US Equities: Technology stocks rallied strongly, with the Nasdaq 100 extending its gains for an 8th consecutive session and finishing 0.9% higher at 15,296. The S&P 500 added 0.3%, reaching 4,378. Daiadog surged by 28.4%, boosting sentiment in the cloud-computing software sector after reporting Q3 results and an outlook that exceeded estimates. Microsoft gained 1.1%, closing at a new all-time high of $360.53. Uber rose 3.7% due to better-than-expected gross bookings in Q3 and favourable Q4 guidance, despite Q3 revenue and earnings falling below expectations.
Fixed income: US Treasuries rallied with long-end yields falling the most, following declines in UK Gilt yields across the pond after the Bank of England chief economist’s dovish comment on UK inflation and a hint of rate cuts by starting mid-2024. Treasuries extended gains in the afternoon after a robust 3-year auction with a strong bid-to-cover ratio. The 2-year yield slid 2bps to 4.92% while the 10-year yield dropped by 8bps to 4.57, flattening the curve by 6bps to -35bps. The Treasury is scheduled to auction $40 billion 10-year notes on Wednesday.
China/HK Equities: Markets pulled back and ended a three-day rising streak, despite the Shenzhen SASAC and the Shenzhen Metro pledged support to Vanke on the previous day. China’s imports unexpectedly grew in October but exports disappointed. The Hang Seng Index sank 1.7% and the CSI300 slid 0.4%. Property and consumer stocks dragged while energy and technology hardware outperformed. We reiterate a positive near-term outlook here.
FX: The US dollar continued to unwound the decline seen after FOMC and jobs data last week, with Fed speakers sounding notably hawkish. Sharp fall in crude oil prices pushed NOK lower to be the underperformer in the G10 space and USDNOK rose to 11.200. AUDUSD tested the 0.64 handle after RBA’s dovish rate hike disappointed, and support at 0.6395/0.6370 could be tested. EURUSD also lost momentum and broke below 1.0680 support before rising back higher and will be on watch today as Chair Powell speaks. GBPUSD broke below 1.23 and is testing support at 50DMA at 1.2285 after dovish remarks from BOE’s Chief Economist Huw Pill who said he expects UK inflation to fall below 5% in October and hinted that he expects rates could be cut by middle of next year.
Commodities: Oil prices slumped over 4% on Tuesday, falling to their lowest levels in over three months. Hawkish comments from Fed speakers brought prospects of further rate hikes back on the table, while China’s weak trade data continued to underscore a sluggish demand outlook. Supply side also looked robust with Russia shipping crude oil near its highest rates in more than four months. Copper was down over 1% despite China’s appetite for commodities remaining strong. Gold dropped below $1970.
- China’s imports increased by 3.0% to USD56.5 billion in October, contrary to a decline projected by economists. Meanwhile, China’s exports fell more than anticipated by 6.5% in October to USD274.8 billion.
- Fed’s Kashkari (voter) said he would err on the side of overtightening policy than not doing enough in order to bring inflation down, noting he is not convinced rate hikes are over. He added that some prices and wages data indicate that inflation could be settling somewhere north of 2%. He said the Fed has more work to do to get inflation under control. Bowman also said that she continues to expect the Fed will need to increase the FFR further and Logan said inflation remains too high and the core question is if financial conditions today are sufficiently restrictive. Chair Powell will be speaking today and expected to also maintain a hawkish posture to avoid markets to price in more rate cuts.
- RBA hiked rates by 25bps to 4.35% but further tightening has been made contingent on data, underscoring RBA’s reluctant hiker image. Read more in yesterday’s FX note.
Macro events: BoC Minutes (Oct), German Final CPI (Oct) exp 3.8% YoY vs. 3.8% prior, EZ Retail Sales (Sep) exp -3.1% YoY vs. -2.1% YoY prior
Earnings: Walt Disney, Airbus, Deutsche Post, Bayer, Singapore Telecom, Ke Holdings
In the news:
- UBS Shares Rise as Lender Wins Back Credit Suisse Clients (Bloomberg)
- U.S. Banks are selling complex debt instruments to private-fund managers to reduce regulatory capital charges on the loans they make (WSJ)
- Rivian raises full-year production forecast, shares rise (Reuters)
- IMF upgrades China's 2023, 2024 GDP growth forecasts (Reuters)
- SoftBank's WeWork, once most valuable US startup, succumbs to bankruptcy (Reuters)
For all macro, earnings, and dividend events check Saxo’s calendar.
For a global look at markets – go to Inspiration.