Global Market Quick Take: Asia – October 25, 2024

Key points:

• Macro: US PMIs remain resilient, while EZ mixed and UK slowed
• Equities: Tesla gains 22% after reporting strong earnings and improving margins
• FX: USD drops with JPY leading the gains
• Commodities: Iron ore traded around $100 due to strong supply
• Fixed income: Long-end Treasury yields stay richer

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Disclaimer: Past performance does not indicate future performance.

Macro:

• US Flash S&P PMIs came in slightly above expectations, even though manufacturing remained in contraction at 47.8 in October while services was in expansion at 55.3. UK’s October PMIs however came in below expectations at 50.3 for manufacturing and 51.8 for services, signalling Q4 growth slowdown. Meanwhile, Eurozone was mixed as French metrics were soft, followed by slightly more encouraging German figures. German IFO numbers will be on tap today for further insights.
• US jobless claims for the week ending 19th October fell to 227k from 242k, suggesting little concerns still of a sharp cooling in the labour market.
• Japan’s Tokyo CPI for October came in above expectations on the core, particularly the core-core measure at 1.8% YoY from 1.6% previously and expected. This adds to the case for further BOJ tightening, but the immediate focus shifts to LDP election over the weekend. Polling suggests that there are risks that the LDP may lose majority which could weaken the ruling party’s governing capacity and this could mean questions on the BOJ’s normalization stance and push for further fiscal measures.

Equities: 

• US – Tesla gains 22%, biggest rally since May 2013 after reporting better earnings and improving margins, taking its market cap to 836M USD. On the other hand, IBM suffered a fall of 6% after reporting weak sales in consulting and infrastructure.
• European - European stocks up slightly on Thursday, driven by strong corporate results. The Stoxx 50 gained 0.3% with Hermes and LVMH leading luxury sector gains.
• Hong Kong - HSI dropped 1.3% and Semiconductor Manufacturing decreased 2.0% amid reports of TSMC chips potentially violating US sanctions by reaching Huawei.
• Earnings - Colgate, Centene Corp, New York Community Bancorp, Booz Allen Hamilton

FX:

• USD pared some of its recent strength as Treasury yields fell amid a technical correction. USDJPY drifted lower to fall below 152 from highs of 153.19 a day before, despite limited attempts at verbal intervention and risks of weekend LDP election hovering.
• EURUSD also clawed back gains to rise back above 1.08 with EZ PMI figures not as dismal as feared. GBPUSD also gained but was stalled even before a test of 1.30 with PMIs disappointing.
• CAD underperformed with USDCAD rising to highs of 1.3869, surpassing the highs of a day before after the BOC’s 50bps rate cut suggesting yield playbook may have been pulled back out.

Commodities:

• Oil dropped amid oversupply fears, rising inventories, and weak Chinese demand, despite US refinery highs and eased Middle East tensions with upcoming diplomatic talks.
• European natural gas futures climbed above €42 per megawatt-hour, approaching their highest since December 1, due to rising power generation demand and Middle East conflict concerns.
• Iron ore traded around $100, a four-week low, due to strong supply from major miners. Fortescue increased shipments by 4% despite cost issues, while BHP reported higher output. Rio Tinto and Vale are also boosting production.

Fixed income:

• Treasuries rose, driven by a drop in WTI crude and euro-zone bond support. Yields hit session lows after a large Ultra Bond futures trade. Option flows included new hedges and position unwinding. Long-end yields fell over 5 basis points. The US 10-year yield was around 4.20%, down over 4 basis points from Wednesday.

For a global look at markets – go to Inspiration.