiving (Market Holiday)

Earnings: Chow Tai Fook Jewellery, Futu

In the news:

• Sam Altman to return as OpenAI CEO after his tumultuous ouster (Reuters)
• Israel and Hamas have reached a deal on a cease-fire and hostages (AP)
• Chinese government advisers will recommend economic growth targets for next year ranging from 4.5% to 5.5% to an annual policymakers' meeting (Reuters)
• Jeremy Hunt cuts national insurance but taxes head to postwar high (FT)

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

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