Global Market Quick Take: Asia – September 20, 2023

US Equities: Stocks retreated in broad-base selling as the 10-year Treasury yield hit its highest level since 2007. The S&P500 and the Nasdaq 100 both shed 0.2%. Intel, Qualcomm, and Amazon were among the major laggards.

Fixed income: The initial weakness in the US Treasury market came when traders took note of the selloff in Canadian government bonds after a surprisingly hot Canadian CPI. Large selling in the 10-year US T-note futures in late afternoon saw the 10-year yield surged to 4.37%, the highest level in 16 years, despite a solid 20-year auction. The 2-year yield climbed 4bps to 5.09% while the 10-year yield settled 6bps higher at 4.36%. 

China/HK Equities: Markets were helped by gains in energy and utilities stocks but dragged down by EV names. The Hang Seng Index finished moderately higher, up 0.4% while the Hang Seng Tech Index slid 0.1%. The CSI300 dropped by 0.2%. News headlines include more cities relaxing home purchase restrictions, CSRC considering measures to encourage listed companies paying dividends, and plans to set up a special loan programme for urban development.

FX: Commodity currencies outperformed with NZDUSD extending gains in the Asian morning hours to 0.5950 with Q2 current account beating estimates. USDCAD reversed from lows of 1.3381 seen after hot CPI while AUDUSD continues to attempt a move towards 0.65. USDJPY remained choppy, with yen defying gains despite more verbal intervention and threats of a coordinated yen intervention with the US (see Janet Yellen comments below). EURUSD still unable to hold gains above 1.07 while GBPUSD stays close to 1.24 with CPI data ahead.

Commodities: Oil rally took a breather with FOMC event risk ahead. Brent still above $94 with API showing inventory drawdowns continued in the latest week. Signs of tightness in physical markets, including diesel, are adding to concerns and $100 oil chatter remains. Gold also turns to FOMC risks after US yields were pushed higher due to hot Canadian inflation prints.

Macro:

• Canadian inflation rose to 4.0% y/y from 3.3% y/y in July, faster than the 3.8% y/y expected amid base effects and fuel price gains. Deputy Governor Kozicki said that underlying inflation remains above a level consistent with the Bank of Canada achieving its target, and noted risks of doing both too much or too little. Markets now price about 50% probability of a hike from BOC in October.
• RBA’s September meeting minutes had some hawkish tones as it was noted that both a 25bps and pause were considered, but statement on “recent flow of data was consistent with inflation returning to target within a reasonable timeframe while the cash rate remained at its present level” was strongly suggestive of no further rate hikes.

In the news:

• Instacart shares close up 12% after public market debut (FT)
• Yellen Says Yen Intervention Understandable If Due to Volatility (Bloomberg)

Macro events:

• At 9:15 a.m. HK/SG time, China will fix the 1-year and 5-year Loan Prime Rates (LPRs). While the Bloomberg survey anticipate no change to the LPRs, the state-owned Securities Times runs an article on today’s newspaper suggesting that it is desirable to cut the 5-year LPR. “more frequently”.
• UK CPI exp 7.0% YoY vs. prev 6.8% (due 1400 SGT)
• FOMC announcement exp unchanged (due 21 Sep 0200 SGT) – read full preview here.

Key company events: Earnings reports for KB Home, FedEx, and General Mills are on the horizon. KB Home's Q3 revenue is expected to be around USD 1.48 billion, in line with their guidance. FedEx's FY23 Q1 results may benefit from UPS labor issues but face challenges in consumer spending and global freights. General Mills' FY24 Q1 is projected to have revenue of USD 4.88 billion. For detailed information, please refer to the Saxo Spotlight.

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

For a detailed look at what to watch in markets this week – read our Saxo Spotlight.

For a global look at markets – go to Inspiration.