Global Market Quick Take: Asia – August 28, 2023 Global Market Quick Take: Asia – August 28, 2023 Global Market Quick Take: Asia – August 28, 2023

Global Market Quick Take: Asia – August 28, 2023

Macro 7 minutes to read
APAC Research

Summary:  Choppy price action seen on Friday as Fed Chair Powell stayed away from steering dovish at the Jackson Hole conference. ECB’s Lagarde also spoke about structural challenges in bringing down inflation but did not confirm a September rate hike, while BOJ’s Ueda continued to steer dovish. Yen weakened to fresh YTD lows while dollar was broadly higher. Still, metals strengthened in early Asia on China announcing more measures to support property sector and stocks.


What’s happening in markets?

US equities (US500.I and USNAS100.I): Equities shake off Powell's speech and advance

Equities initially declined following Powell's moderately hawkish-leaning speech. They fluctuated between gains and losses into the afternoon, but eventually shrugged off the concerns and reversed course to close higher. The S&P 500 rose 0.7%, with gains across all 11 sectors. Leading the way were the consumer discretionary and energy sectors. Notable movements included a 4.1% advance for software vendor Intuit (INTU:xnas) and a significant 5.7% surge for toy maker Hasbro (HAS:xnas), both driven by brokers raising target prices. Tesla (TSLA:xnas) also registered a 3.7% gain. The Nasdaq 100 had a 0.9% uptick. Workday (WDAY:xnas) added 5.4% following reporting Q2 revenue, backlog orders, EPS, and margins all exceeded estimates.

Treasuries (TLT:xnas, IEF:xnas, SHY:xnas): Whipsaw in response to Powell's speech before 2-Year Yield climbs to 5.08% on hawkish interpretation

Treasuries whipsawed between gains and losses as traders attempted to decipher the implications of Powell's speech on the future path of the Fed's policy rates. The 10-year yield concluded the session without change at 4.24%. In contrast, the 2-year yield saw a rise of 6 basis points, reaching 5.08% as the market settled on the conclusion that Powell's speech leaned toward a hawkish stance.

Hong Kong & Chinese equities (HK50.I & 02846:xhkg): Technology-driven pullback sparks market declines, China property bounces on mortgage policy easing

A technology-driven retreat exerted pressure on the benchmark indices. The Hang Seng Index declined by 1.4%, while the Hang Seng Tech Index dropped by 2.4%. NetEase (09999:xhkg) fell 6.7% after reporting softer-than-expected revenue growth in spite of an earnings beat driven by improved margins. Meituan (03690:xhg) dropped by 5.6%. The Chinese e-commerce and food delivery platform beat estimates in revenue and earnings in Q2 but provided slower growth guidance for its food delivery business for Q3. China property names rebounded after the news that Chinese authorities relaxed requirements for mortgage borrowers who have borrowed mortgage loans before.

Within the A-share market, the CSI300 index contracted by 0.4%, primarily influenced by declines in telecommunication, media, computing, electronics, and AI stocks. These losses offset the gains in real estate and bank stocks.

FX: Hawkish-leaning Powell and dovish Ueda throw JPY to fresh YTD lows

The dollar wobbled but was ultimately stronger after Powell reaffirmed that rates will be left higher-for-longer. His comments pushed USDJPY to fresh YTD highs of 146.63 and the high was revisited this morning after Ueda’s dovish comments from Saturday were digested by markets. EURUSD failed to get a bump as Lagarde did not confirm a September rate hike and remains stuck at the 1.08 handle. GBPUSD was the underperformer in the week as it slid below 1.26. NZDUSD had a sixth consecutive week of declines as it continues to test the 0.59 handle while AUDUSD getting a slight bump higher to 0.6420 on China’s stamp duty cut announcement.

Crude oil: second weekly decline as supply concerns eased

Crude oil recorded its second consecutive weekly loss amid signs of additional crude oil supplies hitting the market from the likes from Iran and Venezuela which are helping to offset OPEC+ cuts. Meanwhile, US growth indicators are still holding up, and that has meant that Fed Chair Powell did not take a clear dovish turn at the Jackson Hole conference. Going into the new week, China’s stimulus announcements are pushing prices higher and WTI is back at $80+ with Brent close to $85/barrel.

Copper: China announcements underpin a recovery

Copper prices started the week pushing higher towards $3.80 with resistance seen at $3.82 which is the 100DMA. China’s measures last week to support the property sector brought gains to metals in general, with Iron ore and silver up over 6%. Further stimulus announcements from China over the weekend may continue to support metals. Meanwhile, inventories for copper, iron ore and aluminum have dropped.

 

What to consider?

Chinese authorities cut stamp duties and unveil other measures, aiming at stabilizing the equity market

The Chinese authorities announced four significant measures to provide support to the equity market on Sunday. The Ministry of Finance and the State Taxation Administration jointly announced the reduction of stamp duty on securities transactions from 1‰ to 0.5%, effective August 28. The Chinese equity market surged last two times when the Ministry of Finance changed to charge only the seller instead of both sides of the transaction in September 2008 and also when the stamp duty was cut to 1% from 3% in April 2008 but reactions had been more muted in cuts prior to that.

Another move involves tightening IPOs and listed companies in placing new shares, as announced by the China Securities Regulatory Commission (CSRC). To further stabilize the market, the controlling shareholders' ability to divest their stake is also being restricted. The CSRC also moved to prevent controlling shareholders of companies whose share prices falling below their issuance price, net asset value, or paying insufficient cash dividends in recent years from reducing their holdings on the secondary market.

Lastly, the three Chinese stock exchanges are adjusting the minimum margin financing requirement ratio for securities transactions. The current 100% requirement will be reduced to 80% after market closure on September 8.

Powell’s comments at Jackson Hole remain balanced

Fed Chair Jerome Powell said the central bank would consider another interest rate rise, and that it intends to hold policy at a restrictive level to temper inflation, attempting to sound hawkish but adding nothing new to what was already said at the July FOMC. There was however a more firm language around the 2% inflation target, putting speculations that Fed may consider raising the inflation target to rest. Powell also noted that economy may not be cooling as fast as expected but appeared ready to respond if these conditions reversed. A slight hawkish tone saw market push the rate cut expectations to June 2024 from a month earlier previously. A data-dependent approach will likely be maintained from here but the bar for another rate hike remains relatively high.

ECB’s Lagarde spoke on persistent inflation pressures

The key underlying theme of the Jackson Hole symposium remained that central bankers around the world are not convinced about having put a lid on inflationary pressures in the current cycle. ECB President Lagarde spoke on the ramifications of tighter labour markets, the transition to a greener economy and the fragmentation of the economy into competing blocs. All of these means a structural shift in global economy that could keep inflationary pressures higher than normal and complicate the role of monetary policymakers. However there were little hints on near-term policy direction, with Lagarde only repeating the need to set rates at “sufficiently restrictive levels for as long as necessary” to bring inflation back to target in a timely manner. Markets still pricing in a September rate pause from the ECB.

BOJ’s Ueda echoed structural challenges but maintained a dovish stance

Bank of Japan governor Ueda spoke at the Jackson Hole conference on Saturday and talked about the structural shifts in the global economy, saying that geopolitical tensions and tendencies towards “reshoring” — the return of manufacturing activities and jobs to home countries could be an inflection point. He said that while that could lead to local growth booms, it could also result in production inefficiencies. However, Ueda maintained that he viewed Japan’s underlying inflation to be still below the 2% target and that is reason why they will stick with current easing framework.

 

For a global look at markets – tune into our Podcast.

For thematic discussions on developments affecting your portfolio – watch our The Curious Investor videos.

Quarterly Outlook 2024 Q3

Sandcastle economics

01 / 05

  • Macro: Sandcastle economics

    Invest wisely in Q3 2024: Discover SaxoStrats' insights on navigating a stable yet fragile global economy.

    Read article
  • Bonds: What to do until inflation stabilises

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain inflation and evolving monetary policies.

    Read article
  • Equities: Are we blowing bubbles again

    Explore key trends and opportunities in European equities and electrification theme as market dynamics echo 2021's rally.

    Read article
  • FX: Risk-on currencies to surge against havens

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperform in Q3 2024.

    Read article
  • Commodities: Energy and grains in focus as metals pause

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities in Q3 2024.

    Read article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

Please click here to view our full disclaimer.