Global Market Quick Take: Asia – November 27, 2023

US Equities: Stocks traded mixed in a shortened session on Friday. The S&P 500 ticked up 0.1% while the Nasdaq 100 slid 0.1%. Big techs showed notable weakness with Nvidia, Alphabet, Meta, and Apple underperforming the benchmark indices. Nvidia shed 1.9% after Reuters reported that the chip maker is delaying a new AI chip tailored for the Chinese market. Data from Adobe Analytics showed a 7.5Y/Y increase in US Black Friday online retail sales.

Fixed income: Treasury yields rose across the curve by 5-6bps on Friday responding to the weakness in German Bunds and UK Gilts from Thursday when the US market had been closed. The upcoming supply of $54 billion 2-year notes and $55 billion 5-year notes on Monday, and $39 billion 7-year notes on Tuesday also exerted upward pressure on yields. The 10-year Treasury yield increased by 6bps to 4.46%.

China/HK Equities: The Hang Seng Index pulled back by 2% as autos, sportswear, beverages, banks, and China properties caught weakness. BYD tumbled 5.5% after mainland media, citing auto dealers, reported substantial price cuts by BYD in the latter’s push to reach the 3 million new energy vehicle (NEV) sales target for 2023. For the first 10 months, BYD sold 2.38 million NEVs. In the mainland, the CSI300 shed 0.7%, dragged down by TMT, software, autos and defence stocks.

FX: Dollar was down for a second consecutive week for the first time since July, despite higher Treasury yields in the week. DXY index closed below the 200DMA and 50% fibo retracement of the Oct high from July low. Biggest G10 gains for the week came in NZD which has risen in response to better risk sentiment, and closed the gap to 200 DMA just below 0.61 handle. GBPUSD breached the 1.26 handle, rising to its highest levels since early September. AUDUSD still testing its 200DMA at 0.6584, having breached on Friday before closing just below, and China’s industrial profit numbers will be on watch today. EURUSD still capped below 1.0950 while USDJPY oscillates around 149.50 and PCE data due later in the week will be key.

Commodities: Oil prices seeing some stability at the start of the new week after a drop at the end of last week on concerns around OPEC meeting being postponed. Brent however trades just above $80/barrel on reports that a deal on resolving African oil quotas may be in the works, suggesting the worst outcome may be avoided. Gold is back above $2000/oz, as a weaker dollar supports, while Coper was up 2.5% last week and China’s industrial profits will be key today.

Macro:

• US S&P manufacturing PMI fell back into contraction territory at 49.4 from 50.0, while services pushed a little further above 50 to 50.8 from 50.6.
• German IFO showed small improvements, suggesting stability rather than an upturn in the economy. Business climate improved to 87.3 from 86.9, coming in below 87.5 expected. Current assessment was at 89.4 from 89.2 previous and 89.5 expected while expectations rose to 85.2 from 84.8 previous and 85.8 expected. German Q3 final GDP confirmed the -0.1% q/q earlier estimates.
• ECB’s Lagarde was on the wires and suggested a wait-and-see approach. She said that “We have already done a lot,” and will be speaking again today. De Guindos and De Cos sounded the recession warning.
• BOE chief economist Huw Pill also spoke – to the FT – and said that the challenge for the Bank and other central banks is that headline inflation is coming down, while he added that economic activity and employment growth are weakening and that the central bank cannot afford to ease off tight monetary policy.
• The NBS manufacturing and non-manufacturing PMIs on Thursday and Caixin manufacturing PMI on Friday may inform investors about the latest state of the Chinese economy in November. High-frequency data point to soft manufacturing activities while the non-manufacturing index is anticipated to edge up due to seasonality and infrastructure construction supported by local government bond issuance.
• Australia’s government will introduce a bill this week that would give the RBA’s independent expert members more responsibility for setting interest rates with a new specialist monetary policy board. Furthermore, the bill would implement the recommendations of the RBA review announced in April including switching to fewer meetings in a year and a dual mandate of price stability and full employment.

Macro events: US New Home Sales, China Industrial Profits

Earnings: British American Tobacco, Johnson Controls, Techtronic, Qantas Airways

In the news:

• Black Friday Shoppers Set Online Spending Record, Adobe Says (Bloomberg)
• Nvidia delays launch of new China-focused AI chip (Reuters)
• China offers visa-free entry for citizens of France, Germany, Italy (Reuters)
• China Opens Probes of Troubled Shadow Banking Giant Zhongzhi (Bloomberg)
• China says respiratory disease surge driven by mix of pathogens, calls to ‘minimise personnel movement and visits (SCMP)
• Chalmers to axe his power to override RBA interest rate calls (Sydney Morning Herald)

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

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