Global Market Quick Take: Asia – October 23, 2024

Macro:

• A host of ECB speakers were on the wires, including President Lagarde herself. There was a consistent theme of caution and a broader expectation that inflation target will be hit, but disappointing growth emphasis took the traders’ attention and market pricing for a 50bops rate cut in December picked up.
• Bank of Canada is expected to cut rates by 50bps to 3.75%. With a jumbo cut decision largely priced in, focus will be on whether there is any indication about the pace of rate cuts from here and if more jumbo rate cuts can be expected. Also watch for the BOC’s updated economic forecasts.
• The IMF lowered its global growth forecast for next year to 3.2% and warned of accelerating risks from wars to protectionism. It left its 2024 projection unchanged and expects inflation to slow to 4.3% in 2025 from 5.8% this year. US growth forecast for 2024 and 2025 were raised while China’s growth forecast for 2024 was downgraded.

Equities: 

• US – US indexes closed near flat on Tuesday after initial losses, driven by concerns over higher 10-year yields and a slower pace of Fed rate cuts.
• Starbucks is down 4.15% post market after they reported same store sales plunged 7% and pulled guidance for 2025.
• Mcdonalds fell 5.8% post market after US health officials investigated an E-coli outbreak linked to Mcdonald’s Quarter Pounders in multiple states.
• Japan - Nikkei 225 fell 1.39% hitting three-week lows. The drop followed a weak Wall Street performance and rising US Treasury yields. Investors were also cautious due to upcoming Japan elections and pending corporate earnings reports.
• Europe - The DAX index fell slightly on Tuesday, extending a 1% decline from the previous day. Siemens, Deutsche Telekom, and Allianz dropped 0.6% to 1.7%. However, SAP surged 2.4% on strong earnings, and Airbus rose 2%.
• Hong Kong - HSI edged up 0.1% to close at 20,499 on Tuesday, attempting to recover from the previous session's sharp decline. Gains were primarily driven by auto stocks, with top movers including Geely Auto (7.0%), Li Auto (5.1%), Chow Tai Fook Jewellery (3.4%), and ENN Energy Holdings (3.3%).
• Earnings due today: Boeing, Coca Cola, IBM, Lam Research, Tesla, AT&T

FX:

• US Treasury yields continued to march higher, pushing the Japanese yen lower. USDJPY trades above 151 in the Asian morning, its highest levels since July and is testing the 200-day moving average at 151.37.
• A broadly dovish rhetoric from ECB officials pushed EURUSD back below 1.08 for the first time since early August. The IMF also downgraded Germany’s growth and Trump trade also continues to take a toll on the Eurozone’s economic outlook, signaling potentially more downside for the single currency.
• Commodity currencies outperformed as oil prices jumped higher. AUDUSD attempting a break above 0.67.
• CAD in focus today as BOC decision is on tap. USDCAD trades above 1.38 and a 50bps is largely priced in. A dovish outlook from the central bank may be needed to propel the pair towards 1.3890 resistance.

Commodities:

• Oil futures have risen for the second consecutive session as traders downplay the chances of a Middle East ceasefire and instead concentrate on the tightening global supply and demand dynamics.
• Silver remained around $34, its highest in nearly 12 years, driven by US election uncertainties, Middle East tensions, and expectations of further monetary easing.
• Copper futures rose above $4.35 per pound, recovering losses on hopes of increased demand in China after Beijing's stimulus measures, including rate cuts and potential further reductions in banks' reserve requirements.

Fixed income:

• Treasury yields ended mixed. Front-end to intermediate yields rose slightly, while longer-term yields dipped. The market steadied after Monday's losses, aided by a 2.2% rise in November WTI crude. The 10-year yield surged above 4.20% for the first time since July.
• German front-end yields dropped as money markets boosted bets on ECB rate cuts, following signals of possible faster easing.

For a global look at markets – go to Inspiration.