Global Market Quick Take: Asia – January 18, 2024

Global Market Quick Take: Asia – January 18, 2024

Macro 5 minutes to read
Redmond Wong

Chief China Strategist

Summary:  Treasury yields surged following robust US retail sales, with the 2-year yield up 14bps to 4.36% and the 10-year yield climbing 4bps to 4.10%. USDJPY rallied above 148, while EURUSD saw minimal change despite ECB President Lagarde's warning of rate cuts likely to be later than when the market expected. Spot gold plummeted 1.1% to $2,006. The S&P 500 and Nasdaq 100 dropped 0.6% while the Hang Seng Index plunged 3.7%. The Chinese GDP and activity data were mixed but largely met expectations.


Saxo’s Q1 2024 Outlook titled “What happened to the future” is now out. You can read it here.

The Saxo Quick Take is a short, distilled opinion on financial markets with references to key news and events. 

US Equities: Stocks sank as Treasury yields rose, with both the S&P 500 Index and the Nasdaq 100 Index falling by 0.6% to 4,739 and 16,736, respectively. All 11 sectors of the S&P 500 declined. Tesla dropped 2%, while Apple fell by 0.5% after a US court of appeals declined to grant a longer pause on its smartwatches with a blood oxygen feature.

Fixed income:  Treasury yields rose in response to a hotter-than-expected retail sales report, led by a 14bp jump in the 2-year yield to 4.36%. The 10-year yield climbed 4bps to 4.10%. In the futures and OIS markets, the probability of a 25bp cut at the March FOMC was trimmed to 57%, down from 63% one day earlier. The $13 billion 20-year Treasury bond auction met with tepid demand, with the awarded yield stopping at 0.8bp above the trading level at the time of the auction, and primary dealers left with a larger-than-usual portion of the auction.

China/HK Equities: The Hang Seng Index plummeted by 3.7%. The Chinese GDP and activity data released in the morning were largely in line with expectations. Investors attributed the improvements to the low base in the year before and continued to feel concerned about the sustainability of the recovery of the Chinese economy in 2024. News that the EU may impose a tariff on Chinese electric vehicles as soon as this June triggered selling on EV stocks. President Xi’s remarks of tightening the Party’s control over China’s financial sector with supervision that has 'teeth’ and Premier Li Qiang’s push-back to calls for more aggressive stimulus measures contributed to the deterioration in market sentiment. The CSI300 declined 2.1%.

FX:As US Treasury yields rose, USDJPY extended its rally, reaching above the 148 handle. Meanwhile, EURUSD remained little changed after ECB President Lagarde pushed back market expectations of rate cuts as early as April.

Commodities: Spot gold plunged 1.1% to $2,006 as Treasury yields rose on stronger US data. The short-term direction of gold will be dictated by the trajectory of US bond yields and the dollar.

Macro:

  • US retail sales were stronger than expected in December, rising 0.6% M/M, above the median forecast of 0.4% and November’s 0.3%. Excluding autos, retail sales grew 0.4% M/M in December, also stronger than the 0.2% expected in the previous month.
  • US industrial production growth was 0.1% in December, surpassing the downwardly revised figure of 0.0% in November and exceeding the expected -0.1%
  • The Fed’s Beige Book, a summary of commentary on economic conditions in the 12 Federal Reserve districts, indicated some improvements. Three districts reported growth, one experienced a modest decline, and the rest noted little change.
  • In Davos, ECB President Christine Lagarde stated that while the European Central Bank may consider rate cuts this summer, she emphasized that it is unhelpful for the market to aggressively price in the timing and pace of these cuts.
  • China’s Q4, as well as the full-year GDP for 2003, grew by 5.2% Y/Y, the same as foretold by Premier Li Qiang the day before. Notably, nominal GDP fell to 4.6% in 2023 from 4.8% in 2022. Industrial production increased by 6.8% Y/Y in December slightly above the estimate and November’s 6.6%.  Strength was found in mobile phones and autos but softness in steel and cement. However, retail slowed more than expected to 7.4% Y/Y from 10.1%. Fixed asset investment growth improved to 4.0% Y/Y in December from 2.9% in November, above the median forecast of 2.9%, driven by infrastructure and manufacturing investment while property investment worsened to a -12.3% Y/Y. The headline unemployment rate came in at 5.2%. After a suspension of release for five months, the youth unemployment rate (16-24 years old) on a revised survey methodology came in at 14.9%. All in all, the data were mixed but largely in line with expectations.

Macro events: US housing starts & building permits (Dec), US Philly Fed survey (Jan), UK RICS house price (Dec), Japan machinery orders (Nov)

Earnings: TSMC, Compagnie Financier, Trust Financial, Fastenal, PPG, M&T Bank, JB Hunt, Northern Trust, KeyCorp

In the news:

  • Apple Must Stop Selling Watches With Blood Oxygen Feature (Bloomberg)
  • Third Commercial Ship in a Week Struck by a Drone Near Yemen (Bloomberg)
  • China’s population fell by 2.08 million last year to 1.4097 billion people, down by 2.08 million from 1.4118 billion in 2022 (SCMP)
  • Dimon Says China Risk-Reward Equation Has ‘Changed Dramatically (Bloomberg)
  • Hong Kong finance chief Paul Chan rules out capital gains tax for ‘foreseeable future’ for city (SCMP)

 

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

For a global look at markets – go to Inspiration.

Quarterly Outlook

01 /

  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

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